Bed & Breakfasts in Italy: The case of the Emilia-Romagna Region
Alma Mater Studiorum
Università di Bologna
School of Economics Management and Statistics
Second Cycle Degree Programme in Tourism Economics and Management
Relatore: Manuela Presutti
Anno Accademico: 2015/2016
3.5 - Financial Aspects
The B&B "Villa Teresa" has the typical characteristics of a small family business, with low volumes and an extremely simplified organizational structure.
Moreover, the law does not require for the legal form of the B&B the preparation of financial statements in accordance with the criteria established by the Civil Code. For these reasons, our financial analysis (Table 11) is based on few logical hypotheses.
In order to calculate future revenues we used the average occupancy percentage of B&Bs in Italy, and with this datum we also calculated the number of guests for each year: in the first year we will have approximately 162 guests, in the second year 194, in 2019 we will host around 227 tourists, in the fourth year 251, and in the fifth 291. The “cost of sales” is conventionally the 15% of the total revenues; for the other variable costs we made some basic assumptions such as a cost of 30 euros for all the cleaning supplies, 0,50 cents per person for the courtesy line, and 1 euro per person for electricity and water.
As for the promotion, we assumed to be present on at least three foreign tourist guides (e.g. UK, Germany, Switzerland). The insurance we plan to choose is the one by Anbba.
Table 11 Financial Analysis for Villa Teresa
As it is shown in the Table above, the total income of the first year of activity (2017) would be only 372 euros, meaning less than 100 euros per month if we divide it by the four months of activity, and around 30 euros per month if we split the profit for the twelve months of the year. Even if it is expected to increase year after year, it still seems to be a quite sad scenario. Especially considering that these results do not include taxes, the conclusion we draw is that it is probably not worth the initial effort. In fact, before starting running the Bed & Breakfast “Villa Teresa” we will have to face a significant money outflow.
Specifically, we would buy a 15.000 euros swimming pool (otherwise the structure would not be attractive enough, considering its isolated position), which by the way we decided not to consider as an investment to be amortized since if one day we will close the B&B business, the swimming pool would still be there for us to enjoy. We will also have to buy decorations for the inside and the outside parts of the house, a nice TV for each of the guest rooms, garden tables, garden parasols, etc.
In addition, the limitation of the Emilia-Romagna law regarding Booking.com will force us to pay some foreign tourist guides for advertising our receptive structure. The average cost of a one-page advertising space in an English tourist guide is 500 euros. If we save this money and decide to only advertise ourselves on www.bed- and-breakfast.it foreign people will hardly ever find our structure when looking for a place to stay in Italy; this is not in line with our mission to spread the Romagna passion all over Europe and, hopefully, all over the world.
What we need is a change in the regional legislation: it should allow the promotion on Booking.com since it is allowed in every other Italian Region, and it should be more “generous” with the number of opening days, considering that the average in Italy is 230.