Linda's Bed-and-Breakfast

In August of 1994, Linda Smith, owner/operator of Linda's Bed & Breakfast in Westside, 15 kilometres west of downtown Halifax, Nova Scotia, assessed the current peak season and the upcoming off season. For bed-and-breakfasts, the peak season was the middle of May to the middle of October and the off-season was the end of October through until May. The tourism and travel business had been good and had improved over the last two years, however, the off-season continued to be slow. Linda was concerned about increasing revenues during both seasons and wondered how she might do so.

Company Background and Surrounding Area

Linda, who spent 25 years in personnel administration with the federal government, originally aspired to own and operate a handicraft shop but, at the suggestion of a friend, decided upon a bed-and-breakfast. For Linda, there were four distinct advantages to this type of business. First, she could operate the business from her home. Second, there was little risk because start-up costs were low. Third, the business was easy to start because there were some basic regulations which provided an outline but were not restrictive. Fourth, the type of business provided a high degree of personal satisfaction. Linda felt that to operate successfully one had to be an early riser, a morning person and "... you gotta like people." She also attended two week-end workshops sponsored by Tourism Nova Scotia on operating a bed-and-breakfast. Early in the summer of 1992, Linda opened for business.

Westside was a rapidly growing suburban area, with a population of approximately 35,000 people, about 15 kilometres from the city of Halifax.


This case was prepared by Professor Jeff Young of Mount Saint Vincent University for the Acadia Institute of Case Studies as a basis for classroom discussion, and is not meant to illustrate either effective or ineffective management.

Copyright © 1995, the School of Business Administration, Acadia University. Reproduction of this case is allowed without permission for educational purposes, but all such reproduction must acknowledge the copyright. This permission does not include publication.


There was little manufacturing industry in Westside, although a small business-park was being developed. Most of the approximately 350 businesses, many of which were located on the main highway through Westside, were service oriented. There were many shops, services, and fast-food outlets, some were free standing and others were located in strip malls or major shopping centers.

The Bed & Breakfast Industry in Nova Scotia

Typically, a bed-and-breakfast was owned and operated by a home owner who provided accommodation in his/her private home. Breakfast was served in the owner/ operator's private dining area only to those accommodated. In Nova Scotia, bed-and-breakfast operations with three or more rooms were licensed and inspected yearly through Tourism Nova Scotia. An application for a Hotel License and a $5 license fee had to be submitted to the Training & Inspection Services Section of Tourism Nova Scotia prior to the opening of the business. This application provided for an arranged inspection. Licenses were only issued after inspection and had to be renewed on April 1st of each year.

Tourism Nova Scotia readily supplied copies of The Hotel Regulations Act & Regulations Thereunder, an 18-page booklet which provided important information concerning the relationship between the operation and the guests. Tourism Nova Scotia also supplied prospective bed-and-breakfast operators with a 60-page booklet which provided necessary details on hotel licensing, the Office of the Fire Marshal, the Department of Health, the Department of Transportation and Communications, Health Services Tax, and Occupancy Permits. The booklet also provided information on the Nova Scotia Travel Guide, partnerships and business names registration and construction requirements. In addition, the booklet contained useful comments and tips on a wide variety of issues, such as furniture selection and placement.

Canada Select, a national accommodation rating program, inspected, assessed, and rated bed-and-breakfasts. Owners' participation in the program was voluntary and there was an annual fee. Canada Select rated bed-and-breakfasts according to a star rating system:

1 star - clean, comfortable accommodations

2 star - clean, comfortable accommodations with some amenities

3 star - very comfortable accommodations with a greater range of facilities, guest amenities and services

4 star - the highest standard of accommodations with an extensive range of facilities, guest amenities and services

5 star - exceptional properties which are among the best in the country in terms of their outstanding facilities, guest services and quality provided.

Ratings appeared in some advertising of bed-and-breakfasts and helped travelers find appropriate accommodations. Generally speaking, the number of bed-and-breakfasts in operation in the province had increased yearly, although the total number of rooms occupied had declined since 1989. Exhibit I provides the number of licensed bed-and-breakfast operations within the province of Nova Scotia by year.


Exhibit 1

Number of licensed bed-and-breakfast operations within the province of Nova Scotia by year

 

Year Number of
bed-and-breakfasts
1980 87
1985 155
1989 223
1990 235
1991 251
1992 268
1993 260
1993 300

 

Since 1980, the number of licensed bed-and-breakfasts had more than tripled. The last five years had seen about 15 operations closing each year with 30 - 40 new operations opening each year for a net growth of 12 - 40 operations per year (with the exception of 1993). It should be noted that in 1995, all bed-and-breakfast operations, including one and two bedroom operations, were to be licensed. This would bring the total number of bed-and-breakfasts in the province to about 450, as there were approximately 150 one and two-bedroom bed-and-breakfasts currently in operation.

Data from Tourism Nova Scotia, with respect to numbers of rooms sold and occupancy rates in Nova Scotia for the years 1989 through 1993, are presented in Exhibits 2 and 3 respectively.

Exhibit 2

Numbers of rooms sold by month and year for the Province of Nova Scotia for 1989 through 1993

YEAR

Month 1989 1990 1991 1992 1993

Number rooms sold

January 1,138 959 581 943 586
February 1,111 1,000 724 916 847
March 1,412 1,555 819 936 856
April 1,636 1,351 986 1,040 1,082
May 3,294 2,683 2,613 2,662 2,355
June 6,686 6,176 6,437 5,669 5,523
July 13,534 12,298 12,289 11,680 13,385
August 15,045 13,667 14,154 13,135 15,405
September 9,920 9,377 8,260 8,257 9,344
October 4,240 4,320 3,756 3,715 4,014
November 1,511 1,234 1,040 1,147 1,265
December 1,269 853 679 698 708
TOTAL 60,796 55,473 52,338 50,798 55,370

 

The total number of continually occupied rooms declined in 1990, 1991, and 1992. The total number of rooms occupied in 1993 almost reached 1990 levels but was still less than the number of rooms occupied in 1989.

The summer season started with the long week-end in May and ended with the long week-end in October. In terms of occupancy rates, August, July, September, and June, tended to be the busiest months, respectively, followed by October and May.

These growth patterns may continue for the next few years but some regions of the province, the Valley and South Shore in particular, appeared to have reached close to a saturation point with the numbers of bed-and-breakfasts in operation. There appeared to be some room for continued growth in other regions, such as northern Nova Scotia. In the bed-and-breakfast industry, the emphasis was on providing increased and improved services. Better services might include improved quality of food and rooms and an increase in the availability of private bathrooms.

Exhibit 3

Occupancy rates by month and year for the Province of Nova Scotia for 4989 through 1993

YEAR

Month 1989 1990 1991 1992 1993

Occupancy rate (%)

January 12 10 6 10 6
February 13 11 9 10 10
March 14 15 8 10 9
April 16 12 9 10 10
May 21 15 15 14 13
June 30 27 28 23 22
July 55 46 48 45 49
August 59 54 53 50 55
September 44 42 35 20 36
October 22 24 20 20 20
November 13 12 10 11 12
December 12 9 7 7 7
TOTAL 32 29 27 26 27

 

Current Operation

On May 2nd, 1992 Linda opened for business in her four-bedroom, modern, split-entry home. The house was situated on a large, trim and tidy lot, one and one-half blocks from the main business thoroughfare in Westside. Linda had 3 rooms, 2 with double beds and I with a set of twin bed for rent and the rooms could accommodate a maximum of 6 people. There were two four-piece, shared bathrooms, one upstairs and one downstairs. Rates for the summer season were $40 per night, double occupancy and $35 per night single occupancy. Rates for the winter season were $35 per night, double occupancy and $30 per night single occupancy. Linda's bed-and-breakfast was a three-star operation, licensed with Tourism Nova Scotia, and was open year round.

Located within 15 minutes of the Halifax International Airport, with easy access to major highways 101, 102, and 103, Linda's bed-and-breakfast was easy to find and was within convenient walking distance of major shopping malls and a flea market. Museums, playlands and other attractions were within a five minute drive.

A "quiet retreat for the tired traveler" was the operating rule at Linda's. Breakfast was served from 8:00 a.m. to 9:00 a.m. and included cereal (choice of three), fruit or juice, toast, muffins, homemade jam, tea, coffee, or milk. Special dietary needs could be accommodated with prior notice, arrangements could be made for breakfast to be served in the guest's room and light refreshments were available in the evening. Linda tended to keep her breakfast menu fairly simple and nutritious, avoiding fried foods, because she believed "fried foods don't sit well with people". Her menu was easy to serve, was fast and, more importantly, allowed Linda to spend more time talking with her guests than in the kitchen.

Laundry service, stamps, and bridge tokens were available upon request and there was a portable phone and directories in the living room and a phone and directories in the TV room downstairs. Other amenities included an upstairs sitting room with two daily newspapers, a spacious and quiet back deck with tables and chairs, and a TV room with VCR, board games, playing cards, and books. There was plenty of free parking and arrangements could be made for transportation to and from the airport and the downtown areas. Check-out time was 10:00 a.m. and no smoking was permitted indoors and no pets were allowed. Linda's business had been growing steadily as shown by Exhibit 4 which presents the number of rooms sold by month and year for 1992-1994.

Exhibit 4

Numbers of rooms sold by month and year for Linda's Bed-and-Breakfast for 1992 through 1994

YEAR

Month 1992 1993 1994

Numbers of rooms sold

January - 0 1
February - 3 3
March - 0 10
April - 0 2
May 5 4
June 0 13 17
July 4 31 55
August 9 40 58
September 17 24 37
October 3 6 -
November 2 6
December 0
TOTAL 35 122 187

 

Linda had no full-time or part-time employees but had occasionally hired a student to help on busy weekends. There had been no problems with guests, and should there be, the RCMP office was just five minutes away. The business operated largely on a cash basis, American money was given fair exchange, no credit cards were accepted for payment, but Linda Would take personal cheques, none of which had been returned by the bank.

Linda's Current Marketing Strategy

Linda's catered mainly to tourists and to business professionals. The business focused on the needs of the individual guest and on providing outstanding service. At the moment, a student at the local academy had taken a room for several weeks. This was good for cash flow but Linda did not want to turn her business into a rooming house and she was a bit resistant to this type of business. Linda saw her clientele in terms of four groups 1) tourists, those who lived elsewhere and were literally touring the area; 2) visitors, those who lived elsewhere but were originally from Westside or nearby or had ties to the area and were visiting friends or family; 3) business travelers, those visiting businesses in the greater metro area; 4) other, a catch-all group of those not fitting any of the first three groups, for example, the student. Linda believed that at least 85% of her business came from the first group.

Linda's strategy for promoting her business could be seen in terms of a series of informal and formal activities. Generally, Linda's aim was to have people know "...who you are and where you are" and she felt it was important to be seen as part of the broader community.

Informally, Linda promoted her business through networking during the course of every-day social and business activities. She was active in Girl Guides, Professional Secretaries International, and a local business association. Linda also relied, to some extent, on word-of-mouth advertising done by business associates, friends and more importantly, satisfied guests.

On a more formal basis, Linda had engaged in a number of marketing activities over the last three years. In 1992, Linda placed a sign on her front lawn to advertise her business and to identify it to guests (cost $147). She ran one small ad once in each of the two daily newspapers (total cost - $182) and placed one ad in Atlantic Adventure (cost - $25). She purchased space in a local newsletter (cost - $45) and in a local, community-oriented sports schedule (cost - $ 72). In 1992, Linda's Bed & Breakfast was included in a Metro guide to bed-and-breakfasts (cost $135) as well as a provincial guide book (cost - $5) and an Atlantic bed-and- breakfast book (cost - $25). Linda developed a 3-inch x 6-inch cardboard brochure which described her business, identified its location and listed its amenities (cost in 1992 - $312). These brochures remained a key source of advertising and were distributed mainly at tourist bureaus at entry points to the province and in the Metro area. In 1992, Linda also paid $223 to have her brochures available at two stores in a major food chain located on the south shore of the province. She also paid $62 to have her business card printed in a flyer promoting local businesses.

In 1993, Linda ran an ad in one local daily paper (cost $170) as well as one ad in The Clansman (cost - $76), one ad in the Masthead (cost - $54), the latter were tourist-oriented publications, and one ad in a south-shore newspaper ($117). Linda also placed a business-card ad in brochures for a musical which played in Halifax and which were distributed to those attending (cost - $81). She also continued to buy space in the local, community-oriented sports schedule (cost -$156) and had space in the local newsletter at no charge. In 1993, Linda's Bed & Breakfast was again included in the Metro guide to bed-and-breakfasts (cost -$120) as well as the provincial guide book (cost - $5). Additional brochures for the year cost $120.

In 1994, Linda stepped up her advertising, most ads had tended to be business-card size, and again she had purchased a one-time-only space in each of the two local daily papers (total cost - $164) and in the brochure for those attending the musical (cost - $43). Additional ads were placed in Vic Clansman (cost -$140), Family Tree (cost - $35), and a fiddling competition paper (cost - $40). Linda also continued to buy space in the local, community-oriented sports schedule (cost - $156) and this year, had placed an ad in a flyer supporting seniors' games (cost - $50). Linda's operation was again listed in the metro area tourist brochure (no charge) and the Nova Scotia guidebook to bed-and-breakfasts (cost - $5). In 1994, Linda's Bed & Breakfast was also listed in the Quebec (cost - $30) and the Canadian (cost - $41) bed and breakfast guidebooks. Inclusion in the Atlantic bed-and-breakfast book was estimated at $25 and additional brochures would likely cost $120. Since 1993, Linda had had an ad (at no charge) in a commercial travelers' brochure.

While there was currently no bed-and-breakfast association, Linda was registered with CheckInns and its 1-800 number (cost in 1992,$20; in 1993, $144; and in 1994, $305). Charges for CheckInns were based on 10%) of the room cost plus GST, for example, a room which rented for $40 resulted in a fee of $4.28 to CheckInns. Approximately 40-45%, of Linda's business was booked through CheckInns.

In terms of 1993 promotions, Linda gave away ball-point pens inscribed with her business name and address at Halloween to neighborhood children (total cost $170) and had planned to do so again in 1994 (total cost - $178). In 1994, Linda also provided a prize (two nights free accommodation, for two) for a local school fair (total cost - $89).

Linda estimated that 40%-45%, of her business was a result of Check-Inns and 85% of her guests were tourists, but there had been no formal, long-run evaluation of her markets or marketing activities. Occasional informal surveys of guests had shown that the brochures available at tourist bureaus in the Metro area and at entry points into the province had been successful. One person had a copy of the ad from The Clansman in her hand when she checked in. With respect to paying for brochures to be distributed through a grocery chain, Linda said, "It was mistake number 1. It didn't do a thing for me."

Linda planned to continue her ad in the local sports schedule, "... to be community minded.", but for 1995, planned to "hold back" on many of the other forms of ads, other than the guidebooks, "to see how things worked Out."

The 1994 Nova Scotia Travel Guide showed a total of 192 bed-and-breakfast operations in the province, 13 of which were in the Halifax-Dartmouth and Metro area. The Metropolitan Area Tourist Association listed 14 bed-and-breakfasts in its guide, 5 of which were not listed in the Provincial Guide. Most of these 18 bed-and-breakfasts were located in the cities or in the coastal areas at least 30 minutes drive from Linda's. Linda's closest competitors were in Waverley (20 minutes drive), Enfield (20 minutes drive), and Windsor (25 minutes drive) and, from her point of view, represented no real competition.

There were no bed-and-breakfasts in the immediate vicinity and Linda saw a local motel, which was located just around the corner, as her main competition. However, there appeared to be a good working relationship between the two business owners, as each sent clients to the other when no vacancies were available. Linda believed her competitive advantage was her attention to guests' special needs, the one-to-one service, and the creation of a sense of being at home.

In terms of pricing, Linda had been told by several business colleagues that her prices were a little high. She opened her business later than many bed-and-breakfasts and based her prices on those of other operators. She also based her prices on a comparison between what they offered and what she offered. She felt her slightly higher price was justified because of the better service and accommodation she provided. The Guide to Bed and Breakfast and Country Inns of Metropolitan Halifax-Dartmouth, and Surrounding Areas, prepared by the Metropolitan Area Tourist Association, profiled at least 18 bed-and breakfasts. There was some obvious variability in terms of location, distance to downtown Halifax or Dartmouth, and amenities. However, with amenities roughly comparable to those offered by Linda's, in Halifax city some single rooms rented for $30 or $35 per night, double rooms rented for $40 or $45 per night. In Dartmouth single rooms were available for $32 or $40 per night with doubles being available for $40 and $45. In the areas surrounding the cities, single rooms were available for $25, $30, $35, and $40 and double rooms were available for $35, $40, $45, $50, and $60. Rooms in areas surrounding the cities were comparable to Linda's, although they may not be close to Linda's and may not be considered as direct competition by Linda.

Linda's business plan, which more of a mental outline than a detailed plot, included the goal of having an average of 1 room booked per night every night for the entire year. She had thought about "putting things down on paper" but at present the business was "fun" and she didn't want it to become "work." At this point in time, Linda wanted to know how she could increase business, particularly during the off-season.

Exhibit 5

Nova Scotia visitor traffic flows 1992 - Westside area

Party pass throughs - represents the number of no-resident party trips passing a specific community without stopping.

Party stops - represents the number of no-resident party trips involving a stop of less than one-half hour in a specific community.

Part visits - represents the number of no-resident party trips involving a stop of more than one-half hour, but not overnight, in a specific community.

Overnight party trips - represents the number of no-resident party trips involving a stop of one or more nights in a specific community.

Of the 32,100 tourist parties who stopped in Westside, 20,400 stayed overnight, which translated to approximately 44,250 visitors who booked into some kind of accommodation, campsite or fixed roof.

Reasons for trips

Reasons Pass Stops Visits Overnight Total
throughs
Business 103,400 100 4,000 1,500 109,000
Pleasure 96,800 500 2,100 5,900 105,300
Friends/ relatives 146,200 600 4,100 12,200 163,100
Other 28,200 500 800 29,500

 

Origin of visitors

Origin Pass Stops Visits Overnight Total
throughs
Atlantic Canada 148,700 500 5,200 9,200 163,700
Other Canada 166,700 500 4,500 8,900 180,600
International 62,100 100 900 2,300 65,500
TOTAL 377,500 1,100 10,600 20,400 409,800