Black Enterprise – Inn Vogue

Black Enterprise - Inn VogueBlack Enterprise – Inn Vogue
Running a bed & breakfast is a tough business, but one that can succeed with the right plan

It’s only dawn, but Monique Greenwood and her husband, Glenn Pogue, are already up and at it. In the hours ahead, Greenwood will nurse someone’s sunburn, cook breakfast for 10, and spread out refreshments for the same horde a few hours later. Pogue changes beds, tidies up around the house, and offers up tour advice for the local town. Both will hobnob as much as possible and pamper as many guests as they can. There may be a toilet or two to clean, but they’re loving every minute of it.

A former editor for Essence magazine, Greenwood has been an innkeeper since 1995 and now runs three bed and breakfasts. Her flagship, Akwaaba Mansion, is located in the Bedford-Stuyvesant section of Brooklyn, New York. A second, Akwaaba by the Sea, welcomes guests to New Jersey’s oceanfront community of Cape May. A third opened its doors in Washington, D.C.’s DuPont Circle last year. With two employees, the couple’s Brooklyn and Cape May inns grossed $185,000 in revenues for 2003 with 2004 projections of $370,000, thanks to the third location.

There’s a lot of work and money involved in getting this type of business off the ground. Pogue says that the job requires all-day effort. “I had no idea it was this much,” he says. “I hardly get to lounge. We’re up at 6 and we go all day … until 10 or 11 for late check-ins.” From time to time, Pogue works in television production, putting in additional time even after an eight-hour day.

Greenwood and Pogue are one of many entrepreneurs reaping the benefits of the economically resilient bed and breakfast sector. Despite a slowdown in tourism in the wake of the Sept. 11, 2001, terrorist attacks, bed and breakfasts have managed to hold their own. According to the latest industry figures compiled by the Professional Association of Innkeepers International, these businesses managed to pull in $3.1 billion in revenues in 2002, which was only slightly lower than in 2000. The number of inns in the U.S., meanwhile, has grown to 19,500 from 19,000. The average daily rate for a room has climbed to $136.70 in 2002 from $128.87 in 2000. A few other enterprising African Americans are participating in this growing industry and roughly 20 black innkeepers belong to the African American Association of Innkeepers International (www.africanamericaninns.com).

There’s definitely money to be made in this area, but if you think innkeeping is an easy business to get into, think again. The business can be time-consuming and expensive. Then there are the rigors of keeping house and pacifying guests. In fact, nearly a third of the entrepreneurs that launch these ventures will find the workload too much to handle and cease operations within five to seven years. But those who sweat it out enjoy the security of a sector that’s potentially lucrative and resistant to economic downturns. In this installment of the BLACK ENTERPRISE Dream Business series, we’ll look at some of the pitfalls and rewards of opening a bed and breakfast.


Brooklyn Beginnings

Innkeeping seemed to be the perfect way to combine a number of Greenwood’s hobbies. She had already bought several rental properties in Brooklyn. She liked decorating as well as entertaining, and her interests in antiques and architectural design dovetailed nicely with her new job. Finally, penning the book Having What Matters: The Black Woman’s Guide to Creating the Life You Really Want (Amistad; $12.95), helped Greenwood make up her mind. She says that an assessment of her dreams was the step she needed.

Her first opportunity was an Italian-styled villa, which sat on a lot that could accomodate six brownstones. “All of it was located in the heart of Brooklyn. The kids in the neighborhood called it ‘the haunted house,’ but I thought it was my dream come true,” she remembers. Greenwood rang the bell and went so far as to post notes once or twice a month on the front door to clue the owner in on her interest in buying the property. Finally, after two years of coveting the house, she spied a man standing on the front porch. She talked up her interest, made an offer, and won over the owners, closing on the property for $225,000.

That was the beginning. The structure was weather-beaten, and a fire a few years earlier had caused cosmetic damage. Moreover, the house’s plumbing and electrical wiring were in need of upgrading. A new oil heating system had to be installed. A new roof was fitted and the yard landscaped. The 18 rooms had to be repainted and furnished. Each room needed a private bath installed; in addition, Greenwood added Jacuzzis to the guest rooms. The front porch needed to be lifted six inches. Greenwood brought in a group of architects and contractors and spent more than $75,000 in the first year alone.

Typical bed and breakfast expenses include:

  • Renovations (electrical, plumbing, kitchen, landscaping, fixtures, security system, etc.)
  • Interior decoration (painting, wallpapering, furniture, lighting, etc.)
  • Linens and towels
  • Dishes and utensils
  • Smoke and carbon monoxide detectors, fire extinguishers, and other emergency equipment
  • Promotion and advertising
  • Permits and licenses
  • Insurance (liability, medical, property, workers compensation, etc.)
  • Telephone and answering service/machine
  • Office equipment and supplies (front desk, computer, copier, fax machine, etc.)
  • Reservation service(s)

But easily the biggest up-front cost for running a bed and breakfast is property. “That is the biggest chunk of overhead–maybe 80% to 90% of it,” says Michael Pinkston, who keeps track of members of the Professional Association of Innkeepers International, a Haddonfield, New Jersey-based trade association for innkeepers. “After you pay for the property and get it going, there isn’t much else.”
A nationwide real estate boom has boosted prices across the country, and Pinkston says that owners looking to set up shop on the coasts will experience increased home prices immediately. “There are some pockets of the country where real estate hasn’t gone up that much, but those places tend not to be the best travel locations,” he says.

Greenwood’s New Jersey oceanfront property, an 1850s Victorian structure that consists of three guest rooms and three suites with kitchens, cost her $500,000. Her most recent addition in Washington, D.C., which has eight guest rooms and one apartment suite, carried a price tag of $950,000.

The money it takes to convert a home into a bed and breakfast can be considerable, too, especially for the quaint older homes innkeepers often choose. Greenwood says her biggest conversion bill for the Washington, D.C. , property was for plumbing, particularly adding bathrooms and fitting boilers to heat water. In Cape May (which is only open from Memorial Day to Columbus Day), costs were kept to $20,000 since she bought a home that was already operating as a bed and breakfast. Her Washington, D.C., inn, however, took a $175,000 commitment. Greenwood says that there is just no scrimping when it comes to accommodations. “We attract guests by being a special place, and that means that we have to offer comforts and luxuries to make their visit meaningful,” she says.

In a typical month, ongoing costs for Akwaaba Mansion include a $2,100 monthly mortgage, $1,600 for help to take reservations, and $500 for insurance. Utility fees include $225 a month for electricity, $125 for water, $250 for heating oil, and $50 for cooking gas. Fortunately, Greenwood says that she can count on a 60% occupancy rate.

In most states, bed and breakfasts must be licensed. They must also meet numerous codes, including health, fire, zoning, and building regulations. The cost of compliance is a major consideration in determining the economic feasibility of your business. Greenwood and Pogue had their share of challenges in this area.

Inn the Zone
When getting ready to open the Brooklyn location, Greenwood was
dismayed to hear that some local residents didn’t like the idea of a business in their residential neighborhood. “I was shocked at first,” recalls Greenwood. “My husband and I thought we were doing something to make the neighborhood better, and we really didn’t expect some of our neighbors to want to fight that.” But because there are no zoning regulations governing bed and breakfasts in the New York City area, there aren’t any zoning laws on the books regarding this type of establishment. “Initially, they wanted to apply hotel regulations to me, which of course wouldn’t make sense,” recalls Greenwood. She and her husband then began a grassroots campaign, talking about their situation with the local media and community gatherings. It worked.

Help came from a local architect who had heard of Greenwood’s plight. “He was able to show there was a code that stated single family homes built before a prior date may house guests who pay for that consideration.” This enabled the home to operate as a bed and breakfast, and they were open for business–albeit after shutting down for seven months.

“Akwaaba was our home, so we knew we wouldn’t lose our home,” says Greenwood. She says it was heartening to find many neighbors soon rallying behind their cause. “A local architect came to us and helped us fight to get zoning, and a lot of people circulated petitions on our behalf.”

According to Michael Yovino-Young, a Berkeley, California-based consultant who specializes in appraising bed and breakfasts, zoning issues are just the tip of obstacles to surmount. “Yes, you’ll find that good bed-and-breakfast-type homes are generally in residential areas, and because of that, you can usually expect neighborhood opposition to a commercial operation,” he says. “Then there are building codes aplenty. Compliance with the American Disabilities Act alone will require ramps, wheelchair access, and special bathing facilities that can today run between $40,000 and $75,000, while most old homes are bound to have code violations for fire safety and electrical systems.” One solution, he says, is to buy an existing bed and breakfast. “It will cost more, but it might be wiser to buy into a known quantity that is established and has a revenue stream from the very start.”

Given the commitment and outlays needed, Pat Hardy, co-author of So–You Want to be an Innkeeper (Chronicle Books; $16.95), recommends that you prepare before you plunge into a bed and breakfast. The first step is to estimate an occupancy rate or the number of nights a year you can reasonably expect guests to stay in your establishment. It is a good idea to interview local hotel and inn owners as well as the local visitors’ bureau and chamber of commerce. According to calculations by Professional Association of Innkeepers International, bed and breakfasts in and around cities and resort areas tend to fill just under 50% of their daily capacity in the course of a year, while inns in rural areas average about 38% occupancy. Both Greenwood and Hardy say it is wisest to assume that your rate will start off at half the national average for the first year or two.

Another number-crunching drill is to calculate the room rate. Again, local tourism bureaus, chambers of commerce, and hotel owners may be able to help you hammer out a figure. Greenwood says that for her first establishment, she also had to rely on a hunch or two. Since her Brooklyn bed and breakfast had no local hotel competition, Greenwood instead dug up rates charged by hotels near LaGuardia Airport, some 10 miles away. She charged $85 a night her first couple of years. “After a while, my guests seemed shocked that my rates were so low, and it seems beginning business owners often undervalue their service or the good they sell,” she recalls. “I waited until we were established, but I raised the cost of a room to $135 after our third year.”

Then there’s the marketing aspect. Greenwood and Pogue don’t have a marketing budget, but rely on word of mouth and community involvement to increase awareness about their bed and breakfasts. “The bed and breakfast in New York will be 10 years old next year and so you get a lot of repeat customers who also then tell their friends and family. … We’re [also] aggressive with our Website.”

Though challenges remain for Greenwood and Pogue, they’ve done well for themselves and have no desire to exit the business. In fact, Greenwood and Pogue are about to close on an eight-room bed and breakfast and spa in New Orleans.

10 STEPS TO A SUCCESSFUL B&B
1. Formulate a business plan. Include an introduction, description of the business, sales potential, personnel, consultants, commitments (escrow), and financial information. Make a month-by-month schedule of projected income and expenses. Review the outline often and make changes as necessary.

2. Determine your market. Determine who comes to your location: tourists, travelers, or businesspeople. Form a profile (economic standing, family status, interests) of potential customers based on the local attractions they visit. Ask other inn or hotel executives in the area about their primary market.

3. Project sales revenue. One way is to combine projected occupancy and room rates. Local chambers of commerce and tourist bureaus have information on occupancy rates for existing hotels, motels, and inns.

4. Research your location. Choose a location based on your potential market. Find out how many inns are in the area, how long they have been in business, and if any have gone out of business.

5. Choose a building. Your inn will be someone’s home away from home. To succeed in this competitive industry, most inns offer a private bathroom for each bedroom. The building must be in an area with a low crime rate and within the service area for emergency service. It should also accommodate parking for guests and owners.

6. Learn the law. Visit your local chamber of commerce for information on the federal, state, and local regulations that will apply to your inn. Obtain a business license, which requires an annual fee. State regulations include sales tax permits and unemployment insurance taxes, if you have employees. Local requirements, which vary by community, are administered by the health department, building and zoning department, the department of public works, the fire department, and the planning commission.

7. Get insurance. As an innkeeper, you will be liable for personal injury to guests and damage to your property. Innkeepers should have commercial liability coverage for their building and contents of the public areas. Keep records of contents, receipts, and appraisals, and report all losses.

8. Renovate and furnish. Develop a schedule for subcontractors and ordering materials. Avoid costly fees by learning basic maintenance skills. A queen- or king-sized bed in each bedroom is standard.

9. Calculate room rates. Find out what other inns and hotels in the area are charging. Set your price by analyzing what the room has to offer such as a private bath, or Jacuzzi. Breakfast is usually factored into the rate.

10. Promote your inn. Plan how to promote your inn. Create or order brochures, stationery, and business cards. “Be able to convince people why they should come to your location,” Hardy adds. Use your Website as a valuable marketing asset and offer specials during certain seasons.

 

Original Source: Black Enterprise
by James A. Anderson
–Additional reporting by Stephanie Young
Posted: November 1, 2004