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What to consider when thinking of starting a B&B

Sep 05 2017 21:00

Cape Town - The realities of running a guesthouse can be a little more complicated than people imagine.

If you’re trying to figure out if it’s the life for you, here are just a few of the things you need to consider.
 
Finding the right property
 
“There are two main ways to get into the B&B or guesthouse business,” says Bill Rawson, chair of the Rawson Property Group.

“You can buy an existing guesthouse or you can start from scratch in an appropriate property. Either way, location is vitally important – if you’re not in an area that appeals to holiday-makers or business people, you’re going to struggle to attract regular guests.”
 
Buying an existing guesthouse or B&B
 
When buying an existing establishment, Rawson recommends double-checking the zoning permissions to make sure the B&B or guesthouse is legal, and getting a clear idea of the rate of occupation and expense to turnover ratio from the existing owners.

“Guesthouses are usually significantly more expensive to buy than ordinary residential properties, for obvious reasons,” says Rawson, “especially if they are well-known or popular. You’ll need to weigh the purchase price against potential future earnings as well as the possibility of capital appreciation on the property itself, however don't ignore the existing market value of the property if used as a rental for a family."
 
Converting a residential property into a guesthouse or B&B
 
It may seem more affordable to convert a residential property into a B&B or guesthouse, but Rawson warns that this option isn’t always as cost-effective as it might seem.

“Renovations are not only expensive, but time-consuming and stressful, and it may take months to get the property up to scratch, not only for comfort, but to conform to all the regulations laid out by the government as well. It’s especially important to think about things that might impact your neighbours, like parking,” he adds, “or they’ll be lodging complaints that could put a pin in your guesthouse plans indefinitely.”

It’s also vital to ensure you get the correct zoning permission when setting up a B&B or guesthouse from scratch, and Rawson recommends familiarising yourself intimately with the requirements listed in the local Zoning Scheme.

“The rules can differ from suburb to suburb, let alone municipality to municipality,” he says, “so make sure to check the specifics for your area, and don’t take anything for granted.”
 
Cash flow and finances
 
The hospitality industry is notoriously seasonal, and unless you are lucky enough to attract regular business clientele, you may well need to weather periods of few to no guests and, therefore, no income. Because of this, it’s advisable to plan your finances very carefully and ensure sufficient savings to carry you through the occasional dry spell.

“Try not to overextend yourself, especially at the beginning. High monthly repayments on a large bond can become unmanageable during a particularly bad patch, and you don’t want to find yourself losing your property because of a few months of low occupation. Rates and taxes are also more expensive for guesthouses than ordinary residential-zoned properties,” he says, “but this shouldn’t have a dramatic impact on your profit margins.”

Dry spells aside, successful guesthouses can be very profitable endeavours, with relatively low overheads that scale according to occupancy. In terms of gross income, a guesthouse with four double rooms, charging R600 per person sharing could generate over R86 000 per month at an occupancy rate of 60%.
 
Adapting to the lifestyle
 
Life as a guesthouse or B&B manager can be extremely rewarding, but it’s also rather hard work. You’ll face long days – up early and working until late – and all manner of complications arising from day-to-day maintenance and operations, as well as fussy guests.

“If you’re not a people person, hospitality isn’t for you,” says Rawson. “A huge amount of being a successful guesthouse owner involves being able to please and placate guests – even when they are being unreasonable or rude.”

The upside of the B&B lifestyle is that you’ll likely still have plenty of time to yourself – usually in the middle of the day when your guests are out enjoying the attractions of the area. Remember that you’ll need to ensure there is always someone available at the guesthouse or B&B, so your leisure time might still need to be spent on the property.

One must also realise that you'll now be competing with Airbnb which is very competitive and well positioned due to the shared cost of online marketing. Today most businesses rely upon online marketing to be successful, so it's not just good enough to have an average website, you'll also need to market through as many other platforms such as Facebook and twitter. Today is all about consumer centric marketing.
 
While the B&B life may not be as easy, romantic or idyllic as people imagine, it can, nonetheless, be a profitable and satisfying alternative to a nine-to-five desk job. If you have the energy, dedication, and passion for people the hospitality industry requires, and the ability to plan and budget for the ebbs and flows of the tourism industry, a guesthouse may well be the ideal job for you.

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