So You Want to Be An Innkeeper?

  • The Booyah Bed and Breakfast?

    Imagine this: You’re in Summit, N.J., staying at a local bed and breakfast. You’re fast asleep in your cozy bed and the sun is just starting to rise. The night before, you asked for a wake-up call at 6 a.m., and when the clock hits 6, the phone doesn’t ring. Instead, a man bursts through the door, starts throwing stuffed bulls at your head, and shouts, “Wake up! Wake up! We’ve got a big day today! Let’s get moving.” You sit up with a start, and shake off the sleep just in time to see Jim Cramer leaving the room as quickly as he’d entered. That’s what I imagine Cramer might be like as an innkeeper… and it turns out he is one… kind of. Well, more accurately, he’s recently become part owner of an inn – the DeBary Inn in Summit, N.J. And since he’s not actually running the place, the above scenario will likely never actually play out… alas. But why would Cramer, founder of our sister site TheStreet.com and before that a successful hedge fund, want to buy an inn? Photo Credit: craigmdennis
    Brick and Mortar
  • Brick and Mortar

    For Cramer, the lure of the B&B business was personal, probably similar to others who have made the leap. First, he likes staying in these kinds of places. “I have always gone to these B&Bs all over the place and thought they were cool as all get out,” he says.  (Though technically, the DeBary isn’t a B&B. It’s an inn.) “I am now beginning to understand why you would want to run one even as I am just a partner and no more.” Beyond that, the B&B or inn business is very different from the other kinds of companies Cramer has created or been a part of. “It is fun after creating lots of ‘non-brick and mortar’ stuff like my hedge fund or TheStreet.com, to really make something, a physical structure,” he said, adding that he can understand why people would leave the world of finance and start businesses like this (some of the other investors in the inn are also veterans of finance). “After the taint that is Wall Street I wonder whether people say to themselves, ‘You know what? I want to make an honest living building and doing something!’” Photo Credit: Micah Taylor
    The Road to Success
  • The Road to Success

    Ask anyone in the B&B or inn business and they’ll tell you that it’s a challenging endeavor. And while having Cramer’s name attached to the DeBary Inn may draw customers initially, he and his partners still face the challenges every other owner of one of these establishments faces… and there are plenty of challenges. We spoke to Ripley Hotch, former owner of three inns and the author of How To Start and Run Your Own Bed and Breakfast Inn. He provided us with an important list of dos and don’ts which anyone starting an inn or B&B would be wise to follow. We’ll go through all of them and look at the DeBary in the context of each. Photo Credit: Monica Arellano-Ongpin
    Rule #1: Avoid Starting From Scratch
  • Rule #1: Avoid Starting From Scratch

    According to Hotch, “An already-operating inn will have passed codes, zoning issues, and the usual hostility of communities to B&Bs. You'll pay a premium, but if it's already established, there's a marketing and operating benefit that will save far more time and money than you'd spend trying to get noticed. Plus, all the really profitable locations (i.e., where the tourists are) are pretty much built and overbuilt. Very little room for new.” How does the DeBary Inn stack up? The DeBary Inn has functioned as an inn since 1923, so it’s well-known and has an existing clientele. That said, when Cramer and his partners bought it, they renovated the whole place so it had to pass an inspection by the city... which it has. Photo Credit: bradfordnoble
    Rule #2:  Make Sure This Is For You
  • Rule #2:  Make Sure This Is For You

    Hotch says, “The best inns are hands-on by the owners. What do you want to get out of it? These are small (micro) businesses, with all that implies. They won't make you rich though they will provide a comfortable living (almost all your living expenses are deductible and paid by the business).” How does the DeBary Inn stack up? Since the DeBary Inn is owned by Cramer and other investors, it is not an owner-occupied business. I spoke to one of Cramer’s partners, Lou Helfer, about this particular challenge and he told me that they searched far and wide for the right innkeeper. They settled on a guy who has been in the business for 17 years. He has managed inns, hotels, he’s a licensed sommelier and a gourmet chef. So it sounds like he’s got a love for the business. Beyond that, since Cramer lives relatively close, it’s a safe bet he’s going to be checking up on the place frequently. Take it from me. Photo Credit: russelljsmith
    Rule #3:  Don’t Get Burned By Your Budget
  • Rule #3:  Don’t Get Burned By Your Budget

    “Have enough resources,” advises Hotch. “Double the amount of money you think you need.” How does the DeBary Inn stack up? It should come as no big surprise that Cramer’s got some money in the bank, and he and his partners budgeted accordingly for the venture. They’ve already spent several hundred thousand dollars on the project. Photo Credit: Photos8.com
    Rule #4: Learn the Business Cycle
  • Rule #4: Learn the Business Cycle

    “Every area has slow times,” Hotch notes, “and you need to be aware of how much you need to put aside to make it through slow times.” How does the DeBary Inn stack up? Because of the location, Helfer says that there isn’t really a business cycle or a slow season. The city of Summit is on two train lines that go into Manhattan, and the inn is just a few blocks to the train station. Plus, the area around the inn is home to several large corporations. They are targeting the business traveler, and they’re banking on a steady stream of them. Photo Credit: Redstamp.com
    Rule 5: Have Decent Innkeeper Quarters
  • Rule 5: Have Decent Innkeeper Quarters

    “Burnout is the single most dangerous condition, and happens faster if you don't have a retreat,” says Hotch. “Too many innkeepers started by living in a room behind the kitchen.” How does the DeBary Inn stack up? The entire inn has been renovated, with new bathrooms, Wi-Fi and flat-screen TVs. The innkeeper’s quarters are no exception though the room is – gasp – off the kitchen. Frankly, we can think of no better location, both in terms of privacy and the occasional midnight snack. Photo Credit: DeBary Inn
    Rule #6: Pace Yourself
  • Rule #6: Pace Yourself

    “You'll be called on at all times of the night and day, but you can control that by anticipating guests' needs. A pantry with coffee, tea, soft drinks, cookies, etc., will stop them from calling you at midnight for ice. Also, don't be afraid to tell your guests your schedule. During the last few years I was telling guests that they could call me any time for an emergency, but otherwise, I was off the clock by 7 p.m.,” says Hotch. How does the DeBary Inn stack up? There’s a computer room on the third floor of the inn that will have a refrigerator stocked with drinks and other goodies. Beyond that, Helfer says, “They can bug the innkeeper for any needs. It’s the personal service we’re selling.” Photo Credit: szift
    Rule #7: Remember… Unused Inventory Disappears
  • Rule #7: Remember… Unused Inventory Disappears

    Hotch explains, “if you have 10 rooms, you have an inventory of 10 rooms a day, and thus 300 rooms a month. If you don't book five of those rooms one day, your inventory is 295 for the month... You can't get those rooms back, so it's not like holding cans of tomatoes for another day. Like airline seats, if you don't book them, that revenue is lost.” How does the DeBary Inn stack up? Too early to tell. The Inn just reopened Tuesday. Photo Credit: DeBary Inn
    Rule #8. Avoid Going It Alone
  • Rule #8. Avoid Going It Alone

    “It's usually a couples deal,” notes Hotch.  “It’s really important that at least one is handy. Having to call someone for everything gets expensive. It helps also to claim, assign and divide responsibilities so you are not stepping on one another. Have as much discussion as possible before you get into it to settle disagreements of taste, etc.” How does the DeBary Inn stack up? Though the DeBary’s innkeeper isn’t married, he does have an assistant. Any time the innkeeper is away or sick, the assistant we be available to step in. Someone always has to be living on the premises in order to maintain the license. Photo Credit: makelessnoise
    Rule #9: Get Sophisticated About the Internet
  • Rule #9: Get Sophisticated About the Internet

    Hotch says that, “in good times, most of your reservations come through the Internet. Your web presence is essential, and MUST be beautiful and well-written. That doesn't mean complicated. But it has to be individual, and not copied from someone else's. Look at sites, find those you like, find out who did them, because you'll get a site when you buy, but you might want to redo it.” How does the DeBary Inn stack up? The DeBary Inn’s Web site is pretty old school, though Helfer says it’s currently in the process of being redesigned with new pictures and a reservation page. As it stands, it is only possible to make inquiries using the Web site, not actually make reservations. Photo Credit: codiceinternet
    Rule #10: Plan To Spend A Minimum of Five Years At This
  • Rule #10: Plan To Spend A Minimum of Five Years At This

    “You can't possibly get your money out sooner than five years, especially in these hard times,” says Hotch. “So figure that into your planning.” How does the DeBary Inn stack up? According to Helfer and Jim, they’re in it for the “long haul,” though I bet if someone makes them an offer they can’t refuse… they are Wall Street guys after all. Photo Credit: DeBary Inn
    Rule #11: Get To Know Everyone
  • Rule #11: Get To Know Everyone

    Hotch stresses that owners need to, “get to know everyone in your community who can help, including the Chamber of Commerce, restaurants, other inn owners, etc. You need to have friends.” How does the DeBary Inn stack up? All of the investors are locals. All five are members of the Elks club. Some are in the local Rotary. They belong to a wide variety of churches and synagogues in the area and most have had local business dealings in the past. So they are pretty well plugged in. Photo Credit: Patrick Hoesly
    And the Verdict Is…
  • And the Verdict Is…

    It looks like Cramer, Helfer and the other partners have done their homework. They meet almost all of Hotch’s criteria and for those that they don’t meet (namely the fact that it isn’t owner-occupied), they seem to have reasonably solid contingencies in place. There’s relatively little in the way of competition in the area (apart from a couple of big hotels) and Helfer insists that the DeBary is the most high-end of all of them, which should help draw business people. Relying predominantly on business clientele, however, sounds risky to me. Don’t forget about weddings and bar mitzvahs, guys. Finally, one other smart move is the fact that they’ve outsourced all of the food (breakfast) to a local caterer. That means that the DeBary doesn’t have to lay out the money for food supplies which could go bad if unused.  Limiting risk when possible is always a smart move. Photo Credit: walknboston
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