Starting Your Own Guesthouse

Scene:

You are in your 40's or 50's and feel like you want to do something new with your life...something international, related to travel. Remembering your fondest feelings of traveling internationally, you suddenly realize you would love to have your own guesthouse. A place where wonderful guests visit from all over the world, enriching your life and the lives of each other with delightful conversations and a shared experience in your beautiful rooms, garden, guest lounge, and dining room. New friendships emerge and you feel that you are offering a truly special part of yourself to people through your guesthouse experience.

This is us. We spent some time recently, traveling and exploring the idea of starting a guesthouse. And we have stayed in many guesthouses in many countries over the years and have talked to dozens of hospitality owners, travelers, and others interested in the same idea. This web resource is the result of our research. Rather than leaving our findings gathering dust, I am sharing it here in the hope that it will help others interested in starting their own guesthouse. Can you add your thoughts and wisdom? Please contact me!

Why a "guesthouse"?

A guesthouse is a romantic notion. It is quite different from a "bed and breakfast", hostel, lodge, or hotel. Here are some differences:

There are many variations on these definitions, but the purpose of stating them is to make clear that they are different from a "guesthouse" in certain ways. These differences include:

Guesthouse Principles and Practices

Here are some key principles of successful guesthouses, and how these principles result in specific practices:

Principle #1: Guests feel welcome, safe, certain, comfortable, and relaxed in the best guesthouses

Practices:

Principle #2: Rooms are intimate, safe, comfortable, and private

Practices:

Principle #3: Bathrooms are sanitary, nurturing, available, and certain.

Practices:

Principle #4: Spacious, friendly, comfortable, welcoming, and social common area(s).

(pictured at right: A lovely rooftop guest lounge with couches, tables and chairs, hammocks, plants, decorations, and wifi)

Practices:

Principle #5: Logistics are relaxed, trustworthy, professional, clear, certain, and feel safe.

Practices:

Principle #6: Extra value and special character - the "wow!" factors

Practices: (not all required)

Economics of a Guesthouse - Business Model Comparisons

The very best guesthouses have solid business models and practices. Prices at these places are usually higher than competitors, not lower. A strong business model, professional practices, and higher prices allow the owner to continually update, refresh and maintain the facilities, and pay staff well. A virtuous cycle develops for guesthouses that operate professionally. A quickly degenerating cycle develops for those guesthouses that operate without care for facilities, staff, and guests. Most disheartening are those guesthouses which try to offer a really low price and skimp on everything, with guests trading off financial savings against a poor experience.

Getting the business model "right" for a specific town, city, and country situation is necessary. The recipe will be a bit different in each place but there are some foundation pieces that seem to be universal. Below is a comparison between a typical guesthouse business model and those of other types of accommodation:

Type Source of Profits Description
Guest House

Majority of revenue and profits come from private room fees. Mid-range pricing of room rates, relative to a specific geographic area.

+ travel booking commissions (secondary source of revenue and profits)

+ drink and snack sales (minor source)

  • All ages, though >25 years old are more willing to pay for the quality.
  • Private rooms primarily.
  • Shared and private bathroom options.
  • Social atmosphere where guests specifically want to meet other travelers.
  • Location: Good access to the "centre" of things in a particular place.
  • Standards of the facilities, cleanliness, and service are high
  • Feeling of coziness important.
  • Staff are mature, caring, friendly.
Party Hostel

Revenue and profits come from a mix of 3 parts: shared room fees. Low-end pricing of room rates.

+ alcohol and snack sales (A very significant source of revenue and profits)

+ travel and tour booking commissions (Another significant source of revenue and profits). At one top guest house, these commissions were very important to the overall profitablity of the establishment.

  • The party hostel provides just that: A party place for younger travelers who are very price conscious. The ability to meet and connect with other young travelers is essential.
  • The hostel is really three businesses that feed off each other: Maximum revenue per shared room, alcohol sales, and travel and tour commissions.
  • The more beds/bunks in a room the more revenue and profit.
  • Guests willing to trade off quality of facilities for cheap price and a highly relational atmosphere.
  • A party space and energy is expected.
  • Not necessary to be in the "centre" of a city, but in the "buzz area for young people".
  • Staff must be young and friendly.
Eco-Lodge

Majority of revenue and profits come from private room fees, which are higher due to the special natural nature of the lodge location.

+ alcohol and food sales (significant and necessary secondary source of revenue and profits)

+ extra services, such as yoga classes, mountain bike or kayak rentals, etc. .

  • Mixed travelers. Can be the young eco-hippie set or older travelers looking for a natural, peaceful experience. Longer guest stays lower room change over costs and increase profits.
  • Must provide good food at a carefully priced level.
  • Must manage guest expectations VERY well before they arrive, when they arrive, and during their experience. Absolutely key for a lodge of any kind.
  • Logistics getting guests to and from the location are very important for guest comfort.
  • Personal relationship building is very important between guests and staff/owners due to the isolated nature of a lodge. This puts pressure on staff and owners to be available and socially "on" 12+ hours a day.
  • Full services required. "Eco-lodge" does not mean washing in a stream! Full hot showers, proper beds & rooms, electricity, and wifi required.
  • Clear instructions and processes give guests comfort. The best eco-lodges are not free-flow dope smoking places, but actually professionally run businesses that give guests a great experience from start to finish.

In summary, the business model of a guesthouse is primarily focused on the quality of the room, the overall facility, and owner's manner of running the place. To maximize profits, the guesthouse owner provides a social, non-party atmosphere, cozy comfortable rooms with character, and excellent facilities such as bathrooms. The guesthouse, then is a "safe sanctuary" from which to explore a city and area. A place to return to at the end of a day of exploring to share experiences with others, get advice, rest, refresh, feel emotionally safe, and get culturally grounded. In exchange for crafting this experience, the guesthouse owner can charge much more than a hostel and have longer-staying and better guests.

Marketing the Guesthouse - How to get lots of bookings

By now it should be obvious that the best guesthouses have some pretty clear principles and practices that make them successful.

But is it enough to simply operate professionally, in a friendly manner, and with awesome service? In other words, does "build a better mousetrap and the world will beat a path to your doorstep", as the old saying goes, work?

The owner of one guesthouse in Belize said that actually yes, "word of mouth" (WOM) is their most powerful marketing tool. This is an established guesthouse, in a good location in town, and with many added services available. The owner is also very customer focused, ensuring the absolute best service.

The result is that he estimates that some 50%+ of his customers are WOM and repeat customers, 25% come from Trip Advisor and the rest from walk-in and other other sources.

Having top Trip Advisor reviews is certainly important, but not everyone uses Trip Advisor and the majority of his business comes from doing the right thing - offering an exceptional experience.

Marketing Principles of Top Guesthouses:

Principle #1: Awesome service is #1

Practices:

Marketing is one area that can be frustrating for guesthouse owners. On one hand they know that spending time with their guests and offering a great place to stay are the keys to their business. But on the other hand, the business world seems to be telling them there are expensive advertising and marketing services that need to have money spent on. The most successful guesthouses understand that marketing is not magic. It is relationship building. With guests before their visit, during, and after they leave. And building value-added relationships with local hospitality "partners".

Do you need help with your guesthouse marketing? The author of this site is a business professor at a Canadian University, who is very open to offering marketing support. All he asks is that if he ever visits your country and guesthouse, you make it a nice visit for him. :-) Contact him for more information.

The Guesthouse

The above is one snapshot of what makes a guesthouse both a wonderful place to welcome guests and a financial success, too. Hopefully these research findings help anyone starting or running a guesthouse. If you can add any comments, insights, photos, or other suggestions, please contact me!

Thanks!

Paul Kurucz

Latest update: December 2016

Links and other Resources: