A boutique hotel is a smaller, upscale, luxury hotel with less than 100 rooms that offers a distinct personality, intimate experience, and personalized service. Generally, boutique hotels tend to be located in trendy neighborhoods in large cities, have luxury amenities, and have unique, modern designs.
The market size of the boutique hotel industry in the United States was forecast to reach 12.39 billion U.S. dollars in 2023, following a drop in 2020 due to reductions in travel during the coronavirus pandemic.
According to Fortune Business Insights™, the global luxury hotel market size is projected to reach USD 238.49 billion by 2028, exhibiting a CAGR of 10.4% during the forecast period. The report also states that the market value stood at USD 93.43 billion in 2020.
Steps on How to Start a Boutique Hotel Business
Table of Content
Conduct Market Research
Conducting market research before starting any business is key to the success of the business hence you must not start a boutique hotel business without conducting market research. Market research provides critical information about your market and your business landscape.
It can tell you how your business is perceived by the target customers you want to reach. It can help you determine who and where your customers are, and which customers are most likely to do business with you. Thorough market research will help you understand how your target customers think and adapt to their needs to turn them into regular customers and brand advocates.
a. Who is the Target Market for Boutique Hotel Business?
- Celebrities and artists
- International businessmen and women
b. Is Boutique Hotel Business a Profitable Business?
Yes, the boutique hotel business is quite profitable. In the United States, the industry is projected to be worth $12.39 billion in 2023.
c. Are There Existing Niches in the Industry?
No, there are no existing niches when it comes to the boutique hotel business because a boutique hotel is a niche idea in the hotel industry.
d. Who are the Major Competitors?
- The Inn & Club at Harbour Town – The Sea Pines Resort
- The Little Nell
- The Spectator Hotel
- The Jefferson, Washington, DC
- French Quarter Inn
- The Chatwal, a Luxury Collection Hotel, New York City
- Stephanie Inn
- Wentworth Mansion
- The Inn at Little Washington
- Montage Laguna Beach
- The Lowell Hotel New York
- The Inn of the Five Graces
- Williamsburg Inn
- Solage, Auberge Resorts Collection
- The Canyon Suites at The Phoenician, A Luxury Collection
- Mayflower Inn & Spa, Auberge Resorts Collection
- HarbourView Inn
- Hotel Jerome, Auberge Resorts Collection
- Auberge Du Soleil
- The Rittenhouse.
e. Are There County or State Regulations or Zoning Laws for Boutique Hotel Business?
Yes, and zoning laws require boutique hotel operators to follow specific rules and regulations, including some that apply only to players in the industry. Please note that in many communities, zoning laws require boutique hotels to apply for a permit from the city.
This application process allows the city’s zoning department to determine whether the boutique hotel meets the zoning rules for the community. Permits also ensure that all boutique hotels are properly licensed by county or state agencies.
f. Is There a Franchise for Boutique Hotel Business?
Yes, there are franchise opportunities for the boutique hotel business. Here are some of them;
- Curio by Hilton (initial investment of between £2,960,000 and £76,820,500)
- Master Hosts Inns (Initial Investment – $1,376,100)
- Hotel Indigo by IHG (invest between £13,142,000 and £29,388,00)
- Red Roof Inn (Initial Investment – $195,500 – $5,099,000)
- Hilton Garden Inn (Initial Investment – $12,058,450 – $23,182,650)
- Baymont Inn (Initial Investment – $214,679 – $6,918,952)
- Ascend Hotel Collection (Single Unit Total Investment – $133,950.00 to $1,697,199.00)
- Candlewood Suites (Initial Investment – $8,951,340 – $12,256,515)
- Staybridge Suites (Initial Investment – $11,211,090 – $15,396,430)
- Park Inns & Suites (Initial Investment – $1,682,240-$4,753,320)
g. What Do You Need to Start Boutique Hotel Business?
- A Feasibility Report
- Business and Marketing Plans
- Business Licenses and Permits
- A well-designed, well-furnished, well-equipped, and construction facility
- EIN (Employer Identification Number) / Federal Tax ID Number.
- A Corporate Bank Account
- Startup Capital
Choose a Memorable Business Name
When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with. It is essential that the name you come up with can easily be pronounced, is unique and easily memorable.
Some of the catchy business name ideas suitable for a boutique hotel business are;
Creative Boutique Hotel Business Name ideas
- Red Roof® Boutique Hotel, Inc.
- Barrow Villas® Boutique hotel, LLC
- House Top© Boutique Hotel, Inc.
- Grace Inn® Boutique Hotel, Inc.
- Lugard Lodge™ Boutique Hotel, Inc.
- Harmony Lodge™ Boutique Hotel, LLC.
- Sharon Inn© Boutique Hotel, LLC
- Rose and Raul® Boutique Hotel, Inc.
- Lilly Villas© Boutique Hotel, Inc.
- Nevada Inns© Boutique Hotel, Inc.
- Purple by Mack® Boutique Hotel, LLC
- Golden Heritage® Boutique Hotel, LLC
- Tony Martins™ Boutique Hotel, LLC
- Clara Davidson© Boutique Hotel, Inc.
- Rainbow Inn® Boutique Hotel, Inc.
- RR Inn™ Boutique Hotel, Inc.
- Rosette Inn™ Boutique Hotel, Inc.
- Shavonne Inn© Boutique Hotel, Inc.
- Ocean View® Boutique Hotel, LLC
- Mountain View™ Boutique Hotel, Inc.
Register Your Business
a. What Type of Business Structure is Best for Boutique Hotel Business?
The truth is that you have several options when it comes to the business structure of a boutique hotel business, but the one that most players in this line of business consider is an LLC. It is common to consider an LLC because providers want to protect themselves from lawsuits.
Please note that an LLC will need an EIN if it has employees or if it will be required to file any of the excise tax forms listed below.
b. Steps to Form an LLC
- Choose a Name for Your LLC.
- File Articles of Organization.
- Choose a registered agent.
- Decide on member vs. manager management.
- Create an LLC operating agreement.
- Comply with other tax and regulatory requirements.
- File annual reports.
c. What Type of License is Needed to Start Boutique Hotel Business?
- General Business License
- Zonal Permits
- Signage Permit
- Operational State Facility Inspections
d. What Type of Certification is Needed to Start Boutique Hotel Business?
In reality, you don’t need any special certification to start a boutique hotel business.
e. What Documents are Needed to Start Boutique Hotel Business?
- Business and liability insurance
- Federal Tax Payer’s ID
- State Permit and Building Approval
- Certificate of Incorporation
- Business License
- Business Plan
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Contract Document
- Company Bylaws
- Memorandum of Understanding (MoU)
f. Do You Need a Trademark, Copyright, or Patent?
If you are considering starting a boutique hotel business, usually you may not have any need to file for intellectual property protection or trademark. This is so because the nature of the business makes it possible for you to successfully run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
Cost Analysis and Budgeting
a. How Much Does It Cost to Start Boutique Hotel Business?
The cost required to start a boutique hotel business may vary significantly, but on average, you can budget over a million dollars to start your boutique hotel business.
b. What are the Costs Involved in Starting a Boutique Hotel Business?
- Business Registration Fees – $750.
- Legal expenses for obtaining licenses and permits – $7,300.
- Marketing, Branding, and Promotions – $5,000.
- Business Consultant Fee – $7,500.
- Insurance – $5,400.
- A well-designed, well-furnished, and well-equipped facility – $3 million
- Other start-up expenses include commercial satellite TV subscriptions, and phone and utility deposits ($2,800).
- Operational Cost (salaries of employees, payments of bills et al) – $60,000
- Start-up inventory – $55,000
- Counter area equipment (countertop, sink, ice machine, etc.) – $29,500
- Store Equipment (cash register, security, ventilation, signage) – $14,750
- Website: $1,500
- Opening party: $10,000
- Miscellaneous: $20,000
c. What Factors Determine the Cost of Starting Boutique Hotel Business?
- The size of the boutique hotel business
- The choice of locations
- The required licenses and permits
- The type of facilities (rental or owned)
- The type of additional services offerings
- The cost of hiring and paying a business consultant and attorney
- The cost for branding, promotion, and marketing of the boutique hotel business
- The cost of furnishing and equipping the boutique hotel
- The cost of insurance policy covers
- The cost of registering the business
- Cost of recruiting and training your staff
- The cost for the purchase and customizing of uniforms
- The cost for the grand opening of the boutique hotel business
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?
Ideally, you build a new facility for your boutique hotel business and it will cost you several million dollars depending on the number of rooms, type of facility, and the location.
e. What are the Ongoing Expenses of Boutique Hotel Business?
- Cost of stocking up supplies such as toiletries, beddings, towels, drinks, water, and food ingredients
- Utility bills (gas, internet, phone bills, signage and sewage et al)
- Maintenance of facility
- Salaries of employees
f. What is the Average Salary of your Staff?
- Chief Executive Officer (Owner) – $75,000 per year
- Hotel Manager – $38,000 per year
- Accountant/Cashier – $35,0000
- Marketing and Sales Officer – $35,000 per year
- Attendants (Staff like House Keepers, Concierge, Cook, and Hostess) (5) – $35,000 per year
- Cleaners – $25,000 per year
- Security Officers – $24,150 per year
g. How Do You Get Funding to Start Boutique Hotel Business?
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for a loan from your bank/banks
- Source for soft loans from your family members and friends.
Write a Business Plan
a. Executive Summary
House Nation© Boutique Hotel, Inc. is a luxurious home base for leisure travelers. Our lobby is lavish yet homey, complete with a fireplace and cozy furniture, and upon entering, guests are greeted with complimentary champagne.
The spacious guest rooms are equally as comfortable with features such as carved beds, 40-inch flat-screen TVs, Blu-ray DVD players, free wireless internet, and a private veranda (in some rooms). Additionally, House Nation© Boutique Hotel, Inc. offers complimentary breakfast and a variety of free snacks (like a bedtime plate of cookies and milk) throughout the day.
Our accommodations also come equipped with minifridges, coffee makers, complimentary Wi-Fi access, and personal butlers. House Nation© Boutique hotel, Inc. will ensure that all our properties meet international standards.
b. Products and Service
- Spa, salon, and wellness services
- Meals (local delicacies, Chinese cuisines, and intercontinental cuisines et al)
- Drinks (wines, beers, distilled spirits, martinis, beverages, and non–alcoholic drinks)
- Self–service laundry room
- Business center
- Conference room
- Banquet venue
- Shuttle service
c. Mission Statement
Our mission is to establish a boutique hotel business that will provide top-notch and safe luxury lodgings to both individual and corporate clients in the United States.
Our vision is to establish a standard boutique hotel business that will be become one of the leading brands in the industry in the whole of New York, and also to be amongst the top 20 boutique hotels in the United States of America within the first 20 years of operation.
d. Goals and Objectives
The goals and objectives of a boutique hotel business are to provide a smaller, upscale, luxury hotel that offers a distinct personality, intimate experience, and personalized service to clients.
e. Organizational Structure
- Chief Executive Officer (Owner)
- Hotel Manager
- Marketing and Sales Officer
- Attendants (Staff like House Keepers, Concierge, Cook, and Hostess) (5)
- Security Officers
a. SWOT Analysis
- Ideal Location for a boutique hotel
- Highly Experienced and Qualified Employees and Management
- Excellent facility
- Top-notch customer services and experience
- Financial constraints may restrict the business from building new facilities in key cities
- A new business that will be competing with well-established hotels and other players in the industry.
- Inability to retain our highly experienced and qualified employees longer than we want during the teething stage of the business.
- A rise in the number of travelers
- Unique and customized services will push people to choose boutique hotels over regular hotels
- Online market, new services, new technology, and of course the starting of new markets.
- The arrival of new boutique hotels within our market space
- Low demand during the pandemic will reduce industry profitability.
- Economic uncertainty
- Liability problems
- The government could change its regulatory status and decide to enforce strict regulations that can strangulate new businesses like ours.
b. How Do Boutique Hotels Make Money?
Boutique hotels make money by renting out smaller, upscale, luxury hotel rooms that offer a distinct personality, intimate experience, and personalized service to clients.
c. Payment Options
- Payment via bank transfer
- Payment with cash
- Payment via credit cards
- Payment via online bank transfer
- Payment via check
- Payment via mobile money transfer
d. Sales & Advertising Strategies
- Introduce your boutique hotel business by sending introductory letters alongside your brochure to corporate organizations, travel and tour agencies, and other key stakeholders throughout the city where your boutique hotel business is located.
- Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, LinkedIn to get your message across
- Create a basic website for your business to give your business an online presence
- Directly market your boutique hotel
- Advertise our business in travel and tours\ magazines, community-based newspapers, local TV and radio stations
- List your business on yellow pages ads (local directories)
- Encourage the use of word-of-mouth marketing (referrals)
a. How Much Should You Charge for your Product/Service?
The amount boutique hotels charge their clients depends on the type of facility, the number of days the client wants to lodge and of course, the services rendered. However, boutique hotels charge between $520 to $2,000 per night.
b. How Much Profit Do Boutique hotel business Owners Make a Year?
It depends, but the available report shows that on average, within the industry, a small to medium-sized boutique hotel business owner can earn anywhere from $60,000 to $200,000 and more in personal income for the boutique hotel business owner.
c. What Factors Determine the Amount of Profit to Be Made?
- The capacity of the boutique hotel business
- The types of additional services offered
- The locations of the boutique hotel business
- The management style of the boutique hotel business
- The business approach of the boutique hotel business
- The advertising and marketing strategies adopted by the boutique hotel business.
- The number of years the boutique hotel is in business
d. What is the Profit Margin of a Boutique Hotel Business Product/Service?
The profit margin of a boutique hotel business is not fixed. It could range from 4.5 percent to 15 percent depending on some unique factors.
e. What is the Sales Forecast?
Below is the sales forecast for a boutique hotel business. It is based on the location of the business and other factors as it relates to such startups in the United States;
- First Fiscal Year (FY1): $1.2 million
- Second Fiscal Year (FY2): $2.4 million
- Third Fiscal Year (FY3): $5.2 million
Set Up your Office
a. How Do You Choose a Perfect Location for Boutique Hotel Business?
- The demography of the location especially as it relates to people who travel and lodge regularly
- Accessibility of the location
- The number of boutique hotels and regular hotels in the location
- The local laws and regulations in the community/state
- Traffic, parking and security et al
b. What State and City are Best to Start a Boutique Hotel Business?
- Las Vegas, Nevada
- Los Angeles, California
- Miami, Florida
- Dallas, Texas
- Silver Spring, Maryland
- Rowland Heights, California
- Portland, Oregon
- Oak Lawn, Illinois
- Charleston, South Carolina
- New York City, New York
c. What Equipment is Needed to Operate a Boutique Hotel Business?
- Furniture and Home Appliances
- Gym and Spa Equipment
- Booking software
- Computers and laptops
- Fax machine.
When it comes to hiring employees for a standard boutique hotel business, you should make plans to hire a competent chief executive officer (you can occupy this position), hotel manager, accountant, attendants (staff like housekeepers, concierge, cook, and hostess), cleaners and security guards.
Launch the Business Proper
In recent times, no boutique hotel business opens its door for business without first organizing an opening party to officially launch the business. You can choose to do a soft opening or you can go for a grand opening party,\. The bottom line is that with a proper launching of the boutique hotel business, you will officially inform people in your city that your boutique hotel is open for business.
a. What Makes Boutique Hotel Business Successful?
- Choose good locations and standard facilities to launch the business
- Make sure your partner with key stakeholders and offer a wide range of services (give your customers options)
- Throw an open house grand party before officially starting the boutique hotel business
- Be deliberate with your marketing sales approach
- Encourage the use of word of mouth to promote your boutique hotel business
- Leverage all available online and offline platforms to promote your boutique hotel business
b. What Happens During a Typical Day at a Boutique Hotel Business?
- The business is open for the day
- All the rooms are cleaned and ready to welcome guests
- Guests are welcomed and ushered to their rooms
- Administrative work is done concurrently
- The cooks and other staff members execute their job description
- Stocking of toiletries, cooking ingredients, and other supplies is done
- Maintenance of the properties is carried out when due
- The facility is administratively closed for the day.
c. What Skills and Experience Do You Need to Build Boutique Hotel Business?
- Excellent facility management skills
- Excellent customer services skills
- Interpersonal skill
- Accounting and bookkeeping skills
- Business management skills
- Bargaining skill
- Work experience in the hotel and resort industry
- Experience in managing people
- Experience in business administration
- Experience in handling different types of booking software.