Bed and Breakfast Industry Makes Room for Web

By | March 7, 2011

Niche Market Rebounds from Recession, Looks to Connect with Gen X and Y Travelers


The bed and breakfast industry is shaking off its fusty, lace and ruffles image in a serious attempt to attract younger patronage and embrace the Internet age.

The strategy could greatly increase the industry’s popularity and bode well for the relatively small group of insurance agents and insurance companies that have made catering to the lodgings their special niche.

The lodging industry appears to be rebounding from the recession and experts expect that recovery will continue throughout 2011. Hotel room occupancy was up 5.8 percent in January from a year ago and room rates were up an average of almost 3 percent, according to STR Global, a market research firm.

The Internet has helped level the playing field for B&Bs with hotels.

At the same time, the Internet is giving bed and breakfast innkeepers an opportunity they never had before. The Professional Association of Innkeepers International (PAII) recently kicked off a campaign called “A Better Way to Stay.” The campaign is a “multi-faceted, multi-media” effort to educate people to the charms of staying in a bed and breakfast when they travel. The campaign is an effort to harness the new power of social media.

In the past, travelers chose the Holiday Inn because they knew what to expect. Now country inns, boutique hotels, and bed and breakfast inns can put pictures on the Web. Social media word-of-mouth can spread a reputation quickly, and many sites have consumer reviews. Commercial sites, like TripAdvisor, list bed and breakfast inns, and allow for easy booking.

Many travelers actually prefer bed and breakfast inns, Jay Karen, PAII president, said in a recent interview. Women travelling alone, for instance, often feel safer in a bed and breakfast. Many travelers prefer the personal touch of a small inn, the character of an old house, the morning meal, and they like not being charged for a wi-fi connection.

“I’m not saying hotels should be quivering with fear because our total room volume is incredibly modest by comparison,” Karen said. “But the playing field has certainly been leveled in this new age of connectivity. I have no doubt we will be stealing some market share.”

The campaign aims to target the younger demographic, specifically Gen X and Gen Y travelers, in an attempt to establish their lodging habits while they are still open minded. To that end, many bed and breakfasts already have begun to ditch the lace curtains, the frilly pillows and the antimacassars. They are opting instead for a contemporary look. The houses may still be old, but more and more often, the room has a television and the furnishings are sleek and new.

Insurance Specialists

There are an estimated 17,000 bed and breakfasts in the U.S., and their annual revenue is around $3 billion. The number of agents and insurers catering to the market is not large, however, according to Micky Porter, a bed and breakfast insurance specialist with the Seaman-Leavitt Insurance Agency in Utah.

She and others say the exposures can be relatively risky — older buildings, lots of customers in and out, liquor, and, sometimes, hazardous activities like horseback riding — and the income a bed and breakfast generates for its proprietors is often not great. A bed and breakfast tends to be a labor of love for its owners, as much as a livelihood.

Porter says the average coverage package she offers has a premium about two-and-a-half times greater than a homeowners policy on the same property, but the liability can be huge. There have been underwriters that have chosen to check out of the market after experiencing large claims, she adds.

But, it is not just the liability. Scott Wolf, of James Wolf Insurance, of Frederick, Md., which specializes in insuring bed and breakfasts, notes that many bed and breakfasts are historic structures — 36 percent of bed and breakfasts have a historic designation, according to PAII — and so the owners want, or need, replacement coverage. That involves wooden windows and plaster walls, among other historic touches, and that coverage is expensive, he says.

“We can rebuild to historic specifications, but it is very costly,” Wolf says.

Wolf, Porter and other agents who specialize in the bed and breakfast market say there are bed and breakfasts that just buy property insurance and generic small business coverage, but the business is unique enough that this approach to insurance is probably not wise.

A bed and breakfast should have property insurance to cover the buildings and their contents, some business income protection, general liability coverage, and an inland marine policy for equipment and other moveable assets, as a basis. A proprietor may also need a commercial automobile policy if there is a vehicle used for business.

Wolf says proprietors should also have additional coverages for liquor liability, food safety, guest inconvenience, and even personal liability if the owner lives on the premises, which is common.

Brent Skiles, underwriting manager at Philadelphia Insurance Companies, which has a program for bed and breakfasts and other lodging risks in resort locations, says his firm sometimes writes crime coverage, since inns usually have cash on the premises, and cyber coverage, for electronic records. He says about half of proprietors offered cyber coverage buy it.

“Any commercial bed and breakfast that keeps customer information has an exposure from it,” he says.

Agents and insurers say that the bed and breakfast industry has not fared too badly during the economic downturn, and therefore, they have not done too badly. The conventional wisdom says that while there has been a cutback in travel overall during this recession, bed and breakfasts have not been hurt so badly because many people who travel have chosen to stay closer to home, and they want some charm in their accommodations to offset the loss of extraordinary in their plans.

Porter says that her business has slowed this year, but last year was “gangbusters.” Wolf says that individual bed and breakfasts have not had to cut back on expenditures because their occupancy rates have not suffered. But, at the same time, some were bought at the height of the market and have gotten caught up in the foreclosure crisis.

Now, with business perhaps looking up, but the industry still constrained by the sluggishness in the economy, the agents are cautiously optimistic.

“We’re looking to stay flat,” says Skiles. “I don’t think there are a lot of new bed and breakfasts coming on line because there isn’t a lot of money out there.”

Some bed and breakfasts, of course, will be looking to change their insurance. The Howlers Inn in Bozeman, Montana, which is located about an hour from Yellowstone National Park and has an added attraction of rescued wolves on the property, has not seen business go down because visiting a national park tends to be a cheap vacation, says owner Mary Martha Bahn. But when her insurance expires this year, she is going to shop around. She has had the same insurance program since she bought the inn eight years ago, and the rates have gone up every year. She is not sure she can afford that anymore.

“This is our livelihood,” she said. “I just think it is wise to look around.”

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Insurance Journal West March 7, 2011
March 7, 2011
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