Do you know that some states in Nigeria has less than 10 good hotels? There is so much money to make from hotel business in Nigeria if you know how to start one. If you want to go into hotel business or build your own dream hotel, here is a guide you can follow.
The profit potentials in hotel business is so huge. Although some hotels are struggling to get customers. That’s because customers patronize good hotels only. While the bad ones are struggling, the good hotels are turning away customers.
Imagine filling a hotel of 90 rooms everyday or most days in the week with customers. A typical good hotel can be filled most weekends beginning from Thursday until Monday morning. That’s like 4 nights out of 7 nights in a week.
If you calculate those 4 nights at a budget rate of N10,000 per night that would be N900,000 income from rooms per day. And N3,600,000 per weekend. In one month that is N14,400,000. It doesn’t include food, drinks and hall rental if you provide other hotel services. And good hotels also charge more than N10,000 per room.
Introduction To Hotel Business
Hotel business is very lucrative. Hotels make money selling out their rooms for a minimum of 24 hour use. This revenue is more than what some home rentals charge in one month. Also, hotels make money through other additional services like selling foods, drinks and conference and meeting rooms.
And there are factors that affects hotel business revenue. Most of which includes, domestic trips and total nights spent away from home. Consumer index, consumer spending and inbound trips by non-residents of that city. All that can influence, increase or decrease in hotel patronage.
There are over 17,560 hotels in Nigeria. Most of which are located in cities like Lagos, Abuja and Port Harcourt. Other cities share just about less percentage of the entire hotels in the country.
Even though hotel business is lucrative, most people still fail in hotel business. The reason is not understanding the business and lack of management. You cannot expect to make good money from any business you don’t understand how it works.
Moreover, hotel business is hospitality. If you have more hospitable options more customers would come to you. You must understand that most of your customers are those living in that city, and they all have residence.
But all that won’t even make any difference if you didn’t start your own hotel business. So, you need to know how to start your own hotel business. This report is a step-by-step guide you can follow. I also provided options to connect with a reputable luxury and hospitality design and construction company to help you get the best from startup to finish.
Steps to Starting a Hotel Business
If you want to start a hotel, there are important decisions to make. It will help you decide important actions towards starting your hotel business. These considerations would determine both what kind of hotel business to start, like how many rooms, whether luxury or affordable hotels. Including the target market and choosing your profitable location.
Some of these steps to consider include:
- Choosing your type of hotel business to start. Like, how many rooms, whether luxury or just an affordable hotel.
- Selecting the right location to build your hotel business
- Choosing whether to build from scratch or buy an existing hotel
- Consulting with experts in hotel design and building to determine cost implications
- Consulting government to understand necessary approvals and permits
- Packaging your hotel business plan to explain your strategy, plans and financial requirements.
- Prepare your funding plan to include reaching out to investors and banks to raise the funding required
- Start Building or renovating your hotel
- Hiring and training qualified hotel staff
- Acquiring the required software systems (e.g., reservation system, accounting software, etc.) to effectively manage your hotel business.
- Strategies to launch your pre-opening hotel marketing plan
- And finally to open your hotel to the public
How Hotel Business Works
There are different types of hotels. And if you want to start a hotel business you need to understand which class of hotel is meant for your target customers. Building a hotel without knowing the class of customers that would use that hotel is a big mistake.
It will also affect your hotel design, building quality, finishing style, interior decor and management style. And since most hotel owners don’t even know this, they make mistakes from design and choosing the wrong comoany to build their hotel. Some even hire just any contractor to build a hotel.
Hotels are not built by just any building contractor. It’s not just a house. It’s a hotel business. You need the right designers, builders and decorators with vast hotel building experience. If you get things right this way, you will save lots of waste and get better luxury hotel for the class of customers you are targeting.
The moment you decide to build your own hotel, stop looking for cheap options. The idea of hospitality is to offer luxurious lifestyle. The reason hotels fail is because they are built with cheap products. And hotel maintenance is more important than building the hotel itself.
Cheap products requires more maintenance than high end luxurious products. And if your hotel is cheap, it also attracts the wrong kind of customers. Hotel business is for the rich and those who want to feel rich. It’s not a service to everyone.
Your customers are exclusive and they want luxury that’s the major reason they would leave their homes to sleep in hotels.
Different Classes Of Hotel Business
When starting a hotel business, it’s important you decide the class of hotel you want to build. It’s different from hotel ratings. These classifications takes several criterion. We have classifications based on locations, sizes, by service standard, ownership and affiliation.
These classification takes into account target market. While small hotels does not target elite customers, it’s ideal market is budget customers. The same way large hotels target elite customers with both semi and full luxury amenities. So, in building your hotel business, it must be based on the target market, and that is directly connected to your building budget as well.
Generally, hotels are classified and built with this general classification in mind. Your dream hotel can fall into any of this hotel business class.
Here is the general hotel business classification:
- Commercial Hotels
- Airport Hotels
- Suite Hotels
- Extended Stay Hotel
- Bed & Breakfast Hotel
- Residential Hotel
- Resort Hotel
- Casino Hotels
- Conference Hotels
- Convention Hotels
While Hotels that are classified on the basis of location includes:
- Airport Hotel
- Resort Hotel
- Country Hotel
- City Center Hotel, etc.
Another classification are those by sizes, which includes:
- Small Hotel
- Medium Hotel
- Large Hotel
- Major Hotel
But this class of hotels have two separate classifications based on U.K types and typical class. The U.K. Class is also what often obtain here in Nigeria. So, you can classify Nigerian hotels based on the U.K class and you will be right. But that’s not to mean that some Nigerian hotels are not in the typical class. It’s just that Nigeria doesn’t have a standard class rating of its own.
U.K. classifications are:
- Small Hotel: Fewer than 25 Rooms
- Medium Hotel: Around 25 to 99 Rooms
- Large Hotel: Around 100 to 299 Rooms
- Major Hotel: More than 300 Rooms
While the typical hotels are classified as:
- Small: Nor more than 150 Rooms
- Medium: 151 to 299 Rooms
- Large: 300 to 600 Rooms
- Major: More than 600 Rooms
Also, we have hotels classified based on their service standard, and they are as follows:
- World Class Service Hotel
- Mid-Range Service Hotel
- Economy or Limited or Budget Hotel
The last but not the least are hotels classified by ownership and Affiliation, which are just 2 major groups:
- Independent Hotel
- And Chain Hotel
Different Hotel Star Ratings
Although in Nigeria, most hotels are not recognized by customers by their ratings but all hotel’s fall within their rating of course. While some are internationally rated hotels like Sheraton, Protea and Western hotels, etcetera, others are either self rated or rated by online sites, which are not officially approved.
Nigeria doesn’t have any such rating body for hotels in the country. Most of what is used to rate hotels are the brand popularity and number of rooms. However, we will examine how hotels are generally rated so you can understand how to build the kind of hotel rating you want.
Hotel business is rated based on the amenities and luxury it provides. It’s different from hotel classification, where it’s based on the target market.
According to reports, the original star rating was started by Forbes magazine in the 1950s. Although, many other bodies now rates hotels in the US, but Forbes remain the number one star rating body in the US and globally too.
Below are the different ratings for hotels:
- 1-Star Hotel
- 2-Star Hotel
- 3-Star Hotel
- 4-Star Hotel
- 5-Star Hotel
It’s the lowest level of hospitality, where you may not get a TV, telephone or even daily house keep services. It’s just basic rooms of a bed and table. Bathroom may likely be shared with others. There is probably no on-site facilities and it’s usually not opened 24 hours.
This kind of hotels don’t provide many services either, but you might get a breakfast. You will get a private bathroom with probably shower but not a bathtub. It’s just an upgrade of 1-star hotel with probably cloth racks, telephones and TVs, but don’t expect a flat screen. And the reception desk is likely to be opened 24 hours daily.
This one is just right in many ways. Buts it isn’t too cheap, neither too fancy. It’s the most top hotels you find in most small cities in Nigeria. It typically has a restaurant, a bar on-site, as some has butlers to take your luggage to the rooms. The idea is to make guests feel relaxed and comfortable without spending too much money. It equally has larger rooms, more comfort with more furnitures.
This hotel rating is more relaxing than 3 star. The rooms are bigger and more beautiful, and with large beds, mini bar, including bathrobes, workstation and modern television. Plus valet parking, gym, pool, spa, etcetera. Most importantly, a 4-star hotel is extremely nice and you should be able to notice the difference from the lobby from their fancy decor.
The highest hotel rating is 5-star rating. Although, some still claim there is 7-star rating, but no hotel is currently rated that high. However, 5-star is the luxury hospitality of hotels. It should have all the amenities one requires in a luxury hotel and even more. Everything about 5-star hotel is luxury. It’s not actually so different than 4-star but it offers more luxury in every way.
Most exclusive 5-star hotels includes golf courses, tennis courts, health clubs with trainers and even child care services. It’s the best comfort one can find in hospitality with gigantic lobbies. A typical 5-star room has oversized bathrooms that’s lined with marble counters, large vanity laden with high-end toiletries.
Action Points For Launching A New Hotel Business
Starting a hotel business requires you follow some important steps in achieving your dream. Although, if you don’t know much about hotel business, you will still need the services of a consultant to help you with the plan, design, building and furnishing your hotel.
But the main idea of this post is to help you get it right from the beginning. That’s how to make hotel business work, from the beginning. If you don’t get it right from start, you may never get it right again.
And it’s not about just building the hotel. There is a way a hotel is built for its class of target customers. It saves time and money. Don’t build a high-end hotel only to have low-end customers patronizing it. If you don’t make enough money to maintain the hotel it will close down in no time.
Step One: Determine Your Hotel Classification
Your first step is to determine what class of hotel you want to build. In order words, determine who your target customers should be. What kind of customers do you want your hotel business to serve? Once you get this right, you won’t have a problem deciding the right location for your hotel business.
If you don’t know what customer base to target, maybe you should start by consulting an expert by sharing your hotel business dreams and let him help you target the business rightly.
Step Two: Choosing the Best Location
Choosing a hotel location is like asking where can I setup my hotel that is convenient for the right kind of customers? Who your customers are would determine the location for your hotel. If they are elite customers or budget customers, it’s important you know first, before deciding on the location.
The right location would always be the right place that your target customers would find most convenient to come. If you noticed, motels are mostly built along highways. The reason is because their target customers are usually road travelers.
However, if you are going to invest tens of millions and above into your hotel business, don’t just assume the location is right for your target customers. Going into hotel business is enough risk on its own. So don’t multiply that risk by making wide guesses. Use experts to conduct feasibility study on any proposed location or to find you the right location for your target customer.
If you make mistake of a wrong location your hotel business is doomed from day one. The wise thing to do is to avoid early mistakes like this, it may not be easily corrected anytime in the future. The money you spent on feasibility study is a wise investment. So, don’t ignore it for any reason.
Step Three: Plan for Capital
It doesn’t matter whether you buy an existing hotel or start a new hotel from scratch; even if you choose to renovate a building into a hotel, everything is about money. And it can cost in the millions or billions of naira to build one. And if you don’t have the money readily available, you will need to seek bank loans or get from investors.
Step Four: Package a Business Plan
A hotel business plan is not just a document to help you get loans from the bank. It’s a simple, clear, but persuasive plan that is required throughout the building and management of your hotel business.
It should communicates the vision, mission and focus of the hotel business. And’ defines who should work in the hotel, what qualification they should possess and also their roles and daily work functions.
A good hotel business plan should also look into the staff training requirements and service manual to help it achieve a better customer service experience required of a hospitality brand.
It’s ideal to package both hotel business plan with feasibility study report together for seamless idea management. However, don’t start looking for a cheap business plan package. You need a workable plan and not cut and paste hotel business plan. And expert feasibility study report to cost more.
Step Five: Design, Build And Furnish Your Hotel
Use only the best comoany to plan, design, build and furnish your hotel. A hotel is more than a fine building. So much goes into the building of a hotel. Firstly, the class of hotel business is a major criteria when designing a hotel.
A builder who doesn’t understand the different class of hotels won’t get it right. And when you understand the class of hotel to build, it helps you come up with a feasible budget and save you cost from adding amenities that doesn’t belong with that classification.
Also, hotel furnishing is an important aspect of hospitality. You want customers to satisfy their fantasy which includes luxury beyond what they have and experience at home. Whether you want to build a 1-star or 5-star hotel, you need an experienced company to build your hotel.
If you are new in hotel business then you should be talking to us about designing and building your hotel. Here is what you should do now. Call or WhatsApp: 08139006120 or 07087770518.
Step Six: Offer Satisfactory Services
Whatever your offer let it be satisfactory to your target customers. One of the key benefits of knowing your customers is to be able to provide them with the best services that exceeds their expectations.
That way, even your staff are trained to know what your customers want and how to satisfy them. Sometimes, it could means being courteous, capable of resolving issues that arise promptly or even as simple as remembering the names and preferences of repeat guests and giving advice about what’s new and better for them.
Step Seven: Implement a Smart E-commerce Strategy
Most hotel rooms are sold online than through walk-in customers. A good hotel should be able to sell at least 60 percent of its room via online hotel booking portals. Apart from hosting your own booking portals, you should also list your hotels with every popular hotel marketplace online.
You should take advantage of social media platforms to promote offers and sell more hotel rooms. Your marketing strategy should be such that encourages the sales of more rooms. Even if it includes using price point to lure online customers.
Step Eight: Structure a Smart Hotel Pricing Strategy
Sometimes, a little bit higher than normal price could bring you more customers than an average price or cheaper deals. Be smart and learn smart hotel pricing strategy. It will help you increase number of rooms you sale per day.
However, you should learn to determine room rate based on your cost and market research. You may have relatively high cost than a competing hotel. Selling lower than them may be costing you good revenue.
Price factors should include the following:
- Cost of Staffing
- Room category and amenities
- Average Time and length of stay
- Cost of Maintenance
- And your Competitors pricing
Step Nine: Make Flexible Decisions
Hotel customers are the most difficult set of customers to deal with. And that’s because they are rich or are willing to spend more for luxury and comfort. That means they are also loud and braggadocios.
They want everything, even beyond what they can afford. Sometimes you need to make decisions that is not in the hotel manual, your hotel management needs to be flexible enough to decide on every issue to improve customer satisfactory report.
Also, you should know that a single bad customer review online can destroy your hotel business than a thousands good reviews can do. So, paying close attention to what customers may say about you should help you decide faster on every customer request.
Step Ten: Differentiate And Target Repeat Customers
Customers would remember their experience more than the ambience of your hotel. Offer them better experience to help them choose your hotel against the competitors. Rather than try to do too many things, focus on significant areas of hospitality and do it much better than hotels around you.
Also, you should create the kind of products that other hotels don’t have. That way you win a significant numbers of repeat customers who would come to your hotel because you offer what’s not available elsewhere.
Step Eleven: Focus on Quality Management
Providing quality services at any hotel is not just about the value customers derive from the products. Most times it’s often the way the values are being presented. Having an inspired workforce is better than building the best looking hotel in town.
If your workforce are happy working in your hotel they would in turn express it in the way they serve those who come to the hotel. Primary because they want to continue to work here and not because they are afraid to be sacked.
Focus on employees satisfaction as much as you want customers satisfied by the employees. Factor a good pay and free times for workers into your management style. Don’t treat workers as slaves, because they will express slave mentality in their service delivery.
Step Twelve: Plan For Strategic Marketing
Don’t be the kind of hotel people would discover by chance. Be popular in your market. That’s the way to grow hotel business. If people don’t know your hotel exist they wouldn’t recommend you to anyone.
Create marketing that encourages more new customers. The more new customers you make the better your long time success strategy. Also, discover programs and events that bring more people to your city and tap into them.
It might be churches, government or organizations. Partner with them and create special price package to lure them to use your hotel for their events. Do everything to be the hotel of choice by most event organizers in your city.
Hotel business is location base. The first thing you must get right is your location, using your hotel classification and target customers as a yardstick to determine where to locate your hotel business. And getting your hotel location right should not be a guess job. Neither does it require a magic wand.
What you need is a professionally done feasibility study to determine the possible profitability of your hotel business in your chosen location. And if the right location meets the target customers with the right hotel classification building, your hotel business will be an instance success.
Note the three key points: location, target customer base and the right hotel classification building. These three things would require the best hotel consulting experts to handle it for you. Don’t throw away your hard earned money in ignorance and ‘over-sabi’ mentality.
Finally, if you are planning to start your own hotel business in Nigeria don’t hesitate to contact us through the following contact details. Call or WhatsApp: 08139006120 or 07087770518. Email: email@example.com