Writing a hotel business plan before investing any money in the venture is important to

help you identify what-if any-opportunities you have in the lodging industry. A properly
written business plan will address your target market, what capital you need, and how
long it will take for your operation to be successful. Your hotel business plan can be
broken down into the following major sections: Executive Summary, Market Summary,
Financials, and Operational Plan.

Before writing a full-blown business plan, strongly consider why you are writing the plan.
Is it an internal document to determine the feasibility of your idea? Is it going to be used
to obtain funding? If you are seeking financing, your document needs to function as a
prospectus or sales document in addition to a business plan. An internal document can
be more informative and less focused on “selling” the idea to a third party.

Once you determine the audience for your business plan, start compiling data about the
hotel industry and economic factors in the region you want to locate your hotel. If you
want to buy an existing motel, obtain as much information as you can about its current
occupancy rates, labor and operational costs. This information should be
readily available if the property is already listed on the market. Even if you
want to build your hotel from the ground up, look for hotels in your area for sale. It will
provide you with valuable insight into the profitability of a hotel in your region.

Next, summarize who your hotel will cater to – attracting a budget conscious traveler is
significantly different from appealing to a business traveler or a honeymooning couple.
Define your niche. Go online and visit the websites of hotels who service your target
clientele. Take note of the look/feel of the hotel, the appointments in the rooms, and the
amenities available for the price point.

Once you have summarized your target market, briefly consider how you will locate your
niche. Think about the costs associated with your marketing ideas. A large billboard on
the highway, radio advertising, newspaper ads, search engines – factor in the costs and
briefly outline a plan of action.

Now you have defined your target market and need to think about costs. Business
travelers will expect more frills than a road-weary traveler just looking for a place to
spend the night. Determine how cost-effective it is to add nicer linens, high speed
internet access, a fitness or laundry area and a dining area. Consider the costs of
room service, maids, janitors, front desk attendants, a general manager and a
marketing staff member. Remember to add in the costs of workers’ compensation,
employer-contributed taxes and benefits to your labor costs. Calculate water and
electricity consumption, maintenance, taxes, and insurance expenses you will incur in
the operation of your hotel. These operational expenses form the basis for your
financials section.

Many times your investor will flip straight to the financial portion of your presentation. It
is best to keep the bottom line simple, easy to understand and straightforward. This
overview is not the place to identify individual small expenses. For instance, paper clips
should not be a line item, but instead included in “Office Supplies.” Other categories may
include appliances, room furnishings, linens, décor, and landscaping.

Projections are very important. Even if your venture will lose money for the first several
months, it is important to address that so your investor understands why the long-term
outlook is so good for your hotel. Your financials should include a month-by-month
accounting for one year, then an annual summary for years 2-5. While anything after the
third year is pure speculation, an investor will want to see your long-term thought
process.

Now you have completed a market summary and financials, revisit the operation section.
Do the numbers still make sense? Can you afford a better level of service? Do you need
to shave expenses? Keep sharpening your pencil and revising your
Operations/Financials Summary until the two sections jibe perfectly with your Market
Summary. Now you are ready to tackle the Executive Summary.

The Executive Summary is the last thing you write although it is the first thing your
investor will read. This section is the road map you provide to the reader to walk him
through your plan. This is where you need to sell the reader on your vision. If you cannot
entice the investor to read the Executive Summary in its entirety, you might as well not
bother with the other sections. Your plan is a sales document. Each line needs to
compel the reader to keep going. It should not read like stereo instructions. Try to infuse
your grand idea into the heart and mind of your investor using your Executive Summary.

Now that you have completed your plan, organize any supporting information into an
appendix. Census data, competing hotels’ marketing pamphlets, web published data
and anything else that supports your position should be accessible here. Many investors
don’t view it, but it shows you did your homework – which all investors will appreciate.

Finally, have a trusted friend or colleague edit your plan. A grammatically correct plan
free of typos can make the difference in whether your plan gets a green light from
investors. If you have not taken care to present a quality document, an investor may
view you as sloppy – and not a good risk. These details add credibility to your document
and ensure the best possible outcome.

Use a good quality printer when making copies of your business plan and use at
least 24-lb paper. Binding your document is always more professional than stapling it
together, and consider using a presentation folder to make a great first impression.

If you follow these steps in building a hotel business plan, you are certain to find
success.