Again this year, PKF Consulting was commissioned by the Professional Association of Innkeepers International (PAII) to conduct their biennial Industry Study of Bed-and-Breakfast / Country Inns Operations, Marketing, and Finances.  In this article, we highlight some of the findings of this just-released study.  PAII is the world's largest trade association serving bed-and-breakfast and country inns.

Prime Rates

The ability of hotels to raise their room rates three to four times the pace of inflation has certainly been a major contributing factor to the record levels of profitability achieved by the U.S. hotel industry in the 1990s.  However, hotels and motels were not the only forms of lodging to enjoy strong growth in rates.  In fact, B&Bs and country inns not only achieve higher average room rates than their respective comparable hotel categories, but their ADRs have grown at a faster pace since 1996.

In 1998, the average B&B achieved an ADR of $121.75, 11.7 percent greater than the ADR in 1996.  This compares to an ADR for limited-service hotels of $58.91 and a growth rate of 11.1 percent.  Comparing properties with food and beverage, the ADR for Country Inns was $133.84 in 1998, compared to $107.68 for full-service hotels.  Again, since 1996, rate growth has been greater for country inns (20.1 percent) than full-service hotels (15.6 percent).
 

Separate surveys have found that the typical B&B/Country Inn guest is relatively affluent and well educated.  Not only is this exemplified in the ability to pay higher room rates, but the methods used to book their reservations.  In 1998, an estimated 22 percent of bed-and-breakfast guests, and 12 percent of country inn guests used the internet to make their reservation.  For newer inns (less than 4 years old), this number soars to 32 percent.

Loyalty is also a trait among inn guests.  On average, 17 percent of B&B guests and 22 percent of country inn guests have previously stayed at the inn.  Word of mouth is also a strong generator of demand.  An average of 12 percent of B&B guests and 18 percent of country inn guests heard about the inn they chose from a former guest.

While tourists make up the largest segment of demand for inns, meeting attendees and business travelers are beginning to seek these more intimate accommodations.  To appeal to these segments, more inns are adding meeting rooms.  In 1998, 36 percent of all B&Bs had at least one meeting room, up from 29 percent in 1996.  Given their catering capabilities, meeting rooms are much more prevalent among country inns.  More than half (57 percent) of all country inns in the survey offer meeting rooms, up from 48 percent in 1996.
 

Like hotels, inns have found the need to offer practical amenities to attract business travelers.  In 1998, approximately 71 percent of all inns offered fax machines, up from 65 percent in 1996.  Internet access is also becoming more common.  Nearly 35 of all inns have internet access available on site, while an additional 12 percent have internet access available in their guest rooms.

What's For Breakfast?

For the population at large, they say breakfast is the most important meal of the day.  For inns, breakfast is a defining competitive feature.  Given this importance, it is not surprising that inns outspend their hotel counterparts on their complimentary breakfast offerings.

The average bed-and-breakfast spends $4.22 per-occupied-room on foods for the morning meal, compared to $1.39 for limited-service hotels.  The average food cost for breakfast at country inns is $4.03 per-occupied-room, while all-suite hotels that provide complimentary breakfast spend an average of $3.10.
 

What will you find on the breakfast table?  Fruit, juice, and baked goods are served by over 90 percent of bed-and-breakfast inns, followed in popularity by cheese or egg entrees, pancakes/waffles, breakfast meats, and cereal.
 

Prime Profits?

Due mainly to their small size (average 7.4 rooms), the financial performance of bed-and-breakfasts is actually superior to the average limited-service hotel when measured on a per-available-room basis.  In 1998, the typical B&B averaged $6,875 per-available-room in operating profits  compared to $5,600 for the average limited-service hotel.  It should be noted that the B&B profit figure is before a deduction of an owner's draw.

For country inns, the comparison is reversed.  The average country inn achieved an operating profit equivalent to $6,834 per-available-room, under the $12,136 figure posted by full-service hotels.
 

When evaluating the relatively profitability of inns and hotels, it should be noted that the "pay back" for innkeepers usually differs than that for the typical hotel owner.  Innkeepers frequently rely upon the inn operation to pay for a portion of their housing, food, telephone, and transportation.  In fact, half of all B&B owners and 30 percent of all country innkeepers still need to rely on income from other sources in order to sustain their desired lifestyle.
 

The business of innkeeping is schizophrenic.  On one hand, innkeepers are owners who need to worry about mortgage payments, property values, and income taxes.  On the other hand, they are operators who need to prepare good food, manage employees, and maintain a clean and safe facility.  Even though the total dollar amounts are lower than most hotel operations, the responsibilities and challenges for the owners of the nation's bed-and-breakfast and country inns are certainly equal, if not greater.

The 1998 Industry Study covered the performance of 289 bed-and-breakfast inns and 44 country inns.  Country inns differ from breakfast-and-breakfasts (B&Bs) in that they serve meals other than breakfast.  The study covers a wide range of operating statistics including amenities, marketing techniques, payroll costs, occupancy, room rates, financial performance, and a profile of inn owners.  For a complete copy of the 1998 Industry Study of Bed-and-Breakfast and Country Inns, please contact the Professional Association of Innkeepers International at (805) 569-1853.

Patrick Quek is president and CEO of PKF Consulting, an international hospitality consulting firm headquartered in San Francisco.