Hotel Business Plan
If you’re opening a hotel or expanding your current hotel business, a solid business plan is essential for success.
The following hotel business plan template outlines the key elements to include in your plan. This template is perfect for various hotel business concepts, including luxury, boutique, budget, and resort-style accommodations.
Sample Business Plan For a Boutique Hotel
Below is a free sample of each of the key sections of a comprehensive business plan for a hotel business.
I. Executive Summary
Business Overview
[Hotel Name], located at [insert location here] is a new, small, business-class hotel focused on providing rooms with a clean and modern character that is attractive to business visitors to the area. The hotel’s rooms will feature modern furniture, high-end technology, and modern accessories.
Hotel’s Services
[Hotel Name] will offer all the standard services including daily room cleaning, free local calls, cable TV, a free wireless network, and various other amenities. Additionally, the hotel will include a conference room seating up to 15 for meetings with conference call landlines, wireless internet, and a large flat screen.
Customer Focus
[Hotel Name] will primarily serve business travelers who seek comfort, necessary amenities, and simplicity of services.
- 50,000 business visitors to the area last year according to the Madison Office of Tourism
- The typical business traveler is male (77%) and in a professional, managerial, or technical occupation (53%) according to the National Household Survey of Business Travel
- 55% between the ages of 40 and 49, 16% 18 to 29, 18% 50-59, 10% 60+according to the National Household Survey of Business Travel
- Average household income of $85,900 according to the American Hotel & Lodging Association Lodging Industry Profile
In addition to this business travel market, the hotel will likely see some leisure travel and international guests.
Management Team
[Hotel Name] is led by [Hotel Owner] who has been in the hospitality industry for 20 years. While [Hotel Owner] has never developed a hotel from the ground up, he has worked in the hospitality industry most recently as a general manager, and has held various positions in the management chain over the last 20 years. As such [Hotel Owner] has an in-depth knowledge of the hotel business including the operations side (e.g., running day-to-day hotel operations) and the business management side (e.g., staffing, marketing, etc.).
Success Factors
[Hotel Name] is uniquely qualified to succeed due to the following reasons:
- There is currently no business-class hotel in the community we are entering. In addition, we have surveyed the major corporations with local business offices and determined that they have frequent visitors who would use our location when launched.
- Our location is central to the downtown, airport, and corporate district of the city.
- The team has a track record of success in the hospitality industry.
- XYZ and ABC corporations announced plans to create new corporate centers in the city over the next two years and existing hotel businesses will not be able to handle the increased capacity of business visitors traveling to the city to visit these companies.
Financial Highlights
[Hotel Name] is currently seeking $3,000,000 to launch. Specifically, these funds will be used as follows:
- Hotel design/build: $2,500,000
- Working capital: $500,000 to pay for marketing, salaries, and land costs until [Hotel Name] reaches break-even.
Topline projections over the next five years are as follows:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $1,980,125 | $2,832,031 | $3,409,160 | $3,783,447 | $4,100,713 |
| Total Expenses | $1,375,530 | $1,561,763 | $1,866,977 | $2,027,436 | $2,107,349 |
| EBITDA | $604,595 | $1,270,268 | $152,183 | $1,756,011 | $1,993,364 |
| Depreciation | $372,760 | $372,760 | $372,760 | $372,760 | $372,760 |
| EBIT | $231,835 | $897,508 | $1,169,423 | $1,383,251 | $1,620,604 |
| Interest | $164,782 | $144,184 | $123,586 | $102,988 | $82,391 |
| Pre-Tax Income | $67,054 | $753,324 | $1,045,837 | $1,280,263 | $1,538,213 |
| Income Tax Expense | $23,469 | $263,663 | $366,043 | $448,092 | $538,375 |
| Net Income | $43,585 | $489,661 | $679,794 | $832,171 | $999,839 |
II. Company Overview
Who is [Hotel Name]?
[Hotel Name], located at [insert location here], is a new, small, business-class hotel focused on providing rooms with a clean and modern character that is attractive to business visitors to the area. The hotel’s rooms will feature modern furniture, high-end technology, and modern accessories.
[Hotel Name] was founded by [Hotel Owner]. While [Hotel Owner] has been in the industry for some time, it was in [month, date] that he decided to launch [Hotel Name]. Specifically, during this time, [Hotel Owner] took a business trip to Madison, WI. During his trip, [Founder’s Name] could not find a mid-level, business-class hotel in the downtown area. After several visiting the hotel options in the city and learning of the expected growth in business travel to Madison, [Hotel Owner] recognized an opportunity that a business-class hotel would enjoy significant success in this area.
Specifically, the local demographics, business demographics, and competitive situations in the Madison location were so favorable to the success of this business idea that he knew it would work.
[Hotel Name]’s History
Upon returning from Madison, surveying the local customer base and online market, estimating business travel growth, and finding a potential location, [Hotel Owner] incorporated [Hotel Name] as an S-Corporation on [date of incorporation].
The hotel development operations are currently being run out of [Hotel Owner] home office. Once the land rights have been purchased, operations will be run from an on-site location to ensure that every detail is being thought out and completed.
Since incorporation, the hotel has achieved the following milestones:
- Found site location and signed the land deed purchasing rights to the land.
- Developed the hotel’s name, logo, and website located at www…
- Hired an architecture firm to create a blueprint for the hotel
- Taking bids from construction crews and electrical engineering firms
- Determined equipment leasing and financing requirements
- Began recruiting key employees with experience in the industry
[Hotel Name]’s Services
Below are [Hotel Name]’s initial service offerings and amenities provided.
- Single Rooms
- Studio Apartment-style VIP Rooms for long-term stays
- Conference Room
| Single Rooms |
|---|
| Two Double Beds or One Queen Bed |
| Workspace |
| Modern Bathroom |
| Daily Cleaning |
| Toiletries |
| Complimentary Coffee, Tea, and Chocolate |
| TV with Cable |
| Wireless Network |
| Studio Apartment Style VIP Rooms |
| Sitting Room area with Workspace, Couch and TV. |
| California King bed |
| 1 Luxury Bathroom with Jacuzzi and Shower |
| Daily Cleaning |
| Toiletries |
| Coffee, Tea, and Chocolate |
| Fully-equipped kitchenette with oven, microwave, refrigerator, pots, pans, etc |
| Dining area with dining table |
| Flat Panel TV |
| Wireless Network |
| Complimentary Bath Robe, Slipper, and Bathroom Amenities |
| Conference Room |
| Comfortable seating for 15 at a board-room style table |
| Conference call capable phones |
| Wireless internet |
| Elevated large LCD screen compatible with DVD, VHS, and computer connection |
| Water dispenser |
| Large windows with automatic shades |
Hotel Design
[Hotel Name] will develop a 20,000-square-foot hotel with key elements that will include the following:
- Upper and Lower Floors with 18 Single
- 2 Studio Apartment Rooms
- Conference Room
The hotel location will have 15 dedicated parking spots which should suffice even in peak parts of the travel season as guests will often not have cars with them
[Hotel Name] plans to be open 7 days a week, 24 hours a day, to take care of all guests’ inquiries and issues as they may arise. As demand dictates, we may extend or reduce our services and hours.
III. Industry Analysis
[Hotel Name] directly or indirectly competes with all hotels near our hotel locations that offer business travel services or small conference space. Local competition will come from small meeting spaces, inns, motels, bed & breakfasts, condo complexes, and hotels. Direct competition will come from companies offering business-class services.
Industry Statistics & Trends
This competitive industry is served by the American Hotel and Lodging Association. The AH&LA, citing Smith Travel Research, reports that the average occupancy rate for the industry is 60%. The association calculates over 47,000 properties of 15 rooms or more, 4.3 million guest rooms, annual revenue of $133 billion, an average of 1 billion room nights sold per year, and approximately $27 billion in net profits.
Large companies include Marriott International, Hilton Hotels, Carlson Hotels, and Starwood Hotels and Resorts dominate the US hotel industry.
Major industry product lines are room fees and sales of food, alcoholic drinks, and merchandise. Room fees account for 70% of industry revenue, food is 15% and alcohol is 5%.
- “In the United States, tourism is currently the third-largest retail industry, behind automotive and food stores.” – AH&LA
- “For a hotel stay, 35% of all business travelers spend one night, 26% spend two nights, and 39% spend three or more nights.” – AH&LA
- The profitability of individual companies depends on efficient operations as most costs are fixed.
- An effective marketing strategy is a must.
- A growing number of travelers will demand higher levels of discounts and more free services while expecting higher levels of service as a response to the recession and the hotel industry’s desperation to fill rooms.
IV. Customer Analysis
Profile of Target Market
[Hotel Name] will serve the business travel market of [Insert location] and its immediate surrounding area.
The market we serve is value-conscious and has a desire for high comfort and basic amenities geared toward the business traveler’s lifestyle.
The AH&LA writes that “the typical business room night is generated by a male (65%), age 35-54 (50%) employed in a professional or managerial position (44%), earning an average yearly household income of $85,900. Typically, these guests travel alone (56%), make reservations (90%), and pay $112 per room night.”
The business traveler market is also described by the National Household Travel Survey of US Business Travel as follows:
“The typical business traveler is likely to be male; work in a professional, managerial, or technical position; be 30 to 49 years old; and have an income well above the population average.
Men account for more than three-fourths (77%) of business trips. This compares to nonbusiness travel where men take 54% of the trips and women 46%.
Those who consider their occupation to be professional, managerial, or technical account for over half (53%) of all business trips. This occupational category represents only about 40% of the general population. Sales or service workers account for the next largest share of business trips, 28%. On the other hand, clerical/administrative workers account for less than 4% of business trips even though they represent almost 12% of the population.”
| Total | Male | Female | |
|---|---|---|---|
| Total population | 314,107,084 | 154,515,159 | 159,591,925 |
| AGE | |||
| 30 to 34 years | 6.60% | 6.80% | 6.50% |
| 35 to 39 years | 6.30% | 6.40% | 6.20% |
| 40 to 44 years | 6.70% | 6.70% | 6.60% |
| 45 to 49 years | 6.90% | 7.00% | 6.90% |
Customer Segmentation
We will primarily target the following three market segments:
- The U.S. Business Travel Market: Travelers to [Insert Area, City] corporations and events.
- The U.S. Leisure Travel Market: Travelers to [Insert Area or City] tourist attractions such as the Museum of Fine Art and the Annual Film Festival, as well as visitors to social events such as weddings.
- International Tourists: Last year, there were over 903 million international tourist arrivals worldwide, with a growth of 6.6%. International tourist receipts were $856 billion, according to tourismroi.com.
V. Competitive Analysis
Direct & Indirect Competitors
The following hotels are located within a 10-mile radius of [Hotel Name], thus providing either direct or indirect competition for customer acquisition:
The Madison Concourse Hotel
The Madison Concourse Hotel is Madison’s leading hotel and has been in business for 20 years. The hotel offers a wide array of services and amenities that you typically find at a hotel.
The Madison Concourse offers luxury amenities, many of which are not necessary for business travelers, and charges a high price for those amenities ($200-300 per night). Furthermore, the hotel does not offer a small conference room, only larger meeting spaces. Additionally, this hotel does not offer wireless internet in sleeping rooms.
The Edgewater Hotel
The Edgewater Hotel has been in business for 15 years. The Edgewater Hotel offers a variety of services and amenities all typical of the hotel and hospitality industry.
However, [Hotel Name] has several advantages over The Breakers Hotel including:
- Edgewater is priced at a premium because of its waterfront location
- Edgewater’s rooms are aging and in need of renovation
- Edgewater does not have studio apartment options for long-term stay
- Edgewater does not have meeting space
Doubletree Hotel Madison
Doubletree Hotel Madison is located four miles to the East of our intended location. Doubletree Hotel Madison has been in business for the past 10 years and is part of the Hilton family of hotels, allowing it to use centralized booking with Hilton and the Hilton loyalty points system.
[Hotel Name] has several advantages over Doubletree Hotel Madison including:
- Doubletree Hotel Madison does not have a central downtown location
- Despite the rooms being more modern than most existing, Doubletree Hotel Madison is still behind the time with no LCD TVs or Wireless Network.
While we expect that Doubletree Hotel Madison will continue to thrive based on the Hilton loyalty program, we expect that more and more customers will frequent [Hotel Name] based on the value offered for a similar price and more central location.
Competitive Pricing
| Madison Concourse | Edgewater Hotel | Doubletree | |
|---|---|---|---|
| King Room | $150-$200 | $200-$225 | $235-$265 |
| Executive suite | $250-$325 | $375-$400 | $325-$400 |
| Family Suite | $350-$425 | $400-$475 | $425-$500 |
Competitive Advantage
[Hotel Name] enjoys several advantages over its direct competitors. These advantages include:
- Location: [Hotel Name]’s location in the downtown area, gives the best access to the airport, corporate center, downtown conference centers, and restaurants. The hotel also offers adequate parking making it easy for customers to relax upon arrival.
- Business Amenities: The small conference room allowing visitors to meet within the hotel, will be highly valued by some groups. WiFi throughout the hotel will make working remotely simple for business visitors.
- Management: Our management team has years of business and marketing experience that allows us to market and serve customers in the same manner as our most sophisticated competitors.
- Relationships: Having visited the community for a number of years, [Hotel Owner] knows all of the local leaders, newspapers, and other influences. As such, it will be relatively easy for us to build the brand and awareness of the hotel.
VI. Marketing Plan
The Marketing Plan describes the type of brand [Hotel Name] seeks to create and the hotel’s planned promotions and pricing strategies.
The [Hotel Name] Brand
The [Hotel Name] brand will focus on the hotel’s unique selling points:
- Offering business-class rooms and services
- Offering a central location in the downtown area
- Providing excellent customer service
Promotions Strategy
[Hotel Name] expects its target audience to be business travelers and leisure travelers mainly from the U.S. and surrounding locations in the Midwest. The hotel’s promotions strategy to reach these individuals includes:
Phone Prospecting
[Hotel Name] will assign salespeople to contact area corporations to arrange for bulk corporate rates for their visitors depending on the volume of visitors they will have.
Public Relations
We will contact all local and regional area newspapers and television stations to tell them about the hotel opening and the unique selling point of [Hotel Name].
Advertising
[Hotel Name] will initially advertise on travel websites, which are frequently used these days to book travel due to their ease of use and reviews.
Ongoing Customer Communications
[Hotel Name] will maintain a website and publish a monthly email newsletter to tell local corporations and past customers about promotions and events.
Pre-Opening Events
Before opening the hotel, [Hotel Name] will organize pre-opening events designed for prospective national customers, local customers, and press contacts. These events will create buzz and awareness for [Hotel Name] in the area.
Pricing Strategy
[Hotel Name]’s pricing will fluctuate based on the season and occupancy percentages using a computerized yield management system, but pricing will always place the hotel in the mid-range, below luxury offerings, and above hotels and motels in the area that cannot be billed as business class. Customers will feel they receive great value when patronizing the hotel.
VII. Operations Plan
Functional Roles
To execute [Hotel Name]’s business model, the hotel needs to perform many functions including the following:
Administrative Functions
- General & Administrative functions including legal, marketing, bookkeeping, etc.
- Sourcing and storing supplies for the hotel and conference space
- Hiring and training staff
- Corporate sales to individuals and groups
Hotel Services
- Housekeeping
- Check-in focused on customer service
- Janitor/maintenance personnel to keep the hotel clean and in working order
Milestones
[Hotel Name] expects to achieve the following milestones in the following [] months:
| Date | Milestone |
|---|---|
| [Date 1] | Finalize Land Rights |
| [Date 2] | Design and build out [Company Name]hotel |
| [Date 3] | Hire and train initial staff |
| [Date 4] | Launch [Company Name]hotel |
| [Date 5] | Reach break-even |
VIII. Management Team
Management Team Members
[Hotel Name] is led by [Hotel Owner] who has been in the hotel industry for 20 years.
While [Hotel Owner] has never developed a hotel from the ground up, he has worked in the hotel industry most recently as a general manager, and has held various different positions in the management chain over the last 20 years. As such [Hotel Owner] has in-depth knowledge of the hotel business including the operations side (e.g., running day-to-day operations) and the business management side (e.g., staffing, marketing, etc.).
[Hotel Owner] has also worked real estate consultant on a part-time basis over the past 10 years. Specifically, he has worked in contracting positions to help real estate developers with their hotel launch plans as well as their operations plans once the hotel has been launched.
[Hotel Owner] graduated from the University of ABC where he majored in Hotel and Restaurant Management.
Hiring Plan
[Hotel Business Owner] will serve as the hotel president. To launch the hotel, we need to hire the following personnel:
- Housekeeping staff (5 to start)
- Hotel Manager (will manage day-to-day operations of the hotel)
- Assistant Manager (will manage hotel operations nights and weekends)
- Service Staff (4 full-time to work check-in and guest services – allowing for at least 1 staff person to be on duty at all times)
- Sales Staff (2 full-time) will target and book corporate clients in sleeping rooms and the meeting space
- Legal, Bookkeeping, and other Administrative functions (3 staff)
IX. Financial Plan
Revenue and Cost Drivers
[Hotel Name]’s will come from hotel room occupancy and conference room rentals.
The major costs for the hotel will be the salaries of the staff and the cost of maintaining the standard of the hotel. In the initial years, the hotel’s marketing spend will be high, as it establishes itself in the market.
Capital Requirements and Use of Funds
[Hotel Name] needs to secure funding of $3,000,000 to launch the hotel. The capital will be used for funding capital expenditures, manpower costs, marketing expenses and working capital.
Specifically, these funds will be used as follows:
- Hotel design/build: approximately $2,500,000
- Working capital: approximately $500,000 to pay for marketing, salaries, and lease costs until [Hotel Name] reaches break-even
Key Assumptions & Forecasts
Below please find the key assumptions that went into the financial forecast and a summary of the financial projections over the next five years.
| Number of available rooms | Per location |
|---|---|
| Year 1 | 20 |
| Year 2 | 20 |
| Year 3 | 20 |
| Year 4 | 20 |
| Year 5 | 20 |
| Average daily rate | $155 |
| Average Daily rate growth | 3% |
| Annual Lease (per location) | $25,000 |
| Yearly Lease Increase % | 2.50% |
5 Year Annual Income Statement
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
|---|---|---|---|---|---|---|
| Revenues | ||||||
| Product/Service A | $151,200 | $333,396 | $367,569 | $405,245 | $446,783 | |
| Product/Service B | $100,800 | $222,264 | $245,046 | $270,163 | $297,855 | |
| Total Revenues | $252,000 | $555,660 | $612,615 | $675,408 | $744,638 | |
| Expenses & Costs | ||||||
| Cost of goods sold | $57,960 | $122,245 | $122,523 | $128,328 | $134,035 | |
| Lease | $60,000 | $61,500 | $63,038 | $64,613 | $66,229 | |
| Marketing | $20,000 | $25,000 | $25,000 | $25,000 | $25,000 | |
| Salaries | $133,890 | $204,030 | $224,943 | $236,190 | $248,000 | |
| Other Expenses | $3,500 | $4,000 | $4,500 | $5,000 | $5,500 | |
| Total Expenses & Costs | $271,850 | $412,775 | $435,504 | $454,131 | $473,263 | |
| EBITDA | ($19,850) | $142,885 | $177,112 | $221,277 | $271,374 | |
| Depreciation | $36,960 | $36,960 | $36,960 | $36,960 | $36,960 | |
| EBIT | ($56,810) | $105,925 | $140,152 | $184,317 | $234,414 | |
| Interest | $23,621 | $20,668 | $17,716 | $14,763 | $11,810 | |
| PRE-TAX INCOME | ($80,431) | $85,257 | $122,436 | $169,554 | $222,604 | |
| Net Operating Loss | ($80,431) | ($80,431) | $0 | $0 | $0 | |
| Income Tax Expense | $0 | $1,689 | $42,853 | $59,344 | $77,911 | |
| NET INCOME | ($80,431) | $83,568 | $79,583 | $110,210 | $144,693 | |
| Net Profit Margin (%) | - | 15.00% | 13.00% | 16.30% | 19.40% |
5 Year Annual Balance Sheet
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Cash | $16,710 | $90,188 | $158,957 | $258,570 | $392,389 | |
| Accounts receivable | $0 | $0 | $0 | $0 | $0 | |
| Inventory | $21,000 | $23,153 | $25,526 | $28,142 | $31,027 | |
| Total Current Assets | $37,710 | $113,340 | $184,482 | $286,712 | $423,416 | |
| Fixed assets | $246,450 | $246,450 | $246,450 | $246,450 | $246,450 | |
| Depreciation | $36,960 | $73,920 | $110,880 | $147,840 | $184,800 | |
| Net fixed assets | $209,490 | $172,530 | $135,570 | $98,610 | $61,650 | |
| TOTAL ASSETS | $247,200 | $285,870 | $320,052 | $385,322 | $485,066 | |
| LIABILITIES & EQUITY | ||||||
| Debt | $317,971 | $272,546 | $227,122 | $181,698 | $136,273 | |
| Accounts payable | $9,660 | $10,187 | $10,210 | $10,694 | $11,170 | |
| Total Liabilities | $327,631 | $282,733 | $237,332 | $192,391 | $147,443 | |
| Share Capital | $0 | $0 | $0 | $0 | $0 | |
| Retained earnings | ($80,431) | $3,137 | $82,720 | $192,930 | $337,623 | |
| Total Equity | ($80,431) | $3,137 | $82,720 | $192,930 | $337,623 | |
| TOTAL LIABILITIES & EQUITY | $247,200 | $285,870 | $320,052 | $385,322 | $485,066 |
5 Year Annual Cash Flow Statement
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| CASH FLOW FROM OPERATIONS | |||||
| Net Income (Loss) | ($80,431) | $83,568 | $79,583 | $110,210 | $144,693 |
| Change in working capital | ($11,340) | ($1,625) | ($2,350) | ($2,133) | ($2,409) |
| Depreciation | $36,960 | $36,960 | $36,960 | $36,960 | $36,960 |
| Net Cash Flow from Operations | ($54,811) | $118,902 | $114,193 | $145,037 | $179,244 |
| CASH FLOW FROM INVESTMENTS | |||||
| Investment | ($246,450) | $0 | $0 | $0 | $0 |
| Net Cash Flow from Investments | ($246,450) | $0 | $0 | $0 | $0 |
| CASH FLOW FROM FINANCING | |||||
| Cash from equity | $0 | $0 | $0 | $0 | $0 |
| Cash from debt | $317,971 | ($45,424) | ($45,424) | ($45,424) | ($45,424) |
| Net Cash Flow from Financing | $317,971 | ($45,424) | ($45,424) | ($45,424) | ($45,424) |
| SUMMARY | |||||
| Net Cash Flow | $16,710 | $73,478 | $68,769 | $99,613 | $133,819 |
| Cash at Beginning of Period | $0 | $16,710 | $90,188 | $158,957 | $258,570 |
| Cash at End of Period | $16,710 | $90,188 | $158,957 | $258,570 | $392,389 |
