Financial Chanracteristics of Bed-and-Breakfast Inns

Abstract

A survey of 403 U.S. bed-and-breakfast inns in 46 states found that financial returns for large operations were generally better than those of small as B&Bs. Besides asking typical demographic-data questions, the questionnaire focused on topics such as market mix and sources of business; occupancy rate and room rates; the innkeeper's previous hospitalitybusiness experience; and the methods of entry to the business, project development, loan structure, and profit-and-loss statements. The data show that net operating income, return on total assets, and return on equity for larger operations (nine or more rooms) are favorable, compared with smaller operations, indicating significant economies of scale in the B&B industry. Large operations not only captured a greater market share than did small inns, but also achieved higher operating efficiencies. The survey data suggest that the superior performance of the larger B&Bs may be attributable to their lower investment per unit, the operators' higher levels of previous hospitality experience, their greater marketing resources, and access to more-attractive financing arrangements.