What Does a Hotel Really Cost? What the Construction Budget Doesn't Tell You

When investors, developers, or operators ask "how much does a hotel cost to build?", the answer they usually get is a construction cost per square meter. It's a clean, reassuring number. And it's only half the story.

The other half — the part that rarely makes it into early-stage financial models — is what it costs to turn a building into an operating hotel. Furniture. Fixtures. Equipment. Operating supplies. The things guests actually touch, sit on, sleep in, and use.

The Construction Budget: What It Covers

Construction costs cover the structural work: foundations, concrete, walls, roofing, MEP (mechanical, electrical, plumbing), and finishes applied to the building itself — floors, ceilings, wall surfaces. In France and most of Europe, this is typically expressed as a cost per square meter of floor area, and it varies enormously depending on location, building type, and specification level.

For a midscale hotel in a major French city, construction costs currently run between €1,800 and €2,800 per sqm. For luxury projects, they can reach €4,000–€6,000 per sqm or more. These figures include architect and engineering fees, but they do not include what goes inside.

What FF&E and OS&E Actually Mean

FF&E stands for Furniture, Fixtures and Equipment. It covers everything that furnishes the hotel and is not permanently attached to the building: beds, seating, tables, lighting, mirrors, artwork, minibars, safes, televisions.

OS&E stands for Operating Supplies and Equipment. It covers everything needed to operate the hotel on day one: linens, towels, crockery, glassware, uniforms, cleaning equipment, back-of-house trolleys, kitchen smallwares, guest amenities.

Together, FF&E and OS&E typically represent 12 to 20% of total hotel development cost. The exact proportion depends on the hotel category, the room mix, and whether the project is a new build or a renovation.

Why FF&E and OS&E Are Systematically Underestimated

There are three reasons this happens on almost every project.

The first is sequencing. Construction budgets are locked early — they drive the permit application, the financing structure, the investor presentation. FF&E and OS&E are estimated later, often much later, when the design is further advanced. By the time a realistic FF&E budget lands on the table, the overall envelope is already committed.

The second is incentive structure. The people presenting budgets at the beginning of a project — architects, contractors, project managers — are competing for the mandate. A realistic FF&E estimate that makes the project look more expensive is not what the client wants to hear. The result is systematic underestimation, not out of dishonesty, but out of the structural logic of the tender process.

The third is complexity. FF&E and OS&E costs depend on dozens of variables: room count, room mix, star rating, brand standards, geographic location, BOH configuration, F&B concept. A reliable estimate requires all of these inputs. A guess does not.

What the Numbers Actually Look Like

As a rough reference — and these figures vary significantly by project — here is what FF&E and OS&E typically cost per key in Western Europe:

Budget hotel (2–3 stars): €8,000–€15,000 per key

Midscale hotel (3–4 stars): €15,000–€28,000 per key

Upscale hotel (4–5 stars): €28,000–€55,000 per key

Luxury hotel (5 stars and above): €55,000–€120,000+ per key

These figures include both FF&E and OS&E, and assume a standard room mix. Suites, F&B spaces, and spa facilities add significant cost on top.

The gap between the number that appears in a feasibility study and these figures is, on many projects, substantial.

How to Get a Realistic Number Early

The good news is that a reliable FF&E and OS&E estimate does not require a full procurement study. What it requires is a clear project brief: number of keys, room mix, star rating, location, and whether the project is new build or renovation.

With these inputs, it is possible to generate a breakdown by trade lot — furniture, lighting, curtains, flooring, FF&E equipment, OS&E — that gives a realistic picture of the total envelope before any supplier is contacted.

This is what Figurz is built to do. Our estimation engine draws on data from real hotel projects to produce a budget breakdown calibrated to your specific project parameters. It takes minutes, not weeks, and it gives you a number you can actually build a financial model around.

The Question Worth Asking Early

The most expensive mistake in hotel development is not overspending on FF&E. It is discovering the real FF&E cost too late to do anything about it.

When a project reaches procurement with an FF&E envelope that is 30% below what the market requires, the options are all bad: reduce scope, reduce quality, delay opening, or find additional financing. None of these outcomes is free.

The alternative is to know the number at feasibility — not with the precision of a BOQ, but with enough accuracy to make sound decisions. That number exists. It just needs to be calculated.

Figurz provides independent FF&E and OS&E budget estimates for hotel projects at any stage of development. Run a free simulation at figurz.eu.