As more and more people travel either on holiday or on business there is an increasing demand for comfortable accommodation in most parts of the country. Bed and breakfasts satisfy this need and are ideally suited to locations where the demand could not support a hotel.

A bed and breakfast is the ultimate home business – your home is your business. Bed and breakfasts provide their customers with a service that’s half way between hotel and staying with a friend.

How much can you make running a bed and breakfast

There is a wide range of potential earnings in the industry. How much you can expect to make running a bed and breakfast will depend on your location, the market you target, the number of rooms you have available and your ability to market the business.

A typical Bed and Breakfast in London might be able to offer 10 rooms, achieving 90% occupancy and averaging £40 per night per room, thus generating a turnover of £131,400 per year. However the size of the bed and breakfast and the high occupancy will probably mean that staff are required to help run it and the overall profit achieved is only around 10% or £13,140.

On the other hand a sleepy country bed and breakfast in a summer tourist location might have 5 rooms achieving 50% occupancy and averaging £100 per night per room, thus generating a turnover of £91,250 but due to lower overheads such a bed and breakfast might be able to achieve around 30% profit margin or £27,375 per year.

On top of that, if you’ve started the bed and breakfast from scratch, or built a failing bed and breakfast back up, then when you decide to sell the business you should be able to realise a sizeable capital gain, achieving a premium over the value of the property alone. So a property that originally cost you £400,000 on which you spent £50,000 converting it to a bed and breakfast might sell a few years later for around £800,000 taking into account a growth in house prices and a premium for the business.

How much does it cost to start a bed and breakfast

The cost of starting a bed and breakfast business will vary hugely ranging from a few thousand pounds if you’re going to covert your current home (and your home is suitable), to over a million pounds if you’re looking for a larger property in a premium location.

Starting a bed and breakfast from scratch will involve buying a suitable property which is likely to cost anywhere from a few hundred thousand to over a million pounds depending in the size and location.

As well as purchasing the property you may need to invest in adapting it, fitting it out and marketing the business. All of which will required a budget of anywhere from a few thousand pounds to tens of thousands of pounds depending on the level of work that needs to be done.

As an alternate option you can buy a bed and breakfast that is already trading in which case your start-up costs will be the cost of buying the business and financing the purchase.

How to start a bed and breakfast business

Once you’ve made the decision to become a bed and breakfast owner your next step is to decide whether you are going to buy an existing bed and breakfast – you’ll need more cash, but it already has an income – or start your own bed and breakfast from scratch. I’ll deal with buying a bed and breakfast later in this article so first lets look at the steps involved in starting a bed and breakfast business.

Firstly you’ll need to decide what type of bed and breakfast you would like to start. Be that the simple boarding house catering to travelling businessmen, the boutique weekend getaway or something in between. Then be clear about your goals, is this a full time business to support your family or a business you’re running to provide supplemental income during your retirement? Your goals will impact the market you should be aiming for and you’ll need to focus on one particular market to succeed. Trying to be all things to all people is likely to be a costly mistake and you’ll probably do everything badly rather than one thing well. There is a balance to be struck on the size of your bed and breakfast, the bigger it is the more potential income, however with that comes more work which may mean employing people which introduces more overheads and the bureaucracy of having employees.

Once you’ve chosen your market you’ll then need to find a suitable property in a suitable location. As with opening a shop, one of the keys to starting a successful bed and breakfast is the location. If you’re going to aim at the holiday market then you need to be in or near a holiday destination, if you’re aiming at business travellers then being near to local business districts and good road and rail connections will be essential.

It’s then worth spending some time on market research and competitor analysis – is there enough demand to support another bed and breakfast in that location and can you offer something that competes with the existing businesses.

When it comes to finding a property you’ll need to factor in how many bedrooms you’d like to use for the business and how many rooms you’d like to maintain as a family home. When looking for a property you might find some bargains in old nursing homes or disused pubs. When considering residential property do keep in mind that changing the use of a residential property to a bed and breakfast will require planning permission so you’d be well advised to talk to the local planning authority and find out if it’s going to be possible to obtain the relevant planning permissions before you buy the property. Then speak to them again once you own the property to obtain the relevant planning permissions.

When it comes to buying a bed and breakfast or buying a property to convert into a bed and breakfast you’ll need to speak to specialist finance brokers – an ordinary high street mortgage is unlike to cover it. As such you’ll need to present a business plan explaining how you’re going to operate the business, why it’s a good investment and what experience you have that will enable you to make it a success. Expect the costs of purchasing the property and arranging finance to be around 5% of the cost of the property.

Once you’ve brought a suitable property for your bed and breakfast you should also talk to the local environmental health officers and ensure that you comply with the relevant rules and regulations. In particular they will want to ensure that your kitchen is up to scratch. You should also book yourself on a food hygiene course. The Pink Booklet  provides full guidance to the legal issues you need to be familiar with as an accommodation provider.

Whilst you’re getting the building and legalities sorted be sure to spend some time putting in place a marketing plan and the systems and processes you’ll need to keep your marketing plan in action, take and manage bookings and manage the smooth running of your bed and breakfast.

In particular sort out your terms and conditions and make sure that your booking process will ensure that guests are aware of them. Make sure you have all the relevant insurances in place – speak to a good insurance broker to find out what is on offer.

Then set a date for opening and make sure you’re able to hit it.

Writing a business plan for a bed and breakfast

Due to the capital intensive nature of a bed and breakfast, I strongly suggest you write a proper business plan before spending a single penny on starting a bed a breakfast.

When preparing the financial sections of your business plan try to ensure that your break even point is no more than 40% occupancy, as at best you’ll achieve only around 75% occupancy and you need some margin to generate a profit. Equally make sure you’ve factored into your financial plans sufficient working capital to see you through the first year as building a customer list and a marketing process can take time. For the same reason you should plan to keep costs low during the early years by doing a lot of the work yourself and if possible keep a part-time job on the go too.

Buying a bed and breakfast

Buying a bed and breakfast allows you to enter the bed and breakfast business without having to go through the hardship of starting from scratch. On the other hand you’ll pay a premium to cover the hard work and investment that someone else has already put it.

When it comes to looking for a bed and breakfast for sale, as web as looking on the business for sale websites consider approaching the bed and breakfasts in the area that you wish to buy one and asking them if they are interested in selling. There’s a good chance you’ll find one that is and you may well be able to negotiate a lower price with a business transfer agent’s commission to cover or the over-inflated prices they advise their clients to ask for. If you need help determining a value for a bed and breakfast you’re buying then please read the post How To Value A Small Business.

Marketing a bed and breakfast

The success of a bed and breakfast rest heavily on it’s ability to attract repeat custom. There are therefore two areas you need to focus your marketing on:

  1. Winning new customers.
  2. Retaining existing customers.

Let’s look at each in turn.

Winning new customers for your bed and breakfast

Unless you’re going to create something more than a bed and breakfast, i.e. you’re going to offer so sort of packaged holiday such a guided walks, finding new customers for your bed and breakfast will be all about making it easy for customers to find out about your bed and breakfast. Basically new customers aren’t going to be looking for you by name, instead they’re going to be looking for ‘a bed and breakfast in central Bath’ and the like. Your job then is to indentify all the possible places that a customer could look in order to satisfy their requirement and make sure that your bed and breakfast is listed there. Then once listed make sure you stand out.

So where will new customers look? Well online using search engines and directories such as findmeabnb.co.uk, and offline via: the tourist board, printed bed and breakfast directories and guidebooks.

Network with the local community and local businesses can help too. Whilst few of them are likely to need a bed and breakfast near their own home, they are likely to be asked to suggest places to stay near them so could become a good source of referrals. You could therefore consider joining some of the local networking organisations.

Also consider membership of local and national tourist associations include things like the ramblers association and the AA guidebooks – talk to other local bed and breakfast owners about what works for them and network with them to help each other by providing referrals when you/they are full.

Always track what works – find out from every guest how they heard about you and measure the ROI of each bit of marketing.

Retaining your bed and breakfast’s existing customers

Repeat business is a key driver of success in the bed and breakfast industry. There are two aspects of repeat business:

  1. Making customers want to return, the secret to this is getting the basics right:

    • good comfortable beds

    • a high level of cleanliness

    • excellent breakfast

    • a warm welcoming attitude

  2. Making sure customers remember you and can find you again. Printed leaflets and business cards as will creating a strong brand and continually marketing yourself to past customers.

Running a bed and breakfast business

Once up and running your main costs will be breakfast, marketing and finance. Managing these costs will be important if you want to succeed. And no matter how well you’re doing never stop marketing. It’s better to have too much business than too little and if you have too much business you can always up your price a little until the demand levels off. You might also like to consider variable pricing can be profitable – raise prices at peak times and lower them in the offseason.

Once you’re up and running and have gained a few years worth of experience, you can use the free time in the afternoons and evenings to expand the business by offering training to other would-be bed and breakfast owners.

Useful books on starting a bed and breakfast

  • Just Six Guests: How to Set Up and Run a Small Bed and Breakfast
  • Full English: Or How to Run a Bed and Breakfast and Keep Your Sense of Humour
  • Buying and Running a Guesthouse or Small Hotel: How to Build a Valuable Business and Enjoy a Great Lifestyle
  • Running a Bed and Breakfast for Dummies

Have you started or run a bed and breakfast? If so share your advice below.

 

Similar Posts:

Share