A hotel chain is a series of two or more hotel properties grouped under a single brand name. A hotel chain can offer varying levels of service through its properties, though all will often share signature products or services that join each property together. Operating your own hotel chain can be a very lucrative business. However, running two or more properties in conjunction with each other creates its own set of unique challenges and opportunities. You may start a hotel chain by joining a hotel franchise group, or purchasing your own properties.
How to start a hotel chain by opening a hotel franchise
Step 1
Create a new franchise account with a franchise holding company. Various holding companies allow entrepreneurs, investors, and real estate individuals to start a hotel chain under their current stable of hotel brands. If you wish to take advantage of a holding company’s resources and established name(s), continue to Step 2. If you wish to start your own independent hotel chain, skip to the second section of this guide.
Step 2
Choose a hotel franchise holding company. Many well-known hotel chains are actually franchises and any applicable individual can start a hotel chain under the respective brand. One of the largest holding companies is InterContinental Hotels Group (see Resources), which owns the Holiday Inn brand along with many others. Two other well-known companies include the Radisson group and Wyndham, both of which operate hotel chains with the same names (see Resources).
Step 3
Request a franchise application to start your own hotel chain with a pre-established brand name. Fill out the application. You will need to provide backup financial and personally identifiable data, such as a background check and bank and income statements. The reference data needed for the application varies by holding group. After sending in the application, expect to wait several weeks for your information to be processed. The holding group will alert you to each next step until the application is completed.
Step 4
Secure financial backing. Upon receiving approval from the franchiser to start a hotel chain with its brand, begin contacting local and national financial institutions to obtain financing. Start-up costs vary by hotel franchiser. However, it is typically easier to obtain financing for a franchise than it is to start up an independent hotel chain and receive financing, as your hotel chain will be backed by the resources of an international corporation.
Step 5
Establish the hotels in your chain. The franchiser will often require you to select a location based on its own market research. The franchiser will also guide you through the process of securing a location for each of the hotels, making any necessary renovations to existing buildings, and hiring workers. While you will be the operator of the hotel, you will work very closely with the holding company through the start-up phase to ensure you implement all of their brand guidelines.
How to Start an Independent Hotel Chain
Step 1
Carry out localized market research to determine if a hotel in your area is financially viable and can be supported by consumers. While such research can be carried out by you on a basic scale through surveys, traffic counts, and other methodologies, hiring a local research firm reduces risk on such a large venture. The American Hotel & Lodging Association operates the AH&LA Data Center, which provides market analyses on local neighborhoods and cities for hotel proprietors.
Step 2
Choose locations for your hotel properties. Locations should meet the market audience identified in your market research, as well as be in areas properly zoned for commercial development. The right location varies by the type of hotel chain you plan to operate. For example, luxury hotels should be situated in areas frequented by affluent guests with proximity to local attractions, shopping centers, and cultural districts. Budget hotels and economy chains should be located near utilitarian areas (e.g. the local airport). Business-focused hotels should be placed near business and downtown city districts, the local conference center, and other professional amenities.
Step 3
Design the hotel properties. The architecture, layout, and overarching design of the hotel will affect the perceptions of the guests regarding your hotel brand and value. For example, guests at a luxury hotel will expect a design with more intricacies and built-in luxuries than guests at a budget hotel. You may consult a local building design firm, or employ the services of a national hotel designing firm such as Glumac or Cambridge Seven Associates (see Resources).
Step 4
Solicit construction bids from local or state-based general contractors for the building of your hotels. The right construction company must produce certain bonafides to be chosen for your project. The company should have industrial construction projects in its portfolio. While hospitality industry building experience is not necessary, a general contractor who has built high rises or large buildings is far more relevant than a home developer. A professional contractor will also present you with all of the pertinent details in his bid, including how long he expects the project to take and how much it is projected to cost. Avoid companies that offer bids that promise extraordinarily low prices or fast construction times, as these are often warnings of less-than-standard construction.
Step 5
Create a hotel brand and identity. If you are an individual with considerable brand experience, you may choose to craft this identity yourself. However, most entrepreneurs will benefit from consulting with a branding company and design firm. National hospitality marketing firms include Wilmer Communications (425-775-9100) and Hospitality Marketing Concepts (949-833-8000). Work in close alignment with a graphics design agency to create all aspects of your hotel chain brand, including logos, letterhead, color schemes for rooms, etc.
Step 6
Hire workers. If the hotel chain is small, you may benefit from hiring an employment agency which may be found through your local business association. Larger hotel operations will require the establishment of a human resources office to locate and hire worthy applicants.
Tip
Consider whether you have the financial resources for starting a hotel chain. The average small hotel typically starts at just under $1 million USD, though this price varies considerably according to location. While financing may be obtained to start a hotel chain, individuals must have some means of personal wealth to fund some of the start-up costs.