How to Start a Bed and Breakfast or Hotel Business

What could be better than creating the perfect location and ambiance for people to enjoy their vacation? A bed and breakfast or hotel business is a great way to provide a desirable destination for travelers and a sustainable income for yourself.

We all want to broaden our horizons — and as travel keeps becoming easier, your hotel could be perfectly positioned to take advantage.

There’s a lot of thinking that goes into creating a boutique hotel or B&B business. You need to decide the type of B&B experience you want to create, make the day-to-day running as efficient as possible and market yourself to the right vacationers.

The question is, just where do you start?

Here at Incfile, we know the answer, and we’ve shared it with more than 500,000 people who we've helped to form their businesses. Since 2004, we’ve supported hospitality entrepreneurs just like you, and we’re proud to have been a part of the bed and breakfast business revolution.

To get you off on the right foot, here’s our simple guide to starting up a successful bed and breakfast business.

From highlighting important facts to validating your ideas, and from choosing the right structure to your options for managing and running your business, you’ll find the answers you need.

Read on for some insight into creating your own bed and breakfast business and becoming an entrepreneur. In this guide we will cover:

Facts and figures about the success of bed and breakfast businesses

Business plans for hotel and B&B companies

How to find out if a boutique hotel business is right for you

Where to find bed and breakfast business groups, forums and support

How to validate your bed and breakfast business idea

How to validate your bookstore business idea

Useful online tools for hospitality business owners

Setting up your hotel business, including location, equipment, employees, taxes, finances, licenses and more

How to choose whether your hospitality business should be an LLC or corporation

Ideas for opening a hotel business

Why You Should Start a New Bed and Breakfast

You might be wondering just how popular bed and breakfasts are. Is it a growing sector, and can you make money running a boutique hotel? The statistics might surprise you.

17K

Number of B&Bs, boutique hotels and inns in the U.S.

5%

Growth of the industry every year

$3B

Revenue of the industry per year as a whole

44
%
Average occupancy rate of B&Bs in the U.S.

The average daily rate for a room is around $150

Most B&Bs have between four and eleven rooms, with six being the average

The most popular locations for bed and breakfasts (in descending order) are small villages, rural locations and urban vacation spots

Almost three-quarters of boutique hotel owners are couples, and 80 percent of all B&B owners live on the premises of their lodging

As you can see, there are plenty of opportunities to start up your own bed and breakfast business. We’ll help you be part of that success.

Is a B&B Business Right for You?

Although it can be exciting to open your own bed and breakfast, there will be significant demands on you as a small business owner. Here are some of the things you can expect.

A Day in the Life of a Bed and Breakfast Business Owner

Here are some of the typical tasks you’ll be performing for your bed and breakfast business on a daily basis:

Answering the phone, giving room rates and availability

Greeting guests and showing them to their rooms

Cleaning rooms, changing linens and similar day-to-day maintenance

Taking payment for stays at your B&B

Answering questions about local attractions, tours, restaurants and similar

Cooking meals for breakfasts and possibly other times

Buying supplies including cleaning materials and food

Skills Needed by a Hotel Entrepreneur

The following skills will be very useful in your role as a bed and breakfast small business owner:

The following skills will be very useful in your role as a bed and breakfast small business owner:

Good interpersonal skills for dealing with vacationers

Reasonable financial management and administration skills to run your boutique hotel business

Some skill with cooking and day-to-day hotel management

Strong understanding of the various supplies you’ll need

What Your B&B Customers Are Looking For

The needs of your vacationers will change depending on where you’re located, the type of experience you offer, their expectations and several other factors. For example, guests might want a combination of the following:

An inexpensive room that’s just a place to sleep

A B&B with spectacular views of the surrounding area

Beautiful decorations, furniture and amenities

A fantastic location within easy walking distance of great food and tourist attractions

Ultimately, your guests want a combination of comfort, interest and value for money. The balance between these will vary widely depending on the type of vacationer you’re trying to attract.

What Type of Bed and Breakfast Business Should You Start?

If you want to start a successful bed and breakfast business, it’s important to know what your options are. Here are some of the more popular business ideas:

1

Boutique Hotel for Tourists

This is the “standard” B&B experience providing accommodation for vacationers. They will want easy access to attractions, a nice place to relax and good knowledge of the surrounding area. This type of B&B allows you to cast the widest net when you’re looking for guests, and it will really help if you build relationships with local tourist organizations.

2

Easy Accommodations for Business Travelers

If you’re in a popular city, you can make a good living providing accommodations for business people. They’ll be looking for good transportation access, a place to work in their room, excellent internet connectivity and a way to relax after a long day working.

3

Romantic Getaway

Couples love escaping from the rat race for a romantic weekend away. You can provide beautiful rooms located near high-end restaurants and offer extras like champagne in the room or special baths designed for two.

4

College or University Town Rooms

If you’re in a location near a large academic and student body, you can market toward that demographic and their families. If people are coming in to visit family members or check out schools, they probably only need fairly basic, low-cost accommodations that are relatively close to the major colleges and universities.

5

Niche Boutique Hotel

If there’s enough of a market in your city, you can even go a little more niche. For example, your B&B might specialize in providing a particular type of food like gluten-free or vegetarian. You might be perfect for a specific type of guest like seniors or young people. Whatever area you decide to focus on, do the market research to ensure there’s enough demand.

6

Airbnb

Airbnb is another great way to make a living as a boutique hotel, especially if you only have one or two rooms available.

Validating Your Bed and Breakfast Business Idea

These are all great starting points, but you will need to build on them to make the business your own. You have unique skills and insight that you can use to create a bed and breakfast business that will really stand out.

Getting started in a bed and breakfast business can take a lot of time, effort and money. It’s important to validate your idea and test the marketplace before committing too much.

Identify your B&B business’ unique selling points (USPs)

You’ll need to find the areas that really set you apart. What is it that your boutique hotel does well that you can use as a USP? Do you offer superlative service, amazing food, a great location or something else that helps you stand out?

Look at who your competitors are in the space

Every B&B is going to have competition. That’s not a problem, so long as you can be distinctive. Remember, guests are coming to you for an experience they can’t get elsewhere, so finding out what your competitors are good at and differentiating yourself is essential.

Understand your market

It’s vital to understand exactly who your potential guests are likely to be. Spend some time researching your desired market, where they hang out and how you’re going to reach them. This will be essential to your marketing, communications, sales and outreach.

Talk to guests

Speak with potential guests to understand what they want from your boutique hotel, and validate this by asking if they would commit to spending real money on them.

Get involved with business communities and discussion groups

One of the great things about the bed and breakfast industry is that there are plenty of great communities and discussion groups. Get involved in them and learn the ins and outs of your chosen market before committing.

The thing to learn here is that it’s okay to say “no” to your first, second or third bed and breakfast business ideas. Few hospitality entrepreneurs get it right the first time. In fact, getting it wrong is often a badge of honor! Still, you don’t want to waste too much time, energy or money on the wrong initiatives, so ask and answer these questions honestly to find the right way forward.

Your Bed and Breakfast Business Needs a Plan

A strong business plan is vital for a successful B&B. The startup costs can be high (possibly in excess of $100,000), so it’s important to nail down all of your facts, figures, strategy and other areas.

You need to define how you’re going to run your bed and breakfast business, market yourself, get sales, make a profit and grow. This can only come about through creating a watertight business plan. It will help you get your thinking in order and show your commitment to your boutique hotel.

You will also need to look at financial projections for your bed and breakfast business. What are your expected sales and revenues? What is your profitability? How much money will you keep in the business to grow it? How much will you pay yourself and others?

If you can, try to plan your revenue for the next month, three months, year and two years

It’s vital to take into account the cost of setting up a bed and breakfast business in the first place, also factoring in utilities, staffing and other costs.

Business plans do vary slightly, but they should all cover the following areas:

1

An executive summary with the most important points from your business plan

2

Your goals and what you hope to achieve with your bed and breakfast business

3

A description of your B&B operations, background information and context

4

A market analysis and likely demand

5

An overview of how your boutique hotel business is structured

6

Your business model

7

How you will market and sell your offerings

8

Financial projections, revenue and profitability

9

Appendices

We’ve got the perfect guide to writing your business plan.

Choose the Right Business Structure and Register Your Bed and Breakfast

There are five main business structures you can have in the U.S., and it’s important to choose the right one. We’ve shared your options below. They are:

Sole Proprietorship

This is the "default" business structure and is what your bed and breakfast business will be if you decide not to create a more formal structure. We don't recommend this type of business as it doesn't give you the legal protections you need.

Partnership Company or LLC

This is a type of business that is formed when two or more people work together without creating a more formal business entity. Like a sole proprietorship, it may not give you all the protections your bed and breakfast business may need.

Limited Liability Company or LLC

The most common type of business entity. An LLC is fast, simple and inexpensive to set up and maintain. It protects your personal finances and assets and is a great way to start your bed and breakfast business.

S Corporation

This is a more complex type of business and isn't generally recommended for smaller organizations.

C Corporation

These are the largest and most complex types of businesses and are typically far more than the average hospitality entrepreneur or bed and breakfast business owner will need.

For more information on the advantages and disadvantages of different types of businesses, please see our in-depth guide. If you’ve still got questions, we’ve answered them to help you choose the right business structure for your bed and breakfast business.

In most cases, our recommendation for your bed and breakfast business would be to create an LLC. We’ve got a complete guide to everything you need to do. LLC formation does vary from state to state, but we’ve got you covered, wherever you are.

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Setting up Your Boutique Hotel and Business Operations

Once you've legally created your bed and breakfast business, you’ll need to get some other things in place.

Location of your Bed and Breakfast or Hotel

This is, by far, the most important choice you’ll make. You will need to secure a property large enough to give you all the B&B rooms you need to reliably generate revenue based on expected occupancy. Of course, you can choose to live in the property as well, which will reduce your expenses and ensure you’re on hand when needed. Choose a location that’s suited to the type of guests you want to attract. Look at other competitors in your immediate area, as you don’t want to be on each other’s doorsteps.

Marketing Your Bed and Breakfast or Hotel

Marketing will be a huge part of your bed and breakfast business. Naturally, you will need an awesome website, but you'll also need to get branding, newsletters, digital ads, social media accounts and other channels in place. You should also focus on review websites like TripAdvisor or Yelp. See if you can get into partnerships with travel agents and similar businesses, and market your B&B through travel portals and aggregators.

Software and Process

The right software and processes will make running your bed and breakfast business much easier. See our list of the best apps and software at the end of this guide.

Employees

To begin with, you might want to do everything in your B&B yourself. Later on, you could look into hiring people for tasks like cleaning or cooking.

Finances and Taxes

You will need a separate business bank account for your bed and breakfast business. You might also want to consider a business credit card. Additionally, you will also need to keep careful bookkeeping records and file business and personal taxes. Here at Incfile we can even help you file your taxes.

Furnishings and Equipment for Your Bed and Breakfast

You will need extensive equipment, furniture, fixtures and fittings for your B&B. This will include:

For each room:

En-suite bathroom with a shower and/or a good tub

Furniture including chairs and a desk or table

Bed and comfortable mattress

Internet access

Television

Luxury bed linens and robes

High-quality carpets and window treatments

For the kitchen and dining area:

Stove and cooking equipment to allow for preparation of multiple breakfasts

Tables, chairs, tablecloths and place settings

Enough refrigeration and storage space for all cooking ingredients

Cutlery and dinnerware for everyone

For common areas:

Television, music and other media

Finger foods and snacks

Television, music and other media

Hot and cold beverages

Telephone

Fresh fruit and flowers

Information on tourist attractions, destinations and restaurants

The Complete "Start Your Business" Checklist

A Clear and Comprehensive Guide to Starting Your Business the Right Way

Rules, Regulations and Taxes for Your Bed and Breakfast Business

You will need to explore local, state and federal licenses and permits, and we can also help out with researching your business licensing needs

Taxes

Taxes are a fact of life if you’re in business, and there are various ways you will need to file and pay them. This can include self-employment tax, state income tax and federal income tax. You may also be liable for occupancy and sales and use tax.

As a rule of thumb, we recommend holding back around a third to three-fifths of your earnings to pay your taxes. We can also prepare and file your tax returns for you.

Insurance for Your Bed and Breakfast or Hotel Business

Most bed and breakfast businesses should have comprehensive business insurance. There are various types.

Workers Compensation Insurance

Workers compensation insurance provides coverage for job-related illnesses, disabilities or injuries that affect employees. Regulations for this insurance vary from state to state. It typically covers areas like medical costs, loss of earnings, compensation and retraining.

General Liability Insurance

This insurance protects your boutique hotel business from claims due to being sued. This may include injury to members of the public, property damage, personal liabilities, legal defense and more. It can help protect your business from financial penalties and bankruptcy. This type of insurance could be essential to your bed and breakfast business since you’ll regularly have guests on the premises.

Home and Auto Insurance

If you are working from home on the administration of your bed and breakfast business or driving a vehicle for work, check whether your existing home and auto policies cover you for work use of your home or car. If not, you should either expand your policy so you’re covered or get dedicated business insurance

Maintaining Your Bed and Breakfast Business

There are certain forms and legalities you need to follow to keep your bed and breakfast business in good standing.

1

File an Annual Report

Depending on the state you’re located in, you will probably have to file a report every year. This report tells the state about any major changes to your business, and we can file your Annual Report on your behalf.

Annual Report
2

Pay estimated taxes

You will be expected to pay estimated taxes on what you plan to earn in the current business year. Typically, you will need to pay estimated taxes in April, June, September and January (of the following year).

3

Renew Business Permits and Licenses

Your business will probably have several licenses, permits and other regulations. These typically need to be renewed every year.

4

Prepare Your Taxes

You will need to work with your accountant to prepare all the taxes you need to pay.

5

File your taxes

You will need to file your taxes once a year.

6

Pay payroll and sales taxes

If applicable, you will need to make payroll and sales tax payments on a regular basis.

Groups and Forums for Hotel Owners

Here are some useful places where you can connect with other bed and breakfast entrepreneurs.

Useful Online Tools for Your Bed and Breakfast Business

The right software and apps will make it much easier to run your bed and breakfast business. Here are our recommendations for some of the best tools out there to make business operations a breeze.

Conclusion

The B&B or boutique hotel industry is the perfect choice if you love hospitality and want to provide an amazing experience for your guests. We hope this guide has inspired you to find the right idea for the type of hospitality you want to provide. Good luck!

Start your Bed and Breakfast Business with us, today