In this article, Nikos Morantis analyzes the key points that determine the right amount of budget for the development of a new hotel or the renovation process of an existing hotel business.
Defining the funding sources that determine the budget
The hotel construction process is by definition a very expensive procedure, and the preset of the total available budget plays a crucial role. In order to conduct a proper study, however, we must determine in advance the possible sources of funding and the time frame for receiving it.
Apart from the equities, potential financial solutions, such as including the project in the Development Law and various NSRF programs or borrowing, also play an important role in shaping the final budget. To finally determine, however, if the budget we have gathered is adequate, it is important to know the characteristics of the product we want to create.
Therefore, it is necessary to have a well-studied business plan, which is one of the future hotelier’s initial investments in third-party services prior to the existence of the property. With a business plan in our hands raising funds becomes easier, and, as the project starts shaping, we can also approach potential investors who would like to participate, significantly mitigating risks. Clearly, a business plan is also required when applying for state funding in order to acquire the relevant approvals.
The road to creating the strategy, profile, and owner’s vision
Along with the creation of the business plan, it is important to determine the strategy, profile, and vision of the hotel, widely known as "the Hotel Concept,'' which plays a decisive role in the budget setting. The Hotel Concept determines not only the facilities of the hotel but also the points that we should emphasize and, consequently, the relevant budget that should be invested.
It also determines the overall form of the hotel and the network of potential suppliers and partnerships in order to build a successful business. For example, if we want to create a fully sustainable hotel, we will have to invest not only in ecological energy systems and building and decoration materials but also in a highly specialized network of partners, from architects to engineers. Understandably, this is something that affects the overall investment cost, and therefore the overall budget, and should be acknowledged before the construction begins.
Prioritizing construction and design processes
After defining the budget and concept of our hotel, we should set the relevant construction and design priorities of the project, always in collaboration with the architecture and construction team. The budget should be managed in a way that ensures the competitive advantages and added value of the business in compliance with the business plan, which may affect the funding. The architecture and construction team will provide ideas on the layout and facilities of the hotel based on the concept, which may also significantly affect the budget.
However, the costs of interior design and main equipment should also be considered, as the matter of interior design is important and requires attention. The above, of course, should be determined with relative prioritization according to the profile of the hotel and our vision about it. For example, investment in decorations and paintings would be significantly higher in an art hotel than in a conventional one, leading to rearrangement of the budget distribution per category.
Ensuring the required marketing budget for the hotel's promotion
A common mistake during the budgeting process of a hotel is the oversight of the budget needed for the creation of the hotel's online branding and the marketing budget required for its initial placement. The traveler chooses online which hotel to book depending on the photos of each hotel property, both at B2B and B2C level. So, it is important that a new hotel invests in creating a complete high-quality photo and video gallery, as these are going to be its main promotional tools.
It is also necessary to make a proper online set-up, both on the official website and its booking engine, as well as on the various OTAs, review websites, and social media. It is very common for hoteliers to neglect these aspects, even though they are as important as the hotel windows, since, without them, the investment remains invisible and weak in sales.
To sum up: the budget is no more a secret!
Keeping all of the above in mind, the hotelier can more confidently set the relevant budget for their new business, always with a flexible mindset so that they can rearrange the budget distribution if needed. The most important thing for the success of the project, however, is for the business to share the budget with its partners, and especially with its architectural and construction team. After that, they can achieve not only better financial management but also more realistic approaches and planning. The budget is not a state secret! Share it for better management!
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Meet the Destsetters and create a unique Hotel Concept that will help your property stand out from the competition.
Hotel Concept Development is the most upgraded service of Destsetters that aims to create unique hotels, with high-profit opportunities and proper operation, but also with recognizable features that will help them stand out from the competition.
Considering the location of the property, the owners' desires, the competition as well as the relevant demand, we undertake the specification of the characteristics and the strategy of the project, in order to create a signature hotel that meets the needs of travelers and has real profit prospects.
Our team partners with new investors, hoteliers, consulting companies, and architectural teams, providing them with a whole hotel specification that will offer all the necessary research and hotel know-how, identifying the commercial characteristics of the new accommodation and defining the elements of its strategy, which should be reflected in the designing and concept of the property, striving to create a successful business.
Nikos S. Morantis
Founder & Strategy Specialist
Working closely with Hoteliers from all over the world, examining their needs, but also constantly studying the latest digital marketing techniques applied in the global travel market, Nikos has the pleasure to develop some of the most promising tourism projects, always having open horizons in new challenges.