Guest Houses Can Be Profitable. Here’s The Secret Sauce

From hotels, motels, bed and breakfast, resorts, to hostels, I have written blogs about everything.

However, there was amiss.

I haven’t talked about guest houses. 

Well, I didn’t ignore it; I was just waiting for the right moment and here it is. 

If you’re new to this industry or venturing for the first time, there’s a big learning curve ahead. I will try to cover some of the fundamental tips for running a guesthouse.

So, take this article as one of the pivotal steps on how to run a guest house business and make it big in the segment.

The Rising Demand for Guest Houses

Over the years, various types of accommodation providers have emerged in the hospitality industry. While some couldn’t stay still, some managed to make a long-lasting impact on travelers as well as the industry. And one of those types is guest houses.

Travelers nowadays seek accommodations where they get a homely vibe and yet enjoy the services of a hotel. And this is where guest houses come into the picture.

Also, guest houses are often more reasonable than hotels and much better.

You can take it from me.

Now, instead of writing my take for this section, here’s something an acquaintance of mine shared with me during our conversation.

To note, this acquaintance is also a successful hotelier who owns a hotel and 2 guest houses in Guwahati, India.

This is what he said when I asked him about the current scenario of guest houses:

“Harsh, to be honest, lately I have been focusing more on my guest houses. And I kid you not, they are giving my hotel a run more the money. We even had a meeting sometime back about expanding our guest houses and more services, because the demand is increasing substantially.

I don’t know if it’s exactly because of covid or something else, but what’s sure is that travel preferences have changed. Currently, travelers are keen on B&Bs, homestays, and guest houses. And if you ask me, the demand for these accommodations is going to spike in a few months or years down the line.”

How to Make Your Guest House Profitable?

Even though guest houses are considered to be a part of the smaller accommodation industry, the rewards are high.

Now, when I say profitability, what’s the first thing that comes to your head?

An overwhelming mathematical formula? If so, then slow down.

There’s much to cover before that.

Starting and running a successful guest house takes a great deal of research, time, money, strong strategy, and mental fortitude. And if you can make them work in perfect sync, you’re going to get profitable.

Which is why we are starting from the fundamentals.

Here are the things to keep in mind when you’re running a guest house:

1. Perform competition and market analysis

What if you were a territorial bull shark looking to capture a new feeding area? Would you barge in and fight whoever comes in the way? Or, would just swim around the waters and figure out who you are going to compete against?

Though, both the methods work, knowing about your competition seems to be wiser.

And it is the same with guest house businesses.

The segment isn’t big enough, which is why the competition is tough. So, if you’re planning to start a guest house, it is advised to perform an in-depth analysis of the competition and market.

Simply put, it helps you determine the strengths and weaknesses of the competitor guest houses. Which, further helps in crafting your property’s unique factors, using them for promotions and marketing purposes, and planning strategies for how to expand into a new market.

2. Focus on a specific group of travelers/guests

When you start a guest house, you might feel like catering to a wide variety of travelers with a wider range of wants and needs.  

While this might be intriguing, it presents a lot of challenges. And if you fail to overcome those challenges, it might not work the way you want. 

Then what’s the best thing to do?

Targeting a certain guest base should work the best for you.

For instance, your guest house is located near an IT Park in Bangalore, India. This means you can cater to corporate travelers. Not to mention, these travelers tend to spend more compared to other groups.

But what if your guest house is located somewhere else and you’re not sure whom to target?

In that case, the previous point on market analysis is going to be your sidekick. Do some in-depth market research and find out who is more likely to be your ideal guest base.

Note: You can check out our guest persona blog to understand more about ideal guests.

3. Invest time and efforts in creating a budget

If you have read my previous articles for hotels, B&Bs, and other accommodation segments, you must have noticed that I always talk about budgeting.

Doesn’t matter what’s the shape and size of your guest house or accommodation business, you need to have a budget in place. After all, knowing how much money is coming in and going out of a business is important.

Now how do you create a budget? What are the factors involved? Who’s responsible for this aspect?

Various questions might arise.

Well, fret no more.

To make it easy for you, here’s a detailed article about budgeting for accommodation providers. Read it thoroughly to get a complete idea of it. 

4. Leverage the power of aggregators and OTAs

Aggregators and OTAs play a crucial role in the hospitality industry. And for hotels to become successful, it is vital to work with them.

The reason is that aggregators and OTAs have a massive audience that checks them out daily. They are responsible for driving huge bookings to accommodation businesses worldwide.

Now, there’s of course a commission included which many don’t like. However, if you know how to make it work to your advantage, then working with them shouldn’t be a problem.

But if you still think you can do better without OTAs, here’s a blog about OTA vs Direct Booking that you might want to read.

5. Incorporate revenue management practices

Before I go on to talk about the nuts and bolts of revenue management, there’s a little something I want to state.

If you’re a new guest house and don’t have the budget, then this is completely optional.

Revenue management in the accommodation industry is about understanding and analyzing guest behavior and booking patterns to price guest house rooms to boost revenue growth. Some of the tactics involved are optimizing a property’s presence on OTAs, opening new booking streams, and applying dynamic pricing strategies. 

In simple words, with revenue management, you’ll be able to understand at what time of the year you should increase your prices and when you should lower them.

So, if your guest house business strategy and budget allow, you definitely should go for revenue management.

6. Invest in the latest technology

Technology is at the forefront of the hospitality industry. Be it a hotel or a guest house, the right set of technology can take an accommodation business to sheer heights.

Furthermore, when I say technology, there are various types — property management system, channel manager, booking engine, self-service kiosk, contactless solution, etc.

Now, if you’re a new player in the guest house segment, a comprehensive property management system (PMS) is a great choice.

It not only streamlines and automates your guest house’s operations but improves your bottom line revenue.

And going forward you can start exploring other technological elements and integrate them into your PMS.

7. Invest only in relevant marketing aspects

When it comes to marketing in the hospitality industry, it is easy to get excited by all the avenues available.

But wait, Pal!

Getting your hands on every channel isn’t the wise decision you’ll make.

Do your research on the marketing channels that are more likely to drive reservations to your guest house.

For instance, if we stick to the corporate travelers' example, then LinkedIn marketing seems to be a nice option to invest in.

8. Keep it clean and contemporary

While I talked about some of the prominent aspects of making a guest house profitable, we cannot overlook this one.

Because guests are going to experience the real deal when they step into your property and if it’s not clean or up to the mark in general, the impact won’t be a nicer one.

If someone has chosen your guest house over a hotel, then s/he is not just looking for a reasonable stay but also a clean and comfortable stay.

Therefore, spend a good amount of time on your guest house’s makeover and keep it spick and span.

9. Have a service mindset

When I say service mindset, what exactly I mean is that you have to take every extra mile to offer the best experience to your guests.

For example, if a guest has fallen sick and asks you whether s/he could get boiled food, you don’t pass on that. Rather, if you have the facility and people to cook, you fulfill their request.

The secret to mastering the art of hospitality is having empathy. Your guests are humans, so think of them as humans and not just someone who is paying you for accommodation.

FAQs