Michigan State University Extension
Tourism Educational Materials - 33420029
06/06/02
A Profile of Minnesota's Bed And Breakfast Industry---1988 (Research Summaries)
List of files and visuals associated with this text.
Source: Minnesota
Author: Koth, Barbara A.
ID: CD-FO-3808
Format: Full Text
Year: 1989
Archived Document: This Extension bulletin is no longer
available from the publishing State and may contain
outdated information.
Introduction: Minnesota's bed and breakfast (b&b)
industry is experiencing a dramatic growth. From 1987 to
mid-1989 the number of operations more than tripled to the
present 100 properties now open for business. This rapid
growth has been accompanied by a need for more
information. As competition increases, managers of
existing bed and breakfasts need information to help them
make appropriate management decisions. Potential b&b
managers need to know about the realities of venturing
into the hospitality industry. The public wants to know
what kinds off facilities are available: And regulatory
agencies need data in order to develop realistic and
workable policies.
To meet these diverse needs for information, a statewide
survey of b&b's was conducted in 1988 by the Tourism
Center at the University of Minnesota with funding by the
Minnesota Office of Tourism.
What is a Bed and Breakfast?
The rapid growth of bed and breakfast operations is a
national phenomenon. This nationwide expansion can be
explained by factors such as consumer demand for
excellence in personal service, the popularity of weekend
getaway trips closer to home, the search for one-of-a-kind
experiences during valuable free time, and enjoyable
visits to European b&b's, where this lodging form first
started. But this rapid growth has also created some
identity questions. Just what is it that makes a bed and
breakfast different from other forms of lodging?
Generally, a b&b is defined as a private owner-occupied
dwelling that provides overnight accommodations and
breakfast for a set price. The locations are variable;
both historic and contemporary b&b's can be found in major
metropolitan areas, on farms, in rural communities, and at
lake shore settings. While the common feature is personal
service and hospitality, discussions continue about b&b's
versus inns, number of rooms, type of meals served, and
living arrangements (Kent 1988).
Figure 1. (Vis. 1)Number of bed and breakfasts by county,
June,1989*
* Total number of establishments = 101
Figure 2. (Vis. 2)Number of guest bedrooms, June, 1989*
Bedrooms
* Total number of establishments = 101
Characteristics of Minnesota's B&B's
The primary concentrations of b&b's at present are along
the North Shore, the Mississippi River, Historic Bluff
Country (Houston and Fillmore counties), the Twin Cities,
and the Alexandria area (Vis. 1). In fact, the border
counties along the east account for over half of the b&b's
in Minnesota. Lake City and Stillwater have the most
operations (4 each). Duluth, Grand Marais, Lanesboro, Red
Wing and St. Paul each have 3, demonstrating that there is
little correlation with city size. Minneapolis b&b's have
been slower to open because of city licensing
restrictions.
Figure 3. (Vis. 3)Year when bed and breakfast opened
Minnesota's industry is dominated by small operations; the
average size is 3.85 rooms. Seventy-nine percent of the
operations have four rooms or fewer (Vis. 2). This small
size is in keeping with the historical traditions of b&b's
of offering personal attention and opportunities for
conversation in a homelike setting. Larger establishments
tend to market themselves as b&b inns, and are more likely
to offer extra amenities and meal service. It is estimated
there are 400 rooms available at Minnesota b&b's at
present.
The survey results also show that b&b's are a new
industry. More than 60 percent of the respondents had
opened their doors for business in the two years preceding
the survey and 28 percent had opened in the first six
months of 1988 (Vis. 3). Sixteen new establishments had
opened in the three months prior to the study. Latest
statistics show the rapid growth rate has slowed slightly.
The oldest b&b was started in July, 1981.
Ninety-three percent of the b&b's are licensed, reflecting
a concern for customer well-being and the marketing
advantages of legal operation. However, the survey
methodology suggests that the actual proportion of
licensed b&b's in the state may be lower. At 85 percent of
the establishments, the owner or manager lives full-time
in the building. The remainder offer such nontraditional
setups as "live close," "on the property," or "hire local
help when guest is there." These arrangements can limit
contacts with the guests and lessen the personal touches
that are so much a part of b&b's so this trend should be
monitored closely by operators.
The majority of respondents report that they are in the
b&b business for dual purposes-to meet people and to get
supplemental income (Table 1). Restoring an old building
is a consideration for half. Operators were also asked to
rank the overall importance of each reason, thus providing
a clue about the combination of reasons for going into the
b&b business. For example, meeting people is a
consideration for almost all innkeepers, but it ranks only
fourth in importance. In contrast, slightly more than one
quarter mention the b&b as a primary income source, and
yet it is listed as the most important reason.
There is an expected link between income expectations and
b&b size: far more of the large (5+ bedrooms) b&b's
mention primary income, whereas more small operators cite
supplemental income as a major goal. Data on profits
indicate that income must be only part of the appeal of
running a b&b and case studies in popular magazines
support this reality (Roha 1989, Mamis 1988, Culbertson
1988). Lifestyle (for example, working at home or with a
spouse) and community development objectives are other
typical reasons for opening a b&b.
Table 1. Reasons given by respondents for operating a bed
and breakfast
_________________________________________________
Percent listing as
one of four most Overall rank
Reason important reasons by importance*
__________________________________________________
Meet people 90.0 4
Supplemental income 63.3 3
Restore old building 48.3 2
Help finance home 38.3 6
Tax advantage 35.0 5
Primary income 28.3 1
*Calculated on a 4-point scale
Facilities
The b&b's in operation the longest in Minnesota have
generally been the historic properties. Older homes (more
than 50 years old) comprise almost two thirds of existing
b&b's (Figure 4). However, only 12 percent are on the
National Register of Historic Places, with an additional
16 percent in the application process. Media attention has
focused on historic b&b's, skewing public impressions of
the range of choices available. Bed and breakfast is, in
fact, not synonymous with Victorian mansion, and the
presence of some b&b's in farmhouses and log and lake
shore homes are unique aspects of Minnesota's industry.
Figure 4. Type of b&b building
Historic 61%
Contemporary 19%
Farmhouse 14%
Other 5%
Table 2. Facilities and/or activities available on b&b
property
______________________________________________
Feature Percent (yes)
______________________________________________
Porch/patio 95
Sitting room/parlor 85
Fireplace 62
Hiking/cross-country ski trails 48
Outdoor cooking facilities 32
Beach 25
Fishing 25
Boating 23
Hot tub/sauna/jacuzzi 18
Tennis courts 2
___________________________________________
Bed and breakfasts have many in-house
amenities favored by guests, such as porches/patios,
sitting rooms, and fireplaces (Table 2). Other
attractions reflect the lakes and woods-related outdoor
activities so well known in Minnesota. "Innkeeping"
newsletter's b&b/country inn survey also recognized the
importance of these "extra" touches, and asked about
availability of afternoon tea, hors d'oeuvres, liquor,
flowers, cookies/candies, picnic baskets, refrigerator
use, bicycles, games, social hour, and turndown service
(Brown 1988). Certainly these services are becoming more
common as the Minnesota industry matures, but the
frequency of occurrence is not known. This emphasis on
amenities is one of the reasons b&b's can become
attractions in themselves.
A parallel survey of guests of Minnesota Innkeeping
newsletter's (Koth and Norman 1989) shows that private
bathrooms are extremely important to visitors, ranking at
the top of the decision criteria. However, in this study,
44 percent of the b&b's surveyed have shared bathrooms
only, a setup based on the traditional European style
b&b's (Figure 5).
______________________________________________
Figure 5. Bathroom facilities: shared vs. private
Shared only: 44%
Private only: 28%
Private/shared: 28%
______________________________________________
One quarter of b&b's responding have all private
bathrooms, with another one quarter having a combination
of private and shared. It is extremely rare to share with
host family members. Generally, the rate of guest rooms to
bathrooms is very low, approximately
2:1.
Zoning regulations can be a barrier to start ups, since
most ordinances do not specifically mention b&b's as a
permitted use. Almost two thirds of b&b's are zoned
residential, as compared with business/commercial (19
percent) and agricultural/rural (19 percent). A majority
(54 percent) required no zoning changes. Where changes
were necessary, a special permit was most often obtained
(17 b&b's). Further, obtaining a variance (10 b&b's) was
much more common than actual zoning changes (1 b&b). The
relative newness of the b&b industry in Minnesota and the
lack of general public awareness are also demonstrated by
the fact that only 25 percent of the home communities have
local b&b ordinances. Another potential problem is that
one quarter of the b&b's cannot put out a commercial sign
because of zoning restrictions.
Forty percent were required to make kitchen changes prior
to Department of Health licensing. Most often this was
resolved by installation of a new dishwasher. A full
breakfast is the norm, though the 21 percent that serve
continental breakfast is a high proportion in an industry
where ambience and personal touches are part of the
product (Figure 6). Ninety percent function with domestic
kitchen equipment.
_________________________________________
Figure 6. Type of breakfast served
Full breakfast 61%
Continental breakfast 21%
Continental plus (fruit, cheese +) 8%
Both, depends..... 10%
________________________________________
Prices
There is often a wide range of prices at any one b&b
property, reflecting room sizes,location, bathroom
arrangements, amenities, etc. Therefore, the survey asked
respondents for high and low prices at both single and
double rates. Average 1988 overnight rates are:
Low High
Single $38 $50
Double $50 $58
About 20 percent of the b&b's offer singles and doubles at
the same price.
Figures 7 to 10 show the range of prices at the low end,
midpoint, and upper end. These charts can be used by b&b
operators to assess their own pricing strategies. For
example, if you charge $25 for a simple single room, it is
priced in the lower third ($15 to $30) of all b&b's for
that category (Vis. 7). To evaluate your pricing policies
and decide whether rates should be raised, compare
services and amenities at your b&b with the industry
average. It is assumed that at mid-range price levels, the
guest will stay at a property with some interesting
architecture or decor, but these items are less likely to
occur in the lowest price category. These features would
be expected at b&b's priced at the upper end, possibly
with distinctive antique furnishings, a historically
significant building, or extra services. Meal service
(menu choice, simplicity, and presentation) will also vary
with price differences.
Note that the lowest prices for singles and doubles are
fairly consistent within a narrow range, and probably
represent standard accommodations. Most of the variation
occurs at the far upper end of the pricing scale, and is
probably related to extra amenities available. Bed and
breakfast prices are right in line with an average daily
rate of $52 for Minnesota hotels (Pannell Kerr Forster
1988).
(Vis. 7)
(Vis. 8)
(Vis. 9)
(Vis. 10)
Business Volume
Occupancy rates vary significantly by season, ranging from
a high during summer and fall weekends (average occupancy
= 67 percent) to a low on weekdays in winter
(Vis. 11). Summer and fall are the strongest seasons, and
winter is the most difficult time period to sell. Weekday
(Monday through Thursday) occupancy never exceeds 25
percent. There are wide variations across individual
businesses (for example, ranges of 10 to 100 percent
occupancy). Almost all b&b's are open seven days a week
year-round. The Brown (1988) study found occupancies are
highest in urban, destination, and resort areas, and
lowest in rural regions.
Because of the large number of new b&b's, it is far too
early to accurately measure b&b profitability, but the
following estimates provide a glimpse of the economic
potential of this sector. The number of room nights rented
in the first half of 1988 by b&b's open prior to January I
of that year averages 133 nights. There is uneven
distribution, ranging from 3 to 863 room nights. In fact,
5 b&b's account for 55 percent of all room nights in that
time period. If b&b's opened in 1988 are also included,
5,663 room nights were sold by survey respondents in the
first half of 1988.
Three quarters of the respondents indicate that room
nights increased in 1988 as compared with 1987. Primary
reasons given are more effective word of mouth and longer
time in the business.
(Vis. 11)
(Vis. 12)
Marketing Strategies
In 1987, b&b operators spent an average of $1,261 on
marketing-related activities, ranging from $10 to $5,075
(Vis. 12). This value is inflated by several expenditures
that exceeded $2,000. Typical industry spending is more
modest, as evidenced by the fact that over half spent $800
or less. These figures are not corrected for length of
time in business because the number of b&b's open for all
of 1987 is small.
Over three quarters use brochure distribution, listings in
the Minnesota Office of Tourism booklet, and newspaper
ads, and many give the former two methods very high scores
fore effectiveness (Table 3). Nearly half use direct
mail, and many are very satisfied with the result.
Guidebooks are described as mid-range in effectiveness,
but a survey of b&b guests (Koth and Norman 1989) shows
these regional or national directories are a common
consumer source of information. Word of mouth from
satisfied customers is still the most useful means of
promotion, but in response to an open-ended question, b&b
operators list a wide range of most effective marketing
tools, which closely mirrors the formal rankings.
Promotional ideas volunteered include: ads in the Yellow
Pages; working to get referrals from local businesses,
attractions, resorts, and motels; tours/open houses;
donations and gifts; cooperating with travel information
center staff, coupons; and association memberships.
Table 3. Use and effectiveness of promotion strategies
_______________________________________________________
Percent Average
of respondents Score, Effectiveness
Method using strategy if Used* Rank
_______________________________________________________
Brochures 96.1 2.53 2
Explore MN guide
(MN Tourism Office) 77.6 2.71 1
Newspaper ads 87.0 1.77 6
Magazine ads 60.8 2.16 4
Guidebook 55.8 2.16 4
Reservation service 50.0 1.65 7
Direct mail 45.7 2.19 3
Radio 15.2 1.42 9
TV 4.3 1.50 8
______________________________________________________
*Measured on a 3-point scale, where 1 = not
effective; 2 = fairly effective; 3 = very effective
Management and Policies
Forty percent of b&b operators belong to a professional
bed and breakfast association, most often the Minnesota
Historic B&B Association. This study was conducted before
the formation of the Minnesota Bed and Breakfast Guild in
April, 1989. Another noteworthy development is the
creation of several local groups to take advantage of
cooperative marketing where concentrations of b&b's exist;
17 percent indicate membership in organizations such as
the North Shore or Wabasha County B&B Associations. About
one third are associated with reservation service
organizations (RSO's) that book clients for a fee, but
with few exceptions, there is little reliance on RSO-
generated clientele. However, the average length of
membership in an RSO to date is short (58 percent have
membership of less than one year), and a customer base may
take some time to build. Only three quarters of the b&b's
sampled are Chamber of Commerce members, despite the value
of contact with fellow tourism and main-street businesses
and opportunities for referrals and advertising.
It appears that innkeepers are buying liability insurance
at the highest amounts, with $1 million coverage being the
most common (Figure 13). The sample is evenly split
between homeowner's and commercial coverage, or some
combination of the two (16 percent). For small
operations, home ventures coverage generally is least
expensive.
____________________________________
Figure 13. Amount of liability coverage, 1988
$1,000,000 (38%)
$ 500,000 (21%)
$ 350,000 ( 3%)
$ 300,000 (26%)
$ 200,000 ( 3%)
$ 100,000 (10%)
The idea of b&b's as a supplemental income source is
reinforced here, as 82 percent do not report a profit on
their most recent tax return. If they do, the portion of
total income is low (2, 15, and 20 percent), although two
households make their total household income from b&b
operations. Most likely, another complementary business is
run with the b&b (44 percent), often food service, sale of
arts and crafts, or a gift shop.
Three quarters of Minnesota b&b's are operated solely by
household members. The level of hiring from outside the
family, even for part-time employment, is minimal. The
Brown (1988) study suggests that the owner of a small b&b
will have weekly task responsibilities that look like
this: innkeeping and management (15 hours),
cooking/kitchen (13 hours), housekeeping (11 hours),
maintenance/gardening (7 hours) and miscellaneous (6
hours), for a total of 52 hours on the job. Weekly time
commitments for an inn with 5 to 10 rooms run even higher
(74 hours).
Some standard operating policies were assessed:
Percent (yes)
Children allowed 95
Reservations 53
Pets permitted 15
Friday and Saturday night
booking required during
busy periods 12
Ten operators have established a minimum age of 12 years
for children.
Conclusions
Minnesota bed and breakfasts are remarkably similar to
b&b's as outlined in statewide profiles for Iowa,
Michigan, and New York (Schwieger 1987, Norman 1987,
Dawson and Brown 1988). This suggests there is a standard
pattern of development. First, a core group of innovators
try out the b&b concept in a region. This is followed by
rapid expansion as others build on their popularity. In
the third phase, growth continues, but at a slower pace,
as more competition develops along with an industry track
record and case studies for potential entrepreneurs to
study. Minnesota appears to be entering this third phase.
It is certain b&b's are here to stay as a well
established, integral part of the lodging sector. Although
Minnesota may never reach the level of New York (over
1,000 b&b's), simply because of population differences,
the numbers elsewhere demonstrate the possibilities.
An important finding is that b&b owners/ managers enter
the market for multiple reasons; personal and lifestyle
issues appear to be just as important as financial
considerations. The figures on occupancy, room night
sales, and profitability are an important "reality check"
for prospective innkeepers. Much of the data can be used
to advise individuals who are thinking of starting a b&b,
about important issues they need to evaluate and potential
pitfalls.
The survey results also suggest some actions to be taken
by the major organizations working for the continued
health of the b&b industry. Given the potential problems,
it is critical for active statewide associations to speak
with one voice for the membership. It is essential to keep
the general public and potential guests informed about
b&b's and the options they offer, since there are some
study findings that suggest public impressions may at
times be incorrect. Knowing about management policies sets
the stage for ongoing discussion about the best ways to
handle various situations that come up in daily
operations. Marketing statistics may bring to mind some
joint strategies to increase occupancy during slow
periods. Finally, and possibly most importantly, an
industry profile is an important tool in working with the
legislature and regulatory agencies to write rules that
reflect the unique aspects of b&b's. This is particularly
true for topics such as zoning and food service.
One of most positive aspects of b&b expansion has been
that it has taken place in an environment of cooperation--
-both among b&b operators themselves as evidenced by the
formation of associations, and through ongoing dialogue
with other members of the lodging industry. In general,
there is recognition of the complementary nature of b&b's
as they add to visitor options and service satisfaction.
It will be vital to use this baseline information to track
future changes in this dynamic industry so the b&b segment
can remain competitive and respond to market shifts.
References
Brown and Associates. 1988. Bed and Breakfast/Country Inn
Industry Survey and Analysis. Seattle,WA. 20 pp.
Culbertson, Molly. 1988. The educated innkeeper. Country
Home (June):115-118.
Dawson, Chad P. and Tommy L. Brown. 1988. B&B's: A matter
of choice. The Cornell Hotel and Restaurant Administration
Quarterly, 29(l):17-21.
Kent, Gail Rudder. 1988. To be a b&b or not to be---or to
be called an inn. Country Inns (Aug/Sept):4.
Mamis, Robert A. 1988. Rooms with a view. INC.
(May):56-65.
Norman, William C. 1987. A Descriptive Profile of
Michigan's Bed and Breakfast Industry. Unpublished Plan B
paper. East Lansing: Michigan State University. 66 pp.
Koth, Barbara A. and William C. Norman. 1989. The
Minnesota bed and breakfast market: a guest profile.
Research Summaries. Tourism Center, University of
Minnesota.
Pannell Keff Forster. 1988. Minnesota hotel trends in
1988. Trends in the Hotel Industry (Dec.) 6 pp.
Roha, Ronaleen R. 1989. So you want to run a country inn.
Changing Times 43(2):64-69.
Schwieger, Sandra. 1987. Characteristics of Bed and
Breakfast Homes and Small Inns in Iowa. Ames: Iowa State
University. 2 pp.
Methodology
In July, 1988, a four-page questionnaire was sent to all
71 bed and breakfasts known to be open for business at the
time. This census was compiled from Minnesota Office of
Tourism listings, a review of recent advertisements and
publicity, contacts with county extension agents, and
conversations with a reservation service organization.
After two follow-up mailings, 61 surveys were received for
a response rate of 86 percent.
Small unlicensed b&b's not actively promoting were
difficult to find; these informal "home stays," which rely
only on word of mouth or are open seasonally, are
under-represented. Results, therefore, more accurately
represent b&b's that are regularly visible in the
marketplace, seeking guests, and that have a more serious
ongoing business orientation.
Additional details, original data, and a full report of
the study are available from the author.
Author: Barbara A. Koth, Assistant
Extension Specialist, Tourism
Development, Minnesota
Extension Service
Graphics: Glenn Kreag, Tourism/Recreation Agent, Minnesota
Sea Grant Extension Program, Duluth
Editor: Louise Jones
The author gratefully acknowledges review contributions
from Bill Norman, University of Minnesota, and Joan
Hummel, Minnesota Office of Tourism.
Tourism Center
48 McNeal Hall
1985 Buford Ave.
University of Minnesota
St. Paul, MN 55108
John Sem, Director
This study was funded by the Minnesota Office of Tourism.
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