If you own land and have access to adequate capital, you’ve got plenty of options for developing. If you’re in a small town with few food choices, you could build a popular restaurant franchise. If there are entrepreneurs and freelancers, you could develop office space or a coworking space. Some options are better than others, however, hotels seem to bring the most success. 

Why are hotels an optimal development?

Travelers want a personalized experience that makes them feel like a valued customer throughout their journey. While getting free food and discounted events is great, most travelers place high importance on their experience with hotels. Running a hotel is an opportunity to provide exceptional service to travelers and win their loyalty. They’re also profitable, and flex when the market changes.

Hotels are a great choice when you’ve got capital

When you’ve already got land, you’re at an advantage. However, building a hotel has several costs to be aware of. There are hard costs, soft costs, FF&E, and pre-opening expenses. According to Assets America, a new hotel construction can cost:

  • $115,000 for a midscale hotel
  • $148,000 for an upper midscale hotel
  • $209,000 for an upscale hotel
  • $398,000 for an upper upscale hotel
  • $1,515,000 for a luxury hotel

These costs are approximate and will change depending on where you build. 

Upscale hotels are a sound investment

Developing a bargain hotel – even a brand name franchise – isn’t the best idea when you’ve got competition in the area. You can build one and charge $65 per night, but your competitors can charge less and still make a profit since they built their investment decades ago.

Since building a bargain hotel isn’t an option with competition around, the more upscale you can go, the better (within reason, of course). Naturally, you’ll want to keep your costs down as much as possible, but some expenses are unavoidable. If you want to include a restaurant, for example, you’ll need to hire a real restaurant manager and experienced wait staff. If you want to include a mini bar, you’ll need to hire professional sommeliers. These expenses are to be expected and are just part of the cost of doing business.

Hotels are a flexible source of income

Another reason hotels are a great way to develop land is their flexibility in almost any market. For instance, when the regular market is slow, you can offer your rooms as executive suites or as an extended stay and charge by the week or month. You’ll be able to reach several markets at once. The higher price points and extended stays will make up for fewer short-term customers.

Hotels aren’t just for big cities

Every town needs an affordable hotel. Generally speaking, when a small town only has one hotel or motel, the rates are often sky high even for basic lodging. Small town travelers often wish they had more lodging options to choose from. It doesn’t make sense to pay over $100 per night for a local hotel that doesn’t even provide a complimentary breakfast, but that’s a reality for many small towns. 

Hotels can boost a small town’s economy 

Developing an upscale hotel in a small town provides visitors with better options, more amenities, and can also help boost the economy. For example, say a small town is home to a retreat center where visitors regularly fly in from all over the world to attend events. Most of those attendees will need a place to stay for a few days to a week (or more). If the local lodging situation isn’t affordable, they’re not going to fly out as often as they’d like. However, when there’s an affordable hotel, they’ll fly out more frequently, spend more money, and boost the town’s local economy.

Hotel franchises make hotel development easier

Many land owners find success developing a hotel franchise because it comes with a trusted brand name and reputation. Most consumers prefer to use brand name services, even when cheaper options are available. 

With hotels, brand names are about more than just price. Some hotels are known for specific perks and accommodations that make them stand out. Some travelers enjoy the reliability of staying in the same hotel no matter where they go. Also, some people get used to the consistency between locations and become attached to the familiarity of room layouts and pillows.

People want five-star hotels

Put simply, many travelers only stay in five-star hotels because they want to mingle with other guests for business purposes. They also want laundry service and a full-size gym among other amenities not available at budget hotels. If a town is full of bargain hotels but receives business travelers, there’s room for a better hotel with more amenities.