It’s an image that puts you in an instant state of relaxation—a roaring fireplace in a cozy rural bed and breakfast, sharing stories with fellow travelers while enjoying a glass of brandy or your favorite red wine.
The romantic notions so closely associated with a bed and breakfast have made owning one a popular dream for many people. This is one of the reasons the bed and breakfast (B&B) industry has grown so significantly in recent years.
Do you sometimes drive by a historic property and find yourself fantasizing about turning it into a bed and breakfast? Do you imagine spending your mornings preparing a hearty meal for tourists from around the globe and your afternoons filling the place with the intoxicating aroma of fresh-baked cookies and muffins for when they return?
If this is something you have given serious thought to, starting your own bed and breakfast can be a rewarding and profitable venture. But be sure to go in with both eyes open, as it also requires constant hard work and attention to detail, which might not be a keen interest for everyone.
This article offers step-by-step information on what goes into prepping for and launching your very own bed and breakfast business. To provide an inside perspective on what it takes to run and maintain a successful B&B, I interviewed Kathleen Karamanos, owner and operator of Fundy Heights Bed and Breakfast in Saint John, New Brunswick, on Canada’s scenic East Coast.
What is a bed and breakfast?
If you’ve never had the unique pleasure of staying in a bed and breakfast, you may easily confuse it with other small, privately run inns and motels.
A bed and breakfast is a hybrid which blends the luxury and comfort of an upscale hotel with the atmosphere and décor of a beautiful private residence. Often they are older historic properties which people seek out for the experience of centuries-old hospitality. In fact, 36 percent of American B&Bs have received some kind of historical designation by a preservation society.
Whether the property is historic or not, what makes the experience different from hotels and motels or vacation rentals is the personal attention guests receive from the owner. Playing the role of host, chef, and meal companion, the B&B owner is fully immersed in the guest’s experience. As the name would suggest, the nightly fee includes a hearty, home-cooked meal the next morning.
It’s worth noting that the lines between vacation rentals and traditional bed and breakfasts are ever more blurry, thanks to Airbnb. Prior to 2017, Airbnb was much more focused on the vacation rental experience—meaning your guests check in and it’s likely that you might not ever seem them, and even more likely that breakfast isn’t part of the deal. But these days, you’re more likely to find B&Bs listed alongside regular rentals on Airbnb.
The state of the B&B industry:
In the United States alone, the B&B industry is expected to top $5 billion in 2020, with more than 19,000 establishments across the country. Unlike major hotel and motel chains, bed and breakfasts are typically not owned by corporations.
According to the latest figures, B&B ownership in the United States breaks down as follows:
72 percent of owners are couples
18 percent of owners are individual females
5 percent of owners are individual males
5 percent of owners are non-couple partnerships
79 percent of owners live on the premises
The average American bed and breakfast has an occupancy rate of 43.7 percent and an average daily rate of $150. One way to stay on top of B&B and lodging trends is to connect with industry associations like AIHP, the association of independent hospitality professionals. Bed_and_Breakfast_Divider
Step 1: Questions to consider before committing:
Are you a people person?
This more than anything can be a deciding factor in whether your bed and breakfast venture is a pleasant dream-come-true experience or a daily grind which will wear you down in no time.
According to Kathleen Karamanos, being able to interact with your guests is a key aspect of the job. “You have to make sure you enjoy being in the service industry,” she says. “If you don’t genuinely enjoy meeting new people and finding out where they’re from and learning all about them, this is not the business for you.”
There is plenty of anecdotal evidence of bed and breakfast owners who mistakenly thought they could simply check their guests in and then not interact with them again until they checked out, as though they were running a conventional hotel or vacation rental. This approach is a recipe for failure in an industry that relies on word of mouth and social media recommendations.
Do you have a sufficient business background?
The bed and breakfast industry is a common haven for those looking to get out of the high-stress, corporate lifestyle. While there is no question that great relaxation and satisfaction can be found in the decorating, baking, and cooking that will fill your day, there is still a business element that cannot be neglected.
It is probably no coincidence that nearly three-quarters of all bed and breakfast establishments in the U.S. are owned by couples. Not only is the workload demanding for only one person, but often it requires two people with very different dominant skill sets. It is very common to see one person handle all the hospitality duties while the other focuses on the business responsibilities.
Are you looking to get rich quick?
There’s nothing wrong with wanting to make a huge amount of money quickly, but you will likely want to look for alternative business opportunities if this is the case. That said, running a bed and breakfast can be a profitable and sustainable business. Many couples use it as a way to provide steady income while maintaining a lifestyle they enjoy. However, it is not the type of business that will provide a huge cash infusion over a short period of time.
There may be special events (conventions, festivals, and so on) which will keep your bed and breakfast booked solid for a stretch of time, but in the long term, occupancy rates will ebb and flow depending on the season. It is practically unheard of for a B&B to be at maximum occupancy all year round. So while you can make a steady profit, you will not “get rich quick.”
Are you prepared to give up weekends and holidays to run your business?
If getting away during holidays and long weekends is important to you, it should not come as a surprise that running a B&B might not be the best business venture for your lifestyle. Your busiest times will be all those occasions when you would normally be enjoying a relaxing get-away yourself. Committing to running a B&B means making peace with the fact that you will be working when the rest of us are traveling and playing.
Step 2: Create a bed and breakfast business plan
Every new business can benefit from writing a business plan. You’ll definitely need one if you’re planning to seek funding in the form of a bank loan or investment (more on that in the next step).
If you’ve never written a business plan before, check out our free library of hotel and bed and breakfast sample business plans. You can also download our free business plan template to help you get started.
Don’t get bogged down in the process. If you don’t need to seek funding, write a Lean Business Plan instead, and use it as a tool to strategically manage your business as it gets up and running and starts to grow.
Using a tool like LivePlan that has business dashboards that connect to your accounting solution built right in can help you stay on top of your finances and even model scenarios for growth.
Like, what if you were able to exceed the industry average of less than 50% occupancy? What if you added a second location? What if you increased prices by 10% or hired someone to cook breakfast? Reviewing your financials regularly and especially understanding your cash flow can really help you when it’s time to make a major financial decision.
Step 3: Consider your startup financing
Many older couples sell their home or business in order to invest in a bed and breakfast which will serve as both their residence and primary source of income. If this is not an option for you, there are several funding options, including finding private investors, getting a small business loan from a bank, or finding other business support programs. How much money needed to get the project off the ground will depend on whether you are inheriting a ready-made B&B or converting a property into one.
If you are converting a residence into a bed and breakfast, a suggested rule of thumb is $20,000-$40,000 per guest room for a small property and $35,000 to $50,000 for a larger one. This factors in costs for remodeling to meet regulations as well as brand new bedding, towels, appliances, fixtures, and decorative effects for the room.
Always factor in maintenance costs, both preventative, and emergency. Even in the best-case scenario, you are still going to pay for regular upgrades and maintenance to the exterior, plumbing, and electrical. You’ll also have to be prepared for the worst-case risks when a plumbing pipe bursts or an entire section of the building needs rewiring. If these costs are not factored into the startup financing, you can find yourself in an operational bind before you know it.
Step 4: Choose your location
While it is true that almost any private residence can be converted into a bed and breakfast, not every residence is well suited to being a B&B. To be successful and stand out amongst the competition, there should be something unique and attractive to the building you plan to use. Spend some time on choosing the best location before you buy your property.
Many bed and breakfasts use a historic angle to draw guests. Often a Victorian home can give travelers a sense of what it would be like living in the area in the late 1800s. Others may use proximity to the waterfront or other notable features as a way to entice guests to stay there.
Kathleen Karamanos believes the convenient location of her bed and breakfast is a big selling point for her business. The Fundy Heights B&B is close to downtown as well as to the major highway, which brings travelers north from the New England States, Southeast to Nova Scotia and Prince Edward Island, and West to Montreal, Ottawa, and Toronto.
Zoning and regulations:
You’ll want to study up on all local and state or provincial zoning by-laws. You may have the most beautiful, well-maintained vintage property that seems perfectly suited for bed and breakfast conversion, but if it is in a strictly residentially zoned neighborhood, it may be over before you begin.
Check to see if a business license can be granted for the property at your preferred location. Because a B&B is not an industrial operation, it should not be too difficult to get the necessary clearances, but you cannot take it for granted. Without the green light from the zoning commission, you will not be able to move forward.
Then, be sure to find out what other specific bed and breakfast regulations are in place in your jurisdiction. There was a time when it was common for multiple guest rooms to share a common bathroom.
If this is the plan for your bed and breakfast, you would not be able to operate in the Province of New Brunswick, for example. Kathleen Karamanos is required to have a separate bathroom for each family unit who stays there. Half of the rooms have a private bathroom while the other half have stand-alone bathrooms assigned to each room. Make sure you are aware of all local regulations for running a bed and breakfast as they vary from jurisdiction to jurisdiction.
The right local economy:
Like any other part of the hospitality industry, staying at a bed and breakfast is really a luxury which is not available to everyone. It is crucially important that your B&B is located within a community that has a proven tourism track record and a local economy that can support it.
Don’t give yourself an unnecessarily tough row to hoe by opening up a bed and breakfast in an area that doesn’t have the tourist draw to support it.
Step 5: Take care of permits, licenses, and certifications
You’ll need to make sure you have all of your business license and certifications in place. This goes well beyond simple zoning clearance and covers all the regulatory requirements in running this type of hospitality service.
One comprehensive checklist for all the business licensing and support requirements is as follows:
Conditional use and sign permits (if required)
Business name and/or DBA registration
Certificate of occupancy
Account for transient/lodging taxes
Sales tax account (seller’s permit)
Federal and State Tax ID
Business checking credit accounts
Merchant account (to process credit cards)
ServSafe food certification (if required)
Health Department inspection
Fire Department inspection
Liquor license, if applicable
Insurance (business, liability, property, and liquor liability if applicable)
Property management/reservation and accounting software
Step 6: Develop your marketing strategy
Very few industries are more reliant on word of mouth to attract new customers than a bed and breakfast.
It would seem the best way to get new guests through the door is to keep your current guests more than satisfied with their stay. Especially since the modern day “word of mouth” is a travel site review, where a bad review can be a permanent stain on the operation’s reputation.
Use email templates to help streamline your communications with guests and your staff to save you time and increase guest satisfaction. Keep your website up to date, and consider whether it makes sense to use listing platforms like Airbnb. And always follow up and ask for reviews
Kathleen Karamanos launched a specific strategy to establish strong ties to the travel sites and local tourism boards. That strategy has since proven to be very successful.
“We received a certificate of excellence from Trip Advisor in 2015 and since I took over in 2014, I was able to raise our Canada Select (National accommodations rating program) score from a 4 to a 4.5,” she explains.
Kathleen believes you cannot overestimate the importance of travel advisory ratings in attracting guests. Despite being in a demographic known for their comparatively sparse use of technology, most of her guests find her bed and breakfast and make their first assessment online. But don’t panic if you get a bad review. It’s an opportunity to improve going forward.
She also strongly recommends getting involved with local travel boards and groups, as indirect marketing of your establishment can be very effective in increasing your occupancy rate.
Typically, a B&Bs target market consists of the following:
Couples on a romantic getaway
Locals in need of extra bedrooms
Start thinking of special promotions and offers that would appeal to each of the above segments.
For example, partnering with a local spa to offer a reduced rate on a couple’s massage to guests who stay at your bed and breakfast is a great way to attract more business and it is benefiting more than one local business. Find other win-win partnerships and it will go a long way to strengthening your B&B’s long-term prospects for success.
Step 7: Hire your staff
Perhaps you are part of a couple looking to open up a bed and breakfast and you plan to divide the chores and responsibilities among yourselves. This is not at all uncommon. But before you decide to join their ranks, you should have a complete picture of precisely how labor intensive running a B&B can be.
Susan Poole is the owner of the award-winning 40 Bay Street Bed and Breakfast in Parry Sound, Ontario, and serves as a bed and breakfast coach for new and prospective owners.
She outlines the daily and hourly commitment to keep the place up and running this way:
Breakfast takes three hours from starting preparation to finishing the clean-up
Each bedroom and bathroom plus laundry take an hour
Ensuring that rooms are booked takes up a lot of time as well
All of this is on top of the other weekly chores that must be done, such as grocery and supply shopping. If you are not fully prepared to take on this workload yourself and be fresh to interact with your guests, you will want to bring in hired help.
Each owner will have to decide which responsibilities they want to take on themselves and which ones they want to delegate to employees. Kathleen Karamanos decided to take a culinary course in New York prior to taking over her B&B and believes it has made a huge difference in the quality of service she is able to provide to her guests.