Open A Hotel: 5 Steps From The Idea To The Opening

Receive guests who live out their own creativity, offer a relaxing stay – and at the same time develop successful independence . This is what hotel management staff and career changers dream of when they open their own hotel. 

The prospects couldn’t be better because the tourism industry is booming and promising high revenues. But before a hotel can be founded, there is a lot of work and a lot of costs for the founders . However, if you successfully complete the checklist and five steps in the following article, you can make your dream of your own hotel come true. 

hotel

The term hotel is well known, but anyone who wants to open a hotel should know the exact definition. Because only if certain criteria are met is it actually a hotel and not a pension or other type of accommodation. A hotel must have the following characteristics:

  • a reception
  • daily room cleaning
  • at least one restaurant for house guests
  • more than 20 guest rooms

Those who are not deterred by these definitions can start the preparation and work through the checklist in order to open their own hotel.

Step 1: Check the requirements and concept

If you want to open a hotel, you should first decide which concept will be used to establish it . This decision defines the prerequisites. In total, there are three different concepts for founding a hotel:

TAKEOVER

When the business is taken over, an existing hotel will be continued. This has the advantage that the exact costs of opening a hotel are known and many hurdles when setting up a hotel are eliminated. 

In addition, a solid customer base and business relationships are already in place. However, this concept limits the possibilities of implementing your own business idea, because employees and customers often react skeptically to changes.

START-UP

A start-up at a completely new location , on the other hand, offers the opportunity to plan every detail of the hotel according to your own ideas and to build something of your own right from the start. 

However, this is associated with high costs and new construction or conversion costs are difficult to calculate. In addition, a lot of advertising is necessary when opening a hotel, because potential guests first have to find out about the offer.

FRANCHISE

In the franchise system , the hotel is opened under a certain brand. The advantage is that this brand is known by the guests and inspires trust. In addition, there are international advertising campaigns, the experience of the associated franchise operations and a lot of other assistance. 

However, when opening a hotel, one’s own ideas are completely restricted, because everything is predetermined , from design to structure. In addition, each participant in the program has to pay an admission fee and a fixed portion of the turnover to the franchise partner every month.

Step 2: business plan , financial plan and costs

Anyone wishing to apply for financial assistance, for example to receive support from banks or business partners, must submit a business plan and financial planning . But regardless of this, these plans make sense when setting up a hotel in order to determine your own future plans. The following items should be included on the checklist when opening a hotel:

FOUNDER

Even if theoretically anyone can open a hotel, experience and professional competence are important prerequisites for possible financial aid . That is why it makes sense to list your own specialist knowledge in detail and, for example, to mention experience in the catering or tourism industry. 

In addition, it generally looks more professional when a team of founders at founding a hotel has different skills, for example one person is familiar with business administration and another person has years of experience as a hotel manager.

REC H TSFORM

Many hotels are founded as limited companies  or sole proprietorships, but other legal forms can also be used depending on the initial situation . If you want to open a hotel, you should answer the following questions regarding the legal form:

  • Is the foundation made alone or in a team ?
  • How much equity is available for the hotel?
  • Should investors and business partners get involved in setting up a hotel?

The selected legal form for the hotel is then noted in the business plan with a detailed justification .

LOCATION

This point is used to record why the decision was made for a particular location . Because only if enough guests reach the hotel can it prevail over the competition in the long term. Therefore, the location on the checklist at the hotel establishment should meet the following criteria:

  • Tourist highlights in the area: Events , classic sights, but also a sea, lakes and mountains are suitable for this .
  • Quiet location : In order to be able to relax, a calm atmosphere is important. Even city hotels are therefore never allowed to stand at busy streets or intersections.
  • Good transport connections : In cities, good transport connections are easy to guarantee. But a train station or at least a bus stop nearby also makes sense in the country, because not all guests travel by car .
  • As few competitors as possible : An area with few hotels is ideal. If this is difficult to do, at least the developed concept should differ from the other hotels.

COMPETITION

Anyone who wants to open a hotel must also know the market potential for the hotel idea and the local competition. Google Maps can be a first aid. It helps to select five to seven competitors and analyze exactly which strategies and target groups they are betting on. 

In addition, it would be possible to have a look around on site or even check into a possible competitor hotel. When setting up a hotel, you can collect valuable information in discussions with guests and staff.

OFFER & UNIQUE SELLING PROPOSITION

There were thousands of hotels in world, so the competition is fierce. That is why every hotel should define what exactly is being offered and which unique selling point is behind it. Clean and cozy rooms with free internet have long been standard. Therefore, unique selling points could be, for example, an unusual design, a wellness oasis or childcare for families. When opening a hotel, however, these characteristics should always fit into the budget.

TARGET GROUP

Often the target group arises from the location of the hotel. In the city center, business travelers and short-term travelers tend to be guests, in the countryside mainly those looking for relaxation and by the sea or in the mountains, sports enthusiasts. When opening a hotel, it is important to determine the demographic characteristics such as age, place of residence, income , occupation and, above all, the leisure activities of the potential guests.

FINANCIAL PLANNING

Price calculation is a difficult subject when opening a hotel. Because here it is determined what prices the guests would pay for an overnight stay, services, food and drinks. Added to this are the costs of running the hotel and the salaries of the employees. It is therefore worthwhile to make an exact comparison of the income and expenses . Competitor prices and industry key figures can help with orientation.

COSTS

There are numerous costs involved in founding a hotel. This includes, above all, the tenant or the purchase of a property is expensive, but the personnel costs should also flow directly into the calculations, since the customers cannot be looked after alone. Especially not if there are several rooms.

In general, the costs of opening a hotel can be divided into three areas:

  • Start-up costs : All costs that arise before the actual start-up, for example for advice, training, fees, etc.
  • Fixed costs : All costs that always arise regardless of the occupancy of your room, for example lease and ancillary costs, insurance, etc.
  • Variable costs: All costs that rise or fall with sales, for example for entertaining guests

When calculating the costs, it makes sense to also ask experts from the industry and always plan a certain budget for the “unforeseen”. Because an unscheduled repair or an extraordinary customer request can occur at the hotel opening at any time.

FINANCING

Normally, the opening of a hotel cannot be financed with equity, as particularly large sums of money are incurred for furnishing and further investments. Therefore, there are three ways to enable funding :

  • a loan from the bank
  • the involvement of investors
  • Open public funding programs at the hotel

The key is that while credit increases risk, it guarantees freedom of choice. Those who join forces with investors , on the other hand , have to be prepared for foreign opinions and regular returns.

MARKETING

At this point, an exact customer analysis pays off when establishing a hotel. Because if you know the preferences and behavior of the target group, you can also determine the right marketing channels. 

A website with the most important information is also mandatory for hoteliers. In addition, it can be worthwhile to be present on various social media platforms or to distribute classic flyers. 

In addition, there are the common booking portals, which have now established themselves as a marketing strategy. Opening offers and discounts are also particularly suitable to attract the first guests when the hotel opens. 

The selected measures are then summarized and justified in the business plan.

Step 3: apply for business registration and permits

Anyone wishing to open a hotel must also have certain permits. This includes, for example, the business registration , which every hotel owner can apply to the trade office.

In addition, a so-called restaurant license is required for the restaurant within the hotel. Depending on the state and municipality, this permit can either be applied for at the mayor’s office, public order office, district office or the public order office. 

Those who do not serve alcohol or offer drinks and food exclusively for hotel guests do not need to establish a restaurant license with the hotel.

In addition, GEMA approval is required if music is played in the hotel. And all employees who come into direct contact with food need a valid health certificate.

Step 4: final preparations

Before the hotel can officially open, all previous steps should be completed. In addition, various insurance policies can now be taken out so that the hard work of the past few months is not destroyed by small mistakes. These include, for example, business liability insurance and business interruption insurance .

It is also worthwhile to focus on the team when founding a hotel. Because reliable and resilient employees are particularly important at the beginning . It is therefore important to check the employees again and possibly expand the team. At the same time, the selected marketing channels should also be used to inform the guests about the upcoming opening.

Step 5: opening the hotel

Now the time has come! After months of planning and preparation, it’s time to open the hotel. This also marks the start of the official implementation of the business plan, which of course can always be adapted to the current situation. 

As soon as the first guests appear, it is always worthwhile to ask for their opinion and general mood. This is the only way to continuously adapt the offer at the start-up hotel to customer needs, which in turn has a positive effect on online reviews and bookings as a whole.

Open information about the corona pandemic at the hotel

Due to the effects of the current corona pandemic , special regulations apply to hotels, which differ depending on the federal state. In Lower Saxony, for example, there is a maximum occupancy limit of 50 percent. In addition, common hygiene and protective measures must be observed in a restaurant.

Conclusion

Opening a hotel cannot be done quickly on the side. This project takes a lot of time and careful preparation so that the guests feel comfortable and their own concept can assert itself in the long term. If you are not put off by this and also have an unusual idea, you can start planning and implementing the five steps on the checklist.