Below is a full‑length illustrative business plan for a ground‑up, 120‑key, upscale select‑service hotel located in a mid‑size U.S. metropolitan market. These assumptions are arbitrary, you can adjust as it fits your situation.
Check out this financial model template for hotel acquisition or development. Soon I will have a second public version available that includes options for a few other ancillary income streams (events / food and beverage) as well as optional residency sales. I've done many versions of that model for clients over the years.
1. Executive Summary-
Concept & Flag – 120‑room, 4‑story, upper‑midscale branded hotel (e.g., Hilton Garden Inn or Courtyard by Marriott) proximate to a mixed‑use office/entertainment district.
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USP – Tech‑enabled guest experience (mobile key, app‑based check‑in), destination lobby bar with local craft beverages, and 4,000 sq ft of flexible meeting space.
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Investment Highlights
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Total development cost (TDC): $32 million or $266k/key
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Capital stack: 55 % senior construction loan, 45 % GP/LP equity (80/20 split therein)
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Stabilized (Yr 4) metrics: 75 % occupancy, $198 ADR → $149 RevPAR
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Yr 5 EBITDA: $4.1 million (33 % EBITDA margin)
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Unlevered 10‑yr IRR: 13.6 %; Levered IRR (65 % LTC): 19.8 %
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Exit year 10 at an 8.25 % cap → equity multiple ≈ 2.7×
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2. Company Description
| Aspect | Detail |
|---|---|
| Legal entity | NewCo Hospitality LLC (Delaware); will hold land, improvements, FF&E. |
| Ownership | Sponsor GP 20 % / LP equity fund 80 % with standard promote (preferred 9 %, 70/30 catch‑up, 50/50 thereafter). |
| Management | Third‑party management contract with [Brand‑approved operator] (base fee 3 % of gross revenues + 8 % incentive after 10 % owner’s priority). |
3. Market & Demand Analysis
3.1 Macro & Local Drivers
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Metro population 2.2 M, historical 1.4 % CAGR.
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Proximity (<10 min) to:
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850k sq ft Class‑A offices (anchored by two Fortune 500 HQs)
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500‑acre convention center (650k sq ft exhibit space; 1.1 M annual attendees)
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New 18k‑seat arena (opened 2023).
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3.2 Competitive Set (CompSet)
| Hotel | Keys | Opened | ADR 2024 | Occupancy 2024 | Distance | Notes |
|---|---|---|---|---|---|---|
| Branded Select‑Service A | 110 | 2019 | $182 | 73 % | 0.6 mi | No meeting space |
| Independent Boutique B | 95 | 2021 | $199 | 68 % | 0.4 mi | Lifestyle positioning |
| Full‑Service C | 235 | 1998/renov. 2016 | $213 | 71 % | 1.1 mi | 12k sq ft ballroom |
4. Services & Revenue Streams
| Revenue Source | % of Total Rev (Yr 5) | Key Inputs |
|---|---|---|
| Guest rooms | 78 % | 43,800 Room‑Nights @ $198 ADR |
| Food & Beverage | 14 % | 70 % capture on breakfast, 35 % on dinner/bar; 225 external covers/wk |
| Meetings & Events | 6 % | 240 bookings/yr; avg $3,900 function |
| Other (parking, market pantry, Wi‑Fi upsells) | 2 % | 90 % transient capture @ $8/night |
5. Marketing & Sales Strategy
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Digital & Direct: Brand.com, meta search, SEO, geofenced ads targeted to convention and arena keywords.
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Loyalty Channels: Participation in brand rewards program; target 50 % contribution by Yr 3.
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Corporate Accounts: Pre‑opening blitz to local HQ travel managers; negotiate LNR (last‑room‑rate) discounts ≤ 15 % below BAR.
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Social & Influencers: Local micro‑influencer stays during soft opening; user‑generated content #StayAt[HotelName].
6. Operations Plan
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Staffing – 62 FTEs at stabilization (0.52 FTE/key): GM, DOSM, Finance Mgr, Front Office 14, Housekeeping 22, F&B 16, Eng. 6, Others 2.
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Labor cost: 27 % of total revenue (benchmarked to STR Host Data).
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Tech Stack: Cloud PMS + mobile key, integrated RMS (IDeaS/G3) for dynamic pricing, self‑service kiosks to reduce front‑desk headcount.
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Sustainability: LEED Silver, heat‑recovery HVAC, solar‑assisted water pre‑heating (projected 14 % utility savings).
7. Development & Construction
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Site: 2.3 acres under PSA for $3.8 M ($38/sq‑ft FAR).
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Hard costs: $175 k/key (incl. contractor contingency 7 %).
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Soft costs & FF&E: $31 k/key (architect, permits, brand design review, OS&E).
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Timeline:
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Close land / loan – Jan 2026
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Groundbreaking – Apr 2026
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Topped‑out – Jan 2027
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Soft opening – Nov 2027
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Stabilization – Dec 2030
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8. Financial Plan (First 5 Years)
8.1 Top‑Line Assumptions
| Yr 1 (partial) | Yr 2 | Yr 3 | Yr 4 | Yr 5 | |
|---|---|---|---|---|---|
| Occupancy | 55 % | 65 % | 70 % | 75 % | 75 % |
| ADR | $182 | $190 | $194 | $198 | $210 |
| RevPAR | $100 | $124 | $136 | $149 | $158 |
| Total Revenue (M) | $8.3 | $11.4 | $12.7 | $13.9 | $14.7 |
8.2 Operating Statement (Yr 5, $M)
| Item | Amount | % of Rev |
|---|---|---|
| Rooms Dept. Profit | 11.4 | 78 % margin |
| F&B Profit | 1.6 | 75 % margin |
| Other Oper. Profit | 0.5 | 85 % margin |
| Total Department Profit | 13.5 | 92 % |
| Undistributed Ops. (Admin, Mktg, Energy) | (5.5) | |
| Gross Operating Profit (GOP) | 8.0 | 54 % |
| Management Fees | (1.2) | |
| Reserves (4 % Rev) | (0.6) | |
| EBITDA | 4.1 | 33 % |
8.3 Capital Stack & Returns
| Source | $ M | % of TDC | Terms |
|---|---|---|---|
| Senior Construction Loan | 17.6 | 55 % | SOFR + 300 bps; 3‑yr I/O, 25‑yr am. thereafter |
| Sponsor & LP Equity | 14.2 | 45 % | Promote after 9 % pref. |
Breakeven occupancy = 49 % at $190 ADR (post‑ramp).
9. Risk Assessment & Mitigants
| Risk | Potential Impact | Mitigation |
|---|---|---|
| Construction cost inflation | +5 % TDC → 120 bp IRR hit | GMP contract; 10 % contingency; material hedging. |
| Over‑supply (3 planned hotels) | 5–7 % ADR compression | Differentiate on meeting space, loyalty contribution, dynamic pricing. |
| Economic downturn | Occupancy drops 10 pts | Variable labor model; breakeven 49 % occupancy provides cushion. |
| Interest‑rate spike | DSCR pressure | Swap 50 % of floating debt; consider CPI‑linked rate cap. |
10. Exit Strategy
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Hold 10 yrs, refinance in Yr 5 (post‑stabilization) to return 60‑70 % of equity.
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Market sale in 2037 at 8.25 % exit cap on Yr 10 NOI ≈ $59 M gross sale price.
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Levered equity multiple ≈ 2.7×; sponsor promotes reach 16 %+ IRR hurdle.
11. Implementation Roadmap (Next 12 Months)
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Finalize Brand & Management Agreement – Month 1‑2
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Complete Schematic Design & Budget Validation – Month 2‑4
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Secure Entitlements / Planning Commission Approval – Month 3‑7
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Capital Closing & Land Take‑down – Month 6‑7
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Pre‑Opening Sales Team Hired – Month 10
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Groundbreaking Ceremony & PR Launch – Month 10‑11
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Weekly Cost‑to‑Complete Monitoring – ongoing after groundbreaking
How to Use This Example
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Swap in local data: Replace market drivers, comp‑set stats, and labor cost benchmarks with your region’s STR, CBRE, or HVS data.
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Expand financials: Layer in monthly cash flows, debt‑service schedules, and sensitivity tables (RevPAR ± 10 %; exit cap ± 50 bps) in Excel or your preferred modeling template.
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Align to investor preferences: Adjust leverage, pref‑return, and promote tiers to match your LP mandates.
This outline should serve as a robust starting point for investor decks, lender packages, or brand approval submissions. Tailoring the narrative to your site, flag, and strategic objectives will transform it from “example” to “investment‑ready.”
Check out more financial simulations with these real estate models.
You can hire me for custom financial modeling services here.
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