If i was you i would consider it very careful and start out by targeting a set niche, for example i own a small hosting company which i ONLY target small businesses and we make a focal point of that business the customer service and nearly instant response times to support requests, bigger hosts can not offer that.
So you could offer hosting to dedicated platform , i.e wordpress, joomla , magento etc etc. Or to a particular topic like gaming , business, etc etc etc. The list is endless and also allows you to focus on one marketing vertical rather than the broad term of "hosting" which you are correct there is a huge amount of competition for.
Offer something that sets you apart and gives you hold on the niche market you are targeting.