How To Start A Hotel Business With No Money

How To Start A Hotel Business With No Money

Do you know what the steps are to open a hotel? If you are considering investing in hospitality, there are several things you should keep in mind. The first and most important is that you will need to be up to date with the new trends in the hotel industry. The truth is that opening a new hotel is difficult, as there are many things that you have to consider.

One of the most demanding phases is the pre-opening of the hotel. When you hire a hotel consultant,  you will have the help you need to choose an efficient plan to open your hotel. There are many factors, such as advertising and distribution, that you need to plan for in the pre-opening phase. Keep in mind that each step of the plan can present obstacles.

What is a hotel?

A hotel is a commercial property where travelers who need a room for the night pay a fee to stay there. Last year, the hotel industry generated revenue of more than $200 billion.

Do you want to start a successful hotel business? if you are ready, here is a complete guide to starting a hotel business with no money and no experience.

Okay, we have provided you with an in-depth sample hotel business plan template. We also take it further by analyzing and writing a sample hotel marketing plan backed by actionable guerrilla marketing ideas for hotels. In this article, we will consider all the requirements for starting a hotel business. So put on your entrepreneurial hat and let’s proceed.

Why start a hotel business?

All over the world, the hospitality business is considered a very serious trade, and the reason for this is not far-fetched. The reason why the hospitality business, especially the hotelier, is taken seriously is because of its relationship with the tourism industry.

Whether locally or internationally, one of the ways to make people arriving in unfamiliar places feel comfortable is to have a very relaxed hotel to stay in. This is one of the reasons why the hotel business continues to witness a boom.

The hospitality industry has been around since time immemorial and is still going strong because people cannot do without the services they offer. When you talk about a hotel, you are talking about an establishment that offers accommodation to short-term guests/travelers, tourists, visitors, etc. for a fee.

When people stay in hotels, they have the option to subscribe to other services offered by the hotel; services such as food, drinks, laundry, gym, swimming pool, conference room, and business room, among others.

Starting a hotel business could become one of the best ventures for an entrepreneur. This is due to the lucrative nature and prosperity of this industry. Every day, both foreigners and local migrants and businessmen travel from one point to another and the option they have is to stay in hotels.

It is pertinent to point out that there are different categories of hotels, 5-star, 4-star, or even 3-star hotels. One of the essential things that are unique in each category of hotel is the facilities that make up each one.

Starting a hotel business requires a lot of capital and is considered a long-term investment because it takes a while for the owners to break even and start making a profit. It takes a big investor to consider starting your own hotel business, which is why many hotels are owned by groups of investors.

It is one thing to build the physical structure of the hotel (building), but the real challenge is to manage it profitably. This is why you need to consider the cost of starting a hotel business. One good thing about the hotel business is that the business can grow so much that it will not only have an active presence in key cities in the country where it started but in major cities on every continent of the world.

If you want to start a hotel business then you should read this article carefully as it will help you to establish your own hotel from scratch and build it to be profitable in the shortest possible time.

Starting a hotel business with no money: a complete guide

  • Industry Overview

The hospitality industry has been around since time immemorial and is still going strong because people cannot do without the services they offer. When talking about a hotel, we are talking about an establishment that offers accommodation to guests/travelers, tourists, visitors, etc., on a short-term basis for a fee.

When people stay in hotels, they have the option to subscribe to other services offered by the hotel; services such as food, drinks, laundry, gym, swimming pool, conference room, business room et al. It is important to note that hotel operations vary in size, function, and cost, which is why hotels are classified into different categories (two-star hotels, five-star hotels, seven-star hotels, etc.).

The facilities that some hotels offer can range from a basic bed and storage closet to luxury features like en-suite bathrooms, mini lounges, etc. It is the norm for large hotels to provide additional facilities for guests such as a swimming pool, conference center, business center, babysitting, self-service laundry, fitness center, and services for social events.

In some countries, hotels are required by law to serve food and beverages to all guests staying on their premises, while in some countries, you would have to choose which additional services you want from the hotel. The bottom line is that the more you pay at hotels, the more services you are entitled to.

In recent times, the hotel industry has seen steady growth as various consumer trends supported the demand for the services offered by hotel operators. for example, consumer confidence and spending have seen a steady rise over the period, allowing domestic and international travel rates to rise.

Another consumer trend has been the gravitation toward unique accommodations and experiences offered by establishments in the hospitality industry. Going forward, the hotel industry will continue to experience this strong growth as domestic and foreign travel increases.

The hotel/hospitality industry is a thriving sector of the economy in the United States, United Kingdom, France, Italy, Canada, and most countries around the world. According to statistics, in the United States of America, the hotel/hospitality industry generates a whopping sum of $7 billion a year from over 1,997 registered and licensed standard hotels spread across the entire United States of America.

The industry is responsible for the employment of more than 60,106 people. experts project that the hotel/hotel industry will grow at an annual rate of 5.0%. intercontinental and Starwood hotels are leaders in this industry; they have a lion’s share of the market available.

A recent research report by IBISWorld shows that the hotel/hospitality industry has low-level concentration, with the top four players expected to account for around 33.0 percent of the available market share in 2015. The report further stated that hotels benefit from being able to convert buildings that are not normally suitable for hotel use using low-cost, luxurious materials (for example, slate instead of imported marble).

Additionally, independent hotels do not have franchise fees and some boutique hotel brands offer limited partnerships with investors. on the other hand, capital spending remains high. Labor costs are lower for boutique hotels due to their smaller size relative to chain hotels.

Lastly, the hotel business will continue to flourish because people will always have to stay for various reasons, especially when they are away from their base.

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Starting a hotel business: market and feasibility studies

  • Demographics and psychographics

The demographic and psychographic composition of those who need the services provided by hotels is broad and far-reaching; it is about anyone who has any reason to stay in a hotel or patronize the services and products offered by hotels.

As such, if you are looking along the lines of defining the demographics of your hotel facility business, then you need to be all-encompassing; You should include corporate executives, business people, athletes, government officials, college students, tourists, travelers, travel agencies, event managers, and religious organizations, etc., in and around your target location.

List of niche ideas within the hospitality industry that you can specialize in

Most hotel facility companies tend to operate general services that a standard hotel facility provider is expected to offer. that’s why it seems that there are no niche areas in the industry. But the truth is that there are several niche ideas in the hotel and hospitality industry.

These are some of the niche ideas within the hotel and hospitality industry that an aspiring investor who intends to launch a hotel business can choose from;

  • Hotel Boutique
  • Conventional hotels (2 stars, 3 stars, 4 stars, 5 stars, 6 stars, and 7 stars)
  • Motels
  • Bed and breakfast

The level of competition in the hotel and hospitality industry

The level of competition in the hotel and hospitality industry depends to some extent on the location of the business, its niche area of ​​operation, and course the capacity of its hotel facility. If you can successfully carve out a unique niche for your hotel facility business, chances are you will experience little to no competition.

For example, if you are the only boutique hotel or 7-star hotel facility in your location, you can successfully monopolize the market for a long time before you start to compete. It is also important to state that the competition in the hotel line of business is not limited to just the line of business but you will also be competing against all the players in the hotel and hospitality industry.

List of well-known brands in the hotel industry

It is important to point out the fact that in every industry, there are always brands that perform better or are considered better by customers and the general public than others. Some of these brands are those that have been in the industry for a long time and are therefore known for that, while others are better known for how they conduct their business and the results they have achieved over the years.

These are some of the leading hotel facilities in the United States of America and the world;

  • Wyndham Hotels and Resorts
  • Hilton Hotels & Resorts
  • International Marriott
  • Intercontinental hotels
  • Starwood
  • Oriental Tangerine, las vegas
  • El Langham, Chicago
  • Montaje palmetto bluff
  • The Beverly Hills Peninsula
  • Four season resort
  • El Jefferson, Washington, DC.
  • The lodge on the island of the sea
  • El Nantucket Hotel & Resort, Nantucket, Massachusetts
  • The roof garden on the peninsula
  • Sir Elgin hotel
  • Sofitel Chicago Magnificent Mile
  • The hermitage hotel
  • Doubletree by Hilton Hotel and conference center Regina
  • MGM grand las vegas
  • Grand Hyatt San Antonio
  • Hotel and casino monte Carlo

Economic analysis

When starting a hotel facility business, you only have to get your cost economic analysis right if your intention of building the business is to make a profit, grow the business, and maybe expand the business and start competing nationally.

When performing cost and economic analyzes for your hotel facility business, you need to critically examine these key factors; place, price, and promotion. You will need to continue to review these key factors at regular intervals as you run your hotel facility business.

It is important to note that the acquisition of a facility, the construction and equipping of the facility, the provision of overhead, and the cost of running are some of the most important factors that contribute to the overall cost of running a hotel facility business. and should be considered an important factor in carrying out Your cost and economic analysis.

Starting your hotel facilities from scratch versus buying a franchise

There is no hard and fast rule when it comes to choosing how you are going to start a business. You should be guided by your overall business vision and mission statement.

When it comes to starting a business of this nature, it will pay to buy the franchise of a successful and well-established hotel chain rather than starting from scratch. Even though it is relatively expensive to purchase a franchise from an established hotel chain, it will pay you back in the long run.

But if you want to build your own brand after you have proven yourself in the hotel and hospitality industry, then you may want to start your own hotel business from scratch. The truth is that it will pay you, in the long run, to start your hotel business from scratch. Starting from scratch will allow you to do a thorough market survey and feasibility studies before choosing a place to start the business.

Keep in mind that most of the big and successful hotel brands started from scratch and were able to build a strong business brands.

Possible Threats and Challenges You Will Face When Starting a Hotel Facility Business

If you decide to open your own hotel facility today, one of the main challenges you are likely to face is the presence of well-established hotel facilities and course other players in the hotel and hospitality industry in your target market location. The only way around this challenge is to create your own marketplace.

Other threats and challenges you are likely to face when starting your hotel facility are mature markets, a bad economy (economic downturn), stiff competition, volatile costs, and rising furniture prices.

So too, unfavorable government policies, seasonal fluctuations, demographic/social factors, the downturn in the economy likely to affect consumer spending, and of course the emergence of new competitors in the same place where yours is. There is almost nothing you can do about these threats and challenges other than be optimistic that things will continue to work out for your good.

  • The best legal entity to use for this type of business

You have the option of choosing a general partnership, a limited liability company commonly called an LLC, or even a sole proprietorship for a business like a hotel. Typically, sole proprietorship should have been the ideal business structure for a small-scale hotel facility business, especially if you are just starting with moderate startup capital and want to operate a motel or bed and breakfast. But people prefer a limited liability company for obvious reasons.

If you intend to grow the business and have chains of your hotels through franchises throughout the United States of America, then choosing a sole proprietorship is not an option for you. The Limited Liability Company, LLC, or even the General Partnership will reduce it for you.

For example, setting up an LLC protects you from personal liability. If something goes wrong in the business, only the money you invested in the limited liability company will be at risk. not so for sole proprietorships and general partnerships. Limited liability companies are simpler and more flexible to operate and do not need a board of directors, shareholder meetings, and other administrative paperwork.

These are some of the factors that you should consider before choosing a legal entity for your hotel facility business; limitation of personal liability, ease of transfer, admission of new owners, investor expectations, and, of course, taxes.

If you take the time to critically study the various legal entities that you will be using for your hotel facility business, you will accept that a limited liability company; An LLC is the most suitable. You can start this type of business as a limited liability company (LLC) and in the future convert it to a ‘C’ corporation or an ‘S’ corporation, especially when you have plans to go public.

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Upgrading to a ‘c’ or ‘s’ corporation will allow you to grow your hotel facility business to compete with the major players in the industry; you will be able to raise capital from venture capital firms, you will enjoy a separate tax structure and you can easily transfer ownership of the company; You’ll enjoy flexibility in ownership and management structures.

Insurance policies

In the United States and most countries around the world, you cannot operate a business without having some of the basic insurance policy coverages required by the industry you want to operate from. Therefore, it is imperative to create a budget for insurance policy coverage and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your hotel facility business.

These are some of the basic insurance policy covers that you should consider purchasing if you want to start your own hotel facility business in the United States of America;

  • General insurance
  • Health insurance
  • Liability insurance
  • Risk insurance
  • Workers Compensation
  • Building/Property Insurance
  • General expense disability insurance
  • Business owner’s insurance policy
  • Payment protection insurance

Intellectual Property/Trademark Protection

If you are considering starting your own hotel facility business, you may generally not need to apply for intellectual property/trademark protection. This is so because the nature of the business makes it possible for you to run the business successfully without having any reason to challenge anyone in court for making illegal use of your company’s intellectual property.

On the other hand, if you only want to protect your company logo and other documents or software that is unique to you or even concepts of operation, you can apply for intellectual property protection. If you want to register your trademark, you are expected to start the process by applying with the USPTO. Final approval of your trademark is subject to attorney review as required by USPTO.

Is Professional Certification Needed to Run a Hotel Business?

If you intend to start a hotel facility in the United States of America, we recommend that you obtain professional certifications; It will demonstrate your commitment to the business. Certification validates your competency and demonstrates that you are highly skilled, committed to your career, and current in the competitive marketplace. Furthermore, it is almost impossible to run a hotel facility business in the United States without the proper professional certification.

These are some of the certifications that you can aim to achieve if you want to run your own hotel facility business in the United States of America;

  • Ahlei professional certification
  • Green hotel certifications
  • Certified hotel administrator (cha)
  • Certification in hotel industry analytics (Chia)
  • Certified Hospitality Revenue Manager (chrm®)
  • Green Globe Certification

Please note that you cannot successfully run a standard hotel in most developed countries of the world if you do not acquire the required certifications, licenses, and permits from the appropriate authority.

List of legal documents you need to run a hotel facility business

The essence of having the necessary documentation before starting a business in the United States of America cannot be overstated. It is a fact that you cannot successfully run any business in the United States without proper documentation. if he does, it won’t be long before the long hands of the law reach him.

These are some of the basic legal documents that you are expected to have in place if you want to legally run your hotel facility in the United States of America;

  • Business and civil liability insurance
  • Federal Taxpayer ID
  • State Permit
  • Certificate of incorporation
  • Business License
  • Business plan
  • Health Inspection certificate
  • Copy of the license for the technical assistance service and/or a recent inspection report
  • Non-Disclosure Agreement
  • Employment agreement (offer letters)
  • Employee handbook
  • The operating agreement for LLCs
  • Insurance policy
  • Online Terms of Use (if you have a website)
  • Online privacy policy document (basically for the online payment portal)
  • Articles of Association
  • Memorandum of Understanding (MOU)
  • Building permit
  • Franchise license or trademark (optional)

Financing your hotel facility business

Starting a standard, well-appointed, and well-furnished hotel facility business is capital intensive, even if you choose to start the business on a small scale and only have a handful of full-time employees on your payroll. Leasing a standard facility that can accommodate your guests and staff members, and of course purchasing daily supplies (toiletries and food ingredients, etc.) are part of what will consume a large chunk of your startup capital In essence, if you choose to start the business on a small scale, you will still need to look for funds to finance the business.

When it comes to financing a business, one of the main factors you need to consider is writing a good business plan. If you have a good and workable business plan document, you may not have to work before convincing your bank, investors, and friends to invest in your business.

Here are some of the options you can explore when seeking startup capital for your hotel facility business;

  • Raising money from personal savings and selling stocks and personal property
  • Raise money from investors and business partners
  • Sale of shares to interested investors
  • Apply for a loan from your bank/banks
  • Submit your business idea and apply for business grants and seed funding from the government, donor organizations, and angel investors
  • Source of soft loans from your family and friends

Choosing a suitable location for your hotel business

Starting a hotel facility business comes with its challenges; It is a business that cannot be started anywhere. You will need the approval of the local council and other regulatory authorities of the city in which you intend to open your hotel facility business.

Hotels are part of the human lifestyle, therefore they must be located in a good location; a location that is highly secure and easily accessible from airports and business districts if you want to maximize business profits.

In general, in business, it cannot be overstated that the location you chose to start your business is key to the success of the business, therefore entrepreneurs are willing to rent or lease a facility in a conspicuous place; a place where the demographic consists of people who are always looking for a place to stay and of course people who require purchasing power and lifestyle.

If you make the mistake of renting or leasing a facility for your hotel facility business in a not-too-visible or hidden location simply because it is cheap, then you must be prepared to spend more on promoting the business.

Most importantly, before choosing a location for your hotel facility business, make sure you conduct a thorough feasibility study and market survey first. You can’t rule out the possibility that you will come across a similar business that has just closed shop in the place where you want to open yours.

These are some of the key factors that you need to consider before choosing a location for your hotel facility business;

  • The demographics of the location
  • The demand for hotel facilities and other services provided by hotels in the location
  • The purchasing power of residents
  • Accessibility of the location and proximity to airports, event centers, tourist places, train stations, etc.
  • The number of hotel facilities and accommodation-related service companies in the location
  • Local laws and regulations in the community/state
  • Traffic, Parking, and Safety et al.

starting a hotel business: technical and personnel details

It is important to state that no special technologies are needed when it comes to opening a standard hotel facility, but you will need the following startup inventory and equipment (flat-screen TVs, sound systems, ingredient, and beverage supply, beds and pillows, cabanas, shelves, refrigerators, kitchen utensils, washing machines, and bar equipment, among others.

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Washing machines, dryers, industrial irons, ironing boards, washing machine connection fees (sewer connection), cleaning supplies, soap, detergent, bleach, starch/adhesive, laundry bags, bills for washing and folding, bathroom supplies, racks, hooks/hangers et al.

It is important to note that these pieces of equipment can be purchased fairly used if you are operating on a low budget. When setting up a small office for your hotel facility, you will also need a computer, printer, relevant software applications, telephones, pagers, copier, scanner, fax machine, first aid kit, and uniform.

When it comes to choosing between renting or leasing a facility for your hotel facility business, the size of the hotel facility you want to own and your total budget for the business should influence your choice. In addition, you will need a facility that is in a serene environment, a facility that is large enough to accommodate the number of rooms you have in mind.

As for the number of employees you are expected to start the business with, you will need to consider your finances before making the decision. When it comes to starting a large-scale standard hotel facility business, you will need the services of the following professionals; Director of Operations (you may fill this position), Hotel Managers, Bartenders/Baristas, Sales and Marketing Executive (Business Developer), Accountant, Facilities/Maintenance Manager, HR Manager and Administrator, Customer Service Executive/Officer reception, security guards and cleaners.

Additionally, you would need a minimum of 10-15 key staff members to effectively run a medium-scale but standard hotel facility.

The service delivery process of a hotel facilities business.

Service delivery when it comes to hotel facilities is highly dependent on the organization, the facilities they have to offer, and what they hope to achieve.

A commercial hotel supply facility for customers. once they can win over the customer based on the services they intend to offer and the facilities available; customers make the payment directly to the hotel, specifying the type of rooms, services, and the number of days they intend to stay at the hotel. If it is a full service that a client paid for, it means that they will enjoy all the services and facilities available in the hotel.

The services and facilities will include food delivery to rooms, laundry, gym, conference room, Internet facilities, photocopier, telephone and fax services, and swimming pool, among others.

It is important to state that a hotel facilities company can decide to improvise or adopt any business process and structure that guarantees efficiency and flexibility; the hotel facility business process mentioned above is not cast in stone.

Starting a hotel business: the marketing plan

The fact that the services and facilities provided by hotels are key to our social lives means that there are sure to be more players in the industry, no matter which location you choose to start yours. In essence, you must create creativity and innovations if you are to create a market for yourself within the available market in your community, city, state, or country.

So when you’re crafting your marketing plans and strategies for your hotel facilities, make sure you create a compelling personal and company profile. In addition to your qualifications and experience, it is important to state in practical terms what you have been able to accomplish in the past as it relates to your line of business. This will help increase your chances in the market when you market your services.

These are some of the platforms you can use to market your hotel facilities;

  • Introduce your business by sending introductory letters along with your brochure to travel agencies, households, hospitals, religious organizations, clubs/organizations, campuses and NGOs, and others inside and outside your hotel location.
  • Open your hotel premises with a party to capture the attention of the residents who are your first targets
  • Participate in roadshows in specific communities from time to time to market your services and facilities
  • Advertise your hotel in community newspapers, local TV and radio stations
  • List your hotel in yellow pages ads (local directories)
  • Leverage the Internet to promote your hotel facilities
  • Engage in direct marketing and sales
  • Encourage the use of word-of-mouth marketing (referrals)
  • Leverage the Internet to promote your business
  • Join the local chambers of commerce and industries around you with the primary goal of networking and marketing your facilities and services; you are likely to get referrals from such networks
  • Hire the services of marketing executives and business developers to carry out direct marketing for you

Factors that will help you get the right product price

A key factor that will help you offer your facilities and services at the right price is to ensure that you keep operating costs to a minimum and focus your efforts on marketing and promoting your brand. In addition to the fact that this strategy will help you save costs, it will also help you get the right price for your facilities and services.

You can also try as much as possible to work with independent contractors and vendors; It will help you save costs to paying sales and marketing executives. So too, if you can secure a business partnership with travel and tour companies when it comes to getting referrals, then you will be able to get the price right and of course, maximize profits from your hotel facility business.

As for toiletries, kitchen ingredients, and other supplies, you need to effectively run your hotel facilities; You need to make sure that you buy your items directly from the manufacturers or wholesale distributors in fairly large quantities.

Strategies to increase your hotel’s brand awareness and create your corporate identity

If your intention of starting a hotel facility business is to grow the business beyond the city you are going to operate from to become a national and international brand by opening hotel facility chains and franchises, then you must be ready to start. spend money on promoting and advertising your brand.

No matter what industry you are in, the truth is that the market is dynamic and requires constant brand awareness and brand promotion to continue to attract your target market. These are the platforms you can leverage to increase your brand awareness and create the corporate identity for your hotel facility business;

  • Placing advertisements in both print media (newspapers and travel and tour magazines) and electronic media platforms
  • Sponsor relevant community events
  • Take advantage of the internet and social media platforms such as Instagram, Facebook, Twitter, youtube, google + et al to promote your facilities and services
  • Install your billboards in strategic locations throughout your city or state
  • Participate in roadshows from time to time in specific neighborhoods to raise awareness of your hotel facilities
  • Distribute your fliers and flyers to target areas
  • Communicate with travel agencies, homes, hospitals, religious organizations, clubs/organizations, campuses and NGOs, and others inside and outside the location where your hotel is located, informing them of the facilities and services you offer
  • List your hotel in local directories
  • Advertise your hotel facilities on your official website and employ strategies that will help you drive traffic to the site
  • Position our flexible banners in strategic positions in the location where your hotel is located.
  • Make sure all your staff members wear your branded shirts and all your vehicles and trucks/vans are well marked with your company logo etc.

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