There are lots of ways you can own the real estate and business in a bed and breakfast venture. Your job is to balance the liability protection and maximize cash flow and tax benefits. I once had a client who started his business as a sole proprietor but decided to take advantage of tax benefits by forming another entity to own the business; his tax accountant/bookkeeper urged him to not make any changes because it would cost more for him to do his taxes each year. The little extra it costs to have more complex tax reports prepared is well worth the benefits you get by taking a form of ownership other than sole proprietor.
Do you homework, work with professionals and act on forming a business entity for your bed and breakfast business.
]]>This gives you an average room rate. Adjust up and down for each room, accommodating the variations in rooms and guest experiences to determine each room's rate. This calculation does not provide for a profit, but time should take care of that. As you build your business you will continue to raise your rates. Your first goal is to get people into your beds and build occupancy, then you will naturally develop profit -- if you are satisfying guests' needs. Remember that money is like energy flowing through your B&B inn. The more people, the more energy, the more money, the more success.
Caveat: Keep your room rates low initially so you can build your occupancy and reputation. As your occupancy rises you can raise room rates. Earn the “right” to raise your rates.
To figure what the average room rate is, add all the room rates and divide by the number of guest rooms.
This approach does not take into account room preferences -- which rooms rent more or less often than others -- but does give you a value to work with for your projections. Typically your reality will be better because the more expensive, deluxe rooms rent more often than your basic rooms. But until you have been open awhile you can't anticipate that. For example:Speaking of the lodging industry, there are various terms and philosophies I don't urge you adopt. I am going to mention one other briefly so you at least have an awareness of other ways of doing business -- ways your guests are familiar with and may expect from you. Hotels/motels promote their rooms at their "Rack Rate". But the rates do go up and down from there, based on the season, time of day (travelers can get a better rate later at night than earlier in the day), etc. The problem I see for B&B innkeepers with that approach is B&B guests do talk to each other, unlike most hotel/motel guests. Stop to think about how the guest who planned ahead and paid full price will feel when they learn a guest who didn't plan ahead got a discounted rate. Can you afford to alienate your guests that way? I think not.
As you start your income projections, you have to anticipate the occupancy rate, unless you are buying a going concern and can trust their income numbers. But even then, it would be an interesting exercise to test their stated income.
I believe in anticipating your income low. It's better to be pleasantly surprised than unpleasantly surprised should the income not meet your needs. If you can learn your community's average occupancy rate, anticipate half of that for your first year. If you are buying a going concern, anticipate a minor drop in the occupancy to be conservative.
OR...
Use 25 percent (if you are in a remote area, 1020 percent is more realistic) as your occupancy rate for a new inn.
In either case plan to grow 10 points (from 35 percent to 45 percent) annually for the first two years. Strive to get to 55 percent occupancy as soon as you can. If you can maintain that growth pattern longer by all means do. Obviously you can't keep that pace forever.
Monthly Income
Multiply the average room rate by the number of rooms by the days per month and multiply that by the occupancy rate. For example:
Your average room rate is $118 so for February you would earn, such as:
$118 x 7 rooms x 28 days x 25% = $5,782
Note: Sales tax (from room rental, gift shop, etc.) is not an income item!
Annual Income
Multiply the average room rate by the number of days per year you'll be open and multiply that by the occupancy rate.
$118 x 365 days x 25% = $107,675
You now have tools to help you project your B&B income. The cash flow analysis is starting to take shape for you. The cash flow of the inn is important, but don't let it take all of your focus and energy. You have so many decisions to make about the viability of innkeeping for you as a career and lifestyle.
The ebook Show Me The Money! Great Expectations has more details on the various money aspects of owning and running a bed and breakfast inn. ]]>
Architect Christopher Alexander wrote a marvelous book about his theories of design. He addresses making people comfortable starting from when they enter town all the way to where they enter your building. He addresses what characteristics make people feel welcome, "at home". Here is a bit of what he says about buildings, as I see his words relating to the B&B industry.
A person who stays the night in a strange place is still a member of the human community, and still needs company. At all times, the inn was a wonderful place, where strangers met for a night, to eat, and drink, play cards, tell stories, and experience extraordinary adventures. There is a deep need for company. It is the business of an inn to create an atmosphere where people can experience and satisfy this need. Make the inn a place where travelers can take rooms for the night, but where -- unlike most hotels and motels -- the inn draws all its energy from the community of travelers that are there any given evening. The scale is small -- 30 or 40 guests to an inn; meals are offered communally; there is even a large space ringed around with beds in alcoves.
—Christopher Alexander in Pattern Language
The guest/Innkeeper dynamics are a give and take. You, as the innkeeper, must "receive" to balance your "give". Refuel your energy and soul to maintain your ability to give freely; "receiving" is one of the ways to accomplish that. You may find this another challenge and another part of your "balancing act". Maintaining this balance helps minimize your frustrations and burn out and encourages enjoyment of the haven you have created for the traveler -- your guest. Innkeeping success includes taking care of yourself.
Defining B&Bs
In typical "Yankee" fashion Americans have taken the British bed and breakfast concept and grown it into a widely diversified industry. You'll find every conceivable style of inn varying in size, architecture, business style, attitude, culture, cost, and location. There are bed and breakfasts that range from Manhattan apartments, Kansas farm houses and urban mansions, to boats (ocean, lake and river) and trains. I have seen churches, brothels, schools, jails, and firehouses used for B&Bs. House styles include Victorian and modern, log and adobe, and beehive. Bed and breakfasts have been found underground and underwater, as well as in trees. In addition to different styles of structure there are different styles of environment ranging from casual to elegant, eclectic to period furnishings, garage-sale to designer decor, shared baths to luxury private baths, and low to high touch. All of these characteristics influence the B&B classifications.With this diversity you also find innkeepers and their associations defining establishments in different ways. Here are the best terminology and definitions I can offer, taken from a variety of resources. The classifications I see in various publications include host homes, B&Bs, B&B inns, inns, country inns, and boutique hotels; my classifications are simpler than most I see. These definitions are to serve as guidelines. I feel that service level and professionalism affect your classification more than anything.
* Bed and Breakfast Home/Home Stay
Typically B&Bs found in this group are less expensive than larger, more commercial lodgings, but not always and rarely as inexpensive as their counterparts in the United Kingdom or Europe (known by different names like zimmer frei and pension, for example).
* Bed and Breakfast Inn
This is a broad category of operation styles. There are so many possible names or descriptors for these properties that at times Bed and Breakfast Inn feels inadequate. To me, B&B Inn is another way of saying Special Place To Stay.
* Country Inn
Most of the country inns I know of are on the east coast, though by no means is that a criteria. Country inns are generally located in remote areas where there aren't good restaurants within easy driving distance for the guests so the inn attends to the guests' food needs. It’s rare to find a country inn located in an urban area because of the competition with restaurants.
As you can see there is no one way for a bed and breakfast to look or feel. The inn you decide on should be a reflection of who you are and what hospitality you will offer. The guest experience will be enhanced by the building you use and the style you create in it. The B&B business model is a way for you to think about how to create the best business you can, which include creating the most welcome for your guests.
This article is excerpted from the ebook Building a Good Foundation So You Don't Find Yourself in A Hole. This ebook is a valuable basic in your B&B education.
]]>I am testing the waters to see if there are any aspiring Innkeepers looking for a B&B on The Big Island of Hawaii.
I'm also interested in talking to brokers who work in Hawaii.
Please check out my web site:
www.TaraFirmaInn-Volcano.com
Thanks,
Kate Bell
Owner
Given this transition phase, a strong brand matters. It gives you the competitive edge that will make the difference between surviving and flourishing. A B&B's brand is an intangible asset, but it provides tangible business that adds to the inn’s value. The B&B's marketing, business, and hospitality activities must be consistent with the established brand to improve that edge and value. Consistency is critical to your success.
Once the brand has been established, the message needs to be conveyed to prospective guests. A clear message will be heard above the noise of other B&B properties clamoring for attention. Strong branding helps differentiate between B&Bs to help guests choose the experience that is right for them, above and beyond price. A strong brand image with clear values and attributes will help foster new and developing guest relationships. Brands matter in developing the inn’s business because they:
Given the importance of brands, it's important to develop the "right" brand and strategy to ensure your success.
Weave the brand throughout the business -- it is your statement of who you are. When the brand is an integral aspect of the business strategy, the consistency in everything you do creates a complete guest experience. The experience includes such items as your business rules and policies, your hospitality style, your attire, the logo and where it's used, the ambiance in the inn, and the location as it relates to the brand. Weaving the brand through the business is only part of your challenge.
Another part is effectively communicating that brand promise to your guests. Your marketing must accurately reflect reality; your food and furnishings must be in line with the promise, and the hospitality and atmosphere are reflections of the brand. The brand is as effective as the weakest link in the business. Guest expectations are cultivated by your promise and their experience. Don’t disappoint them. Keep your brand strong.
To maintain consistency your need is to implement controls to insure that the brand promise is delivered in all aspects of the guest experience. If you promise, for example, speed and efficiency, and then don't have the staff to implement a quick check-in/-out, the guest's perception will be you haven't lived up to your promise and your brand reputation starts to crumble. If you promise elegance but don't have a dress code that bans sweat suits for staff, you've undermined your brand promise. Focus on weaving the brand throughout the business so that you deliver what the guest has been promised and expects. Choose the right brand so it's easy for you to deliver the promise and thus be successful.
There's one more terrific advantage to having a strong brand: not only does it help the business, but the clarity of purpose helps to increase your personal satisfaction with running your inn.
Read about other marketing ideas and tips in the ebook Marketing Standing Out From the Competition, where this article was excerpted from.
]]>Expenses include fixed and variable costs. Fixed expenses are those which don't change, regardless of occupancy. Variable expenses are those affected by occupancy or by the season. There will be a sample budget breakout later in the book.
To help you budget your expenses start with the suggested percentages I provide in the Money ebook, covered in the chapter called Projecting Expenses. You can also find a good discussion of this in So...You Want To Be An Innkeeper by Mary E. Davies et al. The PAII Industry Survey (found in the reading lis along with So...), conducted bi-annually, has a wealth of information you can use to fine tune your budget (and other operating decisions). Based on the homework I did for a four-room inn, my innkeeping experience, and the above sources, I apply rule-of-thumb percentages to my gross room income to help budget expenses. One difference between my projections and those offered by others is that I project two savings accounts for B&B improvements and expansion.
Financials can be available from the seller and those numbers will help your analysis. Don't let those numbers deter you from doing your own projections, though. Create your own cash flow projections and then compare those to the numbers the seller provides. That process will raise questions that you will want to research for clarification and answers. You'll have questions like why is the seller spending $X rather than $X+2 or $X-1; why don't you have category "Y"; why do you have category "Z". Just as you will have your own way of looking at your budget, so does the seller. This is a great learning opportunity, so take it and use it well.
Understand that these numbers can vary from one situation to another. They can vary depending on your part of the country, how you approach renovation, the number of employees you hire, the meals you serve, the form of ownership you choose, your creativity with advertising, etc. Do Your Homework! Don't take these numbers as gospel. They are guidelines to help you anticipate expenses until you have real numbers to plug into your scenario. They can also be used to analyze the business of an operating inn to see how well the business is run.
Rooms are your primary profit center. The restaurant, bar, gift shop -- other profit centers -- make money but are secondary profit centers. The restaurant and bar have great cash flow but also great expense; that cash flow can fool you, trick you into thinking it's your primary profit center. Look at more than just the gross income, look at the bottom line, taking into account all of the expenses, to help you see where your primary profit center truly is.
Is the cash flow of the property you are considering strong? Can it be improved or is it as good as it's going to be for a period of time? Does it reflect a good, steady energy flow or is it weak and sporadic? There may not be a right or wrong answer here, but you have to look and decide if it works for you and your situation. Look beyond the surface answer of what the cash flow is and see whether it represents opportunity or not.
]]>I did experience a short spell of resentment by the staff toward the checklists. One or two employees thought the checklists were demeaning, or insulting their intelligence. There was enough conversation about them that I took them down, with the promise from the employees they'd be able to do their jobs as well. After a few days of not using the checklists, they were begging to have them back; they found too many little tasks were being forgotten. I know I valued having them for the days I was pinch hitting.
Since this is how I ran my inn the tasks reflect my style. You'll have your own style, so the operation and subsequent descriptions will be different. But do use these descriptions and checklists as a template for your own shift descriptions.
My approach to shifts was to have distinct hours and tasks, but everyone was cross-trained so they could fill in on any shift. I strived to have each employee, once they were satisfactorily trained, work a minimum of two shifts per week of a given job so they could stay "tuned" for the shift.
Another innkeeper I know used foreign women who didn't speak much English for her housekeepers. Her approach kept the jobs separate so that assistant innkeepers weren't trained for housekeeping and housekeepers weren't trained for innkeeping. The biggest problem I see with this approach is that you can struggle with getting hours filled when an employee trained for one shift isn't available; others may be available, but not trained. Another problem with non-English speakers working at your inn as that they may not be able to interact with guests to provide service; providing service should be the primary purpose of B&B innkeepers and their staff.
And yet another innkeeper's approach was to have overlapping shifts so that each shift had back-up. That was helpful during the high season when the B&B was very busy and hard to get the work done before check-in. It was also helpful during the slow season when deep cleaning was done and two people were needed to move furniture and tackle the job. The way their shifts work is:
Whatever approach you take to covering your innkeeping day, be sure that you and your partner have clearly defined areas of responsibility so that you avoid interfering with each other. Some innkeepers I know don't have that separation of responsibility. One will direct an employee to do their tasks in a certain order and in a specific way. The other will come along and change the order and way of doing the work. The employees are confused and their work is less efficient; creating frustration and anger; the owners have lost some employee respect. You can avoid that by knowing who has what responsibility and only upon invitation can the other offer suggestions or comments. An organizational chart will help you determine who will report to which partner.
As innkeeper, you oversee all the operations and tasks. You verify the work done by the various employees, interact with guests, work the marketing plan, and manage vendor interactions -- like the laundry company, supply ordering, and maintenance contracts. Since you know the inn better than anyone, your main task is to answer the phone. Taking reservations and answering questions about the inn, the guest experience, and the area.
Your biggest job is Public Relations Director. Everything you do is to ensure that the guest experience is top notch and better than anticipated. Making your present guests happy will not only bring them back but also have them tell their friends, family, and work associates about the great B&B they adore going to. Since some people don’t return to the same B&B twice -- that's the way they are because they like new experiences so go to different areas or different B&B inns -- you have to also work at bringing new guests into the inn. The way you talk on the phone, how you interact with guests, the level of service and cleanliness, and the little gestures you make to your guests all go toward the guest experience. Providing a great guest experience is the most successful marketing tool you have.
The use of checklists throughout the inn will make the inn run more smoothly so you can create an experience for your guests that will bring them back and have them tell others about what a great inn you have. Checklists create the consistency your guests will expect and rely on. Checklists are a valuable tool to help make your inn operation a strong one.
My name is Mike and my wife Judy and I are avid motorcyclists touring all over the US. We are developing a website about motorcycle touring and wish to put together a page about B&B's since B&B's are where we like to stay while riding. If you have a B&B and cater to motorcyclists please stop by our site. If you like what you see and wish to be included on our future page about B&B's please contact us through our contact page.
Thanks again and keep up the good work, we love all the great places, food and hospitality that B&B's offer.
Mike DeGeiso
Motorcycle Touring Made Easy
Now is when you also start your market analysis. No matter how well you conduct your market research or how imaginatively you implement your research, you aren't in business until you have a customer. Answering these questions not only will mesh with your market research but also will help you develop your marketing strategies, staff policies, and house rules. You influence who your guests are by decisions you make on inn location, decoration, house rules you establish, and how you visualize your inn. These elements help you narrow your scope of whose needs you want to satisfy. You can't be everything to everyone, so don't try. Be the best you can be in your niche. Here are some areas to contemplate to help you define who your guests will be.
Other educational steps include staying in B&Bs, working at a B&B, taking miscellaneous courses (bookkeeping, business, cooking, B&B) as well as B&B seminars, attending a variety of B&B conventions, and reading as many B&B "How To" books as you can. Get involved in determining if the lifestyle is for you. Delve into the finances to make sure you will earn what you want and need. This is a more complex business than it appears on the surface because it is a job and a lifestyle.
I've talked about asking questions, and now I've covered how to get your answers. Dig deep. Look far and wide for answers. Soul search. Then decide, again and again. It's a great business. But it's not for everyone. Make sure you are one this business is good for.
]]>As you may be starting to see, running a bed and breakfast is a bit more complex than running a household. Learn as much as you can so the business you create is successful, safe and hospitable. Don't let surprises impact your B&B business. Do your homework and research these various topics to create a sound business foundation.
]]>Let's look at these elements individually.
You will find that business is a flow, an exchange, a transformation of energy. It creates new energy options. Money is the barometer of that energy. Good business is selling your inn for more than you bought it for because you added value to it. Good business is turning your operation into a profitable concern.
There are contradictory ideas of how long a business plan should be; I’ve heard everything from 10 pages to "however many pages it takes". My feeling is if you can't concisely state your plan you haven't thought it through sufficiently. Strive for a ten page plan, plus supporting documents, as an ideal length for your plan. You'll be amazed at the thought and effort required to hone your ideas that much.
Later a different concept came about during one of my seminars while I was discussing this topic -- the "Ideal Innkeeping Structure". An attendee felt that the problem with the rectangle as the innkeeping organizational structure was that the guest and the boss (or innkeeper) didn't touch or interact. Hence the circle -- or sphere -- was born as the new ideal innkeeping organizational structure.
The innkeeping structure acknowledges that everyone is an equal part of the inn experience -- your staff, your guests, and you the innkeeper. You set the stage for the experience and then everyone that enters the inn brings their own energy off of which everyone plays. This approach may help innkeepers avoid burnout. You can't be responsible for everyone's experience -- though you definitely should maintain some control. All players have responsibility for the success of the experience. This is a very important dynamic of giving. Maybe you can also think of yourself as the "inngiver".
Let's look at two definitions to help you further decide what your style will be.
These are only about half of the questions found in the ebook, but you get the idea of the kinds of soul searching you need to before getting into this business. Everyone involved in your bed and breakfast plans needs to go through this exercise to make sure it works for them.
Once you have processed this information, prioritize the results to you can decide if the problem is a deal killer or can be managed somehow. If it can be managed, is the help within the team looking at the B&B industry or will you have to hire from outside the team?
As long as you can afford the outside help there's no problem in planning to fill the gaps of what you can't do or don't want to do with employees. Do be aware though that there are times that even with staff you will have to do all of the tasks, whether you like them or not. Factor that into you thinking and follow your wisdom.
Have you asked enough questions and searched your soul enough to determine if B&B innkeeping is for you?
Your B&B plan should start with a vivid dream —- involve all of your senses: hearing, sight, smell, taste, touch, and even your "sixth sense". You should be able to close your eyes and "be there" to experience what your guests will experience. Creating that vivid dream will help you convert your dream into reality. This is the first part of that conversion.
As you learn more about your entrepreneurial characteristics you should also be getting a handle on your personality style. These insights help you see what your market niche is, and this is the time to start developing and fine-tuning that market niche. Your market niche will be your key to success so make it specific and narrow. Determine what your primary business purpose is (service, making money, R&R, special events, ...) and keep that at the forefront of your mind and planning.
The Boulder (Colorado) Pearl Street Mall, is one of the most successful pedestrian malls in the country. Between 1976, when the mall opened, and 1989, when I heard these statistics, rents on the mall rose from $.25/square foot to $25/square foot. Occupancy was at 98% on the first level. Those numbers seem to be holding today too. Why is the mall so successful? Because the merchants determined before the mall was built that their primary concern and purpose was safety and comfort. They wanted people of all walks of life to be comfortable rubbing elbows and being together. Their secondary purpose was merchandising. If customers aren't comfortable and don't feel safe they won't shop with you. As Boulder's Pearl Street Mall is successful because it determined its primary purpose —- and kept it in the forefront of their minds —- so you'll be successful if you understand your primary purpose, which should compliment your market niche.
Prepare. Think of your B&B as a play. Your guests are the equivalent of your audience. They have come to see your "play" and enjoy the experience you have described on your website, in your brochure and over the phone. You, the innkeeper, and staff are the actors. You have written a script that has been rehearsed and perfected. The inn's guestrooms and common areas are the stage. Prepare the scenery and props with care and attention to detail, to support the guest experience you want to offer. The kitchen, office, and laundry areas are the backstage. This is the space you use for "letting your hair down", for discussing how the audience is responding to your play, or for taking a refreshing breath before plunging back into the play at hand. The better the rehearsal and planning the more effortless the play —- your work -— appears and the better the guest experience is.
When your guests comment on how easy innkeeping looks you know you’ve prepared and rehearsed well. Congratulations! Keep up the good work. Make sure your scenery and props are maintained so the magic and shine don't come off and alter your audience's -— guests' -— experience.
Just as different plays have reputations that attract different kinds of people, so do bed and breakfasts. The more completely interwoven your niche, or brand, is through your B&B concept and execution, the more consistent the message is that will attract guests who will love what you have created.
Let me bring this analogy back to the bed and breakfast brand, or market niche, as it applies to your entrepreneur characteristics. You went through a process to learn your strengths and weaknesses. One way to apply that knowledge is to define your B&B market niche to reflect who you are and what experience you want to give your guests. Defining your niche and guest experience is another process, one you need to slog through for utmost business success.
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