For many aspiring or new hostel owners, putting together a business plan can be quite daunting. Here is a summary of what should be included in a hotel business plan from Patrick Landman, CEO at Xotels.
This article was written with hotels in mind, but it applies to hostels as well.
Moving from daydreaming to reality – how to put a travel industry business plan together
1. Executive summary
This exists of two parts:
- Mission Statement: Intro: a one-line company description of your hotel (not two lines or a paragraph). It explains why you are in business or the huge problem you are solving which currently is not being met. For example, in the case of Qbic Hotels: “Moving modular hotels into under-utilized real-estate to reduce build-out cost and time.”
- Objectives: What do you hope to accomplish? (“Reach an annual occupancy of 90%”).
2. Company analysis
More detailed information on the USPs (unique selling points) of your hotel concept.
3. Industry analysis
Information on the current industry trends, state of the marketplace and how this will impact the hotel. Sounds obviously, but this is needed as investors want to be sure you really understand the hotel industry.
4. Customer analysis
In-depth information on your target market, including geographic, demographic, socio-economic, psycho-graphic, behavioral segmentation details.
Which are the types of guests who will mostly stay at your hotel? Explain how your hotel will meet the needs of these main segments in terms of location, amenities and services.
Basically, how will consumers answer this question: “Why this hotel?”
5. Competitive analysis
A study of your local competition or global concept competitors, with each of their strengths, weaknesses, occupancy rates and market share (SWOT analysis).
And don’t forget the most important part: what differentiates the new propertly from them and what makes it stand out.
6. Strategic plan
This exists of three parts:
- Marketing: How exactly will you attract customers/guests? How will you position yourself? What will your message be to the different segments of your business mix? How will your direct marketing work? What is the plan for your hotel website, SEO, SEM and SMM? Will you do offline promotion?
- Distribution: Which third party channels will you use and how will you manage availability? What technology will you need?
- Revenue management: What pricing and yield techniques will you use? What will your payment and cancellation policies be?
7. Operations plan
Logisitcs, responsibilities and more, including:
How will you run the hotel? How much staff and supervisors will you need? What are their job descriptions / responsibilities? What background and experience should they have? When should they start? What are your service standards? Will you develop manuals? Which supplier will you use? How will you manage inventory?
8. Management team
Include the bios of your team. Focus on what uniquely qualifies you to make your hotel a success.
9. Financial plan
Provide the start-up costs of the hotel (capital investment), the ingoing business costs, operational expenses and revenue projections for the next five years. Include KPI like expected occupancy, ADR (average daily rate) and REVPAR (revenue per available room).
If you are raising money, outline how much funding will be needed and when. Explain how you will generate a return on investment for investors, or when lenders will be paid back.
10. Key milestones
These are the most important achievement which once they have been completed, will make your hotel more likely to succeed.
Therefore, you should consider:
- Location selection
- Permits and licenses
- Build-out/construction of the property
- Staff and training
- GOP break-even
- NOI break-even
- 10% Ebitda
Each time one of the key milestones is achieved, the risk of lenders or investor decreases. And once your last key milestone is reached, chance of success is more or less guaranteed.
Provide any other relevant information here. Don’t clutter the main sections of your hotel business plan with too many details. Rather support them with attachments in this part.
Here are two other resources you may find useful:
Hostel Business Plan Outline
Build Your Business Plan tool from the US Small Business Administration
Would anyone be willing to share your hostel’s business plan as an example? (feel free to replace your confidential figures with generic representative numbers)