Developinga Bed

& BreakfastBusiness

Plan North Central Regional ExtensionPublication 273

Developing a Bed & Breakfast Business Plan

Robert D. EspesethCoordinator, Illinois-Indiana SeaGrant Program Recreation SpecialistUniversity of Illinois CooperativeExtension Service

Robert D. BuchananExtension Specialist, Restaurant,Hotel and Institutional ManagementPurdue University

National Oceanic and Atmospheric Adminis-tration, U.S. Department of Commerce.

This work is a result of research sponsored byNOAA, National Sea Grant College Program,Department of Commerce, under Grant NA89AA-D-SG058. The U.S. Government isauthorized to produce and distribute reprintsfor governmental purposes notwithstandingany copyright notation that may appearhereon.

This publication resulted from the activities ofthe Great Lakes Sea Grant Network, which iscomprised of university-based programs inIllinois-Indiana, Michigan, Minnesota, New

York, Ohio, and Wisconsin.

Editor: Stephanie HearnDesigner: Krista Sunderland

North Central Regional Extension Publications are subject to peer review and prepared as apart of the Cooperative Extension activities of the 13 land-grant universities of the 12 NorthCentral States, in cooperation with the Extension ServiceU.S. Department of Agriculture,Washington, D.C. The following states cooperated in making this publication available.

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Publishing State*Programs and activities of the CooperativeExtension Service are available to all potentialclientele without regard to race, color, sex,national origin, religion, or disability.

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Issued in furtherance of Cooperative Extensionwork, Acts of May 8 and June 30, 1914, incooperation with the U.S. Department ofAgriculture and Cooperative ExtensionServices of Illinois, Indiana, Iowa, Kansas,Michigan, Minnesota, Nebraska, NorthDakota, Ohio, South Dakota, and Wisconsin.DONALD L. UCHTMANN, Director,Cooperative Extension Service, University ofIllinois at Urbana-Champaign.

The Illinois Cooperative Extension Serviceprovides equal opportunities in programs andemployment.

Published in part by the Illinois-Indiana SeaGrant program with funding from the

1 .................................................................. Introduction

5 .................................................................. Step One Consult Professionals with Expertise Related to the Bed and Breakfast Business

7 .................................................................. Step Two Analyze Yourself and Your Family

10 ................................................................ Step Three Develop the B&B Concept

12 ................................................................ Step Four Determine and Research Your Market

15 ................................................................ Step Five Forecast Sales Revenue

17 ................................................................ Step Six Choose a Location and a Building

19 ................................................................ Step Seven Develop a Marketing Plan

27 ................................................................ Step Eight Furnishing Your B&B

29 ................................................................ Step Nine Develop an Organizational and Operational Plan

32 ................................................................ Step Ten Develop a Plan to Meet Laws and Regulations

35 ................................................................ Step Eleven Develop an Insurance Plan

38 ................................................................ Step Twelve Develop a Financial Plan

44 ................................................................ Step Thirteen Complete the Business Plan

47 ................................................................ Appendix A Bed and Breakfast Business References

60 ................................................................ Appendix B List of Important Sources of Information for Prospective Bed and Breakfast Hosts

62 ................................................................ Appendix C A Guide: When a B&B Is Not a B&B

64 ................................................................ Appendix D Determining Personal Goals

66 ................................................................ Appendix E Housing and Family Responsibilities Associated with Owning a Bed and Breakfast Business

67 ................................................................ Appendix F A Sample Bed and Breakfast Concept

69 ................................................................ Appendix G Types of Visitor Attractions

70 ................................................................ Appendix H Marketing Worksheet

74 ................................................................ Appendix I Amenities Checklist

76 ................................................................ Appendix J Bed and Breakfast Guest Studies

78 ................................................................ Appendix K Questions to Answer When Choosing a Location and a Building

80 ................................................................ Appendix L Ideas for Continental Breakfasts

82 ................................................................ Appendix M Which Form of Business Organization Is Best for Me?

84 ................................................................ Appendix N Planning for a Tax Audit

86 ................................................................ Appendix O Example of a Projected Profit and Loss Statement

88 ................................................................ Appendix P B&B Start-Up Costs

90 ................................................................ Appendix Q Sample Chart of Accounts

92 ................................................................ Appendix R Examples of B&B-Related Zoning Ordinances

Contents

Introduction1

Although Bed and Breakfasts have been firmly established in Europe for years, theywere introduced in the United States in the late 1960s. There are now more than20,000 B&Bs, up from about 2,000 in 1979. A sign of a maturing industry is theincreasing average number of rooms per property, increasing occupancy rates, andincreasing number of associations and support services; i.e., national, state, andregional associations setting standards (see Appendix B). There are now professionalnewsletters, travel publications, guidebooks, and vendors catering to small lodges.

The rewards of being a Bed and Breakfast host1 include meeting people, addingincome, gaining independence and an enjoyable way of life, and perhaps, restoring anold building. The business can give you great satisfaction as it grows into a valuableinvestment. As a host, your personality, distinctive and personalized hospitality,standards of excellence, and creative marketing can make a significant difference.

What Is a B&B?2There is a wide variety of B&B accommodations available. In categorizing the

different types of B&Bs, the American Bed and Breakfast Association looks primarilyat the use of the entire building and its relation to the B&B activity that occurs there.The association believes this approach is consistent with the way insurance underwrit-ers, legislators, code enforcers, and regulatory bodies are discussing and dealing withB&B issues. Differentiating between the different types of B&Bs remains one of themost important issues for the B&B industry as more legislation is being written tooversee its growth. The following definitions are used by the American Bed &Breakfast Association in its dealings with all public and private organizations andindividuals:

B&B Homestay: A private, owner-occupied residence in which the frequencyand volume of B&B visitors are incidental to the primary use of the building as aprivate residence. One to five guest rooms are made available to transient visitors andprovide supplemental income for hosts. Breakfast is the only meal served and isincluded in the charge for the room. A review of current B&B zoning laws indicatesthat the majority of B&B Homestays continue to be unregulated or allowed primarilyunder zoning provisions for Customary Home Occupations, subjecting them tooutdoor sign restrictions; health, fire, and building code restrictions; and restrictions onthe number of employees deemed necessary to protect residential neighborhoods fromencroachment by business activities.

B&B Inn: A commercially licensed business operated in a building that primarilyprovides overnight accommodations to the public even though the owner may live onthe premises. Guest rooms for a B&B Inn range from a minimum of four to amaximum of 20, although some believe the range is more like 5 to 25 rooms. Breakfastis the only meal served and is included in the room charge. The business is salable to anew owner, and is subject to all local, state, and federal regulations.

Country Inn: A commercially licensed establishment primarily known for itscuisine that is removed from planned, commercial areas and generally accessible forpatronage only by automobile. Overnight accommodations are available and a full-2

service restaurant provides breakfast and dinner to overnight guests and/or the public.The number of guest rooms usually ranges from a minimum of four to a maximum of20, although a number of Country Inns have more than 20 guest rooms. The business issalable to a new owner, and is subject to all local, state, and federal regulations.

Small or historic hotels are also recognized as a part of Bed and Breakfast accom-modations. They are frequently thought of as establishments with twenty or morerooms that provide the service and privacy of a hotel in the setting of an inn with someindividual attention from a host. The State of Michigan defines their historic hotels as"at least fifty years old and associated with events or persons of significance in contrib-uting to the broad patterns of history. Many embody the distinctive characteristics of atype, period, or method of construction in architecture. Most are located in historicdistricts and all have twenty-one or more rentable rooms. If breakfast is not includedin the room price, it cannot be a true Bed and Breakfast.

Although all prospective B&B hosts should find much of the information in thisbook useful, it is designed primarily for someone planning to operate a B&B inn as afull-time business for profit. Whether you generate a reasonable profit will depend onmany variables. The primary variable will be your monthly overhead and debtpayments and annual number of room nights sold. Other variables will includenumber of rooms, occupancy rate, seasonality of your location, start-up and improve-ment costs, advertising expenses, owner/host wage level, and your own profit goals. Afive-room B&B inn completely free of debt with no hourly wage taken out by theowner, may generate a profit with 20 percent occupancy, while an eight-roomoperation with high monthly debt payments may not turn a profit at 65 percentoccupancy. A 1988 study by The Professional Association of International Innkeepers3

indicated that most B&B inns needed at least five to six rooms to reach the break-evenpoint before debt service and at least six to seven guest rooms to reach the break-evenpoint after debt service. The study also revealed that average B&B owners devotedmore than 74 hours a week to the daily running of a five- to ten-room inn.

The B&B Business PlanThe Business Plan is a comprehensive analysis of the details surrounding the creation orexpansion of a Bed and Breakfast business. It transforms ideas and concepts into aworking operation. It requires you to decide what to do, how to do it, when to do it,the resources needed to do it and how to obtain them, how and when financialrequirements will be met, and what to expect. By completing a business plan, you cantake an objective look at your proposed B&B to identify areas of strength, weakness,and opportunity early; pinpoint needs and problems you might otherwise overlook;and plan how best to achieve your business goals.

The Business Plan will help you determine your goals and organize a strategy tomeet them. The plan will help you evaluate and decide whether or not to open a Bedand Breakfast. The plan will:

u Determine if the B&B is worth your time and money.u Improve the probability of success by avoiding a business venture doomed to fail.u Provide carefully thought-out steps to achieve goals for opening the business.

(People who succeed are the ones who know the most about what they are doing.)u Help you consider alternatives and reduce or eliminate difficulties and mistakes

before they occur.

u Provide an efficient, effective tool to use in communicating with your attorney,accountant, insurance agent, banker, zoning board, partner, and others.

u Serve as a management tool for continuous evaluation and monthly and yearlyrefinement.

The planning process presented in this book is in a series of 13 steps that enableyou to carefully analyze the prospects for success on paper before investing time andmoney in a B&B. The suggested outline is flexible so you can tailor it to your ownneeds. Use the flow chart (Figure 1.) to help guide you through the development of theBusiness Plan. As you can see, some steps should be carried out simultaneously.

-

withExpertiseRelatedto the B&BBusinessp. 5

Conceptp. 10

Your Marketp. 12

Planp. 19

Laws andRegulationsp. 32

and YourFamilyp. 7

Planp. 38

Planp. 44

STEP 6Choose aLocation and aBuildingp. 17

STEP 11Develop anInsurancePlanp. 35

The Business Plan is a fluid, working document and an evolving process. Information gathered during later steps may alter the thinking and conclusions developedduring the early planning stages. A change in one step or segment because of new data,information, contacts, resources, valued opinions, etc., may interrelate with severalother steps and must be integrated into these segments.

When developing a business plan, it is important to keep complete notes witheach step, documenting all facts, backing all assumptions, and giving authority for allopinions.

STEP 1ConsultProfessionals

STEP 3Developthe B&B

STEP 4Determineand Research

STEP 7Develop aMarketing

STEP 10Develop aPlan to Meet

STEP 2AnalyzeYourself

STEP 12Develop aFinancial

STEP 13Completethe Business

STEP 5ForecastSalesRevenuep. 15

STEP 8FurnishingYour B&Bp. 27

STEP 9Develop anOrganizationaland OperationalPlanp. 29

FIGURE 1.Flow Chart3

GoalsAt the conclusion of each step, you need to determine which goals are short range (12months or less), and which require long-range planning (more than one year). Someexamples of long-range goals are: to provide an unforgettable guest visit, to meet strongcompetition, to be market minded, to have an enjoyable livelihood, to provide aneeded service in the community, and to earn the status of a desirable communitymember. Some examples of short-range goals are: to develop an award-winningbrochure by a particular date, to establish a list of approved suppliers by a specific date,and to obtain a 25 percent occupancy by the end of the first year.

Goals and the best way to obtain them need to be established for each of thethirteen steps. For each step you should:

u List the goals of that section in descending order of importance.u List the objectives to be accomplished to achieve the goals.u Layout in precise detail the steps (best ways) to accomplish each goal and objec-

tive. Fix the time and responsibility.u Separate the goals into short-term and long-term lists.

Several creative minds reviewed the original printing of this bulletin and sentcomments, suggestions, and materials that helped shape this final product. We wouldlike to thank the following people for their contributions: Charles Hillestad, real estatelaw and small business specialist at the law firm of Scheid & Horlbech in Denver,Colorado, and owner of the award-winning Queen Anne Inn located in ClementsHistoric District of downtown Denver; Pat Hardy Co-director, Professional Associa-tion of Innkeepers International; and Rollin Cooper, Director, Recreation ResourcesCenter, University of Wisconsin at Madison.4

1The host, or the person who has contact with the guests, is usually the owner of the Bed and Breakfastbusiness. However, the host may also be someone hired by the owner to operate the B&B. In thispublication, the term host is used generally to signify the owner as well.2Appendix C, A Guide: When a B&B is not a B&B by Charles Hillestad, provides definitions of severalrelated categories.3"Bed & Breakfast/Country Inn Industry Survey and Analysis, 1988 The Professional Association ofInternational Innkeepers, Santa Barbara, California.

Step One

daily tasks and a casual way of life, andhaving leisure time during scheduledclosed times.

Some of the disadvantages mayinclude: working hours (14- to 16-hourdays, often doing menial tasks); littleopportunity to delegate; concern aboutprivacy and quality family time;competition with chain hotels andmotels; growing competition from otherB&Bs; possible local resentment towardtourists; and uncontrollable factors suchas weather, road repairs, gasolineavailability and price, taxes, changinglaws and regulations, inflation, interestrates, and increasing governmentintervention.

your decision about whether or not toopen a B&B, consult a specialistanaccountant, a lawyer, a banker, aninsurance agent or broker, or a hospital-ity consultant. The fees of suchprofessionals are high, perhaps morethan $100 per hour, or a fixed fee from$100 to $15,000 depending on yourrequirements. However, their knowl-edge may spare you considerable

u Small Business Administration:Counselors, Workshops, SCORE(Service Corp of Retired Execu-tives), and ACE (Active Corp ofExecutives).

u Small Business Development/NewVenture Centers (Federal & State).

Seek out consultants held in highesteem in the community by small5

hardship. Their judgement is by nomeans flawless, yet they reduce the oddsof making the wrong choice.

You can reduce the gaps in yourknowledge and experience and increaseyour chance of success by relying onother peoples experience. The follow-ing resources will cost you no more than

business owners and the hospitalityindustry. The best sources of names areusually other small business entrepre-neurs who are both experienced andsuccessful. As such, they are in the bestposition to offer honest opinions aboutthe skills, interests, and availability ofconsultants. Examine their work,Depending on yourpersonal situation the following may besome of the advantages to owning andoperating a B&B: being your own boss,integrating family and work responsibil-ity, starting a business in your ownhome with relatively low expenses(otherwise the openings can run veryhighbetween $50 and $150 persquare foot), reducing personal livingcosts, eliminating transportation costsand time to get to work, possibly havingtax advantages, enjoying a variety ofYou can gain insight into theadvantages and disadvantages ofentering the B&B business, and obtainvaluable information by talking withnearby B&B hosts, or even helping tooperate their B&Bs for a few days.Attending apprentice programs, one dayoverview workshops, and two- andthree-day seminars may help you decidewhether to enter the B&B business.1

To help with several majorsegments of your business plan and with

Consult ProfessionalsRelated to the Bed &time and a phone call or travel expensesfor a personal appointment:

u County Extension and Sea GrantOffices, B&B Organizations, andhotel/restaurant or small businessspecialists.

u National, State, regional, or localB&B associations.

u Chamber of Commerce, RegionalPlanning Commissions andCouncils, and other touristorganizations.

with Expertise Breakfast Business

6interview some of their clients, anddiscuss their fees and the scope of theirwork. The experts knowledge needs tobe accompanied by a reasonable matchin personal chemistry.

Goals of Step One:1. Determine the major reasons you

want to own/operate a B&B.2. Determine exactly what you want

Some of the most significant advantages to owning a B&B business are being able to workin your own home and being your own boss.to learn (what you need to know).3. Identify the sources of information

you need to gain insight about theB&B business operation. List indescending order of importance.

4. List what you want to find outfrom each resource.

5. Lay out, in precise detail, the steps(best ways) to accumulate essentialinformation from each resource.

1 Information about apprentice programs may beobtained by writing to: Margaret Lobenstine,Wild Wood Inn, 121 Church Street, Ware,Massachusetts 01082; Carl Glassman, the InnSchool, Wedgewood Inn, 111 West Bridge,Hope, Pennsylvania 18938, Charles Hillestad,2151 Tremont Place, Denver, Colorado 80205,and Pat Hardy, Bed and Breakfast InnkeepersGuild, P.O. Box 96710, Santa Barbara,California 93190. Also check the classifiedadvertisements of Inn Times, Inn Review, CountryInns and Innsider, B&B newsletters such asInnkeeping and Inn Business Review; and thepaperback books about starting a B&B. For moreinformation about workshops and seminars,contact your County Cooperative ExtensionService, American Bed and Breakfast Association,and Professional Association of InnkeepersInternational.

Step Two

their own shortcomings.Be sure to base the pros and cons

of entering the B&B business on yourown, personal goals and philosophy.Take the time to explore your specificgoals and determine whether owningand operating a Bed and Breakfastbusiness would accomplish what youdesire. You should also set personalgoals for two, five, and ten years fromnow. Then decide whether operating aB&B will help you meet those objec-tives. Consult Appendix D, Determin-ing Personal Goals, when you do thisexercise.

To help determine whether youwould enjoy the B&B profession,

ments and tax benefits?u Develop brochures, advertise-

ments, promotional materials, andmedia relations?

u Talk on the phone, take and recordreservations, check customers in,show guests to rooms, andreceive payments for your service?

u Clean bedrooms and bathrooms,, providendscape,enance?

a majority of be well-ion.

times a year?u Go the extra mile to provide an

unforgettable guest visit?u Enjoy a variety of people?u Provide all types of people with a

wonderful and unique experience?u Find a way to talk to someone with

whom you have a conflict withoutalienating that person?

u Plan menus; purchase, prepare, and7

do laundry, make bedsamenities, decorate, laand do building maint

If you answered yes tothese questions, you wouldsuited for the B&B profess

serve food; and follow healthdepartment standards?

u Be your own boss, do what isnecessary to accomplish the joband enjoy a challenge, and workwell under pressure?Evaluating yourself as aB&B host is an important task. Youneed to (1) analyze your strengths andweaknesses, (2) prioritize your short-term and long-term personal andbusiness goals, and (3) carefully examinewhether you have the necessarytechnical and business skills.

Begin by assessing your strengthsand weaknesses. Think about how thesecharacteristics pertain to the B&Bbusiness and be honest with yourselfmost people find it hard to recognizeAnalyze Yourself and Y

carefully complete the following ques-tionnaire:

Would you be able to:u Provide old-fashioned hospitality

and courtesy?u Combine business sense and

business experience with commonsense?

u Wear many hats, and change themoften and quickly?

u Repeat answers enthusiastically tothe same questions hundreds ofour Family

u Work long hours in varied anddemanding situations withfrequent interruptions?

u Organize your time for work,finances, and family?

u Plan, make many decisions, learnfrom experience, and change yourbehavior accordingly?

u Obtain and follow the advice ofexperts?

u Become proficient in bookkeepingand accounting?

u Develop and monitor a budget,and understand financial state-

Hillestad (see Appendix C) addsthese factors:

Next, evaluate your inventory ofskills and interests. Sort out your ownskills and the skills of your partner(s).

atmosphere that your B&B will need todevelop a regular clientele and to securebookings from favorable referrals. ToDetermine how you and your partner(s)will overcome any deficiencies you mayhave in skills that are necessary tooperate a B&B. Decide how importantthese factors are to the success of thebusiness. Keep in mind that an abun-dance of skills in one category will notnecessarily make up for a deficiency inanother. Success is most probable whenyou (and/or your partner) rate high ineach of the categories.

The successful entrepreneur is oftenan overachieverhealthy, energetic,confident, open to reasonable risk,industrious, goal-oriented, accountable,innovative, and technically competent.Being your own boss means meetingcustomer demands, working long hours,providing necessary government reports,and coping with uncontrollableeconomic conditions.

Discussions between groups ofsmall business owners revealed 10common challenges they faced.1

1. Knowing your business 2. Knowing the basics of business

management 3. Having the proper attitude 4. Having adequate capital 5. Managing finances effectively 6. Managing time efficiently 7. Managing people 8. Satisfying customers by providing

high quality 9. Knowing how to compete10. Coping with regulations and

paperwork

In the hospitality industry youmust show your desire to accommodate.Your primary job will be to satisfy yourguests needs. Simply providing a cleanroom and a good breakfast will not beenough to make your guest feel thatyour B&B is special. Only through agenuine interest in customers and acommitment to making their lodgingexperience unique, can you create the8

help you decide whether to enter theB&B business, you may want to consultthe U.S. Small Business Adminis-trations Checklist for Going IntoBusiness, (see Appendix A).

Essentials for survival in smallbusinesses include (1) capitalizing onstrengths and compensating forweaknesses, (2) recognizing problemsand limitations, and (3) building onnatural strengths.

The proper frame of mind, realisticexpectations, and strong personalcommitment to your B&B are at leastas important to success as industryknowledge (accounting and bookkeep-ing, food preparation and sanitation,financial management, marketing,hosting, housekeeping, etc.) Findingsomething that you love, that has thepotential of being successful, somethingthat you passionately enjoy doing, willcontribute much to your success. Thelove of doing it is necessary to with-stand the long hours and pressures ofstarting and managing your B&B. Longhours and a variety of tasks requiregood time management skills. Referringback to the business plan will help youset priorities and ensure that you spendtime most efficiently. The ability toadjust to many variables is paramountto increase revenue, reduce costs, andeffectively serve guests.

Research by Dun and Bradstreetclearly indicates that business failuresresult primarily from incompetence.Following are the reasons for businessfailure (in decreasing order) that applyto B&Bs:

1. Inadequate sales 2. Competitive weakness 3. Heavy operating expenses 4. Poor location 5. Excessive fixed costs and debt 6. Other problems indicating poor

judgmentu Excessive optimismu Inadequate planningu Misuse of timeu Poor marketingu Confusion of business and

personal relationshipu Burn outu Downplaying the need for

experience

Determine How the B&BWill Affect Your FamilyAnother important consideration ishow the B&B will fit into your familylife. You should carefully consider thefeelings and attitudes as well as agesand work styles of each familymember and try to anticipate familytension and personal impact that thebusiness may cause. You and yourfamily should discuss how your timewill be divided between the business,the family, community functions, andleisure activities. It will be importantto establish areas of the house forfamily only, and to define rules forusing the kitchen and the telephone,both of which will be important tothe business.

Also, if family members plan tohelp with the business, you will needto assign responsibilities (see Hous-ing and Family ResponsibilitiesAssociated with Owning a Bed andBreakfast Business, Appendix E),decide how much each member willinteract with guests, and determinehow definite the distinction will bebetween family and business relation-ships. By addressing these types ofconcerns before you open, you will beable to avoid tensions, resentment,and misunderstandings among familymembers later. Also, assess the effectof support or disenchantment offriends and neighbors on yourself,spouse, and children (loss of play-mates, etc.). Remember that friendsand neighbors can cause conflict.

9Establishing areas of the house and grounds for family only and those available for guest useis an important consideration when contemplating opening a B&B.

Goals of Step Two: 1. Determine your strengths (what

you like to do passionately) andhow you will capitalize on theseitems.

2. Determine your weaknesses,limitations, what you absolutely donot like to do, and how you willovercome these factors.

3. Determine how to gain an in-depth knowledge of the B&Bindustry.

4. Determine how to learn the basicsof managing a B&B, such as theprinciples of accounting, hosting,financial management, marketing,housekeeping, food preparation,and planning for the future.

5. Examine your frame of mind,expectations, and personalcommitment.

6. Determine your short-term and

long-term goals (see Appendices Dand E) personal goals family goals family B&B responsibilities goals for friends and neighbors

7. Determine how you will set timepriorities.

1 1989 Dun & Bradstreet.

Step Three

o

tion of ideas that form the foundationof a unique, customer-satisfyingexperience. First, state in a few sentencesthe major features or attractions of eachconcept component. This will help youvisualize your business in relation toyour market segment and yourcompetition. The reader should be ableto experience the B&B and feel as ifhe or she were actually there. Thedescription should appeal to theemotions as well as the senses. Explainthe unique touches that will distinguishyour B&B from others. Describeintangible appeals, like charm, ambi-ence, quaintness, and atmosphere. Give

Explain exactly what businessyou are in and why it will beprofitable and continue to grow.Describe what your business willbe like in five years. Explain yourstandards, appraisal methods ofreaching those standards, andcommitment to quality inhospitality, service, food prepara-tion and sanitation, housekeep-

bedrooms; bathroom featuressuch as number of baths that areprivate and whether they havespecial shower heads, thicktowels, etc.; breakfast areas,menu, method of service, andtime of service; other featuressuch as porches or patios,fireplaces, and meeting rooms;favorable equipment features

individual temperatures, refrigerator space, andduction features; andcomfort, safety, cleanli-d housekeeping of the.10

ing, safety, maintenance, andgroundskeeping.

u Formulate a preliminary guestprofile including such demo-graphic information as age, edu-cation, and geographic locationof guests. (See Appendix J.)

such ascontrolnoise reoverall ness, aninteriorThis step should be completedin two phases. The first phase is todefine, describe, and evaluate the conceptthat best fits your strengths, interests,customer needs, and your home. Theconcept should also be closely related tothe community tourism thrust andlocation of your potential customers butdifferentiated from the competition. Thesecond phase is to redefine your conceptafter completing all the steps in thebusiness plan.

The B&B concept is a combina-Develop the B&B C

reasons why customers will spreadfavorable comments.

The concept should describe sixcomponents to provide a compositepicture of your B&B. Describe eachcomponent by moving from a generalidea to a more detailed description ofyour proposed B&B:

u Explain exactly what you areselling, such as a special travelexperience, host personality,personal touch, romance,privacy, luxury, or history.ncept

u Facilities: Define exterior, physical

features: architecture, renovation(anticipated or completed),theme, decor, colors, predomi-nant features, outdoor furnish-ings such as picnic tables andgrills, view, lawn, landscaping,recreation areas, garden, trails,pond/stream, woodland, etc.

Define interior features: publicspace, furniture, style, size;distinctive features of the

11

the concept as a four-legged stool withone leg being the architecture, decor,and amenities, another being serviceand hospitality, the third being food,and the fourth being location. Hispoint is that if one leg is weak, theother three better be very strong. Thestool cannot stand if two or more of thelegs are weak.

Determine whether the compo-nent parts fit together and complementeach other. Is each part compatible withthe overall concept? Is the concept

u Assistance and hospitality: Explain how thinking begins

why you are in this business. 2. State exactly what you are selling. 3. Describe the strong points of

your B&B. 4. Describe anticipated customer

expectations and how to meetthem.and ends with the customerhow staff attitudes, manner ofserving guests, and personaliza-tion of service will make guestsfeel like welcome VIPs. Explainhow the staff and service will selland promote the B&B. Describethe staff dress and grooming andhow it relates to the theme andimage of the B&B. Describehow the telephone will be usedas a goodwill ambassador.

Tell what amenities or physicalitems or articles will be given toguests such as special soaps, foodtrays or baskets, flowers,departing gifts, etc.

List the unique services orobjects that the host and staffwill provide for the benefit ofthe guest such as a tour of thehouse and grounds, afternoontea, use of the telephone, tourarrangements, bed turn-downservice, laundry service, creditcard acceptance, and 24-hourmessage-taking service. Alsodescribe the assistance providedto the guest on local activities,menus, maps, etc.

Describe activities that will beoffered, including inside enter-tainment such as games, TV,books, and hosts hobbies;activities on the grounds such asoutdoor cooking, horseshoes, orbadminton; and nearbyattractions such as restaurants,shops, and recreation andentertainment centers.

u Consider the unique supportfeatures of your location andneighborhood like nearby touristattractions and demand generators.

u Business aspects: Describe your experience or

related experience in thehospitality industry.

Decide on your B&Bs openingdate, degree of seasonality, hoursof check-in and check-out,breakfast hours, etc.

Describe what you learned fromother B&B operators that youwill put into practice.

Define policies that affect theB&B image and customerpreference, such as smoking,alcohol, children, and pets.

Describe the price structure andhow it relates to the competition, perceived price to valueratio, and to the image of theB&B.

Relate the name of the B&B tothe logo, theme, image of thebusiness, and the community orarea.

Tell what amenities might beprovided in the future and howthey will contribute to thesuccess of the B&B.

Hillestad (Appendix C) thinks of

As part of your B&B concept, you should decidwould like to present.compatible with the market segmentyou are trying to attract? At thispoint, you should evaluate how yourconcept fits your strengths andcustomer interest in staying at yourB&B. Be sure your concept answersthese questions about your proposedB&B: Why will customers want tostay in my B&B rather than thecompetitions? What is unique ordifferent about my B&B? What willmy B&B provide for my customers?How will I generate satisfied custom-ers? Why will customers feel theyobtained more than expected? Whywill my concept succeed?

Goals of Step Three: 1. Tell who your customers are,

what your B&Bs major featuresand attractions are, where yourbusiness will be located, how youwill operate the business, and

e on what type of dining atmosphere you

Step Four

similar needs and wants, such astravelers for (1) pleasure, (2) business,(3) special occasions or events, (4) visitsto friends or family, (5) specialty market(such as school teachers, foreigntravelers), and (6) weekend or weekdaymarket segments.

Market research involves learningwho your competition is, establishingyour market segment, developing thestrength of your B&B so that yourmarket will notice and want it, pricingit right, and telling your market that it isavailable. Marketing research serves twofunctions: It develops new knowledgeabout your B&B, especially about howcustomers will see it compared to other

B&B?u Why wont/dont they come?u Why dont they come more often?u Where do they come from?u Who is my average customer (age,

sex, education, income, occupation,purpose of travel, etc.)?

u How does my B&B differ from thecompetition?

A study of your market will helpyou examine your B&Bs location in

bankers, and city government officials.You should also contact such state andlocal agencies as the Chamber ofCommerce, economic developmentcommissions, planning agencies, andconvention, visitors, and tourist develop-ment bureaus. Many areas have eco-nomic development offices where youcan find current, statistical data regard-ing the economy, building activity, salestrends, and community services of a

p state,dations12

relation to the economic environment,proximity to events and attractions thatcould generate business, and the currentand future demand for rooms. Thestudy will help you determine whether a

specific area. Other resources to tainclude local B&B hosts, regional,and national B&B associations, anregional reservation service organiz(RSOs).The key to marketing in theB&B industry today is understandingthat there is no one consumer. Compre-hending this concept, understanding theneeds of the consumers, knowing thesegmentation of your market, andselecting the best ways to reach yourconsumer are what marketing research isall about.

A given group of consumers can bedivided into market segments, orspecific (limited) groups of people withDetermine and Resear

accommodation alternatives, and itprovides information for decisionmaking. Researching the market usuallyinvolves systematically gatheringinformation, analyzing the data to findout what it means, and developingimplications. Ask yourself, What doesit tell me to do, or not to do?

Marketing research is customer andprospective customer oriented andshould answer the following questions:

u Why will/do customers come to mych Your Market

proposed B&B has market potentialand estimate the occupancy rate foryour B&B.1

To obtain the informationnecessary to analyze your market, youmay need to consult lodging operators,community business people, thepersonnel and purchasing departmentsof local companies, merchant associa-tions, the countys CooperativeExtension director, Sea Grant MarineExtension personnel, city planningcommissioners, real estate developers,

13

Many state tourism and develop-ment offices have considerable informa-tion about travelers, such as their

Wc

valleys, rugged terrain areas,caves, nature preserves, andstate parks.

Historic sites such as historichomes, old mills, round barns,Indian burial grounds, monu-ments, memorials, birthplaces offamous people, and exhibitions ofold-fashioned lifestyles.

Annual or seasonal events such as flea markets, craft fairs,festivals, pageants, outdoor artshows, community theaterproductions, and sportingevents.

Recreational areas such as zoos,parks, amusement parks,museums, and botanicalgardens.

Recreational facilities such ashealth spas, racquetball courts,golf courses, tennis courts,swimming pools, bicycling and

u Evaluate the advantages anddisadvantages of your B&B. Takeinto account the following aspectsof your B&B and determinewhether they would be consideredadvantages or disadvantages byyour target market: Determine the uniqueness of

your B&B. Consider unusualfeatures such as a collection ofpaintings, antiques, a library, oran exceptional view. Alsoconsider services and amenitiessuch as brushing snow off cars,providing coffee and a news-paper with personal wake-upcalls, placing flowers in the roomor chocolates on the bed pillows,and 24-hour answering and faxservice. (For a more completelisting of amenities see Appen-dix I.)income, age, location, education level,etc. Some states have departments,bureaus, or university divisions thatcollect and chart demographic data bythe state and county. The SmallBusiness Administration (SBA)consulting arm called SCORE(consisting of retired executives) mightalso be able to help in your marketresearch project.

The Department of Commerceoversees the research and distribution ofeconomic information. Their Survey ofCurrent Business and census bureaureports population statistics and otherchanges in the nations economy. Dontoverlook the Superintendent ofDocuments, U.S. Printing Office,Washington D.C. 20402, which offersbooks, reports, and governmentdocuments on a variety of subjects.

The marketing worksheet inAppendix H will help you identify andresearch your market. Fill in theworksheet as you analyze aspects of yourB&B. The result of your analysis,recorded on the worksheet, will formthe basis of the marketing plan that youwill develop in Step Seven. Consider thefollowing points as you complete themarketing worksheet:

u Determine what you are selling,taking into account the type ofB&B and area. For example,decide whether you are marketinga unique experience, a personalservice, a friendly atmosphere, agood location, an opportunity tomeet new people, or an area ofscenic beauty.

u Evaluate your community. Assessthe quality and availability ofresources (facilities, services, staff,and image). Consider how thetourist attractions in the area mightaffect your market potential andhow your B&B might betterattract overnight guests. Take intohen considering your bedroom decor, it is helustomers in mind.

account the following types of attrac-tions: Natural features such as lakes,

beaches, streams, forests,wildflowers, foliage, scenicpful to have a profile of your prospective

hiking trails, and skiing areas. Restaurants and shopping areas. Nighttime entertainment such

as theaters, comedy houses,nightclubs, and concert halls.

Make an honest appraisal ofyour B&B. Consider the

u

This information may be used as aguide until you have obtainedspecific information for your B&Barea.

Goals of Step Four: 1. Determine travel/tourist growth

trends regionally and locally. 2. Divide the market into segments:

tourists, businesses, group meetings,package tours, special occasions,visits to family and friends, specialtymarkets, etc.

3. Make an honest appraisal of your

slocation and road network, thehome and its condition, yourabilities as a host, quality ofservice, pricing, design, facilities,and overall image of your B&B.Determine which aspects wouldbe considered advantages andwhich would be considereddrawbacks.

Evaluate your operating policies.Consider your policies onsmoking, pets, children, andalcohol, and whether your targetmarket would perceive thesepolicies as advantages ordisadvantages.

Evaluate the potential of aspecialty market such as foreigntravelers, school teachers, retiredfarmers, singles, handicappedindividuals, etc.

Evaluate the competition.Consider your competitionslocation, facilities, promotionalthemes and messages, type ofcustomers attracted, and prices.Note anything unusual abouttheir policies, services, andcommunity status. Find out thevisitor statistics and occupancyrates in the area.

Determine business factors thatattract people to the community.Consider the areas manufacturingor agricultural business activity,conferences and conventions, hotelsand motels, hospitals, nursinghomes, colleges and universities,and retail stores. An analysis of the elements listedin this section will provide a listingof the strengths and weaknesses ofyour proposed B&B, which youwill use in Step Seven, Develop aMarketing Plan, to improve theattractiveness of your B&B and takeadvantage of your situation.Appendix J compares the results ofa Michigan and Minnesota B&Bguest study completed in 1988.14

location, architecture and decor,landscaping, house condition,services, and prices.

4. List attractions in your communitythat draw or could draw customers.

5. List all the strengths and weaknesseof your B&B.

6. Examine the competition bylocation, facilities, prices, andanything unusual about theirpolicies, services, and communitystatus.

7. From the information gathered, listproblems and opportunities.

8. Set precise goals to: improve the image of your B&B establish an occupancy rate for

the first three years increase weekday business increase off-season volume

9. Develop a series of strategies in theform of specific recommendationsand weigh in terms of cost, effec-tiveness, and ultimate benefit(return).

1 See The Inn Business, Canadian GovernmentPublishing Center, Supply Service Canada,Ottawa, Canada, K1A059. Marketing ofHospitality Services, Food, Travel, and Lodging byW.J.E. Crissy, Robert J. Boewadt, and Dante M.Laudadlo, published by the Educational Instituteof the American Hotel and Motel Association,East Lansing, Michigan.

Step Five

accuracy, then develop strategies toincrease revenue and profit. Withoutgood sales forecasts, you cannotrealistically plan expenses and makefinancial commitments.

Sales are calculated by multiplyingthe number of rooms rented during agiven period (days of operation) by theaverage room rate. Occupancy measuresthe percentage of available rooms rentedat a given time. Area B&B operators,the American Bed and BreakfastAssociation, and reservation serviceorganizations may supply importantinformation concerning occupancy.Keep in mind that factors such as theseason of the year, time of week, andweather conditions affect occupancy.

year occupancy figures available.Informal reports from operators indifferent locations suggest that anaverage occupancy ranges from 10 to 25percent the first year. B&Bs in ruralareas usually have a relatively highoccupancy rate because hotel/motelconstruction is not feasible in ruralareas. Promotion, favorable word-of-mouth, and repeat customers mayincrease occupancy by perhaps 10 to 15

sity, showed that the occupancyranges during the slowest monthand the busiest month variedwidely by state. Mean occupancyduring the slowest month rangedfrom 5 to 13 percent, and duringthe busiest month ranged from 24to 48 percent.

u A realistic occupancy percentageduring the first year for many ruralB&B locations without resort ormajor attractions has been 10 to 25percent. With advertising, repeatguests, moderate competition, andfavorable self and word-of-mouthpromotion, occupancy should15

percent each year for the first threeyears.

To project income you need to:

u Determine preliminary room rates.u Investigate your situation carefully.

Use judgment and knowledge ofA fter determining themarket potential, you should make amonthly estimate of the room revenuefor the first year. A good forecastestimates sales revenues over a three-yearperiod broken down as follows: firstyear - weekly, second year - monthly,and third year - quarterly. The roomsales forecast is very important to theprofit planning processit is also verydifficult to estimate with certainty.Review your estimate repeatedly forForecast Sales Revenue

The major variables affectingoccupancy during your first year ofoperation will probably be yourlocation, the amount of travel throughyour area, the attractive qualities of yourB&B, and the amount of promotionand exposure you have received.

A few B&Bs have had all thebusiness they wanted the first year,while others did not have a singlecustomer during their first six monthsto a year. But, there are no hard, first-the area gathered from hotels andmotels, the chamber of commerce, areservation service, national, stateand regional B&B associations, etc.Talk with several B&B operators insimilar situations about theiroccupancy/marketing experience.

u A nine-state survey of B&Bestablishments conducted in May,1990 by CenStates Chapter, Traveland Tourism Research Associationand the Department of Hotel,Restaurant and InstitutionalManagement, Iowa State Univer-

TABLE 5-1.Example of Income for a 5-room B&B Inn

1st Year 2nd Year 3rd Year

0 $60.00 $70.00

25% 40%

365 365increase to about 25 percent thesecond year and perhaps byanother 5 to 10 percent the third year.

u Annual revenue is projected bymultiplying the number of rooms bythe room rate times the number ofdays open, times the occupancy rateplus additional sales. (See Table 5-1).

u Additional Sales services, such as: - transportation - guided tours - child care - laundry - mending - meeting/banquet rental space retail sales, such as: - catering extra meals, luncheons,

or off-premise (if in a licensed kitchen)

- baked goods - crafts - antiques - books

The sales revenue is based on roomrate, occupancy, and the number ofdays open. It is a key estimate because itserves as the basis for almost all otherestimates you make. It is vital, therefore,that occupancy and income be pro-

Average Room Rate $60.0

Yearly Occupancy 15%

Days Open 365

Yearly Room Income $16,42occupancy break-even. You may needto refer to a book about break-evenanalysis, a hospitality accounting book,or an accountant.

Goals of Step Five: 1. Apply your knowledge from

researching the market; and makerealistic assumptions, taking intoaccount the travel volume to yourarea and your competitorsoccupancy percentage. Make goalsfor: first year - weekly second year - monthly third year - quarterly

2. Make assumptions based oneverything going right.

3. Determine how much lowerrevenue would go if everythingwent wrong.

4. Determine how sales could beincreased, and by how much: promotion and advertising personal selling word-of-mouth quality services retail sales other

5. Project the time between start-upand reaching break-even occu-

5 $27,375 $51,00016

jected in a realistic waynot just pickedout of the air. Revenue projections mustbe based on facts and well-thought-outassumptions. It is critical that youknow the anticipated time betweenstart-up and the time you reach

pancy.

Step Six

preference for a certain climate or ahometown where long-time friendscould help raise money and drawcustomers. However, prospective B&Bhosts should balance personal preferencewith business sense. Because the two donot always coincide, it may be necessaryto compromise.

In selecting a location andbuilding, ask yourself why you prefer aparticular area. Does the home matchyour expected customer profile? Toselect the best building and location, listthe items that require minimal time andexpense and those that require extensivetime and expense.

The ideal location of your B&B

the size of the city, the recreational,social, educational, and cultural aspectsof the community, availability of healthcare services, employment for yourspouse, and distance from relatives.Before you commit yourself to aparticular location and building, youshould examine the zoning, fire, andhealth requirements that pertain tothem. The cost of coming intocompliance with such requirementsmay preclude the possibility of operat-

licensed contractor will cost approxi-mately $20 to $70 per square foot.Additionally, Hillestad suggests, If youare going to restore a historic structure,you should obtain the services of aspecial architect and contractorexperienced with preservation tech-niques, which are vastly different fromnew construction techniques. Refer-ences and the Better Business Bureaushould be checked also. To be eligible

follow theards for aommercial

ative Law Forillestad17

ing a B&B business there. See Inspec-tion Checklist, A Guide for Buyers andOwners of Vintage Houses forquestions to consider in the selection of a building and its location.2

for tax credit, you need to Secretary of Interior standhistoric building used for cpurposes.

In his paper, PreventInnkeepers - Contracts, HA common saying in thehospitality industry is that the threemost important factors for a successfuloperation are location, location, andlocation. Ideally you would select alocation by geographical region, a citywithin that region, an area within thatcity, and a specific site within that area.However, few prospective B&B hostsgo through that process of site selection.Most B&B operators already have alocation in mind based on personalChoose a Location an

would be close to main traffic routes andyear-around, high tourist destinations.Find out where tourists like to go,and locate there. An attractive countrysetting with little competition is alsoideal. Unique features are valuable (butnot compulsory), such as a historicbuilding with antique furnishings.

An important criterion for selectingyour location is that the environmentmeet your needs and those of yourfamily. Consider factors such as climate,d a Building1

Buying ConsiderationsIf, after answering the questions inAppendix K, you are seriously consider-ing buying property to start a B&B,there are a number of factors to considerand verify. Hillestad points out in hispaper B&B Acquisition and OpeningCosts, that your initial building willlikely range between $50 and $150 persquare foot, and that you will need4,000 to 7,000 square feet for a typical10-bedroom inn. Renovation by a

Some things to consider when choosing alocation and a building include availabil-ity of parking, attractiveness of outdoorlandscape and surrounding neighborhood,and proximity to restaurants andhighways.suggests that you include severalcontingencies in any contract such asavailability of financing, approval fromall government entities, and condition ofhouse such as mechanical systems andstructural components. It would beworthwhile to pay someone and get awritten report to make sure everythingis in working condition and that youhave adequate utilities. Other items to

check for are back taxes, title, and aproperty survey.

Be sure to research the sites zoningclassification and those of the surround-ing properties. If zoning laws do notpermit accommodation facilities, findout whether a variance or a change inzoning can be obtained.

Estimate the chances for objection-able future development such as noiseproducers, and examine factors thatcould limit expansion. Also find outabout expected road and highwaydevelopment. Review restrictions on theplacement and size of signs. Also be sureto check the asking price and taxburden because these costs willultimately be reflected in the room rates.Analyze the deed to see if there are siteeasements or other restrictions.Goals of Step Six: 1. Realistically evaluate your

location. 2. Evaluate the location as a place

for you and your family. 3. Determine, if appropriate, the

factors to research and verify inbuying your B&B property.

4. Determine, if purchasingproperty, the specific contingen-18

cies to include in your contract. 5. Integrate the location, building,

and concept.

1Even if you have already selected a locationand building, this step can help you evaluateyour choice.2Published by the Old-House Journal, 69ASeventh Avenue, Brooklyn, New York 11217.

activities must be continuously carriedout.1

Look upon your property, itsarchitecture, decor, and pricing as yourproduct package. Think of all thelodging alternatives in your area ascompetitive products sitting on a shelfnext to yours. Then imagine travelers asconsumers with a wide range of tastes,incomes, and interests. You need toexamine the market, decide to whomyou are going to sell, and then directyour marketing toward attracting thoseconsumers. Step Four, Determine andResearch Your Market provided theinformation to determine whatsegments of the market offer opportu-nity. Design your market strategies so

Step Seven

The personal image you project and thereputation of your B&B can make thedifference between success and failure.You need to promote yourself as well asyour B&B. You will be judged on howyou dress, walk, speak, and interact. Yourattitude of caring and ability to makeguests feel special will produce repeat andreferral business. A good, lasting impres-sion can be created by (1) front deskpersonal and telephone contact with

friends where to find a good B&B. It isthe quality of the total B&B experiencethat makes the customer appreciativeand talkative. Prospective owners/hostsneed to be aware of how critical word-of-mouth public relations are in thegrowth of their B&B, thus one of yourmost important goals should be thatevery customer have an enjoyableexperience.

Strategy (Mix) strategy, or mix, should

package of offeringsract and serve theh external and internales need to be developed19

guests; (2) the name of your B&B, yourlogo, slogan, and sign; (3) the design ofyour stationery and business cards; and(4) the eye-catching brochures andconfirmation cards.

Coming up with a catchy nameone that sounds good, piques peoples

MarketingThe marketingbe viewed as adesigned to attcustomer. Botmarketing mixYour marketing plan shoulddetail exactly what you want toaccomplish, factors that may affectmarketing efforts, resources available inthe community, specific groups ofpotential guests most interested in yourB&B and strategies to attract them,objectives for each market segment, animplementation plan, a budget, and amethod for evaluation and change.Keep in mind that marketing is anongoing process and that promotionalDevelop a Marketing

that your market will notice your B&B.In this step you will determine the bestway to tell your market about your B&Band the best way to price it right. Youneed to develop a series of strategies thatsatisfies the special needs, desires, andbehavior of your target markets. Thenevaluate each strategy in terms of cost,effectiveness, and benefits (return).

Importance of Image, Name,and Word-of-MouthPlan

curiosity, and tells something about your B&Bis an important marketingconsideration. The name alone can helpgenerate customers. A consumersdecision to select a B&B may involveactually visualizing or imagining what itmay be like to stay in the B&B. Try tochoose a short name, falling early in thealphabet, with a lot of imaginationassociated with it.

B&Bs grow stronger by personalrecommendations of customers andfriends. Consumers generally ask trusted

20

for different target markets. You need todevelop ways to enhance the quality of

u

u

(approximately 4 inches wide by 9inches long), and has good rackvisibility. Be very careful to selectimages and words that willrepresent your B&B in an accurateand inviting manner. Unless youare a talented writer and artist, youwill need to hire professionals towrite the copy and create theartwork for the brochure. You willalso need to select a typesetter anda printer. Secure bids from severalprinters to get the best value foryour money. However, be careful

additional quantities or reprints.u Aggressively pursue opportunities

for stories in newspapers2 andmagazines. Media coverage is veryimportant for new B&Bs. Sendregular news releases to national,state, and local newspapers andradio and television stations. GuestTV and radio appearancesdescribing the uniqueness of yourB&B can be extremely effective.Consider contracting with afreelance writer to develop articles

T sdthe overall trip experience including (1)trip planning and anticipation, (2)travel to the B&B area, (3) the experi-ence at the B&B, (4) travel back home,and (5) recollection. Focus attention onthe experience desired by the guests andalso the facilities, lodging, food services,and events that will produce theseexperiences.

Guidelines to External Pro-motionFollow these guidelines to receive thebest promotion for your money:

u Promote only to the marketsegments that are most likely tofind your B&B attractive andsatisfying.

u Become a member of the Chamberof Commerce, the Better BusinessBureau, and the nearest Conven-tion and Visitors Bureau. Find outif you can advertise in their annualor seasonal mailings. Volunteer togive presentations on the B&Bbusiness at local clubs andcommunity gatherings. Becomeactive in civic and communitygroups and offer your home as ameeting place to build rapport andcooperation. Provide rooms forcharity auctions. Invite thecommunity to an open house.Consider purchasing advertisingspace in local Chamber ofCommerce brochures and specialtypublications on local activities suchas skiing and hunting. Whenbuying ad space, compare pricesbased on cost per thousands(CPM) of readers reached. Become the local touristpromoter and expert. Develop areputation as an involved memberof the community who providesquality, personal service at a fairprice. Help develop promotionalliterature on the history, seasonalevents, and unique features of yourcommunity. Through membershipin a national, state, and regionalB&B organization you may havethe opportunity for joint publicityand advertising.State and regional directoriespublished by your State Depart-ment of Tourism and Bed andBreakfast Association are veryeffective.An attractive brochure is animportant marketing tool.Relatively inexpensive brochuresneed to be developed to provideinformation about your type ofexperience, unique features,location, bathroom arrangements,getaway aspects, rules, nearbyrestaurants and recreationalactivities, and sightseeing ideas.Make sure the brochure fits into abusiness envelope, is rack size

o objectively evaluate your property and itriving by looking for a nice place to spend anot to sacrifice quality. Keep in mind that you will haveto review the brochure carefully ateach stage of development. Makesure important information such asroom rates and policies on depositsand credit card usage are clearlystated. The brochure can bedistributed to potential customers;other B&Bs; lobby areas ofrestaurants, hotels/motels, andhealth care facilities; travel/customer locations; appropriatepublic events, fairs, and festivals;recreation and sporting shows;local and regional retail servicebusiness firms and organizations;local funeral homes, upper-levelschools, and antique dealers.Estimate your distribution numberbased on a six-month supply. Thenobtain a printing cost for thatamount, as well as estimates for

architecture, imagine that you are a travelern evening.

about your B&B for submission to fact sheets, stationery, and policysheets is a relatively inexpensive

After weighing the time, cost, andbenefits, you may find it advantageousto become involved in other promo-tional and community programs thatmay include:

Cooperating with area businesses andcompetitors. Make personal sales calls onarea business people, especiallyrestaurant managers, personneldirectors, purchasing agents, hotel andmotel managers, real estate salespeople,and taxi drivers. Give them brochuresand other promotional material andfollow up each visit with a personalletter. Local referrals are a very solid wayto attract guests at little or no cost.Cooperate with area hotels and motelsto jointly promote facilities. Develop areferral network with area and regionalB&Bs.

Contacting private citizens andcommunity leaders. Read the localnewspaper carefully and make personalregional newspapers. Somenewspapers have a weekly calendarand tourism section that lists theareas lodging accommodations.Finally, develop a press kitincluding a photograph, a briefhistory, and a description of yourB&B to give to newspaperreporters, freelance writers, andtravel writers.

u Work on getting listed in B&Bguidebooks.3 There are B&Bcritic guidebooks with indepen-dent opinions on B&Bs based onthe authors standard, and usuallythere is no fee. Some guidebookshave someone inspect the B&B.Another type is a listing B&Bguidebook which is useful inlocating B&Bs in an area oralternative B&Bs in an area or city. Listing your B&B in guidebooksis a relatively simple and inexpen-sive (the majority do not charge afee, others charge about $50 to$75) way to attract guests,particularly distant customers. Todecide which books you would liketo be listed in, browse through thetravel section of a bookstore. (SeeAppendix A for a listing of B&Bguidebooks.) Select a reasonablenumber of guidebooks that lookattractive and compare them basedon the following factors: cost,circulation, market, updatingfrequency, membership require-ments, type of B&B description,exclusivity stipulations, certainstandards that must be met, andinspection policies. You may alsowant to inquire about liability andgroup life insurance policies. Alsoask about newsletters and otherbenefits. Because it may be one totwo years before a new or updatedguidebook reaches the bookstores,contact the guidebooks writersbefore you open.

u Incorporating the name and logoof your B&B on business cards,21

way to promote your B&B.Professional-looking business cardscan help establish credibility andraise interest. Attractive, well-written fact sheets can gainexposure and promote the imageyou have created for your business.Fact sheets can be posted onbulletin boards, handed out toguests, included in mailings, andsent to other B&Bs in your region. Policy sheets should be posted ineach room to outline the rules ofyour establishment while remind-ing guests of your businesss nameand logo. Also consider incorporating thename and logo of your B&B onin-house items such as informa-tional posters, placemats, statio-nery, and complimentary gifts suchas matchbooks, pens, and post-cards. Making your name and logoas visible as possible will makeguests more likely to rememberyour particular B&B.

u If the advertising price to valueratio is appropriate, plan to attracttravelers by advertising in state andassociation magazines for business-people, health care professionals,educators, engineers, and com-puter technologists.

u Cultivate and encourage goodword-of-mouth through discountsand complimentary services.

u Follow up on contacts with thebusiness firms of guests by offeringmidweek price reductions andsmall, corporate meeting packages.Encourage guests staying duringvacation and pleasure times to takeadvantage of B&Bs for businesstrips.

u Provide discounts for customerswho refer a guest to your B&B.

u Look into the cost/value relation-ship of accepting credit cards.Promote your name and logo on a signin your yard if the zoning allows; ordisplay a B&B flag or banner.

Other Relatively Low-CostPromotional Programs

Yellow Pages. Because B&Bs are still aless common form of lodging, your

ic .calls to local people holding familyreunions, weddings, funerals, confirma-tions, bar mitzvahs, and other eventswhere out-of-town guests may beinvolved. Send out congratulatory letters

If you offer special features, such as a musmention these in your promotional effortsconcerning awards, promotions, andaccomplishments to keep your businessprofile high among communityleaders.

Answering inquiries promptly.People who make inquiries are yourmost promising potential customers.Such inquiries should be answeredpromptly, and with the informationrequested. You should make it easy forthose who inquire to make a reservationby including a phone number they cancall collect or a self-addressed, stampedreservation form and envelope. Developdirect mail thank yous.

Creating special promotions. Con-sider offering holiday and weekendpackages that include activities such ascross-country skiing, snowmobiling, icefishing, autumn hiking tours, Elizabe-than Christmas themes, and interna-tional gourmet holidays. Create eventsroom or fireplaces in the bedrooms, be sure to

such as art classes, writing seminars,chess tournaments, mystery weekends,sweetheart escapes, and internationaland harvest fests. Promote your B&Bsuniqueness to wedding consultants,22

town wholesalers, and meetingplanners. Develop walking tours, andprovide free rooms and a free packet totravel writers. During the off-season,advertise special rates in newsletters,newspapers, and regional magazines forfamilies and senior citizens. Offerfamily and friend promotions to regularguests. Special events and package dealssuch as these will create interest in andgenerate publicity for your B&B.

Try to plan special events for eachseason of the year and encourage localmerchants to co-sponsor and promotethe events. Nonprofit sponsorshipentitles you to free public serviceannouncements on radio and television.

Listing in the Yellow Pages. Thereare now separate B&B sections. If youhave a business phone number you areentitled to one free listing (name,address, and telephone number) in thelisting may be most visible in the motelsection. The majority of people whoconsult the Yellow Pages are passingthrough town and calling at the lastminute to find a place to stay. VariousYellow Page advertisements can bepurchased in addition, through thetelephone sales representative.

Developing a newsletter. Animportant tool for reminding formerguests about your B&B and generatingrepeat business is the newsletter. Ideally,a newsletter will contain information onthe accommodations offered by yourB&B, a history of the home, promo-tional events and package deals, specialcommunity attractions, and announce-ments of improvements or additions tothe B&B. You might also considersending out Christmas cards and otherappropriate seasonal greetings.

Advertising on the radio. Radio isone of the most expensive forms ofadvertising. However, you mightconsider using it to announce youropening and to promote your B&B earlyin the busy season. Select a station thatmore or less shares your target marketsegment. For radio promotion to beeffective, listeners should hear the nameof your B&B several times a day during aperiod of a week. Seek professionaladvice in writing copy and choosingbackground music so that you projectthe image you want.

Listing with a Reservation ServiceOrganization (RSO). B&B ReservationService Organizations maintain andpublish listings of B&Bs in variouslocations that travellers may consultwhen deciding on lodging. The B&Bhost pays a listing fee from $5 to$200most fees are in the $25 to $75range. RSOs do charge a commission,usually 20 percent of the guests lodgingfee and commission is charged forrepeat guests as well. In exchange for thefees and commission, the RSO screensguests, handles deposits, and providessome publicity. Most arrangements

23

between B&B hosts and an RSO areclearly described in the form of a signedcontract. Some RSOs require that your

It is important that marketingefforts be continually evaluated to

rooms, and $9,498 for 21 plus roomsand an overall average of $6,408. Thisstudy tended to reflect larger B&Binns located in higher priced areas.

Consumer Data Collectionand EvaluationDevelop a formal and informalmethod to collect data about yourguests such as where they are from,their party size, their trip purpose,how they found out about your B&B,and their evaluation of your B&B.Keep track of your occupancy rateand referrals sent and received fromother accommodations. Promotionscan be evaluated by money-offcoupons, post office box numbers,or department numbers.B&B conform to certain standards andmay have exclusive contracts.

There are many B&B reservationorganizations to choose from, so youwill want to shop around in selectingthe RSO that best suits your needs.4

When selecting an RSO, ask about thefollowing: experience, type of operation,fee structure, advertising scope,exclusivity restrictions, special standards,and membership benefits.

Considering other options. There arenow national B&B magazines, travelagent publications, travel clubs likeAAA, and video brochures. Otherpotential advertising methods areoutdoor advertising on main highways(billboards), directional signs, and signsin front of the B&B. Consider cost andpotential problems with zoning andneighbors.

Using an internal mix. Providequality personal service and if possible, afull breakfast, nicely decorated bedroom,thick towels, and a large bar of soap. Yourinternal marketing strategy needs toreflect: 1) hospitality and good guestrelations (the central focus of the hostand employees thinking and actions is tosatisfy customers and their needs)treateach guest as a B&B critic, continuallythink of ways to make the experiencememorable, call people by their names,etc. 2) quality controlservice, cleanli-ness, food, safety, dependability, etc., and3) personal sellingadditional items,longer stay, more frequent return visits,referrals, higher priced rooms, etc.

Marketing BudgetMoney and time should be spentduring different times of the year foreach Marketing Mix strategy. Decisionsshould be based on costs, projectedrevenues, and desired profitability ofdifferent activities.

A 1988 Facility Analysis of Minne-sota Bed and Breakfast Industry revealedthat in 1987, B&B operators spent anaverage of $1,261 (several spent morethan $2,000) on marketing andrelated activities, but over half spent$800 or less, which tends to reflectsmaller, more rural B&Bs. The 1988Professional Association of InnkeepersBed and Breakfast/Country InnIndustry Survey & Analysis (of 72 innsin eight states) showed the averagemarketing expense to be $2,738 fortwo to four rooms, $4,975 for five toten rooms, $13,921 for 11 to 20

Part of your marketing plan shouldinclude taking a few interesting photos ofyour B&B to distribute to publishers.improve effectiveness.

Pricing FactorsDeciding the room rate is complex.Most B&B Inn owners with a largeinvestment cannot survive many yearsunless they take in more than they payout. It is important to realize that costand profit estimates hinge on incomefrom salesand sales hinge on the rightprice, among other things.

Your price strategies should reflectthe perceived value of the experienceyou are selling, your business costs, andyour profit goals (not someone elses).Your income (before tax) is the revenueless variable and fixed costs.

PRICE = Guest experience +Image + Service + B&B Product+ Overhead + Profit6

Lets take a quick look at the meaningof these terms: 1. Guest Experience is the psychologi-

cal value of the experience you areselling to your guests such as:hospitality and personal touches,charm of building, romance,privacy, luxury, view, location,local attractions, etc. Is theexperience unique enough tocommand a premium price?

2. Image involves the personal imageyou project and the reputation ofyour B&B. The goal of image-building is to create a good andlasting impression.

3. Service is a philosophy, a thoughtprocess, a set of values andattitudes that differentiates yourB&B from competitors. Theservice-oriented host makes thecustomers needs and expectations thecentral focus of the business.All aspects of the B&B arestructured to make it easy for thecustomer to do business with you,and to give each guest a memorableexperience.

charging $60. However, it cannot greater possibilities of exceeding

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4. B&B Product is the location, thedesign and condition of the

facilities, quality of food andservice, price, and the total guestexperience.

5. Overhead expenses in the hospitalityservice industries are controllable bythe manager, for example, adminis-trative and general; advertising andpromotion; heat, light, and power;and repairs and maintenance. Non-controllable expenses, or non-operating expenses include rent,taxes, insurance, interest, deprecia-tion, and amortization.

6. The profit formula is: revenue lessexpenses equals profit. However, abetter view of the profit is ex-pressed by the formula: revenueless required profit equals allowableexpenses. This promotes the beliefthat you must know profitrequirements (not whats left) andfactor them into your pricing andoperating plans. Owners need toconsider the amount of return tocover their original investment plusa return on their investment. Theinvestor must determine what themoney is worth so more accurateprofit requirements can beestablished.

These are the factors that influencepricing:

u Price Sensitivity. The hotel/motelindustry is considered to be pricesensitive. There is some evidencethat indicates a $1 increase in roomrates will reduce occupancy by one-half percent. Possibly B&Bs arenot as price sensitive as hotels andmotels because of the high averageincome of B&B guests and theselling of a total B&B experience.Results of a 1983 Laventhol &Horwath study support thisassumption. The study showedthat B&Bs charging $70 a nighthad higher occupancy than those24

be assumed that higher pricesautomatically cause an increase inoccupancy. Popular areas andhigher cost-of-living areas such asCalifornia charge higher rates andhave higher occupancy.

u Quality. Commit yourself toproviding quality to establish andmaintain credibility with yourcustomers. If your B&B provides agreat deal of luxury, personaltouches and charm, historic value,private bathrooms, and fullbreakfasts, higher prices shouldreflect this. High quality and highprices often go together.

u B&B Differentiation. A differenti-ated B&B is sufficiently unique forcustomers to develop a preferencefor it. High differentiation,uniqueness, or distinctiveness andhigher rates often go together. Themore differentiated the B&B, theless price sensitive it is.

u Competition. Competitive marketsstimulate lower prices.

u Service. The more service youprovide, the higher the price maybe. A B&B that focuses on thecustomers needs and expectationscan charge more because of a highperceived value5, and will probablyalso receive more repeat and referralbusiness. Do everything to ensurethat your customers are satisfied. Ifyou do not please them and listento them, you are less likely tosucceed. Service builds credibilityand reputation.

u Location. Urban, tourist intense,nearby attractions, and high cost ofliving areas can charge more thanremote or low cost of living areas.

u Target Markets. Higher prices willtend to limit or attract high incomeand more prestige-conscioustravelers. Lower prices willencourage more family and budgettravel business.

u Size of B&B. Larger inns may havesome economy based on size andthe break-even point. The financialsurvey of inns completed in 1988by the Professional Association ofInnkeepers International andpublished in Innkeeping showedthat two to four room propertiesdid not make money, but with sixto seven rooms the owner/innkeeper started making a profit,and an 11 to 20 room inn averagedan 8.23 percent return on initialinvestment including owner time(which excludes property apprecia-tion). By 25 plus rooms, ownersrealized a 28.7 percent return.Marketing Goals. If you want toincrease occupancy to coveroperating costs during lowoccupancy periods, reducing ratesmay be considered to attractspecific markets such as commer-cial and high frequency business.You may also want to encouragemeetings, packages (confirmationof room and an event), andpromotions to boost weekday oroff-season periods.Your Business Cost. (See Appen-dix Q.)

actors that may increase room rates arestimated to be:

Private baths ($10 to $25)Historic value ($10 to $20)Amenities ($.50 to $6) for eachamenity based on the time andmaterials involved and on thecustomer-perceived value. Thefollowing guidelines may behelpful:

modest, ($.60 to $1)average, ($1 to $2)above-average, ($2 to $4)luxury, ($4 to $6)

Third adult in room ($7 to $10)Child under 12 ($5 to $10)Pets ($5)Breakfast, based on cost of foodand labor:

continental ($1 to $2)continental plus ($1.50 to $3)full ($2.50 to $6)

u Unusual features such as a pool,spectacular view, hot tub, access to

u Small room ($5 to $25) 4. Charge one dollar for eachthousand dollars of construction

= required room revenue

)1

1 u Lack of sound insulation in floor,walls or ceiling ($5 to $10)

Turn Key/Total Cost (land, building, furniture, fixtures, and equipment)

number of rooms

TABLE 7-1.Pricing Formula

u EXAMPLEMotel

$5,000,000 (Total Cost

100 rooms

u EXAMPLEB&B

$300,000 (B&B value)

5 rooms25

3. Obtain the recommendations ofseveral reservation service organiza-tions.

Average Room Construction and Furnishing Costmultiplied by 1/10 of 1 percent of average room cost

=

= $50,000/Room

= $60,000/Room

$50,000 x .00

$60,000 x .00Room Rate=

= $50 Room Rate

= $60 Room Ratea lake or river, fireplace, antiques,gardens, gift shop, etc.

u Equipment such as air condition-ing, TVs in rooms, fax service, etc.

Factors that may decrease room rateand by how much:

u Over two rooms per bath or morethan four persons per bath ($5 to$20)

u Single room (10 to 20 percent lessthan double)

u Weekly ratesu Special rates for families occupying

two or more roomsu Special rates for seniors (10 to 15

percent less)u Special rates for a second night

with no fresh sheets or towels ($2to $4)

u Special off-season rates (20 to 25percent less)

u Poor location ($2 to $4)u Package deal

u No closets, poor lighting ($2 to $5)

Some B&B Homestay operatorsare only trying to supplement theirincome with a few room sales a monthto help pay utilities, taxes, and insur-ance. However, if you are opening aB&B Inn or Country Inn for profit andhave high fixed expenses, such as loanpayments, property taxes, and insurancepremiums, you will want to cover allyour costs and get a good return onyour investment and a fair return onyour time.

Pricing It RightThere are several avenues to try thatmight provide some help for pricesetting: 1. Learn the pricing strategies of

several B&Bs in your area,particularly ones with similarlocation, quality, and service.

2. Seek insight from state, national,and regional B&B associations.

cost as a pricing rule of thumb.See Table 7-1 for how the pricingformula works.

Cost Recovery and Returnon Investment Plus Valueof Special B&B ExperienceProfits are the target. Revenue andexpense projections are used to deter-mine the average room rate that willfulfill investment and profitabilitygoals. It takes more time and knowl-edge than pricing based on intuition,competition, and trial and error methods.A brief example follows:

Desired after tax dollar return (say 15percent return on equity).

+ overhead (taxes, interest, insurance,depreciation, wages, telephonemarketing, maintenance, etc.)

+ operating expenses (laundry, cleaning,guest supplies, food, office supplies,utilities, etc.)

Required room revenue divided byprojected number of occupied room

3. Identify the community resources touse.

and return on investment formula you can meet your expenses you can live with the time period between start-up and break-even

10. Briefly describe potential problemsand proposed solutions.

11. Create an implementation planassignment of responsibility, goals,(objectives or steps), and timetable forcompletion of each segment.

12. Establish a marketing budget by acertain time of year.

13. Establish a short schedule ofimportant review methods by aspecified time of year.

1 Adapted from Tourism Marketing, Tourism Information Series

No. 4, Edward M. Mahoney and Gary R. Warnell, Cooperative

Extension Service, Michigan State University, East Lansing,

Michigan, 1986.2 For $20, you can purchase an updated list of 350 pressure-

sensitive labels for major news-papers, magazine travel editors

and writers, and freelance writers from Inn Review, P.O. Box

1789, Kankakee, Illinois 60901.3 Innkeeping Newsletters 1988 Industry Survey showed that an

average of 23 percent of inn business came from books and

travel guides. Professional Association of Innkeepers

International (P.O. Box 90718, Santa Barbara, California

93190) has an excellent Guide to the Inn Guidebooks. It contains

a list of about 160 guidebooks, and information on fees,

getting the authors attention, and responding to

questionnaires.4 You can obtain a current listing of RSOs from: The

American Bed and Breakfast Association, 16 Village

Green, Suite 203A, Crofton, Maryland 21114 (as part of

a kit), or from Ellie Chast, Sweet Dreams and Toast Inn,

P.O. Box 4835-0035, Washington, D.C. 20008.5 Perceived