Start a motel business by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your motel business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a motel business?
Motel costs include the following:
- Staff salaries
- Supplies (linens, cleaning products, etc.)
- Office equipment
- Commercial insurance
What are the ongoing expenses for a motel business?
Motel owners will need to account for the cost of salaries, equipment, maintenance, rent/mortgage, utilities, and commercial insurance.
Who is the target market?
The target market can be anyone looking for a place to stay at a reasonable price. The target demographic usually refers to tourists or passersby, but this is not always the case. Plenty of locals may want to take a staycation to see their town in a new light (without going overboard on costs).
How does a motel business make money?
Motels charge people a set amount to use their facilities. This charge should account for not only the direct costs of the room (including utilities), but also the common areas and the service staff.
How much can you charge customers?
Motel owners can charge the going rates in their area. They may only be able to charge $15 a night for a weekday during the off-peak season. However, owners may be able to charge $100 or more per night during a three-day weekend if there’s a major event happening in their area.
How much profit can a motel business make?
Profits for motels can be substantial, especially if the demand is high. Room rates can conceivably triple during major events and peak tourist season. However, average profits have fallen in the last few years for motels from around 35% to 25%.
How can you make your business more profitable?
Motels can consider selling merchandise to their customers, including T-shirts, hats, and sweatshirts. Or they can set up a small gift shop where customers can purchase liquor, snacks, and beverages. These convenience goods and souvenirs can be sold at high-profit margins and can provide supplemental income beyond that of the standard room rates.
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your motel business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Find the right bank for you, read our review of the Top 5 Banks for Your Small Business
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
STEP 7: Get Business Insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a motel business
Most people will likely find you via online research. You’ll need to create a website that is search-engine friendly and easy to navigate or consider investing in paid online advertising. Owners may also want to look into partnerships with websites like Expedia or Priceline. Offer special rates or special amenities for first-time guests. Finally, consider partnering with travel agents or other local partners as a way to spread the word about your new business. Travel agents are always on the lookout for reasonable places for their clients to stay, especially in high-traffic cities or neighborhoods.
How to keep customers coming back
Attracting customers starts with being visible enough for them to find you. Ensure your online and local presence gives you a competitive edge over other local options. When guests are with you, the staff should be welcoming, accommodating, and proactive to their needs. This will help generate the reviews you need and help guests remember your business if they ever swing through your area again. Consider offering an incentive for people to fill out a survey about their experience, such as a small gift. Their feedback can help you fine-tune your operation for future guests.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Motel Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
People who want to provide travelers or locals with a safe, affordable, and comfortable place to stay. The best owners will actively seek to improve their guests' experiences by sharing their passion for tourism and the joys of discovering a new area.
What happens during a typical day at a motel business?
Owners will likely spend their time coordinating staff and ensuring the facility meets quality standards. They’ll need to manage employees, ensure regular maintenance, and interface with guests. Owners will oversee all activity within the motel and make adjustments as needed. They'll set financial expectations and design their marketing for their target demographic.
What are some skills and experiences that will help you build a successful motel business?
You should be organized, logical, and good with people. If you’re not committed to your staff and customers, you’re likely to overlook important details in your business. Most motel owners will hire a general manager to take care of many of the daily activities, but owners still need to stay involved enough to catch smaller issues before they turn into big problems.
What is the growth potential for a motel business?
Quality motels are always in demand in practically all areas of the country. Even in places that are saturated with facilities, patrons are always looking for something extra. For example, if your motel offers more security than those around it, this can entice people to try your motel over more established businesses in the area.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a motel business?
The best approach for opening a motel business is largely determined by the area in which it’s located. Owners should scout different locations and assess the competition around each one. Once owners do their research on comparable hotels or motels, they can use this information to distinguish their business.
Carving out the right brand starts with understanding what your potential customers need. Are people worried about their safety in a large city? Are they looking for a motel with more amenities? Do they believe the motels are overpriced in their area for what they receive? Is your location closer to the most popular locations in your town? As you narrow down your strengths, it should be easier to set the right branding strategy for your customers.
In the advent of websites such as Airbnb, the competition has never been more intense for motels. But not everyone wants to stay on someone’s private property where anything could happen. It’s an owner’s job to figure out what’s missing for travelers before advertising directly to those needs.
Motel owners can also consider offering unconventional options that other motels don't. For example, towns that are frequented by truckers may be able to turn a profit by renting rooms by the hour. These working professionals may just want a place to shower, eat, and change before their next stop without having to pay for a full night. Or owners may want to outfit their motel with luxury amenities. Anything from free breakfast to turn-down service can give your motel a good reputation from the moment you open.
How and when to build a team
Most motel owners will build a team immediately to ensure guests have access to staff members at all hours of the night. Look for people who are conscientious, friendly, and organized. Staff should have a strong background of the town, so they can answer questions and enhance a guest's stay. Look for people who can stay calm during emergencies and direct guests to safety.