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.

Hotel Business Plan - 3 Years Profit Forecast

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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.

Hotel Business Plan - Startup Cost

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

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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.

Hotel Business Plan - Marketing Segmentation

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.

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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:

  1. The competition in this field is immense in the area we are working in. We need to provide something extra to get customers.
  2. We will provide complementary dinner to our customers. No hotel in the area does this and this will give us a competitive edge.
  3. 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

Hotel Business Plan - Sales Monthly

6.4 Sales Yearly

Hotel Business Plan - Sales Yearly

6.5 Sales Forecast

Hotel Business Plan - Unit Sales

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.

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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

Hotel Business Plan - 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

Hotel Business Plan - Profit Monthly

8.3.2 Profit Yearly

Hotel Business Plan - Profit Yearly

8.3.3 Gross Margin Monthly

Hotel Business Plan - Gross Margin Monthly

8.3.4 Gross Margin Yearly

Hotel Business Plan - Gross Margin Yearly

8.4 Projected Cash Flow

Hotel Business Plan - Project 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

 

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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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