Opening a Hotel Business? Avoid These 4 Common Mistakes

Starting even the simplest hotel or inn is a venture that carries with it a high amount of risk. Here are four top mistakes to avoid when opening a hotel business.  

Mistake 1: Not Raising Enough Capital

A hotel owner generally purchases the property of the hotel, and the down payment alone may be substantial. Factor in all of the additional costs before you can invite a guest inside – renovation, HVAC, electrical, plumbing, computer systems, initial marketing, and supplies. Then, without good, conservative projections of your costs and revenues over the first year, hotel owners can still fail to have enough cash on hand to see them through the early growing pangs before room occupancy rises enough to cover costs. Don’t let this happen to you. Asking your investors for more help a few months after opening shows them that you didn’t understand the business to begin with. They will likely make you pay for the mistake by taking a greater percentage of the business, saddling you with much higher interest rates, or even replacing you with a new manager.  

Mistake 2: Failing To Check The Zoning  

Before any work begins you must know that the location you desire is properly zoned for a hotel. Don’t simply follow the word of the owner who wants to sell you the land or lease you the building. To be sure, you must check with the zoning authority yourself and see the zoning in writing. Your plans can be doomed from the start if you are not zoned correctly.  

Mistake 3: Failing to Seek Professional Help  

Hotel entrepreneurs should consider using the services of an expediter – an experienced professional who knows the local government’s ins and outs and will pursue attaining all of the proper licenses and permits on your behalf. Consider the references and experience of such a person carefully. Only if you plan to open multiple hotels do you have a good reason to learn permitting yourself and forgo an expediter. In those cases you may quickly move up the learning curve after your first hotel or two, saving money in the long run.  

Mistake 4: Getting the Insurance Wrong  

People sometimes get injured in hotels. As such, you need to make sure you get the appropriate insurance for your hotel. You need to make sure you insure the hotel itself and any additional property owned by the hotel.   In addition to property insurance, you will need liability insurance for customer and workers compensation insurance for employees. Since insurance expenses for hotels can be significant, be sure to shop around for the best rate.