Why is the B&B industry so lucrative?

To say that the B&B industry is alive and well in the United States would be a pretty substantial understatement. A wide-ranging industry survey commissioned by accommodation software services provider Little Hotelier in 2015 revealed the following statistics among the findings.

• Approximately 17,000 B&B inns are open for business in the United States; this makes up about 30% of the 53,432 U.S.-based accommodation-providing properties open as of 2015, according to the American Hotel & Lodging Association (AHLA).

• The entire industry is valued at $3.4 billion.

• The typical B&B includes between four and 11 rooms, with eight-room inns the popular median in the survey.

• On an average day, the typical B&B manages 43.7% occupancy, meaning that anywhere between 1½ and five rooms are taken.

• The average nightly rate at a B&B is right around $150. With the occupancy rate applied, the B&B manager can expect a daily return of $58 to $60 per room.

• This all adds up to over $8 million spent daily at B&B’s – and that’s just for the rooms!

Again, note that rate. At $150, B&B’s are suddenly affordable for the average traveler. After all, hotel industry statistics show that the *average* hotel room in the United States in 2016 was priced just a few cents below $124, thereby setting the ignominious record for cost in the country for the fourth consecutive year.

More important factors to consider about that $124 figure; naturally, none of the classic “hidden costs” accommodations often tack on are included. Secondly, the $124 represents a 3.3% increase year-on-year; a 13.4% jump from 2008, a previous peak year for the industry; and a whopping 32.5% increase since 2001 – and remember that these are *average* hotels, thus typically below a two-star quality rating.

Meanwhile, the increase in B&B room rates since 2008 has been just 2%: A number barely keeping ahead of inflation over the time period and serious evidence that the traditional B&B industry is steadily encroaching on the hotel industry’s former bastion – at least outside the major metropolitan areas.

But what about that new-fangled approach to accommodation, i.e. that mode embodied by AirBnB and like operations? In the mid-2010s, contradictory findings were revealed by a couple of giant research firms.

First off, Morgan Stanley announced their findings from a study of 4,000 travelers to/within the U.S., U.K., Germany and France in 2017; definitely one to file under “A” for “apocalyptic,” report author Brian Nowak noted that “Brian Nowak, executive director of Morgan Stanley Research, wrote in the report: “[Our] survey shows rising Airbnb adoption (now approximately 18% of travelers) with demand increasingly coming from hotels. … While still small, we believe Airbnb has been almost double the threat to hotels in 2016 than previously believed, and the threat is growing.”

This certainly sounds damning, but Nowak also wrote that adverse financial impact is well more likely for hotels because “cannibalization of traditional hotels [by AirBnB] has also been higher.”

An opposing view on the would-be juggernaut AirBnB came from accommodation industry researchers STR, who compiled a 2016 report entitled “Airbnb & Hotel Performance: An analysis of proprietary data in 13 global markets” based on Airbnb data. Though AirBnB, if statistically considered as a single entity, would be considered the second-largest accommodation “chain” in America to Marriott, the truth is that hotel business is still increasing within healthy parameters and in general AirBnB is an alternative to travelers seeking a stayover.

The statistics – on both sides, really – indicate that traditional B&B’s should remain mostly impervious to the internet behemoth. As it turns out, even moderately successful B&B establishments have some inherent advantages over the AirBnB’s of the world.

Primarily is of course location. As can be read on the Balaplace page devoted to location, B&B’s, hotels and AirBnB’s can all be said to inhabit different worlds: Whereas the highest proportion of hotels and motels are found in the city, a big 72% of B&B’s call a village or the countryside home. The leisure/business gap is also quite significant: While the AHLA calculates around 40% of hotel-goers are on business, informal estimates of B&B and AirBnB visitors show that business travels make up a single-digit percentage of B&B guests.

So while the good news is that B&B industry has stayed lucrative into the 21st century, the future of this old-fashioned tourist trip appears set for decades more to come…