What to Consider When opening a Hotel Business


Opening a hotel business can be a highly lucrative venture – but given its capital-intensive nature, one that should be thoroughly contemplated from all angles before you decide to take the plunge. In this article, we delve into the critical aspects – from finance to regulatory requirements to marketing – that prospective hotel owners should consider before deciding to open a hotel.

Analyze your Expenses 

The first thing you’ll need to consider when opening a hotel business is exactly how much it will cost – and whether you can afford the capital needed, or the debt you’d have to incur. 

Whether you’re building from scratch or buying an existing property, there are numerous costs that you will need to account for such as buying or building a property, renovating rooms, hiring staff, and investing in technologies like an inventory management system or a hotel guest app

At this stage, you’ll need to break down and analyze every aspect of your potential outflows, including construction or purchase costs, hiring and operating expenses, marketing budget, and contingency funds.

Work out your Revenue Projection

Once you’ve determined the costs, or outflows, of your business, the next thing you’ll need to consider is your revenue or inflow you can expect to generate to validate if it will, in fact, be a profitable venture. 

To determine how much revenue you can expect to generate, begin with some research around the revenue regional competitors typically generate, including factors like demand patterns, typical price points in the area, and the target market you’ll be catering to. 

For example, is your pricing and revenue generation strategy focused on catering to a high volume of budget travelers with low-price value services? Or will you focus on a niche demographic of wealthy travelers through an exclusively priced 5-star hotel?

Read Up on Regulations

One of the most crucial aspects, other than finances, to consider before opening a hotel business is any necessary legal or regulatory aspects involved. Hotels require several types of licenses and permits such as business licenses, signage permits, and special permits for amenities like swimming pools or a spa. 

Food and beverage outlets will need to comply with food safety regulations, and you’ll also need an alcohol license if you plan to serve liquor at your hotel. Relevant regulations may even dictate several aspects of the building itself – for example, the types of materials used in construction, the number of emergency exits, or fire systems. 

What we’ve listed here is by no means a comprehensive overview of all the legal aspects you’ll need to consider. You’ll most likely want to consult with a lawyer experienced with the hospitality industry in your area to successfully navigate these requirements.

Focus on Funding

Once you have an idea of the expenses involved and regulations needed, you’ll need to look at how you’ll generate funding. Is your new venture something you can fund yourself – and if so, for how long? It’s important to remember that with the large overhead involved in a hotel business, your new venture may not be immediately profitable, even if it proves highly popular. 

With this in mind, you’ll also want to consider exploring various funding options, such as bank loans, private investors, or partnerships.

Read also: Hotel business plan Nigeria

Select the Perfect Location

Now that you have funding secured, congratulations! You’re ready to start moving into (or constructing) your property. And as in any kind of real estate, what matters most is location. When choosing the site of your hotel, consider factors such as proximity to tourist spots, accessibility to transit, and the scenery – and how these factors contribute to the overall positioning and offering of your hotel. 

Other than off-site benefits that are easily accessible to your guests, you’ll also want to consider which features and amenities will appeal to your target market – such as office spaces for business travelers, a daycare service for family travelers, or a high-end spa for luxury travelers.

Craft Your Messaging and Marketing 

The last thing you’ll need to consider before opening your brand and marketing. After all, you may have the best property in the world, but you won’t generate revenue if no one has ever heard of it. Marketing your hotel business has two key parts you’ll need to consider. First, crafting a unique brand identity that reflects your price point, caters to your target market, and highlights the most valuable benefits and unique propositions about your property. 

The second part is delivering that message to your target market in a variety of ways, including through social media, online booking platforms, and of course a website on which it’s easy to make a booking, welcoming your very first guests to your brand new property. 


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