When processing this strategy, I realize that it is not important for Brody to win.  He prefers to keep them all together…in one group…and not having a single marble stray from the group.  It’s really hard to lose to him…sometimes I have to jump backwards to lose ground to let him win.  But he loves to play.  He is focused less on winning (an outcome) …and more focused on the pleasure he receives by being methodical and orderly (his strategy).

Katie Couric recently interviewed Howard Schultz, CEO of Starbucks, to discuss the company’s new strategy of retail products in the grocery store.  When queried about the 50% drop in stock price this past year, Mr. Schultz made a statement that explained the failure… “We saw our growth as our strategy…not as an outcome” .  Rather than focusing on their core values of customer service and quality coffee products, they strived only for growth and expanded the company too quickly.  They have since closed over 600 of their less productive stores to get back to their values.

Both of the above stories of Chinese Checkers and Starbucks reveals an important lesson for us innkeepers.  We often focus on the growth of our bottom line (important…but it is an OUTCOME, not a strategy).  The strategy to achieve the desired outcome is to stay focused on those core values that are important to our guests.  Our guests seek the full experience of the stay.  It’s not just a room with a bed anymore.

If a guest is a history nut and asks for directions to the nearby battlefield…listen and think:  “What can I do to go BEYOND the question to make his experience more complete?”  Rather than just giving directions, do you have the National Park Service brochure and map to give him?  Did you buy the park’s Audio CD for your guests to take on an auto tour?  (He won’t buy one for a one-time visit…but YOU can use it dozens of times!).  Do you have a 10% discount coupon for their gift shop?  Can you loan him your digital camera to take a photo of his family at the park to use on your blog page or to print out a copy for their refrigerator door?

We can make our hospitality and concierge services a major part of the full experience by thinking BEYOND their immediate needs and anticipating those extras that make the experience complete and memorable.

As innkeepers, we are all good at this stuff.  We just need to make sure we stay focused on our hospitality strengths as a strategy to get to the outcome we all desire.    Scott

The Chocolate Turtle, Corrales, NM, a four guest room Lifestyle Inn

according to the PAII industry studies conducted over the last decade and more.  They are the personification of what the leisure traveling public imagines when they hear the term bed and breakfast.

Up until now, Lifestyle Inns, when considering their exit strategies, have had few options.  The most common avenues for selling a lifestyle inn is a FSBO (For Sale by Owner), which has its pros and cons depending on the skills and time availability for the owners, or to list with a local residential real estate agent who usually does not understand how to market a small lodging business, does not know how to value a lifestyle inn, and is not familiar with the intricacies of the unique lodging industry.  I had a local agent representing a buyer call to set up a tour of an inn for 9am on a Saturday morning…convenient for her buyer, but terribly out of the question for the innkeepers up to their ears with breakfast, check-outs, and turning the rooms for that evening’s check-ins.

Limestone Inn, State College, PA, a 5 guest room Lifestyle Inn

But The B&B Team^® has recently announced their Lifestyle Inns Program™, an alternative for Lifestyle Inns that offers the professionalism of industry-experienced consultants and brokers to help with an inn owner’s exit strategy.  Bushnell & Bushnell Services, an affiliate member of The B&B Team^® is proud to be working with a number of Lifestyle Inns across America.

So what’s in it for you?

• You benefit from our deep cumulative experience as innkeepers, brokers, and consultants with our commitment to ethical practices
• You get results-focused professionals…this is our livelihood, not a hobby.  We succeed by helping you achieve the results YOU want
• You receive unvarnished, credible valuations…important for you since an overpriced inn will just sit and sit on the market and an underpriced inn leaves money on the settlement table…both undesirable outcomes.
• Your inn is presented with a superior (we feel the best!) Buyer’s Offering Report to properly represent the quality of your inn
• You receive our Commitment to Client Communications…you will actually hear from us to keep you informed of progress
• You benefit from our leading industry presence
• Your inn will be featured on the most informational websites in our industry.

Finally…an alternative of significant value for the Lifestyle Inns of America!  …especially in the current economy where results-focused professionalism is critical.     Scott

Being smaller usually limits the amount of help the inn can afford.  3-5 rooms often means doing it all yourself.  6-8 rooms may allow for some part-time help with housekeeping and laundry or sitting the desk.  Such intense and time-consuming involvement by the owners in a 24/7 environment can take its toll.  Taking care of yourself to prevent burnout is a topic at nearly every convention.  I received a call yesterday from some lifestyle innkeepers in Kentucky who are nearing the end of their toleration rope.  Advice in this situation?

• Find that “rhythm” of the inn…the daily routine that manages your time for you.  If housekeeping after breakfast and check-outs is done by 1 pm, take a nap, or sit and read, or enjoy a hobby until the check-ins start strolling in that evening.
• Force yourself into days off.  It is an easy temptation to take your “day off” and catch up on emails, or paying the bills, or shopping.  Before you know it, the day is over and it’s time to get back to work!  Get off for the whole day…play golf, visit the museum you send your guests to, or catch a movie with friends.
• Alternate time off. If you are a couple, plan time for one person covering the inn while the other takes some time off.

Answering the phone is not only interrupts your work, it is too important to ignore!  Having a message that promises you will return the call between certain hours not only has the likelihood of NOT losing the reservation, it allows you to exercise good time management in order to get things done.  Some phone services can be engaged who will answer for you and are professional allies in the battle against interruptions.  Dave Balderson, owner of  the 6 room Wayside Inn in Ellicott City, MD., is a strong believer, and user!, of such a service to allow for evenings off.  He’s a believer, and is now way past the average innkeeper turnover rate of 7 years.  Answering 24/7, even if it is not YOU, makes you look big in a small lifestyle world.

Smaller inns may not have the conference room space or facility for corporate retreats and meetings as do the larger inns.  But marketing to the smaller groups, the birders, quilters, scrap-bookers, local garden club, or the Red Hat Ladies offers these smaller groups a venue they cannot afford (or that the larger inns even want) elsewhere.  And it’s a great way to get the big-time exposure in the community of your presence as a lodging alternative for visitors.

The website of the small inn can level the playing field even against the Big Guys.  The Chocolate Turtle in Corrales, NM, a 4 guest room Lifestyle Inn owned by Dallas and Nancy Renner, won the Best Website competition in all of New Mexico…even beating out the Marriott and other mega-names in the lodging industry.  This is a primary contributor to their incredibly high occupancy rate.  A small inn’s website needs to “think big” in its style, its format, its functionality, its photography and its Search Engine Optimization effectiveness.  Gone are the days of having your website, designed by your high school daughter, with photos of the bed in each room (guests want to see MORE than just a bed), with backgrounds of mauve, harvest gold, and avocado.  Think Big, and up-to-date, with your website.

Lifestyle Inns, and there are about 15,000 of them in the US, have a predominant role in the lodging segment that we all enjoy.  Their success as a smaller inn can depend on them thinking like the big guys!      Scott

A Lifestyle Inn is one that, although not viable as a self-supporting business, offers the LIFESTYLE to the innkeepers… one of the personal rewards of inn-ownership.  Usually there is some other source of income to help sustain the small business (the 2006 survey indicates that 83% of owners of 1-4 guest room B&B’s RELY on outside income and it shows 61% for those inns with 5-8 rooms).  Perhaps a pension, perhaps one of the owners has a career outside of the inn, perhaps they have owned the inn long enough to not have a large, if any, mortgage, or perhaps the owners are blessed with other income producing assets to help pay the bills, including the mortgage, of the small inn, but they rely on some source of outside income.

I am not suggesting that there is anything wrong with being a Lifestyle Inn.  On the contrary, these smaller inns are the backbone of the B&B industry.  They have woven the very fabric of the definition of a B&B.  When the leisure traveler thinks of a B&B, they reflect on thoughts and memories of a beautifully maintained, perhaps historic property, creatively landscaped, romantic rooms and room features, and a breakfast that tantalizes the eyes AND the palate.  Lifestyle B&B’s have created the getaway release of which people dream and yearn.

Lifestyle Inns have created the very definition of a growing alternative for the American leisure travel industry.

More to follow soon about Lifestyle Inns.    Scott

But it is time to also self-reflect on an innkeeper’s plans to exit the Bed & Breakfast scene and understand the TIMING of that exit.  I have been a proponent of the 5 Year Plan to exiting the business, and the first 3 years is to ensure your taxes are clean and clear.  When you are in the due diligence process, the buyer’s representatives and lender will want to see 3 years of taxes…and you will want them looking spiffy!

Marilyn and I were innkeepers and fully understand the emotional pull to reduce income taxes each year.  There is definitely the temptation to expense (instead of capitalize) that new roof or charge up some restaurant visits as inn Travel & Entertainment expenses.  But if you plan on selling your inn within the next 5 years, there are preparations to be taken NOW to ensure the selling price is what your property deserves.

It all boils down to increasing Net Operating Income.  The value of your business activity is based on how much NOI your inn’s performance delivers.  At the “rule-of-thumb” cap rate of 10%, a $10k increase in NOI can result in a $100,000 increase in sale value.  Sacrificing a few short-term tax bucks for the big benefit is well worth the effort!

Here are a few ideas to improve your NOI:

• Remove personal expenses from inn expenses, such as supplies and food
• Report all revenues, including cash sales
• Only pay yourself what you need…but have something in there.  If there is no payroll included in the expense report, a lender will insert some, perhaps too much, and reduce NOI.
• Consider whether you are overstaffed and can reduce unnecessary payroll labor and associated withholding expenses.
• Keep depreciation, income taxes, rent you pay yourself and other legitimate expenses in your expense schedule to avoid a buyer’s lender from inserting too-high estimates.
• Capitalize major renovations and equipment purchases rather than expense them.  Your accountant can help you with appropriate practices.
• Of course, do NOT let your marketing practices falter.  Keep increasing Occupancy and ADR!

I hate this time of year too.  But thinking ahead and keeping your financial records in order will grease the skids when it is time to exit the business.    Scott

Comments?  Do you have other NOI increasing ideas?

Age-Related Conditions

An Inn, like any retail product or industry, goes through a Life Cycle from infancy to death. It starts as a glimmer in its parents’ eyes, a dream of a lifestyle healthy and productive. It grows with careful nurturing, education, and aspirations, matures into a productive adult, capable of self-sufficiency and satisfaction. Physical and financial ailments will emerge someday, some sooner than later, but eminently all will experience the pain and, without exception, a slow (or sometimes cancerous) downhill slide (or plummet) to demise.

Doctor: “Which do you want to hear first…

the good news or the bad news?”

How cold and ugly a picture…how uncaring to express such a prognosis without apparent feelings or emotions! But without a continued regimen of properly prescribed vitamins, medications, and regular health check-ups, an inn’s health WILL decline. That’s the bad news.

The good news is that there are fountain-of-youth-like medications that can extend an inn’s life expectancy well into the future…perhaps to immortality!

Let’s examine each stage of the Life Cycle to see where YOUR INN resides…

NEWBORN: A start-up inn, whether from the ground up or the conversion of an existing structure, is a difficult and risky time of life. This inn has NO sales yet and is starved for cash flow. It needs basic but regular feedings of vitamins and nutrients (and cash!) to stay alive and start growing.

Prescription for Good Health

• A professional website, with Search Engine Optimization strength, is more than a well-baby checkup, it is life-giving.
• The Inn industry internet directories are the friends, though distant, that will provide support and baby-shower gifts.
• Building those personal relationships with local businesses and attractions which are the family and relatives close at hand providing needed nourishment. Invite a BUNCH of them over for a visit.
• Send out Birth Announcements to the paper, your family and new-found friends.
• A trusted consultant, like a good pediatrician, can help you with your marketing plan for growth.

YOUTH: A youthful inn is realizing growth, slow but surely at first, and is learning how to walk with its policies and procedures and talk with its guests and neighbors. Still immature…still inexperienced, but full of ideas and energy. Feed this youngster, model good habits, teach right from wrong, and give lots of love.

Prescription for Good Health

• Don’t relax the Care and Feeding prescription of the Newborn.
• Buy life insurance now. Extend the personal relationships to the Chamber of Commerce, the Convention and Visitors Bureau, and those networking opportunities that broaden the exposure of your baby.
• Youth doesn’t have to be wasted on the Young. It is wise to take advantage of public relations opportunities with inn birthdays, events and milestones.
• Listen to the good advice of family and friends (i.e. guests). Keep this youngster clean behind the ears and well dressed for a good first impression.

ADOLESCENCE: Ahhh…those troublesome teenage years! This inn, perhaps not really yet a teenager, demonstrates strength in its financials. Occupancy is growing at a satisfying rate, perhaps even starting to earn a living and starting to pay some of the expenses around here. But this inn can eat you out of house and home. Watch your budgets for danger signs. It is easy for him to hang out with the wrong people (such as marketing efforts that don’t work) or spending wastefully on frivolous whims.

Prescription for Good Health

• Put your tracking devices to work on your website and directories. Fire the slackers and find new friends.
• Take a parenting class so that you can educate the Inn skillfully. Attend the conferences and conventions that will expand your horizons, try new techniques and question outdated ways of managing the Inn.
• Compare the Inn’s budget with the PAII survey data to see where he’s been hanging out and on what he has been wasting money.
• Consider elective courses to learn new marketing skills as pay-per-click, blogs, internet-issued newsletters, and email marketing.

YOUNG ADULT: This inn is ready to head out on its own. It is suddenly viable, not only employed and making enough to cover the expenses, but also making enough to even pay back Mom and Dad for their kind parenting. These are the glory years…satisfying and productive. With a little cash left over after the bills and mortgage are paid, it offers the opportunity to reinvest back into the health of the family, er, I mean inn.

Prescription for Good Health

• Start investing in the Inn’s future. Upgrade those rooms and baths that may be starting to show some wear and tear, add a room feature or two and adjust the pricing to reflect the added value.
• Keep the stethoscope on the marketing tracking devices. Look for failing practices and expenditures and cure them now…before they are nothing but expense drains. Expand those marketing efforts that are paying off.
• Your past guest and repeat guest lists are growing. Treasure these trusted friends. Don’t be distant with those who mean the most to you even if you haven’t seen them for a while.
• Keep active…keep exercising. Take time off (you’ve earned it). Keep exercising your minds with educational opportunities and activities
• It’s timely to consider revamping the website to show off the changes you’ve made, keep up with newer technologies, and preventing a stale look.

MATURE ADULT: When sales start to level off from the previous years, productivity and growth remain viable and healthy, but there is no more need for new shoes for growing feet and pants that are too short. Reaching maturity can be satisfying and last for dozens of years with preventive medicine and caution. Now is the time to consider your future.

Prescription for Good Health

• If you feel young, energetic, and still have the zest for the innkeeping lifestyle, go for it! Stick with the prescriptions that have been successful to date…they seem to be working fine!
• Give back to your community. Expand your marketing exposure with volunteer and educational activities. Lead a PAII workshop!
• It is timely to be planning the reinvention of the inn. What surgeries and facelifts are needed to extend healthy adulthood well into the future? Expansion? Adding a spa? Redefining the demands of the markets and changing polices (pets?) and procedures (social events?). Did you fail to revamp your website last year?
• If you are feeling the financial and energy aches and pains, plan your retirement. Develop your exit strategy. Remember, it usually takes YEARS to prepare, so start now. Your primary care consultant can help with your strategy.
• Continue to monitor your health records, financial and marketing. It is important to catch health issues early, before they are life-threatening.

SENIORITY: A senior inn is one that is feeling failing financial health. Sales have peaked and are now heading south (not to Florida!). The value of the inn, although still viable and paying the bills including debt, will continue to decline the longer the condition goes unremedied. It is time for action NOW.

Prescription for Failing Health

• Commit to retirement (selling) or reinvention of the inn. Inaction toward either goal will allow untreated conditions to worsen.
• Take care of yourself…treat the symptoms. Deferred maintenance on the inn is a sure sign of Alzheimer’s-like denial. The downward spiral will steepen if allowed.
• Find a specialist, one strong in what ails you…a consultant who can guide you through the process. You are not alone in the struggle.
• Keep up with the prescriptions of the past, healthy years. If you stop taking your marketing pill, ignore your blood pressure tracking devices, plop down on the couch and only pray for healing, the pain will get stronger.

THE GERIATRIC INN: The old timer of all inns is the one who has ignored the prescriptions of the inn-medical community and now sees sales BELOW the viability line. There is no commitment or money for improvements or maintenance, attitude is slipping into inhospitable senility, the retirement nest-egg is being drained, friends and neighbors don’t visit anymore, and the new inns on the block are throwing rocks through our market-share windows.

The Last Will and Testament Diagnosis

• Make your own arrangements. Pass the inn on to the kids or family who, with less long term debt, may be able to rejuvenate the ailing reputation and reverse the deteriorating growth.
• Contact an industry hospice consultant to ease the financial pain with short term, morphine-like, sedatives and help plan for a distressed sale. Don’t expect too much. The car is not worth much with that many miles on it.

Perhaps a bit too much analogy here, but the message is the same. Knowing where YOUR INN lies on the life cycle graph, and understanding what marketing, financial, and long-term planning actions need to be done, is as important as the day-to-day routines that monopolize our schedules. Reflect on the Life Cycle…and build its principles into your business plans.

Please let me know WHAT YOU ARE DOING to take good card of your Baby!