Moving from daydreaming to reality – how to put a travel industry business plan together

Okay, dreamers – you have decided to go ahead and launch a travel business. In fact, you’re going to open a fancy new hotel!

You have thought out an amazing concept delivering unparalleled guest service; it will dozens of awards; the media will gush at its brilliance.

Back on planet earth, however, the next step would be to calm down for a while and write a business plan, right?

It’s like the road map to an opening. However, this is where most entrepreneurs get stuck.

Why? Many do not have the time, don’t know what to write or indeed even get started on the financials. But until you finish the business plan, you will not be able to get the financing either. So you end up with ideas sitting in your head, not realizing your dream.

The reality is that it is not that difficult to make a good hotel business plan. It is merely a structured summary of your idea. Most people try to include everything about their hotel concept in the plan. But this leads to an indigestible super-novel – AKA a mess.

They key is knowing what to include, and what not to include – but essentially you need to create a clear road map, something that will excite investors rather than bore them to death like many business plans full of redundant information end up doing.

One of the main challenges is that after reading the first page of most business plans, I often still do not fully understand what the hotel is all about. For investors and lenders it is crucial they can quickly comprehend your plan, without reading the whole document.

We have put together a guideline with ten critical points you must include in your hotel business plan (the same structure could be used for other parts of the travel industry, with tweaks to the product):

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
  • Opening
  • 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.

11. Appendix

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.

Summing up

Many people have great business ideas. But the difference between dreamers and entrepreneurs is the mindset. One question to always ask: are you actually ready to ship your idea from teh drawing board to the marketplace?

The first step is to put your ideas on paper, so I hope this guide will help you write a persuasive hotel business plan.

NB: More from Xotels.

NB2: Kid idea image via Shutterstock.

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Patrick Landman

About the Writer :: Patrick Landman

Patrick Landman is a contributor to tnooz and founder and CEO of Xotels. This hotel management group assists independent hotels with revenue management, online marketing and internet distribution strategies.

They offer outsourcing services, coaching, consulting and training. In his blog, Patrick challenges hoteliers to think out of the box and not to accept the established order.

Through a passionate drive for growth and improvement he brings creative tips, ideas and best practices to the table that can help hotels drive up their bottom line.

In previous roles he has helped to develop businesses like RateTiger and Hotels.com into industry leaders. 

 

Comments

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  1. Alex

    I think it’s worth understanding the difference between the extremely flexible, fast paced world of software startups and a more involved, costly business of starting a hotel venture. While you may be able to apply the Lean Canvas to the hospitality industry at a high level, a solid business plan that will be followed (sometimes for years before hotel opens!) is definitely a requirement.

    There is also no rule that every business plan is written in stone and amendments are always permissible where appropriate. 😉

     
  2. Petr Klymec

    Great example of Gen X vs Gen Y business thinking!

    Business planning concept was and still is a straightforward logical and comprehensive sequence of (old school) “must knows” or “steps how to build&run a business” (not only for Dummies). It used to work and in some cases it still works. In any case BP is worth of getting acquainted with for those who never leapt into the entrepreneurial wonderland and do not understand the sheer spectrum of aspects and disciplines involved (as mentioned above in the points 1-11).

    But the times are changing. Success is ever more related to the capability to lead the innovation. Mere adaptation to the speed of change will be just a plain battle for survival. Mid to long term planning without incremental building-testing-improving seems to loose the race to more agile businesses and this is not only true for (tech) start up scene but also for already established and sizable companies.

     
  3. Patrick Landman

    Patrick @ Xotels

    @ John,

    Love the quote by one of the undoubtedly best planners in history.

    The challenge we find, is that there is little or no planning at all, leading to unforeseen disappointments in terms of costs or service outcome with new hotel concepts.

    No planning is a recipe for disaster I would say. Indeed, one can never plan everything expecting the outcome to be exact.

    I like your point. Be honest. Fully agree. Set the right expectations, they will only lead to disappointments and potentially conflicts down the road …

    @ Eric Steve,
    Love the book!

    As John says though there is not a ‘one fits all’ solution. It depends on your business and own team culture which approach works best …

    Thanks for the great feedback!

    Patrick

     
  4. Eric Ries & Steve Blank

    I agree with John Pope. Ever heard of the Lean Startup and Business Model Canvas?

     
    • John Pope

      Eric & Steve (if that is actually you),

      I reckon it would be next to impossible not to have heard about “The Lean Startup” methodology, unless you’ve been spending the majority of the past couple years in the hills of Pakistan, hanging with OBL & Co. 😉

      I read your book (and listened to the audio version) on the recommendation of both Fred Wilson, and my mother, and thought it advocated plenty of sound principles and strategies to give an entrepreneur a solid chance of success – for most people, anyway.

      However, I also think there’s something to be said for the Steve Jobs approach, to only ship when as close to perfection has been achieved – or in Apple’s case, sublime simplicity. After all, you only have one chance to make a great first impression. The quote from DaVinci that Jobs used regularly with his designers and engineers, “Simplicity is the ultimate sophistication.” has always resonated with me deeply. As you know, simplicity takes tremendous refinement, which inevitably comes with extended time frames and internal (non-public) pivots.

      The approach we’ve adopted is a hybrid of many of your Lean principles, especially processes, coupled with the burning desire to only present refined simplicity – a.k.a. not shipping the Minimum Viable Product when we could have earlier in the process.

      The result and experience has been successful for us, in that, we didn’t burn through any operating capital whilst not being 1000% confident with our product. I think it’s worked for us – but, of course, only time and the market will tell. I think remaining fluid, as opposed to rigid, in your adopted methodology is the ultimate recipe for most any person or situation – or as Bruce Lee said, “Having no way as way. Having no limitation as limitation.”

      In any regard, nice to have such an esteemed “Dynamic Duo” contribute to the conversation. 🙂

       
  5. John Pope

    Interesting content for a Tnooz article.

    If I may add a counter-point to the unquestionably comprehensive article, in the words of Dwight D. Eisenhower, “Planning is useful, plans are useless.” I think this was prophetically also coined for business plans, in particular.

    Unless it is an absolute requirement for the acquisition of investment funding, the plan that’s originally conceived of ultimately is never worth the paper it’s written on. Again, that’s not to say the process doesn’t have value, but in practice ALL plans stray from their original intention for an infinite number of previously unforeseen reasons.

    And, that especially goes for plans that are outsourced to third-party “experts” to complete – it is the owner of said project that needs to be responsible for completing the task of planning – or else, you’d be just as savvy to throw the money out of the window, instead.

    Which leads to my final point, Business Plans tend to be written for an external audience – i.e. investors, bankers, potential partners, etc. – rather than business owners themselves. This leads to including content that you think people want to hear, rather than what’s most honest, realistic or possible.

    When planning, be honest with your capabilities and expectations, this makes the process far more valuable, and, ultimately, more believable and useful.

     
 
 

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