How to open a hotel or a hostel? Step by step guide
Thinking of starting your own hosting business?
At LobbyPMS, the software to successfully manage and market your accommodation, we give you a quick guide to each of the essential activities that you must perform to open a hotel in different countries of Latin America. This can be a hostel, a hotel, a tourist apartment, or any other type of accommodation. In general, for all these types of accommodation you must comply with the step by step that we will tell you below.
💼 1. Define your business plan to open your hotel:
Any entrepreneur should have a work plan before starting activities to develop their idea. This is important for any project, however, if we talk about an accomodation, a business idea becomes an essential step.
This “idea” and “step by step” is what is commonly referred to as a business plan, business plan, or simply the definition of a business model.
To achieve a successful business plan, we recommend using the CANVAS methodology, with which you can quickly define the 9 key aspects that are required to establish a business model:
- Customer segment
- Value proposal
- Distribution and communication channels
- Relationship with clients
- Income stream
- Key resources
- Key activities
- Cost structure
📍 2. Select a strategic location for your customer segment
When analyzing the ideal location for an accommodation business, one tends to quickly think about the most touristy places where the vast majority of hotels and hostels in the city have traditionally been located. However, this should not always be the case. It is because the ideal location for your business will depend on the customer segment you want to target, especially if you are wanting to differentiate your business from the competition.
We recommend that you make a list of the preferences that your customer segment would have regarding the location of the place and their needs.
For example, if your idea is an accommodation for people who travel for health and wellness tourism, then you should look for quiet places, close to the main clinics or medical centers, and with easy access possibilities.
🔎 3. Research about land uses (Permissions for a hotel)
In most countries in Latin America, it is necessary to have a land-use license to start a commercial establishment open to the public.
Who issues the land use license? This varies by country, but normally the Municipal, Departmental, State Planning offices (or depending on the name given to these offices in the country where the accommodation is to be constituted) of each city are in charge of issuing said concept to whoever requests it.
Normally, to apply for the land license or permit for your hotel, you do not need to have an incorporated company. You can request it as a natural person with your identity document and the other documents required by the planning office. On some occasions, by law, you must present the business plan you have for the project to support the permits you are requesting.
💻 4. Find the Property Management Software that best suits the needs of the hotel
Many properties start their operation without thinking about a very important point: the daily operation and management. This may seem simple, but if you do not think it well from the beginning, it is very easy to fall into overselling, lack of inventory control, lack of coordination in the shifts of hotel employees, mismanagement of suppliers, sales that do not come to fruition, wrong distribution of the availability of rooms through the different sales channels, among others.
To solve this problem, our recommendation is to look for an allied software from the beginning. The software will allow you to have simple control of all the operation, administration, and sale of the accommodation rooms. With LobbyPMS, for example, you can distribute your availability on your website and through different OTAs such as Booking.com, Expedia, etc. You can also have a reservation calendar, a personalized reservation engine, manage rates in real-time, control costs, hotel inventories, worker shifts, income, expenses, among many other aspects of the establishment.
🏨 5. Now, what are the more specific steps that I must follow if I want to open my hotel?
It is clear that all countries have different laws and regulations. However, what is certain is that generally all countries work very similarly (especially Latin American ones). In each city, country, department, state, etc., there are entities with different names, but the logic and function of each of them is similar throughout the region. Our recommendation is that you first understand the concept of each of the entities and processes that we mentioned above, and having this in mind, apply the same logic to know the place you should go in your city or country.
How to open a hotel in Colombia
- The first thing is to register the establishment with the Chamber of Commerce and the DIAN (Legal requirement). This will allow your hosting business to be legally registered in Colombia. There are two ways to register the business: As a natural person or as a company.
In this link you can find the differences between each one and the guide to register with the Bogotá Chamber of Commerce (CCB). Do not worry about it being the CCB, as this registration is carried out in a similar way in all the cities of the country.
- When you have your company legally registered and your property ready to receive people, then you will need to comply with these two additional legal requirements: Apply for the National Tourism Registry (RNT) and register your hotel in the Colombia Migration System (Legal requirement).
You can request them at the same time you start your commercial activities, but you will have a deadline to obtain them. Otherwise you could face sanctions that can seriously affect your business.
The RNT is a legal requirement that must be met by all companies that offer tourism services in Colombia. Enter this link to know the details of the registration process.
- Migración Colombia is the Colombian customs agency responsible for monitoring and carrying out immigration control in the Colombian State.
One of the legal obligations that you will have as an entrepreneur in the hospitality industry is to send Migración Colombia the list of foreign people who entered and left the hotel each day.
To do this you must access to SIRE (Foreigners Registration Information System), with the access codes that will be given to you at the entity when you request registration. You will need to have done step 4 to get the access.
- Building licenses for new properties or renovations (Legal requirement). If you are going to build your property from scratch, or you will make renovations on an existing business, or you need to adapt an old family home for your accommodation business, then you will need a construction license to be able to carry out this activity.
We recommend this article where the types of licenses, requirements and procedures to obtain them are detailed.
How to open a hotel in Mexico
Opening a hotel in Mexico means having to meet certain general and specific hotel requirements. In addition, these requirements can be at the Municipal, State, and Federal level.
- Registration in the Federal Taxpayers Registry (Federal Procedure): The Federal Taxpayers Registry, better known as RFC, is an alphanumeric composite key that the government uses to identify individuals and legal entities that practice some economic activity in Mexico in a way legal.
- Carry out the State Registry of Causers. This is a State procedure that ensures that everyone makes their tax payments to the State correctly and without fail.
- Operating License or Opening Declaration. (Municipal Procedure): Like the Land Use License, the Operation License or Declaration of Opening is issued at the municipal level by the city council for the place where the establishment of the company is located. It authorizes the start of the activity in the establishment.
- Registration of the Business Registry in the IMSS: This procedure must be carried out up to five days after starting the activities. If you do not do this, your hotel establishment will incur penalties.
- To process the opening with the Ministry of Health. Closely linked to this point, do not forget to obtain the sanitary license for the operation of the hotel and the food and beverage area, the firefighters permit, applications for the electrical and gas installation, and the installation of advertisements at the Ministry of Industry and Commerce.
- Finally, the approval of the Secretary of the Environment and the Neighborhood Council will be necessary.
The procedures are quite long, tricky and in some states, they are also expensive. Fortunately, since 2007 there is a special government plan to carry out all these procedures and meet the requirements to open a hotel in less time. It is the Rapid Opening System for Tourism Companies (SARE Turístico).
With this system, it is possible to open a low-risk business in the tourist area in a period of 48 to 72 hours, simply by presenting the voter’s credential, the proof of compatible land use, and the proof of possession of the place.
How to open a hotel in Dominican Republic
The steps are simpler than they seem:
- You must first obtain the operating license. This is requested to the Ministry of Tourism of the Dominican Republic with all the details such as the name of the company that will operate the establishment, the activity to which it will be dedicated, name of the hotel, location, among others.
Keep in mind that this operating license is granted for 1 year, so you must update it annually.
- You must formally register the commercial name of the establishment with the National Office of Industrial Property (ONAPI).
- Register the establishment with the Chamber of Commerce.
- You must make the payment of taxes to the General Director of Internal Taxes.
Remember that the moment you want to complete all the procedures with the Ministry of Tourism, you will have to present certain information (already completed in your business plan). An example of this are the price rates per room, which will be given according to their category.
How to open a hotel in Peru
In the case of Peru, the requirements are established by the Ministry of Foreign Trade and Tourism (MINCETUR) in the Regulations for Lodging Establishments. It establishes the provisions for the classification, categorization, operation, and supervision of lodging establishments; as well as the functions of the competent entities in this matter
To complement the steps established in the Lodging Establishments Regulations, do not forget:
- Register in the Single Taxpayers Registry
- Complete the documents: Operating License, Unique Procedure Form (FUT), and the ESSNA sworn declaration.
- Establish the classification and / or categorization of the accommodation. For this purpose, you must fulfill the infrastructure, equipment, service, and personnel requirements established in the regulations. This classification is:
- For the authorization and operation of the lodging establishments, the owners of these businesses must be registered in the Single Registry of Taxpayers (RUC) to obtain the Administrative Records and Sector Authorizations. They must also have the respective Operation License.
- Last but not least, do not forget to follow the guidelines for health surveillance of workers at risk of exposure to COVID-19 approved by the Ministry of Health (Minsa)
🌟 6. Make your dreams come true
Tourism in Latin America continues to consolidate as one of the fastest-growing economic sectors, so starting an accommodation business can represent a successful investment for you.
Still, like any new business, it takes passion, perseverance, and discipline to be successful.
Regardless if you are starting your first company or if you are an experienced entrepreneur, do not forget the importance of staying at the vanguard by researching all the behaviors of your customer segment, the advances of the industry, and the strategies of the competition.
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