So you want to open your hotel, resort, or inn. Exciting! There is nothing quite like welcoming guests and providing them with a memorable experience. But before you dive in headfirst, listen up. The hospitality industry may seem glamorous, but it also has many pitfalls. As an industry veteran, many new hotel operators make costly mistakes. I’m here to guide you away from them.
In the coming weeks, I’ll share the top 10 mistakes I see hotel operators commonly make – from poor customer service training to inefficient operations to marketing missteps. My goal is to help set you up for success from the very beginning. Running a hotel is challenging work but also rewarding. Follow this series, and you’ll be well on your way to opening the doors of your dream property. The guests will come, they’ll love it, and you’ll build a thriving business. How does that sound? If you’re ready to learn from other’s mistakes, read on. Your new hotel adventure awaits!
Choosing the Wrong Location for Your Hotel
Choosing the wrong location for your hotel is one of the biggest mistakes you can make. The site can make or break your business, so do extensive research to find an ideal spot.
Look for areas with a proven tourism industry and steady visitor numbers year-round. Check if competing hotels are nearby and ensure there’s enough demand to go around. A scenic natural setting or proximity to attractions are big pluses.
Consider your intended audience and what could appeal to them. Business travelers prefer central, downtown areas close to companies and transit. Leisure travelers are more interested in resort destinations near recreation or entertainment.
Consider factors like traffic, parking, and transportation. Your guests will want convenience and access. Think long-term about future development plans that could impact your location.
Make sure your location is easy to get to by various modes of transport. Can guests arrive by air, rail, bus, or automobile? Are transit options to and from your hotel readily available? Convenience is key.
While location is critical, remember the cost. An ideal spot in a pricey neighborhood may need to be more affordable. Find a balance between a desirable setting and reasonable expenses like rent, utilities, wages, and property taxes.
Your hotel can thrive with extensive planning and the right location tailored to your needs. But choosing unwisely could leave your rooms empty, so do your homework and choose a spot with care. Location, location, location—it’s the golden rule of hotels.
Failing to Understand Local Zoning and Permit Requirements
One of the biggest mistakes new hotel owners make is needing to understand the local zoning laws and permit requirements. These regulations vary in each city and county, so you must do your homework.
Know the Zoning Codes
Ensure the property you want to purchase is zoned for commercial use and specifically for hotels or motels. Some areas may prohibit new hotels altogether or restrict size and amenities. You’ll want to check the number of rooms allowed, parking requirements, building height limits, and more.
Obtain Proper Permits and Licenses
All new construction and renovations require permits. Be prepared for a lengthy permit process, as hotel projects often need approval from planning, zoning, building, fire, and health departments. You’ll need permits for occupancy, fire safety, liquor (if applicable), and general business. Double-check that any existing tickets are appropriately transferred to your company upon purchase.
Plan for Delays and Extra Expenses
Navigating the permit process often takes longer and costs more than anticipated. Build extra time and money into your budget in case plans need revision or new requirements emerge. It’s common for hotel openings to be delayed by months due to unforeseen permitting issues.
By understanding the rules and regulations in your area, you’ll avoid costly surprises and ensure your hotel is appropriately licensed and permitted. While the process can be tedious, paying close attention to details upfront will result in an establishment that is legally compliant and ready to operate smoothly. Taking the time to do it right means your guests can relax and enjoy their stay, confident they’re in good hands.
Not Having Enough Working Capital to Get Started
One of the biggest mistakes new hotel owners make is needing more working capital to launch and operate the business properly.
Financing the Initial Start-Up Costs
Opening a hotel requires a significant investment to cover costs like purchasing or leasing the property, renovations, furniture, operational expenses, and marketing. Ensure you have enough funding to cover the first 6-12 months of costs before opening the doors. This will allow you to focus on building up the business rather than struggling monthly to pay the bills.
Look into small business loans, crowdfunding, private investors, or partnerships to raise capital. Do plenty of research to determine accurate cost estimates for your particular hotel before seeking funding. Underestimating start-up costs is a recipe for disaster.
Creating an Operating Budget
Once open, closely monitor your income and expenses to ensure you stay within budget—track items like utility payments, staff wages, maintenance, advertising, and amenity costs. Make adjustments as needed to account for seasonal changes in occupancy and revenue.
A detailed operating budget will allow you to set room rates appropriately, plan for slow months, and avoid unpleasant surprises. Review your budget regularly and look for ways to cut unnecessary costs without impacting the guest experience. Small changes can add up to significant savings over time.
Maintaining Adequate Cash Reserves
Even with a solid operating budget in place, unforeseen costs will arise. Keep enough cash in reserve to deal with emergencies like natural disasters, economic downturns, or large-scale repairs. A good rule of thumb is to have at least 3-6 months of operating expenses in savings as a financial cushion. This emergency fund will give you stability in case of temporary setbacks.
With sufficient working capital, careful financial planning, and cash reserves, you’ll avoid many pitfalls new hotel owners face and set your business up for long-term success. Monitoring costs, adjusting as needed, and preparing for the unexpected will help keep your hotel operating smoothly.
Hiring the Wrong Management Team
A familiar mistake hotel owners make is hiring the wrong management team. Your management staff will run the day-to-day operations of your hotel, so choosing wisely is critical to your success.
Lack of Experience
Don’t hire managers with little to no experience in the hospitality industry. Look for candidates with a proven track record of success operating a hotel. While you can train skills, you can’t train instinct and knowledge that comes from years of experience.
Strong leadership is essential. Look for managers who can motivate and inspire your staff. Poor leadership will lead to low morale, high turnover, and subpar customer service.
Lack of Business Sense
Your managers should understand hotel operations and have good business sense. They must effectively control costs, maximize revenue, and make data-driven decisions. Managers lacking business acumen may need help to optimize key performance metrics like occupancy rates, average daily rate (ADR), and revenue per available room (RevPAR).
Choose managers with a collaborative leadership style, not an autocratic micromanaging style. Micromanagers can damage work culture and staff motivation. The best managers hire good people, provide clear direction, and give them the freedom and support to do their jobs well.
Lack of Adaptability
Look for open-minded, flexible managers who are willing to adapt to changes. The hospitality industry constantly evolves, so managers must keep up with trends and modify operations, services, and amenities to meet guest demands. Inflexible managers who resist change will prevent a hotel from falling behind competitors.
By avoiding these common mistakes and hiring an experienced, business-savvy, and collaborative leadership team, you’ll set your hotel up for success. Your managers are responsible for crafting an exceptional guest experience, so take the time to find the best candidates for these crucial roles.
Neglecting Guest Experience and Satisfaction
As a hotel operator, one of the biggest mistakes you can make is paying attention to the guest experience. Your guests are your lifeblood; keeping them happy should be your top priority.
Lack of Personalization
Do you greet guests by name and make personal connections? People love being recognized and feeling like more than just another body filling a room. Take time to chat with guests and find opportunities to use their names. Simple gestures like a welcome card or snack in their room with a handwritten note can go a long way.
Poorly Trained Staff
Your staff are on the front lines of the guest experience, so proper training is essential. Employees should be knowledgeable, friendly, and able to handle complaints and problems. Teach staff to anticipate needs, resolve issues quickly, and maintain a positive attitude. Guests will appreciate staff who seem genuinely happy to help them.
Lack of Cleanliness
A dirty or unclean room will ruin a guest’s experience instantly. Rigorous cleaning procedures and checklists should be in place to ensure rooms meet high standards of cleanliness. All public areas like lobbies, gyms, and pool areas should also be kept spotless. Consider offering extras like turndown service to make a good impression.
Failure to Respond to Reviews
With sites like TripAdvisor and Yelp, ignoring online reviews is a big mistake. Respond promptly to all reviews, especially negative ones. Thank the guest for their feedback and address any specific issues they mention. Let them know you appreciate them bringing the problem to your attention so you can improve. Your quick, caring responses will build goodwill with potential guests who see how responsive you are.
Keeping your guests happy comes down to the basics: a clean, welcoming environment, polite and helpful staff, and personal touches that make them feel valued. Focus on exceeding expectations at every turn; your guests will become your biggest advocates. Their repeat business and enthusiastic referrals will be critical to your success and growth.
So there you have it, the top 10 mistakes hotel operators frequently make and how you can steer clear of them. Running a hotel is no easy feat, but by learning from the missteps of others, you’ll be well on your way to success. Focus on the little details, provide fantastic service, market smartly, keep costs under control, and most of all, remember why you got into this business in the first place – to create memorable experiences for your guests. If you build it, they will come – but only if you avoid these common pitfalls. You’ve got this! Now, go out there and open the hotel of your dreams. The world is waiting to check-in.