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How to Run a Hotel

Every year thousands of people, ranging from retired couples to lifelong hospitality professionals, choose to buy a hotel or guest house. But why?

Tourism is the world's biggest industry and the UK, despite the weather, is the eighth most popular destination.

In 2015 there were 36 million visitors to the UK and foreign tourists spent £22 billion. It is predicted that by 2025 the UK tourism industry will be worth £257 billion.

These are impressive figures, but is buying a hotel really a viable and worthwhile venture? And how can you make it a success?

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.”

Most hotel owners, however, do quite nicely. 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 who can expect to convert about 50% of the turnover into profit.

Above the VAT registration limit of £85,000, 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 £100,000 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.

Holidays are not a necessity so one expects the hotel industry to suffer in an economic downturn, but despite a severe recession this 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. In 2015 domestic tourism was up 11%. Regions which saw the biggest increases in overnight trips include Yorkshire (+20%), the West Midlands (+22%), London (+14%) and the South West (+14%). Additionally, there is a steady demand for business-related accommodation all year round.

How has the UK tourism industry changed?

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.

The British palette has become 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.

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, you need to be a 'people person'. 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 – it is the bedrock of any hotel success.

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Jon Neale

About the author

Jon is a freelance journalist and has done a substantial amount of work for Dynamis. Before going freelance he worked at Estates Gazette, and has written a number of articles for the Sunday Times, the Telegraph, the Independent on Sunday, Retail Week, The Grocer, Square Mile, and Regeneration.

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