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

Rochester Institute of Technology

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1994

A Feasibility study: The Conversion of the Krenzer

house into a bed and breakfast

Eric Sherrard

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A FEASIBILITY STUDY:

THE CONVERSION OF THE KRENZER HOUSE INTO A BED AND BREAKFAST

by

Eric R.Sherrard

Aproject submitted to the

FacultyoftheSchoolof_{Food, Hotel,}andTravel Mangement at

Rochester Instituteof_Technology in partialfullfillmentoftherequirements

forthe degreeof MasterofScience

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:

~

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.

ABSTRACT

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

Thisreport consistsoffourmajor sections. The first focusesonthecosts

associated withtheconversion. Thesecond area examinesthe _marketingthat

is neededto_developthebed and breakfast. The third focus researchesthe

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

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.

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

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

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

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 Krenzer_familysince 1861. Currently, the houseserves as a_{study house}for graduate studentsin the School of_Food,

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

cannot_help butnoticetheoak hardwood floors throughout the house. A

fireplacewith an _{accompanying bay}windowin the _living room and an adjacent

sunroom are_{very impressive}aswell. _{The stairway leading}to thesecondfloor is also finished in the beautiful hardwood.

Thesecondfloorconsists of_{four verycomfortably}sized 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

PROBLEM STATEMENT

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

BACKGROUND

RIT is_{constantlylooking} fornew _learning models to _help enhance

theeducation ofitsstudents. Within the School of_{Food, Hotel,} and

Travel Management, thefood managementdepartment has a studentrun

restaurant. Henry's restaurant provides a handson _learning

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

systems can be found in mosttravelagenciestoday. _Therefore, students

learningthe SABRE system arewellequippedto function in thetravel

industry. Thehotel _{department, however,} doesnot_currentlyhave a

"tangible"

educationaltool or modeltoeducate itsstudents.

PURPOSE STATEMENT

Thepurpose ofthis_studyis to analyzethe_feasibilityoftheKrenzer

SIGNIFICANCE

The School of_{Food, Hotel,} andTravel Management needs

somethingtangible to _bringitsstudents closertogether andtoattract

students and thisis a golden opportunity. The developmentofa bed and breakfast mayattract studentsthat_mayhave gonetoanother _university

to learn from their _lodgingfacility. In addition, the project would_bring

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. The_universitywould now extendto alandmarksite_along 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.

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

preserve its historical heritage. The houseserves as host toovernight

guests and provides _dining accomodations.

Tangible

-Somethingthatcan be felt_bytouch.

Business _{Feasibility Study}- A_{report produced}

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

ASSUMPTIONS

This_studywill gather informationonhow tocoordinatethe

developmentofabed andbreakfast fora _universityprogram. Itwill

identifywhat stepsand measures needtobecarriedoutfor theplanto

work. Itwill needthesupportofthe _UniversityBoard to be developed.

The _studywillfocuson_onlyone _property inone specific area.

PROCEDURE

This studywill _onlyexamineone _propertyand itspotential for

developmentintoa bedand breakfast. _Onlyone_{feasibility study}will be

performed in this report, and presentedto the_facultyofTheSchool of

Food, Hotel, andTravel Management.

The independent variable is thepotential ofthe property. The

dependentvariable in thisstudyis thefeasibilityoftheproject. The

LONG RANGE CONSEQUENCES

Should the information from this_feasibilitystudy be used inthe

developmentofthe Krenzer House as abed and breakfast, theguideline

may beemployed inother institutions or bedand breakfast

CHAPTER II

LITERATURE REVIEW

Asthis_{feasibility study}attemptsto _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 start_upexpenses

3. _Workingcapital

A bed and breakfastisa business_investment, and likeall business

investments it is important to look _{realistically}atthesituation. 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

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 purposeof_figuring the breakeven point.

InHow to PurchaseandOperateA Bed & BreakfastorCountryInn (1993), Oates and Bredfeldt alsodiscuss the importance of_{understanding} the financial needs ofa bed & breakfast. _Theyreview_{the financial statement,}

sources offinancing, purchaseexpenses and start_upcosts, a _regulatory checklist, and some start_upadvantages anddisadvantages. Some

disadvantages mentionedare noprior recognition, notrack record, long, long start_{up time,} codes andlicensing, financial complexity, and payback. Some of theadvantages are: do ityourown_way,widerange ofchoice, timeframe

flexibility, and tax benefits.

-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 the_qualityof 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 of_starting a

bed&breakfast. Their book_additionally 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. stateofthe_economy

3. aggressive_advertising

4. uniqueness

5. tariffstructure

Ater thefirstyear, the_forecastingbeginsto look intopatternsthatoccur, aswell

as advanced and actual bookingsof guests.

Once_forecasting is complete, projectionscan befiguredonthe

occupancy ratefortheyear. Thiswill enablethe breakevenanalysisto be

calculated and when an investmentwillturntoa profit.

Marketing

Once costs have been_{figured, marketing/advertising} parametersneed to

bedeveloped. The Bedand Breakfast Business Planning Guideof NYState

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

potentialcustomersfor_marketing

1. Categorize existingorpotential customers

2. Evaluate potential customergroups and choose

oneormoretofocusyourbed&breakfaston

3. _Developa _{marketing strategy}thataddressesthe

Accordingto the guide, provided isalistofthemost effective_advertising 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 _implementinga_marketing

planshould be reflectedin yourroom price sothatadequetefundsare

available toreach your_marketing 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.

-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, develop}thebed andbreakfastand itsmarketing

and_advertising around these themes. Figure 1 isa _copyof_marketing research

on a sample competitor.

-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 Food_quality 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 . ,

ViJ-HCjudl M loco.k kcu<> no </c*.

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12-InOatesand Bredfeld's How to Purchaseand Operatea Bedand

Breakfast (1993). _theyprovide a listthat_theysuggest 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

-13-Licensing

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

Richard Taylor lista set ofbylaws_concerning bed & breakfast's thatreflect

some or all ofthe_following limitations.

- The

dwelling is residential

- No

morethanone meal per_dayis served

Noguest _cookingfacilitiespermitted

- Length_of

stay is limited

- The _{number ofguest rooms} is limited

- Off

street_{parking is}required

- Must be_{owneroperated}

Anybuilding changes mustbereversibleto the

original residential use.

-14-The Taylor'salso discuss_{fire, building,} and health inspection codes that

needtobeadhered toin orderfora bed & breakfast tobe developed.

Afire inspectionwill concentrateonthe_followingcriteria:

Containment-_isthe

abilityofthestructuretoresistthespreadofafiresothat

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

ceilings needto havea specific_ratingoffire resistance. _Typically, the localfire

code would requirethese materials tohave afire resistance_rating of

three-quarters of anhour.

Egress- _{refersto the numberandtypeofescape routes available tooccupants}

during afire. Thefirecodes inyourareawill_specifythenumberof stairways

and exitdoorsrequired inyour home. Ina b &bthe interior_stairwayis _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

purpose_dry chemical extinguishers on all levelsand at all exits.

A building inspection concentrates onthephysical _integrityofa houseand its

general stateof repair. _Safetyconcerns include_anythingthatcould present a

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

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

advertising.

Health Inspectionsare concernedwiththefollowing.

-What isthe_availabilityand_qualityof_{water, light,} and heat?

- Bathroom

specifications coverthehealth and_safetyofguestbathrooms.

- Linen _requirementsdeal

with the_availabilityofprivate towels and

washclothes and the minumum number of bed linenchanges.

Properstorage mustbeconsidered, aswellas preparation and

disposalof guestfood.

-16-CHAPTER III

METHODOLOGY

Within the_{feasibilitystudy, four distinct}areasofresearch 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 each_section, 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 :

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 next_stepin _determiningrenovationalcosts wastotalkwith RIT

builing assessors ScottLawson and Kevin Buck. _Installing new _bathrooms,

creating anapartment in the_basement, and _convertingthegarage intoa master

bedroom were discussed in partofthe renovational plans.

Thecosts of renovationsfor thisproject researchedthe_following 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

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

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

occur_{in assuring}thatproper_wiringexists and costsincurred

from any re-wiring that needstooccur.

Total 10,000

Porch/FrontEntrance

Estimatedcost entails _rebuildingfront porch andarchway.

Total 20,000

-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

-21-Projected Income

Several steps were performedto projectthe annual income ofthe

property.

The projected_occupancy rate wasfigured through_forecasting the

occupancyof thebed & _{breakfast everyday}oftheyear. _Forecastingwas_done,

in part, throughimplementingTaylorandTaylor's ideas inStartand Runa

ProfitableBed & Breakfast. (1992)The firstyear_forecastingtips included:

- Estimate

the _bookingdays available

toyourbed & breakfast

-Adjust theestimatesto allowforvarious

market conditions

- Calculate

yourfirst-year _bookingforecast

The RITcalenderofevents wasthemainsource usedtoproject

occupacyat certaintimesoftheyear. The_forecastingwas broken down_by

months andthen_everydaywithineach monthwasforecasted. (Figure₃₎ After

forcastingwasdone, Dave_Crumb, anadvisor onthis project and priorGeneral

Managerof MarriottHotels, and Bill_Gunther, whospecializes in_forecastingat

the Radisson Plaza in Downtown Rochester, reviewedthe_forecasting

procedure and calculated numbers. Additional suggestions_they mentioned

included:

-22-When are high and low_occupancy levels and_why

Whatwill be donefor low_occupancy levels

Will B&Bclose _during low_occupancy periods.

- Be

conservativewithinitial_forecasting estimates

Occupancypercentageswill be loweratfirstbecause of

familiarityof_property

Figure 3 liststhe_forecastingand is followed_bya_summary(Figure₄₎

andsuggestions ofthe_forecasting results.

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CO2 1-3 X1-LLCO< 3 CO2 H3

X LL 00oo

51-LOco r~00 cno "~ _OJ00

"J-LO COr~ 00 cno 00 00 00 oo oo 00 1-OJ LO 00 CO OJ oo 00 00 cn 00 o oo CO 2 O O OC LO LO o 00 5 .o 13 73 o aj

LO LO 3-_*ft- _oo cnoooo oo LOoooo oooo oo ooLOLO LOLO LOLO LOLO LOLO LOLOLO LO

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

-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

[image:37.484.89.356.37.601.2]

Analysis of Monthly Forecasting

August

-A very high expectancymonth where students are_looking

at RIT forenrollment and newstudents are arriving. Executive

leadersclassesthroughoutthe_Universityalso occur_during the

beginningofAugust.

September- Labor

Dayweekendisa _{big holiday}forvacationers.

Therest ofthemonthis expected tohaveaverage_occupancyas the

autumnatmospheredevelopsthroughout the houseandits

surroundingswill_keep a _{steady flow}of visitors.

October

-Steadyoccupancy isexpectedtocontinuewiththeautumn

themes. _DuringParents_Weekend, rates willincreaseandthehouse

willbe at maximum occupancy.

November- This_monthwill

have high occupancytowards theend of

thequarteras parents cometoRochester topick_up students. A

Thanksgiving themethroughoutthemonth willhope toattract

visitors. Between_Thanksgiving andthereturn of students forwinter

term, thehousewillbe closedfor break.

December- Christmas decorationsthroughoutthehousewillhope to

attract_steadycustomers. Withparents _{picking up} theirchildren for

Christmas_break,occupancyisexpected tobe high. Between

ChristmasandNew Yearsthe housewillbe closed.

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 students_{for spring} termwill attract parents.

The rest of_{the 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 and_spring isnotyet afactor. Possible

suggestions includebusinessspecialsthroughout theweek.

Occupancycouldpick_{up forspring}specials 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.

-30-Tune

-As occupancy is lower, the housecouldwork with the

Admissionsdepartment to_bring prospective students _lookingat RIT

to_stayatthe house. Thehousecould also re-introduce business

specials_during the_week, and markettosummerfestivalsthat occur

throughout thegreaterRochesterarea.

luly- The house

maycontinuetowork withAdmissionson _bringing

student recruits tothehouseand_{promoting business}specials

throughout theweekfor surrounding companies. Possible "Beatthe

Heat"

weekend packages _{may increase occupancy}aswell.

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's_{primarycompetitors,}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 the_{surroundinghotels,} but isalittle higherthan

averagedueto theextra featuresitprovides.

-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

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

After_determiningfirstyear projected_{occupancy (67%)} each

followingyear was projected todeterminea_long termforecastand

breakeven point forthebedandbreakfast. These numbers were

determined through_discussingestimated percentageincreaseswith

Dave_Crumb,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.

-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}

-35-Operating Expenses

Annual_operatingexpenses forthis project were figured usinga

varietyof sources.

First, a generalexpense guide sheet forsmall businesseswas used

froma_consultingguidebookdeveloped _byDr. RichardMarecki toset

up the format for theexpense report. Specificexpense costs were

thenresearchedfromboth theNYState Business Planning Guide

(1989) andOatesandBredfeldt'spublication How toPurchase and

OperateaBed & Breakfastor_CountryInn (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 annual_operatingexpensesforthe KrenzerHouse.

-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

-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.

-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

-39-Marketing

After a review ofthe literature on this _subject, and _speaking

withadvisors Clyde Vollmers andDave_Crumb, the_marketingplan

fortheconversionoftheKrezer House into abed&breakfast

consistsofthreephases: internal analysis, external analysis,

andan action plan.

The internalandexternalanalysis guidelineswere developed

through theexample of a_marketing plandevised for Henry's

restaurant in_Rochester,New York_{byGrieco, 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 about_{advertising in} themost effective way.

Advisors tothisplan wereDr FrancisDomoy, Mr. Dave_Crumb, and

Dr. Clyde Vollmers.

Considerationsexamined in this_marketing segment consisted

ofthe _budgetaryaspects, whowillbe _doing the _advertising, what

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

-40-MARKETING PI AN

External Analysis

1. Demographics

-River Road

- On

Campus

-Shuttle Bus Accessible

- Population

ofRITis 16,507

- Enrolled

studentsfromall50states and80nations

- Real

business_opportunity

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

Secondary Competitor:

NearbyB & B's

Strengths Weaknesses

elegance _(history) distance from RIT

duration of business not run_bystudents

Internal Analysis

1. Strengths

It isvitaltoacknowledgethestrengths and uniqueness ofthe

Krenzer Housecould have uponthe RITcommunity.

Learning Environment: can_easilychange and adaptto unmet

needsofthecustomer

Minimal laborcost: operations and _advertisingdone _bystudents

- Unique

setting: _historyofhouseand Henrietta farmlands

Ties RITand_communityclosertogether

Handicap accessible

Unifieroftheschool

- On the Genesee River

- On

theRITshuttle route

-neighboring apple and pear orchard

- Red barn

-Parking

-Easy accesstoshopping

-42-2. Weaknesses

Sizeoftherooms: _relativelysmall comparedtosome otherb &b's

in Rochester

EastRiver Road: cars separatehouse_{from the river,} and create

noise

- Lack

ofbed andbreakfast_trainingstudents _mayhave

- When

beginninga new quarter/or_year, students are not as

experienced

3. _Pricing Strategies

Pricingwill be done_bythestudent 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. _Pricingwill_varyatthis _propertyas some months havea

higherforecasted _occupancythanother months. _Pricingwill remain high _during

highexpected occupancy, butwill remain on acompetitive basiswithin the

Rochesterarea.

-43-Action Plan

One advantageofthe bedand breakfastis its operationthroughThe

School of _{Food, Hotel,} and _{Travel Management. The housegivesthe}salesand

marketing classes a golden _opportunityforsales experience with aproperty.

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

advertisingto ourtargetmarkets. The_advertisingwill have to beoverseen_by

the directorofthe_propertyasthereis no planfor a sales and _marketing

director.

This is how the_advertising 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 _havingto_worry about extratime

oftravel or _finding a placetoeatfor breakfast for the_visitingguests

to RIT. Breakfastwillbeavailable at nocostto the RIT

representatives who_bringtheirgroupswhoare_visiting RIT to the

Krenzer House.

-44-Licensins and Permits

Theareas of_{occupancy 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 and_handicap

accessibilitywasthendiscussed with a_building inspectorfromthe

townofHenriettaand alsothroughdiscussionswith a_handicap

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.

-45-LICENSINGAND PERMITS

OccupancyPermits

Inorderforthe bedand breakfast_{to open,} itmust obtain

occupancypermits. Thesepermitsare grantedfromthe_countyand

state,andrequireinspection. The _countryand stateinspection is

usuallycombined. _Safetyand general appearanceofthe _property

arethe mainfocus ofthe_building inspection. When_advertisingis

done properlyandthehouseappears safeforguests, thebusiness

mayobtain itspermit.

Health Permit

The_propertymustalsopasshealth inspectioncodes. Themain

focuswith this inspection isthe_sanitaryconditions ofthekitchen

andbathrooms. Cleanlinessand overall good sanitation must existin

orderforthe_propertytoobtainits 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 the_wiring system and

also have locationsthroughouteachfloorofthehouse.

-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. For_{safety precautions,} extinguisherswill bechecked _regularly

forpropersuppression.

Additionally, the firecode states thatreflective numbers must

beput onthedoorsof each room 1 footoffthefloor. Thestairways

mustalsobe_properlyindicated 1 footoffthefloortoallowfiremen

whoare_crawling on the ground toknowwhere _theyare. Thiswill

be installedwithin theKrenzer House to ensure properfire safety

codes.

Handicap Accessibility

AlthoughtheKrenzer Housedoesnot meet state requirements

fora_propertyto be_{handicapaccessible,} theforecastedplanslookto

have one roomthat is_handicapaccessible. Staterequirements _say

thatproperties thathaveatleast5 rooms and morethan 15

employees must haveat least 25%_handicapaccessibility. The first

floor thatwillbe builtat thebackofthehousewillbe_handicap

accessible.

-47-OPERATIONALPLAN

Inorderto maintain service, theseelements of operation needto be

covered:

Reservations

Thearea of reservationswill bethe_{responsibility}of 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 what_dayand whatmonth of arrival. _Also, how_manyrooms are needed

for a particular _dayand how _manyare_alreadyoccupied. _Anyspecial requests

a guest _may havewill also beincluded.

Housekeeping

The cleaningofthe housewill _{be the responsibility}ofthemanager and

the students. Part ofthe requirements of thecoursein _runninga bedand

breakfast include housekeeping, and_everystudent 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.

-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 adjunct_{facultystatus, live}atthe _house,

and is projected a $25,000 annual salary.

GraduateAssistant- _{$5,000 assistantship}

Student Manager- Upperclassman

who has prior experience _working in

the house.

-49-Whilestudents are_away (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.

-50-CHAPTER IV

SUMMARY. CONCLUSIONS. AND RECOMMENDATIONS

The_feasibilityoftheKrenzer House to be convertedinto abed

and breakfastwas brokendown into four distinctareasforthis

project. Thecosts section wasfirst studied extensively. After

figuringrenovational and_{operatingexpenses,} and_forecastingthe

potential_income, 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 not_onlycome fromthedirectincome fromtheproperty. The

developmentofthe houseasabedand breakfastwould also enhance

theimageoftheschooland increasestudent enrollment.

How the housewouldbemarketed was also examined in detail.

After_internallyand_{externally analyzing}the house'scompetitors,

qualities,andpotential, anaction planwasdeveloped. The

recommendationsoftheactionplan zero inon _{the target markets,}

andhowtobestattract gueststo the property. _{Sending brochures,}

calling corporateaccounts,and_encouragingincentives to thoseRIT

employeeswho _bring theirgueststo the house is the final

recommendations ofhowtomarketthehouse in bestestimation.

-51-Licenseand_operating codes werealso important to researchif

the housewastobe developed intoabed andbreakfast. How to

obtain_{fire, occupancy,}andhealthpermitswas_established,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, and_student) givea_{strong backbone}to ensuretheoverall

goals andobjectivesofthebusinesswillbe maintained. The

operational planalso projectsthat theeducationofthestudents(in

regardto_{learning cost, managerial,}and operationalaspectsof a

lodgingfacility) will occur.

Thisprojectconcludesthat theconversionoftheKrenzer House

intoa bedandbreakfastisafeasibletask. _{The study indicates}that

the_{operational, licensing,} and_marketing aspects are all_very

attainable. The _studyalso showsthat thedevelopmentofthis

projectwouldbea_moneymaker. _{Not only}would the_propertymake

aprofit in seven_years, 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".

-52-REFERENCES

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

A48-A49.

Bed and Breakfast_Lodging 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. _HenryHoltand_Co., 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.

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.