The business of tourism – 21 November 2014
There are many factors to consider, such as where your business will be and who your target market is, but much of these decisions will be based on your budget, so that may be a good place to start.
Here are just some of the costs associated with setting up a new accommodation business:
The cost of building or buying a new premises
The size of the entire property and its location (rural or urban) will influence the building costs. For example, the cost of transporting equipment, furniture, etc. will be higher if one is further away from an urban area
The level of refurbishment, renovation or upgrades needed; including landscaping the garden and building/maintaining the pool;
Guest Rooms: Beds, TV, linen, furniture, towels, curtains, bathroom mats, lamps, coffee sets, décor;
Dining Room: tables, chairs, table-cloths, cutlery, crockery and glassware, décor;
Kitchen: Appliances (perhaps industrial size) like fridges, stoves and coffee machines, cooking utensils, bains maries, hot-plates, etc;
Public areas: Furniture, mirrors, décor and other fixtures;
Consumable stock for the kitchens and bedrooms;
Office: Computers, printers, copiers, booking systems, furniture, office supplies (guest register, purchase orders, letterheads, etc.), switchboard;
Licenses and levies: there are various documents you will have to apply for, such as a zoning certificate, trading license and perhaps a liquor license. These cost money, so it must be included in the budget
Marketing: A professional website, ads, business cards and brochures will be needed;
Other modern conveniences, such as Internet access/wifi, DSTV, air-conditioning;
Hiring employees is a significant start-up and on-going cost. In the beginning, employees will have to be trained and provided with uniforms;
The extent of these costs will depend on the type of establishment and its target market – perhaps the star grading you hope to get – as this will dictate the quality or luxury of the materials that need to be purchased.
Financing your start-up
Any financial institution you approach to finance your business will expect you to have an own cash contribution and an asset you can use as security. This means that you will need a smaller loan, which will help when it comes to having enough monthly cash flow to service the debt. In order to cover any finance repayments and to keep your business viable, you should not have more than 50% of the value of your business being debt. This means that if the total start-up cost is going to be N$1 500 000, you should have N$750 000 to contribute in cash and get the rest from a financing institution. This way your business has the greatest chance of succeeding.
This is the second article in our “Entrepreneurs in Namibian Tourism” series. Look out for “Buying a tourism accommodation business” next week.