The hotel industry offers one of the most ambitious and capital-intensive moves you can make in the hospitality space. Opening a hotel business in the U.S. gives you a long-term asset that can generate consistent revenue across room bookings, food and beverage, and events such as weddings and conventions.
And the demand for rooms is there.
According to the American Hotel & Lodging Association (AHLA) 2026 State of the Industry Report, domestic travel demand for both leisure and business was up 21% in 2025 compared to pre-pandemic levels.
The U.S. Travel Association estimated that domestic leisure travel grew 1.9% in 2025, while business travel inched up 1.4% in its annual Travel Forecast. International travel dipped in 2025, but major events, such as the World Cup and America’s 250th birthday celebration, are expected to trigger a 3.7% rebound.
It’s easy to see why many entrepreneurs are considering starting a hotel business. The key is choosing the right hotel type and business model. It can range from a small independently-owned hotel to a luxury 5-star franchise property or a niche concept like a dog hotel.
You can build independently or partner with an established brand through franchising, which offers a more structured path into the industry.
How to Start a Hotel Business in the US
Launching a hotel in the U.S. requires careful planning. While the process can be complex, breaking it down into core steps makes it more manageable and helps you avoid costly mistakes.
Conduct market research
Start by analyzing demand in your target market. Look at occupancy rates, average daily rates (ADR), seasonal trends, and the competition. Try to identify gaps in the market and where you can capitalize on them. For example, is there a lack of budget or extended-stay accommodations, or too many business properties and not enough leisure options?
If you’re brand new to the industry and exploring how to start a small hotel, secondary markets or emerging destinations often offer the best entry points with less competition.
Choose your hotel concept
Your concept determines almost everything, including pricing, branding, design, and operations. In addition, your target audience falls under this bucket. Do you plan to cater to business travelers, families, tourists, or all three segments?
This is where you decide whether you’re starting a:
- Budget-friendly small hotel or bed and breakfast
- Boutique hotel
- High-end luxury property
- Niche concepts like extended stay or pet lodging
Entrepreneurs researching boutique hotel business models will focus on the guests’ experience. This requires creating a luxury feel while keeping your property unique yet personalized.
Starting a 5-star hotel means you’re scouting premium locations and planning on high staffing levels.
Write a hotel business plan
As with starting any business, you need to create a solid business plan. Plus, you’ll struggle to secure financing without one.
A thorough hotel business plan should include:
- Market analysis
- Competitive positioning
- Revenue projections
- Operating costs
- Marketing and distribution strategy
Detailed financial projections are critical when seeking funding. Lenders and investors will expect a clear roadmap showing how your hotel will generate revenue and sustain profitability.
Secure funding
While you picked your concept and completed your business plan, you likely don’t have the funds it takes to get your project off the ground. So, you’re probably wondering whether you can start a hotel business with little or no capital. The solution to this issue is using loans, lining up investors, or forming partnerships.
Typical funding sources include:
- SBA-backed loans
- Commercial real estate financing
- Private equity or investors
- Joint ventures
Since lenders know hotels are expensive, a detailed business plan is essential for convincing potential financial partners that you have a sturdy hotel model.
Select the right location
Location can make or break your hotel.
You want to be close to:
- Airports
- Business districts
- Tourist attractions
- Convention centers
Other factors to consider include having a property easily accessible by public transportation and major roadways, and being located in a safe and secure area.
How Much Does it Cost to Start a Hotel Business?
The final price tag depends on many factors, such as:
- Location
- Property size
- Brand positioning
- Level of service
- Whether you’re building from the ground up or renovating
Typical startup cost ranges
- Small hotel business: $500,000 to $5 million
- Boutique hotel: $3 million to $15 million
- Luxury / 5-star hotel: $20 million to $100+ million
According to HVS, a global consulting firm focused on the hospitality industry, hotel development costs are often calculated per room and can vary dramatically depending on brand standards and location. Urban luxury properties, for example, can exceed $500,000 per key (room), while limited-service hotels are significantly lower.
Ongoing costs to consider
Startup costs are just one piece. You also need to factor in:
- Staffing and payroll
- Maintenance and utilities
- Marketing and distribution
- Franchise fees (if applicable)
- Insurance and compliance
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Types of Hotel Businesses You Can Start
The hotel business offers plenty of flexibility, as you have many different options between models and price points.
Small hotel business
For entrepreneurs starting a small hotel business, this model offers a more manageable starting point. A small hotel business typically has:
- Fewer rooms
- Lower overhead
- More flexibility in operations
It’s often the best way to learn the industry without taking on massive financial risk.
Boutique hotel business
Boutique hotels focus on tailoring their service to each guest and creating a distinct experience for every traveler.
It offers:
- Unique design
- Personalized service
- Strong brand identity
They are also trending in the right direction. Boutique hotels had the largest market revenue share in North America in 2025, according to Grand View Research.
Luxury or 5-star hotel business
A luxury hotel demands:
- Prime real estate
- Premium amenities
- Highly trained staff
- Exceptional service standards
It also requires deep capital and operational expertise.
Niche hotel concepts
Niche hospitality is another rising sector, which in some cases, outperforms traditional ones.
One example is pet-focused lodging. Entrepreneurs entering the dog hotel business are tapping into a rapidly expanding market.
According to the American Pet Products Association, Americans spend billions annually on their pets, including pet hotels. A prime example of a successful company is K9 Resorts Luxury Pet Hotels, a franchise that won the Pet Care Business Excellence Award for Industry Leader in 2025.
Other niche ideas include:
- Wellness retreats
- Extended-stay hotels
- Eco-friendly lodging
Hotel Franchises: a Structured Way to Enter the Hospitality Industry
A franchise hotel is often less risky than opening an independent hotel. In addition to providing access to a proven business model and critical resources, franchise hotels also come with brand standards, from complimentary continental breakfast to high-speed Wi-Fi and VIP programs, that create consistency and build customer loyalty.
The sector is growing, too. According to the AHLA, 57% of hotels in the U.S. are franchised, and there were more than 36,000 franchised hotels in the U.S. in 2024, a 34% increase over the last decade.
Major brands on the Entrepreneur Franchise 500 range from luxury operators like InterContinental Hotels & Resorts and Embassy Suites by Hilton to more accessible options like Baymont by Wyndham and Red Roof Inn that require less than $1 million in minimum investment.
However, franchise hotels have franchise fees, mandatory start-up costs, royalty fees, and less operational flexibility. So, it’s important to weigh the trade-offs between the franchising and independent roadmaps.
Common Mistakes When Starting a Hotel Business
- Underestimating costs: Startup and operating expenses almost always exceed initial expectations. Most trade publications recommend having 6-12 months of operating expenses.
- Choosing the wrong location: Regardless of the brand or concept, selecting a poor market is a recipe for failure.
- Overleveraging: When you carry too much debt, it limits your flexibility and increases risk, especially during down times or offseasons.
Starting a hotel business is neither simple nor cheap. However, it can be a rewarding and highly profitable endeavor if done correctly.
Whether you’re launching a small hotel, a boutique concept, or a luxury property, success comes down to strong research, disciplined execution, and a clear financial plan.
You can build independently for full control or opt for franchising to get structure and scale.
