The temptation of the maximum
If the plot and the bye-laws allow 120 rooms, it feels wasteful to build 70. More rooms seem to mean more revenue. But rooms only earn money when they are sold, and every unsold room still has to be built, financed, furnished, cleaned and maintained.
What happens when supply outruns demand
An oversized hotel fills its extra rooms by cutting rates, which lowers revenue on every room, not just the extra ones. Payroll and energy grow with the building. The result can be a hotel with higher revenue but lower profit, and a much larger loan.
Finding the right number
Start from demand on an ordinary weekday, not the peak of wedding season. Add realistic growth and the likely share your hotel can win against competitors. Then compare the returns of several room counts in the financial model, including the cost of building each. The right number is the one with the best return, not the most rooms.
Using the space differently
Space not used for rooms can sometimes earn more as banqueting, meeting rooms, a better restaurant or simply a smaller, cheaper building. A feasibility study tests these options before the architect fixes the plan.
