Friday 29 March 2019

Finance Fridays – Starting a Bed and Breakfast Business

We were looking at ethical investing for last week's Finance Fridays. This week we are talking about setting up a bed and breakfast business. Many people see this as something they can do as a way of taking early retirement or to keep them busy in retirement. Television shows such as Four in a Bed have made many people think it is something they could do well. Is it just a case of cooking bacon and eggs each morning and then changing the sheets or is it a full-on seven days a week slog? Will you find it a money sink or can you really make a living out of it? Let's have a look at what you need to think about.

Is there a market for Bed and Breakfast where I live? - Tourist locations will always have people visiting and wanting to stay overnight. You must gauge if the demand is already covered by existing Bed and Breakfasts and hotels. Have a walk around at different times of the week and see how often the 'Vacancies' notice is displayed. Alternatively you may suit the business and contract work sector better. Some contract workers are looking for weekday accommodation for up to six months but go home at weekends. Also look into the availability of family rooms in your area as this is can be at a premium.

Is my property suitable? Having a spare room does not turn your home into a viable Bed and Breakfast business. If you just have the one room think about renting it out long-term. People staying in a Bed and Breakfast like to have their own ensuite bathroom rather than sharing. Will your domestic boiler be able to cope with a number of people having baths and showers in the morning? You will also need a large room to serve breakfast each morning. Also think about your own private living quarters. Is it secure? You may need to do some expensive building work to get the modifications sorted. It could lead you to buying a new building which is better designed for a Bed and Breakfast business. This is a big leap and could be a financial disaster if you don't do your homework right.

Price it right – With any product you need to price it right in order to make a profit. What you charge will depend on the area and your market but it still has to add up financially. There will be days when you have nobody coming to stay so that means no income. This all needs to be accounted for. What price you charge needs to be value for money but still take in account the costs of breakfast in terms of buying the ingredients and cooking it; the extra laundry; electric, heating and water costs; insurance and whatever costs you incur for marketing, adverting and being part of trade organisations.

Seasonality – The great British weather can have a vast effect on your Bed and Breakfast financially. People will often wait until a couple of days before booking a trip away if they are unsure about the weather. Other people may cancel or not turn up at all. In summer you could be fully booked but find once September arrives you are struggling for custom for months on end. This means you will need to spread your income out throughout the year.

Market it – Social media can be great free marketing tools but for a Bed and Breakfast there is a lot more than setting up a Facebook page. There are a number of trade organisations for travel companies. Some will give you a free listing but this may get swamped when looking at other local businesses. Premium listings will cost you money as well as advertisements in travel brochures. As a business repeat customers are vital so treat everyone well. You may not like all your customers but their review on TripAdvisor could make or break your business.

Book it – You can have it so everyone books direct through you. You will get the full booking price but it will limit your coverage. If you choose to be listed on sites such as bear in mind that you will need to pay them a commission on each booking.

Days off – People need to somewhere to sleep every day of the week. You may find your type of business and location is more popular on certain days. For example tourist locations will always have people wanting to stop for weekends while those close to motorway junctions and business parks will attract weekday visitors. At first to get the business up and running you will be tempted to book in whoever wants to come. Having a fully booked Bed and Breakfast is great financially but you may find you burn out quickly. Think about designating one day a week where you have no guests staying to give yourself a rest and catch up with things.

Have you ever thought about opening a bed and breakfast? Do you think you could make it a viable business?

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