Mar. 28, 2005 - Times are tough for Denver bed- and-breakfasts.

At least four central Denver bed- and-breakfasts have closed in the past two years. Among those surviving are seven historic inns that say they are scrambling for creative ways to stay in business.

They're searching for new markets, offering package deals, banding together and even taking marketing lessons from large hotel chains.

"We're hanging on, but we're struggling," said Jim Peiker, who has owned the nine-room Castle Marne Historic Inn since 1989.

"We've lost money the past four years. To stay afloat, we've put in $100,000, we've cashed in everything, we've refinanced. It's that desperate for us." The combination of terrorism and an economic downturn in 2001 noticeably slowed travel throughout the nation, especially business travel. Colorado's hotel occupancy rates fell from 64 percent in 2000 to 57.6 percent in 2002, and were relatively flat through 2004.

"We're slowly starting to rebound," said Richard Scharf, president and chief executive of the Denver Metro Convention & Visitors Bureau. "But some of the things that are happening with the B&Bs are happening in our industry as a whole." The smaller, family-owned inns feel economic pressure much earlier than the larger hotel chains, said Colorado Hotel and Lodging Association president Ilene Kamsler. "They operate on a much smaller margin." And because of their close proximity to downtown, the Colorado Convention Center and the state Capitol, Denver's bed-and-breakfasts have traditionally relied more heavily on business travelers than most B&Bs. Some innkeepers say business travelers accounted for more than half of their customers before the economic downturn.

Dennis and Christiana Brown were among the casualties of the difficult market. They spent 11 years running the four-room Haus Berlin Bed and Breakfast Inn before closing it in late 2003.

"After 9/11, we lost a lot of regular business travelers, and it all kind of stopped at once," said Dennis Brown. "We struggled through another year, then we were forced out.

"These are mom-and-pop businesses," he added. "There are a lot of expenses to cover." The Browns still live in their Capitol Hill house but consider it a private residence instead of a way to generate revenue.

Other innkeepers admit to losing more than $50,000 a year. In an effort to keep their books balanced, they say they are operating their rambling historic mansions with skeleton crews, doing all of the cooking and cleaning themselves.

Running a B&B is not an easy way to make a living, yet it's easy to fantasize about.

Sallie Clark, who for 19 years has owned the Holden House 1902 Bed & Breakfast Inn in Colorado Springs with her husband, offers seminars for aspiring innkeepers.

"We used to call it 'the Bob Newhart syndrome,' " she said. "People think it's an idyllic life." Debbie Reynolds, vice president of the Bed & Breakfast Innkeepers of Colorado and owner of the Rocky Mountain Lodge and Cabins in Cascade, said she did eight years of research before buying her inn three years ago.

"People glorify it," she agreed. "They don't realize it's a lot of work." But dreamers across the country are still opening B&Bs. In any given year, about 20,000 bed-and-breakfasts are operating in the United States, a number that has held steady over the past decade, according to the Professional Association of Innkeepers International. Almost all innkeepers also live at their B&Bs.

Most are located in tourist destinations, such as Colorado's mountain towns; only 18 percent are in urban settings such as Denver.

"Urban B&Bs are still a small part of the industry," said Robert Mandelbaum of PKF Consulting in Atlanta, who has studied the lodging business. "How many large, single-family homes do you find in urban settings? Plus, the cost of land and upkeep tends to be more prohibitive." The industry has a high turnover rate in terms of ownership, Mandelbaum added.

"A lot of people get into the business for the appeal of it," he said. "They don't realize it is still the lodging business, with all the taxes and the fees." Nationally, the average bed- and-breakfast occupancy rate was 38 percent in 2002, according to the Professional Association of Innkeepers International. That may contribute to the relatively high cost of renting a bed-and-breakfast room.

In 2002, the average national B&B rate was $136.70 a day, while Denver's average hotel room went for $86.05 a night.

Those prices are reasonable, innkeepers say, because they include a full, home-cooked breakfast, evening cocktail hour and personalized service.

Even so, Walter Keller said he thinks that "over the past 15 years, the industry has priced itself way, way too high. Doing it the old way just doesn't work anymore." He has owned the Lumber Baron Inn & Gardens in northwest Denver for 11 years but now is taking an aggressive approach to pricing that mimics the discount travel websites. He slashed his online quotes by up to 75 percent during the week.

"I'm doing what the big hotels and the airlines do," Keller said. "And as scary a transition as this was, I have found a lot of success with it. It definitely helps with the bottom line." Some of Keller's colleagues disagree with his approach.

"I think discounting hurts you in the long run because the customer is going to get used to paying $49 for B&Bs," said Crystal Sharp, who runs the Holiday Chalet Victorian B&B. "We have so much more to offer as far as experience than the Marriott." To fill empty rooms, owners have instead turned to special events, offering "romance packages" for couples and promoting themselves as locales for small corporate meetings, baby showers and weddings.

"We're definitely looking at packages that appeal to younger people," said Jay Hadley, co-owner of the Capitol Hill Mansion Bed & Breakfast. "There are markets out there that haven't been tapped into by a lot of the bed-and-breakfasts." Many say they also rely more heavily on neighborhood business, catering to the visiting parents and families of downtown Denver dwellers, many of whom live in apartments or townhomes.

Ellen Doig of Tempe, Ariz., said she always stays at the Gregory Inn when she visits her daughter and her family, who live north of downtown.

"There is such a huge difference between a B&B and a hotel as far as the personal service," Doig said. "I love it there. It's just so quiet and peaceful." Seven Denver inns also have banded together to form the Denver Bed and Breakfast Guild, pooling their resources to promote themselves online and in travel publications.

"Being a small, family-owned business, it's hard to do a lot on your own," Peiker said. "We just don't have the money." The website is a smart move, said Sandy Soule, vice president of marketing for the website BedandBreakfast.com, which has 5,600 member properties.

"It's a market where you have to be running fast not to fall behind," she said. "If the B&Bs want to stay competitive, they have to offer services like Wi-Fi (wireless Internet) and promote those services online." The guild convinced Mayor John Hickenlooper to declare last May "Bed and Breakfast Month." The promotion will be held again this May, with participating inns offering special packages to try to lure new customers.

Until then, Peiker and others say they're doing everything they can to weather the storm.

"It's a labor of love," Peiker said. "We're not quitters."

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