Tips On How To Start And Operate a Small Hotel or B&B

Last update: 12th February 2018

As one of our important markets are Small Hotels and B&Bs in these series we would like to share with you our experience after 11+ years of running a small B&B in Europe where we received multiple Awards of Excellence by Tripadvisor – it’s issued only to the Top 1 % of the establishments.

During the past 15 years we also stayed in other small hotels in USA, Europe, Middle East and Asia so we can easily compare and share the insight. The experience described below is accurate to best of our knowledge as of February 2018 and for establishments smaller than 10 rooms. All prices noted below are in US$ (USD).

I assume most of you reading this are going to setup an establishment in area where there already is some competition in place and also it’s not something super remote where is no infrastructure such as Broadband Internet connectivity and that it’s intended this way. These places might have different rules of the game and target markets – what I’m trying to cover here is how to best run an establishment in either central area of large city or near central where the competition is very high.

Target Customers

As it was said in previous paragraphs we assume here that your customers are looking for accommodation in close proximity to city center but are on tight-ish budget and are not in large corporate collecting points. The reason why I’m saying this is because if they have the money to stay in Hilton it’s unfortunately quite unlikely that they can be turned to suddenly seek for a small time establishment, however we have seen it at times – some tourists staying in large hotel and wanting to get “an experience” in a local small time B&B so they booked a single night – to their surprise our facility had almost everything that large hotel chain provides and for fraction of the price :). The exact opposite are people looking for hostels where they share the room with other people – unfortunately I can’t provide any insight in these kinds of establishments. The customers we are targeting are ready to pay in most cities between $50 to maximum of $100 during peak season for a double or twin room per night.

Another thing is that a lot of people in corporate jobs collect so called rewards points and as they stay during their work time in Hiltons (where corporate pays for it and pays a corporate price which is fraction of what retail customer pays) but the points are collected nevertheless, later these people will book a stay at Hilton for fraction of what the retail price is – they probably end up paying same or even less than what your retail price is while staying in a 5 star hotel – very difficult to beat this offer. Unfortunately you are not part of the hotel chain and these reward points make little sense to implement, though if you have a very frequent and loyal corporate customer you can grant them a free stay at your place or for a fraction of price – we did that at times and people really appreciate it.

Location And Transportation

While in previous paragraph we explained that these customers are on quite tight budget most people are not willing to stay in an area where there is no public transportation available nor the taxi is very, very cheap (ie. the ride to downtown should costs less than $10), if you have an establishment in such place it’s going to be incredibly difficult for you to gain good room utilization at a reasonable price. Larger hotels could establish a hotel shuttle however that is not viable option if you have less than 10 rooms. If there is no good transportation to your place I would generally advise against leasing/buying it. From our experience people seldom want to travel longer than 30 minutes to downtown (or their point of interest). This is why there are 3 most important things about real estate – location, location, location. I would add that to some degree this can be replaced with excellent Transportation infrastructure.

Infrastructure And Facilities

At the price tag mentioned above ($50 – $100) people already expect their own bathroom, restroom and obviously a free & fast WIFI. While laying new plumbing pipes is difficult to near impossible to do, laying a new Ethernet cable so the WIFI access point is closer to the rooms and therefore making the Internet faster is very cheap and the cabling can be easily hidden. Your customers expect a good WIFI coverage and they expect the WIFI to be fast – all this can typically be arranged for cheap using multiple WIFI AP (good and inexpensive brands are ASUS and Ubiquity) and thorough wiring. We strongly recommend to consider Ethernet wires directly to the rooms and if the budget allows even one WIFI AP for each room.

Regarding the speed of the Internet itself as of 2018 you should calculate at least 2 Mbps for each room for download and at least 0.2 Mbps for upload for each room, that is the bare minimum so if you have a 10 rooms hotel you should have actual speed of 20/2Mbps. You can easily check where you stand on www.speedtest.net if it shows less than that you need to get your speed upgraded or even change to a different provider. If this can’t be done you would have to order multiple Internet lines (say 2 lines with 10Mbps download and 1Mbps upload each, each line covering 5 rooms). The 20/2Mbps line should absolutely not cost more than $100 a month and in most places you should pay no more than $25 – $50 a month.

Typically the “residential” line is better choice than the “business” line as it’s significantly cheaper and the average speed is quite similar. Though whenever possible you should get the fastest Internet available as typically the price difference between the slowest and fastest line is one lunch worth while the speed can differ in order of magnitude – think up to 10x faster for 50 % extra. Another thing to consider is that at peak times, say at night from 9pm till midnight, the faster Internet plans have higher priority (different aggregation group), so while the cheap plans are billed at say 20/2 Mbps at peak times it can be half that speed (10/1Mbps), while the more expensive ones with billed speed at 50/5 Mbps can perform at peak times at speed of 30/3 Mbps or so.

In order to make your customer actually happy I would not settle with anything slower than 50/5 Mbps (for 10 rooms hotel) otherwise it’s unlikely it’s going to be praised in the reviews. There is also a mobile app to test this (search for speedtest.net) – download it, go to each individual room and test it multiple times, say 3 times during different times of the day and average it and consider the minimums, then speak to your IT provider what can be done about it.

Breakfast

The last chapter of today’s blog post is going to be about the breakfast. Speaking freely sometimes even in otherwise highly rated hotels this can be quite an awful experience – I have seen four star hotels (especially in Asia) which served bread, jam and eggs every day for breakfast. While nothing wrong with it if you do this every, single, day it becomes really annoying especially after more than 3 days. The advice here is to shop smart – you are a small establishment so you can still buy at local grocery things that are on promotion or near expiry and it’s going to be in sufficient quantity. This can save incredible amount of money and at the same time keep variety in place as at different times the grocery need to sell out different things. Just to be clear – we don’t encourage you or expect you to serve caviar, salmon and shrimp for breakfast but it needs to have variety and it needs to be fresh. Also especially if you have more than 5 rooms there are already some economies of scale and when people travel in pairs rather often the girls and women eat very little in the morning but at the same time are extremely pleased when they can “see it” that it’s there and available. Besides if you do a bit extra you and your staff can finish what is left :).

During the peak season such as around New Year’s Eve and Easter when you can charge more we strongly encourage you to improve the breakfast as well – these people are paying premium so treat them as such and don’t forget to take photos of the breakfast and post it on your hotel website as well as on review websites.

The Summary

The above applies to small accommodation – establishments with up to 10 rooms, in or near large city center. The target customer is willing to pay $50 – $100 per night.
Location is the key though if you are in not so great location but still with good public transportation or incredibly cheap taxi service you can do OK.
Invest in good Internet connectivity and fast & reliable WIFI – it’s typically very cheap fix and can make huge difference in customer experience.
Breakfast is operating expense but there is economies of scale and in the end the costs are not that high as it might seem at the first look. Try to offer different things on different days and customers will appreciate it. Shop smart, follow special offers.

What is coming next?

Next time we will share a bit about the promotion, customer acquisition and the customer service – you have a lot to look forward to.

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