How to create a hotel business plan? (For 2 and 3 star hotels)

Running a 2 and 3 star property seems daunting no matter how good your hotel's location is and what best amenities you can provide to guests.

But if you don't know the ins and outs of the hospitality industry, such as your target audience, competitive pricing strategies, and the current trends in the hospitality industry, then it would lead to a downfall.

To succeed in this competitive landscape, you need a detailed business plan and a well-documented strategy that you can share with investors and other stakeholders to get funding for the hotel.

No business plan equates to less occupancy and shrinking profits.

Let's talk about everything from A to Z about what a business plan means for hotels, why it is important and how you can create a successful plan for your business.

What does a hotel business plan mean for 2 to 3 star hotels?

The business plan covers everything that helps you run your hotel business profitably, including staff salaries, room and food costs, operating expenses, technology costs and your marketing budget.

Generally, it starts with market research, identifying the target audience, doing the market analysis and financial projections that become a guiding point for hoteliers to keep them closer towards their goals.

Consider this hotel plan as the roadmap that helps you attract investors, get funding to scale your hotel biz and make better decisions for your property.

It isn't an optional upgrade. Still, it’s advantageous for you when you're setting up a new hotel or trying to expand your hotel business and you want to improve your hotel operations.

Why having a business plan is important for

• What's your brand objective?
• What specific facilities does your property offer (such as room type and size of property), and where is the property located?
• How many rooms does the property have, and does it have a jacuzzi?
• Does your hotel provide a free Wi-Fi facility to guests, and does it conduct any events for guests?
• Think about ancillary revenue sources you will provide to guests, such as in-room food and beverage options.

3. Industry Analysis

Here, you will perform an analysis of the hospitality industry and find out trends and external forces that affect your hotel brand, but these are not under your control.

These include direct or indirect competitors, economic and environmental factors, technology trends, etc.

During the COVID-19 pandemic, hoteliers cared about implementing sanitary measures first.

For instance – you observed that some hotels offer contactless check-in solutions for guests. And others have started copying this trend.

Now, this becomes an opportunity for you to think about what type of digital technology you will adopt to enhance the guest experience.

When doing industry analysis, make sure to look at the future growth and potential of the hospitality industry.

4. Competitor Analysis

The next step that comes in the phase of a business plan is to stalk your competitors.

Find out 3-4 direct and indirect competitors and see how they are performing, and you can think of aspirational competitor examples to benchmark against.

Note: Direct competitors are other competing hoteliers.

Indirect competitors include motels, resorts, hostels, B&Bs etc.

Do a SWOT analysis to see what your strengths are, what are the things you lack, what industry trends you can leverage and what will be the biggest threats to your property.

Through competitor analysis, you found that your competitors offer luxury amenities for business travellers, but they charge high prices from them. You can find out whether there are service gaps or not? This is one instance.

Later, you found out that most guests complain about missing breakfast facility at other hotels or poor Wi-Fi; try to include that in your property and get a competitive edge.

This competitive intelligence should also help you identify key industry trends to leverage.

Currently, sustainability is a major trend and a report from the World Tourism Organization Sustainability Report states that 73% of travellers prefer to choose hotels that value sustainability.

Whether you use energy efficient lights, serve locally sourced organic food or adopt sustainability practices, this trend differentiates your 2 and 3-star property from others.

5. Identify your target audience

As different guests have different needs and priorities, you need to understand who your ideal customer is. If your goal is to please every target customer, then you're serving no one.

You need to understand your guests' profile and their behaviour, and once you know the ins and outs of that, you can create marketing material and offer the amenities/ services that interest them most.

Ask yourself these 3 questions -

Do you want to cater to business or leisure travellers? Do you want to serve a specific guest profile or different guest profiles?

What are their preferences and interests?

What experiences add value to their stay? Are they more tech-savvy, or do they resist using technology?

6. Hotel services and amenities

This part of the business plan lays out the key services and amenities that your hotel offers.

Think about a few things -

• If your hotel is in the tropics, then a pool might be the best option.
• If your ideal guests have some dietary restrictions, then you can offer a healthy breakfast menu.
• Do your guests value sustainability? Then how do you make your property a sustainable place?
• Where does your guest spend time most? Can your Instagram content or social media activities influence them?
• Can you offer an additional facility, such as turning the corridor or unused space for conducting conferences? That's how you can generate more ancillary revenue.

7. Marketing strategy

Next comes the marketing strategy through which your hotel can get more bookings and eventually generate more sales.

Here, you need to decide the channels on which you will promote your hotel and see which channels your audience uses the most.

Do they search online, or do 90% of them spend most of their time on social media?

Consider your marketing strategy as the important pillar without which you can't fill your rooms.

But your marketing strategy should marry with those channels where your target audience spends most of their time.

When starting, there are different marketing channels to choose from -

• Loyalty programs
• Social media marketing
• Search engine optimization
• Traditional marketing channels (partnerships with local businesses)
• Email marketing
• Online reviews (earned media)
• Paid advertising

Choosing which channel to go with is a challenging task initially, but you can get inspiration from competitors, like what channel is working best for them and iterate the same strategy for yourself.

Later, try and test and double down the efforts where you see maximum advantage.

8. Operational plan

The operational plan details the key tasks and responsibilities of hotel staff and how they will work towards achieving your hotel goals.

This includes the following -

• Hiring staff for different departments such as sales & marketing, F&B, front office department, etc.
• Service expectations you expect from hotel staff.
• Management of inventory
• Job description and responsibilities, deadline for completing those tasks
• Estimated costs for hiring resources in each department
• The resources and amenities you will provide include a restaurant, wellness centre, bar, pool, spa, etc.
• Day-to-day activities required for service delivery, such as room reservations, guest relations, health and safety, etc.

9. Financial projections

• While crafting the business plan, small hotels need to set a clear financial strategy which starts with the preparation of financial statements such as

1. -P&L, balance sheet,
2. income statement,
3. cash flow statement,
4. break-even analysis

• Your financial plan should showcase the revenue projections such as your estimated revenue, such as ADR and RevPAR, for the next 2-5 years.

These should be based on revenue generation sources like how you would generate revenue such as food and beverage sales, sales from rooms, gym subscriptions or other upselling and cross-selling programs.

• Be clear about the cost structure. Divide the total costs into fixed and variable expenses. Mention the primary costs that increase your hotel expenses, such as paying salaries to staff or hotel maintenance expenses.

• If you're starting your hotel and want investors funding, then you need to have a SOLID funding plan. How much do you need for the initial hotel cost?

Your business plan should specify what you would do after raising funds, where the money will go, and how it will grow your hotel business.

• Ultimately, your goal is to make your hotel a profitable venture, so wherever possible, include clear pricing terms, what type of rooms you will sell, the payment options you will provide and a clear cancellation policy.
• Highlight the revenue management strategy which requires hiring a revenue manager to rank your hotel across different OTAs. He will look upon the pricing and discounting strategy of competitors to ensure that you never lose revenue.

The hotel plan should cover everything as to what the revenue manager will do and how it will 2x your hotel revenue in how much timespan.

10. Technology plan

Today, every hotelier wants to run their hotel smoothly and enhance the guest experience.

That's possible by doing technology integration in your hotel operations.

To speed up the check-in/check-out process, you can use contactless check-in. This saves time for guests as they can skip the front desk staff, and it also shows that you care about their health and safety.

Similarly, think for a moment when guests can open their room doors through the digital keys on their mobile phones. This makes their check-in experience smoother. But this is just one use case of how technology can be a game changer for hospitality businesses.

Here are the few technology integrations you need to do to make your hotel stand out from others -

• Specify which website builder and booking engine you'd invest in and why.
• How would you increase your direct bookings and save more revenue? Do you go for a hotel website builder that helps you manage your online presence?
• Mention what property management system you will use for managing daily hotel operations and housekeeping processes and tracking the arrivals and departures.
• Does that hotel management software help you manage group bookings on the go?
• How would you increase your property's exposure by getting your hotel listed on different online distribution channels and OTAs?
• What's your plan for making your hotel a smart hub? Would you be investing in smart locks or voice assistant technology to enhance guest experience?
• Would you develop a mobile app that provides guests with access to hotel amenities/services at their fingertips?

How can BOTSHOT turn your BUSINESS PLAN into Reality?

The real challenge that comes for 2- and 3-star properties is executing the things laid out in the business plan.

BOTSHOT provides you with the right tools to manage your hotel operations, enhance your guest experience and get you more bookings with no dependence on OTAs.

• CreateWith helps hotel owners like you to create a beautiful SEO-optimized website using drag-and-drop components.

This increases your chances of ranking higher on SERPs. It comes with booking engine integration so that guests can directly book your property online on hotel’s website.

• Property management system to help you manage your daily hotel operations from check-in to housekeeping processes.

Through a single dashboard, you can see everything about arrivals, departures, where bookings are coming from, etc. Our PMS comes with eFrontDesk integration, meaning guests can complete their check-in formalities before entering the hotel.

• To manage the room rates and availability across multiple channels, our channel manager can be game changer. Whatever rates and availability you update on PMS, the same is reflected on the channel manager. No more overbooking hassles.
• To help you take food orders, dine-in requests and dine-in orders for hotels and restaurants, we provide cloud-based POS for hotels and restaurant owners.

FAQs

Q.) How long will a business plan for hotels be?

A hotel business plan can go around from 10-15 pages, with an executive summary of the important part.

Q.) Can I get funding for my hotel with a business plan?

Yes, investors can fund your project if you do a great job at researching the target market and doing competitor analysis and your financial and revenue projections are solid.