I've come up with an idea to start a small 3 room hotel. What's the minimum number of employees I need and which employees do I need to hire?

I'm starting this hotel and planning to expand in future. At the moment I'm working on a budget so I can't hire employees unnecessarily. So I need to know the exact amount of employees required for 3 room hotel. And which employees I need? (For example like housekeepers, desk staff, etc)

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8

Dear Sulanka

My wife and I run a small and very successful hotel in Spain for 10 years, which we sold last year. We also have been running a Web Design and Hosting company for the last 8 years focusing on hotels so we have gained a lot of insights into this industry.

Here are a few tips which I hope will help:

1. Employment laws, costs, and expectations are different in different countries so without this information it is very difficult to offer you advice. Any advice below should be viewed under the context of Spanish law and may not apply to your country.

2. Hotels of any kind have high fixed cost and marginal variable costs. They are very much like Airlines and financial decisions such as cost and pricing should be based on the same principal. For example the cost of capital, maintenance, and staffing of any hotel is the same whether you have 1 room or 100 room occupied. It is the variable cost that changes such as food, electricity, etc. so you must always try to avoid substantial increase in your fixed costs unless it is unavoidable. Here is a useful article for you http://www.cognisantassociates.co.uk/hotel_rate_setting/

3. Room/Staff ratios is a serious concern in Hotel business. From our experience until you hit 5-6 rooms you need to be working on the basis of using casual workers on demand (cleaners, waiters, etc.). When you reach this number of rooms you need at least 1 member of staff (cleaning 7 or 8 rooms can take an hour per room in changeover days and 20 minutes during normal days). Hotel owners need to roll up their sleeves and do most of the work themselves if they want to make any money. In order to run a hotel without getting involved in the day-to-day work of the hotel, you need around 14 or more bedrooms. So until this time you need to stay very much hands-on and involved in every aspect of your hotel function (I am not just talking about directing, but actually making beds, clearing dishes, etc.)

4. Hotel sector is now extremely competitive business and independent hotels are finding it increasingly difficult to grab attention. Using OTAs erodes your margin. For example Booking.com charges 20% commission and I am still at a loss as to what value they add to guests or hotels. With Google search being overwhelmed by large OTAs, the smaller hotels have been pushed out of the direct booking business, so it is becoming more costly to gain guests. This was not the case in 2006-2010.

5. Small hotel owners cannot afford to become “Managers” as they need to be involved in carrying out every aspect of their service in order to save costs. This means more work to be done by the owners, less time to be strategic, and less hours left to do anything else (that is why we sold ours as we could not run 3 businesses at the same time when one of them was a hotel!)

So in summary think very carefully before entering this sector. It sounds idyllic and great life style choice, but the reality is far from this perception.


Wish you the very best.

Ali gave you excellent advice.

Thanks for your in detail answer Ali.I will consider all these points before starting the business.

7

My in-laws owned a motel in Maine. and they did it all themselves just the two of them for 33 years

5

The number of employees is not the first question you need to answer. One of the first questions you need to answer is, what demographic are you serving? You need to answer your gross revenue questions first. How much gross revenue will your business be able to generate? Outsource every aspect of your facility that doesn't need to be performed at your facility. Revenue management is a key and that can be outsourced with a reservation service. What level of service and what price will your rooms be?

For example, and off the charts five-star facility could charge $1000 per day and you're gross revenue would be $3000 per day. You would want to provide excellent concierge service and not have any need unmet. If however, you are charging $50 a night per room, people expect a clean room and a bed.

Ali gave you excellent advice. Also, you cannot count on being 100% booked. I don't know the particulars of your situation, but conservatively your percentage booking could be as low as 50% initially for planning purposes. Your initial gross revenues would be based on 3×7x50% = 10.5 rentals per week. Say 10. If you rent your rooms for $100 each night, can you survive on $500 per week? Again, I am emphasize that the 50% booking rate is a conservative assumption for planning purposes in a worst-case scenario.

Thomas has made an excellent point here. Our experience of small Hotels (under 20 rooms) and Micro Hotels (under 10 rooms) show an even worst occupancy rate than 50%. Average small hotel in Spain has an occupancy rate of 30%-35%. One of the reasons we sold our hotel so quickly & at such a good price was we managed 53% across the year, which is almost unheard of in Andalucia. You need to check what occupancy rates and what average rates your local competition actually achieves.

5

The answer has been given and it is hidden in your occupancy levels. 3 x 365 = 1095 rooms @$50 = $54,750 maximum revenue. Best case of 50% occupancy at $50 per room = $27375 revenue per year.. Out of this your fixed costs have to be paid, then your variables. So it really depends on your expected occupancy and revenue per room, this will determine whether its you with your sleeves rolled up or employed staff. When done right it can be rewarding personally and monetary. As someone who did my time 22 years in hospitality business, all that remains is to wish you the best of luck and good fortune.

4

By carefully building and thinking through your business plan, the answer will become self evident. As with any new venture, the detail and quality of your plan is key to your success. By setting out realistic and relevant goals everything else should begin to fall into place. In respect of staffing, it really will balance on the provisions and services you want to offer. Hope this has proved of some use to you and good luck.

4

Ideally, you will just need a couple of employees - one for room service/cleaning and th other at reception to receive clients, collect payments and manage calls. If you want you can outsource this to a manpower agency on a contract basis. They will charge you more but you are ensured of their availability. Hospitality is a business where personal touch always is welcome. So you will need to be focused full time if you want to grow. Cheers.

4

A 3-room hotel is hardly a viable business, unless it's a ritzy villa overlooking the Mediterranean, so you can charge exorbitant room rates.
Consider a bed-and-breakfast. Probably run by one person, or mom and pop. Perhaps the kids help.
If they have high enough occupancy rate, they may hire a part-time room cleaner, who works a few hours a day. Many B&Bs require a minimum 2 or 3 night stay, to reduce room cleaning costs. They may hire a maintenance person or gardener for a couple of hours a week. They wish they could hire a part-time bookkeeper.
But you've got to have more rooms, and more business, before you can hire these people.

3

Sincerely, with only three rooms you can not afford to hire nobody. Probably you will need to work by yourself and members of your family.

My good friend have 7 room hotel, actually the name of the hotel is 7
http://www.hotel7.com.mk/

In order to stay profitable he is working there and another member of his family. This hotel can generate two decent salaries, but nothing more...

For more question you can visit his page and ask for advice.

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