How to run a hotel

The tourist trade remained surprisingly resilient during the recession

Every year thousands of people – ranging from retired couples to lifelong hospitality professionals – choose to buy hotels for sale or guest house as a way into business ownership.

And, from the four-bedroom guest house on a residential street, to the secluded Country House hotel, to the inner-city lodge hotel for business customers, the range of lodgings is as varied as the buyers.

Tourism is the world’s biggest industry and, despite the onset of global recession, international tourist receipts are stabilising, at 6.13% of global exports in 2010 and expecting to increase with the advent of the London Olympics, 2012. International tourism receipts are the expenditures by international inbound visitors, including payments to national carriers for international transport, such as British Airways, The Eurostar and Virgin Atlantic. 

The UK – despite the weather – is the sixth most popular destination in the world, after France, Spain, the US, China and Italy. Tourism is London’s second biggest industry, with more than 20 million visitors in 2010.

For hotel owners in most areas of the country, native business remains the primary source of income 

As a luxury good, one expects the industry to be sensitive to economic downturns, as well as security threats, but tourist numbers visiting London after the 2005 bombings recovered quickly, while the severe recession has not sufficiently dented numbers visiting the UK.

However, there has been a countervailing factor: the weak pound. Fluctuating currencies are a variable with huge implications for hotels and guest houses relying on foreign tourists, and over which they have no control.
 
Nevertheless, for hotel owners in most areas of the country, native business remains the primary source of income. Many Brits still have holidays and weekend breaks in the UK, and there is a steady demand for business-related accommodation all year round.

Love or hate

Running a hotel evokes a vision of a people-orientated existence in a tranquil corner of Britain, but it’s not to everyone’s taste. “It is a job that people either love or hate,” says Martin King, head of the commercial department at Waycotts in Torquay.

“Those who enjoy it will prosper, but some just can’t cope. This business demands 17-hour days, seven days a week, dealing with the general public continuously.

“The vast majority, however, do quite nicely. It is a very good lifestyle. With a seven- or eight-bedroom guest house you could turn over about £45k a year, based on an average of £5k to £6.5k per bedroom.”

This sort of scale will suit a semi-retired couple, he says, who can expect to convert about 50% of the turnover into profit.
 
Above the VAT registration limit of £68k, however, the business changes profoundly. There is a ‘gap’ in which hotels become unviable, as extra proceeds end up in the taxman’s pocket due to the 17.5% which has to be added to all bills.

Hotels only become sensible propositions again once you pass £100k turnover or, roughly, 16 bedrooms. Then you can also employ extra staff, such as chefs and receptionists.

With the exception of year-round hotspots such as London or Edinburgh, seasonality remains one of the biggest issues for a hotelier. In Devon, for example, trade is brisk in July and August, while November to February is exceptionally quiet.

Reinventions

Buyers should be aware of how tourism as an industry has changed since the halcyon days of the British seaside resort. Many of the towns formerly dependent on that trade, such as Blackpool or Scarborough, are suffering as foreign travel has become so much more affordable, although areas such as the West Country are still popular, particularly with young families.

Manchester and Glasgow have become tourist hotspots thanks to massively successful urban regeneration projects — not to mention the fact that budget flights have popularised the idea of city breaks. Other successful reinventions include Brighton (hip nightlife and thriving gay community) and Wales (outdoor activities and world-renowned jazz and book festivals).

These days, no prospective hotel owner can ignore the power of the ‘grey pound’. Britain’s over-60s are richer, healthier and more populous than ever — and they are determined to enjoy their retirement.

Activity-based breaks, such as those involving golf, cycling and walking long-distance paths like the South West coast or the Pennine Way, are increasingly popular among older people.

Gastranomic destinations

The British palette has become rather more sophisticated in recent years and a good meal is now seen as a potential highlight of being away from home. Towns such as Ludlow advertise themselves as gastronomic destinations, which people visit purely to eat in restaurants or shop for food.

Some hotels – and not just extravagant destinations such as Raymond Blanc’s Manoir aux Quat’ Saisons – sell their accommodation through the provision of high-quality food. Adding a restaurant, or improving the existing offering, can revive a flagging business and attract custom from non-residents as well as your hotel guests.

With second-home ownership at an all-time high, this allows you to attract the custom of holidaymakers who have their own accommodation, as well as locals.
 
In this industry, more than most, you need to be a ‘people person’ rather than a Basil Fawlty. Providing a helpful and friendly service is of paramount importance – that’s why it’s called hospitality.

This is the surefire way to good reviews, repeat business and good reports to friends and family — the bedrock of any hotel success.