How to Start a Bed and Breakfast

ON THIS PAGE

• How to Start a Bed and Breakfast
• How Big is the Bed and Breakfast Industry?
• What External Factors affect the Bed and Breakfast Industry?
• What are the Key Customer Segments in the Bed and Breakfast Industry?
• What are the Key Costs in the Bed and Breakfast Industry?
• What are the Keys to Launching a Bed and Breakfast?
• What are the Typical Startup Costs for a New Bed and Breakfast?
• Helpful Videos
• Additional resources in the Bed and Breakfast Industry

How to Start a Bed and Breakfast

If you’re looking to start a bed and breakfast business, you’ve come to the right place. Since we’re going to show you exactly how to do it.

We’ll start with key bed and breakfast industry fundamentals like how big the market is, what the key segments are, and how revenues and profits are generated.

Then we’ll discuss keys to not only starting a bed and breakfast business, but succeeding in it!

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How Big is the Bed and Breakfast Industry?

According to IBISWorld, there are just over 7,300 Bed and Breakfast and Hostel Accommodations businesses in the U.S. Together, these businesses generated $2.9 billion in revenue last year. This represents an annual growth rate of 1.9% over the past 5 years.

What External Factors Affect the Bed and Breakfast Industry?

A number of factors affect the performance of the bed and breakfast industry. These drivers include:

Consumer spending: Consumer spending has a major effect on travel demand. When consumer spending is high, Americans are more likely to travel and seek overnight accommodation. Conversely, spending on overnight accommodation is reduced sharply when consumers are forced to cut back.

Domestic trips by US residents: Domestic tourism is vital to the B&B and Hostel industry. During the recession, Americans did not travel as much. However, with the improving economy and rising incomes, Americans are expected to spend more on leisure activities, including travel.

Consumer Confidence Index: When consumers are feeling optimistic about their current and future financial prospects, they are more likely to take a trip that involves hostel or bed and breakfast accommodations.

Consumer sentiment has increased in the recent years; however, given its sensitivity to changes in financial markets, it still poses a potential threat for the industry.

Inbound trips by non-US residents: The recovery the world’s major economic powers, and the growth of emerging economies has been a catalyst for tourism to the US. Younger international travelers typically frequent hostels, whereas older international travelers are more likely to stay in bed and breakfasts.

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What are the key customer segments in the bed and breakfast industry?

The key customer segments in the bed and breakfast industry are as follows (with the percentage of revenue they generate in parentheses):

• Vacation travelers: 58.2%
• Family travelers: 21.8%
• Business travelers: 12.0%
• Other- 8.0%

What are the Key Costs in the Bed and Breakfast Industry?

There is some variability between the cost structures of industry establishments, with the profit margins of hostel chains generally benefiting from economies of scale. The industry is highly fragmented and made up of many small enterprises.

Purchases: Purchases in this industry consist of bedding, towels, cleaning supplies, and food and beverages.

Wages: The industry is fairly labor-intensive, and requires customer service, cleaning staff, maintenance staff, marketers, and kitchen staff. Though many of these duties are performed by owner-operators, and therefore are not attributed to wage cost, fully 18.0% of industry revenue goes toward wages.

Rent and Utilities: Rent and utility costs are high in this industry, and account for 11.3% of revenue.

Depreciation: Depreciation is another significant cost for industry operators, accounting for an estimated 8.9% of revenue.

Other: Other expenses include general administrative costs, commission to travel agents and booking websites, marketing, insurance and security, among others.

What are the Keys to Launching a Bed and Breakfast?

1. Suitable location – many B&Bs have some historical connection or have unusual architecture. Is your home interesting? Or does the building you’re purchasing have a history?

2. Determine whether you have what it takes to run a B&B – Since Breakfast is part of the industry name, it follows that you need to be able tocook breakfast – and hopefully enjoy the task – or hire someone to do the cooking. In addition, ask yourself if you are willing to be on call at all times, providing customer service and keeping the inn tidy?

3. Check with the local government about B&B Zoning – It is important that you verify with your municipality if you are zoned for a B&B, then file all the necessary applications for running the business (i.e. – business license, food service/liquor license, etc.).

4. Take an objective look at your property – determine what renovations and decorating needs to be done to make it inviting. Make sure you look at each guest room as a guest would, paying attention to how comfortable you would be sleeping there.

5. Decide on the amenities you will offer – Amenities are an important part of a B&B, and can be the reason a guest books a room or moves on to another property. Do you have en suite bathrooms? Will you offer a wine hour in the evenings or a turndown service?

6. Determine your pricing – there are many variables that can affect pricing, like the size of the rooms, the amenities, type of breakfast, common areas, location, and area attractions.

7. Set house rules – don’t make an exhaustive list of rules, but pick out a few important ones that will ensure your guests’ safety and make the stay a positive experience.

What are the Typical Startup Costs for a New Bed and Breakfast?

Initial (Startup) Costs:

• Furnishings and Renovations
• Mattresses and Bed Linens
• Smoke Detectors
• Signs
• Legal Fees, Permits, Licenses
• Promotion and Advertising
• Business Supplies (computer, fax machine, etc.)
• Kitchen Equipment

Ongoing costs:

• Mortgage
• Taxes and Insurance
• Utilities
• Website hosting fees
• Food
• Cleaning Supplies
• Toiletries

Helpful Videos

HostelManagement.Com: Roadmap to Success

 
I Love Inns – How to run a bed and breakfast inn

 
Innkeepers Marketing Boot Camp: Introduction to Inbound Marketing

 

Additional resources in the bed and breakfast industry

For additional information on the bed and breakfast industry, consider these industry resources:

• Hostelling International USA: www.hiusa.org
• US Census Bureau: www.census.gov
• Professional Association of Innkeepers International: www.innkeeping.org
• American Hotel and Lodging Association: www.ahla.com
• US Bureau of Labor Statistics: www.bls.gov