How to write a hotel business plan, part by part

A plan has two readers: the people you ask for money, and you. The US Small Business Administration (SBA), whose guide to business plans is one of the clearest free ones, describes two kinds:

• A traditional plan: detailed and long, often dozens of pages. The SBA says lenders and investors commonly ask for this one.
• A lean plan: the most important points on about one page, quick to make and easy to change. It suits a simple business or one you expect to revise often, though some lenders still ask for more detail.

In India, the Ministry of Tourism gives a fair picture of what a backer wants to see. When it approves a hotel at the project stage, it asks for a copy of the feasibility report, the total project cost, the owners' own money in it, and the debt with where it comes from.

Start with the one-page version (the last part of this guide). If it doesn't add up on one page, it won't add up in fifty.

The SBA lists the parts of a traditional plan. For a hotel in India they come out like this:

• Summary: what the hotel is, where, for whom, what it costs and what you are asking for. Write it last.
• The hotel: the kind of place (hotel, guest house, homestay, bed and breakfast, resort), the rooms, the meals, and why a guest would pick it over the place next door.
• The market: who comes to your town, when and why, and where they stay now.
• Owners and team: whether it is a proprietorship, partnership or company, who runs it day to day, and the staff you need.
• Rooms, prices and other income: room types, prices through the year, and income from food, events or anything else.
• Marketing and sales: how guests will find and book you.
• Funding: how much you need, how much is your own and how much borrowed, and what it pays for.
• Forecast: nights sold, income, costs and cash, month by month for the first year and a year at a time after that.
• Risks and papers: what could go wrong, and the licences, approvals, quotes and sources behind your figures.

The SBA suggests five years of forecasts, with monthly or quarterly figures for the first year.

This is the part most easily guessed, so give every figure its source and the date you read it.

• Tourist numbers: the Ministry of Tourism's India Tourism Statistics gives domestic and foreign tourist visits for every state and union territory each year, from the state tourism departments' own counts. Its table of visits by state is the place to start.
• Foreign guests: the Ministry's Annual Tourism Snapshot gives foreign tourist arrivals month by month, which shows when foreign guests come.
• Your street: list every hotel, guest house and homestay within a short drive on Google Maps and the booking sites, with their room types, ratings and number of reviews.
• Their prices through the year: what each charges for the same kind of room on a weekday and a weekend, in the busy months and the quiet ones, and on the dates of your town's festivals, fairs and wedding season. Write each price down with the date you read it.
• Who books: families, pilgrims, couples, business travellers, wedding guests, groups. Each wants different rooms, meals and prices, and books in a different way.

Visits are not bookings. They tell you whether a place draws people and when, and whether a year was unusual, not how many of them will stay with you. The hotels around you, and what they charge, tell you more about your own rooms.

Decide the kind of place early, because it sets the rules you build to. The Ministry of Tourism's own lines, for its voluntary schemes:

• A star-classified hotel needs at least 10 lettable rooms, all with outside windows or ventilation, and a minimum room and bathroom size for each star: at least 120 square feet without the bathroom for 1 star, rising to 200 for 5 star.
• A guest house, for the Ministry's approval, needs at least 6 lettable rooms, with double rooms of at least 120 square feet.
• A homestay or bed and breakfast under the Ministry's scheme lets between 1 and 6 rooms, 12 beds at most. In a homestay the owner's family lives in the house; in a bed and breakfast an agent or operator does.

Your state may set its own limits: Himachal Pradesh, Kerala and Goa all do for homestays (see the guide on registering a homestay in India). Star classification is voluntary, but if you may want it one day, building to its sizes now is simpler than rebuilding later.

Then describe what a guest gets: the room types and how many of each, beds, bathrooms, views, meals, parking, a lawn or hall for events, and anything the places around you don't have.

Income is built, month by month, from the rooms you have, the nights you sell and the average price you sell them at.

1. 1Count the room nights you can sell in each month: rooms × nights in the month.
2. 2Estimate how many of them you will sell, from what you found in the market: more in the season and on festival dates, fewer in the quiet months. Be careful in the first year, while no guest has reviewed you yet.
3. 3Set an average price for each month from what the places around you charge for the same kind of room, after the discounts and offers you expect to give.
4. 4Take off what the booking sites keep on the bookings they bring. Each site's commission is in its contract (see the guide on booking site commission).
5. 5Add the other income: meals, events, laundry, transport.

Put the quiet months in honestly. They decide whether you can pay the loan.

Split the costs into money you spend once and money you spend every month.

• Project cost: land or lease, building or conversion, furniture, linen, kitchen, fire safety equipment, the website and booking engine, licences and approvals, and money to live on in the months before you open.
• Running costs: staff, electricity, water, gas, laundry, food, repairs, insurance, software, booking site commission, marketing, loan repayments and taxes.
• Approvals that cost time as well as money: land use permission, sanctioned building plans, the fire safety certificate, pollution control board consent where your size needs it, and food safety registration or a licence (see the guide on licences to open a hotel in India).

Get written quotes for the big items and put them at the back of the plan. A cost with a quote behind it is one a lender can check.

Say how much you need, how much is your own money and how much borrowed, from whom, and what each part pays for. The SBA's guide asks for the funding needed over the next five years, whether it is debt or equity, and how it will be used.

• Your own money and your partners': who owns what share, and how each is paid back.
• Bank loans for a small unit: banks and other lenders give them under the Pradhan Mantri MUDRA Yojana, in four sizes, Shishu, Kishore, Tarun and Tarun Plus. MUDRA refinances the banks, small finance banks, non-banking finance companies and microfinance institutions; you apply to the lender.
• MUDRA says it has no agents or middlemen for its loans, and warns borrowers to keep away from anyone claiming to be one.

A homestay in a village may fit schemes for self-employment too: the Ministry of Tourism's strategy for rural homestays asks that eligible rural homestays be considered under schemes such as the Prime Minister's Employment Generation Programme (PMEGP). Ask the agency that runs the scheme in your district whether yours qualifies.

Say where each booking will come from, and what each kind costs you:

• Google: your Business Profile on Google Maps and Search, and Google's free booking links to your own website (see the guides on Google Business Profile for hotels and Google's free booking links).
• Booking sites: which ones, and the commission each keeps (see the guide on booking site commission).
• Your own website with a booking engine, for guests who already know your name, with no commission to pay.
• Companies, travel agents and wedding planners near you (see the guides on bookings from companies and travel agents, and on wedding and event bookings).
• Reviews: a new hotel has none, so plan how you will ask every guest from the first week (see the guide on asking guests for reviews).

Plan this month by month too: a booking through a booking site costs its commission, one through your own website costs your booking engine's fee.

A plan that shows its weak points is easier to trust. Work out, and write down:

• Break-even: how many room nights a month you must sell, at your average price, to cover that month's running costs and loan repayment.
• The bad year: the forecast with fewer nights sold and lower prices than you expect. Can you still pay the loan?
• Delays: approvals and licences take time. The Ministry of Tourism's star classification alone aims at a decision within three months of a complete application.
• One-off years: the 2025 tourist counts include the Kumbh Mela, which doesn't come every year. Don't build a forecast on an unusual year.
• Competition: new hotels being built near you.

Put the papers behind the plan at the end: land documents or lease, building plans, quotes, licences applied for, and the source and date of every figure.

Before the long plan, answer these on one page:

• Who will stay, and why here?
• How many rooms, of which kinds?
• How many nights you expect to sell each month, and at what average price?
• What it costs to build and open, and where that money comes from?
• What it costs to run each month, with the loan?
• The month it starts to make money, and the bad-year answer to the same question?

When every line has a figure and its source, the long plan is mostly a matter of writing it out.