How to Start & Run a B&B BandBED2eBook-1 | Page 24

but if you have other sources of income you can turn to, you must bear these
alternatives in mind because there is no point in accepting a “contribution” from a
discounted B&B booking which makes you less money than you could have made from
an alternative revenue source in the working time necessary. In practice, you should
have in mind a minimum contribution you will accept for a booking: in effect your
minimum wage for the work involved.
The fact that the Gross Profit Percentage (GP%) is so high – and thus “contribution”
starts at such a low level of sales - in an accommodation business like a B&B is very
important, and has big implications for how the business should be managed –
particularly as far as marketing and pricing are concerned. We consider these later.
Pricing:
What do we mean by “pricing” and why is it important? Many people new to
business (and some veterans who should know better!) underestimate the importance
of pricing so don’t give it much thought or priority. The assumption is often: look at
what your competitors are charging, and copy them, or slightly undercut them.
Pricing, of course, can’t be done in a vacuum and you do have to be aware of the
marketplace you are in. However, you also have to consider the “product” you are
offeing compared with that of your competitors, and of course your own costs come
into the equation too.
To start at the beginning, “pricing” is the discipline of setting your charges to your
customers for your services – both the levels of these charges and the pricing structure
and conditions. So in B&B terms, “pricing” does not mean simply coming up with one
figure, your room rate per night. It means thinking through the market size, consumer
demands, competitive capacity and pressure, and your own cost structure, then setting
a framework whereby you can achieve the highest overall profitability.
This “framework” may typically include:
• Seasonal pricing
• Differential weekend / midweek pricing
• Special prices for key dates (bank holidays, half term, local festivals etc.)
• Differential pricing for single occupancy and multiple (eg family) occupancy
• Duration supplements or discounts (eg a supplement for single night stays at
weekends, or discounts for longer stays)
• Restrictions (eg no one-night bookings at weekends, three night minimums in
half term, etc.)
Pricing is one of the key elements of marketing, and has a critical effect on the success of
a business. Yet it is neglected by many because it is seen as dull, difficult, and figure-
based and so much less glamorous than playing with new logos or advertising
campaigns.
How to Start & Run a B&B
www.howtorunabandb.com