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There are things that you need to anticipate when you are starting a big business and making an investment in one (as opposed to starting a home business from scratch). When you open your own restaurant, or you decide to establish an office for your company, you have more things to consider and additional steps to take in order for the move to produce the desired results.
The bigger the business, the more things you have to take into account when planning for it. For the sake of this article, we are going to use the hotel business as an example. So, do you have what it takes to start your own hotel business? Do you know the preparations that you need to make to succeed? Let’s find out what it entails.
Getting Intimate with the Market
The first thing you want to do is become more intimate with the market. I’m not just talking about reading a few bits of research data and concluding that you are ready after a few minutes. I’m talking about actually getting to know the industry players, learning more about the segments and critical stats, and jumping into the market head first.
Yes, it is easy to know that the expected annual growth in the hotel business is around 4%, but how does that stat translate to real business or operational benefits? Will your hotel grow at a rate of 4% a year?
The same goes with stats like the $166.5 billion market cap or annual revenue. How far into that large cake can you get when you do start your own hotel business? What’s the situation near the location that you have in mind? Is the walk-in traffic substantial enough for an on-site restaurant and other amenities?
You see, these details really matter when you invest big in an industry. The large investment you make amplifies even small market factors. Since the goal is to have an investment that turns over a healthy return year after year, being extra careful and actually taking the steps to know about the industry are indeed very important to do.
The next thing you need is capital. After all, starting a big business or entering certain industries means investing a large sum of money to get started. The hotel business is no different. Even when you are building a small boutique hotel for fewer than 100 guests, you still need to invest a large sum to get the business off the ground.
Fortunately, capital is no longer a big hurdle in today’s market. You can choose to self-fund your new hotel business to maintain control over the entire operation. You can also turn to top financial institutions like Asset America for the best hotel financing. Asset America also offers hotel sales and brokerage service.
Investors are easier to find as well, plus you now have the option to crowdfund your hotel if the idea behind it is attractive enough for backers. Instead of selling ownership of the hotel to investors, you raise funds by offering perks and special deals to backers on crowdfunding platforms. Getting funding without losing ownership is always the better way to go.
Targeting the Right Market
Market segmentation is the next thing to pay attention to. The target consumer or guests you choose will affect virtually every part of setting up your new hotel business. For example, the layout of the hotel needs to be adjusted to the kind of customers you want to target; you can’t expect to build a luxurious hotel without the right amenities and room sizes.
The hotel industry is very detailed with its market segmentation. Budget hotels are very popular among backpackers and business travelers, but you can’t forget those who prefer midscale hotels. Upper midscale hotels offer more amenities at affordable prices, while upscale hotels go a step further than that, such as offering the best massage table in the resort.
At the top, we have upper upscale and luxury hotels. I know that these segments appear confusing, but they are actually used on the market. JW Marriott, for example, is a luxury hotel. Marriott, on the other hand, is an upper upscale property. To reach more customers, Marriott also has properties like Courtyard by Marriott and Westin filling the lower segments.
Since you are starting your first hotel business, targeting the right market segment becomes very important. This is due to the fact that you can only target one (or two, at maximum) market segment at a time, and you want to target the one with more potential customers for your new hotel.
Aiming for Growth
Last but certainly not least, you need a detailed business plan. I know many entrepreneurs started their home or online businesses without a clear business plan; many created their business plans AFTER starting their ventures. The same approach will not work when you are setting up a big business like your own hotel business.
One of the reasons why a clear business plan becomes crucial in a bigger business is the scale of the business itself. With more people involved and more team members helping you run parts of the operation, maintaining the same vision across the entire organization becomes very important. One of the ways to do that is by being on the same page regarding business objectives.
On the other hand, investors and financing institutions will want to know what your business plans are before backing you or making an investment in your new hotel business. A business plan doesn’t just define the objectives that you want to achieve, but also the ways you can achieve those objectives and take your new hotel business to success.
With these ingredients in place, you will be able to maintain control over businesses of different sizes without feeling overwhelmed. These elements are key foundations to your new hotel business. Once you use them to your advantage, you only have everyday tasks and challenges to overcome. Achieving success in a competitive industry such as the hotel industry will not be a problem. Continue paying attention to the details, target the right market, get your capital ready, and aim for growth.