I Want to Open a Hotel: The Budget Checklist Before You Talk to Anyone
You have a property. Or an idea. Or both. You want to open a hotel — a boutique property, a maison d'hôtes, a conversion project, or a full development from scratch. And before you call an architect, before you talk to an operator, before you sign anything, you need to know one thing: how much is this actually going to cost?
This checklist is for first-time hotel investors and developers who want to build a realistic picture of the total budget before any professional fees start running. It covers every major cost category, in the order they typically appear in a project — and flags the ones that are most commonly forgotten.
You have a property. Or an idea. Or both. You want to open a hotel — a boutique property, a maison d'hôtes, a conversion project, or a full development from scratch. And before you call an architect, before you talk to an operator, before you sign anything, you need to know one thing: how much is this actually going to cost?
This checklist is for first-time hotel investors and developers who want to build a realistic picture of the total budget before any professional fees start running. It covers every major cost category, in the order they typically appear in a project — and flags the ones that are most commonly forgotten.
Step One: Understand the Total Cost Structure of a Hotel Project
A hotel project has five main cost categories. Most first-time investors know about two or three of them. All five need to be in your financial model from day one.
Land and acquisition costs cover the purchase price of the property or site, notary fees, agency fees, and any due diligence costs. In France, notary fees alone typically add 7 to 8% on top of the purchase price for a commercial property.
Construction and renovation costs cover the structural work: foundations, walls, roofing, MEP, and building finishes. This is usually the largest line item and the one most investors focus on. It is expressed as a cost per square meter and varies significantly by location, building type, and specification level.
Interior fit-out costs — FF&E and OS&E — cover everything that goes inside the building: furniture, lighting, curtains, artwork, equipment, linens, uniforms, and all operating supplies needed for opening day. This is the line item most commonly underestimated at feasibility.
Soft costs cover professional fees: architect, interior designer, project manager, AMO, legal, accounting, permits, and insurance during construction. In France, soft costs typically represent 12 to 18% of construction costs.
Pre-opening costs cover everything needed to launch the hotel as a business: staff recruitment and training, marketing and website, reservation system setup, first inventory of perishables, and working capital for the first months of operation.
Step Two: Get Realistic About Construction Costs
Construction costs are the line item that sets the tone for the whole financial model. Get them wrong at feasibility and every other number in your model is built on a false foundation.
As a rough reference for Western Europe, construction costs currently run at the following levels for hotel projects. Budget and midscale renovations: €800 to €1,500 per sqm. Upscale renovations: €1,500 to €2,500 per sqm. New build midscale: €1,800 to €2,800 per sqm. New build upscale and luxury: €2,800 to €5,000 per sqm or more.
These figures include structural work and building finishes but exclude interior fit-out, professional fees, and VAT.
Two factors consistently push construction costs above initial estimates. The first is building condition — older buildings, listed buildings, and properties in dense urban areas almost always reveal surprises during works that are not visible at feasibility. Budget a contingency of at least 10 to 15%. The second is specification creep — the gradual upward drift in specification quality as the design develops. A budget set on a midscale specification that becomes an upscale project during design development will have a construction cost overrun built in from the start.
Step Three: Budget the Interior Fit-Out Properly
The interior fit-out budget — FF&E and OS&E — is the line item that most commonly derails hotel projects. It is estimated late, underbudgeted systematically, and often raided when construction costs overrun.
The core reason is structural. At feasibility, most investors use a generic cost per key derived from a previous project, a rule of thumb, or a number suggested by someone in the room. These numbers are rarely wrong by accident — they are wrong because they do not reflect the actual project: its room mix, its star rating, its location, its brand standards, its F&B concept.
As a starting reference, total FF&E and OS&E costs per key in Western Europe currently run at these levels. Budget hotel (2-3 stars): €8,000 to €15,000 per key. Midscale hotel (3-4 stars): €15,000 to €28,000 per key. Upscale hotel (4-5 stars): €28,000 to €55,000 per key. Luxury hotel (5 stars and above): €55,000 to €120,000 or more per key.
These figures cover standard guest rooms only. Suites, F&B spaces, spa, fitness, and back-of-house areas add significant cost on top and need to be budgeted separately.
The fastest way to get a realistic interior fit-out budget for your specific project — broken down by trade lot — is to run a simulation on Figurz before your first meeting with an architect or interior designer.
Step Four: Don't Forget OS&E
OS&E — Operating Supplies and Equipment — is the most forgotten budget line in hotel development. It covers everything the hotel needs to operate from day one that is not part of the building or the FF&E: linens, towels, crockery, glassware, uniforms, cleaning equipment, back-of-house trolleys, kitchen smallwares, guest amenities, and operator-selected equipment such as minibars and safes.
OS&E typically represents 15 to 25% of the combined FF&E and OS&E budget. For a 40-room midscale hotel, this means budgeting €120,000 to €240,000 for OS&E alone — a line item that frequently appears as zero in first-time investor feasibility models.
The practical rule: if your financial model does not have a separate OS&E line, your interior fit-out budget is wrong.
Step Five: Build In the Soft Costs
Soft costs are the professional fees and administrative costs that sit alongside construction and fit-out. They are not optional — they are a legal and practical requirement of any hotel development — but they are frequently underestimated or forgotten in early financial models.
The main soft cost categories for a hotel project in France are architect and interior designer fees (typically 8 to 12% of construction costs), project management and AMO fees (3 to 6% of total project cost), permit and administrative costs, insurance during construction, and notary and legal fees on the acquisition.
A simple rule of thumb: budget soft costs at 15% of your total construction and fit-out budget. It will rarely be less than this, and on complex projects it can be significantly more.
Step Six: Plan for Pre-Opening Costs
Pre-opening costs are the costs incurred between the end of construction and the first day of trading. They are not capital costs — they do not appear in the construction or fit-out budget — but they are real cash outflows that need to be financed.
The main pre-opening cost categories are staff recruitment and training, marketing and brand launch, website and reservation system setup, first perishable inventory, and working capital to cover the first three to six months of operation before the hotel reaches stabilised occupancy.
For a midscale hotel, pre-opening costs typically run between €2,000 and €4,000 per key. For an upscale or luxury property, they can reach €8,000 to €15,000 per key. These are not small numbers — and they need to be in your financial model before you approach a bank or an investor.
The Checklist: What Your Budget Needs Before You Talk to Anyone
Land and acquisition costs including notary fees
Construction and renovation costs with a 10-15% contingency
Interior fit-out budget (FF&E) broken down by trade lot
OS&E budget as a separate line item
Soft costs at approximately 15% of construction and fit-out
Pre-opening costs including working capital
VAT and financing costs
If any of these lines is missing from your model, your total project cost is underestimated. The question is not whether the gap exists — it almost always does — but whether you find it now, at feasibility, or later, when the options for managing it are more limited and more expensive.
Figurz provides independent FF&E and OS&E budget estimates for hotel projects at any stage of development, broken down by trade lot. Run a free simulation at figurz.eu before your first meeting.
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