Knowing that Australia has a wealth of interesting places and features, those who have an inclination for building enterprises venture into the hospitality business. Other than running restaurants or souvenir shops, they bank on resorts and boutique hotels. These hospitality establishments can be a source of lucrative income if the investor knows the economics of the enterprise.
For some, the economics of this type of business may sound mundane; you just welcome visitors, serve them food, give some travel tips, and then the money will come flowing in. But it actually encompasses some complex particulars, from planning the blueprint to marketing. Here’s an overview of the financial aspects of starting and running the business.
If you want to start an accommodations business, you have two options: build a hotel or motel from the ground up or buy an existing property. Constructing a hotel from the ground up is ideal if you have more than two investors who will fund the project. Otherwise, it will be wise to buy an existing property and renovate it to suit your specifications and the needs of your target market. Start-up costs are dependent on the following factors: the number of rooms, equipment, facilities, taxes, and the type of management rights for sale you find for the property’s maintenance. Include in the outlays the employment of staff and their training.
There are times when resorts and hotel owners become so occupied with the construction or the renovation of the establishment that they overlook promotional activities. Hospitality establishments are sometimes difficult to market, as the number one thing you need to promote is comfort, a concept that is hard to concretise. Marketing costs are usually high, but you can save a lot by implementing some methods, such as listing your hotel on directories or travel guides. Other things to consider include branding efforts and online marketing activities, which may cost you some initially.
The operational costs of the hotel depend on the number of rooms. The operation of the establishment is centred on factors like profitability and the economic condition of the location. With this in mind, hotel owners use a metric called REvPar or Revenue Per Available Room. They also use ADR (Average Daily Rate) or the figures that represent the average rental income paid by guests during a given period.
Running a hospitality establishment is more complicated than guests think. The same principles apply to both big and small accommodations chains. To further processes and improve income, it’s always wise to encourage your venture capitalists to offer new services or speak with a property manager regarding the improvement of certain facilities.