How to Start a Hotel Business

How to Start a Hotel Business

India is one of the most favorite destinations of tourists to travel and explore to. And due to the development of the infrastructure and globalization, it has become a top tourist hotspots of the world. Travel and tourist industry directly benefited the hospitality business. Tourism in India is the third largest foreign exchange earner of the country. In this article, we will take a look at one specific sector – the Hotel Business, how you can start one and what all steps are needed to be followed.

The Travel and Tourism Competitiveness Report by World Economic Forum, has ranked India at the sixth place in tourism and hospitality.

There are many places, cities, beaches, mountains, valleys, monuments, malls and hill stations to experience in our country. And tourists would obviously look for an accommodation while they’re here. And this gives an ample amount of opportunities to the hotel industry to operate in and make a handsome profit too. So, here is the first clue to the initial decision to be made. There is an emergence of budget hotels in India to cater to much of the population who seek affordable stay.

"A hotel should relieve travelers of their insecurity and loneliness. It should make them feel warm and cozy.” — Bill Kimpton, founder of Kimpton Hotel and Restaurant Group

Location and Type

Location has traditionally been the most important critical success factor. In the right location, where competitors are not fulfilling all customer needs, a hotel can thrive. However, in a neighborhood that has heavy competition from existing hotels, success may not be so forthcoming. So, in order to get started with your hotel business, you will have to decide the location it will be set in. It is going to be the most important decision and a mistake here could cause repercussions in the future.

Now, the hotel could be for business (one which will accommodate business and corporate activities, like business meetings) or one which is solely for tourists and travelers (so, it would be more commercial, emphasis on aesthetics will be there). The entrepreneur would need to determine which location will work best for the hotel to be situated at.

So it would be most profitable and effective if the hotel is located near a tourist destination, in major cities like Delhi, Goa, Kerala, Rajasthan, Mumbai, etc. An intensive research about the potential prospects of a specific region should be done. It would work better if the hotel is located near a parameter of 1 to 10 kms from the tourist hotspot.

A simple, clear, but persuasive hotel business plan is necessary not only for you to think through how you will take on the opportunity, but for you to convince any investor or lender that you have the ability to do so.

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If you wish to start your business with best potential prospects in future, don’t cut your investments on great logistics. Logistics play a vital role in the beginning stage of business and working of lodging legitimately. A close proximity to commercial destinations, e.g. a shopping mall, or a multiplex, is desirable. It is crucial to be at the closest to these hotspots for the smooth and fruitful operating of the business.

“The key is to set realistic customer expectations and then not to just meet them, but to exceed them — preferably in unexpected and helpful ways.” — César Ritz, King of luxury hotels


A decision about the area requirement of the hotel business also has to be made. The entrepreneur will need to decide the zone that he will require for setting up the infrastructure appropriately. The number of rooms, the spacious aspect of the room and building, the area in square feet, and the type of hotel would determine the area.

A good amount of emphasis on the “start” should also be made, for instance a 5 star hotel would have a lodging with good amount of rooms and be spread over a huge area. It is essential to know the scope of your hotel business in the particular area where you are planning to start the hotel.

Hence, you have to conduct a market survey within 10 kms of the hotel location. This will help you to know whether it will be profitable in starting the hotel in that location. If there is any competition from similar hotels, you can create a business plan with unique facilities and features to offer for the customers. If you have something new and unique to offer, it will attract more customers to your hotel than your competitor hotels.

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Hotel Layout

The entrepreneur needs to plan the hotel’s layout after deciding the type, location, logistics and area for the same. Getting a professional assistance and consulting an interior designer for the same would be of great value. They will guide you regarding the various intrinsic details and specifications of hotel décor and other methods to attract visitors.

An aesthetic theme and an appealing furnished hotel will run better as the word of mouth spreads the advertisement for it. There are consultants and professional service providers for the same, and one should definitely consider getting it as it will add more to the future returns.


This is an important aspect in every business – the finances should be given major importance and assurance that there are enough for every other section of the business activity. Whether you buy an existing hotel, build one from scratch, or renovate a building into a hotel, you will need lot of money to invest.

The funds can be obtained from various sources. An entrepreneur need to make the decision of how the funding would be fetched. And exhaustive research and thought should be given to this part. You can also consult with a financial agent for the same. The agent will require a specific commission for the services, you can even search for their services online. Finances can be attained from existing savings, selling of a property, a friend or family member, financial institutes, banks, shares or bonds, and other such sources. The entrepreneur should see that the funds collected will yield in the future, be returned to the bank on time if loan is taken and that no wastage of these resources is done.

Recruit Staff Members

Once the physical aspect of the business is handled, the entrepreneur should start the process of recruiting the staff members. A hotel requires a team of staff that will include housekeeping, chefs, managers, office workers, waiters, servers and customer care executives and cleaning staff being most important ones, the businessman can hire other people to work for him too. You could start the staff member’s team with known people who are willing to work with you and for you, and conduct other recruitment process thereafter and hire more people into your business.

By concentrating on employee satisfaction as well as customer service, a hotel can increase the likelihood that employees are happy and, in turn, provide excellent customer service.

Motivate them, train them, care about them, and make winners out of them… they’ll treat the customers right. And if customers are treated right, they’ll come back.” — J. Willard Marriott, founder of the Marriott Corporation

Licenses and Registration Requirements

There are many licenses and registration requirements that you will be need for hotel business in India. The licenses needed would have to be renewed on an annual basis. They pertain to building property, safety, police, trade, registrations, ESI, Employee PF, FSSAI, GST and other such permits. Let us discuss them in a bit more detail.

  1. A building permit would be required according to the National Building Code. All hotel in India must have this legitimate business license according to the significant Town Planning Act or Development Act or Municipal Act and other such relevant statutes for format, designing of building, water supply, sewerage, seepage, electric charge, and so forth.
  2. Fire Safety Permit is required for the fire well being declaration. The fire safety license is an important requirement for working of a lodging business. A Fire security endorsement is usually given to if the building has fused appropriate fire avoidance and fire wellbeing measures as required under the guidelines and controls of the Act. The hotels are checked intently by the Police Department to check if the lodgings are kept up to dated.
  3. A Health Trade license is required from the Health Department for eateries and Hotels in India which is typically issued by the Municipal Corporation.
  4. To make your business a legal working entity, you will require a business registration for your hotel business. ESI i.e. Employee’s State Insurance is an independent enterprise requirement under the Ministry of Labor and Employment Act, Govt. of India.
  5. The business needs to contribute 4.75% of the wages for all representatives procuring RS. 15,000 or less toward ES manager levy.
  6. An Employee Provident Fund (PF) Registration is also required for any establishment that uses more than 20 individuals in India.
  7. A Bar license is required if the hotel also serves liquor in the eateries. An FSSAI Food business license under the Food Safety and Standard Act is required for working a Food Business in India and Restaurant in India.
  8. And lastly, your business will require a GST registration in India and you can contact a legal service provider for the same.

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Another important requirement for your hotel business would be to obtain appraisal from the Indian Tourism Board. These appraisals typically work inside 1*, 4*, 2*, 5*, 3*, and 5 deluxe * system. And hence the owner should look at every possible way to promote its business locally and globally, both.

Also Read: List of Top Travel Startups in India


Hotel business in India is one of the most lucrative and best business ideas to start up with. One should definitely consider the idea for opening up a business in the hospitality sector as it is the fastest growing industry, especially in India. Hotel businesses are thriving today, and hence lodging business can be one of the most gainful organization to begin.

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