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Facing increased expenses and alluring profits, B&Bs cash out

From The Wall Street Journal:

Many bed-and-breakfasts are closing down as owners realize they can make a bigger profit by selling the home as a private residence than they do operating the business.

Rising interest rates also have made it more difficult for innkeepers to pay the mortgage and still make money.

Historically, bed-and-breakfasts have sold for four to six times a year’s gross revenues. Under that model, new owners could afford to buy a home, pay the mortgage and expenses, and bank the difference.

But because real estate values have soared so quickly, the formula no longer works. Now, such homes are selling at eight times annual revenues, and often much more. Revenues, meanwhile, are up only slightly.

We’ve seen this happen in the Boston area, in Provincetown, specifically. Owners of many guesthouses (a close equivalent of B&Bs) have decided, over the past couple of summers, to close their doors, and sell off their properties, either as single-family homes, or as condos.

The benefits: less rapid turnover of guests, meaning less congestion, and probably less damage to the town, because owner-occupants are probably more cautious, less loud, etc.

The costs: less turnover of guests, meaning less tourists looking to go out to eat and shop, all the time, meaning less tax revenue for the town.

Source: More B&B Owners Choose to Cash Out - By Conor Doughergy, The Wall Street Journal, by way of Realtor.org