Opening up a hotel seems to be romanticized in the same way opening a restaurant is. But like opening a restaurant, there is a market to watch and politics involved. The goal, of course, is to generate something of a long term revenue, but more than that, also building a business with purpose. This will take money that will more than likely have to be loaned out from a rich and generous friend, or a bank, and either case will likely require a stout business plan. Whether you’re starting a local boutique hotel, or the nicest resort in Cabo, here is a feel of the industry.
Investors and Sectors
As a new investor, it’s wise to know who is investing in the same market from where, and why. America alone is seeing a huge increase in offshore investors. Due to high visiting rates from eastern countries, Asia retains the top spot as the largest offshore lodging investor. HNA Group, a chinese firm, has a 25 percent stake in Hilton Worldwide Holdings. It’s the largest shareholder among hoteliers. European buyers are also ramping up investments in American hospitality. According to The Investor, from January to May 2017, Europe accounted for 38 percent of all foreign investment into U.S. hotels – a 13 percent increase on the same time frame last year. However, most of these offshore investors are only interested in higher tiered hotels and resorts. There is still a huge market for other hotel sectors.
According to RealtyMogul.com, hotel sectors can be divided into five major segments:
- Deluxe: Four Seasons, Ritz Carlton, Wyndam Luxury Resorts
- Luxury: Sheraton, Hilton, Westin
- Upscale: Crowne Plaza, Doubletree, Embassy Suites
- Midscale: Holiday Inn, Best Western, Comfort Suites
- Economy: Rodeway Inn, Econo Lodge, Motel 6
Deciding which hotel sector to invest in largely depends on the approved loan. Dividing the loan evenly to accommodate guests with hotel essentials, up to date amenities, and originality will be the largest hurdle.
Amenities and Hotel Technology
What separates hotels and motels is the amount of amenities. The paying guests dub such amenities either necessary or unnecessary. Hotels may offer larger rooming, indoor spa and pool, late-night entertainment, and meals. While a motel may only offer the bare essentials of a standard room and direct parking access.
However, the beating heart of any sized hotel, motel and resort is the technology that it’s run on. This is an essential part of running a business for hospitality that many investors deem unneeded. When it comes to hotel technology, more often than not, hotels carry a maze outdated and inefficient technologies. According to Stay’NTouch.com, a fully integrated hotel system is more efficient, more secure, and cheaper to run. Hotels can easily view and compare all data sets and get insights about their guests and their business using online virtual data rooms. These insights that can help improve service levels, provide personalised experiences and create more revenue opportunities.
Steps to Launch
The first and most obvious step is to get the money. Most likely from a bank. Banks are more than willing to hand out loans so long there is a wise, and detailed business plan laid out nice and pretty for them to look over.
- Location is essential to setting a hotel apart from it’s competitors. It must be visible, preferably in a high traffic area. A convenient location near nightlife entertainment, restaurants, and shopping. In the right location, where competitors are not fulfilling all customer needs, a hotel can thrive.
- Planning for capital and having a set business plan is what will be thoroughly studied by lenders. Whether the plan is to buy, build or renovate, the investor is going to need a large sum of money to do so. Create a simple and persuasive hotel business plan to convince the lender that the stakes are in their favor. No savvy investor/lender will be attracted by a lack of planning.
- Originality is what sets apart one hotel from their neighboring competitor across the street. Developing a personality both in person and online is the ultimate marketing strategy. What makes this specific hotel unique, and other than price, why would guests stay at this hotel rather than it’s neighboring competitor?
Investing in a hotel isn’t just for those that are abnormally wealthy. Even if the entire hotel is built solely on a loan, it can still be done with a disciplined business plan and a well rounded marketing strategy.