While we are indeed B&B owners, we are not professional investors. Nor are we primarily business people. In fact, we are quite sure that we have chosen to run our B&B in ways that would drive an accomplished businessman crazy. We have never instituted policies and practices that make income or cash flow our first priority. Instead, we have balanced our personal preferences with generating "enough" income. As a result, we cannot tell you how much income the property can generate.

The things we can tell you are:

• How much income the property has generated.
• The ways in which we have inhibited revenue.
• What we think the income stream can be, should the new owner make income generation the top priority.

We know that prospective owners will be interested in knowing what our operating expenses have been. At the same time, we are reluctant to make the details of our finances available on a web page. To resolve this potential impass, we have incorporated our intimate knowledge of our B&B operating costs into a small number of scenarios. Each one of the scenarios:

• Is intended to fit with a range of priorities and preferences that prospective buyers may have.
• Summarizes the amount of profit or loss that new owners can expect based on actual operating costs, the B&B's level of occupancy, and new owners' financing costs.

These scenarios gives us a way to provide prospective buyers with useful baselines about the property's ability to pay for itself, while at the same time protecting the details of our personal financial data.

Below, you can find out what our experience tells us.

Summary of Actual and Projected Revenue

We opened the B&B, The Beach House, A Bed & Breakfast by the Sea, in June 1995. In that first year, revenues totalled about $13,000.

• In calendar 2006, revenues were more than $268,000
• From August 2006 through July 2007, revenues were more than $293,000.
• We expect calendar 2007 revenues to be more than $303,000.
• Earlier this year, we raised rates for the first time in nearly a decade. The new rates applied to only a portion of 2007 bookings. Given a full year at the new rates at our established occupancy rate, the property can be expected to generate $325,000.

We believe that $325,000 is well below the property's potential. Not only have we grown the annual revenues to nearly a third of a million dollars, we have done this without the benefot of using standard business practices. We describe how our policies inhibit income in the sections below.

To understand how and why we have operated at less-than-optimal revenue, it may be helpful to click here to see a Brief History of the B&B.

From a Business Perspective: Things We Have and Have Not Done Well

From a purely business perspective, there are several things we've done right. There are also several things we have done (and continue to do) wrong.

Reaching the actual revenue potential involves maintaining the good things we have done while correcting the shortcomings of our business approach.

Things we've done quite well

• We found a wonderful location: On the beach, and adjacent to miles of permanently protected National Wildlife Refuge. Even on holiday weekends, our beach is never crowded. And, just a few steps away, the beach in the refuge is empty.
  
  
• We created a special environment that guests love: Guests love the place, and they don't want to leave. Much (perhaps most) of our business comes from "word of mouth" recommendations.
  
  
• We treat our guests the way we want to be treated: We combine pampering them with leaving them alone. We don't intrude. People feel at home here.
  
  
• We treat our staff the way we want to be treated: We like our staff, and they like us. We do not have problems with turnover.
  
  
• We work with the Gulf Shores Convention and Visitors Bureau: We get a lot of business from our ad in their Gulf Coast Visitors Guide and their toll-free referral service.
  
  
• We carved out a special and unique niche in the marketplace: We are the only place for couples to have a few days on the beach in a quiet, kid-free environment. We are the only place on the beach for those who have less-than-a-week and who don't want to stay in a hotel or condo. We are the only B&B on the coast. We have no direct competition.
  
  
• We attracted attention from national media: Through no effort on our part, our special place attracted attention from national media. Click here to see a summary of media reviews.
  

Things we have not done well

• We do not advertise: Except for one small ad in the Gulf Coast Visitors Guide and listings on two B&B websites, we do not do any advertising whatsoever. All our business comes from word of mouth, response to the Gulf Coast Visitors Guide, and searches on the Internet that target Gulf Shores. If someone doesn't already know about us, they are not likely to find us.
  
  
• We do not accept credit cards: Guests pay by personal check. For many prospective guests, this does not fit their spending habits.
  
  
• We do not permit online bookings: We insist on talking with prospective guests before they book. For many prospective guests, it's easier to do an online booking elsewhere.
  
  
• We only occasionally permit very brief stays: While we have become a bit more flexible about our minimum stay policy, it is still very much in effect, and it actively discourages prospective guests whose schedule doesn't fit with our policy.
  
  
• We have an overly-simple rate structure: We do not charge more for the busier weekend nights, holiday weekends, and other very high demand times.
  
  
• We have not kept rates current: We have raised our rates only twice in 13 years. Earlier this year, we raised rates for the first time in nearly a decade. We probably should have raised rates annually by the rate of inflation... or more. Other businesses in the area have, but we haven't.
  
  
• We have not capitalized on our national media attention: Despite our glowing media reviews, we do not have a high profile. Each media review prompts an immediate spike in bookings, which in turn adds to our "word of mouth" reputation, but our failure to market the B&B means that we have not exploited our reputation as we might have.

We know that other hospitality businesses do most, if not all, of these things. But we do not. Why? We don't do them primarily for two reasons:

1. We are not business people. By temperament, I'm a college professor, and Carol is a mom and now a grandmother.
2. We are comfortable with our established practices and are reluctant to deal with extra complication that "doing things better" would involve.

These may not be good reasons, but they are the real reasons. We are who we are. We're not business-minded, and we've done what we know how to do. It will be for someone else to take revenues to the next level.

Room for Increased Revenue

Revenue is determined by two factors: room rates (how much we charge) and occupancy rate (how full are we).

Early this year, we increased room rates for the first time in nearly a decade. We expected that higher room rates would cause some reduction in our occupancy rate. So far, our occupany rate is comparable to last year. For 5 of the first 7 months, it has been higher than last year. At last year's occupancy rate, a full year at the new room rates will produce gross income of more than $325,000. Based on bookings for this year, we believe it is viable to increase rates further, and we intend to do so for the 2008 season.

The shortcomings of our business practices are most obvious in one important place: the occupancy rate. Last year, the B&B's income was based on:

• An annual occupancy rate of only 45%.
• A May-September occupancy rate of only 59%.
• An October-April occupancy rate of only 35%.

We know the established 45% occupancy rate is much lower than it can be. Guests who discover our B&B love the place. They routinely tell us that they feel that, in discovering our place, they have found a special jewel. The problem is not that guests don't like us. They do.

The problem is that not enough people know we're here. And, because we don't advertise, this is not surprising.

Friends who are in the hospitality business in other Southern locations are shocked to hear that our occupancy rates are what they are. When they learn what our occupancy rates is, they tell us they had thought it would/should/could be 20-to-25 percentage points higher.

We know that a concerted effort to correct our business and marketing shortcomings would result in substantially higher levels of business. However, because we aren't business-minded people, we do not feel qualified to say with any accuracy what those results might be.

What we can accurately report is the revenue that a given occupancy rate would produce. We can also share our opinions about what is achievable.