Is a Hotel Business Profitable?(Yes, Read on 50 tips)

Is a Hotel Business Profitable?: Being a small business owner comes with challenges unique to the size and function of the business.

The small business owner has to handle all the challenges of selling.

Delivering, financing, managing and growing the business with little or no staff, while trying to make it a success.

The most important of all is to retain the interest of all stakeholders like customers, vendors and team to build momentum in a short span of time.

Running a small business can be hugely rewarding both personally and financially.

A hotel is an establishment that provides lodging and, often times, meals and other services for travelers and other paying guests.

A motel, on the other hand, provides lodging for motorists in rooms usually having direct access to an open parking area.

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Is a Hotel Business Profitable?:
Is a Hotel Business Profitable?

Is a Hotel Business Profitable?

Hotels that consist of 25 or more rooms provide 83.6% of industry revenue (with 62.7% of industry revenue coming from guest room rentals, 12.5% coming from food and alcohol sales, 4.2% coming from conference and meeting rooms and 4.2% coming from other charges), while hotels that offer fewer than 25 rooms only constitute 3.8% of industry revenue.

Motels provide about 12.6% of industry revenue.

The relative proportion of revenue from each of these segments has been relatively stable over the past five years, although motels experienced some growth at the expense of higher-priced hotels during the recession.

According to IbisWorld, there are 74,372 hotels, and the hotel industry generated $166.5 billion in revenue in the United States alone last year. This represents an annual growth rate of 4.7% over the past 5 years. Industry profits were $26.0 billion, and wages paid to hotel employees totaled $42.7 billion.

Is a Hotel Business Profitable?

1. Start with a simple question like: “What shall we do?”

It can be helpful to have people who are bright and creative join you for a casual brainstorming session.

Start with a simple question like: “What shall we do?

The idea is not to create a business plan, just to generate potential ideas.

Many of the ideas will be duds, and there will be quite a few ordinary ones.

But a few may emerge that have real potential.

2. Consider your talents, experience, and knowledge when selecting a concept.

If you have a particular skill set or talent, consider how these resources can be applied to meeting some sort of market demand.

Combining skill and knowledge with a market demand increases your odds of having a successful business idea.

For example, you may have worked with electronics as an employee for many years.

You may have noticed a demand in your community for a particular form of electrical work.

And combining your experience with the market demand can allow you to attract customers.

Is a Hotel Business Profitable?

3. Define your goals.

Do you want financial independence, eventually selling your business to the highest bidder?

Do you want something small and sustainable.

That you love doing and from which you want to derive a steady income?

These are the things that are good to know very early on.

Is a Hotel Business Profitable?

4. Create a working name.

You could even do this before you have an idea for the business.

And if the name is good, you may find it helps you define your business idea.

As your plan grows, and things begin to take shape, the perfect name may come to you.

But dont let that hinder you in the early phases.

Create a name that you can use while you plan and don’t hesitate to change it later.

  • Always check to see if the name is being used by somebody else before selecting it.
  • Try to create a name that is simple and memorable.

5. Define your team.

Will you do this alone, or will you bring in one or two trusted friends to join you?

This brings a lot of synergy to the table, as people bounce ideas off each other.

Two people together can often create something that is greater than the sum of the two separate parts.

6. Think of some of the biggest success stories

Think of some of the biggest success stories in recent times, such as John Lennon and Paul McCartney; Bill Gates and Paul Allen; Steve Jobs and Steve Wozniak; and Larry Page and Sergey Brin. In every case, the partnership brought out the best in both sides of the equation.

Is a Hotel Business Profitable?

7. Think about the areas

Think about the areas that you are either weak in, or have little knowledge of.

Finding partners compatible with your personality who can fill in your knowledge.

Or skill gaps is an excellent way to ensure your business has the resources you need to succeed.

8. Choose your partners wisely.

When choosing the person or people youre going to build the business with, be careful.

Even if someone is your best friend, it doesn’t mean that you will partner well in a business operation.

9. Start it with a reliable person.

Things to consider when choosing your co-leaders and support cast include:

Does the other person complement your weaknesses?

Or do both of you bring only one set of the same skills to the table?

If the latter, be wary as you can have too many people doing the same thing.

While other things are left unattended.

Is a Hotel Business Profitable?:
Is a Hotel Business Profitable?

10. Do you see eye to eye on the big picture?

Arguments about the details are a given, and are important for getting things right.

But not seeing eye to eye on the big picture.

The real purpose of your business, can cause a reaction that may be irreparable.

Be sure your team cares about them and buys into the purpose as much as you do.

11. Spot real talent beyond the certifications

If interviewing people, do some reading on how to spot real talent.

Beyond the certifications, degrees or lack thereof.

The area an individual is educated in is not necessarily the area they are most talented in.

An interviewee may have a background in accounting for example.

But their experience and your assessment of them indicates they may be a better fit helping with marketing.

Is a Hotel Business Profitable?

12. Create a business plan.

A business plan helps to define what you think you need to launch your business, large or small.

It summarizes the sense of your business in a single document.

It also creates a map for investors, bankers.

And other interested parties to use when determining how they can best help you.

And to help them decide whether or not your business is viable.

13. Write your business description.

Describe your business more specifically, and how it fits into the market in general.

If you are a corporation, LLC, or sole proprietorship, state that, and why you chose to go that route.

Describe your product, its big features, and why people will want it. Answer the following questions:

  • Who are potential customers? Once you understand who they are and what they want, come up with a marketing strategy.
  • What price are they willing to pay for your product or service? Why would they pay for your product or service over your competitor’s?
  • Who are your competitors? Do a competitive analysis to identify key competitors.
  • Find out who is doing something similar to what you are planning, and how have they been successful.
  • Just as important is to find the failures, and what made their venture fall apart.

Is a Hotel Business Profitable?

14. Write an operational plan.

This will describe how you will produce or deliver your product or service and all costs.

  • How will you create your product? Is it a service that you are offering, or if it’s more complex— software, a physical product like a toy or a toaster — how will it get built? Define the process, from sourcing raw materials to assembly to completion, packaging, warehousing, and shipping. Will you need additional people? Will there be unions involved? All of these things must be taken into account.
  • Who will lead, and who will follow? Define your organization, from the receptionist up to the CEO, and what part each plays in both function and financials. Knowing your organizational structure will better help you plan your operating costs, and fine-tune how much capital you will need to function effectively.

15. Getting feedback.

Friends and family make great resources for asking questions and getting feedback.

Don’t hesitate to use them as your sounding board.

Needing to increase the size of your premises.

This happens more often than expected.

Once the stock starts piling up, you may find it ends up in your living room, bedroom and the garden shed.

Think rental of storage premises if needed.

Is a Hotel Business Profitable?

16. Write the marketing plan.

Your operational plan describes how you will produce your product.

And your marketing plan describes how you will sell your product.

When you create your marketing plan, try to answer the question of how you will make your product known to potential customers.

  • You will want to include the type of marketing you will use. For example, will you use radio ads, social media, promotions, billboards, attend networking events, or all of the above?
  • You will also want to define your marketing message. In other words, what will you say to convince customers to choose your product? Here, you want to focus on your Unique Selling Point (also known as USP). This is the unique advantage your product has to solve your customers problem. For example, you may be lower cost, faster, or higher quality than your peers.

17. Come up with a pricing model.

Start by checking out your competitors. Know how much are they selling a similar product for.
Can you add something to it (add value) to make yours different and hence make it a more enticing price?

18. Take Note.

Competition isn’t just about the goods or services themselves.

It is also about your social and environmental credibility.

Consumers are increasingly conscious of the need.

To show that your business is concerned with labor conditions and isn’t damaging the environment.

Certification endorsements from reputable organizations.

Such as labels and stars, can reassure customers that your product.

Or service is more aligned with their values than one lacking the certification.

19. Cover the financials.

The financial statements translate your marketing and operational plans into numbers — profits and cash flow.

They identify how much money you will need and how much you might make.

Since this is the most dynamic part of your plan, and perhaps the most important for long-term stability.

You should update this monthly for the first year, quarterly for the second year, and then annually after that.

Is a Hotel Business Profitable?

20. Cover your startup costs.

How are you going to finance your business initially?

The bank, venture capitalists, angel investors, Small Business Administration (SBA), your own savings.

These are all viable options. When you start a business, be realistic.

You will probably not roll out of the gate making 100 percent of whatever you project.

So you need to have enough ready reserve to fund things until you are really up and running.

One of the surest roads to failure is under-capitalization.

  • What price do you intend to sell your product or service for?
  • How much will it cost you to produce?
  • Work out a rough estimate for net profit—factoring in fixed costs like rent, energy, employees, etc.

21. Come up with an executive summary.

The first part of a business plan is the executive summary.

Once you’ve developed the other parts, describe the overall business concept.

How it will be monetized, how much funding you will need, where it stands currently.

Including its legal standing, people involved and a brief history.

And anything else that makes your business look like a winning proposition.

22. Secure start-up costs.

Most businesses require capital to start.

Money is typically required to purchase supplies and equipment.

As well as keep the business operational for the period before your business becomes profitable.

The first place to look for financing is yourself.

23. Do you have investments or savings? I

f so, consider using a portion to fund your business.

You should never invest all your savings into a business due to the risk of failure.

In addition, you should never invest money put aside for emergency savings.

Experts recommend having three to six months of income put aside for this purpose.

Or money you will need over the next few years for various obligations.

Is a Hotel Business Profitable?

24. Consider a home equity loan.

If you have a home, looking to get a home equity loan can be a wise idea, since these loans are typically easily approved (since your home acts as collateral), and interest rates are typically lower.

  • If you have a 401(k) plan through your employer, consider borrowing against the plan.
  • Plans typically allow you to borrow against 50% of your account balance up to a maximum of $50,000.

25. Consider saving ahead as another option.

If you have a job, save a portion of your monthly income over time to cover your start-up costs.

  • Visit a bank to inquire about small business loans or lines of credit.
  • When doing this, always visit many providers to ensure you are getting the best rate.

26. Manage your running costs.

Keep a close eye on your running costs and keep them in line with your projections.

Whenever you see something spent wastefully.

Like electricity, phone plans, stationery, packaging.

Look around and estimate how much you really need.

And minimize or remove the cost in every way possible.

Think frugally when you start up, including renting items.

Instead of purchasing them and using pre-paid plans for services your business needs.

Instead of locking yourself into long-term contracts.

27. Have more than the minimum.

You may determine it will take $50,000 to start your business, and that’s fine.

You get your $50,000, buy your desks and printers and raw materials.

And then then the second month arrives, and you’re still in production.

And the rent is due, and your employees want to be paid, and all the bills hit at once.

When this happens, your only likely recourse will be to pack it in.

If you can, try to have the reserves for a year of no income.

Is a Hotel Business Profitable?

28. Pinch those pennies.

Plan to keep purchases of office equipment and overheads to a minimum when starting up.

You do not need amazing office premises, the latest in office chairs and pricey artwork on the walls.

A broom cupboard in the best address can be sufficient.

If you can artfully steer clients to the local coffee shop for meetings every time (meet them in the foyer).

Many a business start-up has failed by purchasing the expensive gizmos instead of focusing on the business itself.

29. Decide how to accept payment.

You will need to do something to get payment from your clients or customers.

You can get something like a Square, which is great for small businesses.

Since it requires the minimum amount of paperwork and the fees are minimal.

However, if you feel uncomfortable with technology.

You can inquire about a more traditional merchant account.

Note that PayPal, Intuit, and Amazon all offer similar solutions.

Make sure to look into all options before making a selection.

  • If you are online business, services like PayPal offer an excellent way to receive payment and make transfers.

Is a Hotel Business Profitable?

30. Consider finding an attorney or other legal advisor.

There will be many hurdles to leap as you go from working stiff to overworked.
And underpaid small business owner.
Some of those hurdles will be composed of stacks of documents with rules and regulations, ranging from building covenants to city ordinances, county permits, state requirements, taxes, fees, contracts, shares, partnerships, and more. Having somebody you can call when the need arises will not only give you peace of mind, it will give you a much-needed resource who can help you plan for success.

Tip: Choose someone with whom you “click and who shows that he or she understands your business. You will also want someone with experience in this area, as an inexperienced legal advisor could lead you to legal trouble or even fines and prison time.

31. Get an accountant.

You’ll want someone who can deftly handle your financials.

But even if you feel you can handle your own books.

You’ll still need someone who understands the tax side of running a business.

Taxes with businesses can get complicated, so youll need (at a minimum) a tax advisor.

Again, no matter how much of your finances they’re handling, this should be someone trustworthy.

32. Form a business entity.

You’ll need to decide what type of business entity you want to be.

For tax purposes and hopefully to eventually attract investors.

You will do this after you’ve decided whether you will need money from others.

Either in equity or loans and with the advice of your legal and accounting experts.

It is one of the last steps taken before you actually spend money or ask someone for money.

Most people are familiar with corporations, LLCs, etc..

But for the vast majority of small business owners, you will need to form one of the following.

  • A sole proprietorship, if you will be running (not including employees) this business on your own or with your spouse.
  • A general partnership, if you will be running this business with a partner.
  • A limited partnership, which is composed of a few general partners, who are liable for problems with the business, and a few limited partners, who are only liable for the amount in which they invest in the business. All share profits and losses.
  • A limited liability partnership (LLP), where no partner is liable for another’s negligence.

Is a Hotel Business Profitable?

33. Get a website.

If youre selling online, get your ecommerce in gear and either build a website, or have one built for you.

It’s your storefront, so anything and everything you can do to make people want to visit, and want to stay, do it.

  • Alternatively, if your business is more oriented toward the “in person experience, traditional marketing may be just as important. For example, if youre starting a landscaping business, focus on getting the word out to neighbors before starting a website
  • When making a website keep in mind that simplicity and clarity are key. A simple design that clearly states what you do, how you do it, and what you charge is most effective. When making your website, remember to emphasize why your business is the best solution to a clients problem.

33. Hire professional designers.

If you do decide to get a website, make sure it looks professional.

Designers may cost more initially, but a well presented and trustworthy site is essential.

It needs to look professional and work with ease.

If you are including money transactions.

Invest in security encryption and check that your money transfer companies are sound and reliable.

34. Discover your inner publicist.

You might truly believe in your product or service.
But in order for it to be successful, everyone else must believe in it too.
If you’re new to advertising and marketing or you dislike doing the sales pitch, now is the time to overcome such feelings and put on the publicist persona.
You need to develop an excellent short pitch to convince people they need your product or service, one that reflects the value, purpose and potential of what your business is offering.
Write down this pitch in many ways until you find one that you feel satisfied says it all and is something you can say readily. Then practice it like crazy!

Tip: Depending on your business, it could be appropriate to have interesting, eye-catching business cards printed.

35. Spend time developing an excellent social media presence.

This can be done well before the business is ready, increasing anticipation.

Use Facebook, Google+ and Twitter, and any other social media you participate in to build excitement and spread the word.

You want to build a buzz so that people will begin following your progress.

Be sure to choose business accounts for your business and keep your personal accounts separate.

The messages you send should be tailored differently, depending on which account you’re sending from.

Is a Hotel Business Profitable?

36. Implement your marketing and distribution plans.

With your product being built or services developed, and a reasonable expectation on when either is ready for selling, begin marketing.

  • If you will be advertising in periodicals, they will need copy or images at least two months in advance of publication.
  • If you will be selling in stores, get pre-orders sold, and shelf space allocated. If you will be selling online, get that e-commerce site ready to sell.
  • If youre offering a service, advertise in appropriate trade and professional journals, newspapers and online.

37. Secure space.

Whether its an office, or a warehouse, if you need more space than your garage or your spare bedroom, nows the time to get that.

  • If you dont generally need an office beyond your home, but may occasionally need meeting space, there are often places that can address those needs. A quick Google search on business meeting rentals [your city/state]” will deliver plenty of rental options in your area.
  • Be sure to contact your local municipality about zoning laws. Some types of small businesses cannot be ran out of a home, and it is important to ensure your business is operating within its proper zone.

38. Launch your product or your service.

When the product is all built, packaged, coded, online, and ready to sell.

Or when your services are fully worked out and ready to go, hold a special event to launch your business.

Send out a press release, announce it to the world.

Tweet it, Facebook it, let the word resound to all corners of your market—you have a new business!

Tip: Hold a party and invite people who can spread the word for you.

It doesn’t need to be pricey––purchase the food and drink from bulk discount stores and get family and friends to help with catering (you can give them a product or service in return).

39. Consider trading on eBay or Overstock.

  • Most direct selling companies have low start up capital compared to a traditional brick and mortar business. You can also break even rather quickly compared to the traditional business.

  • You can also consider trading on eBay or Overstock.

  • It is ok to start small with one or two products and then add more and more great ideas as you go!

Is a Hotel Business Profitable?

40. Dont be afraid to experiment with prices.

You should determine the minimum price for your product or service to break even.
But experiment with low-price or premium-price variations.
Always believe in yourself even when financial money is down hill.

41. Take risks.

Nothing is get without any risk. So, whenever there are chances of risk, do not fear.

Always provide value and service to those who may be your customers, even if they are not currently.

When they do need your product, you want them to think of you first.

With the advent of the internet, online businesses are probably the easiest way to start and very much less expensive in terms of start-up cost than a bricks-and-mortar counterpart.

42. Keep learning, and be adaptable to change.

Find buddies, mentors, local business-related organizations, Internet forums.
And BusinessHAB to discuss the daily details of running a small business.

It’s much easier for everyone to perform their core businesses well and prosper when they don’t waste time and energy reinventing the wheel” on housekeeping.

43. Be confident

Be confident and have a good mind about everything you do.
Also, be prepared for all the unsuccessful times that may occur.
When you have launched your business, take criticism and praise constructively.
These comments can be valuable education for starting your new business.
It will also help you to build your business to higher standards.

44. Meet with your local Small Business Development Center.

SBDC’s provide help during all stages of the business life cycle. They can help you create a stellar business plan to approach a lender with and their counseling is always free.

45. Identify your customer base.

In your business plan, you need to identify who you think will buy your product or service. Why would these individuals need or want your product or service? The answer to these questions should help to determine all other aspects of your business’ operations.

  • Here, it useful to ask questions of your service or product. For example, you may want to ask questions like, does my product/service appeal to younger or older people? Is my service affordable for lower-income consumers or is it a high-end purchase? Does my service appeal to people in specific environments?

46. Try and Know the Project growth.

All successful small businesses need to grow their customer base and production capabilities over the first few years of operating. Make sure you have identified how your business can and will respond to growth potential.

  • Be realistic with your growth potential. Keep in mind that growing your business requires a growth in investment capital as well. Projecting too much growth in too short a time period can quickly deter potential investors.

47. Manage your inventory efficiently.

Inventory management can make or break a small retail business, so manage it carefully to ensure that you’re maximizing every dollar spent. Invest in small inventory quantities at first and continuously monitor inventory numbers so you know what’s selling and what isn’t. Rotate inventory frequently to remove slow sellers and replace them with new items.

  • Inventory management is often dictated by the “shelf-life” of the product you are selling. For example, if you are dealing with perishable items, it is critical to move the oldest products out of your inventory first to maximize the profits of your business.

Is a Hotel Business Profitable?

48. Get your license.

Remember to register and acquire your small business license in the particular industry of your business. This step is important to ensuring that you’re running your business legally and according to industry regulations. Be sure to register for permits related to particular services you offer, like home repair or tax preparation, which could require registration and certification. You will not be able to hire effective employees if your business is not operating with the appropriate licenses and permits.

  • Not all businesses require licenses. Be sure to check with your local small business administration to see what your business requires.

49. Certify employees.

Employ individuals with certification in your business’ field, like certified public accounting or electrical repair technician. Having certifications for all employees will ensure that your employees are skilled at the highest level and will increase your client’s confidence in your business.

50. Stay organized.

Organization of your time, employees, finances and inventory is one of the keys to successfully run a small business. Develop a spreadsheet that helps you keep track of all the important details so you don’t have to keep them straight in your head, and make time — at least once a week — to review everything.

  • Organizing weekly, bi-weekly or monthly meetings between you and your staff can help ensure that everyone is on the same page and will help you avoid wasted time or overlap in the various responsibilities of your team members. Meetings can also help you analyze who is and who is not adequately performing the duties assigned to them.


  • Beware of people who ask for money before giving you business. Trade leads to prosperity through mutual gain, so a business should be willing to pay you to work for it. (A franchise store or home-sales business may have legitimate start-up costs, but they should reflect a reasonable cost of getting you started in the business so the managers would make money through your success, rather than just by getting you in.)

  • Beware of business propositions that seem to offersomething for nothing. They probably involve taking something from somebody—usually you. There are innumerable variations, some more polished than others. Examples include pyramid schemesand advance-fee fraud.
  • Need help planning your career? Whether you’re looking for a change or change finds you, career guidance from Right Management can help you be more successful in your job search.

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