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Will You Make Money Running a Bed and Breakfast?

Part of a worksheet series for aspiring innkeepers

By

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Many people say the financial benefits are one of the reaons they want to open a bed and breakfast.

It's probably not realistic to expect to earn your entire living from the operation of a small (four rooms or less) bed and breakfast. On the other hand, if you're looking for a way to supplement your income, a bed and breakfast in your home can provide some other financial benefits.

In the U.S., bed and breakfast operators may deduct some costs when preparing taxes. (IRS rules are always changing, so you should get professional advice on tax matters.)

How Much Can I Make?

Let's look at an example with four rooms available at $85 a night.

  • If every room is filled, that's $340 per night.
  • Over a week, 4 rooms x 7 nights = 28 room nights. 28 x $85 = $2,380.
  • There are 28 room nights in a week x 4 weeks = 112 room nights in a month. If every room is booked every night, that's 112 x $85 = $9,520.
  • There are 365 nights per year X 4 rooms = 1460 room nights. If every room is booked every night, that's 1460 x $85 = a maximum annual gross income of $124,100.
Notes:

  • $124,100 is the potential gross income based on 4 rooms being filled every night over the entire year.
  • The average B&B operates at just over 50 percent occupancy, so realistically that number should be cut in half, to about $62,000.
  • Gross income is income before expenses and taxes. Those need to be subtracted before arriving at your net income (profit).
What's the Catch?

The chances of being booked every night of the year are exceedingly slim, no matter where you're located or what you do to increase occupancy rates.

What would be a success for your bed and breakfast? Many people would think that filling rooms 100 nights out of the year would be good, while for others that would be a disaster.

According to one survey of bed and breakfast operations, the average number of room nights booked is 362 (that's a per-inn total, not 362 nights per room), and that's after several years of operation. If you figure 362 room nights at the average rate of $60 a night, that's a gross income of about $20,000.

As you can see, running an inn isn't a get-rich-quick scheme.

Don't expect too much from your first year unless you're located in a very popular tourist area or an area of high demand with few accommodations. If you want to make a full-time living as an innkeeper, consider running a full-service inn with more rooms.

Determining Rates

How much should you charge? There are no set rules, but there are some guidelines.

It still surprises some to find out that many bed and breakfasts aren't cheaper than a hotel or motel. This was the case years ago, but not now. Most guests who stay at a B&B are looking for something special and are usually willing to pay for it.

You don't want to charge too much or too little. (Charging too little can lead potenital guests to believe that your inn isn't up to the quality they desire, even if that's not the case.)

The rate should be a function of direct and indirect costs plus an amount for profit. Research what comparable accommodations in the area charge, and consider these points:

  • Type of room
  • Ttype and size of bed
  • Private or shared bath
  • Special services or amenities
  • Average rate at local hotels
The more you have to offer, the more you can charge. Don't charge so much that you keep guests away, but don't charge so little that you are giving away your time.

Having too many or too few reservations may indicate that a rate change is needed. Remember, for example, 10 reservations at $100 each will net more income ($1,000) than 15 reservations at $65 each ($975).

Length of Stay

The typical bed and breakfast guest stays a short time. One survey indicated about 60 percent of guests stay one night, 25 percent stay two nights and about eight percent stay three nights.

The length of stay depends on the reason the guest is visiting. If it's a business trip or if you live in an area with many tourist attractions, a guest may stay longer. If the guest is stopping on the way to another location, the stay will be shorter.

Projecting Income

Use this formula to project your estimated gross income. (100 nights is being used as an average. You may adjust that number.)

# of double rooms (times) cost per room (times) 100 nights
(plus)
# of single rooms (times) cost per room (times) 100 nights
(plus)
# of suites (times) cost per room (times) 100 nights

Add the three numbers to arrive at your projected gross income for one year: $________

This series of worksheets and information was originally written by Eleanor Ames, a Certified Family Consumer Sciences professional and a faculty member at Ohio State University for 28 years. With her husband, she ran the Bluemont Bed and Breakfast in Luray, Virginia, until they retired from innkeeping. Many thanks to Eleanor for her gracious permission to reprint them here. Some content has been edited, and links to related features on this site have been added to Eleanor's original text.

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