A bed and breakfast is a small establishment that operates within the lodging industry. It offers guests an opportunity to spend the night in a home-like setting, then a breakfast in the morning. Many of these businesses are private family homes, with most hosts living on the property. Most properties will accommodate guests with a private bedroom and private bathroom, while common areas serve coffee, tea, and serve like a living room or dining room.
What is unique about the bed and breakfast industry is that there are specific differences when comparing business opportunities in the United States with those in other countries. In New Zealand, they tend to be more expensive than a motel and are often located in historic homes. In Romania, they are often located on farms, featuring property-produced items for meal services. In the UK, it is a no-frills option that is cheaper than a hotel.
The custom of opening one’s home to guests is something that has always been part of the American culture. With 17,000 bed and breakfasts located in the U.S., they are found in remote rural areas, large cities, and could be anything from a small cottage to a large mansion.
If you’re thinking about getting involved with this type of business, then here are the pros and cons of owning a bed and breakfast to review.
List of the Pros of Owning a Bed and Breakfast
1. You can build the exact type of business you want to have.
When you own a bed and breakfast, then you get to be in full control of the atmosphere being created. The interior design, room designs, and common areas are all a blank canvas when you first get started. In the United States, the average bed and breakfast can get started with just 4 rooms, while most have 11 or less. Whether you stick with a theme or you decorate based on your own tastes, this business is a chance to mold something around what you already love to do.
2. You get to market your business to core demographics at your comfort level.
A bed and breakfast naturally markets itself to distinctive demographics. Most of your travelers are going to be either on vacation or exploring, which means they’re coming to your business to relax. Only 23% of bed and breakfasts are in urban areas where business travelers may be more common. You can price your rooms at a rate which limits who stays with you even more too, although higher prices mean you’ll need to provide more services and better rooms to make the investment feel worthwhile.
3. You’re creating a business which allows you to work at home.
Almost 4 out of 5 bed and breakfast owners live on their business property. With the average size of this business being 5,700 square feet in the United States, it doesn’t take much work to remodel an existing property to be suitable for guests. Even if you charge the industry average daily rate of $150, the amount of revenue per room each night is above $50. On just 4 rooms, that’s $200 of profit per night, which means you’re earning about $6,000 per month. That’s a comfortable living for doing something that you’re passionate about already.
4. There are minimal initial investments required if you already own the property.
The primary cost that new bed and breakfast owners face when remodeling an existing property is the inclusion of private bathrooms. You’ll need the building permits, health and safety inspections, and some zoning reviews, depending on your community, as well as parking and sign permits. The typical home of proper size can often get everything done for under $100,000.
5. You can’t be fired from your own business.
Most customers are very forgiving. If you make an error (and everyone does) and are willing to admit it right away, then you can come to an understanding with the affected party and still create a positive experience. Even if you irritate someone to the point where they decide to never return, they’re the only ones who are essentially “firing” you. With this being your own business, you answer to yourself. That means you’re not worried about performance reviews, project deadlines, or the other issues of the common workplace. You cook, you clean, and you socialize with your guests a little bit.
6. You can pick your schedule.
If you’re thinking that a bed and breakfast is more of a weekend opportunity than a 7/24/365 type of business, then you can structure your home in a way that allows this to happen. You can open on Friday, Saturday, and Sunday only if that’s what you want to do. Some weeks, you can choose not to open at all if you need a break from the experience. Although you won’t earn any cash per room when you’re not open for business, you gain more control over the circumstances of life. That is why this is an opportunity which is quite popular for many homeowners today.
7. You can list rooms on different sites and platforms.
One of the best places to list rooms from your bed and breakfast is on Airbnb. Even if that seems counterproductive, the company has teamed up with an online reservation system designed specifically for this type of business called ThinkReservations. That takes a lot of the marketing problems out of the picture when you’re trying to promote a higher occupancy rate for your company. Connecting your company to this opportunity is just as easy as signing up for a new Facebook account. Just add your Airbnb credentials to the ThinkReservations website and your essential details are shared across both platforms.
8. You’re in control of the cooking.
Most bed and breakfasts offer limited options for their guests because it takes time to bake or make something special. You’re always in control of the cooking, so that means you are in charge of the menu. Don’t forget to offer vegetarian, vegan, and gluten-free options to help people feel satisfied with their stay. Some people may have food allergies, so ask about what they can or cannot eat before you start baking. You can stick with your comfort zone or experiment – it’s your place.
9. You get to socialize with your guests.
Unlike a hotel, the bed and breakfast is a place where people can choose to socialize with one another if they wish. Although this isn’t a pleasant experienced when social activities are forced upon people, like a specific breakfast time, it can be nice to get to know people as you help them get settled or start the day with a good meal. For those who are extroverts, there is nothing better than a chat with someone new while getting ready for the day. Then you can show people all the local hidden gems that don’t make it onto the tourism brochures.
10. There are special tax rules that may apply.
Most communities require bed and breakfasts (along with hotels, motels, and similar businesses) to charge a lodging tax. In 22 states, there are statewide lodging taxes which apply, going as high as 13% of the room rate for the business. You may be required to charge a sales tax as well. Then you must collect these taxes and remit them to the proper authorities within a specific timeframe to stay in compliance with your permits and licensing.
List of the Cons of Owning a Bed and Breakfast
1. People won’t stay with you unless you offer a proper value promise.
A bed and breakfast works well when travelers believe it is in a perfect location. To fulfill their expectations of what you can provide during a stay, it is helpful to have some basic services available at your property. Water and sewer must be your top priority. If you’re not on municipal services, then you are responsible for the septic system. Many communities will require you to test your well water frequently as well.
Road maintenance is another issue to consider. If your road isn’t plowed when the snow flies, or the gravel turns to mud in the rain, then people may see staying at your bed and breakfast as a risky proposition. Insurance, power access, communication networks, and even your property’s HVAC system must all be evaluated for commercial use instead of private use.
2. Travelers are unwilling to compromise on their own definition of value.
When travelers look to a bed and breakfast as their lodging option of choice, then they have specific requirements which they’re not going to compromise on – no matter how great your property might be.
94% of people want their bed and breakfast choice to offer a private bathroom. 90% say that free breakfast plays a role in their lodging choice. 63% prefer a late arrival check-in, while 60% want free satellite or cable television in their room. In comparison, only 7% say that assistance with luggage is a top priority.
3. Online review sites play a large role in the number of reservations you receive.
If someone has a poor experience at your bed and breakfast, even through no fault of your own, then one negative online review can reduce reservation levels. Star ratings are available on some websites after one review, so if you only had one person leave a comment and it’s a 1-star rating, then your bed and breakfast is a 1-star facility until others leave reviews too. Higher star ratings always equate to a higher conversion rate.
92% of travelers will use a local business over outside competition, such as a hotel chain, if the business has a 4-star rating or higher. Consumers spend more money at businesses with higher ratings too. An increase of 1 star can bump revenues for you by 10%. That’s why you must encourage positive reviews because most people only leave a review if they had a negative experience.
4. Your geographic location will influence your overall success.
If no one travels to your location, then you’re going to have very few guests. That’s fine if you’re only wanting some extra cash every now and then, but not so good if you’re trying to turn your bed and breakfast into a full-time job opportunity. You must also consider the cost of licenses and permits with your company compared to the revenues you’re able to earn. If your business is in Early, IA, the chances of maintaining high capacity rates are much smaller than if your bed and breakfast is located near the Seattle metroplex area.
5. If there’s a problem, it is up to you to solve it.
Because most bed and breakfasts are family-run businesses, it is up to you to fix the problems your guests encounter. Although you can get some help from local contractors for major issues, like the furnace going out, the minor issues must be solved by you. The problems your guests encounter are likely caused by you as well, which means there is no one else to blame. It can be difficult to manage customer service in that situation because your guests know all these facts too.
6. You may not have any income for long periods.
A bed and breakfast is an unpredictable business. Even when everything is humming along as it should be, the industry-wide average occupancy rates every night is below 50%. Using the examples from above on revenue per room, that means you’d average about $100 per night, or $3,000 per month. Those revenues may not be enough to cover your operating costs, which means even if you exceed expectations for your first year in business, you might lose money.
There are ways to manage costs, like using energy-efficient appliances, since 6% of your operational budget comes from the use of utilities. Maintenance and marketing costs must be figured in as well, which can be limited if you do the work yourself. Most bed and breakfast owners discover this business opportunity is not a get-rich-quick scheme.
7. There are financial, personal, and legal liabilities to consider.
When people are in your home, there is no telling what they might do when enjoying their private bedroom. You might walk in there the next morning to find the artwork gone, the windows smashed, and the TV suddenly non-operational. Although you can make yourself whole by pursuing legal means and using insurance, there is a cost consideration to look at here.
You also have the issue of people hurting themselves on your property. If someone slips and falls on your stairs, even with proper signage and non-slip flooring, an unfriendly court system might find you financially responsible for the injuries suffered. If you turn your home into a bed and breakfast, then you’re increasing your liability risks. Period.
8. You’ll get out a lot less when you run a bed and breakfast.
If you love getting out to explore your community on a regular basis, then owning a bed and breakfast is not for you. Most couples and families who own this type of business do their own cooking and cleaning as a way to improve their revenues. That means you’ll be spending more time running your business. That can lead to feelings of loneliness or isolation, especially if you’re operating the bed and breakfast on your own. Those feelings make it difficult sometimes to get motivated in the morning.
9. Your reputation hangs on the breakfasts you serve guests.
As described by Oyster: “Bed and breakfasts are particularly popular with those who appreciate a hearty morning meal, though travelers who aren’t into eating first thing in the morning might be inclined to forego the typical spread of hot dishes and fresh baked goods in favor of a cup of coffee to go.” Compared to the breakfast options at a hotel, there are high expectations of what you’ll offer with this type of business. They will not disappear, even if coffee is the only thing desired. Without a great breakfast, your business could be in trouble before it even opens.
10. Cleaning takes a lot of time out of your day.
Many bed and breakfast owners hire staff to clean the rooms each day because it can become a real chore. You’ll find hair in the tub, shower, sings, and bedding. Garbage doesn’t always make it to the bin. Leftover food and drinks are often left out. Toilets might not be flushed. The odors can be overwhelming when you combined sweaty shoes and dirty clothing. Make-up on the bedding and who-knows-what on the towels are just some of the interesting finds you’ll discover in rooms each day.
11. You can be considerate, but your guests may strike a different tune.
People have no sense of time when contacting a lodging business. They call you late in the night, either wanting a room or to make a reservation. Some people will chat you up for a long time on the phone, then decide to stay somewhere else – even if all that information is on your website. Discounts are often expected because of a AAA membership, their age, or because they live on a fixed income. People arrive early, stay late, then get upset because you don’t offer them full services at the time. You’ll run a gauntlet of issues that can be frustrating to manage.
The pros and cons of owning a bed and breakfast focus more on the experience than the money you can earn. If you love meeting new people and providing them with a safe place to stay, then this business opportunity could be perfect for you. It is a way to turn your home into some extra cash. For owners who want a business which provides an immediate return, this is not the industry to embrace.
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