How to Write a Hotel or Motel Business Plan
The hotel and motel industry has been growing continuously over the last several years. There are numerous reasons for the hotel and motel industry's growth.
First, discretionary income in the US has been continuously increasing. The continued rise in discretionary income is often correlated with households vacationing. And when people vacation, they will either be staying at a hotel or motel during their travels. Also, as surprising as it sounds, increasing competition from hostels such as Airbnb has been driving innovation in the hotel and motel industry. This innovation has allowed industry competitors to exploit current market opportunities. Because of these situations and others, having a well-prepared hotel and motel business plan is an excellent strategy not only for possible funding opportunities but also to document strategic moves. With this said, our business plan writer has concocted some tips and tricks for when you are ready to write a hotel or motel business plan or hotel or motel financial projections.
Executive Summary for a Hotel or Motel Business Plan.
The executive summary section for a hotel or motel business plan should succinctly summarize all important aspects of your business plan like the financial projection section, funding section, and organizational management segments as well. However, hotel and motel business plan writers should pay particular attention to the organization's amenities and document them well in the executive summary section. Of course, her business plan writer recommends not listing every amenity under the sun at the facility. However, touching on two or three important amenities, like a swimming pool or close to shopping, is an excellent strategic move.
The company information section for a hotel and motel business plan should start with identifying the organization's legal structure and address where the hotel/motel will be located. Other important company information that should be included would be amenities provided at the hotel/motel, proximity to popular shopping in the area, and popular area attractions. Further, the location section should also discuss major thoroughfares in the area and their ease of access from the location. This is especially important for motels that cater to transient individuals.
Service Description and Competitive Advantages
The service description section for a hotel and motel business plan should start with describing the types of rooms available for guests. Some motels have one or two types of rooms. However, hotels often have a wide assortment of rooms with different amenities. Because of these differences, make sure to provide specific details about the differentiating factors between the rooms. Keep in mind, though, in your business plan, try to stay away from specifically stating prices for each room. As we all know, hotel rates fluctuate just about every time of year and for just about every reason. So, avoid having to update your hotel and motel business plan continuously by not including room rates. An excellent substitution for this practice would be low-priced, moderate price, and high-priced labels.
The target market for a hotel or motel may differ depending on the organization's location. For example, motels next to an interstate may target travelers on the road. In contrast, hotels may target vacationers to specific locales such as Disney World, national parks, beaches, etc. Once the target market is identified for your company, make sure to provide two or three justifications for this target market. Another example would be if a hotel targets beach vacationers, then a justification may be that the hotel or motel is located on the beach or within close proximity of it.
Industry research for a Hotel or Motel Business Plan
The industry research section for a hotel or motel business plan should start with examining the national trends and statistics for the industry. IBIS World has excellent national statistics related to the hotel and motel industry. For example, IBIS world claims that hotel and motel revenues for the last year were approximately $107 billion. The growth rate annually for the last five years in the industry was about -10%. However, industry experts anticipate a significant surge in the next year, at about a 15% annual growth rate. Profit margins for hotel motel competitors are approximately 3.5%. There are almost 80,000 hotels and motels in the US. These entities employ over 1 million individuals. This indicates that most hotels and motels are small or medium-sized organizations. These are just some trends and statistics about the hotel and motel industry that should be included in the industry research section of a business plan.
The owner and management section of a hotel or motel business plan should start with describing why the business owner wants to start or expand their hotel/motel. Once this foundation is set, then the business owner should expand upon their experiences related to the hotel/motel industry. Experiences may include significant travel as a business person or enthusiasts, work experience at various hotels or substantial research conducted related to the industry. Next, make sure to support your experiences with relevant educational accolades such as business degrees, real estate experience, etc. By following this strategy, future and current hotel and motel business owners are able to justify their future aspirations for ownership.
Funding Request for a Hotel or Motel Business Plan
The funding request section for a hotel or motel should start with explicitly stating the exact dollar amount needed to start or expand the hotel or motel. For example, this would be an organization needs $1 million to start a beachfront hotel. Next, identify popular categories for the hotel or motel. Some categories may include buildout, land purchase, renovation cost, training costs, advertising blitz, etc. Once each category is identified, then assign a specific dollar budget to the category. At the bottom of the list of categories, make sure to provide a grand total, which is identical to the top-line dollar amount funding requested. By following the structure, future hotel/motel business owners are able to show decisiveness with the amount needed for funding would also have a little bit of wiggle room because they have funding amounts categorized as compared to itemize.
The financial projection section of the hotel or motel business plan should start with identifying average room prices and the average number of guests staying on a daily basis. From this foundation, the business owner should then identify the cost for each room to clean and sanitize. Also known as the variable cost. Once the variable costs, average room prices, and an average number of guests are identified, the financial projection professional for your business plan can then calculate the gross profits quickly on a daily basis anticipated. Next, make sure to use growth rates and expand the gross profit section to project a 30 day, or monthly, expected gross profit. After this is complete, subtract all fixed costs, including labor, from the gross profits. This will leave you with very basic earnings before interest and taxes. The final step would be to deduct any interest payments made and taxes anticipated. Once you have your net profit for the month, then use growth rates and other financial strategies to project annual profits and losses.
Hopefully, these insightful tips and tricks for writing a business plan were helpful. As always, if you need help with a business plan or financial projections, just send us an email or give us a call.
Author: Paul Borosky, Doctoral Candidate, MBA., Author