THINGS TO KEEP IN MIND WHILE PURCHASING OR CONSTRUCTING A HOTEL
Hospitality is a dream business and asset for everyone. Everybody thinks it’s lucrative, yes it is but from outside not from inside. After this covid-19, hotels become nightmares for a few investors and owners. Buying a running hotel or constructing a hotel is a hectic process. Hotels are a sizeable investment of time, effort, and money, but success in the hospitality business is lucrative on both level financial and personal.
If you are thinking or planning of making an investment in the Hotel, there are so many aspects to consider before taking any step towards buying the land or purchasing a running Hotel.
First of all, you should be clear about these below-listed points :
1- Make your financial Planning before deciding anything
The first thing that will affect this decision is your Budget. You should opt for the economically viable option or the option required as per your future plan. If you are planning to purchase the land, it should be approved by the Government and must have a clear title. It should be checked that there are no previous agreements or disputes on the land. Thereafter decide the star rating for the hotel (3,4,5,7) according to the area where you want to construct the Hotel and your fund’s availability.
While purchasing the land, keep in mind the open area required to make a swimming pool, open restaurant, open lounge, parking space, live performance area, etc. Purchase the land according to the future expansion too. If you wish to purchase an already constructed Hotel, it should meet your requirements. The quality of construction, furniture & fixtures, and other installed equipment must be checked and it will be favorable if much renovation/replacement of things is not required.
2- You should be clear about what kind of Hotel you want to run
You should also decide if you want to run just a simple boutique hotel then a small property will work for you as you will only need a space to build some rooms, restaurant, lobby area, and reception desk, etc. but if you want to run a hotel with a bar, then the required area increases as to obtain the liquor license, the property must have more than 21 rooms and 1000+ square feet bar area along with the lobby, restaurant, and reception area. If you want to run a hotel+bar+club then the space requirement will increase even more. There are specific requirements for club-like soundproofing making dance floor, smoking area, centralized cooling plant, and huge sound system along with DJs, etc. This will affect your budget immensely therefore the planning must be in a way that suits your requirement and availability of funds. Do proper planning before moving ahead.
3- Location is the King. Easy approach from city or within city.
4- Other points which can help out in making smooth decision
- Nearby fruit and vegetable market can help daytoday transportation cost.
- Nearby places to buy essentials in emergency.
- Good internet and network connectivity as it is must in todays scenario.
- Competitive rates of rooms, food and liquor.
- Good hygiene, easy disposal of garbage and Good drainage system
- If you are planning to purchase an already running Hotel, its previous reputation is very important and the reason for its previous owner to sell the property is equally important. While purchasing the already constructed Hotel, proper parking area, good condition of rooms kitchen and other areas, proper dining space, etc. must be looked for.
CONCLUSION
Once you are clear on your thoughts and have taken your decision now it’s time to decide whether you want to run the hotel yourself, Or want to lease it out to a person or a company Or you want to give it to a brand to run it on management contract.
If you want to run the business yourself, the availability of funds is the key factor and you must have some experience in the field or you must have someone who has some prior experience of running a hotel.
If you are constructing a hotel for lease purposes, you should decide if you want to lease the property to a person or a company. The lease amount must be decided according to the investment made in the land and construction plus a minimal profit. Leasing the property will provide you with a stable income without much trouble. All the aspects about the time period, monthly/yearly lease amount, repair and maintenance, disputes, etc. must be explained elaborately in the lease agreement to avoid any conflict in the future.
Another option you have is to hire a company for the management of the business while keeping the ownership to yourself. This allows you to hire experienced staff and keep the risk minimal while having all the ownership rights to yourself. You can hire a company on a fixed monthly payment or percentage-based profit sharing. While hiring a company to manage your business you should look for a company that has handled a similar kind of work in the past or handling in the present successfully.
