January 23, 2020

The Outlook for B&Bs

When you are running your own small business it is sometimes hard to keep up with cutting edge information. Our slower times in the Wisconsin winter allow more time for reading, reflection and planning.  I recently re-listened to an InnSpeak podcast from my friend Ben Lloyd at Odysys. The podcast originally aired in Spring of 2019.

Ben was discussing the state of bed & breakfasts (B&Bs) as a segment of the lodging industry with Rob Fulton.  At the time, Rob was the CEO of AIHP (the Association of Innkeepers and Hospitality Professionals).  The podcast discussion was prompted by a research report attributed to PhocusWright.  AIHP commissioned the report in partnership with PhocusWright originally released the report in late 2018.

Just to note how things are changing in the lodging industry, Expedia bought out in the summer of 2018.  A once supportive, listing oriented website became another commission charging OTA (online travel agent) under the Expedia umbrella.  Also, as of January 1, 2020, AIHP merged with the Professional Association of Innkeepers International (PAII). This move consolidated these two professional organizations into one association called the Association of Lodging Professionals (ALP).  Rob is still part of this new, more dynamic professional new organization. It is better positioned to support innkeepers as a result.

After hearing the podcast, I was interested enough to find and read the PhocusWright White Paper titled “B&Bs UNBOUND – The State of B&Bs in the U.S.” Below I share what I learned with our readers. Much of the information below is my interpretations from the podcast and the paper.  I thought folks who stay at B&Bs and other travelers might find this information interesting.

The Lodging Industry and B&Bs
Multi-colored graphic of names of different types of hotels and lodging

Today’s traveler has endless lodging options from which to choose.  The internet has made it much easier for travelers to find everything from luxurious resorts to private cabins, from swanky urban hotels to hostels, and a large range of hotels at a variety of price points. Travelers often overlook the B&B segment of the lodging and hospitality industry. It is overshadowed by large hotels, hotel chains, and online travel agencies (OTAs) with much larger marketing budgets.

However, as many of our readers already know, B&Bs often serve wonderful full breakfasts. They also offer an array of unique characteristics that are hard to come by in other lodging options. Many B&Bs have been around for many years, even decades. They provide traditional charm and a level of service that usually cannot be found in larger properties and big hotel chains.

Confusion with the term B&B

Despite being long-established, there’s still a great deal of confusion and difficulty categorizing B&Bs within the lodging industry. The term bed and breakfast is often loosely used. B&Bs vary drastically from one to the next, and use various terms to describe themselves. Travelers may not be fully aware of the vast array of types of lodging, much less different types of B&Bs. They also may think about a property differently than it is portrayed. For instance, two in five innkeepers also describe their establishment as a historic inn, followed by country inn and boutique hotel. B&B guests, on the other hand, use all sorts of terms to describe their last B&B. These include guest cottage (13%), homestay (11%), and private home (10%), as well as country inn (15%) or historic inn (10%).

Like other alternative lodging, small, independent owner/operators primarily manage B&Bs.  Although the average B&B has eight guestrooms – some have as many as forty, while others have as few as two.  B&B operators of various sizes can also have stark contrasts in business performance. Regardless of size, B&Bs still serve a smaller segment of travelers than traditional hotels. Unlike hotels and other niche lodging segments, B&Bs are generally successful at capturing direct bookings.  Most of these direct bookings take place online or by phone.

 The B&B Landscape 

There are currently about 19 thousand B&Bs across the 50 states. From historic buildings and romantic lodges to ski retreats in the mountains and party destinations in the South, B&Bs span throughout the U.S. These properties offer a wide array of experiences and amenities.  Nearly two-thirds of the properties in the U.S. B&B market are located in the combined New England and Southern regions. A significant number of B&Bs make up the lodging market in all U.S. locations.

Key Findings

The following are some of the key findings noted in the report and podcast:

  • B&B properties are widely spread throughout the U.S., serving travelers in all corners of the country. Over a third of B&B properties are located in the South.
  • From low-end to high-end, accommodation options continue to spring up around the country. However, most B&Bs are long-established operations. Over half the B&Bs have been in operation for longer than a decade.
  • Unlike hotel chains, B&Bs are deeply rooted in the lives of the innkeepers that run them. Most are mom and pop establishments handed down through generations. They provide a full-time occupation and primary source of income for the vast majority of owners.
  • As expected with B&B properties, breakfast is by far the most common service offered to guests – some offer a small continental option, but 85% provide a full breakfast.
  • In addition to standard services and amenities, some B&Bs also provide services that generate additional revenue streams. Wedding facilities and conference rooms top the list for extra revenue. However, less than a third of operators offer such services.
  • Online ratings and reviews not only provide value to travelers during the shopping phase, but are critical to the success of B&Bs. Three in four innkeepers say online ratings and reviews on travel websites are the primary reason travelers chose to stay in their B&B.
B&B Operations

The overwhelming majority of B&B properties are small operations. From guest services and marketing strategies to housekeeping, cooking and other back of house operations, most innkeepers manage daily operations of a B&B as a full-time occupation.  As mentioned earlier, the average B&B has eight rooms. Since many have fewer rooms, most B&Bs employ fewer than five employees. Additionally, just one or two employees run half of the B&Bs.  Many of these are family-run entities that have been passed down through generations. Yet two-thirds of B&B properties have been in business for over 10 years, and over half have been operating for 20 years or longer.

These independent, family run properties, use different benchmarks than the overall lodging industry. The B&Bs may be small properties, but they provide a boutique value. Regardless of seasonal changes in occupancy, 77% of B&Bs change rates just a few times per year or less. Forty percent of B&Bs earn less than $100K in annual revenue, and almost two-thirds earn less than$200K. Still, the B&B provides the primary source of income for nearly two-thirds of their owners.

Current State of B&Bs

Despite the B&B marketplace being a rather small subset of the overall U.S. lodging sector, the American B&B industry is doing very well. When travelers book a B&B, they are guaranteed just that – a bed and breakfast – and more. While the overwhelming majority of properties (85%) offer full breakfast to guests, the remaining few still offer a lighter continental breakfast option. Even historical properties in remote locations recognize the needs of today’s digitally connected traveler. Nearly all (97%) properties offer Wi-Fi – the most commonly offered amenity other than breakfast. The forgetful traveler need not fret, 95% of B&Bs offer toiletries for guests as well. While not as common, the majority also offer daily room cleaning service, soft beverages and water, and welcome snacks for guests.

Providing a comfortable and home-like environment is embedded in B&B culture, and most properties recognize the growing importance of these features. Outside of standard amenities available for guests, common areas are the most common type of facilities offered by B&Bs. Nine in 10 properties include a garden/patio for guests to enjoy free time outdoors. Nearly three quarters include a social area or lounge for visitors to relax and socialize with one another. Seven of 10 establishments also provide libraries of free books available for guest use.

Future Outlook  

The B&B market shows a positive outlook for the coming years.  Though occupancy remains low for B&Bs compared to other lodging segments, that’s not to say guests aren’t happy with their experiences. Plenty of B&B guests attest to pleasant stays. The right marketing message in the right place can help entice travelers to stay at a B&B for their next trip. B&B travelers are extremely valuable customers, usually with decent size travel budgets.  Attracting new guests to B&B properties will benefit the bottom line for independent operators, and continue the success of one of the most traditional and charming segments of the U.S. lodging industry.

Unfortunately, like other lodging categories, OTAs are likely to take prominence in the coming years unless changes occur in the online lodging marketplace. Currently, big travel brands and OTAs bid hard for keywords in online marketing and drive up price. This makes it much harder for small B&Bs to operate successfully. Finding ways to drive direct bookings by guests will be important for the continued success of these small gems of the lodging sector.

Watch for our blog article on February 5th. It will discuss how travelers can save money and help keep B&Bs in operation by #BookingDirect!