How Much Does It Cost To Start a Hotel?

Opening a hotel is no small task. There are many costs and expenses to consider when starting a hotel, from land acquisition and construction costs to marketing and website development. This article will help you understand the various expenses they can expect when starting a hotel.

 

Most Common Hotel Startup Costs

Land Acquisition And Construction Costs

If you plan to build a hotel from scratch, the land acquisition and construction costs can be significant. The cost of the land will vary depending on the location, but it is typically one of the most costly expenses associated with starting a hotel. On average, hotel owners can expect to pay $3 million for the land alone.

The construction costs will also vary depending on the size and type of hotel you plan on building. A small boutique hotel will cost less to construct than a large, full-service hotel. On average, construction costs for a small hotel can range from $5 million to $10 million.

 

Overhead Costs

There are many overhead costs associated with running a hotel, such as utilities, staff salaries, and general maintenance. These costs can add up quickly, so it is important to factor them into your budget when planning to start a hotel.

Utilities alone can cost hundreds of thousands of dollars per year, depending on the size of the hotel. Staff salaries will also vary depending on the number of employees and the type of positions they hold. For example, a hotel with 50 employees will have higher staff costs than a hotel with only 10 employees.

Finally, the cost of general maintenance and repairs can also be significant. Depending on the age of the building, you may need to budget for major repairs or renovations.

 

Business License

In order to operate a hotel, you will need to obtain a business license from your local government. The cost of the license will vary depending on the municipality, but it is typically a few hundred dollars.

 

Business Insurance

It is also important to have adequate business insurance when operating a hotel. This will protect you in case of any accidents or natural disasters that may occur. The cost of business insurance will vary depending on the size and location of your hotel, but it is typically a few thousand dollars per year.

 

Interior Decorating

Once you have the land and construction costs under control, you will need to start thinking about how to decorate the inside of your hotel. This includes everything from the paint color on the walls to the type of furniture in the lobby.

The cost of interior decorating will vary depending on the style of hotel you are going for. A more luxurious hotel will obviously cost more to decorate than a more budget-friendly hotel. On average, interior decorating costs can range from $50,000 to $200,000.

 

Furniture

In addition to the cost of decorating, you will also need to purchase furniture for your hotel. This includes everything from beds and dressers in the guest rooms to chairs and tables in the lobby. The cost of the furniture will vary depending on the quality and quantity you purchase.

On average, you can expect to spend $10,000 to $20,000 on furniture for a small hotel. If you are planning to furnish a large hotel, the cost could be significantly higher.

 

Initial Supplies

Once the construction is complete, and the furniture is in place, you will need to stock your hotel with supplies. This includes everything from toiletries in the guest rooms to dishes and silverware in the restaurant. The cost of initial supplies will vary depending on the size of your hotel and the quality of the products you purchase.

On average, you can expect to spend $5,000 to $10,000 on initial supplies for a small hotel. If you are stocking a large hotel, the cost could be significantly higher.

 

Labor Costs

In addition to the costs of land, construction, overhead, and supplies, you will also need to factor in the cost of labor. This includes the salaries of your employees, as well as any contractors you hire to help with the construction or decorating. The cost of labor will vary depending on the number of employees and the type of positions they hold.

On average, you can expect to spend $30,000 to $50,000 on labor for a small hotel. If you are hiring a large number of employees or hiring for highly skilled positions, the cost could be significantly higher.

 

Marketing

Once your hotel is up and running, you will need to start thinking about marketing. This includes everything from advertising in local publications to creating a website for your hotel. The cost of marketing will vary depending on the size and scope of your marketing campaign.

On average, you can expect to spend $5,000 to $10,000 on marketing for a small hotel. If you are planning a large marketing campaign, the cost could be significantly higher.

 

Website Development

In today’s digital world, it is important to have a website for your hotel. This will allow potential guests to find your hotel online and learn more about your services. The cost of website development will vary depending on the features you want to include on your site.

On average, you can expect to spend $1,000 to $3,000 on website development for a small hotel. If you want to include more complex features, such as online booking, the cost could be significantly higher.

 

Software

In addition to a website, you will also need to purchase software to help run your hotel. This includes everything from accounting software to reservation software. The cost of the software will vary depending on the type and quantity of the software you purchase.

On average, you can expect to spend $500 to $1,000 on software for a small hotel. If you are purchasing a large number of software programs, or if you are purchasing more complex programs, the cost could be significantly higher.

 

Professional Services

Finally, you will need to factor in the cost of professional services. This includes anything from legal fees to accounting fees. The cost of professional services will vary depending on the type and quantity of services you require.

On average, you can expect to spend $1,000 to $3,000 on professional services for a small hotel. If you require a large number of services, or if you require complex services, the cost could be significantly higher.
 
Try Our Hotel Startup Costs Calculator
Enter your expected costs to run your hotel below and then click the “Calculate My Startup Costs” button. We have included estimated costs for each category, but feel free to modify our figures to reflect your specific business needs.

Permits, legal, licensing, Insurance and misc. fees
Building permits
$
Business license
$
Beer, wine liquor license
$
Legal fees
$
Liability/property insurance
$
Workman's compensation insurance
$
Miscellaneous
$

Equipment and set-up costs
Printer
$
Furniture
$
Conference Room Equipment
$
Register, printer and retail program
$
Bankcard machine/printer
$
Computers and Software
$
Stereo system
$
Telephones
$
File cabinets and office furniture
$
Miscellaneous
$

Lobby fixtures
Front desk/check out
$
Displays and backdrops
$
Miscellaneous fixtures and hardware
$
Shipping costs
$

Hotel Building/Property, Interior and exterior construction/upgrades
Purchasing location/building
$
Architect/contractor fees
$
Exterior awning and signage
$
Exterior upgrade
$
H.V.A.C
$
Lighting install/upgrade
$
Plumbing/fire
$
Interior finish
$
Miscellaneous
$

Start-up office, retail and packing supplies
Stationary, business cards, etc.
$
Mailing supplies
$
Cleaning supplies
$
Retail supplies (bags, tissues, ribbon)
$
Café supplies (food containers, dishes)
$
Miscellaneous
$


 

Final Thoughts

Starting a hotel can be a costly endeavor. You will need to factor in the cost of land, construction, overhead, supplies, labor, and marketing. In addition, you will need to purchase software and pay for professional services. The exact cost will vary depending on the size and scope of your hotel.

On average, you can expect to spend $50,000 to $100,000 on startup costs for a small hotel. If you are starting a large hotel, the cost could be significantly higher.

Despite the high cost of starting a hotel, it can be a very rewarding endeavor. If you are passionate about the hospitality industry, starting a hotel can be a great way to turn your dream into a reality.


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Calculating Average Daily Rate (ADR) For Your Hotel