The current COVID-19 pandemic is devastating to the hospitality industry. In fact, 20% of hotels are expected to go out of business in New York alone.
Although this is a difficult time for incomes solely dependent on hospitality or entertainment, it could create opportunities for those with unaffected incomes. As hotels shut their doors and are put up for sale, buyers may find better prices than in a better economy.
If you are considering investing in a hotel business and are wondering how to open a hotel, check out the guide below.
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How to Open a Hotel
Opening a hotel is no small endeavor. There are many legal requirements to meet before you can even open the doors. Below is a brief outline of what is generally involved.
The Business Plan
All businesses should start with a business plan. The plan considers all the aspects of the business that need to be worked out. As the old adage goes, people don’t plan to fail, they fail to plan.
First, consider the initial start-up cost for this kind of investment. It is considerable. Do you have the capital, or do you intend to apply for a loan? A bank will need to see a thorough business plan before they consider loaning any money.
The initial investment should consider the cost of renting or purchasing the space and furnishing it, if necessary. There are other initial expenditures as well, like licenses and equipment.
There are also ongoing costs to pencil in. These are the costs of the staff, internet service, maintenance and upkeep, marketing, etc.
Be sure to describe your target market and how the hotel will make money. Consider how much money the hotel needs to make to clear overhead and turn a profit. Then, set the room rates. Brainstorm other ways the hotel could make money, like with a hotel bar or partnering with a tour company.
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Establishing a Legal Entity
The hotel needs to be a registered legal entity to prevent the owner, as an individual, from being held personally responsible for things that occur at the hotel. Common legal entities include sole proprietorship, corporations, partnerships, and limited liability companies.
Make sure to do some research on your business name before registering it.
Registering for Taxes
Businesses have state and federal tax liabilities. You need to apply for an Employer Identification Number from the IRS to register for taxes. This is a relatively simple, cost-free step.
Opening a Business Account
Business assets and expenditures need their own banking and credit accounts. This is necessary to keep the money straight come tax season. Building credit for your business is important for future business investments.
Set Up the Accounting System
There needs to be a clear record of income and expenses. Advertising and hotel internet marketing costs, for example, need to be systematically organized into detailed accounts. This is one of the more complicated steps and it is advisable to hire a professional accountant.
More Business Advice
Figuring out how to open a hotel involves many complicated steps. Navigating tax liability and accounting alone is difficult to manage without a professional finance background. However, it is not impossible to accomplish with the right resources and a good amount of effort.
For more business product and service advice, don’t forget to browse the rest of our page.