Marketing California Hospitality
Inn Sellers|California's Many Faces|Inn Financing|Inn Listings

Inn Buyers/Early Stages/Self Scrutiny

 Aspiring innkeepers should consider the following long before purchasing an inn.

Do you have the type of personality required to own and operate a successful hospitality establishment?  Do you have the fundamental willingness to “serve” the public graciously as well as the ability to roll with the punches that hospitality and the economy can throw your way

Have you read books that discuss owning B&Bs?  The publication entitled “So You Want to Be an Innkeeper: The Definitive Guide to Operating a Successful Bed and Breakfast or Country Inn” is a great resource

Have you taken professional seminars designed to educate aspiring innkeepers? 

 

Location, Size & Layout

Just as with all real estate, “location” remains the single most important consideration in purchasing a B&B or inn with potential for growth and future success.  The right “LOCATION” is key because the industry is “hospitality” – which involves “destinations,” i.e., “locations” where travelers “WANT” to visit.  Because location is so important, selection of the right location not only heralds the promise of a rewarding future, but also impacts success of a viable “EXIT STRATEGY.”  (Please call or email to receive an article on “The Importance of Exit Strategies.”)

Size of an inn can also be an important factor in deermining future success.  It is commonly thought that B&Bs with five or more rooms offer the best chance of profitability.  However, other important considerations include:

Does the inn provide adequate common areas for guests to relax?  These can be interior or exterior.

Does the establishment provide adequate and/or legal guest parking?

Do guest accommodations offer private baths

Does the inn include a commercial kitchen convenient to a guest breakfast room

Does the inn offer adequate storage and laundry facilities?

Does the inn offer easy-to-see and welcoming signage enabling visitors to locate the inn?

Will the B&B require updating and, if so, at what cost?

 

OWNERS’ Quarters

Owners’ quarters are increasingly important to aspiring innkeepers.  After a long day, innkeepers need a private place to relax and call “home.”  Unfortunately, B&Bs frequently offer extremely small owners’ quarters – sometimes merely one bedroom and bath without even a kitchen.  The size of owners’ quarters can make an impact not only on every day operations of an inn but also on the future of an inn sale.

 

Business Financials & Inn Appraisals/Valuations

Traditionally, B&Bs have been appraised primarily for their real estate value rather than for any business value.  For example, with an inn appraisal of $1,150,000, the valuation could break down roughly as follows:

 $1,000,000 (Real Estate, including Buildings and Land)

      100,000 (FF&E -- Furniture, Fixtures and Equipment)

        50,000 (Business Value)

The above offers a rough generalization but should be understood by aspiring innkeepers and owners alike.  Buyers often want to see financials documenting an inn’s last three years of operations.  Naturally, such financials can reflect an innkeeper’s managerial talents but, frequently, also are controlled by the economic health of the world, nation or immediate locality.  A poor economy can kill the greatest managerial talent and dull P&L Statements. 

As a result, appraisers feel comfortable evaluating only what is real and tangible.  Managerial talent becomes, therefore, the least quantifiable element in the equation.  For this reason, appraisal reports will always assign most value to the tangible land and buildings, some value to tangible furniture, fixtures and equipment and the least value to the “business” which supposes some intangible managerial skill and/or marketing talent.  Likewise, buyers should not be overly impacted by financial disclosures that reflect uncertainties of past intangible management. 

Because of our prolonged, slow world economy, occupancy has been down in all of today’s hospitality markets.  Since occupancy is what “pays bills” for hospitality, few B&Bs – just as few premier hotels -- are able to show positive financials today.  Although our world economy has impacted the entire hospitality industry, change for the better is beginning to appear in California.

 

Conclusion

Recently-released tourism projections for the Golden State point to better days soon ahead.  For a buyer, now certainly is the time to buy since inn prices are down.  However, as soon as the economy begins to show solid signs of consistent growth, B&B prices again will begin to rise.  This is “supply and demand,” and how classic real estate always works. 

In summation, any aspiring innkeeper today should not place too much importance on sellers’ past business financials but, rather, should focus on the far more important value of an inn’s location, size and other aspects.  But, from a business standpoint, any serious B&B buyer must ask himself/herself if he/she has those essential managerial/marketing talents required to take advantage of coming growth opportunities in hospitality – the same set of skills needed equally to trump and sustain any future economic downturns.

EXCLUSIVE BUYER REPRESENTATION SERVICES to Benefit from FULL MARKET COVERAGE

If you wish to tour inns, B&Bs and historic hotels that are for sale but not simply those listed only by myself, I am able to help you.  However, before I am able to serve you with full-market coverage, I will need you to review and sign an Exclusive Buyer Representation Agreement drafted by California Association of Realtors attorneys.  A copy of this Agreement can be found on the HOME PAGE of this website or by emailing me at: Johanna@apr.com

REALTOREqual Housing Opportunity
CalBRE Lic. # 01307696

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