Factors Influencing Bed and Breakfast Occupancy Rates

Occupancy rates are an important tool in measuring the value and ultimately the price of a given property.  But unless there is a thorough investigation of both past performance and future capabilities, bed and breakfast occupancy rates can cause a problem in both directions.  Dependence on historic rates can lead to an undervaluing of a property.  On the other hand, rosy projections based on erroneous information can quickly cause a financial problem.  This blog attempts to define factors that are positive for occupancy along with factors that might make occupancy rates below expectations.

POSITIVE FACTORS

1. Schools. Proximity to universities and private preparatory schools will provide several weekends of full occupancy.  These include parents’ weekends, drop off and pick up weekends, alumni reunions and graduation.  Other school events with a positive influence on occupancy include sporting events, especially football, and cultural events at larger schools.  School visitations of prospective students will also add some occupancy.  One cautionary note:  some events are scheduled in prime tourist time when the Inn could possibly be full without the event.

2. Medical facilities. Hospitals seem to constantly need staff and bring doctors to the area for interviews.  Many facilities use interim nursing staff with short-term assignments.

3. Business activity. In urban areas, local businesses will create fairly consistent occupancy.  An advantage of this type of occupancy is that it normally occurs midweek.

4. Strong hospitality area. When all is said and done, the hospitality area in which the Inn is located will provide highest occupancy numbers.  A cautionary note.  We often see Inns promoting their Inn as being only twenty minutes from a major activity such as skiing.  In truth, every ski area has plenty of occupancy available and twenty minutes might as well be two hundred miles.

5. Destination weddings have become a big deal.  There seems to be no end to the number of couples who actually want to get married.  Remember that most weddings occur on weekends in times when the Inn might be busy with normal traffic. 

NEGATIVE FACTORS

1. Rural location. Inns with rural locations as a rule do not have the normal midweek business available to urban Inns.  The market is largely weekend leisure travelers.  While they may create active business most weekends, a year of weekends is an occupancy rate of 28.4%.

2. The number of small (six bedroom) Inns is proliferating. The problem with smaller Inns is that they don’t have the funds to develop a cost effective marketing program.  Also, most small Inn owners are also the staff and must spend their time operating the Inn rather than marketing it.

3. Inns can at times appear to be very busy. However, prospective Innkeepers often visit Inns for sale during a busy time.  Most small Inns function on the coattails of larger properties during busy seasons.  Out of season, larger properties tend to swallow up whatever business there might be.

4. Airbnb cuts into the business of smaller Inns. Airbnb has proven to be very competitive in urban markets and less so in rural locations.  While it may not be a direct competition from an occupancy viewpoint, it provides heavy price competition.

5. Saturated market. Smaller Inns in particular are subject to loss of occupancy due to new competition in the marketplace. In strong market areas the competition can come from below in the form of Airbnb or from above in the form of flagged properties.

Future Innkeepers should of course look at history.  However, they need to take a careful look at the resources available to properties.  Inns for sale often have reasons that go far beyond occupancy.  Perhaps the better opportunities lie with Inns that have resources that are poorly utilized.  A careful inventory of available marketing resources should be reviewed before a purchasing decision is made.  Done right, it will be the basis for a successful marketing plan.

Until Next Time,

Bill Oates