How to operate a budget hotel profitably?

Question

I am starting the business from scratch and am considering whether to acquire existing budget hotel business or to build entirely new operation. Are there any trade secrets that I need to know which an outsider like myself at the moment may not be aware of? What are the operational issues that need to be dealt with and is it complicated to control the costs? Is it important to consider the location or surrounding amenities? Is the room rates the major issue for the guests when choosing where to stay? Does the operation become routine eventually and more or less run by itself?

Answer 1

Quite the proposition there.

Like all real-estate-related businesses, hotel management is highly dependent upon location. The town in which I live has a major tourist attraction that draws people from NYC, so room rates are two to three times as high as anywhere within 50 miles. It also has a Fortune 500 company headquartered in town, so we get a fair amount of business travelers. If you can get a property near one or both of those things, you're going to do a lot better than some random interstate exit.

Amenities are kind of a base value for what you can expect to charge for a room, with nicer hotels obviously charging more than more spartan ones. But your location kind of serves as a multiplier to that base value. The hotel at which I worked charged more than twice what was usual for a hotel in its chain, but only a bit more than slightly lesser equipped properties in the area due to the high demand for lodging. Go somewhere dumpy enough and even three and four star hotels are cheap. Budget property or no, there's no demand for lodging of any kind unless there's something to do in the area.

Trade secrets? Your staff will make or break the place, and it's hard to get good help these days. I'd plan on hiring a hotel manager rather than doing everything yourself. Check his employment history and previous properties. See how they did. Leave it to him to staff the hotel or you'll go nuts.

Controlling costs? Most of your costs will be pretty fixed. You'll pay taxes (especially property taxes). You'll pay for utilities. You'll pay for staff. Staff is the one area with a little play, but don't skimp here. You get what you pay for. Then again, if you're running a budget place and don't really care about guest satisfaction, maybe you can get away with less.

If you're going after the budget tourist crowd, it's all about price. Amenities are of some advantage, but if someone is looking to spend less than $50 on a room, they can't afford to be too picky. If you're going after the business traveler and upscale tourist crowd, amenities are where it's at. Free wireless, fridges/coffee pots in the room, etc. Everyone wants a pool, so get one. But you really need to figure out what kind of traveler you want to attract.

I guess the big trade secret is that hotels tend to be quite profitable if you can stay reasonably full. We're talking 20-45% profit margins. You'll only get the higher profits if you have a well-run property in a tourist area, but it's certainly doable.

In terms of buying or building: if you can find a local hotel management company that runs a decent operation, consider building a property from scratch. The problem with buying an existing property is that owners aren't likely to want to sell a reliably profitable property. If you see a hotel on the market, asking what's wrong with it is a good idea.

Answer 2

The best routes to take are to research the process of starting a business as well as the industry you're interested in.

I recommend checking out the SBA, Entrepreneur, The Start Up Journal & Nolo. All 4 are great informational resources for the new/small business owner. I posted links for you in the source box.

Associations may be a good avenue to explore. These organizations will address many of the thoughts, questions and concerns you'll inevitably have as well as many you haven't anticipated yet. See the source box for some relevant links.

Research, research, research – this cannot be stressed enough. Read as much as you can about the industry. Here are some book titles that are relevant:

* A Survival Guide for Hotel and Motel Professionals by Karen Levine, Alan Gelb
* Check In; Check Out: Managing Hotel Operations (7th Edition) by Jerome J. Vallen
* Buying and Running a Small Hotel: The Complete Guide to Setting Up and Managing Your Own Hotel, Guest House or B and B by Ken Parker
* 100 Tips for Hoteliers: What Every Successful Hotel Professional Needs to Know and Do by Peter Venison
* How to Open a Financially Successful Bed & Breakfast or Small Hotel by Lora Arduser

There are plenty of free informational resources out there. Check the source box for links to articles.

Hope that helps! I wish you much success & happiness in all your ventures!

Answer 3

Budget hotel can be profitable only if you keep the costs low. It is a good family business, where dad is working the reception and mom is taking care of the housekeeping.

Answer 4

if its a budget hotel then the important items customers look for - in this order are...

1/ Price - The cheaper the better - selll rooms in advance cheaper to ensure your nightly quota is reached

2/ Location - important but people will travel further for a cheaper price

3/ Frills - people dont expect too many frills from a budget hotel - so dont go over the top!

Answer 5

As all the business you need to make a profitability preliminary analysis considering the market that you want to have or the one close to the actual alternatives. In any way the success is proportional to your force to make everything happen

Answer 6

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Answer 7

Ideally I'd recommend hire someone as manager
who got this kind of experience. I used to work with DoubleTree Guest Suites in Austin,TX,mayb
I'd be helpful to give you concrete advise if you willing to hire me as consultant / employee.

Answer 8

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