Opening up a hotel?

Hi,

I was just thinking about business opportunities and was wondering how much, building a hotel, in a tourist filled city cost, and what the running costs of a hotel in a city like Toronto or Vancouver or such be like...
I'm talking about an average hotel here, say a 2-3 star hotel...
how much would the profit every year be...will it be a lot of hassle?

any advice or points of argument are appreciated, as i want to know the pros on cons of opening up a hotel...

note: i think ive posted this in the right place...

Reply 1

BlackHawk

Why?

There are plenty of hotels, and most of them are owned by companies who have more than one hotel.

Do you have any hotel experience? Any sales and revenue experience? In order to have any chance of success in a business, you have to know the business inside out.

I can't remember the figures from my last board meeting exactly, but it's something like a £200,000 profit with £620,000 outlay per annum. That's for a 3 star 100 bedroom hotel. It's only just starting out too, so it should give you an idea. The company who bought it did so and refurbished it for £6 million.

If you want my opinon, it's not worth it unless you have sound financial backing, maybe a few business partners, in depth knowledge of the industry and business markets

Reply 2

Nashir

Well..im just planning to do engineering at university..no experience wat so ever....
but its jsut the fact that i know an engineer cant earn a lot of money no matter how good he is...80K just aint good enough....its jsut a possibility for the future...

i was just lookin for advice...is there a big chance of failin at business??

Reply 3

alastair

There is a massive chance of failing in a business. Over 50% of new businesses will fail. A B&B is a more realistic option but i doubt that is ever going to make 80k per year. Why are you doing an Engineering degree if you have no plan on doing Engineering as the pay isnt high enough?

Reply 4

BlackHawk

Huge chance of failing. For one it's very hard to get financial backing from anyone. I'm not sure of the failure rate of hotels, but for restaurants about 60-70% fail.

If you're looking at a small hotel (ie 25 bedrooms or less) consider the following:

Type of hotel

who will be your guests. Will you target a specific market such as families, business people or holidaymakers, or will you aim to attract a broad cross-section of guest

where will the hotel be located. If you are aiming for the tourist market you will need to be in an area such as the seaside, a well known beauty spot or other tourist attraction. If business people are targetted you will need to be close to major business centres, preferably on a main road, near a main line station and so on. Perhaps you plan to open up near a regional airport to cater for holidaymakers flying in and out.

what will be the typical length of stay - for example, business people and travellers generally stay overnight while holidaymakers are looking for weekend breaks or a longer holiday

how big will the hotel be. This will affect your costs, your pricing policy, the facilities you will be able to offer guests, the number of staff you will need, whether you will provide staff accommodation and what regulations you will have to comply with

Which services will you offer

will you apply for a licence to sell alcohol and operate a bar

will you offer restaurant meals and, if so, will you do the catering yourself or

will you need to employ a chef

will you open your restaurant and bar to non-residents

what will you provide in your bedrooms, for example, TV, tea and coffee making facilities, toiletries, hairdryers, mini-bars, trouser presses and bathrobes

how many bedrooms will have ensuite bathroom facilities. Bear in mind that if you want to achieve even a One Star rating under the VisitBritain scheme, your hotel will have to have ensuite or private facilities in at least 75% of the rooms and for Two Stars and above all rooms have to have ensuite or private facilities

what facilities will you offer, such as a TV lounge, sports room, fitness room and so on

will you aim to gain a star rating

will you have a function or conference room

will demand be roughly the same all year round or will you be busiest in, for example, the summertime. Will you have bookings all week or will you need to attract a different type of guest at weekends

how will you monitor wastage, theft and other stock losses - these can be a real problem in the hotel trade

Pricing policy

what will be your pricing policy - for example are you aiming at the budget end of the market or at a less price sensitive clientele

will you price by the room or per person

will your overnight prices include breakfast

will you offer weekend, short break or weekly packages. If you are located near an airport, might you offer a 'park and fly' package

will you charge more at some times of the year than at others

will you charge less for children

how often will you review your prices

will you offer discounts and special offers

For a small hotel, I had a friend buy one (14 bedrooms) for £750,000 and they turned over about £60,000 a year profit. They're selling up as they don't feel it's worth it. They work about 70 hours a week each to keep costs down. Where are you going to get the capital from to buy a hotel? With no experience you'll be lucky to find a bank that will touch you.

Reply 5

Nashir

Guess u are right...
what businesses are easy to start up, by that i mean they are cheap to startup and have a high rate of success and will get u a fair amount of profit...?

i choose engineering coz its what interests me most...but i've read in a number of articles that not having done accounting and such shouldnt stop one from opening up a succesful business...

Reply 6

AlexanderKing

The start up cost of a hotel, of that calibre in a major city would most probably run into at least £500,000 for the initial investment.

If it were, say, in London, you'd proabbly be looking at (regarding property prices, general cost of living) around £1-1.5 million in investment.

You'd have to persuade and pitch to investors or a bank first (not the Dragons :-p).

Reply 7

alastair

Nashir

I don't think such a business exists! If it did then everyone would be doing it. To get a fair amount of profit and stand a good chance of success you will need a lot of initial money.

Reply 8

The Regend

...or an excellent new idea! Like Alastair said, no business is cheap, guaranteed high profits and easy work, otherwise there would be no point in it! Everyone would be doing it. The difference between owning your own company and working for a company is that your input directly reflects results. The less time and effort you put in to a company, generally the less the rewards will be.