It’s My Dream to Build a Hotel. How Can I Make it Easier?

By Tom Baker, Managing Principal

Investment Calling

It’s no secret: an attractive and well-managed hotel is a revenue machine. Done right, developing a hotel can be a guaranteed ticket to a healthy and enduring ROI. It’s true that entering the world of hospitality can be a complex, intimidating undertaking (especially in 2022). If your dream is to build a hotel, to truly oversee the development and growth of your investment from start to finish, there are four integral steps in the process that you should take the time to mull over. My colleagues and I have compiled them below to help guide you in your considerations.

  • The Planning Phase (Conceptual/Planning/Feasibility)

Take a moment and consider: what do you as the developer or investor truly want out of the experience of owning the hotel you’re about to build? Hold those considerations in your mind. Now, think over who you’d like for the clientele of this future hotel to be, and some of the exceptional hotels where you’ve been a guest. Do all of the elements of these deliberations meld together in the vision you have for your hotel? There’s no doubt that landing a large and sustained ROI is a top goal and should be weighted as such. To get there though, you’ll first need to build a hotel that guests are truly excited about. You’ll need to incorporate fresh features and smart ideas that will make travelers choose to stay at your hotel, and not the one down the street. You’ll also need to survey the area where you plan to build including the costs of fees and permits as well as regulations. Know what other buildings are in the construction phase or have been approved. Know the group events that happen regularly there or don’t happen at all. Which companies have headquarters or offices there? Building an alliance with a consulting company that has a proven track record of developing successful hotels is a beneficial move for a number of reasons at this stage. Mostly, the intimate knowledge of the ins-and-outs of a complex industry that a firm like AHA brings is invaluable and can help keep costs down and avoid costly mistakes. An expert consultant can advise on the feasibility of each part of your plan, keeping you out of the weeds from the outset.

  • The Funding Phase (Procurement)

To brand or not to brand – this is now your question. Choosing to coalesce with a brand leader in the industry makes it much easier to secure funding. It can also grandfather your new hotel into already-existing credibility and recognition with future guests. However, aligning with a corporate brand means that certain freedoms (and profits) will be sacrificed. Finding like-minded investors and keeping the project under your full control can be not only more rewarding (especially if the hotel is a passion-investment), but much more individually profitable. Your success and extra returns can remain your own. Either way you decide to go, brand or no brand, it’s a wise choice to enlist a consultant to advise you during the funding phase. Consultants will have priceless experience and numerous connections in the hospitality industry. This can vastly broaden your search options, and produce invaluable insight to help track down all the funding you’ll need to move out of the conceptual phase, and into the exciting part – action.

  • The Construction Phase

One of the most difficult aspects of developing a hotel is getting through all the headaches of the construction phase. Some believe that procuring adequate funding or managing the hotel after its initial development will be their biggest challenges – but combing through what seems like endless numbers of construction companies, then overseeing the actual building site, is often the greatest hurdle in the process. Watching so much of the money you and others have invested be eaten up so quickly at this stage (because of the high costs associated with building) can be alarming. Partnering with an independent consulting company can bring tremendous relief during this phase. This is especially true if it’s your first time investing in a project with a major construction element. Expert consultants will have successfully overseen these same struggles many times before. They’ll be able to reassure you during the most stress-inducing moments. They also bring with them trusted contacts in the world of construction, so you can feel at ease knowing that you are getting the biggest bang for your buck on materials and labor. Next comes hiring a skilled team of employees that will provide the faces of your new hotel. 

  • The Management Phase (Operational/Asset Management)

At this stage, your hotel is built and you’ve had your grand opening! Congratulations! It’s a good time to celebrate your wins so far, but no doubt you know the real work has just begun. Luckily, if you choose to integrate a consultant in asset management to your team, that work will be handled with ease. Your most important investment decisions will have additional oversight by experienced professionals who are already experts in the hospitality industry. A team of asset management consultants will have a continued stake in the success of your hotel, which means larger returns for you. They’ll also be your first line of defense against all the unknowns and firsts that you’ll soon encounter as an investor in the complex, ever-evolving hospitality industry. With luck and help, your beautiful new hotel will be soon running like a well-oiled machine.

The AHA Takeaway

Developing a hotel from the ground up is likely to be an endeavor rife with challenges at every step along the path. However, the rewards and returns of such an undertaking are sure to be plentiful – this motivation is what will keep you moving forward through the most challenging parts of the process. In the midst of all the tribulations of hotel development, one key piece of advice remains the most important – partner with an experienced team of professionals to help guide you to make the best decisions at every turn.

Let’s talk. Use the quick form below and I’ll personally reach out.

– Tom Baker, Managing Principal

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