1. Why the cost per room is the right unit
The cost per square metre misleads in hotels because the area per room varies considerably by category: from 18 m² for a budget room to 100 m² for a luxury suite. Two hotels at the same cost per square metre but with very different room sizes will have radically different costs, and revenues, per room.
Revenue per available room is the reference indicator of hotel profitability. It combines occupancy and average nightly rate. It is against the target for that figure that an investor validates or rejects the construction budget: a cost per room must be repaid over the operating life from the revenue the room generates.
The rule of thumb
In hotels, a rule of thumb holds that the construction cost per room should not exceed 1,000 times the target annual revenue per available room if the economics are to balance over 15 to 20 years.
For example: a three-star with a target of 80 € a night × 365 days × 70 % occupancy = 20,440 € per room per year. Maximum recommended budget: 20,440 × 15 years = 306,000 € a room. A budget of 130,000 € is very comfortable; 280,000 € would already be stretched.
This simplified calculation does not replace a full business plan, but it quickly detects a budget out of balance before any design work begins.
2. Ratios by category
The table gives cost bands per room excluding VAT for the principal hotel categories, with indicative operating data for testing the economics. The ratios exclude land, fees and operating supplies and equipment.
| Category | Cost per room excl. VAT | Average room area | Equivalent €/m² | Target occupancy | Target revenue per room | Contingency |
|---|---|---|---|---|---|---|
| One-star / budget | 55,000 – 90,000 € | 18 – 22 m² | 2,800 – 4,500 € | 75 – 85 % | 35 – 55 €/night | 8–10 % |
| Two-star | 80,000 – 120,000 € | 22 – 28 m² | 3,200 – 5,000 € | 72 – 82 % | 55 – 80 €/night | 8–12 % |
| Three-star | 110,000 – 160,000 € | 25 – 32 m² | 3,800 – 5,500 € | 68 – 78 % | 80 – 130 €/night | 10–12 % |
| Four-star | 150,000 – 250,000 € | 30 – 45 m² | 4,500 – 7,000 € | 65 – 75 % | 140 – 250 €/night | 10–15 % |
| Five-star and luxury | 280,000 – 600,000 € | 45 – 100 m², suites | 5,500 – 12,000 € | 60 – 70 % | 350 – 800 €+/night | 12–18 % |
| Boutique hotel | 120,000 – 220,000 € | 28 – 45 m² | 4,000 – 6,500 € | 65 – 75 % | 120 – 300 €/night | 12–15 % |
| Aparthotel | 90,000 – 150,000 € | 35 – 55 m² | 2,500 – 4,000 € | 70 – 80 % | 80 – 150 €/night | 8–12 % |
These are French market references and vary widely with location, from the Paris central business district through the major cities to medium towns. Apply the regional factor from the pillar article.
3. How the budget splits by functional zone
What separates a three-star from a five-star economically is not simply more luxurious room finishes. It is above all the proportion of common areas, lobby, restaurant, spa, conference rooms, which concentrate most of the premium in high-end establishments.
| Functional zone | Share of total area | Share of budget, 3-star | Share of budget, 5-star | What explains the difference |
|---|---|---|---|---|
| Rooms and bathrooms | 55 – 65 % | 40 – 50 % | 30 – 40 % | A greater proportion of common area in a five-star |
| Lobby and reception | 3 – 6 % | 6 – 10 % | 10 – 18 % | Fine materials, ceiling height, artwork |
| Restaurant and bar | 5 – 10 % | 10 – 15 % | 12 – 18 % | Professional kitchen, equipment, signature design |
| Spa, pool, fitness | 0 – 8 % | 0 – 8 % | 8 – 15 % | An indoor pool costs 800 k€ to 3 M€ according to size |
| Conference and meeting rooms | 3 – 8 % | 5 – 8 % | 4 – 8 % | Acoustics, audiovisual equipment, demountable furniture |
| Back of house: kitchen, laundry, plant | 10 – 15 % | 12 – 16 % | 10 – 14 % | Heavy professional kitchen, complex service areas |
| Parking | Variable | 8 – 15 % | 10 – 18 % | Basement parking frequent in city centres |
| Circulation | 8 – 12 % | 8 – 12 % | 8 – 12 % | Proportional, little differentiation between categories |
The table reveals a structuring reality: rooms represent 55 to 65 % of a hotel's total area but only 40 to 50 % of the budget in a three-star and 30 to 40 % in a five-star. The common areas consume a rising share as the category climbs. That concentration of budget on the spaces that carry the brand explains the jump in cost between four and five stars.
4. The effect of special facilities
The presence or absence of special facilities, pool, spa, fine-dining restaurant, ballroom, is the most decisive parameter for cost differences within a single category. Two 100-room four-star hotels can cost 150,000 € and 250,000 € a room according to the list of facilities, a difference of 10 million euros on the total budget.
| Special facility | Indicative cost excl. VAT | Effect per room, 100 rooms | Recoverable through revenue? |
|---|---|---|---|
| Indoor pool, 25 m | 1,200,000 – 2,500,000 € | + 12,000 – 25,000 €/room | Partly; a strong differentiator but expensive to run |
| Full spa, five treatment rooms or more | 600,000 – 1,500,000 € | + 6,000 – 15,000 €/room | Yes; revenue per room rises 15 to 25 % in the upper segments |
| Fine-dining restaurant | 800,000 – 2,000,000 € | + 8,000 – 20,000 €/room | Partly; strong prestige, but often loss-making in operation |
| Helipad | 300,000 – 800,000 € | + 3,000 – 8,000 €/room | No; pure luxury positioning |
| Ballroom or grand salon | 400,000 – 1,200,000 € | + 4,000 – 12,000 €/room | Yes; conference and events business is highly profitable |
| Wine cellar or cocktail bar | 150,000 – 400,000 € | + 1,500 – 4,000 €/room | Yes; a high-margin food and beverage differentiator |
| Basement parking, 50 spaces | 1,400,000 – 2,000,000 € | + 14,000 – 20,000 €/room | Partly; in city centres, essential for business guests |
The indoor pool: the most expensive facility to operate
A hotel indoor pool represents 1.2 to 2.5 M€ of construction cost, on top of which come 80,000 to 180,000 € a year of operating costs: heating, water treatment, staff. Over 20 years the total often exceeds the initial construction cost.
For a 100-room four-star, the pool represents an annual charge of 800 to 1,800 € a room, that is 3 to 7 € a night of additional operating cost, often hard to pass on fully in the rates.
The economist and the hotel consultant should assess together whether the pool suits the positioning and the local market before it enters the brief.
5. New build against hotel renovation
Renovation ratios per room
Hotel renovation follows the same per-room logic. The bands vary with the level of intervention and the target category.
- Refresh, paint, beds, furniture: 8,000 – 20,000 € a room; the category is maintained and the life of the asset extended.
- Intermediate renovation, bathrooms, finishes, equipment: 20,000 – 50,000 € a room; a partial upgrade or a return to category standard.
- Heavy renovation, spaces redistributed, all services replaced: 50,000 – 120,000 € a room; often tied to a change of positioning or franchise.
- Total transformation, change of category, common areas rebuilt: 100,000 – 300,000 € a room; equivalent to new build with the constraints of the existing.
The renovation cycle
A well-run hotel follows a structured cycle: a refresh every five to seven years, an intermediate renovation every 10 to 12, a heavy renovation every 20 to 25. Those cycles are written into franchise agreements as brand standards and into operators' management leases. The economist intervenes at each cycle to confirm the budget and prioritise the work around operating constraints, closing wing by wing, working in an occupied hotel.
6. Operating supplies and equipment: the forgotten budget
Operating supplies and equipment covers everything not in the construction budget: bed and bath linen, crockery, glassware, mobile kitchen equipment, room and restaurant furniture, front-desk IT, staff uniforms.
This budget is systematically under-estimated in early feasibility studies. The reference bands are 8,000 to 15,000 € a room for a standard three-star, and 20,000 to 50,000 € a room for a five-star. On a 100-room hotel that is an additional capital cost of 800,000 to 5,000,000 €, outside the construction budget.
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In summary
Hotel construction costs run from 55,000 € a room for a budget establishment to more than 600,000 € a room for a luxury property. Reasoning per room, and setting that against the target revenue per available room, is the fundamental economic test before any investment decision. Common areas, lobby, restaurant, spa, take a rising share of the budget as the category climbs, up to 60 % of the total in a five-star. Special facilities create the largest differences within a category; their relevance must be confirmed by an operating analysis before they enter the brief. Operating supplies and equipment, at 8,000 to 50,000 € a room, is the item most regularly forgotten in opening budgets.
Reference basis of the figures
These bands are orders of magnitude for framing, and their reference market is the Paris region. They serve to place a budget at the earliest stages and to compare building types with one another. They replace neither a tender exercise nor an estimate prepared on drawings, and they are not a record of prices actually charged.
The figures on this page are stated in January 2024 values and have not been recalculated: the table mixes construction costs with revenue indicators, on which a building cost index has no meaning. In addition, the weight of fit-out in a hotel programme makes the all-trades index a poor fit.
To bring them forward, apply the usual revision formula: updated value = page value × (BT01 for the month in question / 130.8). The BT01 all-trades index, published monthly by INSEE on its 2010 base, stood at 130.8 in January 2024 and 134.7 in January 2026, a rise of about 3 %.
BT01 measures contractors' input costs, wages and social charges, materials, plant and energy, not the prices actually tendered.
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Sources: the BT construction cost indices published monthly by INSEE on its 2010 base, used to update the figures · construction cost statistics from SDES, the statistical service of the ministry responsible for construction · regulatory texts published in the Journal officiel and consolidated on Légifrance for the requirements cited.