Starting a hotel

27 April 2005
Starting a hotel

You can just see yourself sitting behind reception, welcoming guests, showing them to their rooms and then pouring convivial pre-dinner drinks, smiling and being mein host.

This is the vision of someone with rose-tinted glasses, but certainly there are definite benefits to owning a hotel. Financially it's a big commitment, so try to research the whole idea as thoroughly as possible.

If it's your first time as a business owner, there's some valuable advice on the Government's website on how to start up.

The Big Picture

Location, location, location

While location is crucial, so is offering quality service, regardless of the "level" of service you provide. A well-run, friendly, two-star hotel can easily be a success, while a four-star hotel with grumpy staff and a lax attitude to serving customers can easily go under.

Don't forget to check with the local council about any planning permission required - that includes any changes to signage you may be planning to make.

Here's a brief guide to planning permission considerations.

The big idea

The need for a big idea will depend on whether you are planning to take on an existing hotel and run it in a similar fashion, or whether you are developing your own style or brand.

If you intend to create a new style of hotel, then do your market research on the area. Can you attract your target market? Is there enough corporate business in the area to make it work? Is it realistic to have a conference centre that holds 1,000 people in a rural area?

Spend time, effort and money making sure you've got a good handle on the area and the chances for making a success of your idea. Time spent now could save you time in the future. [

Know your market during the day and in the evenings, find out if there are local businesses you can work with.

Financing your dream

This is the tricky bit. Here's a basic guide to get you started on what is needed and what you should think about.

You need to be prepared with a business plan, a presentation of your idea on how the business will work and a realistic breakdown of costs. Only then will any investor take you seriously.

There are plenty of sites that will help you build a business plan, and you should look at a few before starting.

Channel 4's site offers a good step-by-step on how to write a business plan - it's even got templates to download to help you get started

Most of the high-street banks have pages on their websites with advice on starting a new business. The Royal Bank of Scotland's includes information on writing a business plan, what loans banks give out, and other sources of income.

Who's going to pay for it?

Don't despair if you know you don't have the money to finance your idea; few entrepreneurs do. There are plenty of options from family, friends and banks to business angels and venture capitalists.

The key to convincing most to part with their hard-earned cash is that YOU know what you're doing, have the skills and team to pull off the Big Idea and are capable of paying them back in a realistic time scale - anywhere from three to five years is the norm.


What type of finance are you looking for - equity capital or debt finance? Click here for our brief guide to each and who offers what.

This site gives you some insight into other potential sources of investment

If you're still struggling for financial assistance there are grants and advice from a variety of bodies. Click on Grants, Information and Advice.

Down to the detail

Right you've got the building, the idea and the finance, and now all you have to do is open the hotel. You've got a lot of work ahead of you.

Money matters

Whether you've got outside investors, a bank loan, or just a handout from Mum and Dad, you're still going to need to keep track of all things financial in the business - or hire someone to do it for you.

Unless you or your partner are trained in bookkeeping, hiring an accountant is essential. Ask fellow hoteliers or other local businesses for recommendations.

Depending on the size of your business, you particularly need to know about VAT registration and all the paperwork involved - although you can now do VAT returns online as well as pay an annual flat fee if your business turnover is less than £150,000. As you'll probably be hiring staff, you need to set up a PAYE (pay as you earn) system and ensure national insurance contributions are being met.

Making it look pretty

Buying a hotel often means costly refurbishment, but few new businesses can afford to do it right away. A rolling refurbishment, room by room, may be a more sensible financial approach, bankrolling the future costs as the money comes in.

That said, often you want to stamp your own look on a place and so will want to ensure the hotel presents a consistent image. It may help to find a design consultant who specialises in hotels to send across the right messages.

Do some market research. Look at what the big chain hotels do. This may be not just to learn from them, but also to help you establish what you don't want.

Before you buy get a good survey - better to discover problems before you start your 10-week renovation than halfway through. Make sure builders submit new quotes if the job changes, and be certain the work is necessary before giving the go-ahead.

Legal eagle

Whatever you do, don't fall foul of the law by being ignorant of legal requirements for the business.

Your solicitor has probably already been involved with the purchase or leasing of your premises. Chances are your hotel will have a bar, for which you'll need a licence, so be sure to get this dealt with.

While you're thinking about licences, you'll also need two licences if you play music in public: one from the Performing Right Society and the other from Phonographic Performance Expect to pay about £90 for the former and £42 for the latter.

Government advice on intellectual property licences

Insurance. Dull, maybe, but essential. Think buildings, contents, fire and liability insurances - and that's just to get you started.

Any premises open to the public need to conform to fire regulations, so contact the local fire officer for advice and to arrange the final inspection.

And don't forget there is now the Disability Discrimination Act, which affects access to all public buildings by the disabled, so be sure that any plans for alterations take these new requirements into account.

Information on the act

Disability Rights Commission

There are crucial legal matters that fall into the following categories:

Food hygiene

Assuming that your hotel has a restaurant, it's probably a good idea to call the environmental health officer to come in for a chat and tell you the work that needs to be done to meet the appropriate standards. EHOs are there to help, and on the whole are happy that you consult them early, before a situation gets out of hand.

The Food Standards Agency produces a downloadable booklet on things to be considered when opening a new catering business.

There are legal training requirements for anyone handling food, and you must make sure any staff you employ are trained to the correct standard.

By 2006 it will be a legal requirement to demonstrate tangible systems - ie, documentation, rotas and schedules - for HACCP (hazard analysis, critical control points) procedures. So it's best to put the systems in place while setting up the business.

If you're opening a restaurant in Scotland, follow this link to find out about food hygiene regulations there

Hiring staff

Don't fall foul of employment laws - for example, discrimination. This is an area that is constantly evolving. From 2006 it will be illegal to discriminate on the basis of age. Candidates can take you to an industrial tribunal if they feel they've been discriminated against at the recruitment stage, so be aware of your obligations and their rights.

Also make sure you know what female, and male, employees are entitled to in terms of maternity and paternity leave and pay. [Link to pregnancy, maternity and adoption].

And if the employee isn't working out, know the correct way to go about firing them.

For more information on writing job advertisements, writing a job description, hiring staff, writing job offer letters, setting up employee appraisal schemes, and if it all goes wrong, firing them, click through to the following [LINK]

Shout about it

Marketing your hotel is vital to pull in customers. This isn't just about advertising, which can be expensive and may not target your market accurately. [

You'll need a marketing plan to help you budget for expenditure.

Here are just a few ideas for marketing your new hotel:

Even if you can't afford someone to do publicity for you, know the basics yourself and put them into action.

There are plenty of hotel guides and, chances are, the hotel may already subscribe to a few of them. The AA, RAC and local tourist board guides are the usual ones. If you're going for something a little out of the ordinary, it may be appropriate to contact other marketing groups such as Small Luxury Hotels or Pride of Britain to see if you meet their criteria for membership.

Make sure you contact the local tourist board to tell them you're opening and get on their books as a potential accommodation provider in the area.

Network locally, joining business associations and local chambers of commerce. This includes supporting local activities, which can win you valuable publicity and goodwill.

Try to find an unusual angle to get your hotel featured in the local newspaper's editorial section.

Make sure local taxi drivers know where to find your hotel - there's nothing worse than guests getting into a taxi at the railway station and the driver having no idea where you are because you're new.

Think of promotional offers - two for ones; happy hours; buy a meal, get a free bottle of wine - as incentives to bring in the customers.

Ensure that your brochure presents the right message, and target those customers most likely to use the facilities you offer. In today's internet age a website is crucial and can be a great sales as well as marketing tool.

Having an official opening can help generate local interest and awareness of your hotel - invite any of your financial supporters, friends, family, local journalists, dignitaries, and anyone who has helped out in the start-up process.

In addition to being a good way of thanking them for their help, they are all potential customers and are also likely to tell their friends about the hotel.

If you're aiming to achieve recognition for the food at your hotel, you might think about writing to the food critics of the local and national press. While not everyone wants their attention, a review is likely to bring you to the attention of far more people than you could possibly reach otherwise. Be prepared to take the criticisms on board, however.

Helpful hints

Join the professional body to enable you to meet like-minded people and stay abreast of current changes in the law that may affect your business

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