We all love luxury hotels because of the comfort and amenities they offer along with a fat bill. People with luxury lifestyles and frequently involved in the business or tourism sector keep travelling around. They prefer staying in one of the best grand hotels, which charge around 15,000 per day just for getting into a room. Yes, it is really expensive but have you ever thought about it ?
* How do the 5-star hotels make profit ?
* What about the problems they have ?
* What is the business model ?
* What about the expenses they have ?
Let's discuss,
Imagine investing 300 crores in building a grand hotel, along with all the amenities for 2 long years. The hotel has 300 rooms along with employees for every other service. Then another big expense comes from the electricity bill, water, maintenance services, employee salaries, technology and overall management of the hotel. The marketing of the hotel and promotions are based on events and market demands. If there is a tourist season, the price goes upwards and if there is no demand, prices move downwards with offers making it difficult to fill hotel space. Hypothetically, per day, approximately 210 rooms will be occupied. Then what about the rooms which are vacant? Based on the brand value, many customers prefer hotels with trust, which takes years to build with credible recognition.
When all this comes under such big expenses, how do they even make money ?
The amount you pay for entry is only to stay, the real bill adds on for food from breakfast to dinner. There are bars, spa, gaming zone and room services. All these are charged by hotels, along with various corporate events, weddings, birthday parties, family gatherings, happening frequently makes it a significant amount of business growth.
During the peak season time the prices multiply with demand, making them balanced when the demand is less. Nowadays, the business model of hotels has turned into a franchise model, where money invested by one and maintained by others. These new innovative concepts make the business and finances flow better without any burden on one. The booking systems and marketing strategies helps them reach the right audience. Even many hotels collaborate with airlines and travel services to guide them and promote them with the right offers. The 5-star hotel business has a high risk of huge investment along with high profits over the long term.
