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Okay, dreamers – you have decided to go ahead and launch a travel business. In fact, you’re going to open a fancy new hotel!
You have thought out an amazing concept delivering unparalleled guest service; it will dozens of awards; the media will gush at its brilliance.
Back on planet earth, however, the next step would be to calm down for a while and write a business plan, right?
It’s like the road map to an opening. However, this is where most entrepreneurs get stuck.
Why? Many do not have the time, don’t know what to write or indeed even get started on the financials. But until you finish the business plan, you will not be able to get the financing either. So you end up with ideas sitting in your head, not realizing your dream.
The reality is that it is not that difficult to make a good hotel business plan. It is merely a structured summary of your idea. Most people try to include everything about their hotel concept in the plan. But this leads to an indigestible super-novel – AKA a mess.
They key is knowing what to include, and what not to include – but essentially you need to create a clear road map, something that will excite investors rather than bore them to death like many business plans full of redundant information end up doing.
One of the main challenges is that after reading the first page of most business plans, I often still do not fully understand what the hotel is all about. For investors and lenders it is crucial they can quickly comprehend your plan, without reading the whole document.
We have put together a guideline with ten critical points you must include in your hotel business plan (the same structure could be used for other parts of the travel industry, with tweaks to the product):
1. Executive summary
This exists of two parts:
- Mission Statement: Intro: a one-line company description of your hotel (not two lines or a paragraph). It explains why you are in business or the huge problem you are solving which currently is not being met. For example, in the case of Qbic Hotels: “Moving modular hotels into under-utilized real-estate to reduce build-out cost and time.”
- Objectives: What do you hope to accomplish? (“Reach an annual occupancy of 90%”).
2. Company analysis
More detailed information on the USPs (unique selling points) of your hotel concept.
3. Industry analysis
Information on the current industry trends, state of the marketplace and how this will impact the hotel. Sounds obviously, but this is needed as investors want to be sure you really understand the hotel industry.
4. Customer analysis
In-depth information on your target market, including geographic, demographic, socio-economic, psycho-graphic, behavioral segmentation details.
Which are the types of guests who will mostly stay at your hotel? Explain how your hotel will meet the needs of these main segments in terms of location, amenities and services.
Basically, how will consumers answer this question: “Why this hotel?”
5. Competitive analysis
A study of your local competition or global concept competitors, with each of their strengths, weaknesses, occupancy rates and market share (SWOT analysis).
And don’t forget the most important part: what differentiates the new propertly from them and what makes it stand out.
6. Strategic plan
This exists of three parts:
- Marketing: How exactly will you attract customers/guests? How will you position yourself? What will your message be to the different segments of your business mix? How will your direct marketing work? What is the plan for your hotel website, SEO, SEM and SMM? Will you do offline promotion?
- Distribution: Which third party channels will you use and how will you manage availability? What technology will you need?
- Revenue management: What pricing and yield techniques will you use? What will your payment and cancellation policies be?
7. Operations plan
Logisitcs, responsibilities and more, including:
How will you run the hotel? How much staff and supervisors will you need? What are their job descriptions / responsibilities? What background and experience should they have? When should they start? What are your service standards? Will you develop manuals? Which supplier will you use? How will you manage inventory?
8. Management team
Include the bios of your team. Focus on what uniquely qualifies you to make your hotel a success.
9. Financial plan
Provide the start-up costs of the hotel (capital investment), the ingoing business costs, operational expenses and revenue projections for the next five years. Include KPI like expected occupancy, ADR (average daily rate) and REVPAR (revenue per available room).
If you are raising money, outline how much funding will be needed and when. Explain how you will generate a return on investment for investors, or when lenders will be paid back.
10. Key milestones
These are the most important achievement which once they have been completed, will make your hotel more likely to succeed.
Therefore, you should consider:
- Location selection
- Permits and licenses
- Build-out/construction of the property
- Staff and training
- GOP break-even
- NOI break-even
- 10% Ebitda
Each time one of the key milestones is achieved, the risk of lenders or investor decreases. And once your last key milestone is reached, chance of success is more or less guaranteed.
Provide any other relevant information here. Don’t clutter the main sections of your hotel business plan with too many details. Rather support them with attachments in this part.
Many people have great business ideas. But the difference between dreamers and entrepreneurs is the mindset. One question to always ask: are you actually ready to ship your idea from teh drawing board to the marketplace?
The first step is to put your ideas on paper, so I hope this guide will help you write a persuasive hotel business plan.
NB: More from Xotels.
NB2: Kid idea image via Shutterstock.