1.       The Numbers Don’t Lie?  Once again we are faced with an incredible array of numbers coming out of respected professionals who are trying to figure out the impact of the National recession.  The problem is that the numbers can be made to say anything, but a careful review will show that no matter whose numbers are used, the picture is not rosy.  Take for example the Gross Domestic Product (“GDP”).  The Government released figures in January showing a decline in GDP for 2008 of 3.1 %, the worst in over a decade, clearly signaling the fact that the recession was worse than most economists had predicted.  On February 27th, after the markets closed, the Government revised the GDP loss to a whopping 6.2 %.  Stocks world-wide are tumbling on that piece of bad news, in fear of a longer recovery period.  The downward spiral seems to continue with the report that even revered investor Warren Buffet lost $11.5 billion in the net worth of his Berkshire-Hathaway Corporation. 

2.      What is the impact on the Inn Business.  First, it is hard to get numbers for the Bed and Breakfast Inn business separately.  Smith Travel Research (“STR”) is the most respected source of historical numbers for the Hospitality Business, but does not collect data from small properties (under 50 rooms).  One data release from STR shows that New England seemed to be holding its own relative to the US National data.  For example, December, 2008 results for New England included a drop in occupancy rate of -2.1%, while Average Daily Rate (“ADR”) decreased by -3.6%.  This resulted in a huge decrease in Revenue Per Available Room (“REVPAR”) of -5.7%.  The National figures during the same December period showed larger decreases in Occupancy of -6.8%, in ADR of -3.2%, and a REVPAR decrease of -6.6%.

For the Year 2008 as a whole the figures are also instructive.  New England showed a decrease in occupancy of -2.8%, but an increase in ADR of 1.9%, resulting in a miniscule decrease in REVPAR of -0.9%.  The National figures for 2008 were far worse, with a decrease in occupancy of -4.2%, but an increase in ADR of +2.4%, resulting in a decrease of -1.9% in REVPAR. 

The numbers from STR show that, until about September, 2008 was a growth year with higher occupancies that dropped precipitously in the 4^th Quarter.  Rates were still climbing in December, as the Hospitality Business seemed to lag in discounting.  Overall, 2008 would be a down year, but only in comparison to the strong growth in the prior three years.

3.      New England is not the same.  One interesting thing that jumps out of the results shown by STR is that the New England States are not homogeneous.  In fact, it was clear in both the December and National results for 2008 that Northern New England (Maine, New Hampshire, and Vermont) fared much better individually than the Nation or their Southern New England counterparts.  For example, for 2008 as a whole, Vermont showed an increase in occupancy of +1.9%, an increase in ADR of 4.8% along with a REVPAR increase of +6.8%.  While the results in Maine and New Hampshire were more consistent, they were slightly worse than New England as a whole.   The bottom line was that overall, 2008 was a non-growth year, with a really cloudy picture for 2009.

4.      The Real Data comes from Sales Tax Revenues.  Another well respected source of industry research comes from Atlanta-based PKF Hospitality Research (“PKF”).   Utilizing results of sales tax collections in Maine, PKF reported that September lodging sales in that state dropped by -12% from 2007, and continued to drop by -2.6% in October on a year-to-year basis.  While Maine finished the year 2008 slightly ahead of 2007 (+0.7% growth in revenue), this came after 6% annual growth in the preceding three year period.  PKF is projecting as a whole a -7.8% decline in REVPAR for Maine in 2009, which would make it one of the steepest declines in recorded history since the 1930’s.  PKF also predicts that Maine will not fare as worse as others, because of its relative low cost and its rural location which fosters escape from the big cities.   Presumably this would apply to all of Northern New England with similar characteristics prevalent throughout the region. 

5.      Summary:  Batten Down the Hatches!  No one likes to consistently hear bad news, but there is little about the economy that seems to be saying that things are going to get better soon.  Predictions for a recovery in late 2009 and early 2010 are all that we have to go on, but most economists are hedging on those dates.  Similar to the broad-based declines in 4^th Quarter, 2008, retail spending, the American consumer seems to have switched to a survival mode, and this does not bode well for discretionary spending at least until there is some better news on the horizon.  We have advised our consulting clients of the following:

          a.       Budget for a decrease in revenue of about 10% for 2009, adjusting expenses as much as possible to that revenue;

          b.       Increase spending in Marketing, particularly electronic marketing to capture market share;

          c.       Neither increase or decrease overall rack room rates.  Develop packages with adventure travel features which show good overall value.  Up-sell rooms whenever possible, and include value-added options with all room rates.  Partner with local businesses and cross-market as much as you can. 

          d.       Hold discretionary spending to a minimum and build cash wherever possible in the event that this recession lasts longer than expected.  Do not defer necessary repairs and maintenance, but this is not the year to spend money on capital improvements. 

          e.       Remember why you came into the Hospitality Business. It is all about the guests and not the Innkeepers!

          f.        This too shall pass.  Look to the future, because the past is gone forever.

We spent some time over the Holidays with our family outside of Boston.  Rather than displace some of my nephews, we tried the closest hotel.  This was a large chain hotel on a major route west of Boston with a huge shopping center across the street.  While there were several small (3 room) bed and breakfasts nearby, we thought we should see what the hotel industry was up to.  What a mistake!

First of all, we should say that the room itself was newly redecorated, fairly large and well furnished.  The bed was a new pillow-top king-size, and the furnishings were standard up-scale hotel furniture.  There was a very large, new flat-screen TV with Hi-Def capabilities.  There was also free wi-fi and good desk space with plenty of lights and a.c. outlets.  It contained the typical business set up with desk and swivel office chair in addition to two other upholstered seats.  The heat was the ubiquitous through the wall air conditioning/heat unit, but with a more modern temperature control on one of the walls.  The bathroom was standard size, but upgraded with a stone countertop, tile floor, and bowed shower curtain rod, giving the appearance and feel of a larger bathtub.  In short, this was a fairly up-scale hotel room, the same to be found in most cities of the Country.   What it lacked in charm, it made up with functionality; or so we thought. 

We were using reward points left over from the corporate world for one of the two nights of our stay.  This is where the trouble started.  We had paid for our second night as a deposit, with the first to be paid for by the reward.  The cost of the room was quoted as $99 plus tax.  When we checked in, however, the desk clerk advised us that we would need to check-out and then check-in again on the next day.  They said that they could not guarantee that we would be able to stay in the room, as room assignments for check-ins are made each morning.  We advised them that they needed to figure it out, but we were not moving rooms.  The next day we did, in fact have to check-out and then check-in again, but somehow they managed to keep us in the room.   We then went to breakfast in the dining room.  This was a holiday, so they were not serving a buffet.   We were seated, and then waited about a half-hour for a server to bring the menus and coffee.  Overall, the breakfast was sub-par and the service very poor.   When we finally checked out, the desk clerk told us that since we stayed in the same room, which apparently was a higher level than the rate quoted us, we had to pay an additional $50, despite the fact that our written confirmation was clear.  We, of course, refused to pay, and the desk clerk said she would discuss it with the manager.  After we left, they just charged the difference to our card anyway.  We are still waiting for the credit that they promised, but the credit card company will reverse the charge if the hotel does not do so.

The long and short is that in the battle between hotels and bed and breakfast inns, we win, hands down!  It is not about luxury rooms, amenities, or discounted rates.  It remains true that personal service, quaintness, and charm will win out every time.  It is not just about the room.  While our room was perfectly adequate, and in fact, in some respects a clear upgrade, it was sterile, lacking any “charm” or individuality.  This room could have been found anywhere in the United States.  Close your eyes, and you may not know where you are for a minute.  One of the things about old house syndrome at bed and breakfast inns, particularly those in older, historical buildings, is that the sounds of the Inn at night, the groans of the boiler or creaks and pops of the radiators, can impact your sleep, at least on the first night.  Well try those hotel thru-wall heaters which make a huge noise as they cycle on and off all night.  I’ll take charm every time. 

The most important thing that we have to offer in our small part of the Hospitality Industry is the personal service that our innkeepers give to their guests on a daily basis.  This is what clearly sets us apart from the much larger hotel business, and the one thing that will help us survive the tough times to come.   The more the economy gets worse, the more respite, peace and good old fashioned hospitality will be needed to provide our guests with a retreat to recharge their batteries.   Do not ever underestimate what we have to offer the traveling public.  It is something that hotels can never supply, no matter how many concierges they have.  The hotels of the world will compete by price to stay alive.  The bed and breakfast industry has a magic wand and can better compete with hospitality, charm, and personal service.  For all times, this is what differentiates us from the hotel business, and what will continue to make us successful in the years to come.  What we need now is to spread the world that we are open for business as usual, and that means “Hospitality” with a capital “H.”

Many people decide to become an Innkeeper before they really understand what innkeeping is really about.  Innkeeping is a satisfying career.  However, if this major decision is not approached honestly, your dream of becoming an Innkeeper can easily become a nightmare!  We consider the following the basic five questions a Future Innkeeper should be asking themselves BEFORE they make the commitment to purchase an Inn.  These questions cover the who, what, when, where, and how of Innkeeping.  We will explore the following questions during the next four week period.  Be sure not to miss out!

• Who makes the best Innkeeper?
• What is the typical day at an Inn?
• When is the best time to purchase an Inn?
• Where is the best location?
• How do you go forward with an Inn once it is identified?

Stay tuned to get all of the great information.  Since it is the Holidays and you may not be able to wait, e-mail me at office@inns-for-sale.com and I’ll sent it to you right away!