What does it cost to open a small hotel? A line-by-line budget for an existing building

There is no single figure. Opening a small hotel in an existing building is a sum of separate lines: deposit and rent during the fit-out, conversion work, furniture and equipment per room, fire and certification work, systems, opening stock and working capital for the first months. Build the total from your own quotes, not from a cost per square meter.

You have found the building: a few floors, a courtyard, a price you can just about carry. The first question from the bank, your family or your partner is the one you typed into a search box: how much does it cost to open a small hotel? The honest answer is a table, not a number. This article builds that table line by line, so you can fill it from real quotes and see the payback at the end.

Why is there no single figure for the cost to open a small hotel?#

Because in an existing building the cost is not a rate applied to a surface, it is a set of decisions about what the building already has and what must be added. Two buildings of the same size can differ by multiples, and neither is wrong.

A cost per square meter comes from new construction: shell, structure, roof, facade. It says nothing about whether the rooms already have bathrooms, whether the electrical panel can carry air conditioning, or whether a fire escape exists. For a fuller picture of what official construction figures do and do not cover, see reading the official unit-cost table for hotel construction in Türkiye.

The biggest single variable in a conversion is the wet core. Moving or adding a bathroom per room means plumbing, waterproofing, tiling and ventilation, and it is the line that most often breaks a first budget. The second variable is services capacity: electrical supply, hot water, heating and cooling, and the ventilation a kitchen needs. Upgrading a supply connection is slow and is priced by others, not by your contractor.

The third is the fire and life-safety package: detection, escape routes, signage, and the works those require. It is a design question before it is a price question.

What to ask for instead of a rate: an itemized quote per work package, a per-room-type price for furniture and equipment, and a separate per-unit price for each bathroom. Then compare quotes line by line, not on the total.

Write every line as one-time or recurring. Deposit, conversion and furniture are one-time. Rent, payroll, utilities and systems subscriptions are recurring and start before revenue does.

What does the building cost before any fit-out work starts?#

Either a purchase price with its transaction costs, or a lease with a deposit, advance rent and a rent bill that starts on day one of the fit-out. Both belong in the opening budget, and they are usually the two largest lines.

If you buy: the price, plus the title deed fee, the valuation report the bank will ask for, and the professional fees for the legal check on the title and any encumbrance. If you lease: the deposit, usually expressed in months of rent and held for the life of the lease, plus any advance rent. Both are cash out at signature even when the deposit comes back later.

Rent during the fit-out is a real cost line. Every month between taking the keys and taking the first booking is rent and payroll with no room revenue against it. Where a lease is transferred from a previous operator, a transfer premium may be asked. Decide what it buys: a fitted interior, a licence history, furniture, or simply the right to the location.

Check before signing that the lease permits lodging use, that the building's permitted use matches what you intend, and who pays for structural works and for the permits. Take the lease to a lawyer; this article does not replace that. The lease type also changes the economics: for the differences, see an ordinary lease, a hasılat kirası or a management agreement.

What conversion work does a construction figure leave out?#

Almost everything a guest touches. A construction figure prices the shell; a conversion prices the inside of it, and that is where the money goes in an existing building.

Start with the wet cores: bathrooms per room, waterproofing, drainage falls, ventilation. Price per bathroom unit, then multiply, then add the rooms where the drain position forces a raised floor or a pumped waste solution. Electrical comes next: the incoming supply capacity, the distribution panel, circuits per room, and the load that air conditioning and a kitchen add. Ask the network operator early; an upgrade has its own timeline and its own invoice.

Then mechanical: heating, cooling, hot water production and storage, and ventilation for kitchens, bathrooms and any windowless space. Sound insulation between rooms, and from corridors and lifts, is cheap while walls are open and expensive to add after the first complaint. Fire and life safety, detection, alarm, escape routes, fire-rated doors, signage and lighting, is designed first and priced second.

Circulation and access matter too: lift, stairs, accessibility, luggage movement, and the back-of-house route for linen, waste and deliveries that keeps guests and staff apart. Kitchen, breakfast area, laundry, storage, staff areas, exterior, signage and landscaping each form a work package with its own quote, and each is routinely missing from a headline rate.

How much does it cost to furnish and equip each room?#

Price the room, not the hotel. A room set quoted per room type, multiplied by the number of rooms of that type, gives a number you can check against a supplier and defend later.

Write the room set once: bed and base, mattress and protector, bedside tables, wardrobe, desk or table, chair, mirror, lighting, curtains and blackout, safe, minibar or kettle, television, hair dryer, bathroom fittings and accessories, door hardware, signage and the artwork. Then count the par stock. Linen and towels need enough sets to cover the laundry cycle, plus the stained and the worn. A hotel with one set per room is buying replacements in month two.

Separate furniture and equipment from operating supplies: the bed is capital, the amenities are stock. They are bought differently, depreciated differently and funded differently. Ask each supplier for delivery, installation, warranty and the spare-parts position. A price that excludes installation is not the price.

Compare at least three quotes per package and record the date and validity on each. A quote that expires during your fit-out is a budget error waiting to happen. VAT, customs duty and any import cost on imported items belong in the line, not in a footnote. Confirm the treatment with your accountant before you commit to a supplier.

What has to be paid before the first guest arrives?#

People, systems, permissions and stock. None of them produce revenue on the day they are paid for, and all of them are needed on the day the first guest arrives.

Pre-opening payroll is the first: the team is hired and trained before opening, and the front desk, housekeeping and kitchen leads are usually the earliest and longest-running lines. Training days and trial stays, running the hotel with staff in role before paying guests arrive, are a cost, and cheaper than learning in front of a review.

Systems come next: a property management system, a channel connection to the booking sites, a point of sale for the restaurant or bar, accounting, and the compliance setup for guest identity notification and electronic invoicing. Price the setup, the subscription and the training separately. Permissions and inspections carry fees, professional support and, often, small works that follow an inspection. This article does not list the legal steps; confirm your own case with a licensed adviser.

Opening stock covers linen, amenities, cleaning chemicals, food and beverage for the first weeks, printed material, and the small tools that keep a building running. Market entry covers photography, a website, the booking-site listings, and the rate and content work that has to be finished before the first rate can be sold. For a fuller treatment of these lines, see the pre-opening budget lines to plan before the first guest.

How much cash should be set aside for the first season?#

Enough to run the hotel through the months when costs arrive and revenue does not. That is a separate number from the opening budget, and it is the one that decides whether the hotel survives its first year.

A budget is a plan; cash is a calendar. List the months, put the expected collections in one column and the payroll, rent, suppliers and taxes in another, and find the lowest point. In a seasonal hotel the lowest point is usually just before the season starts, when stock and payroll are already committed and the first guests have not yet paid. For how to build that calendar, see planning the months between seasons for a seasonal hotel.

The first season carries costs that later seasons do not: staff learning the building, no repeat guests, no reviews, and suppliers who have not yet extended terms. Set a contingency line and decide in advance which conditions release it. A contingency that can be spent on anything is not a contingency, it is a second budget.

Keep the opening budget and the working-capital line apart in the table. Mixing them hides the fact that working capital is spent and recovered, while fit-out money is spent and depreciated.

How do you fill in the table and turn the total into a payback figure?#

Fill it bottom-up from quotes, then divide the total by the annual cash the hotel is expected to keep. That division, not the total, is the number a partner or a bank will ask you for.

Record for every line: the source of the quote, its date, whether it is one-time or recurring, and the amount in one currency. Convert at a stated rate and write the rate down. Add the lines you cannot quote yet as estimates with a name beside them, so that the gaps are visible instead of being absorbed silently into a round total.

Separate the property from the operating business. If you buy the building, the payback of the operating business and the return on the property are two different sums and should not be merged. For the payback, take the annual cash the hotel keeps after operating costs, rent, payroll and tax, and divide the opening total by it. Use your own revenue assumption, and test it at a lower occupancy than you hope for.

If the total exceeds the cash you can raise, the answer is scope, not optimism: fewer rooms in phase one, a simpler bathroom solution, furniture bought for the rooms that open first. Once the hotel is open, the same discipline moves to the operating side: cost per occupied room, line by line tells you whether the budget you built is holding.

What to do next#

Open a spreadsheet with the rows above and start attaching quotes, dates and names to them. The building, the conversion, the room set, the pre-opening period and the first season's cash are five separate sums, and only when all five are written down can you divide by the annual cash the hotel is expected to keep and see whether the project works for you.