Starting a hostel or hotel in the Philippines is a dream for many people. This dream is completely understandable when you look at the profit and potentially multiple streams of income people can make from opening a hostel or a hotel in the Philippines!
In today’s article, we will look at how to start a hostel or hotel in the Philippines. Even though hostels and hotels are different, they share many steps and potential hurdles entrepreneurs will encounter.
In other words, if we are going to answer the question of how to start a hostel or hotel in the Philippines, we need to break each step down to analyze each task entrepreneur will need to complete. Below are the highlights of today’s guide.
How To Start A Hostel Or Hotel In The Philippines?
Depending on your location, your clientele, and your business strategy, there might be one or two small steps that are not included in the main guide. However, these 8 steps will be more than enough to help you fully plan your business for most business models. So, let’s have a look at these 8 steps in more detail.
1. Build Your Hotel / Hostel Plan For The Philippines
Before we dive into the plan that we will need for any hostel or hotel based in the Philippines, it’s important that I just quickly mention that at this stage, it’s all about the ideas. Stage one is about putting ideas down onto paper. These are good ideas and bad ideas.
You do not need to find all the answers at this stage, so please do not worry. I say this because, speaking to many Filipinos, planning is one of the most daunting tasks some people are worried about.
Everything we will speak about today can be researched and learned online, and it’s completely free. So, please do not worry. Anyways, let’s get straight down to it.
When we set up any business, the first stage initially is the plan. There are many business plans you could choose from which specialize in hotels or hostels. A quick Google search will allow you to download specific hotel and hostel business plans.
However, a simple business plan will cover most areas you will need to focus on.
When you ask how to start a hostel or hotel in the Philippines, one of the biggest areas you will need to identify is your Identity. In other words, it’s important to differentiate yourself compared to other similar businesses in the area (unless you have very low competition).
So how do we differentiate ourselves? Here are some questions which can help you find your identity.
What Is Different About My Location From Other Businesses?, How Will I Generate 10/10 Reviews From My Customers?, Where Do I Need To Focus My Attention On To Support Growth?
There are also several parts of any business plan. Not all are relevant to a hotel/hostel business. The main parts of a hotel/hostel business you will need to focus on…
- S.W.O.T ANALYST
- MARKETING (STEP7)
- 3,6, AND 12MONTH PLAN
- YOUR BUSINESS MISSIONS AND VALUES
- FINANCIAL ANALYST & PLANNING
- OPERATIONAL STRATEGY
- CLIENTELE PROFILE
- GROWTH STRATEGY
This plan of yours (similar to what we mentioned in our real estate investment guide) Is completely changeable at any time. The benefit of having a plan will allow us to brainstorm any ideas and have a visual strategy for the business. Now let us check out our next step!
2. Investigate Local Law & Requirements
When we look to answer how to start a hostel or hotel in the Philippines, an overlooked area is law and requirements.
So what are the laws? When you are looking to start a hostel or hotel in the Philippines, there are certain laws you will need to abide by. Such as the tourism act.
There are also other requirements in law covering the areas of tourism and hospitality. (http://accreditationonline.tourism.gov.ph/Downloadables/Standards/AccommodationEstablishments.pdf)
Other laws speak about specifics, such as certain permits you will need to have and certain regulations you will need to follow as a hotel or hostel owner; however, from research, it seems certain islands and cities do slightly change their specific requirements.
Most sales channels set out some requirements. For example, if you decide to use channels such as Airbnb, booking.com, or other well-known 3rd party channels, you will need to abide by that rules and regulations to list your hotel/hostel on their site.
The good news is that most hostels and hotels in the Philippines will already meet most of these requirements. Each website has different requirements, but most arise around similar topics such as guest safety, local laws, etc.
3. Building Captial
One hurdle you may come across, especially in the early days, is capital. How much is this all going to cost? This is an area we will focus on during step one. The full amount will cost will typically depend upon your location, the building, the materials, the upkeep, the staff, and the monthly costs of running the hotel or hostel.
There are two main costs. 1) The start-up costs. 2) The running costs. If you have the capital already, then move on to step 4. If you do not have the capital or are struggling to raise it, here is a 4-common method to raise funds.
- BUSINESS / PERSONAL LOANS
- FAMILY AND FRIENDS.
- CO OWNERSHIP (SHARED BUSINESS)
- ANGEL INVESTORS
4. Choose Your Hotel / Hostel Location
Like in real estate, the location of your hostel or hotel will be the most important factor and can impact whether this business investment is a success or a failure.
Many real estate experts talk about the perfect location. They speak about a location we should have; this is also something we have talked about in previous articles. What is the perfect location? It depends on your ideal customer. For one customer, a location may be perfect; for another, the location could be a nightmare.
In other words, it is important when you’re looking at the location to think about your ideal customer and their needs. For instance, if you are opening a business hotel for businessmen and businesswomen, a potentially perfect location would be in a business park.
Alternatively, if your ideal customers or families are looking to spend some quality time near the beach, then a business park is quite literally the opposite of what they want.
The location is also important for any potential profit you may make in the future. The location is also very important due to the costs that are involved. If you can find a location in a suitable area with low costs, then your profit will be much higher than if you have found an average location in an expensive area.
The focus here, as mentioned above, is the customer’s needs. For example, if you are planning to open a luxury hotel, then potentially your profits will also be luxurious, which means you will be able to afford the expensive costs in an expensive location.
On the other hand, if you are opening a hostel for backpackers, your profits will be lower; therefore, your location costs will also need to be low to make a decent profit level.
5. Building Your Revenue
Our next step on how to start a hotel in the Philippines is investigating potential avenues for income. This is often the most exciting part for entrepreneurs like yourself because this is the part where your imagination meets your business instincts.
As we all know, hotels and hostels will differ dramatically depending on the clientele, the location, and the strategy of that business. Please note we have not included any obvious income revenues such as those people will pay for staying in your accommodation.
- BREAKFAST LUNCH AND DINNER
- SNACKS AND HOTEL ROOM SERVICE
- MOTORCYCLE RENTAL OR CAR RENTAL
- ESSENTIAL PRODUCTS (EXCLUDING TOOTHBRUSH SOAP SHAMPOO ETC)
- NON-ESSENTIAL PRODUCTS SUCH AS ALCOHOL
- VENUE RENTAL
- SERVICES SUCH AS PERSONAL TRAINING OR YOGA CLASSES
- LAUNDRY SERVICES
- CURRENCY EXCHANGE
As we can see above, there are many ways hotels and hostels can maximize their profits. This is extremely important to any business that is looking to grow. A word of caution, however, it’s important that a business always keeps its customers a sense of value for money.
In other words, certain hotels add free services to attract more customers. As a business owner, you will decide whether you do this or charge for the services you provide.
6. Focus On Building Your Team
This step is special because it is flexible. By this, I mean it can be started before or after this stage. is it is recommended you start looking for stuff a month or two before you go live. However, there may be situations where this can be lengthened or shortened depending on your plan in step 1.
One mistake I see with many new business owners, especially those in the hospitality industry, is those who struggle to delegate certain tasks to the staff.
Running any hostel or hotel, it’s not an easy business, especially during peak seasons. Therefore, a strong and reliable team that can do tasks is essential in running your business.
7. Marketing Your Hostel / Hotel in the Philippines
At this stage of the journey, we have now reached the part of marketing. Marketing is a whole article covering many different forms and different budgets.
Some entrepreneurs would argue that marketing is one of the most important parts of any business. Personally, I agree, it is essential for most modern businesses to have a strong marketing game.
You may be wondering why marketing is so important for a new hostel or hotel? Can’t I just list my property on websites such as Airbnb and booking.com?
Yes, you can, but there are ways to rank higher on their websites and appeal more attractive to customers. One of these methods is to increase your marketing to attract real customers and gather real reviews, so you have social proof of your attractive hostel or hotel.
When they first decide to book a hotel or hostel in the Philippines, many customers look at 3rd party websites such as the ones mentioned above.
However, many people also look at websites search as Google Maps and other search engines to scout out accommodation before they decide to book. Therefore, your business must be seen to be attractive on all platforms.
Marketing will have a big part to play when you look back at your clientele.
For instance, if you are appealing to business customers, you may want to position your marketing towards areas where business customers will see your accommodation and target your advertisement to something that will appeal to this clientele.
There are several rules that businesses tend to follow when it comes to marketing.
As we look into the future, we can see that businesses are becoming more independent and are diversifying themselves with other businesses, which is always a great thing. It’s not always about doing what you feel you should do but doing something that will catch people’s attention.
As a quick example of how marketing can be used to catch attention, in 2018, a brand-new Range Rover sport was left outside of a famous street in London.
This street saw thousands of locals and tourists visit each day. This Range Rover car was slightly different as it had the word CHEATER sprayed painted on it, and the windows and doors were smashed in. Thousands of people and news outlets around the world reported this story as it was so extreme. Hundreds of thousands, if not millions of people, would have seen this story and this brand due to the news coverage and social media sharing.
The brand decided to do this as a marketing campaign, and it worked. (It was a hoax) millions of fresh eyes were now on the legendary brand of Range Rover, and these people had a chance to see the brand new Range Rover Sport.
8. Take Your Hostel / Hotel Live
We have now reached the end and have hopefully answered how to start a hostel or hotel in the Philippines. Our last stage is to go live. Depending on your hotel or hostel size, you may decide to do a hard and soft launch. This will help you cope with any unexpected demand.
Going live at least for the first six months is almost like a trial period for every hostel and hotel in the Philippines. This is because you can gather real data and real experiences from your guests, and you can see firsthand what has been working and what hasn’t.
One of the most important things is your reputation. Social proofing such as reviews is one of the most important things that clients look at before deciding whether to book.
In addition, it would help if you build real relationships with your customers and that your business is always pushing to provide real value in one form or another to its customers.
Starting A Hostel Or Hotel In The Philippines Conclusion:
Looking at the tourism statistics, we can see that tourism has been steadily increasing in the majority of the Philippines over recent years.
I personally believe the Philippines will be extremely bustling with tourism over the next 5 to 10 years as more and more people are discovering the beauty that the Philippines holds.
This is great news for hotel and hostel owners and fresh start-ups within the Philippines. One thing I have discovered when looking at hotels and hostels is that fresh locations are popping up.
Some of these locations were just well known to the locals, but as they are getting busier, more businesses are starting to set up accommodation in these areas and making a killing in profits.
In other words, I can see there is a demand, and there is not always supply, which is great news again for business owners in this industry.