A Feasibility study: The Conversion of the Krenzer house into a bed and breakfast

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Rochester Institute of Technology

RIT Scholar Works

Theses

Thesis/Dissertation Collections

1994

A Feasibility study: The Conversion of the Krenzer

house into a bed and breakfast

Eric Sherrard

Follow this and additional works at:

http://scholarworks.rit.edu/theses

This Thesis is brought to you for free and open access by the Thesis/Dissertation Collections at RIT Scholar Works. It has been accepted for inclusion in Theses by an authorized administrator of RIT Scholar Works. For more information, please contactritscholarworks@rit.edu.

Recommended Citation

(2)

A FEASIBILITY STUDY:

THE CONVERSION OF THE KRENZER HOUSE INTO A BED AND BREAKFAST

by

Eric R.Sherrard

Aproject submitted to the

FacultyoftheSchoolofFood, Hotel,andTravel Mangement at

Rochester InstituteofTechnology in partialfullfillmentoftherequirements

forthe degreeof MasterofScience

(3)

FORMK ROCHESTER INSTITUTE OF TECHNOLOGY

School of Food, Hotel and Travel Management Department

or

Graduate Studies

M.S. Hospitality-Tourism Management

Statement Grantin2 or Denyin2 Pennission to Reproduce ThesislProject

The author of a thesis or project should complete one of the following statements and include this statement as the page following the title page.

Title of thesis/project: _----'F'""e""'a....s.l...· b"".l".."l""i...t::Ly...S"""t""'u~dy::L....•~K=.:re5O.!n~z.:lOe....r-'H~o~yiOi!s~e-'a...s"-"'a~ _

Bed & Breakfast

I, Eric Sherrard , hereby (grant,~ permission to the

Wallace Memorial library of R.I.T., to reproduce the document titled above in

whole or part. Any reproductionwillnot be for commercial use or profit.

OR

I, -', prefer to be contacted each time a

request for reproduction is made. I can be reached at the following address:

~

(4)

FORM I ROCHES1ER INSTITUlE OF 1ECHNOLOGY

School of Food, Hotel and Travel Management Department of Graduate Studies

M.S. Hospitality-Tourism Management Presentation of ThesislProject Findin&s

Name: Eric Sherrard Date: 6/29/94SS#: _

08 Credits

Committee Chairperson's Signature

Title of Research:A Feasibili ty Study: The Conversion of The Krenzer House

Into A Bed And Breakfast

Specific Recommendations: (Use other sideifnecessary.)

Thesis Committee: (1) Dr. Francis M. Domoy (Chairperson)

(2) Dr. Richard F. Marecki

OR (3)

Faculty Advisor: Dr. Francis M. DolllOY

;&pl

Credits Approved:

:?~Z~.f

---Date

jI27/q~

Date~ Department Chairperson's Signature

Note: This form will not be signedby the Department Chairperson until allcorrections, as suggested inthe specific recommendations (above) are completed.

(5)

ABSTRACT

The Krenzer House isanoldfarm house located at3000 East River Road in Rochester, New York. Thefeasibilityoftheconversion ofthe Krenzer House intoabedand breakfast is the focusofthis project.

Thisreport consistsoffourmajor sections. The first focusesonthecosts

associated withtheconversion. Thesecond area examinesthe marketingthat

is neededtodevelopthebed and breakfast. The third focus researchesthe

licensesand codes needed. While the final area developsan operational plan.

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ACKNOWLEDGEMENTS

I would like to thank Louis Gagliano and Amynah Virani for helping me develop the idea for this project.

Thank you also to Scott Osborne and Stacy McKenzie for helping me put the final pieces together.

I would also like to thank the faculty at the School of Food, Hotel, and Travel Management fot their help and guidance on not only this project, but through my entire Master's degree studies.

Most importantly, I would like to thank my family for their

continued support and encouragement when times got difficult.

(7)

TABLE OF CONTENTS

Abstract i i

Acknowledgements i i i

List of Tables vi

Chapter I

Introduction 1

Problem Statement 2

Background 2

Purpose Statement 2

Significance 3

Definition of Terms 3

Assumptions 4

Procedure 4

Long Range Consequences 5

Chapter II

Literature Review 6

Costs 6

Marketing 9

Licensing 1 4

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Chapter III

Methodology 1 7

Renovational Costs 17

Projected Income 22

Projected Expenses 36

Marketing 40

Licensing and Permits 45

Operational Plan 48

Chapter IV

Summary, Conclusions, and Recommendations 51

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LIST OF FIGURES

Figure

1 . Market Research of Sample Competition 12

2. Renovational Costs of the Krenzer House 21

3. Forecasting-Monthly Breakdown 24-27

4. Forecasting Summary 28

5. Hotels within 5 miles of RIT 33

6. Long Term Forecast of Occupancy and Income 35

7. Operating Expenses of the Krenzer House 37

8. Break Even Analysis 39

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CHAPTER I

INTRODUCTION

The Krenzer House, an oldfarm house locatedat3000EastRiver Road

in Rochester, New Yorkwas purchased byRIT in 1989 from Fredand Marie

Krenzer. Thehouse hadbeen inthe Krenzerfamilysince 1861. Currently, the houseserves as astudy housefor graduate studentsin the School ofFood,

Hotel, andTravel Management, and isalso used as a classroom meetingfacility

once ortwiceaterm.

To saythat the house is beautiful isan understatement! Asyou enter

throughthefront door fromafullporchthatoverlookstheGenesee River, you

cannothelp butnoticetheoak hardwood floors throughout the house. A

fireplacewith an accompanying baywindowin the living room and an adjacent

sunroom arevery impressiveaswell. The stairway leadingto thesecondfloor is also finished in the beautiful hardwood.

Thesecondfloorconsists offour verycomfortablysized bedrooms. The bedroom atthe end ofthe hall iswherethe farmworkers lived, and is separated

bytwo sets ofdoors. Coming down the back stairwell, you arrive in the kitchen

with additional stairsthatgodown to the basement. Theremains of an old cider

chest, fruitcellar, andthe farm workersbathroomare still intact. Then, as you

walkoutthe back door, youlook right intoa good sized apple orchardthatjust

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PROBLEM STATEMENT

Currently, RIT does not haveany unique or specialized housingfacilities for importantgueststhatvisitthecampusforshortperiods oftime.

BACKGROUND

RIT isconstantlylooking fornew learning models to help enhance

theeducation ofitsstudents. Within the School ofFood, Hotel, and

Travel Management, thefood managementdepartment has a studentrun

restaurant. Henry's restaurant provides a handson learning

environmentforafull servicerestaurant. Thetravel school accomodates itsstudents withafullfunctioning computer lab. SABREcomputer

systems can be found in mosttravelagenciestoday. Therefore, students

learningthe SABRE system arewellequippedto function in thetravel

industry. Thehotel department, however, doesnotcurrentlyhave a

"tangible"

educationaltool or modeltoeducate itsstudents.

PURPOSE STATEMENT

Thepurpose ofthisstudyis to analyzethefeasibilityoftheKrenzer

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SIGNIFICANCE

The School ofFood, Hotel, andTravel Management needs

somethingtangible to bringitsstudents closertogether andtoattract

students and thisis a golden opportunity. The developmentofa bed and breakfast mayattract studentsthatmayhave gonetoanother university

to learn from their lodgingfacility. In addition, the project wouldbring

profitto theprogram through meansofdirect income from theproperty.

Furthermore, itwould providetremendous hands-on experience for the students who runthebed andbreakfastand create its

environment. Thecurrent imageof RITwill alsobeenhanced. The

school would nolonger be simplyencompassed in an all-brick settingon

topofthe hill. Theuniversitywould now extendto alandmarksitealong theGenesee River. Theservice RITwould provideto dignitaries,

parents, alumni, corporateVIP's, and otherimportantvisitors would also be greatly upgraded.

DEFINITIONS OF TERMS

School of Food, Hotel, and Travel Mgm't. AprogramwithinRIT

thateducates in Hotel/Resort Management, Food Preparationand Management, Travel Management, and Nutrition and Dietetics. Education occursat both undergraduateand graduate levels.

Landmark Bed and Breakfast- A house that has been

restoredto

preserveits historical heritage. The houseserves as hosttoovernight guests and provides diningaccomodations.

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-3-Landmark Bed and Breakfast- A house that has beenrestored to

preserve its historical heritage. The houseserves as host toovernight

guests and provides dining accomodations.

Tangible

-Somethingthatcan be feltbytouch.

Business Feasibility Study- Areport produced

by identifying market opportunities and predictions of profitability based on research.

ASSUMPTIONS

Thisstudywill gather informationonhow tocoordinatethe

developmentofabed andbreakfast fora universityprogram. Itwill

identifywhat stepsand measures needtobecarriedoutfor theplanto

work. Itwill needthesupportofthe UniversityBoard to be developed.

The studywillfocusononlyone property inone specific area.

PROCEDURE

This studywill onlyexamineone propertyand itspotential for

developmentintoa bedand breakfast. Onlyonefeasibility studywill be

performed in this report, and presentedto thefacultyofTheSchool of

Food, Hotel, andTravel Management.

The independent variable is thepotential ofthe property. The

dependentvariable in thisstudyis thefeasibilityoftheproject. The

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LONG RANGE CONSEQUENCES

Should the information from thisfeasibilitystudy be used inthe

developmentofthe Krenzer House as abed and breakfast, theguideline

may beemployed inother institutions or bedand breakfast

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CHAPTER II

LITERATURE REVIEW

Asthisfeasibility studyattemptsto identifythe market opportunities and

profitbreakdown ofthe potential ofthebedand breakfast, fourdistinctareas are

examined. Thecosts section examineshowand whenprofitwill occur. The

marketing sectionwill lookinto howand if the business isableto sell itself.

The legalities and codes section note whatlaws needtobe adheredto in

orderfor the businesstostart and run. Theoperations breakdown examines

how the house will berun and maintained.

Costs

Startinga Bedand Breakfastwill require three typesof initial investment.

1. Capital equipment andfixtures

2. Initial startupexpenses

3. Workingcapital

A bed and breakfastisa businessinvestment, and likeall business

investments it is important to look realisticallyatthesituation. Thesection on

Investment Requirements and Financial Analysis in Bed & Breakfast Lodging

Operations: A BusinessPlanning Guidefor NYState (1989). describes how to

determine initial investment requirements, how to developa cash flow analysis,

income statement, balance sheet, and provides guidelineson how toevaluate a

Bed and Breakfast decision. Thecashflow projection isone ofthemost

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Thecash flowanalysis:

1. Identifiesthe amountofworking capital needed

2. When it willbeneeded

3. Wherecash comesfrom

4. Wherethecash goes

Oncea cashflowanalysis and capital equipment andfixtures list is

developed, a projected income statement and balancesheetcan be built. To

evalutethe bed& breakfast decision, theguidethen introduces the Hubbards formulaand break evenanalysisformula. The Hubbards formula identifies :

initial investment requirements, operational costsfor a projectedlevel ofactivity,

and projected revenue. A BusinessPlanning Guidefor NY State (1989) The breakeven pointis theamount ofsales atwhich expense costs

equal total revenues. Profitequals zeroatthe break even point. Determining

whena propertymakes a profitis the purposeoffiguring the breakeven point.

InHow to PurchaseandOperateA Bed & BreakfastorCountryInn (1993), Oates and Bredfeldt alsodiscuss the importance ofunderstanding the financial needs ofa bed & breakfast. Theyreviewthe financial statement,

sources offinancing, purchaseexpenses and startupcosts, a regulatory checklist, and some startupadvantages anddisadvantages. Some

disadvantages mentionedare noprior recognition, notrack record, long, long startup time, codes andlicensing, financial complexity, and payback. Some of theadvantages are: do ityourownway,widerange ofchoice, timeframe

flexibility, and tax benefits.

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-7-Determining what needstobe included within the bed & breakfast (living

room, diningroom, bedrooms, bathrooms,. . . ) was reviewedin Martha Murphy's book OwnandOperateYourOwn Bed & Breakfast (1994).

Renovationalcosts should thenbe figuredtoassure thequalityof rooms

meeting Murphy's requirementsfor rooms andfurnishings are set.

Monica and Richard Taylor'sbook Startand Runa Profitable Bed &

Breakfast (1992)also provides guidance in the functional realm ofstarting a

bed&breakfast. Their bookadditionally provides information by discussing

renovationsthatneedto beaddressed. Theyaresimilar with otherbed &

breakfast authors in reviewingfinancial records andfinancial planning. They

do, however, also providehelpful insight into"forecasting yourbusiness

success."

Forecastingentailsseveral specific eventsthatare usedtoproject

income flows.

A firstyearforecastincludes:

1. average booking daysavailable

2. stateoftheeconomy

3. aggressiveadvertising

4. uniqueness

5. tariffstructure

(18)

Ater thefirstyear, theforecastingbeginsto look intopatternsthatoccur, aswell

as advanced and actual bookingsof guests.

Onceforecasting is complete, projectionscan befiguredonthe

occupancy ratefortheyear. Thiswill enablethe breakevenanalysisto be

calculated and when an investmentwillturntoa profit.

Marketing

Once costs have beenfigured, marketing/advertising parametersneed to

bedeveloped. The Bedand Breakfast Business Planning Guideof NYState

(1989), discusses three factors that needto beaddressed in determining

potentialcustomersformarketing

1. Categorize existingorpotential customers

2. Evaluate potential customergroups and choose

oneormoretofocusyourbed&breakfaston

3. Developa marketing strategythataddressesthe

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Accordingto the guide, provided isalistofthemost effectiveadvertising forms.

- brochures

bed and breakfast guidebooks

-newspapers

- direct

mail

magazines

Some other noted ideasinclude:

-complimentarygifts

-sendingphotosof yourguests atyourb& b

-special promotional packages

Importantlynoted in theguide is "Thecostsof implementingamarketing

planshould be reflectedin yourroom price sothatadequetefundsare

available toreach yourmarketing objectives."

The marketingplandevelopedfor Henry's restaurant atRIT in Rochester,

New York by Grieco, Menna, Pornchanok, and Virani (June, 1994) usesan

internal and external analysis in determininga marketingplanfor their

customers. Theexternal analysislooksat understandingthe environment,

percentageofcustomersin differentcategories, competitors(primaryand

secondary), and identifyingthe business opportunities andthreats. The internal

analysisexamines the restaurant's strengths andweaknesses, the location, the

pricing and service strategies, andthe promotional strategiesthatcould be

used.

(20)

-10-Monica and RichardTayloralsodiscuss marketing and advertising in

Startand Runa Profitable Bed& Breakfast (1992). Theydiscuss the

importanceof market research and whatit willtellyou. Surveynearby

competitors andtheirmarkets, andwhat makes customers cometotheir

properties(benchmark). Next, developthebed andbreakfastand itsmarketing

andadvertising around these themes. Figure 1 isa copyofmarketing research

on a sample competitor.

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-11-Figure 1.

SAMPLE #7

HOSPITALITYRATING FORM

HnTKFNAMF. -nWW fr-/^ r/oo<>e. DATE VISITED

,4-5."-// 11* ?-> Poor Fair Good Pocir Fair Coca EXTERIOR Signage >Q

'

Q Q BATHROOM Fixtures G X

Parking q ja Q Lighting D G 71*

Housecondition Q Q EC Decoradon u G Landscaping Q "L Q Cleanliness r-* (-. s-Trash&garbage Q Q "K Towels Q G

1

Ext.guest areas Q }& Q Ventilation Q G

Neighborhood Q Q * Privacy e-i G TS

c

CHECKIN Welcome Q K Q Convenience rj G d

Baggage a. q Q BREAKFAST Welcome tf Q G Tariffpayment Q Q al Timeslot Q G > Checkinroutine Q X Q Presentation a Q

Touroffacilities *S]f Q Q Food variety n n S*

Houserules Q O j Foodquality G G s

Adviceoffered * 2- Q Cleanliness a G '3 Hostattitude Q & a Hosthygiene G G 3

BEDROOM Layout Q Q tf Hostattitude G M G

Cleanliness Q Q * CHECK OUT Routine Q G ^L

Decoration Q Q s: Timeslot G

Q-Comfortablechairs Q Q M Baggage X Q a

Clothesstorage Q ^ Q Hostattitude Q X Q Bedcomfort

A, Q

X Traveladvice is Q Q

Readingmaterial Q HOSPITALITY RAT1NC

V Q a

Writingspace Q O

#*

Lighting Q Q *

Privacy Q Q

*

Security Q Q Roomrefreshments

>

Q a

-COMMENTS: rr . ,

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(22)

12-InOatesand Bredfeld's How to Purchaseand Operatea Bedand

Breakfast (1993). theyprovide a listthattheysuggest shouldbe usedfor

developing a marketing plan.

Developing a Marketing Plan

Who Are You

WhatThe InnRepresents

Whoshouldcome To TheInn

DevelopProfiles Of The Customers

IdentifyThose Customers

TalkToThem

Constant Devotion To Themes

Consistent Messages

(23)

-13-Licensing

In Startand Run aProfitable Bed & Breakfast (1992), Monicaand

Richard Taylor lista set ofbylawsconcerning bed & breakfast's thatreflect

some or all ofthefollowing limitations.

- The

dwelling is residential

- No

morethanone meal perdayis served

Noguest cookingfacilitiespermitted

- Lengthof

stay is limited

- The number ofguest rooms is limited

- Off

streetparking isrequired

- Must beowneroperated

Anybuilding changes mustbereversibleto the

original residential use.

(24)

-14-The Taylor'salso discussfire, building, and health inspection codes that

needtobeadhered toin orderfora bed & breakfast tobe developed.

Afire inspectionwill concentrateonthefollowingcriteria:

Containment-isthe

abilityofthestructuretoresistthespreadofafiresothat

theoccupants can escape. The building materials used in thefloors, walls, and

ceilings needto havea specificratingoffire resistance. Typically, the localfire

code would requirethese materials tohave afire resistancerating of

three-quarters of anhour.

Egress- refersto the numberandtypeofescape routes available tooccupants

during afire. Thefirecodes inyourareawillspecifythenumberof stairways

and exitdoorsrequired inyour home. Ina b &bthe interiorstairwayis usually

consideredto beafireexit.

Detection- specifies thenumber, location, andtypesoffireand smoke

detectorsneeded in the b& b toadequetelywarn customers.

Suppression- referstothe

number, locations, andtypesoffireextinguishers

needed tomeetyour local fire code. Typicallycodedcallforfive pound multi

purposedry chemical extinguishers on all levelsand at all exits.

A building inspection concentrates onthephysical integrityofa houseand its

general stateof repair. Safetyconcerns includeanythingthatcould present a

hazard to the guests. Examples include, loose floor boardsor unsafeelectrical

(25)

-15-wiring. The inspectorwill also reviewany regulations about signagefor

advertising.

Health Inspectionsare concernedwiththefollowing.

-What istheavailabilityandqualityofwater, light, and heat?

- Bathroom

specifications coverthehealth andsafetyofguestbathrooms.

- Linen requirementsdeal

with theavailabilityofprivate towels and

washclothes and the minumum number of bed linenchanges.

Properstorage mustbeconsidered, aswellas preparation and

disposalof guestfood.

(26)

-16-CHAPTER III

METHODOLOGY

Within thefeasibilitystudy, four distinctareasofresearch were

developed. These concentrations included: costs, marketing, legalities, and

operations.

Costs

Costswerebroken downintoareasof renovations, projected

income and projected expenses. A break even analysis and

projected profit pointwerethen determined. It is important tonotethat

within eachsection, costs and incomewere calculated veryconservatively.

Renovational costs werefirstestablished. A general guidelinefor

renovationswas examined in Monicaand Richard Taylor's book Startand Run

a Profitable Bed& Breakfast.(1 992).Thisguidelineconsists of :

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17-Checktheceilings and wallsfor cracks, peeling

paint, andfaded wallpaper

- Examine

thecurrent conditionof electrical

wiring, switches, and outlets

- Consider

installing high efficiency light fixtures

Install adequete room ventilationand room

circulation

The nextstepin determiningrenovationalcosts wastotalkwith RIT

builing assessors ScottLawson and Kevin Buck. Installing new bathrooms,

creating anapartment in thebasement, and convertingthegarage intoa master

bedroom were discussed in partofthe renovational plans.

Thecosts of renovationsfor thisproject researchedthefollowing areas

for remodeling:

Rooms and Bathrooms

Parlor/Living Room 5,000

Dining Room 5,000

Kitchen 5,000

4 Bedrooms 20,000

4 Bathrooms 25,000

Tntal 100,000

(28)

18-Eguipment

Washer/Dryer, Furniture, Electronics, Kitchen equip.

Estimates throughDavies (pg. 57-62), and confirmed with

Clare Lanzatella (Mt. Vernon Manor).

Total 100,000

Garage

Floors, Walls, and Door 10,000

Carpeting 1,000

Furniture 5,000

Plumbing/Bathroom 20,000

Contingency 4,000

Total 40,000

(29)

19-Basement

Walls,Floors 10,000

Carpeting, Stairway 5,000

Furniture 5,000

Plumbing/Bathroom 5,000

Contingency 5,000

Total 30,000

Wiring

Currently, wiringexists throughout thehouse. Expenseswill

occurin assuringthatproperwiringexists and costsincurred

from any re-wiring that needstooccur.

Total 10,000

Porch/FrontEntrance

Estimatedcost entails rebuildingfront porch andarchway.

Total 20,000

(30)

-20-Figure 2.

Renovational Costs

Rooms & Bathrooms $100,000

Equipment 100,000

Garage 40,000

Basement 30,000

Wiring

10,000

Porch / Front Entrance 20,000

Contingency 10.000

Total Renovational Cost 310,000

(31)

-21-Projected Income

Several steps were performedto projectthe annual income ofthe

property.

The projectedoccupancy rate wasfigured throughforecasting the

occupancyof thebed & breakfast everydayoftheyear. Forecastingwasdone,

in part, throughimplementingTaylorandTaylor's ideas inStartand Runa

ProfitableBed & Breakfast. (1992)The firstyearforecastingtips included:

- Estimate

the bookingdays available

toyourbed & breakfast

-Adjust theestimatesto allowforvarious

market conditions

- Calculate

yourfirst-year bookingforecast

The RITcalenderofevents wasthemainsource usedtoproject

occupacyat certaintimesoftheyear. Theforecastingwas broken downby

months andtheneverydaywithineach monthwasforecasted. (Figure3) After

forcastingwasdone, DaveCrumb, anadvisor onthis project and priorGeneral

Managerof MarriottHotels, and BillGunther, whospecializes inforecastingat

the Radisson Plaza in Downtown Rochester, reviewedtheforecasting

procedure and calculated numbers. Additional suggestionsthey mentioned

included:

(32)

-22-When are high and lowoccupancy levels andwhy

Whatwill be donefor lowoccupancy levels

Will B&Bclose during lowoccupancy periods.

- Be

conservativewithinitialforecasting estimates

Occupancypercentageswill be loweratfirstbecause of

familiarityofproperty

Figure 3 liststheforecastingand is followedbyasummary(Figure4)

andsuggestions oftheforecasting results.

(33)

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2 co 3 oo X h- LL LO < CO CO 3 CO 2 00 1-cn 3 o X LL oo < CO 00 3 CO <* 2 LO CO

3 X

h-00

LLCO< o 00 3 CO 00 2 00 00 1-m OJ 3 00 X 1-LO 00

(37)

-27-Figure4.

1st YEAR FORECASTING SUMMARY

at $90/ Night

Income

$12,600

$10,800

$11,250

$7,200

$7,650

$7,200

$9,450

$7,650

$9,000

$11,700

$9,000

$6.750

$110,250

-28-Rooms

August 140/155

September 120/150

October 125/155

November 80/155

December 85/155

January 80/155

February 105/140

March 85/155

April 100/150

May 130/155

June 100/150

July 75/155

(38)

Analysis of Monthly Forecasting

August

-A very high expectancymonth where students arelooking

at RIT forenrollment and newstudents are arriving. Executive

leadersclassesthroughouttheUniversityalso occurduring the

beginningofAugust.

September- Labor

Dayweekendisa big holidayforvacationers.

Therest ofthemonthis expected tohaveaverageoccupancyas the

autumnatmospheredevelopsthroughout the houseandits

surroundingswillkeep a steady flowof visitors.

October

-Steadyoccupancy isexpectedtocontinuewiththeautumn

themes. DuringParentsWeekend, rates willincreaseandthehouse

willbe at maximum occupancy.

November- Thismonthwill

have high occupancytowards theend of

thequarteras parents cometoRochester topickup students. A

Thanksgiving themethroughoutthemonth willhope toattract

visitors. BetweenThanksgiving andthereturn of students forwinter

term, thehousewillbe closedfor break.

December- Christmas decorationsthroughoutthehousewillhope to

attractsteadycustomers. Withparents picking up theirchildren for

Christmasbreak,occupancyisexpected tobe high. Between

ChristmasandNew Yearsthe housewillbe closed.

(39)

29-January- Lower

occupancyis expected becauseofthe winter

weather and it is themiddle ofthe term. Winterweekend packages

arerecommended.

February

-Occupancywillbe slow untilValentine's Weekend.

"RomancePackages"

willbe usedtoincreaseoccupancy. Theend of

the term forclasseswhich occurs attheend ofthemonthwill also

attract parents andisexpectedtobeahigher occupancyperiod.

March

-The return of studentsfor spring termwill attract parents.

The rest ofthe month, however,willbe a slower period. "Getaway Weekends"

or "Businessman'sSpecials"

mayhelpattract guests.

April

-Occupancyis still expectedto bealittle slowerdue to thefact

it is themiddle ofthequarter andspring isnotyet afactor. Possible

suggestions includebusinessspecialsthroughout theweek.

Occupancycouldpickup forspringspecials towardstheend ofthe

month.

May

-Duringgraduation period, rateswillincreaseas demand isat its highest. Weekendpackages are suggested forgraduation

weekend forincreased revenue and guaranteed occupancy. Parents

picking up underclassmenduring theweek priorexpectsto be high

occupanacyaswell. TheRochesterspringfestivals thatoccur after

graduationwill bringhigh occupancyas well.

(40)

-30-Tune

-As occupancy is lower, the housecouldwork with the

Admissionsdepartment tobring prospective students lookingat RIT

tostayatthe house. Thehousecould also re-introduce business

specialsduring theweek, and markettosummerfestivalsthat occur

throughout thegreaterRochesterarea.

luly- The house

maycontinuetowork withAdmissionson bringing

student recruits tothehouseandpromoting businessspecials

throughout theweekfor surrounding companies. Possible "Beatthe

Heat"

weekend packages may increase occupancyaswell.

(41)

The rate the bed and breakfastwould charge per night was

also projected tofigureannual income. First, therate ofadouble

bedroomforeach hotelwithin a 5 mile radius ofRITwasdetermined

in ordertoestimate thecostof a room forthebedand breakfast.

A$75 rate was theaverage ratedetermined forthese hotels,

which wouldbetheKrenzer House'sprimarycompetitors,dueto

theirlocation nearRIT. Figure 5 lists the hotels, their rates, and

number ofrooms accordingtoAAA.

Because oftheunique features ofthe house, as wellas afull

Americanbreakfast inthe morning, a $90 rate wasdetermined as

therate tochargeper night at theKrenzer House. This rateis

comparablewith thesurroundinghotels, but isalittle higherthan

averagedueto theextra featuresitprovides.

(42)

-32-Figure 5.

Hotels Within 5 Mile Radius of RIT

Hotel Rate Rooms

Econolodge 49.95 102

Holidome 95.00 250

Howard Johnson 60.00 96

Marketplace Inn 65.00 145

Marriott Thruway 140.00 307

Microtel 40.95 99

Radisson Inn 69.00 171

Red Roof Inn 58.99 108

Residence Inn 1 1 0.00 112

Super 8 52.88 121

Average 75.17

(43)

Theprojected number ofrooms expectedtobeoccupied was

thenmultiplied bytheroom rate of$90 pernight toget aprojected

annualincome. The formula looksasfollows:

number ofexpected roomsannual x $90 night = projected

annualincome

Afterdeterminingfirstyear projectedoccupancy (67%) each

followingyear was projected todeterminealong termforecastand

breakeven point forthebedandbreakfast. These numbers were

determined throughdiscussingestimated percentageincreaseswith

DaveCrumb,an advisorto this project,andClareLanzatella,who

owns and operatesMt. Vernon Manor Bed andBreakfast. They

determined the futureestimates through theexperiences theyhave

hadin both forecasting and thebed andbreakfast industry. Figure 7

liststhefutureoutlookfor occupancyandincomeuntilthe bedand

breakfast is expected to breakeven.

(44)

-34-Figure 6.

Long Term Forerraqt

Year Rooms Occupied % Occupancy

income

1 1225/1825

2 1300/1825

3 1350/1825

4 1450/1825

5 1450/1825

6 1450/1825 79 130,500

7 1450/1825 79 130,500

67 110,250

71 1 1 7,000

74 121,500

79 1 30,500

79 1 30,500

(45)

-35-Operating Expenses

Annualoperatingexpenses forthis project were figured usinga

varietyof sources.

First, a generalexpense guide sheet forsmall businesseswas used

fromaconsultingguidebookdeveloped byDr. RichardMarecki toset

up the format for theexpense report. Specificexpense costs were

thenresearchedfromboth theNYState Business Planning Guide

(1989) andOatesandBredfeldt'spublication How toPurchase and

OperateaBed & BreakfastorCountryInn (1993). Actualexpense

costs tooperatethe bed& breakfastwere then guaged after

discussing costswithClaire LanzatellaofMt. Vernon Manor Bed &

Breakfast inRochester, NYand thefigures used in thebedand

breakfastguidebooks. The expense report (Figure 7) liststhe

projected annualoperatingexpensesforthe KrenzerHouse.

(46)

-36-a o o o to o D o o cj o

o o oo oo O o o o o o o < O D O o o o o o o o o o O o o CM g o n a n z jj < u D Z < jj jL D 1 a o o o O o oo

o o o ro O o o o o O O O o o o cj o o o m O o o in o o o o o o o o o o o o o o o p-cn U-o o o CO o a oo

o o o o o o o o o O D O o o o o o oo

o o o o o o o o o o o o o PO o o o 1 6 o g 1 s. | ra E o 1 s a o a c e o o *J-o s j ri a UJ a 1 X c c c o c T O o c C a a 1 C n o c c E g a 3 I I t X < Q C 1 1 1 I 3 . 5 i I u c t a i 1 s 1 ? -I 1c s aI

(47)

-37-The breakeven analysiswas then developed using all three

costfactors( renovations, income,andexpenses). The projected

annual expenses were subtracted fromthe projected annualincome. Theannualprofitwas then subtractedfromtherenovationalcosts of

theproject. (Figure8)

Theformulaused looks asfollows:

annual income expenses = annual profit

renovational costs annual profit = newrenovationalcosts

Profit from the bedand breakfastwas then established when the

renovationalcosts were paid offfrom theannual profits over a set

numberofyears.

(48)

-38-0 0 0 0 0 ro O O O OT CM iO i 0 1 0 1 ^ 1 M 0 0 0 O O O O ^1-0 ;0 0 : OO :(NJ O :0 : O iro O O : LO : CM !* !O ; 0 !LO : CO 0 0 m 00 00 0 0 LO LO 0 0 0 r*. CO O O O PO O O LO LO iO !O :LO !LO jCO 0 0 LO LO OO O O LO LO :O : O IO ; * :m = 0 0 : O : PO ! O IO : LO jLO 1 0 : O ! "^ 1^ r-00 LU O C3 Z fe < 1-t LL O a. 0. a: < LU >-fe 1-LL O cc tx a: < LU >-0 z CM h-LL O cn a. < LU >-a oe CO U. 0 a: a. a: < UJ >- F-H U_ 0 cn a. a: < LU >-X I-LO LL O a: D_ < LU >-X 1-LO |_ Li. O a: D_ OC < LU >- 1-in CO >-< z < z UJ > LU < LU OC CO 06 .?? LL. CD LLl 0 LU H m LU O 1-m LU Q s LU z 1-m LU 0 r-CO LU Q

(49)

-39-Marketing

After a review ofthe literature on this subject, and speaking

withadvisors Clyde Vollmers andDaveCrumb, themarketingplan

fortheconversionoftheKrezer House into abed&breakfast

consistsofthreephases: internal analysis, external analysis,

andan action plan.

The internalandexternalanalysis guidelineswere developed

through theexample of amarketing plandevised for Henry's

restaurant inRochester,New YorkbyGrieco, Menna,Pornchanok,

andVirani (1994). Theaction plan was thendevelopedthroughthe

helpof advisors onthisproject. Theaction plan stateshowthe

marketingwill bedone in staight and simpleterms. After the

internal and externalfactorshave beenassessed, and all

marketing/advertising featuresare examined, theaction planis the

suggestion for howtogo aboutadvertising in themost effective way.

Advisors tothisplan wereDr FrancisDomoy, Mr. DaveCrumb, and

Dr. Clyde Vollmers.

Considerationsexamined in thismarketing segment consisted

ofthe budgetaryaspects, whowillbe doing the advertising, what

exactlywillbe advertised,and who the advertising will be done to.

(50)

-40-MARKETING PI AN

External Analysis

1. Demographics

-River Road

- On

Campus

-Shuttle Bus Accessible

- Population

ofRITis 16,507

- Enrolled

studentsfromall50states and80nations

- Real

businessopportunity

2. Customer Analysis

- Parents

-Visitinggueststo RIT(alumni)

- Corporate VIP's

Vacationers

-Community

3. Competitor Analysis

PrimaryCompetitor:

Surrounding Hotels

Strengths

name recognition

larger

familiarity

price

distance to RIT

Weaknesses

atmosphere

repetitive

no uniqueness

(51)

Secondary Competitor:

NearbyB & B's

Strengths Weaknesses

elegance (history) distance from RIT

duration of business not runbystudents

Internal Analysis

1. Strengths

It isvitaltoacknowledgethestrengths and uniqueness ofthe

Krenzer Housecould have uponthe RITcommunity.

Learning Environment: caneasilychange and adaptto unmet

needsofthecustomer

Minimal laborcost: operations and advertisingdone bystudents

- Unique

setting: historyofhouseand Henrietta farmlands

Ties RITandcommunityclosertogether

Handicap accessible

Unifieroftheschool

- On the Genesee River

- On

theRITshuttle route

-neighboring apple and pear orchard

- Red barn

-Parking

-Easy accesstoshopping

(52)

-42-2. Weaknesses

Sizeoftherooms: relativelysmall comparedtosome otherb &b's

in Rochester

EastRiver Road: cars separatehousefrom the river, and create

noise

- Lack

ofbed andbreakfasttrainingstudents mayhave

- When

beginninga new quarter/oryear, students are not as

experienced

3. Pricing Strategies

Pricingwill be donebythestudent managers whenthestudents begin to

runthe bed and breakfast. Under currentapplication, andforfutureoutlook, the

average rateforadouble bedroom wascalculated. For this study, the average

rate of$90forroomswas used. Theexplanationfor this ratecanbe found in

chapter3ofthereport. Pricingwillvaryatthis propertyas some months havea

higherforecasted occupancythanother months. Pricingwill remain high during

highexpected occupancy, butwill remain on acompetitive basiswithin the

Rochesterarea.

(53)

-43-Action Plan

One advantageofthe bedand breakfastis its operationthroughThe

School of Food, Hotel, and Travel Management. The housegivesthesalesand

marketing classes a golden opportunityforsales experience with aproperty.

The bedand breakfastalso has a projectedfirstyear budgetof$5,000for

advertisingto ourtargetmarkets. Theadvertisingwill have to beoverseenby

the directorofthepropertyasthereis no planfor a sales and marketing

director.

This is how theadvertising will work:

1. The bed &breakfastwill have approximately5,000color brochures

made up and sent out over a periodoftime toourtargetmarkets.

Thiswill be our original marketing.

2. Callswill also be madeto local businesseswho mayusethe bed

and breakfast for meetingpurposes.

3. Advertisingwillstressthe convenience of meetingright on RIT's

campus in arelaxed settingwithout havingtoworry about extratime

oftravel or finding a placetoeatfor breakfast for thevisitingguests

to RIT. Breakfastwillbeavailable at nocostto the RIT

representatives whobringtheirgroupswhoarevisiting RIT to the

Krenzer House.

(54)

-44-Licensins and Permits

Theareas ofoccupancy permits, health permits, fire

safety permits, and handicap accessibility were studied in this

report.

MonicaandRichard Taylor'sbookStartandRun aProfitable

Bed & Breakfast (1992) providedvaluable insightas faras fire

safetyregulations andhow toobtain a health permit,and was used

astheguideforthis project. Occupancypermits andhandicap

accessibilitywasthendiscussed with abuilding inspectorfromthe

townofHenriettaand alsothroughdiscussionswith ahandicap

qualifications representative ofNYStatewho is locatedinAlbany.

The discussions pertainedto thePublic LawofNew Yorksection

101-336, title HI "Public Accomodations and Services Operated By

Private Entities". The handicapinformation inthis sectionofthe law

was discussed in detailasit directlyaffects the possibledevelopment

oftheKrenzorHouse intoabed& breakfast.

(55)

-45-LICENSINGAND PERMITS

OccupancyPermits

Inorderforthe bedand breakfastto open, itmust obtain

occupancypermits. Thesepermitsare grantedfromthecountyand

state,andrequireinspection. The countryand stateinspection is

usuallycombined. Safetyand general appearanceofthe property

arethe mainfocus ofthebuilding inspection. Whenadvertisingis

done properlyandthehouseappears safeforguests, thebusiness

mayobtain itspermit.

Health Permit

Thepropertymustalsopasshealth inspectioncodes. Themain

focuswith this inspection isthesanitaryconditions ofthekitchen

andbathrooms. Cleanlinessand overall good sanitation must existin

orderforthepropertytoobtainits health permit.

Fire Safety License

Asstated in the literaturereview, a fire inspectionwill

concentrate on: containment, egress, detection,and suppression. The

Krenzer Housewill havea fire resistance rating ofthree-quarters of

anhour. This isthestandard requirementof containmentforabed

and breakfast. TheKrenzerHousealsohas fourexits andtwo

stairwaysin case of afire. The numberof exits required forabed

and breakfast in New York is two,while the number of stairways

(interiororexterior) is twoas well. Therefore, thehouse has

efficient means of egressalready in place.

In regard todetection, thestate ofNew Yorkrequires a

hardwired fire alarm system. The alarms that run on batteries are

not sufficient. Thealarm mustbe set through thewiring system and

also have locationsthroughouteachfloorofthehouse.

(56)

-46-Before theKrenzer Housewereto open,a hardwired firealarm

systemwouldbe installed. Although the local firecode doesnot

requirefireextinguishers within a bedand breakfastproperty, the

Krenzer Housewillhave themat both levelsofthehouseand at all

exits. Forsafety precautions, extinguisherswill bechecked regularly

forpropersuppression.

Additionally, the firecode states thatreflective numbers must

beput onthedoorsof each room 1 footoffthefloor. Thestairways

mustalsobeproperlyindicated 1 footoffthefloortoallowfiremen

whoarecrawling on the ground toknowwhere theyare. Thiswill

be installedwithin theKrenzer House to ensure properfire safety

codes.

Handicap Accessibility

AlthoughtheKrenzer Housedoesnot meet state requirements

forapropertyto behandicapaccessible, theforecastedplanslookto

have one roomthat ishandicapaccessible. Staterequirements say

thatproperties thathaveatleast5 rooms and morethan 15

employees must haveat least 25%handicapaccessibility. The first

floor thatwillbe builtat thebackofthehousewillbehandicap

accessible.

(57)

-47-OPERATIONALPLAN

Inorderto maintain service, theseelements of operation needto be

covered:

Reservations

Thearea of reservationswill betheresponsibilityof thehouse manager

and students. Partofthecourse requirementswill bethereservations

department. Because ofthelownumber of rooms, adetailed reservation

system is not needed. The reservation system should include beingableto

enter whatdayand whatmonth of arrival. Also, howmanyrooms are needed

for a particular dayand how manyarealreadyoccupied. Anyspecial requests

a guest may havewill also beincluded.

Housekeeping

The cleaningofthe housewill be the responsibilityofthemanager and

the students. Part ofthe requirements of thecoursein runninga bedand

breakfast include housekeeping, andeverystudent in thecourse will

participate.

Grounds

Maintenance and repairs doneon thehouse willbe done by RIT

maintenance and thesecosts arefiguredwithin the institutionalcosts section of

the expense report.

(58)

-48-Educational

Classeswill beorganized andtaught bythe House Manager.

Students will learn:

Businessaspects ofthe lodgingfacility

- Managerial

aspectsofthe lodgingfacility

-Operational aspects( reservations, cooking, housekeeping, ...)

Management

House Manager- willserve as adjunctfacultystatus, liveatthe house,

and is projected a $25,000 annual salary.

GraduateAssistant- $5,000 assistantship

Student Manager- Upperclassman

who has prior experience working in

the house.

(59)

-49-Whilestudents areaway (holidays / summer), the housewill be

maintained bythemanager /and or graduate student ifguests are in house.

The manager will resideatthe house (basementas apartment). Heorshewill

beatthehouse for emergencies, liabilities, or problemsthatarise. A manager

willalways beon propertyif guests are atthehouse.

(60)

-50-CHAPTER IV

SUMMARY. CONCLUSIONS. AND RECOMMENDATIONS

ThefeasibilityoftheKrenzer House to be convertedinto abed

and breakfastwas brokendown into four distinctareasforthis

project. Thecosts section wasfirst studied extensively. After

figuringrenovational andoperatingexpenses, andforecastingthe

potentialincome, itwasdeterminedthat thebreakeven point would

occur nearthe6 1/2 yearpoint. Profitwouldthen beginto grow by

the seventh yearthehouseis in operation.

Additionally, it is important toremember thatincome toRIT

would notonlycome fromthedirectincome fromtheproperty. The

developmentofthe houseasabedand breakfastwould also enhance

theimageoftheschooland increasestudent enrollment.

How the housewouldbemarketed was also examined in detail.

Afterinternallyandexternally analyzingthe house'scompetitors,

qualities,andpotential, anaction planwasdeveloped. The

recommendationsoftheactionplan zero inon the target markets,

andhowtobestattract gueststo the property. Sending brochures,

calling corporateaccounts,andencouragingincentives to thoseRIT

employeeswho bring theirgueststo the house is the final

recommendations ofhowtomarketthehouse in bestestimation.

(61)

-51-Licenseandoperating codes werealso important to researchif

the housewastobe developed intoabed andbreakfast. How to

obtainfire, occupancy,andhealthpermitswasestablished,andwill

beimplemented ifandwhen the conversionofthehouseoccurs.

Anoperational plan was also developed. After it was

determinedwhatservices needed tobe provided inorderforthe bed

and breakfastto properlyoperate, the management structurewas

developed. The threeareasofmanagement (manager,graduate

assistant, andstudent) giveastrong backboneto ensuretheoverall

goals andobjectivesofthebusinesswillbe maintained. The

operational planalso projectsthat theeducationofthestudents(in

regardtolearning cost, managerial,and operationalaspectsof a

lodgingfacility) will occur.

Thisprojectconcludesthat theconversionoftheKrenzer House

intoa bedandbreakfastisafeasibletask. The study indicatesthat

theoperational, licensing, andmarketing aspects are allvery

attainable. The studyalso showsthat thedevelopmentofthis

projectwouldbeamoneymaker. Not onlywould thepropertymake

aprofit in sevenyears, buttheimageand enrollment ofRITwould alsobeenhanced.

It is therefore recommended that RTT instillan overseer ofthe

renovations thatneedto take place and extendtheschool to the

banksofthe Geneseewitha bedand breakfastcalled "The Krenzer House".

(62)

-52-REFERENCES

American Automobile Association. (1995). Tour Book: New York.

A48-A49.

Bed and BreakfastLodging Operations: A Business Planning Guide

for New York State. Publ. by NYState Small Business

DevelopmentCenter. Jefferson CommunityCollege. Watertown,

New York. December 1989.

Davies, MaryE. So You Want to bean Inkeeper. Chronicle Books,

San Francisco. 1990.

Garrison, Davidson and Davidson. Financial Forecasting and Planning.

Quorum Books, New York. 1988.

Grieco, Menna, Pornchanok, Virani. (June, 1994) Strategic Marketing

for Henry's Restaurant.

Kravitt, Gregory. Creating a Winning Business Plan. Probus Publ. Co.

Chicago. 1993.

Marecki, Richard F.,Ph.D. (Dec. 1991) Consulting Guide for Travel

Agencies.

Murphy, Martha W. How to Own andOperate Your Own Bedand

Breakfast. HenryHoltandCo., New York. 1994.

Notarius, Barbaraand Gail Brewer. Open Your Own Bedand

Breakfast. Second Ed. JohnWileyandSons Inc. 1992.

Oatesand Bredfeldt. (1993) Howto Purchase andOperatea Bed and

RroakfastnrCountry Inn.

(63)

53-Public Law 101-336. July 26, 1990. Title III: Public Accomodations

and ServiceOperated by Private Entities.

Schaeffer, Nancy. (July 1, 1988) The Bed and BreakfastIndustryof

New York State.

Stankus, Jan. How to Open and Operatea Bedand Breakfast Home.

ed. Globe Pequet. Old Saybrook,Ct. 1986.

Taylor, M. and Richard Taylor. Startand Run a Profitable Bedand Breakfast. Self Council Press. Vancouver, B.C. 1993.

Figure

Figure 1.SAMPLE #7

Figure 1.

SAMPLE 7. View in document p.21
Figure 4.1st YEAR FORECASTING SUMMARY
Figure 4 1st YEAR FORECASTING SUMMARY. View in document p.37