Innkeeping Today

My, how innkeeping profiles have changed. When we first started consulting with inns, somewhere in the 18th century, most served dinner to house guests. The majority were run by a couple, most of them full time.  Occupancy was low, usually mostly weekends and a few holiday seasons. Foliage, with football, graduations, and other special functions helped to keep most of the innkeepers fed, dressed, and with a working vacation to an inn meeting.  Income from rooms was a functional minimum for survival, for the inn was the sole source of income.

The landscape is very different today. By far the dominant mode is bed and breakfast and increasingly the innkeeper is a single person or runs the inn while a partner holds down a normal job, often telecommuting for a good portion of their position. For the contemporary innkeeper, a smaller inn is a viable economic activity. The inn supplies lodging and all the other basic needs, much of it without any cost at all.

While a five room inn rarely produces a conventional viable cash flow, its contribution to the living costs of the owners is efficient at a very low level of activity.  Many smaller inns have high occupancies because they are situated in towns near attractions such as colleges and universities. But a high occupancy often requires staff and marketing costs above the more modest costs of single owner innkeeping.

Photo of B&B in Tryon NC
Tryon, North Carolina, Bed and Breakfast for Sale 

With the contemporary inn profile, innkeepers can combine their innkeeping activity with their partner’s business activities.  Unfortunately, bankers have been very slow to let go of their conventional models. Typically, they expect the inn to produce a cash flow equivalent to 1.25 times debt service. They have no ability to value the obvious positive relationship with normal living expenses. That means a high percentage down payment. In turn this encourages future innkeepers to opt for startups with a lower initial investment but a much higher long term cost.

We are fortunate to be consulting in the transfer process with many fine inns that fit this emerging profile. Call us for an introduction!

Warm Regards,

Bill

Leave a Reply

Your email address will not be published.