Just received the March Consumer Reports magazine and a spark plug ignited in my brain! The cover story spoke to me. ‘Boost Your Home’s Value By 10%’.  Let’s see if what they say can also relate to how to make your Inn more valuable. Many of the suggestions made in this article are points we have been suggesting (strongly) with our innkeeping clients since The B&B Team has been in business. When The B&B Team values a property, condition plays a big role.

For the article, Consumer Reports contacted 303 real estate pros from around the country. They answered many survey questions. Let’s take a look at what innkeepers should be doing to keep their property in top condition. You do this for your guests, right?  You will also need to work for the time, and that time will come, when you open your Inn for potential buyers. It’s important to keep up with real estate industry trends to see what other property owners are doing to get their homes ready for a quick and profitable sale.

‘What are the costliest mistakes sellers make?

#1 Clean Up, Clear Out

‘Nothing drives away would-be buyers faster than clutter.’ I wish we could say that we see this occasionally but unfortunately we see this mistake far too often. Basements and owner’s quarters are the worst.  Potential buyers must be able to see their possessions in these spaces. They are leaving their comfortable private homes and need to feel they are entering a clean, safe and comfortable environment for their private living and working space.

#2 Spruce Up the Kitchen

Most of your guests may never see your Inn’s kitchen unless it is an open floor/door configuration. But your potential buyers will! Ongoing repairs and upgrading appliances and fixtures as needed is recommended. You don’t want to be facing costly repairs in a short period of time.  A fresh coat of paint goes along way too.

#3 Freshen up the Bath

Have to add the ‘s’ here!  “Simple improvements like caulking the tub or re-grouting the tile floor go a long way in the mind of the buyer.”  Remember, everything they see that is fresh, clean and repaired well is something they don’t have to face doing themselves.

The Consumer Reports article lists and rates fixtures for the kitchen and bath. Good information and worth picking up this issue or subscribing online.

#4 Paint the Rooms-Selectively

Fresh, clean and de-cluttered also can refer to the walls in your guest rooms. Fussy and flowery wallpaper has been on the unwanted list for a while. Starting now with updating your guestrooms is highly recommended. One or two at a time and you will be surprised at the positive reaction you will get from your guests as well as your future prospective buyers.

#5 Enhance the Exterior

Curb appeal is so important. It is like your home page on your website. The 3 second opt out rule is true for your exterior too. Buyers see overgrown shrubs, weeds in the walkways, and even worse, a cracked foundation. Result: They are thinking ‘reduced price’.

“The roof is another area to pay close attention to because prospective buyers are sure to do the same.”  The B&B Team will ditto this statement 5 X +. We have seen buyers walk away from properties that they are very close to purchasing because of roofing problems that the sellers just didn’t want to deal with. True!

“Web appeal” has been called the new curb appeal. That puts a premium on the photos that you use in your online property listing.” We love when our seller clients have good photos. “Buyers pay more attention to photos than the actual property description.”

These are just some highlights from this article with so much great information and advice. It could be 10% boost in value or even more. But don’t wait, the important word here is ‘ongoing’. If you value your Inn than let it shine. Others will also see the care and love you have put into your Inn and that =more value.

Thanks for Listening,

Janet Wolf

A thanks to Andrew Pruden, owner and innkeeper at The Inn and the great staff for their service and welcome.  If you get a chance to visit Bloomsburg, the recently opened Pub and Grille was fabulous and their  micro-brews and menu were a welcome Friday night treat.

Lots of laughs…lots of strong interaction…and lots of appreciated feedback on the effectiveness of the workshop.  But one attendee made a comment that I am still thinking about a few days later.  “I’m not afraid anymore, Scott”.  I think this just became another goal of these workshops for me.    Scott

My antennae went up like a dog’s ears at suppertime.  After failing to convince him that this is an important step to understanding the revenue and net operating income of the inn (to help establish its value), we closed our conversation that perhaps the best way to sell his property is as a residence through the local MLS system since a buyer would never be able to get a commercial loan on that property without the bank seeing the financials.  He was satisfied with that…I guess.

But the point is trust.  I lost trust with him.  Was he cheating the IRS and did not want to let anybody discover it?  Were his numbers so poor that I would be trying to sell his inn only on its potential?  Does he even have records?  All kinds of distrustful thoughts went through my head.  I hope all them are wrong.  If a seller, perhaps even unwittingly, withholds information from a buyer, trust is jeopardized, and with the limited number of buyers and the huge inventory of inns for sale, buyers will look elsewhere.  Building Buyer/Seller trust is critical.  So how is it done?

Like a good Boy Scout…Be Prepared!

• Having complete and accurate records (including taxes…they will be scrutinized during a buyer’s due diligence period)
• Track occupancy by month from year to year.  A buyer wants to see the seasonal nature of the inn (especially to understand what happens in the slow season).
• Have a complete Inclusion/Exclusion list of the furniture and fixtures will transfer with the property and what will go with the sellers.
• For a smaller inn, have a property condition disclosure (available from any real estate agent) prepared.  This is required in many states anyway.
• For larger inns, consider a Seller’s Inspection completed BEFORE a buyer’s inspector finds any defects (and they WILL find the problems!),  This inspection demonstrates full disclosure of the condition of the inn, provides a report accuracy defense in the event the buyer’s inspector overinflates the seriousness of a deficiency, and leads to a corrective plan to defuse emotions and begin negotiations.
• Keep your gift certificate log current
• Open and honest conversations about marketing, buyer’s opportunities, and full disclosure.

When Marilyn and I were looking for our inn long ago (the Dead Sea was only sick back then), the owner of one of our candidate inns pulled me aside and said “Don’t worry about the numbers, Scott.  I put two kids through college on this inn!”.  We left never to return.  If he was willing to cheat the IRS, he was willing to cheat us.

Innkeepers…think about the “surprises” that made YOU angry when you bought your inn.  We’ve all been there.  Think like the buyer of your inn.  What roadblocks can be removed now to build Trust and not jeopardize the chances of a timely and financially rewarding transfer.

Anybody have any trust surprises when you bought your inn?  We would love to hear about them and what could have been done differently.   Scott

]]> https://bbteam.com/blog/innkeeping-excellence/ Mon, 16 May 2011 16:48:27 +0000 https://bbteam.com/?p=2431 The B&B Team is incredibly fortunate  to work with a number of inns who exemplify excellence in Innkeeping. Whenever we see innkeepers doing all the things that make inns great, we are so pleased, especially when we’ve been able to play even a small role in that success.

This past weekend we held a seminar for aspiring innkeepers, people who are thinking about starting a bed and breakfast, at The Lakehouse Inn and Winery in Geneva on the Lake, Ohio. This was a wonderful setting for a seminar, because the location, itself, is so demonstrative of how to do everything right, one step at a time, over a period of years.

At breakfast our first morning, Sam Fagnilli, the owner and winemaker (and carpenter, architect, visionary, and resident handyman) explained to our attendees how they had started in 2000 with a rundown building with a poor business but a location they were seeking: a home on Lake Erie. Being larger than they needed for a house and more than they would have spent for a house had they found it, they decided to make it a business to pay for itself.

Once they had a few rooms open, they soon realized that they needed a draw to their inn. Located on the Wines and Vines Trail district of northeastern Ohio, they decided that wine would bring people, so they started making wine and opened a winery. That led to a core part of their business model.

With no quality restaurants in the area and none open in the winter, they had to feed guests an evening meal, so they opened a small restaurant, initially only for guests. Eventually that led to a separate building with patio dining open to the public. The tasting room and barrel storage eventually found a home below the “beach house” they renovated and turned into a luxury accommodation. Soon a beach-front dining deck complemented the tasting room. In recent years terraced stone walks and patios overlooking Lake Erie have further added to the property’s attraction. And weddings have added to the cash flow.

Did I mention that all of this was paid for by cash flow from the business, not borrowed funds? Today the inn has eleven guest rooms, wine making facilities, wine tastings, small restaurant with large patio dining, and a loyal clientele.

Last year they had the chance to purchase a small property across the street. In what was the living room of the old house, we held our Innkeeping classes this weekend, and we’ll not see it that way next year, as they will be turning the house into a good sized meeting room for indoor functions and a day spa. They’ll create additional parking for weddings and large events as well as summer staff housing on the property, solving past challenges at the same time. Once completed, they are going to expand the restaurant facilities to enclose what is currently open-air patio dining to make it a year-round facility with wine tasting in the winter months. Can you say “destination property?”

For the eleven years that this family has owned The Lakehouse Inn and Winery they have defied the odds. Every year they have grown their revenues, and there’s an important reason why. They believe, as we teach, that you can never stop moving forward, or you start moving backward. They have always paid attention to and studied their business, looking for opportunities to fill-in weak times and arenas. They understand the linkages that create reasons for people to come to their inn and provide memorable experiences. They have always attended PAII conferences to learn and get great new ideas. And they truly understand the meaning of hospitality. So, to Sam and Karen, Andrea and Lance, Nathan and all the staff at The Lakehouse Inn and Winery, kudos for showing us Excellence in Innkeeping.

A full agenda…board of directors meeting, business meeting for the association, my presentation on Exit Strategies, a delightful social, a breakfast presentation by Marie Lanier on Social Media, and my final presentation on Inn Valuations, punctuated by visits to the vendor booths, made for a full and satisfying meeting.

Wow! …you talk about a difference in topography and flora between NM and the Eastern Shore of Maryland!  We must have crossed the Rio Grande six times on the trip (in a car on a bridge, not wading) and through Hatch, the world’s mega-center of chiles!  About 4 hours south of Albuquerque, in Silver City, the Inn on Broadway was host to our evening social of munchies and networking.

When Nancy and I took the photo above, little did I know I was stepping on little spikey-burrs that penetrated the soles of my shoes (Nancy called them Goat heads), which took a while to pull out when we got back to the Chocolate Turtle, the inn owned by Nancy and Dallas Renner located in Corrales, NM.

But after a long couple of days “working” in Silver City, the real pleasure was getting back to the inn.  You see, most of the inns in NM, including the Turtle, were participating in the “B&B’s for Vets” program on November 10, where veterans and active service members alike can stay at no charge…a  generous THANK YOU for their service.  Here is a photo taken the next morning of those service  members at the Chocolate Turtle.

From left to right:  Army Sgt. Ross Cox and his wife, Master Sgt (ret) Terri Cox; Senior Master Sgt Jody Martinez (Air National Guard) and his wife Sarah; Marine Corporal Brian Barela with wife Victoria and son Uriah.

Thank you for your service and to those family members at home who support our active and veteran service members.

As a veteran myself, I am proud to be a part of the innkeeping industry, a group of folks who really care about what is important.     Scott

By now most of you realize that social media and consumer generated content, whether it be blogs, Facebook and Twitter, TripAdvisor, or product reviews on e-commerce sites, are essential to long term business success. After all, while Boomers still make up the lion’s share of inn guests (and, by the way, females aged 55-65 are the fastest growing segment of Facebook users), Gen X and Gen Y (the Millenials) are forming a growing percentage of the traveling public. And, since most businesses (like your inn) want to be around in a few years, paying attention is a smart choice.

A great article in Hotelmarketing.com called “Gen Y and the online travel marketer” by Caroline Gates of TIG has some eye-popping statistics blended with some good advice. For instance, not only did this generation (born between 1977 and 1995) grow up with an electronic device in their hand and a computer at every turn, but they are already spending about $200 Billion a year.  The younger ones aren’t booking rooms at your B&B, but the older ones are starting to, especially if you give them a compelling reason and show them that you “get it.” Gen Xers, more than Millenials, are definitely part of every inn’s guest roster, and they’re pretty plugged in, too.

If 78% of people trust peer reviews and only 14% trust advertisements, and your website is an advertisement, the importance of bringing those reviews front and center is critical. If you’re already doing this, good for you. If you aren’t, start engaging your guests in the process and build a reserve of great reviews on all the main travel sites. And put those reviews on your home page.  This is pretty basic.

The younger generations, who are the future of travel, want to be entertained and respected, too. Keep your content on Facebook, your blog (which you should be doing) and your website fresh. Keep and show a sense of humor. Seek out places where all your guests might congregate, and join the conversation. Read and respond to travel blogs. In other words, engage.

In branding and marketing we talk about the fact that travelers want “bragging rights” when they return home. Where once being able to have stayed at the most luxurious, well known, and expensive place constituted the only important thing to brag about, today people want to brag about what they did on their vacation. And increasingly what they did may have social implications. They helped build a Habitat house, volunteered to clean up a park, ran a race for the cure, or otherwise did something that, in their opinion, “mattered.” And hopefully they also stayed at a great inn whose owners helped them find the opportunities and took good care of them. They’ll tell all their friends (via social media), and we’ve always known how important word of mouth is.

We all know about SEO, search engine optimization, and how important it is for travelers to find your website. But are you aware of Google’s new real-time search results? There’s a new wrinkle in SEO, and it involves social media. Google can now find and index information about your inn as it is being published on Facebook, Twitter, and other media. What does this mean for you? The more people you can have writing about their great weekend with you (bragging about it), posting pictures, telling their friends, the more prominent you’re going to show up in the new search results. Will it affect traditional search ranking? No one knows for sure. But “social rank” is increasingly more important to many than organic Google ranking.

But let’s be honest, innkeepers don’t have to obsess about this the way Pepsi or Apple do, but you do have to be in the game. For years at conferences in our blog (The Innkeeper’s Resource) and in personal consultations with clients we’ve spoken and written about changing trends, tastes, and demographics, social media marketing, and the basics of hospitality. In the end, the important thing is not to get discouraged. Take bite sizes. Put together a plan for reinventing and reinvigorating your marketing. This may have to start with reinventing your inn, but you won’t know if you don’t ask. Sound daunting? It doesn’t have to be. Think of it as FUN! And if you can have fun, you’ll be happier, your guests will be happier, and your bed & breakfast will be more successful. Did I hear “exit strategy?”

What are YOU doing to be part of the new world we live in?

Peter

The study, now in its fifth year, takes a snapshot of the bed and breakfasts and inns for sale in March of the year and breaks the statistics down into several categories by price, size, state, region, and the country as a whole. The core criteria is that the property be currently operating with two or more guest rooms, be for sale, and be advertised in at least one of several primary "inns for sale" websites.

In March, 2009 there was an increase over 2008 of 6.4% in the number of inns for sale across the country, rising to 990 properties. New to the study this year was an examination of how many inns had verifiably sold since the previous study. 82 properties had sold, indicating that there is currently a twelve year supply of inns for sale, assuming no changes and no additions!

On average, despite a soft economy and a devastated real estate market, prices on average were up 0.7% nationwide, though this varied by region and property size. The increase was "1.5% for inns in the 5-10 room class and 10.9% in the 12-15 room class. Prices did however drop for larger inns (17-40 rooms) by almost 2%." Regionally, prices trended up everywhere except in the New England, Pacific, and South West regions. Only the East North Central region remained static.

Another important observation of the study is that inns appear to remaining on the market longer with 21% being for sale for two or more years and 5% still available after three or more years. The B&B Team, sponsors of the study, believe that this 2-3 year time period to sell a bed & breakfast inn is not unusual, but there is clear statistical evidence to support this. Additionally, a large number of properties which are still operating dropped off the list in 2009, indicating discouragement with the marketplace.

In light of the large numbers of B&Bs and inns for sale, The B&B Team believes that the smaller properties, those that would be desirable as residences, should focus their efforts on selling as residential real estate rather than as B&B's. This will increase their owners' chances of a successful sale in a timely fashion. Inns that are viable going concerns should ensure that their asking price reflects what an over-saturated marketplace and lenders will find "reasonable and defensible."

Simply put, a 1031 Tax Deferred Exchange is a mechanism whereby a real estate investor can roll over the cost basis from one investment property to another and defer paying capital gains taxes until the last property is sold and cashed out. In a transaction, a third party "qualified intermediary" ("QI") holds the funds from a sale until a new purchase is made following strict IRS guidelines. The QI then pays out the funds for the purchase and receives a fee for their services. The problem is, the industry of exchanging is not regulated, and here's what happened to clients of The B&B Team.

They sold their inn. Proceeds of sale went to a qualified intermediary per the rules. They had 45 days to designate new investments and 180 days to settle. After 45 days they hadn't found a property to buy, so they asked for their funds back, only to discover that there was no money! "It seems that he [the QI] invested client funds in Lehman Brothers auction rate securities probably as long as a year ago. When that market froze, he started funding exchanges with new client money (otherwise known as a Ponzi scheme). By the time we were to be funded, there wasn't any cash left."

This is an unmitigated disaster for these folks, and apparently there are a number of exchange companies recently that have filed for bankruptcy, so others have been hurt by similar schemes and problems. But don't throw out the baby with the bath water. There is a solution to protect yourself.

Our client goes on to say, "If someone wants to do a 1031, they need to make sure that the agreement states that their funds are to be kept segregated in an account in their name (very important) and that they specify how the funds are to be invested. In addition, they need to make sure they get copies of the bank statements. If the amount is more than FDIC covers, they might want a surety bond for the difference." To support this, our client adds that "The only one getting their money back so far is someone who did the above. The court ordered an immediate release of their funds."

In a time of greed and uncertainty, there seems to be no shortage of unscrupulous people. But bad behavior doesn't make a system wrong. It's people who are flawed, and people who can learn lessons. We hope you'll make note of this warning and advice about 1031 exchanges, so you can both take advantage of the great tax benefits inherent in them and protect your assets in the process.

Peter