The hotel business is booming, but starting and growing a hotel can be quite complex. As the industry continues to segment into inns, mom and pops, and major chains, it also faces immense pressure from guest houses, hostels, time share condos, and a plethora of rooms for rent in private homes. Many small hoteliers try to provide something for everyone and end up growing too quickly in ways that cannot be sustained. A written business plan provides a vital road map for controlling and directing your growth. It is also your key to securing important funding from outside investors and lenders.
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Business Planning 101
Your business plan contains a snapshot of your hotel as it exists today along with a detailed growth plan for the next three to five years. It lays out your goals, identifies obstacles, and provides in-depth plans for meeting your goals. It is a living document that will evolve as your hotel grows and changes.
The executive summary provides a clear overview of your entire business plan, so it is normally written last. Investors and lenders use the first page to decide whether to read more, so lay out your most important information up front. Describe your hotel, summarize your market analysis proving that a new hotel is needed, and list your unique qualifications for meeting that need.
The company analysis explains your hotel as it exists today. Talk about its founding, current business stage, and legal structure. Outline important past milestones, such as securing key funding or hiring a noted hotel manager. Provide more information about your hotel’s unique qualifications. For example, it might be located in an historic building or have the only day spa in town.
The industry analysis can seem overwhelming, as most cities feature dozens to hundreds of hotels. However, you need to focus only on your relative market, which is the portion of the hotel industry that mirrors your hotel. Is it a small mom and pop? A boutique hotel with upscale service? A resort destination with on-site restaurants and activities? Decide what niche you want to target, and then research the projections and trends that affect your niche. Create a plan for overcoming any hurdles that you find in your research.
Anyone who has ever traveled is a potential hotel customer, but not all of them are your potential customers. Who will choose your hotel? Are they traveling for business or pleasure? Are they in town for a wedding or other special event? Do they travel with small children? How often will they visit your city? Are they price conscious? Do they want the latest amenities? Luxury bedding and robes? Are they rugged outdoors types? Figure out your customers’ demographics and how they decide where to stay. Then identify their unique needs and draw up a plan for meeting those needs.
Not all hotels in town are your direct competitors. Those that target a different market, as well as restaurants and other businesses that target a different need within your market, are known as indirect competitors. Describe each direct competitor, or hotel that targets your market, individually and explain how your hotel differs from theirs. Group your indirect competitors into a single unit and talk about them as a whole.
Marketing hinges on the four P’s: Product, Price, Place, and Promotion. Product refers not only to your hotel nights, but also any products or services you sell. Price is how much you charge for each product, along with your rationale for each price point. Place is your hotel’s physical location, as well as your website and any third-party booking sites you use. Promotion is your way of convincing customers to stay at your hotel, while Customer retention is how you will get them to come back.
The operations plan describes your methods for meeting the goals you defined earlier. Everyday short-term processes are the individual tasks involved in booking reservations, checking in customers, cleaning and maintaining the hotel, handling luggage, settling accounts, and so forth. Long-term processes are the ways you will meet defined business goals, such as hitting a certain occupancy rate or adding a restaurant.
A strong management team will convince financiers that your hotel has solid business potential. Highlight your key team members’ backgrounds, focusing on those elements that prove their ability to grow a company. A strong advisory board can be helpful in overcoming weaknesses if you can show how the board will directly affect the company’s growth.
Heavily analyzed by potential investors and lenders, a hotel’s financial plan can be extremely tough to develop. This section delineates individual revenue streams by projected timeline for implementation and relative importance, discusses outside funding sources, and summarizes past and future Income Statements, Cash Flow Statements, and Balance Sheets. You must make key assumptions that are both reasonable and verifiable through an analysis of similar companies. Finally, a good exit strategy demonstrates your understanding of the market and willingness to capitalize on profitability.
Your full financial projections belong in the appendix, along with any other documentation that helps prove your claims. Attach letters from key partners, patent details for any new automation technology, and similar documents.
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