How Much Does It Cost to Start a Hotel? A Complete Guide
- Nate Jones, CPCU, ARM, CLCS, AU
- Dec 16, 2025
- 2 min read
Starting a hotel is a dream for many entrepreneurs, but understanding the costs involved is crucial before taking the plunge. From land acquisition to operational expenses, launching a hotel requires careful planning and substantial investment.
Key Hotel Startup Costs
1. Land and Property Costs
Acquiring land or purchasing an existing property is the first major expense. Costs vary depending on location, size, and proximity to tourist attractions or business hubs.
Small boutique hotel: $500,000 – $5 million
Mid-range hotel: $5 million – $15 million
Luxury hotel: $15 million – $50 million+
Read More: Find Out more about property costs
2. Construction and Renovation Costs
Building a hotel from the ground up is typically the largest single investment. Costs include labor, materials, architecture, permits, and interior construction. Renovating an existing property can reduce costs but still requires substantial investment.
Small boutique hotel: $3 million – $15 million
Mid-range hotel: $15 million – $35 million
Luxury hotel: $35 million+
3. Furnishing and Equipment
Hotel rooms, lobbies, kitchens, furniture, and technological infrastructure such as Wi-Fi and security systems require careful budgeting. High-quality furnishings attract guests and improve long-term revenue.
Estimated cost: $20,000 – $50,000 per room
Read More: Hotel furnishing guides
4. Licensing and Permits
Before opening, hotels must obtain necessary permits, including business licenses, health permits, and fire safety approvals. Costs vary by city and state but are essential for legal compliance.
Estimated cost: $5,000 – $25,000
5. Staffing and Operational Costs
Staffing is a significant ongoing expense. This includes hiring management, housekeeping, front desk, marketing, and training personnel.
Estimated first-year cost: $200,000 – $1 million+ depending on hotel size
Hotel Insurance Coverage and Costs
Insurance is critical for protecting your investment. Here are key insurance types hotels need, with average annual costs:
Protects against claims of bodily injury or property damage caused by hotel operations.
Estimated cost: $500 – $2,000 per room
Covers the hotel building, furniture, equipment, inventory, and supplies against damage or loss due to fire, theft, or vandalism.
Estimated cost: $1,000 – $3,000 per room
Required for all employees; covers work-related injuries or illnesses.
Estimated cost: $0.75 – $2.50 per $100 of payroll
Commercial auto coverage for vehicles used in hotel operations.
Estimated cost: $1,200 – $3,000 per vehicle
Required if your hotel serves alcohol; protects against claims from intoxicated patrons.
Estimated cost: $500 – $2,500 per year
Total Startup Cost Estimates
Hotel Type | Estimated Cost |
Small Boutique | $3M - $15M |
Mid-Range | $15M - $35M |
Luxury Hotel | $35M+ |
Final Thoughts
Starting a hotel requires careful budgeting, planning, and risk management. By understanding costs and securing proper insurance, you can protect your investment and set your business up for long-term success. Working with experts like Wexford Insurance ensures you get the right coverage tailored to your hotel’s needs.
Contact us today.
