1.Determine the layout of your hotel. How many floors will your hotel have? How many guestrooms will be on each floor? Remember that some—if not all—of the first floor will include a lobby and lounge or restaurant.

This is a sample layout of hotel floor. You can decide how many guestrooms will be on each floor of your hotel.

2.What is the total number of guestrooms in your hotel?

Follow these steps to work through this calculation:

• Number of floors with guestrooms × Number of guestrooms on each floor = Total number of guestrooms

3.What is the square footage for each floor of your hotel? Assume that all guestrooms are the same size: 18’ × 18’. Safety regulations mandate that every floor have a hallway at least 5’ wide with egress at both ends.

Follow these steps to work through this calculation:

• Width of two guestrooms (2 × 18’) + Width of hallway (5’ or more) = Width of each floor

• Length of guestroom (18’) × Half the number of guestrooms on each floor = Length of each floor

• Total width of each floor × Total length of each floor = Square footage of each floor

4.What is the total square footage of your hotel?

Follow these steps to work through this calculation:

• Square footage of each floor × Number of floors = Total square footage of hotel

5.Calculate the cost to construct the “shell” of your hotel. The “shell” includes the building with parking, utilities, and basic facilities, ready to be finished as a hotel. The shell costs $109 per square foot.

Follow these steps to work through this calculation:

• Total square footage of hotel × Cost of shell per square foot ($109) = Total cost of shell

6.Calculate the total cost of FF&E for your hotel. Each guestroom will vary slightly, but the average cost of equipping each room with FF&E is $9,800.

Follow these steps to work through this calculation:

• Total number of guestrooms × Average cost of FF&E per guestroom ($9,800) = Total cost of FF&E

7.Calculate the subtotal cost for the hotel facility, including the costs of the land, the building shell, and FF&E. For your hotel, you will purchase four acres of urban, commercially zoned land for $1.2 million.

Follow these steps to work through this calculation:

• Cost of land ($1.2 million) + Total cost of shell + Total cost of FF&E = Subtotal cost of facility

8.Estimate the soft cost, which is a construction industry term referring to expenses that are not directly related to construction. Soft cost includes architectural, engineering, financing, and legal fees, as well as other pre-and post-construction expenses. Soft cost is estimated as 5-10% of the subtotal cost of the facility.

Follow these steps to work through this calculation:

• Subtotal cost of facility × 5 ÷ 100 = Minimum expected soft cost

• Subtotal cost of facility × 10 ÷ 100 = Maximum expected soft cost

9.Estimate the working capital, which refers to expenses incurred in the formation of a firm, as well as advertising, promotional activities, employee training, and other costs incurred before a firm can open its doors. Working capital—also called preliminary expenses or startup expenses—is estimated as 5-7% of the subtotal cost of the facility.

Follow these steps to work through this calculation:

• Subtotal cost of facility × 5 ÷ 100 = Minimum expected working capital

• Subtotal cost of facility × 7 ÷ 100 = Maximum expected working capital

10.Calculate the total cost for the hotel preopening, including the costs of the facility, soft cost, and working capital.

Follow these steps to work through this calculation:

• Subtotal cost of facility + Soft cost + Working capital = Total cost of hotel preopening

11.Calculate the cost for the hotel preopening per room.

Follow these steps to work through this calculation:

• Total cost of hotel preopening ÷ Total number of guestrooms = Cost of hotel preopening per room