April 14th 2025
Opening a hotel is a significant business endeavor with many steps involved in the process. The venture requires strategic planning and careful consideration of numerous factors. For starters, the core of this process is based in conducting a comprehensive market research and feasibility study.
This crucial first step helps ensure that your hotel: 1) meets the needs of the market, 2) stands out among competitors, and 3) has the potential for long-term success. This article explores key elements of market research and feasibility studies for a hotel, and it covers the following points:
Defining your target audience
Evaluating location
Analyzing competitors
Understanding demand and seasonality
We broke down specific details for each of these main themes below. Let's dive into the crucial details involved in the respective parts of a hotel's market research and business feasibility study.
"A big business starts small."
– Richard Branson, Co-Founder Virgin Group
The first and most important question in your feasibility study is: for whom are you building this hotel? Identifying your target audience determines the type of hotel you should build, the amenities you offer, your pricing strategy, and your approach to marketing communication. Consider the following guest segments when identifying your prototypical client:
Frequent Business Travelers: This type of guest prioritizes efficiency, convenience, and productivity. For example, they seek fast check-in/out, reliable Wi-Fi, business centers, conference rooms, and you'll have a better chance attracting them if your property has easy access to commercial hubs or convention centers.
Tourists on Vacation: Leisure travelers look for relaxation during their stays. They also may be quite keen to create memorable experiences during their trip. They value comfortable accommodations, proximity to local attractions, access to tours and excursions, and relaxing amenities such as spas and pools.
Families: Traveling families require spacious accommodations, kid-friendly amenities, and safety features. Proximity to entertainment options, family suites, and recreational activities are key considerations.
Luxury Experience Seekers: These guests expect premium services, personalized experiences, and exceptional quality. Luxury travelers look for high-end furnishings, fine dining, concierge services, and wellness facilities. When you are looking at a higher price point, you are also looking at elevated expectations for what is received.
Budget Travelers & Backpackers: These guests seek affordability without compromising safety and comfort. Hostels, budget hotels, or capsule hotels often cater to this segment with shared accommodations and minimalistic services.
Long-Stay & Extended Stay Guests: Corporate employees, expatriates, and temporary residents may look for serviced apartments or extended-stay hotels with kitchenettes, laundry services, and home-like amenities.
Event & Wedding Guests: Some hotels cater to intimate and unique events like weddings, or more providing professional settings for corporate events, and conferences, which require large event spaces, catering services, and top-tier hospitality. If you decide to have these kinds of services, you will need the space and resources to make it happen.
Clearly defining your target audience will guide every aspect of your hotel’s development, from location and design to guest services and pricing.
The best way to find yourself is to lose yourself in the service of others.
– Mahatma Gandhi
Location, location, location... It is a critical factor in determining your hotel’s appeal and accessibility. A hotel that’s difficult to reach or isolated from major attractions will struggle to attract guests. Here are key considerations when conducting a location analysis:
Proximity to Transportation Hubs: Hotels near major airports, train stations, and highways benefit from steady traffic, particularly from business travelers and tourists needing overnight stays before or after flights.
Business & Convention Centers: If your hotel caters to corporate travelers, choosing a location near business districts, office complexes, or convention centers can generate consistent demand.
Tourist Attractions & Leisure Destinations: Hotels near landmarks, cultural sites, theme parks, and beaches appeal to leisure tourists and families seeking convenience and easy access to attractions.
Walkability & Accessibility: Consider how guests will navigate the area. Is it safe and walkable? Are there local restaurants, cafes, or shopping districts nearby?
Local Infrastructure & Safety: A well-developed neighborhood with reliable utilities, road access, and security is essential. Tourists prioritize safety when selecting accommodations during their visit.
Competition & Saturation: Analyze the number of existing hotels in the area and their occupancy rates. A heavily saturated market might make it difficult to stand out, whereas an underserved location might offer greater opportunities.
Real Estate Costs & Zoning Laws: The affordability of land, property taxes, and zoning regulations can significantly impact investment feasibility. Research local laws related to hotel development before finalizing a location.
Potential for Growth & Development: Locations with upcoming business districts, planned infrastructure improvements, or increasing tourism can be excellent long-term investments.
Choosing the right location can significantly impact your hotel's long-term performance and desirability.
Understanding your competition is essential for identifying market gaps and creating a compelling value proposition. Here's how to conduct an effective competitive analysis:
Identify Direct & Indirect Competitors: Look at hotels with similar target audiences, services, and price ranges within your chosen location. Include short-term rentals (Airbnb), motels, and boutique accommodations in your analysis.
Review Pricing Strategies: Study how competitors structure their pricing across seasons, weekdays, and weekends. You can then assess factors that influence their rates, such as amenities, brand reputation, and guest reviews.
Analyze Service Offerings & Unique Selling Points / Services: Compare competitors and the amenities they provide, room types, food & beverage options, and special services. Identify any gaps in the market that your hotel could fill.What amenities and features are included in their rates? Are there opportunities to offer more personalized or unique services?
Study Occupancy Rates & Revenue Performance: If available, data on competitors’ occupancy rates and revenue per available room (RevPAR) can provide insights into market potential. Online platforms such as TripAdvisor, Booking.com, and Google Reviews offer invaluable insights. Identify what guests praise and where competitors fall short. Are there consistent complaints about service, cleanliness, food quality, or room amenities that your hotel could improve upon?
Benchmark Occupancy and Ratings: If accessible, study competitors’ occupancy rates, online ratings, and customer loyalty programs. High-performing competitors can inspire best practices, while underperforming ones highlight opportunities for differentiation.
A competitive analysis helps you determine how to position your hotel within the market and craft a guest experience that fills unmet needs.
Great companies are built by people who never stop thinking about ways to improve the business.
– J. Willard “Bill” Marriott, Executive Chairman of Marriott International
A strong feasibility study includes an analysis of local demand patterns. Knowing when travelers are most and least likely to visit your location helps you plan your operations and revenue strategies more effectively.
Peak Seasons: Identify the times of year when tourism or business travel peaks in your area. This might coincide with holidays, festivals, school breaks, or industry conferences. Higher room rates can be charged during peak demand.
Local Events, Attractions & Festivals: Conferences, trade shows, concerts, and cultural festivals can drive seasonal surges in demand. Aligning promotions and packages with these events can maximize occupancy.
Off-Season Strategies: Consider how you’ll maintain occupancy during slower months. Strategies may include offering discounts, hosting local events, or targeting remote workers and long-stay guests.
Weather & Climate Considerations: Seasonal weather changes impact traveler behavior. Resorts in tropical destinations might experience a dip in bookings during monsoon seasons, while ski resorts thrive in winter months.
Tourism Trends: Are there emerging travel trends in your region? Is the area gaining popularity due to a new attraction or cultural movement? Understanding these trends can help you align your brand with growing demand.
Corporate vs. Leisure Demand: Some markets experience fluctuations between weekdays and weekends. Business hotels often see high occupancy during weekdays, while leisure hotels may peak on weekends and holidays.
Business Cycle Alignment: If targeting business travelers, consider the local business calendar. Hotels near tech hubs, universities, or government offices may experience periodic demand based on specific industry cycles.
Pandemic & Economic Impact: External factors such as economic downturns or global events (e.g., COVID-19) can disrupt travel patterns. Ensuring adaptability and crisis planning is crucial.
Analyzing seasonality allows you to plan staffing levels, marketing campaigns, and pricing strategies to achieve and maintain profitability year-round.
We see that conducting thorough a market research and feasibility study is the essential first step in launching a successful hotel. By identifying your ideal guests, selecting the right location, studying your competition, and analyzing demand trends, you can build a hotel that meets market needs and stands out in a competitive landscape. The insights gained from this process serve as the foundation for every decision that follows. These decisions involve design, branding, operations and pricing.
With a clear understanding of your market, you position your hotel for strong performance and long-term success.
Feel free check out our full range of hospitality technology products, or contact our hospitality technology products team directly. We’re happy to address your inquiries and point you in the right direction.
Here are nine key points you should consider before opening a hotel. We’ll go into each point more in depth in separate articles linked here.
Key aspects of business and financial planning for a hotel: investment and funding, budgeting, revenue models, and break-even analysis.
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