Dabbling with the idea of running your own hotel, but don't know where to start? Here, we explore why you should start a business in the hotel industry, how to start one and some factors to consider before diving in.
Why start a hotel business?
There are many reasons you might consider starting a hotel business in the UK. Firstly, inbound tourism is steadily increasing (with 38 million inbound visits recorded in 2023), and there’s more good news — staycations are also thriving, with eight out of 10 of us choosing to holiday inside the UK in 2025.
Hoteliers face a lot of uncertainty and stress when it comes to launching a new hotel business, but although there’s risk, there’s also plenty of reward. Savills forecasts a £5.8 billion investment into the UK hotel market by the end of 2025, which should give new hoteliers market confidence. That, alongside the growing trend for staycations and a consumer desire for mid-market luxury hotels, there certainly seems to be space in the industry for newcomers.
Factors to consider when starting a hotel business
So, before you start scrolling through properties for sale on Rightmove, here are four considerations when starting a hotel business:
Ensure you have the correct licensing and are regulatory compliant
From alcohol licenses to entertainment permits, make sure you research everything you need to run your hotel compliantly so you don’t experience any fines or delays when opening your doors to guests.
Take time to conduct a market analysis and understand what customers want
It’s tempting to deliver what you think customers will like, rather than actively listening to guest feedback. For example, 61% of customers will pay more for personalised services, so if you don’t understand consumer wants, you might struggle to attract and retain your ideal customer base.
Conduct in-depth competitor research
Knowing what’s out there already is critical to running a successful hotel business. You need to benchmark your room prices (i.e. using dynamic pricing) against others in the industry so you don’t price yourself out, you need to discover their weaknesses and therefore the opportunities they create, and, competitor research ultimately keeps you competitive — you’re constantly looking for new ways to enhance guest experience.
Prioritise guest satisfaction
Without your guests, you don’t have a business, it’s as simple as that! That’s why every change you make to your menu, every new service you add, and every customer touchpoint needs to be customer-focused. Prioritising guest satisfaction means you generate better customer reviews, build lasting relationships and word of mouth referrals.
Factors to consider when starting a hotel business
How much it costs to start a business depends on a few factors — whether you’re renting the building or buying, buying out an existing owner or starting a brand new business, and, of course, the location of the hotel. For example, the upkeep of a property in London will be much more expensive than one in rural North Wales.
Associated costs of running a hotel:
- Property rent or mortgage
- Bills
- Initial decor and decor upgrades
- Booking system
- Staff (maids, concierge, chef, waiting staff, marketing, hotel manager, etc.)
- Food and drinks
- Licenses and permits
- Insurance
How to start your hotel business
Here are five steps to starting your new hotel business in the UK:
1. Register your business with Companies House
It’s time to register your business. There are several legal structures you can choose to register as: limited company, partnership, and sole trader are three of the most common. By registering as a limited company, you can separate both business and personal finances, and you’ll have better options when it comes to business finance. It’s straightforward to set up through HMRC, but you can always pass this task over to your accountant.
You always have the option of registering as a sole trader or a partnership, too. Read up on all options to ensure you choose the right legal structure for your hotel.
2. Create a business plan
By creating a hotel business plan, you understand the state of the market you’re entering, enabling you to forecast cash flow, map out business models and marketing strategies. Creating a comprehensive plan like this helps you secure funding or investment, too, as most lenders and investors will want to take a look at your business plan when assessing your borrowing credibility.
3. Secure funding for your hotel
After you’ve written your business plan, you’ll have a good idea of how much capital you’ll need to launch your new business. This puts you in a great position to start looking into business funding sources. You might be parting with personal funds or getting a loan from family and friends, but if you’re looking to take a more official approach to funding, you might want to consider your hotel finance options.
You might purchase your hotel property with a commercial mortgage or a bridging loan, or you might need a merchant cash advance to invest in staff, marketing or for kitting out your hotel interior.
4. Find a property
When choosing a hotel property, you need to consider size, location, development opportunities, etc., so it’s not a decision you should rush into making. Before you start viewing potential properties, take the time to research your locations and visualise your hotel. How many rooms? Does it have on-street parking or a car park? Do you need garden access?
If you’re not sure where to start your search, you can use a commercial agent to help you navigate.
5. Build a friendly and reliable team
It’s time to start hiring, don’t wait until you’re ready to open your doors, it’s a good idea to hire staff in the months leading up to the big launch so you have time to train them on your brand values, customer service processes and get them familiar with tech like your booking system.
You want to hit the ground running come launch day, so consider enlisting the help of a specialist recruitment agency, and take your time to carefully curate your supportive team that will help you achieve your dreams of successful hotel ownership.
How to apply for hotel finance
At Capalona, we’re brokers, so we help you find and compare lots of lenders and products in one self-serve platform. Our tool is 100% free, so just share what you’re looking for, and our tool will instantly show you eligible hotel loan products for running a small hotel business.
There’s no obligation to accept any offer you see, but if you do see something you like, just click through to the lender’s website to continue with your loan application. Find and compare hotel finance.
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