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Habeas Domus

Bed and Breakfast as a small business

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We have a lot of discussion on here about BTL and its effects on the market, but I thought I would bring up a thread for the small business area of Bed and Breakfasts.

How does B&B make any sense as a business in 2016 given the high cost of property?

My own anecdotal experience is that the number of B&Bs seems to be shrinking and the ones still open tend to be owned by "retired" 80+ years olds who are typically "only letting a couple of rooms" and "planning to pack it in next year"

Room occupancy rates are showing an upward trend since 2012 - which is what you would expect with more people leaving the industry than joining it, so less competition:

https://www.statista.com/statistics/301484/bed-and-breakfast-room-occupancy-rate-in-the-united-kingdom-by-counrty/

https://www.visitbritain.org/accommodation-occupancy-latest-results

That would seem to indicate that competition from AirB&B etc has not been forcing down rates.

 

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Anecdotally, it has always been incredibly hard work to run a B&B. Never underestimate the potential stupidity of guests. There are no guaranteed 'down hours'. You will find yourself pandering to the most ridiculous of requests. And you will still get crap reviews on occasion. Once you open your home to the public, the law of averages says that there will be a proportion of nutters.

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I want a bowl of organic fair trade M&Ms with all the green and yellow ones removed, brought to my room, like YESTERDAY.

Edited by 200p

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There was a show on radio 4 this afternoon about the hidden homeless.

There are B&B type landlords coining it in London, who only offer councils, emergency bedsits, and charge accordingly. £600m odd is spent on emergency accommodation in that show.

Listen here http://www.bbc.co.uk/programmes/b080t8nn#play

and you can download the mp3 from that link.

Edited by 200p

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One couple I know have recently closed their BnB business, sold up and downsized. In the last few years they have got fewer bookings, mainly wedding groups. This is in a popular historic SE town. They used to get many bookings from US tourists, but that business has dwindled to nothing. They concluded that US tourists were just not coming to the UK now, or perhaps were staying in London. They also had plenty of stories of guests who were a right PITA. Too much work for too little return. The nail in the coffin was that their large Victorian property was mortgaged on an interest only loan, coming up for renewal next year. Without much BnB income, the loan would not have been renewed. They sold out and repaid the loan just in time - very lucky to have one viewer of the property who bought it.

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1 minute ago, onlooker said:

One couple I know have recently closed their BnB business, sold up and downsized. In the last few years they have got fewer bookings, mainly wedding groups. This is in a popular historic SE town. They used to get many bookings from US tourists, but that business has dwindled to nothing. They concluded that US tourists were just not coming to the UK now, or perhaps were staying in London. They also had plenty of stories of guests who were a right PITA. Too much work for too little return. The nail in the coffin was that their large Victorian property was mortgaged on an interest only loan, coming up for renewal next year. Without much BnB income, the loan would not have been renewed. They sold out and repaid the loan just in time - very lucky to have one viewer of the property who bought it.

US tourist that is looking for B&B accommodation - probably mid income and probably not doing nearly so well in current economy than they were. Meanwhile replaced in numbers by Chinese for example, probably not culturally enticed by B&B type accommodation - hotel and visit to Oxford street or on large tours with accommodation provided by operator - again hotel based to get the number of places required.

 

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Cause it make sense, tax credits.

It does actually make sense to me as a guest  knowing that i am receiving a service that is supplied by the homeowner for zero pence per hour. So yeh, a weekend at a Georgian rectory for £30 a night each makes perfect sense.

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We have not seen any change in US guests and an increase in Canadians but those from the continent almost disappeared from about 2012 and have not come back in the same numbers. There has been a more recent down turn in Australian and New Zealand guests. We did have massive upturn in Chinese but this has almost stopped again now.

 Our B&B competitors ARE generally winding down their businesses and some are on the market but this seems to be a lifestyle choice. In all honesty I think some of them have made so much money that they are now in position as to never to have to put up with the crap from guests any longer. Believe me you have no idea as to the extent and magnitude of this - we have had almost all conceivable flavour of idiot in 10 years running our hotel. There is little doubt in my mind that most of the B&Bs are taking a lot of black market trade, undeclared to taxman and taken in cash. There are massive tax breaks for running a B&B and very little increase in costs, especially if you don't tell the tell the insurance, mortgage or taxman. Many costs can still be claimed from taxman even though most payments are taken as back handers.

For us this would not be possible even if we wished to as since 2008 almost all our trade is taken by card.

Worst of all is the fact that it seems to me that B&Bs pay no more council tax than the house did before. In comparison our Business Rates have gone up massively.

As for the data quoted I would be wary as  we  became exasperated by the supposed continual increase in occupancy levels quoted through the recession and stopped submitting our own data because of this. At the same time this was supposed to be happening many places were going bust. A better indicator would be the number of places for sale of Colliers Robert Barry and Christies. There seem to be a lot available at the moment and many sit unsold for years.

 

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tax credits are a possible explanation. I does explain a lot of B+Bs with young families in the likes of Scarborough and Whitby.

Although they'll struggle to raise the finance - banks are pretty aware that B+B is mostly a hiding to nowhere, so are reluctant to lend money to buy them.

As far as not telling your bank or insurance!!!! Youd have to be insane to not tell them FFS.

What is a pissed up guess burns down the house FFS?

Reall,y not telling your insurer does not save you money and you'll end up repo'd and in court.

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16 minutes ago, spyguy said:

tax credits are a possible explanation. I does explain a lot of B+Bs with young families in the likes of Scarborough and Whitby.

Although they'll struggle to raise the finance - banks are pretty aware that B+B is mostly a hiding to nowhere, so are reluctant to lend money to buy them.

As far as not telling your bank or insurance!!!! Youd have to be insane to not tell them FFS.

What is a pissed up guess burns down the house FFS?

Reall,y not telling your insurer does not save you money and you'll end up repo'd and in court.

I think over a short horizon it's possible to kid yourself that you are making money. You can earn an income by ignoring the dilapidations. I don't think that guest houses sell as well as unadulterated houses, one way or another the end result is probably very little profit. (profit- loss of capital when you sell over owning a normal house0

Edited by crashmonitor

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26 minutes ago, spyguy said:

tax credits are a possible explanation. I does explain a lot of B+Bs with young families in the likes of Scarborough and Whitby.

Although they'll struggle to raise the finance - banks are pretty aware that B+B is mostly a hiding to nowhere, so are reluctant to lend money to buy them.

As far as not telling your bank or insurance!!!! Youd have to be insane to not tell them FFS.

What is a pissed up guess burns down the house FFS?

Reall,y not telling your insurer does not save you money and you'll end up repo'd and in court.

I know several who are playing this game.

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Isn't AirBnB, the elephant in the room on this thread?  Easier to try it out and rent a single room or two - than buy a place half a dozen of them. 

Like BTL, any fool can have a go now and frequently does.  

Edited by StainlessSteelCat

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The view from a complete outsider....

From what I've seen when house hunting, getting out of the B&B game by selling up either means selling the place to someone else who'll carry on the B&B trade or un-converting the house. I've seen loads of houses where most or even every bedroom has had a wardrobe-sized shower cubicle squeezed in somewhere to make it ensuite(-ish), often ruining the original room - coving/skirting doesn't match, new "walls" of cardboard-like stuff, the room itself made jigsaw-shaped and pokey, etc. As a non-B&Ber, I don't want to buy 5 "bathrooms" nor do I want the ballache of removing a plywood Tardis from every bedroom.

So who buys them?

Genuine query...

Edited by Shrink Proof

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34 minutes ago, Shrink Proof said:

The view from a complete outsider....

From what I've seen when house hunting, getting out of the B&B game by selling up either means selling the place to someone else who'll carry on the B&B trade or un-converting the house. I've seen loads of houses where most or even every bedroom has had a wardrobe-sized shower cubicle squeezed in somewhere to make it ensuite(-ish), often ruining the original room - coving/skirting doesn't match, new "walls" of cardboard-like stuff, the room itself made jigsaw-shaped and pokey, etc. As a non-B&Ber, I don't want to buy 5 "bathrooms" nor do I want the ballache of removing a plywood Tardis from every bedroom.

So who buys them?

Genuine query...

Looking at how long ex B+B/Ghouses stay on the local businesses for sale website - no one.

 

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Only ex-Nursing homes tend to be harder sell.

I know one which is still operating - they need the cash - but trying to sell up to retire.

Way too big for a house.

Cannot be sold as a Nursing home as the current owner has a pass on the current nursing home regs. A new owner would need to update the building structurally.

Person planned on retiring at 55. They are currently 73.

Touch and go on cash flow. To few people in and i gushes cash out. If they are full it turns a small cash profit.

 

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The Nursing house was bought in the early 80s.

They did consider a hotel but the Nursing home option was more lucrative - then.

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For the larger B&B I would guess the only option is to convert to flats so a builder.

Either way you ain't going to make any money on the sale.

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39 minutes ago, Shrink Proof said:

The view from a complete outsider....

From what I've seen when house hunting, getting out of the B&B game by selling up either means selling the place to someone else who'll carry on the B&B trade or un-converting the house. I've seen loads of houses where most or even every bedroom has had a wardrobe-sized shower cubicle squeezed in somewhere to make it ensuite(-ish), often ruining the original room - coving/skirting doesn't match, new "walls" of cardboard-like stuff, the room itself made jigsaw-shaped and pokey, etc. As a non-B&Ber, I don't want to buy 5 "bathrooms" nor do I want the ballache of removing a plywood Tardis from every bedroom.

So who buys them?

Genuine query...

 

Someone like me, like you say a lot to strip out, but insignificant if you you have to do a lot of plastering / rendering and ripping out of a whole lot more than just the odd sink, loo and shower. It goes with he territory anything suitable for B&B's  are generally going to be older houses that have been maintained at minimal cost and often need to be stripped to the shell anyway. It certainly puts a lot of people off and it is reflected in the price that they eventually sell for.

 

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Years ago - and I mean way before I was born, so 1940s/1950s - seaside B=Bs or Guest houses, same thing, were run by maiden Aunt types.

Too many men blown up in WW 1 + 2; surplus of unwed women with no means to support themselves.

These type were still common up til the 70s - I remember a few around Whitby + Scarborough.

The 60s saw a lot of people retiring early - normally on medical grounds - from the mines and moving to the seaside for the woman to run a B+B whilst hubby convalesced.

80s saw a rework of that with people being laid off with a reasonable payoff and selling up to run a B+B for 10ish years before they fully retired.

These days? Dont need to be married in a relationship to get knocked up. No one works down the mine. Few people are laid off on good money; most people will be working way after 65.

Just leaves gay men cashing up after 30 years on cruise ships.

 

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Running any form of small business tends to be a lot of hard work and hassle for fairly limited rewards at the best of times unless you're very lucky and talented. High property prices make getting into the market nigh impossible unless you've got serious money & if you had chances are you could think of better things to be doing with it in the first place. The decline in the B&B market is the traditional owner getting out & very few entering the market.

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