“Great companies are built by people who never stop thinking about ways to improve the business – J. Willard.”
These words are true across métiers, including the hospitality sector. Stepping in the hospitality world as a business owner is a responsible undertaking and doesn’t happen overnight. An idea doesn’t translate to business without efforts.
Tasks like naming the hotel, obtaining a license, hiring staff are obvious, but what about less-heralded, equally essential tasks like getting insurance, registering for taxes, or measuring KPIs?
Like other businesses, starting a hotel requires meticulous planning, and lack of it would quickly result in the piling of workload. Instead of spinning the wheel and guessing where to start, follow these five steps to transform your dream into a reality.
Step 1: Draft a Business Plan
What do successful hospitality businesses have in common?
A great business plan.
According to research, a business plan increases sales growth and doubles the business by 30%.
You should have in-depth knowledge about the sector you’re entering before making any commitments. Knowing the ins and outs of the industry can be the difference between success and failure. The business plan should answer the following questions:
- What style of hotel (boutique, vacation rental, budget hotels, and family hotels) do you want to start?
- Do you want to build or buy a hotel?
- What is the location and size?
- Who is the target market?
- What are the startup cost and the ongoing cost of running a successful hospitality business?
- Who are the competitors?
- What are the marketing, HR, and operational budget?
Key takeaways: When starting a business, you need to apply for a license to run the hotel. Ensure the plan covers details about being compliant with federal regulations and the taxes you need to pay.
The golden rule: Carry out a market survey to understand the business’s potential, particularly at the location of your hotel.
Step 2: Build a Website
Look around you, from meals to grocery; everything is online. With an increasing number of internet users, people actively look for easy and comfortable ways to search for information – the same is true with the hotel industry. What you need is a hotel website. Not having one in the digital age is absurd and leaves a dent on your reputation even before the first guest steps in.
Having your website is an excellent way to showcase individuality and puts your brand in the forefront. In 2018, 66.7% of the total hotel bookings were direct website bookings. If you don’t want to lose potential customers, you need to build a vacation rental website.
The website is a reflection of your hotel’s unique personality. It’s a great way to showcase what sets your hotel apart from the local competition. Use your website to tell stories and make it the voice of your brand. Interestingly, a website is a great marketing tool for gaining organic search results and increasing website traffic.
Websites turn potential customers to guests and guests to returning guests. It has a significant impact on the perceived value and credibility of your business.
Key takeaway: For better branding, ensure that your official hotel or vacation rental website is the first thing that shows up on Google when someone searches for your hotel’s name. Furthermore, use the website to upsell potential guests with lucrative and attractive packages, including tours, activities, and travel.
The golden rule: No business in the hospitality industry can survive the digital age without an appealing and mobile-friendly website.
Step 3: Develop a Marketing and Pricing Strategy
What next after you’ve launched your website? Will a website alone suffice in bringing guests?
The challenge of being in the hotel industry is the overwhelming amount of competition. With the growing penetration of Airbnb, it becomes a challenging task to stand against the competition. Hitting the right metrics is crucial for increasing the booking. And this is where you need a marketing and pricing strategy.
From allocating more marketing budget during the peak season to using social media to reach out to potential customers – a marketing strategy will kick-start your hotel business journey. Figure out when things are busy, slow, and steady to adjust the marketing budget.
When it comes to pricing, give importance to yield management as it controls the profitability.
It’s a variable pricing strategy that sells the right room at the right time to the right customer. Using the right yield management strategy offers a bouquet of advantages like:
- Increase in revenue
- Decrease in errors
- Helps in understanding customer
- Results in effective segmentation
Also, focus on remarketing to your target audience because every 3 in 4 people abandon their cart while booking. While remarketing lowers the abandonment rate, it closes more bookings because remarketing displays promotional ads to people who recently visited your website.
You can even build a customer loyalty program because such customers function as your brand advocates and spread the message to others.
Key takeaway: A comprehensive hotel revenue management software will help you reach the customers, generate revenue, and understand the booking pattern.
The golden rule: Don’t just market the hotel; focus on marketing the location as well.
Step 4: Get an Insurance
The old-age proverb: “Prevention is better than cure” rings true for the hospitality sector because it is risk-prone.
As a vacation rental owner, you take risks by providing a place for people to stay with their belongings for a short duration. Aside from this liability cover, asset or property damage is another concern for a new hotel.
Having an adequate liability cover is non-negotiable for a healthy bottom line and ensures that a small event doesn’t jeopardize it.
The following gives you a list of insurance coverages for defending your hospitality business against unforeseen incidents.
- General liability insurance protects you from lawsuits and claims filed by customers for damage and injuries to their belongings.
- Equipment breakdown provides insurance against sudden damage to equipment due to breakdown. For example, the centralized air-condition and heating system fails; the hotel’s loss would be payable at the time of claim.
- Property insurance insures the physical structure, along with the cost of rebuilding or repairing. The insurance covers the cost when you’re forced to shut down the operations due to physical damages to the property.
- Cyber insurance liability protects your frontline system and crucial customer data against cyber-attacks.
- Liquor liability insurance safeguards your hotel from damage done by intoxicated guests.
- Employee dishonesty insurance pays you when hotel employees commit thefts.
- Worker insurance covers the employee against injuries and sickness resulting from situations at the hotel.
- Medical insurance covers all the employees and is usually a mandatory federal regulation.
Key takeaways: It’s your duty to protect your hotel, and insurance is not a piece of general knowledge. Therefore, find a comprehensive insurance policy that covers all your hotel needs. While the type of coverage changes from hotel to hotel, the basic coverages remain the same worldwide.
The golden rule: Insurance is not a one-day affair and requires renewal year after year. Ignoring hotel insurance is a strict NO.
Step 5: Hire and Train Staff
You may be a jack-of-all-trades, but you cannot run a hospitality business alone. You need staff who can represent your hotel’s values, ethics, and culture to the guests. These frontline workers can make or break the hotel’s first impression.
It’s easier said than done because the sector requires people with a different and specific skill set. With an employee turnover rate of 73.8%, finding the right hotel staff is a thorn in your side.
Look for the following traits in your staff:
- Guest-first attitude
- Ability to tolerate stress
- Team player
- Adhere to rules
- Ability to handle challenging situations with a smile
Key takeaway: Look for the right mix of a trait from the onset. The first batch of employees is the most important as they set the work atmosphere and become a role model for others. Adequately train your staff to provide an excellent guest experience.
The golden rule: Hire people who are active listeners because they can absorb instruction and take feedback constructively.
The hospitality business can be rough, but not if you have the secret formula for success. Your hotel’s opening and the first sales are just the tips of the iceberg because you need to grow continuously to stay afloat in the competitive hospitality sector.
Use these five steps as the starting point to build a hotel to make it the next big thing in your town or city. While these steps will help you launch the business, there is no perfect plan and no one-size-fits-all formula. Ensure you prepare thoroughly before starting a business because things will unexpectedly go awry.
For launching and running a successful hospitality business, you should adapt to the changing situation and become a problem-solver for seamless guest experience.