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Hotel Business Plan for starting your own hotel
Hotels are among some of the best businesses that you can start if you have the investment for it. As a matter of fact, if you want to invest a large sum of money in a business that has virtually zero risk, rental real estate business plan might just be the safest option.
We will give you a business plan for hotel that you can use to start your own hotel and make a lot of money while you are at it. This sample business plan for a hotel will follow the example of Hotel Intergalactic, a venture by John Abruzzi. Let us now see what business consultants have to say about this business.
Hotel Business Plan Summary
2.1 The Business
Hotel Intergalactic will be a 3-star hotel situated in downtown Los Angeles. The hotel will be registered with the local government and will be insured. The details of this business will be described in this executive summary for hotel with focus being on the way you can make lucrative profits by owning a hotel.
2.2 Management of Hotel Business
The next thing this business plan template for hotel needs to address is the way this hotel will be managed. For this, we will hire a manager to look after the day-to-day matters of the hotel. Other than the manager, one accountant and three assistant managers will be hired.
As this is a business plan for small hotel, we will not be hiring a lot of managerial staff to run it. The assistant managers will be responsible for procurement, operations, and customer service. The assistant managers will report to the manager who will act as an agent of the owner, John Abruzzi and will make decisions on his behalf in his absence.
2.3 Customers of Hotel Business
The customers of this free sample hotel business plan will be the following:
- People coming to visit Los Angeles.
- People who are in Los Angeles for business meetings.
- Los Angeles-based companies that need accommodation for their employees coming from other cities.
2.4 Business Target
The targets of Hotel Intergalactic are:
- Becoming the best hotel in Los Angeles.
- Starting to make a profit of $29,800 a month by the end of year 3.
- Expanding its services to at least other cities by the end of year 5.
Company Summary
3.1 Company Owner
Hotel Intergalactic will be owned by John Abruzzi. John has a master’s degree in hospitality management and has been working in the hoteling industry for more than half his life. He knows the business and is passionate about it. He also has enough money to start the business. Combined, all these factors make him the perfect owner in this hotel business plan pdf.
3.2 Why the Hotel is being started?
John Abruzzi is one of the most prominent hotel managers in the area and that means if he starts a hotel people will know he means business. In this example of a hotel business plan, the main reason for starting this business is that this is a profitable business opportunity.
3.3 How the Hotel will be started?
Step1: Making a Feasibility Report
The next thing this new hotel business plan needs to discuss is the feasibility report. At this stage, a survey will be conducted to chalk out the demand and availability of hotels in downtown Los Angeles area. Any good hotel business plan sample doc needs to make sure of the thing that a proper feasibility report is made and the hotel is designed according to the demand in the area.
Step2: Developing a Brand
This hotel business plan, just like a resort business plans needs to cover another important thing. This is developing a brand. As the hotel is going to be in the heart of Los Angeles, it is cardinally important to have a brand.
Step3: Establishing the Hotel
As the hotel is to be constructed from scratch, the best-case scenario would’ve been an empty plot but that is not the case as the downtown Los Angeles area is fully covered by a concrete jungle. For this purpose, an apartment building will be bought and will be modified into a hotel.
Step4: Promotion and Marketing
Last, but not the least, the hotel needs to be promoted on all media channels to make sure people are aware of its existence and it attracts business.
| Start-up Expenses | |
| Legal | $249,000 |
| Consultants | $0 |
| Insurance | $30,000 |
| Rent | $30,000 |
| Research and Development | $24,000 |
| Expensed Equipment | $55,000 |
| Signs | $4,200 |
| TOTAL START-UP EXPENSES | $392,200 |
| Start-up Assets | $345,000 |
| Cash Required | $360,000 |
| Start-up Inventory | $40,000 |
| Other Current Assets | $230,000 |
| Long-term Assets | $273,000 |
| TOTAL ASSETS | $1,248,000 |
| Total Requirements | $1,640,200 |
| START-UP FUNDING | |
| Start-up Expenses to Fund | $392,200 |
| Start-up Assets to Fund | $1,248,000 |
| TOTAL FUNDING REQUIRED | $1,640,200 |
| Assets | |
| Non-cash Assets from Start-up | $1,633,000 |
| Cash Requirements from Start-up | $382,000 |
| Additional Cash Raised | $51,000 |
| Cash Balance on Starting Date | $37,000 |
| TOTAL ASSETS | $2,103,000 |
| Liabilities and Capital | |
| Liabilities | $29,000 |
| Current Borrowing | $0 |
| Long-term Liabilities | $0 |
| Accounts Payable (Outstanding Bills) | $46,000 |
| Other Current Liabilities (interest-free) | $0 |
| TOTAL LIABILITIES | $75,000 |
| Capital | |
| Planned Investment | $1,640,200 |
| Investor 1 | $0 |
| Investor 2 | $0 |
| Other | $0 |
| Additional Investment Requirement | $0 |
| TOTAL PLANNED INVESTMENT | $1,640,200 |
| Loss at Start-up (Start-up Expenses) | $387,800 |
| TOTAL CAPITAL | $2,028,000 |
| TOTAL CAPITAL AND LIABILITIES | $2,103,000 |
| Total Funding | $1,640,200 |
Services of Hotel Business
A hotel business plan, unlike a home inventory business plan has a limited number of services. While a home inventory service business can offer a lot of services, a hotel business can only offer a few. Here’s an overview of the services Hotel Intergalactic will be offering:
- Accommodation
It goes without saying that the most important service offered by the hotel will be accommodation. The hotel will have 20 single-bed, 20 double-bed, and 10 twin-bed rooms for accommodating the guests.
- Banquet Service
The second most important service provided by Hotel Intergalactic will be that of a banquet. Three large halls will be made a part of the hotel and will be provided for everything from business meetings to birthday parties.
- Restaurant
The top floor of the hotel will have an open-air rotating restaurant which will be open for the guests in the hotel and any other person coming in just for a meal.
- Bar and Lounge
The hotel will also feature a bar and a coffee lounge. These services will also be available for both the guests of the hotel as well as other people.
Marketing Analysis of a Hotel Business
Marketing analysis is the study of the various variables of the market that can affect the successful operation of a business. Any business plan for a hotel operation needs to shed light on this in order for the hotel to be successful. Before we get into the details of this business plan sample hotel industry, we need to have a look at the industry as a whole. There are just above 90,000 hotels in the US and more than $194billion change hands in this industry annually.
5.1 Market Trends
Note
If you want to learn how to write a business plan for a hotel, you will have to closely study the trends of the industry. Just like making sample property management business plans, it is important to have an insight into the market before establishing a hotel.
The US hoteling market might have its seasonal ups and downs, but it has been noted in the past decade that the industry has seen a steady growth. The worth of this industry has increased from $133billion in 2009 to just under $200billion in the last decade. Industry experts and analysts are of the view that this industry will show a minimum of 5% growth by 2025.
Let’s now see more details of this hotel business plan outline.
5.2 Marketing Segmentation
One of the most important things to consider when planning any business is the market segmentation. You need to have a clear idea of the market segments that you are going to target and only then you can properly plan everything.
Apparently, the hoteling business is only for one market segment, the people who need a place to spend the night. However, there is more to the story that just that. Even a house painting business plan has multiple market segments. Any hotel can have customers and clients divided into a number of market segments. We will focus on four segments of the market via Hotel Intergalactic.
5.2.1 Individual Customers
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Most of our customers will fall into this category. These will be the people who show up at the hotel and want a room. We will make every possible effort to make sure these customers go home happy and consider us the next time they need a hotel.
5.2.2 Companies
Companies need accommodation for their employees when they are on a meeting. This segment of the market will give us bulk business and we will offer them discounts to make them our loyal customers.
5.2.3 Bar and Restaurant Customers
As the hotel will have a bar and restaurant, the people coming to visit them will also be a segment of the market for us.
5.2.4 Banquet Customers
As the hotel is to have three banquet halls, this will also be an important market segment for us. We will rent out the halls for conferences, parties, weddings, birthdays and any other function people need them for.
| Market Analysis | |||||||
| Potential Customers | Growth | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
| Individual Customers | 33% | 36,000 | 38,000 | 40,000 | 42,000 | 44,000 | 10.00% |
| Companies | 22% | 24,000 | 26,000 | 27,000 | 29,000 | 30,000 | 10.00% |
| Bar and Restaurant Customers | 20% | 22,000 | 23,000 | 25,000 | 27,000 | 28,000 | 10.00% |
| Banquet Customers | 25% | 30,000 | 32,000 | 34,000 | 36,000 | 38,000 | 11.00% |
| Total | 100% | 112,000 | 119,000 | 126,000 | 134,000 | 140,000 | 10% |
5.3 Business Target
Our business targets are:
- To maintain the highest standards of client satisfaction.
- To become a well-known name in the industry.
- To expand the business to all the major cities of the US.
Business Plan for Investors
5.4 Product Pricing
Hotel Intergalactic will offer the services at a price comparable to that of the competitors. We might keep the price a bit lower than that of the competition at the start to attract customers but once we earn name, we will increase the prices.
Marketing Strategy of Hotel Business
The next important thing for opening a hotel business plan is the marketing strategy of the hotel. No hotel management company business plan can be complete if it has no marketing strategy. To make a workable marketing strategy, we need to do the following.
6.1 Competitive Analysis
The competitive analysis for Hotel Intergalactic has revealed the following:
- The competition in this field is immense in the area we are working in. We need to provide something extra to get customers.
- We will provide complementary dinner to our customers. No hotel in the area does this and this will give us a competitive edge.
- We will subsidize the companies who want accommodation for their employees so that they choose us over the other options.
6.2 Sales Strategy
- We will advertise the hotel through all the media channels in the area.
- We will partner up with travel agents and tour planners to get customers.
- We will offer discounts to companies who want to get accommodation for a large number of their employees.
6.3 Sales Monthly
6.4 Sales Yearly
6.5 Sales Forecast
| Sales Forecast | |||
| Unit Sales | Year 1 | Year 2 | Year 3 |
| Accommodation | 41,000 | 43,460 | 46,068 |
| Banquet Service | 40,000 | 42,400 | 44,944 |
| Restaurant | 56,000 | 59,360 | 62,922 |
| Bar and Lounge | 38,000 | 40,280 | 42,697 |
| TOTAL UNIT SALES | 175,000 | 185,500 | 196,630 |
| Unit Prices | Year 1 | Year 2 | Year 3 |
| Accommodation | $54.00 | $62.64 | $72.66 |
| Banquet Service | $70.00 | $81.20 | $94.19 |
| Restaurant | $40.00 | $46.40 | $53.82 |
| Bar and Lounge | $42.00 | $48.72 | $56.52 |
| Sales | |||
| Accommodation | $2,214,000.00 | $2,722,334.40 | $3,347,382.38 |
| Banquet Service | $2,800,000.00 | $3,442,880.00 | $4,233,365.25 |
| Restaurant | $2,240,000.00 | $2,754,304.00 | $3,386,692.20 |
| Bar and Lounge | $1,596,000.00 | $1,962,441.60 | $2,413,018.19 |
| TOTAL SALES | $8,850,000.00 | $10,881,960.00 | $13,380,458.02 |
| Direct Unit Costs | Year 1 | Year 2 | Year 3 |
| Accommodation | $52.00 | $59.00 | $68.00 |
| Banquet Service | $68.00 | $78.00 | $90.00 |
| Restaurant | $38.00 | $43.00 | $49.00 |
| Bar and Lounge | $40.00 | $45.00 | $52.00 |
| Direct Cost of Sales | |||
| Accommodation | $2,132,000.00 | $2,564,140.00 | $3,132,596.80 |
| Banquet Service | $2,720,000.00 | $3,307,200.00 | $4,044,960.00 |
| Restaurant | $2,128,000.00 | $2,552,480.00 | $3,083,158.40 |
| Bar and Lounge | $1,520,000.00 | $1,812,600.00 | $2,220,233.60 |
| Subtotal Direct Cost of Sales | $8,500,000.00 | $10,236,420.00 | $12,480,948.80 |
Personnel plan
Another thing that needs to be made clear in this hotel resort business plan sample is the staff that we will need to operate the hotel. Unlike an RV park start up business plan, we will need a larger workforce to smoothly run the operations of the hotel.
7.1 Company Staff
- John Abruzzi will be the owner and CEO of the hotel.
- 1 General Manager.
- 2 Assistant managers.
- 1 Accountant.
- 1 Receptionist.
- 5 Waiters.
- 3 Waitresses.
- 2 Drivers.
- 1 Guard.
- 4 Cooks.
- 2 Bartenders.
7.2 Average Salary of Employees
| Personnel Plan | |||
| Year 1 | Year 2 | Year 3 | |
| General Manager | $13,000 | $14,300 | $15,730 |
| Assistant Managers | $24,000 | $26,400 | $29,040 |
| Accountant | $11,000 | $12,100 | $13,310 |
| Receptionist | $8,000 | $8,800 | $9,680 |
| Waiters | $45,000 | $49,500 | $54,450 |
| Waitresses | $27,000 | $29,700 | $32,670 |
| Cooks | $40,000 | $44,000 | $48,400 |
| Bartenders | $16,000 | $17,600 | $19,360 |
| Guard | $8,000 | $8,800 | $9,680 |
| Drivers | $14,000 | $15,400 | $16,940 |
| Total Salaries | $206,000 | $226,600 | $249,260 |
Financial Plan
The last thing to be discussed in this business plan is the budget for hotel business plan. As the hotel is being started from scratch, the following expenses are to be arranged:
- The cost of establishing the hotel.
- The cost of hiring the staff.
- The salaries of the staff for the first 6 months.
- The cost of buying cars for guest pick and drop.
- The money needed to advertise the hotel.
- The money needed to establish a web presence of the hotel.
8.1 Important Assumptions
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 8.14% | 8.19% | 8.26% |
| Long-term Interest Rate | 8.40% | 8.48% | 8.52% |
| Tax Rate | 24.03% | 24.45% | 25.80% |
| Other | 0 | 0 | 0 |
8.2 Break-even Analysis
| Break-Even Analysis | |
| Monthly Units Break-even | 5342 |
| Monthly Revenue Break-even | $132,420 |
| Assumptions: | |
| Average Per-Unit Revenue | $234.00 |
| Average Per-Unit Variable Cost | $0.66 |
| Estimated Monthly Fixed Cost | $164,120 |
8.3 Projected Profit and Loss
| Pro Forma Profit And Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $8,850,000 | $10,881,960 | $13,380,458 |
| Direct Cost of Sales | $8,500,000 | $10,236,420 | $12,480,949 |
| Other | $0 | $0 | $0 |
| TOTAL COST OF SALES | $8,500,000 | $10,236,420 | $12,480,949 |
| Gross Margin | $350,000 | $645,540 | $899,509 |
| Gross Margin % | 3.95% | 5.93% | 6.72% |
| Expenses | |||
| Payroll | $206,000 | $226,600 | $249,260 |
| Sales and Marketing and Other Expenses | $140,000 | $148,000 | $156,000 |
| Depreciation | $2,200 | $2,350 | $2,480 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $2,900 | $3,000 | $3,100 |
| Insurance | $2,100 | $2,100 | $2,100 |
| Rent | $3,200 | $3,300 | $3,400 |
| Payroll Taxes | $34,000 | $35,000 | $36,000 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $390,400 | $420,350 | $452,340 |
| Profit Before Interest and Taxes | ($40,400) | $225,190 | $447,169 |
| EBITDA | ($40,400) | $225,190 | $447,169 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | ($8,080) | $45,038 | $89,434 |
| Net Profit | ($32,320) | $180,152 | $357,735 |
| Net Profit/Sales | -0.37% | 1.66% | 2.67% |
8.3.1 Profit Monthly
8.3.2 Profit Yearly
8.3.3 Gross Margin Monthly
8.3.4 Gross Margin Yearly
8.4 Projected Cash Flow
| Pro Forma Cash Flow | |||
| Cash Received | Year 1 | Year 2 | Year 3 |
| Cash from Operations | |||
| Cash Sales | $53,000 | $57,240 | $61,819 |
| Cash from Receivables | $19,000 | $20,520 | $22,162 |
| SUBTOTAL CASH FROM OPERATIONS | $72,000 | $78,480 | $84,758 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| SUBTOTAL CASH RECEIVED | $73,000 | $79,000 | $85,000 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $40,000 | $42,000 | $45,000 |
| Bill Payments | $25,000 | $28,000 | $31,000 |
| SUBTOTAL SPENT ON OPERATIONS | $65,000 | $70,000 | $76,000 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $0 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| SUBTOTAL CASH SPENT | $66,000 | $71,280 | $76,982 |
| Net Cash Flow | $18,000 | $20,000 | $22,000 |
| Cash Balance | $28,000 | $31,000 | $33,000 |
8.5 Projected Balance Sheet
| Pro Forma Balance Sheet | |||
| Assets | Year 1 | Year 2 | Year 3 |
| Current Assets | |||
| Cash | $277,000 | $310,240 | $341,264 |
| Accounts Receivable | $23,000 | $25,760 | $28,954 |
| Inventory | $4,200 | $4,704 | $4,900 |
| Other Current Assets | $1,000 | $1,000 | $1,000 |
| TOTAL CURRENT ASSETS | $284,000 | $318,080 | $357,522 |
| Long-term Assets | |||
| Long-term Assets | $10,000 | $10,000 | $10,000 |
| Accumulated Depreciation | $19,100 | $21,392 | $24,066 |
| TOTAL LONG-TERM ASSETS | $23,000 | $25,760 | $28,980 |
| TOTAL ASSETS | $292,000 | $327,040 | $367,920 |
| Liabilities and Capital | Year 4 | Year 5 | Year 6 |
| Current Liabilities | |||
| Accounts Payable | $18,500 | $20,720 | $23,289 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| SUBTOTAL CURRENT LIABILITIES | $18,000 | $20,160 | $22,660 |
| Long-term Liabilities | $0 | $0 | $0 |
| TOTAL LIABILITIES | $16,000 | $17,920 | $20,142 |
| Paid-in Capital | $30,000 | $30,000 | $31,000 |
| Retained Earnings | $54,500 | $59,405 | $65,346 |
| Earnings | $197,000 | $214,730 | $236,203 |
| TOTAL CAPITAL | $283,000 | $308,470 | $339,317 |
| TOTAL LIABILITIES AND CAPITAL | $299,000 | $327,040 | $367,920 |
| Net Worth | $296,000 | $322,640 | $354,904 |
8.6 Business Ratios
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | INDUSTRY PROFILE | |
| Sales Growth | 7.25% | 8.03% | 8.90% | 3.00% |
| Percent of Total Assets | ||||
| Accounts Receivable | 9.21% | 10.20% | 11.31% | 9.80% |
| Inventory | 5.41% | 5.99% | 6.64% | 9.90% |
| Other Current Assets | 2.13% | 2.36% | 2.61% | 2.40% |
| Total Current Assets | 150.02% | 152.00% | 152.00% | 158.00% |
| Long-term Assets | 11.56% | 11.60% | 11.64% | 12.00% |
| TOTAL ASSETS | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 4.92% | 4.96% | 5.00% | 4.34% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 0.00% |
| Total Liabilities | 7.63% | 7.69% | 7.76% | 7.38% |
| NET WORTH | 101.30% | 102.11% | 103.05% | 110.00% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 95.30% | 97.87% | 100.61% | 99.00% |
| Selling, General & Administrative Expenses | 94.10% | 96.64% | 99.35% | 97.80% |
| Advertising Expenses | 1.55% | 1.59% | 1.64% | 1.40% |
| Profit Before Interest and Taxes | 42.00% | 43.13% | 44.34% | 33.90% |
| Main Ratios | ||||
| Current | 34 | 35 | 36 | 32 |
| Quick | 34 | 34.4 | 35.26 | 33 |
| Total Debt to Total Assets | 0.18% | 0.18% | 0.17% | 0.40% |
| Pre-tax Return on Net Worth | 74.08% | 74.70% | 75.00% | 75.00% |
| Pre-tax Return on Assets | 95.03% | 99.78% | 104.77% | 111.30% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 33.10% | 34.13% | 35.18% | N.A. |
| Return on Equity | 55.80% | 57.53% | 59.31% | N.A. |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 7.7 | 7.8 | 7.8 | N.A. |
| Collection Days | 100 | 100 | 100 | N.A. |
| Inventory Turnover | 32 | 33.6 | 33 | N.A. |
| Accounts Payable Turnover | 15 | 16 | 16.3 | N.A. |
| Payment Days | 27 | 27 | 27 | N.A. |
| Total Asset Turnover | 2.5 | 2.5 | 2.6 | N.A. |
| Debt Ratios | ||||
| Debt to Net Worth | -0.04 | -0.03 | -0.04 | N.A. |
| Current Liab. to Liab. | 1 | 1 | 1 | N.A. |
| Liquidity Ratios | ||||
| Net Working Capital | $240,000 | $253,440 | $267,633 | N.A. |
| Interest Coverage | 0 | 0 | 0 | N.A. |
| Additional Ratios | ||||
| Assets to Sales | 0.86 | 0.87 | 0.87 | N.A. |
| Current Debt/Total Assets | 1% | 0% | 0% | N.A. |
| Acid Test | 29.1 | 29.12 | 29.16 | N.A. |
| Sales/Net Worth | 2.1 | 2.2 | 2.3 | N.A. |
| Dividend Payout | 0 | 0 | 0 | N.A. |
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