Operators in the Hotel and Motel industry provide short-term lodging in hotels, motor hotels (motels), and resort hotels. Operators may also offer food and beverage services, recreational services, conference rooms, convention services, laundry services, parking, and other services. This industry excludes hotels that have casino facilities attached.

Statistics have it that in the United States of America, the hotels and motels industry generates over $133 billion annually from more than 92,746 registered and licensed hotels. The industry is responsible for the employment of over 1,361,490 people.

Experts project the Hotels and Motels industry to grow at a 5.0 percent annual rate. Marriott International Inc., Hilton Worldwide Holdings Inc., InterContinental Hotels Group PLC, and Wyndham Hotel and Resorts are leaders in this industry; they have the lion’s share of the available market.

Steps on How to Start a Hotel Business in 2022

1. Conduct Market Research

The first step in the market research process for a hotel business is to develop market-based research questions in line with your overall business goal and objective. In this regard, you should source information that will help you maximize your business, help you know what your potential market is looking for, help you structure and equip your hotel, and of course, operate your hotel with less stress.

a. Who is the Target Market of Hotel Business?
  • Corporate Executives
  • Business People
  • Sports Men and Women
  • Government Officials
  • College Students
  • Tourists
  • Travelers
  • Travel and Tour Agencies
  • Event Managers
  • Religious Organizations
  • Carnival Organizers
b. Is Hotel Business a Profitable Business?

Yes, the hotel business is profitable. Statistics show that the industry generates an average of $133 billion annually in the United States of America. For example, Hilton Worldwide Holdings Inc. generated approximately 4.31 billion U.S. dollars in revenue in 2020, down 51.63 percent from the previous year’s total.

c. Are There Existing Niches in the Industry?

Most hotel businesses tend to operate general services that a standard hotel facility provider is expected to offer. That is why it seems like there are no niche areas in the industry. But the truth is that there are various niche areas in the hotel and hospitality industry.

These are some of the niches within the hotel and hospitality industry;

  • Boutique Hotel
  • Conventional Hotels (2 Stars, 3 Stars, 4 Stars, 5 Stars, 6 Stars, and 7 Stars)
  • Motels
  • Bed and Breakfast
  • Short Let
d. Who are the Major Competitors?
  1. Marriott International Inc.
  2. Hilton Worldwide Holdings Inc.
  3. InterContinental Hotels Group PLC
  4. Wyndham Hotel and Resorts
  5. Hilton Hotels & Resorts
  6. Starwood
  7. Mandarin Oriental, Las Vegas
  8. The Langham, Chicago
  9. Montage Palmetto Bluff
  10. The Peninsula Beverly Hills
  11. Four Seasons Resort
  12. The Jefferson, Washington, DC.
  13. The Lodge at Sea Island
  14. The Nantucket Hotel & Resort, Nantucket, Massachusetts
  15. The Roof Garden at The Peninsula
  16. Lord Elgin Hotel
  17. Sofitel Chicago Magnificent Mile
  18. The Hermitage Hotel
  19. DoubleTree by Hilton Hotel & Conference Centre Regina
  20. MGM Grand Las Vegas
  21. Grand Hyatt San Antonio
  22. Monte Carlo Hotel and Casino
e. Are There County or State Regulations or Zoning Laws for Hotel Business?

Yes, there are county or state regulations and zoning laws for hotels, and players in this industry are expected to work with the existing regulations governing such business in the county or state where their hotel is domiciled. For example, in New York City Zoning Resolution, a hotel is under commercial use whereas the New York City Building Code Classifies a Hotel as Residential.

In addition to the above, it is important to note that in most states in the U.S,

  • No hotel or motel structure shall be located within fifteen feet of any public street right-of-way or five feet of any alley right-of-way. Such setbacks shall be increased, for the entire structure, by an additional two feet per story for every story above the first two stories.
  • No hotel or motel structure shall be located within twenty feet of any abutting R or P zoned property. Such setback shall be increased, for the entire structure, by an additional two feet per story for every story above the first two stories.
  • All structures, cumulatively, shall not occupy more than sixty-five percent of the entire hotel or motel site.
f. Is There a Franchise for Hotel Business?

Yes, there are franchise opportunities for the hotel business. Here are some of them;

  • Days Inn. Initial franchise fee: $35,000.
  • Super 8. Initial franchise fee: $25,000 to $35,000.
  • Motel 6. Initial franchise fee: $25,000.
  • Hyatt Hotels & Resorts. Initial franchise fee: $60,000.
  • Hampton by Hilton.
  • InterContinental Hotels Group or IHG.
  • W Hotels Worldwide
  • Red Roof Inn
  • Le Meridian
  • Ascend Hotel Collection
  • Conrad Hotels and Resorts.
g. What Do You Need to Start a Hotel Business?
  • A Feasibility Report
  • Business and Marketing Plans
  • Business Licenses and Permits
  • A Good and Well-structured Facility
  • Furniture, Beds, Pillows, and Gadgets
  • EIN (Employer Identification Number)/Federal Tax ID Number.
  • A Corporate Bank Account
  • Cooking and Serving Wares
  • Employees
  • Startup Capital
  1. Memorable Business Name ideas for Hotel

  • Arrows Place® Hotel, Inc.
  • Blue Gates® Hotel and Resorts, LLC
  • Rex Brown© Hotel and Resorts, Inc.
  • Jessica Adams® Hotel and Resorts, Inc.
  • Four Corners™ Hotel and Resorts, Inc.
  • Allen Blocks™ Hotel and Resorts, LLC.
  • Tyler Company© Hotel and Resorts, LLC
  • Sky Power® Hotel and Resorts, Inc.
  • Land Base© Hotel and Resorts, Inc.
  • Marron Gates© Hotel, Inc.
  • W.F Kanye® Hotel and Resorts, Inc.
  • April Lemon® Hotel and Resorts, LLC
  • Perfect Hedge® Hotel and Resorts, Inc.
  • Donald Simons Hotel Corporation, Inc.
  • People’s Place® Hotel USA LLC.
  • Silver House® Hotel and Resorts, Inc.
  • Rye Kent® Hotel USA LLC
  • West End® Hotel and Resorts, LLC
  • East Pointe® Hotel USA LLC
  • R Elliott® Hotel USA LLC.
  1. Register Your Business

a. What Type of Business Structure is Best for Hotel Business?

Even though there are several options when it comes to the business structure of a hotel business, the one that most players in this line of business consider is LLC. It is common to consider LLC because providers want to protect themselves from lawsuits.

Please note that an LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms listed below. Most new single-member LLCs classified as disregarded entities will need to obtain an EIN.

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 Open a Hotel Business?
  • General Business License
  • Food Handler’s License and Permits
  • Health and Safety Permit
  • Commercial Kitchen License and Approval
  • Zonal Permits (Applicable in some cities)
  • Signage Permit
  • Operational State Facility Inspections
d. What Type of Certification is Needed to Open a Hotel Business?

These are some of the certifications you can work towards achieving if you want to run your own hotel facility business in the United States of America;

  • AHLEI Professional Certification
  • Eco-Friendly Hotel Certifications
  • Certified Hotel Administrator (CHA)
  • Certification in Hotel Industry Analytics (CHIA)
  • Certified Hospitality Revenue Manager (CHRM®)
  • Green Globe Certification
e. What Documents are Needed to Open a Hotel Business?

These are some of the basic legal documents you are expected to have if you want to legally run a hotel business in the United States of America;

  • DBA
  • EIN
  • Business and liability insurance
  • Federal Tax Payer’s ID
  • State Permit and Building Approval
  • Certificate of Incorporation
  • Business License
  • Food Handler’s License and Permits
  • Health and Safety Permit
  • Commercial Kitchen License and Approval
  • Copy of license for the service support facility and/or a recent inspection report
  • Non – disclosure Agreement
  • Business Plan
  • Employment Agreement (offer letters)
  • Operating Agreement for LLCs
  • Insurance Policy
  • Online Terms of Use
  • Online Privacy Policy Document
  • Contract Document
  • Company Bylaws
  • Memorandum of Understanding (MoU)
f. Do You Need a Trademark, Copyright, or Patent?

If you are considering starting a hotel business, you may not need to file for intellectual property protection, copyright, patent, or trademark because hotels do not require one except on rare occasions.

  1. Cost Analysis and Budgeting

a. How Much Does It Cost to Start a Hotel Business?

The average cost of starting a hotel in the US ranges from $750,000-$1,000,000 for a small motel, with the national average being around $22,000,000 for a hotel with around 115 rooms.

b. What are the Costs Involved in Starting a Hotel Business
  1. The total fee for registering the business in the United States of America – $750.
  2. Legal expenses for obtaining licenses and permits as well as the accounting services (software, P.O.S machines, and other software) – $3,300.
  3. Marketing promotion expenses – $3,500, and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
  4. The cost for hiring a business consultant – $5,500.
  5. Insurance (general liability, workers’ compensation, and property-casualty) coverage at a total premium – $2,400.
  6. The cost for acquiring a property including reconstruction and facility facelift – 2.5 million
  7. Other start-up expenses including phone and utility deposits ($5,500).
  8. Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $100,000
  9. The cost for hotel equipment (flat-screen TVs, sound systems, food ingredients and drinks, beds and pillows, cabins, racks, fridges, kitchen gadgets, washing machines, and bar equipment among others washing machines, dryers, industrial pressing irons, ironing board, washer hook-up fees (sewer connection), cleaning supplies, soap, bleach, starch/adhesive, laundry bags, bathroom supplies, racks, and hooks/hangers, et al): $250,000
  10. The cost of launching a website: $600
  11. Miscellaneous: $5,000
c. What Factors Determine the Cost of Opening a Hotel Business?
  1. The size of the hotel (number of rooms and facility size)
  2. The choice of location
  3. The required licenses and permits
  4. The cost of equipping and furnishing the hotel
  5. The cost of hiring and paying a business consultant and attorney
  6. The cost for branding, promotion, and marketing of the hotel
  7. The cost for the purchase of hotel equipment and serving wares.
  8. The cost for insurance policy covers
  9. The cost for registering the business
  10. Source of your supplies and ongoing expenses
  11. Cost of recruiting and training your staff
  12. The cost for the purchase and customizing of uniforms
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?

It will pay you to build your hotel facility. The truth is that building or reconstructing a hotel facility will help you come up with a unique edifice.

e. What are the Ongoing Expenses of a Hotel Business?
  1. Supplies such as cooking ingredients, replacement of bed sheets, pillows and pillowcases, soaps, creams, toothpaste, towels, shampoos, serving wares, and gas).
  2. Utility bills – (phone bills, signage, and software renewal fees et al)
  3. Salaries of employees
f. What is the Average Salary of your Staff?
  1. Chief Executive Officer (Owner) – $65,000 Per Year
  2. Hotel Manager – $42,000 Per Year
  3. Facility / Maintenance Manager – $40,000 Per Year
  4. Sales and Marketing Executive – $28,000 Per Year
  5. Accountant (Cashier) – $32,000 Per Year
  6. Chief Cook – $37,000 Per Year
  7. Kitchen Assistants – $26,100 Per Year
  8. Bartender/Baristas – $26,000 Per Year
  9. Front Desk Officer – $26,800 Per Year
  10. Cleaners/Washer Men – $24,000 Per Year
  11. Security Officers – $24,000 Per Year
g. How Do You Get Funding to Start a Hotel Business?
  • Raise money from personal savings and sale of personal stocks and properties
  • Raise money from investors and business partners
  • Sell shares to interested investors
  • Apply for a loan from your bank/banks
  • Apply for business grants and seed funding from the government, donor organizations, and angel investors
  • Source for soft loans from your family members and friends.
  1. Write a Business Plan

a. Executive Summary

Sean and Sharon Hotel will be located in the heart of Las Vegas, a less than 20 minutes drive from McCarran International Airport in Las Vegas, and a few minutes drive from Mandalay Bay Event Center. We are conveniently located in the world’s headquarter of casinos and games.

b. Products and Service
  • Lodging
  • Meals (Local Delicacies, Chinese cuisines, and intercontinental cuisines)
  • Drinks (wines, beers, distilled spirits, martinis, beverages, and non – alcoholic drinks)
  • Self–service laundry room
  • Minimart
  • Conference room
  • Banquet venue
  • Shuttle service
c. Mission Statement

Our mission is to deliver reliable and excellent service superior to what our competition can offer and to ensure that our hotel enjoys over 90 percent occupancy in most parts of the calendar year.

Vision Statement

Our vision is to open a standard hotel that will become the number one choice in Las Vegas.

d. Goals and Objectives

The goals and objectives of the hotel business are to provide a luxury accommodation for people to lodge; to provide high-quality food and beverages; to provide a friendly and welcoming atmosphere; to provide professional, hygienic, and attentive service; and to impart value for money.

e. Organizational Structure
  • Chief Executive Officer (Owner)
  • Hotel Manager
  • Facility/Maintenance Manager
  • Sales and Marketing Executive
  • Accountant (Cashier)
  • Chief Cook
  • Kitchen Assistants
  • Bartender/Baristas
  • Front Desk Officer
  • Cleaners/Washer Men
  • Security Officers

Marketing Plan

a. SWOT Analysis
Strength:

The location of our hotel is perfect for such business, our management team has robust experience in the industry, our customer service is second to none in the whole of Las Vegas and our facility is top-notch.

Weakness:

Our perceived weakness could be that we are a new business, and we may not have the financial muscle to sustain the kind of publicity we want to give our business.

Opportunities:

The fact that Las Vegas is regarded as the world’s headquarter as far as the casino business is concerned means that loads of tourists, business executives, and travelers would want to visit Las Vegas, and we are well-positioned to welcome them because our hotel facility is just about 20 minutes drive from McCarran International Airport in Las Vegas, and a few minutes drive from Mandalay Bay Event Center.

Threat:

One of the threats that are likely going to confront us is unfavorable government policies, a downturn in the economy which is likely going to affect sales, and perhaps the emergence of new hotels (competitors) within the same location where our hotel is located.

b. How Do Hotels Make Money?

Hotels make money by offering the following services;

  • Lodging
  • Meals (Local Delicacies, Chinese and intercontinental cuisines)
  • Drinks (wines, beers, distilled spirits, martinis, beverages, and non – alcoholic drinks)
  • Self–service laundry room
  • Minimart
  • Conference room
  • Banquet venue
  • Shuttle service
c. Payment Options
  • Payment via bank transfer
  • Payment via credit cards
  • Payment via online bank transfer
  • Payment via check
  • Payment via mobile money transfer
  • Payment via bank draft
d. Sales & Advertising Strategies
  • Introduce your hotel by sending introductory letters alongside your brochure to traveling agencies, households, hospitals, religious organizations, clubs, campuses, et al within and outside the location where your hotel facility is located
  • Open your hotel facility with a party to capture the attention of residents who are your first targets
  • Advertise your hotel in community-based newspapers, local TV and radio stations
  • List your hotel on online directories and yellow page ads (local directories)
  • Leverage on the internet to promote your hotel facility
  • Engage in direct marketing and sales
  • Encourage the use of word of mouth marketing (referrals)
  • Leverage on the internet to promote your business (when you blog regularly on key issues as it relates to your business, people who consider you an expert in the field)
  • Join local chambers of commerce and industries around you with the main aim of networking and marketing your facilities and services; you are likely going to get referrals from such networks.
  • Engage the services of marketing executives and business developers to carry out direct marketing for you.

Financial Projection

a. How Much Should You Charge for your Product/Service?

The average motel will typically cost less than $100 a night. It mostly depends on location and demand. Hotel costs vary widely and are based on factors such as brand name, amenities, location, and demand. Hotels will mostly cost more than $100 per night, with the average cost being around $180 a night.

b. How Much Profit Do Hotel Business Owners Make a Year?

Using an inflation calculator, we estimated that in 2021, owners of a hotel chain can expect to earn around $49,000 – $74,000 per year. To put that into perspective, the American middle class consists of those earning between $48,500 and $145,500 per year.

c. What Factors Determine the Amount of Profit to Be Made?
  • The capacity of the hotel (number of rooms and other facilities)
  • The types of customized hotel offerings (ratings)
  • The location of the hotel business is covering
  • The management style of the hotel
  • The business approach of the hotel
  • The advertising and marketing strategies adopted by the hotel
  • The number of years the hotel is in business
d. What is the Profit Margin of a Hotel Business?

The profit margin of a hotel business is not fixed; it usually depends on factors that are unique to your location and the type of hotel. But, it can range from 35 percent to 55 percent depending on the occupancy rate of the hotel.

e. What is the Sales Forecast?

Below is the sales forecast of a Hotel Business based on the location of the business and other factors as it relates to such startups in the United States;

  • First Fiscal Year (FY1): $750,000
  • Second Fiscal Year (FY2): $1.2 Million
  • Third Fiscal Year (FY3): $2 Million
  1. Set Up your Office

a. How Do You Choose a Perfect Location for a Hotel Business?
  • The demography of the location especially as it relates to tourism and commercial activities
  • The demand for the services offered by hotels in the location
  • The purchasing power of businesses and residents of the location
  • Accessibility of the location
  • The number of 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 Open a Hotel Business?
  • Las Vegas Nevada
  • Los Angeles, California
  • Chicago, Illinois
  • New York City, New York
  • Boston, Massachusetts
  • Miami Beach, Florida
  • Silver Spring, Maryland
  • Orlando, Florida
  • Houston, Texas
  • Dallas, Texas
c. What Equipment is Needed to Operate a Hotel Business?

You will need the following start-up inventory, (flat-screen TVs, sound systems, food ingredients and drinks, beds and pillows, cabins, racks, fridges, kitchen gadgets, washing machines, and bar equipment amongst others washing machines, dryers, industrial pressing irons, ironing board, washer hook-up fees (sewer connection), cleaning supplies, soap, bleach, starch/adhesive, laundry bags, bathroom supplies, racks, and hooks/hangers et al).

It is important to state that this equipment can be purchased as fairly used if you are operating on a low budget. In setting up a small office for your hotel facility, you also need a computer, printer, relevant software apps, telephones, pager, photocopier, scanner, fax machine, first aid kit, and uniform.

  1. Hire Employees

When it comes to hiring employees for your hotel business, you should make plans to hire a competent chief executive officer (owner), hotel manager, facility/maintenance manager, sales and marketing executive, accountant (cashier), chief cook (chef), kitchen assistants, bartenders/baristas, front desk officer, cleaners and security officers.

  1. Launch the Business Proper

No hotel opens its door for business without first organizing an opening party to officially launch the business. You can choose to do a soft opening if you are operating on a low budget or you can go for a grand opening party. The bottom line is that with a proper launching of the hotel, you will be able to officially inform people in your city that your hotel is open for business.

a. What Makes a Hotel Business Successful?
  • Having an innovative business idea
  • Following a clear vision
  • Creating a solid business plan
  • Developing missing skills
  • Finding the right talent and network
  • Building a strong company culture
  • Maintaining excellent customer service and outreach
  • Analyzing your competitors
  • Being open to change
  • Taking calculated risks
  • Accepting and learning from feedback
  • Never giving up.
b. What Happens During a Typical Day at a Hotel Business?
  • The hotel is open for the day’s work
  • The rooms are cleaned and properly arranged to welcome visitors
  • Food services and the bars are operated as required
  • The hotel stays open to check in and check out customers.
c. What Skills and Experience Do You Need to Build a Hotel Business?
  • Excellent customer services skills
  • Good managerial and human development skills
  • Team-building & Interpersonal Skills.
  • Excellent communication and negotiation skills.
  • Organizational skills.
  • A strong understanding of the hotel industry
  • Attention to detail
  • Good supervisory skills
  • Familiarity with all aspects of the hotel and hospitality industry
  • Experience in working as a hotel manager
  • Experience in managing people
  • Experience in business administration