How To Start A Small Hotel Business – In the last ten years, the number of boutique hotels in the US alone has grown by more than 265% now standing tall with a market size of $12.41 billion. No wonder boutique hotels are gaining an ever-increasing number of devoted fans – all thanks to their surprisingly charming, aesthetically pleasing, and elegantly individualistic settings.
Travelers, tourists, and boutique enthusiasts prefer to stay in a comfortable and inviting place full of hospitality rather than a luxury suite that costs a lot of money without moving the heart. And as a frequent business traveler, I second this choice! And as much as I want to keep showing my love for boutique hotels, let’s save that for another blog and go to the real agenda of this article.
How To Start A Small Hotel Business
So, now we know that boutique hotels are a hot commodity, and making your own little boutique hotel sounds like a great idea. Starting a boutique hotel, like any other business, requires money, but you also need the right knowledge and real-life experience to make it happen. Where to get it, you ask? Here in this article, I will walk you through some definite steps that you, as an entrepreneur or investor, can take to confidently start your own boutique hotel business in 2022.
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Boutique hotels offer small, intimate accommodations to people looking for a pleasant yet private experience during their trip. They are usually built on a specific theme and aesthetic to provide a complete destination experience. To further simplify this, boutique hotels offer Instagram-worthy backdrops, custom decorations, and fulfilling venues to keep you high on life.
Another thing I would point out about this hotel is its smaller size. Because boutique hotels focus on providing a personal experience, a standard boutique hotel can have anything between 6 to 15 rooms.
The first step, of course, is to keep in mind the estimated cost of getting your boutique hotel up and running. Only then, you can decide if you want to pursue this dream or try something else.
As I said above that boutique hotels are smaller than usual, they have special themes and extra facilities.
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Unlike large-scale hotels in the hospitality industry that have a separation between the ownership of the real estate (party A) and the hotel company (party B), the situation in Boutique Hotels is the opposite. You have to own both real estate and hotel business, because
Choosing a place with minimum expectations of travelers can cost you less, but if the place does not have enough potential, it may not turn into a profitable venture. Moreover, I believe that the city / country you choose has a significant impact on costs. For example, a boutique hotel in London will cost much more than one in El Paso.
Take this as a rule of thumb: a not-so-good property in a location with potential is always better than a good property in a location with zero to low potential. More on choosing a location with the right potential in part 2.
Okay, as you can already guess, a boutique hotel with more rooms, facilities, and decor will be expensive compared to one that revolves around a simple theme. While minimalistic is in trend, sometimes going the extra mile and creating a wonderful destination experience can help you stand out among competitors.
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Below are some statistics and numbers to give you a rough idea of how much you can expect. So, let’s say we want to open a 10-suite boutique hotel in Ibiza, Spain:
5: 50k for miscellaneous expenses. For example, initial marketing, pre-launch manager, branding costs, website, social media channels, etc.
So, this hypothetical project in Ibiza, Spain has cost us a total of 2.3 million € in upfront costs. Is that what you expected or can you manage this amount to invest in the boutique hotel of your dreams? If yes, congratulations, you just cleared the Level and it’s time to move on to the next step.
Location is important obviously, but even more, is the potential inside that location. While looking for a location, don’t just look at the top location with a lot of hustle and bustle. Instead, shortlist places that have the potential to become dream destinations for your visitors.
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For example, take Ace Hotel or Mysuites in New York. Both opened in 2008 in the NoMad District, which is the home of NO Man. Shocked, dirty, and dull. Doesn’t sound like an ideal location to start a boutique hotel business? But guess what!
The Ace Hotel and its underground culture changed the color of the hood to the destination and over a period of only ten years, it has become the NoMad district today, one of the most trendy, hip odd in NYC.
I cannot stress enough the importance of finding wonderful concepts that are hot topics among your potential visitors. We all have a spark of creativity inside us, but we need to know what people click on and what they don’t.
Like a secret recipe, the ideal concept has the perfect mix of lifestyle, location, attractions, financing, personal touch, flair, style, tourist expectations, and your personality in the hotel so that it says what you want. trying to achieve.
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The intimate size of the property makes it an inviting and welcoming place. Whether you have 5 or 20 rooms, focus on giving your guests exactly what you claim. Another key factor is guest amenities that reflect your personality and the message you want to send as a hotel owner.
Moreover, personal service, high-quality bathrooms, and local food options help you create something elegant and classy.
So, there are three ways you can finance your dream boutique business. On a scale of 1-3, 1 being the most beneficial and 3 being the least.
If you have enough resources to help you manage money, VOILA, it is one of the most stable and least dependent ways to start your boutique business. With your personal money, there are absolutely zero interest costs, and you do not have to agree to binding terms and conditions contracted by banks and other lending companies – because your money, your rules!
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According to my personal experience, banks are quite hesitant in giving loans to small businesses. However, if you have a good history and a strong bank statement, it can be the safest and most reliable way to finance your boutique hotel. The average market interest rate for banks is 3% which is low compared to private lenders.
This company provides quick loans through a quick application process. If you don’t want to go through the full process with the bank, sign up for 8% which can be a bit high for young entrepreneurs.
Always compare the most expensive lender with the worst-case scenario of daily rates and occupancy because it is always wise to prepare your plan considering both sides of the coin.
Usually, a business plan can be a presentation of your idea if you need to sell your idea to raise funds. To make a convincing business plan, I recommend breaking everything down into steps to have a clear vision of what you are looking for.
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Start by writing an overview of the boutique hotel industry. Talk about facts like the role of boutique hotels in the country’s economy. Statista shows that boutique hotels in the US have employed more than 133,400 people in 2021 to date. This is actually down from the previous figure of 165,000 due to the pandemic.
It is also worth mentioning that this industry is growing rapidly at a rate of 2.7% per year, making it a market of 17.3 billion in the US alone.
The products and services offered depend on the type of guests you want to welcome. Standard amenities provided by boutique hotels include food, beverages, laundry, and other health services such as gyms and spas.
Focus on trends in the market and new targets to gain a competitive advantage over other boutique hotels. Moreover, doing a SWOT analysis to discover strengths, weaknesses, opportunities and threats can make you well-prepared to excel in this business.
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For example, your power can provide an out-of-the-box theme with high luxury settings. Opportunities for boutique hotels revolve around gaining more business by attracting new guests in any way possible. At the same time, threats and weaknesses can be your competitor’s advantage over you.
Your team’s top sales leader creates a sales forecast to provide you with projected revenue figures for a maximum of 5 years. This helps you get an idea of the expected Break-Even Point, after which your business starts making a profit.
Now that you’ve generated funding, your business plan can be summarized in a simple spreadsheet. Here, you can list:
> closing costs can be separated because they want to have a better idea of all closing costs, brokers, attorney fees, facilitators, and all renovation costs, plus furnishing, finishing, and
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