Looking to start a hotel business? We’ve rounded up some tips to help you get started. Although the competitors in the hotel market do exist, the hotels themselves are far from a dying breed. Here, we’ll be dealing with everything from the hotel market to the financial metrics.
The hotel market
In the US alone, there are more than 74,000 hotels that generate more than $100 billion per year in revenue. But let’s start with the basics: how does one classify a hotel? Well, by several characteristics; for instance, whether it provides a full or limited service and whether it’s located in an urban area, its price or rate level, the number of rooms, and whether it’s independent or a part of a chain of hotels. The classification of a hotel is an important factor in starting a hotel business because knowing exactly what type of hotel you want to start is the first step of this endeavor.
Understanding the hotel revenue
Hotels generate the majority of their profit from renting out their rooms. That being said, there are other key revenue sources to take into account, such as food, alcohol, and amenities, as well as renting conference and meeting rooms. These are add-ons for hotel guests that they can pay for, and they’re often under-appreciated by hotel owners. You can improve your hotel operations with Room Raccoon to ensure you’re maximizing on every aspect of your hotel, and not wasting resources where you could be making revenue.
External factors that affect the hotel market
The performance of the hotel industry is affected by several factors. For instance, domestic trips by residents make for a ton of impact here, especially when it comes to business travel; total nights spent away from the home influence the accommodation demand directly. Then, there are inbound trips by foreign visitors to take into account – trends in international visitor arrivals and their length of stay impact the demand for accommodation hugely.
Changes in consumer confidence also make a substantial impact on decisions made by individuals regarding expenses on traveling and entertainment.
Finally, consumer spending levels: essentially, when consumers are spending more, they are more likely to pay for travel and accommodation and this is especially important when it comes to selling luxury.
Financial metrics
The key financial metrics in the hotel market are profit, purchases, wages, rent and utilities, and various other expenses. Industry profit is obviously measured as earnings before interest and taxes. Purchases regard bedding and room supplies, beverages, and meals. Wages for the front desk, concierge, and the rest of the back-of-house activities are also an essential factor that needs to be taken into consideration. As a rule of thumb, rent and utilities comprise roughly 7% of hotel revenue. Finally, other expenses, such as digital marketing costs and royalty fees also need to be taken into account.
Hotel market competitors
The market leaders in the hotel industry, when it comes to market share, are Hilton Worldwide Holdings Inc. which holds 13.7%, Marriott International Inc. which holds 13.5%, and InterContinental Hotels Group PLC which holds 7.5%. The rest of the market goes to smaller players. This means that 65.3% is essentially more or less a free market, making the hotel industry extremely lucrative for new hotel endeavors.
Hospitality SEO
Hotel SEO is crucial for any hospitality business and it can really improve profitability and customer loyalty. For example, high-quality content is a great way to increase brand awareness and it enables a business to keep ahead of the competition. A reputable SEO company can analyze trends and gain a significant first-mover advantage which gives businesses a fighting chance over competitors. So, if you are looking for ways to increase your hotel’s visibility, SEO is the right way to go.
Accommodation and service
Accommodation is what sets hotel businesses apart. It is, naturally, absolutely essential in the hotel market. Although people aim for luxury, service plays a key role in running a successful hotel business. Think of the accommodation and service aspect as your signature factor in your future hotel business. It can be the general vibe of your hotel, an interesting idea that sets you apart, extremely quality service, a cool discount idea, it can virtually be anything. For instance, a comfy bathtub can make a ton of difference, as people will gladly choose your hotel based on pure luxury.
Similarly, the cleanliness of your hotel can either make or break your reputation. Bedding and towels should be spotless, so you should buy an Industrial Laundry Machine to take care of your linens. Bathrooms should be shining, communal areas should be maintained and your restaurant/bar/breakfast room should have a 5-star hygiene rating.
Additionally, nothing can tarnish a hotel’s reputation faster than a guest encountering bed bugs. So regularly inspecting rooms and working with a professional bed bug treatment service is essential. Ensuring you use a comprehensive Hotel Bed Bug Treatment service is critical for keeping your hotel pest-free. This extra step can not only protect your reputation but also reassure your guests that their comfort and safety are a priority. These are the basics, so if you can’t get this right, you need to re-evaluate. Make the accommodation and service that you offer your signature move – this is exactly what will have people swarming towards your hotel, rather than to the sea of competition.
Employees
Last, but definitely not least, it is important that you look for an elite workforce. You are in the service industry, after all; how your employees treat your visitors is essential in making sure that your customers become returning ones.
This is a rough picture of the essence of a hotel business. Take the hotel market under consideration, and make sure that you understand hotel revenue, the external factors that affect the market, and your competition. Get introduced to the financial metrics, emphasize quality service and accommodation and hire a great team of employees.