Another lamb to the slaghter!

[Boscoe]

Firstly I’d like to say a big thanks, We’re considering buying a place for a B&B and all your posts/opinions/experience have been invaluable… Even having read te post we are still thinking about buying a Chambers D’Hote J… I think I’ve read every post in this forum going back 3 years and it’s been an eye-opener! Special thanks to Cassis and Quillan for some insights I’d rather have not ‘seen’!

 

I hope none of you feel I’m coming here with daft questions as I think I’ve read everything I can that is available  it is with this caveat I post the following…

 

 

Please pick holes in the following…

 

We are looking to buy a house in the Pyrenees to turn into a CDH…

 

We have enough capital to buy and renovate to a high standard.

 

The site is perfect for skiing in the winter (accesses to five stations between 5 and 20mins drive) and great for walkers/cyclists/ etc etc in the summer

 

Research shows me that I can charge an average of 65 Euros per room for four rooms with a family ‘suite’ going for an average of 95 Euros given the standard we will present and the fact the property is VERY picturesque and photographable. My background is in marketing so I’m confident wel’ll do as well as most and hope to do better.

 

The season will be…

 

Winter -  mid Jan to mid April for skiing

Summer – June-Aug for walking/cycling/taking the air etc

 

I’m looking at a 53% occupancy rate for the purpose of break even analysis.

 

My wife is a classically (French) trained, and experienced chef  (head chef in some top hotels around the world) and combined with the ‘quality’ rooms and accommodation we envisage offering a 4/5 course evening meal for 30euros per head, with wine bought separately. This is our ‘niche’!  

 

We are looking at at 50% take up on this offer (but see the point below regarding secondary AE) We have priced these menus in France and will make 65- 70% GP on the Table D’hôte ie 21 euros per person. We will offer wine for sale at minimal GP.

 

This all equates to a turnover of around 80,000 Euros.  I know what a lot of you will say – “good luck with that” however as we have two seasons and just for this exercise please stay with me…

 

If we do better then our estimates we will be turning over more than 80K Eureo and therefore will get into another regime.

 

To do better that the 53% occupancy we realize we will have to do something special… we have arranged with a number of friends/contacts many ideas for special events which we are confident we will fill (and we have been told we will fill by the people running the courses as they have been asked many times to do such).

 

These include

 

Ski and snowboard weeks.

Mountain bike and cycling weeks

Artist week with an internationally acclaimed artist.

Photography weeks with a photographer who has been published world wide

Cooking weeks with our choice of chefs from around the world who owe the other half a favor (and there are many!)

Etc Etc Etc… Basically we’ll be calling in a LOT of favors!

 

 

Now this is where the advice comes in… I’m thinking that one of us can be an AE for the CDH (lets call them No1) and another can be an AE offering the ‘holidays’ (lets call them No2) whether that be a weeks skiing or a weeks photography course No2 can ‘buy’ accommodation from No1 for their holiday clients at a discount rate, keeping No 1 under the 80K turnover limit. As No2 will be offering ‘accommodation and food’ to guests, they will therefore be applicable for the 80K turnover limit even though the accommodation isn’t their own? (big question!)

 

As ‘No2” will be offering holidays at half board for a week at a time, our income will grow substantially as there will be in effect a 100% take up on the food all costed in at  a 65%-75% GP (before any of you laugh at this, this is the difference between what a trained and experienced chef can do and an amateur, no offence meant!)

 

So we’d keep the CDH income less than 80K by using No2 and ‘buying’ rooms from ‘No1’ at whatever discount was needed (and possibly others). No1 will be defiantly in the AE  <80K tax regime as they are offering “accommodation and food” No2 will also be in the <80K AE tax regime as they will be also be offering “accommodation and food” even if it isn’t owned by them?

 

So our plan is as above. We have talked to a French accountant who said ‘it is OK‘ but I’ll be honest he didn’t look like he cared if we either got rich or thrown in jail for tax evasion, and didn’t fill me with confidance, hence asking here if anyone can pick holes in the plan?

 

 

I know I’m thinking big and many of you will laugh and tell me I’d be lucky but I’m looking at the up side and how I can do this without paying everything in tax.  Possibly I’m asking if any of you have tried and succeeded in associating two individual AE statuses together to your benefit?

 

Thanks in advance…

 

 

 

 

 

[Babbles]

If you're offering all that you say you want to the prices seem low, before we opened the average room rate in the village was under 70 Euros but we can charge up to double that and people are more than happy to pay. we have many Nationalities staying with us and when the decide to come here they look at an enormous area and are comparing what we do and offer rather than the immediate area. I feel that breaking even at 53% occupancy is too high a percentage and would aim to break even at at about 35% and see how that reflects on the room rates. We thought that as you can only have 5 rooms/suites as a CDH you need to get the best price possible per room and still be good value, our comments on Tripadvisor say that people think we're good value and one of the weblistings we are on advertise us as budget!!! Its all a matter of perception and I would 't get to hooked up on what's on offer in the immediate area and what they charge.

[Will]

I tend to agree with the above post that 53% is far too high as a break even rate.

You obviously have useful backgrounds, experience and contacts, and have done quite a lot of sums. However, I think you need to add an accountant with experience of running a business in France to your contact list. To my mind, the idea of two AE regimes for such closely-related activities carries a very big risk of not being acceptable under the regulations (which are still under development). It sounds to me as if you are trying to arrange your business so you can run it as autoentrepreneurs.

The AE regime is not a one-size-fits-all cost-saving measure. It is very restrictive and by paying according to your turnover rather than real profit you are laying yourselves open to paying greater amounts in cotisations than you need. Many businesses are served much better by not being AEs. By going for a réel regime, you are not limiting your turnover, you can offset your real costs, you can benefit from recovery of TVA (and you can charge TVA) where applicable. Moreover, AE is strictly a sole trader regime. Even if you could run your business as two AEs (which I very much doubt) you would not be able to employ anybody. Four or five rooms, including a suite, plus meals and all the 'add-on' activities represent a heck of a lot of work for two people. And when the favours run out...

Just my thoughts - apart from the reservations above I see no reason why your ideas should not work. Marketing will be the key.

[Quillan]

A good hotel should have a 70% occupancy rate but your not in the hotel business, if your open all year you will be lucky if you have an average occupancy rate over a year of 55%.

If you are doing the meals etc then it's very hard work especially during the season, up at 06:30 and to bed at around 0:30 to 01:00. Even when you are only half full and the guests eat in you can only knock about an hour off. So as said combining the CDH with other business interests, I think, could stretch yourself a bit to far. These type of relationships can be somewhat fickle at the best of times and if you stop getting their business for whatever reason and you are reliant on the income you could be stuffed.

As Will says if you can market it well then your going to be OK as that is the key.

Going the route you want to go you should consider the CDH as your main income and any 'deals' you do with other parties the cherry on the cake i.e. the money from which pays for those little things in life that you like but don't need.

If I was going to do what you want to do I would look to buy an existing chalet which might need a little tidying up because the standard you are talking about is going to cost around 1,750 to 2,000 Euros per m2 to renovate (see the thread on just renovating a normal house where it seems 1,500 per m2 is the norm). You also have to take in to account time to renovate, depending on what needs doing it may take you a year just to get a good builder to start. If you get a builder who can start earlier then make sure they have a good reason (cancelled contract for example) or that they are OK. Many builders who are recommended by Agents give the agent a percentage and guess who pays for that. Only use proper qualified, registered in France with proper French insurance builders. Don't be tempted to employ a builder just because they speak English.

Other than that and of course the regulations involved (you may need a second, professional, kitchen for the cookery course, you need to check that) each CDH is different and unique in its own right. Anyway good luck.

[Will]

Qillan has been doing the job for some time now, so it's worth considering what he has to say.

I think I read somewhere that in order to register gites and CdH as a proper business (even under the micro/AE regimes), you need to provide something other than just accommodation and meals. Some people offer something like cycle hire to meet this requirement. If this is true, then it would seem to make it even more difficult to separate the two parts of your proposed business.

[Quillan]

You might be thinking of regional produce. You have to include this in your meals and you may also sell things made locally, we sell local honey and goats cheese and have a few pictures painted by a local French artist. The latter is cheap pictures for us as all the produce is 'sale or return'. To be honest we have sold one jar of honey in about 5 years. We also use local wine and cakes and of course bread. We do use the honey and cheese in our cooking.

In the old days it enabled the farmers wife to sell farm produce direct to guests. GDF says you must do this sort of thing, I guess its to help the local economy and also 'showcase' local produce. I think, if memory serves without digging it out, you need to do regional meals, not all the time of course but you must offer them. I try to cook 2 per week, easy when its Cassoulet, tin of baked beans, couple of duck legs and a few Walls bangers [;-)] .

I shoukld add that I don't know about Gites.

[cooperlola]

Lisa J (who doesn't post so much here since she started her business but is still a member of the site as far as I know) was one person who used the bike hire thing with her gite for this.  She'd know.

[Boscoe]

Thanks all for your comments, we are off on a spying trip for a few days staying in a range of B&B's around the area. I'll respond more fully (and probably ask more questions) when we get back...

Have a good week end all!

[Dordogne Landlady]

Just the sort of guests us B&B owners love, people spying and then we find they have set up in competition just round the corner. When we first started we had a meeting with the local Maire to explain what we wanted to do and if we could put signs up and where. Lovely guy gave us every help. Six years later, Brits moved in round the corner and overnight whacked up their signs on our posts, even had the cheek to put them above ours. No knock on the door to introduce themselves and ask first. Just tread carefully or you may ruffle a few feathers which have already been hard earn't!!

[LisaJ]

Still here - and yes bicycle hire does work. Basically, you have to offer a service alongside gite rental to register as a micro-entreprise and I am sure meals count, along with extra cleaning etc.

L'assurance maladie vaut bien une bicyclette as Henri IV didn't say....

L

 

[Quillan]

[quote user="Dordogne Landlady"]Just the sort of guests us B&B owners love, people spying and then we find they have set up in competition just round the corner. When we first started we had a meeting with the local Maire to explain what we wanted to do and if we could put signs up and where. Lovely guy gave us every help. Six years later, Brits moved in round the corner and overnight whacked up their signs on our posts, even had the cheek to put them above ours. No knock on the door to introduce themselves and ask first. Just tread carefully or you may ruffle a few feathers which have already been hard earn't!![/quote]

Well he is welcome to stay at ours. Personally I think he doing exactly the right thing, its call market research and yes it has happened to us which is why we have been running courses for the last few years and charge people for the privilege of picking our brains. Mind you, you can't complain too much, I mean a captive market for 6 years is pretty good.

[Dordogne Landlady]

Hardly a captive market in the Dordogne where there is a B&B at every turn. Hard work and marketing has kept us in business now for 7 years. We already work together with a number of B&B's in the area by passing enquiries over if we cannot be of help. My point was not to upset people who have already spent time and money establishing themselves, introduce yourself and work with them if possible.

[LEO]

[quote user="Dordogne Landlady"]Just the sort of guests us B&B owners love, people spying and then we find they have set up in competition just round the corner. When we first started we had a meeting with the local Maire to explain what we wanted to do and if we could put signs up and where. Lovely guy gave us every help. Six years later, Brits moved in round the corner and overnight whacked up their signs on our posts, even had the cheek to put them above ours. No knock on the door to introduce themselves and ask first. Just tread carefully or you may ruffle a few feathers which have already been hard earn't!![/quote]

Welcome to the forum ,Dordogne Landlady,

I think you have responded to the word spying

Market research / spying is usually the same thing! would you have posted if the word research ,had been written

[HoneySuckleDreams]

Hi,

Just to add a little bit to the conversation. I picked up on the skiing/snowboarding quote.

Be careful thinking that the winter in the Pyrenees is all a snow, it's a bit hit and miss at times, so dont go thinking that it's wall to wall snow for 5 months.

You mention 5 resorts within 5-20 minutes. Where exactly? the problem with resorts being close together is that they all suffer the same weather. Be it no-snow i.e. 0 resorts at all, or too much snow and a nightmare to get between. Just a thought if you are wanting to fill your CDH with skiers/boarders.

It's also very French/Spanish. Could you convince the brits to part with their hard earned?

[Quillan]

Actually most of the resorts have snow cannons so there is not a lack of snow on the slopes. The problem is if you have too much snow which can block the region off transport wise. Getting food and things can be a problem during these time. I think walking is a better option as an activity, all those roads going up and down, down and up, you have to be very fit to ride a bike. Also for walking you have the GR9 (think thats the right one), the high level trans Pyrenees footpath.

If I was the OP I wouldn't worry about the Brits coming as many go to the Alps. This business is all about 'bums in beds', nationality, race, colour and sexual orientation don't come in to it. I would say about 60% of our visitors are French, then about 25% English speaking, the rest all sorts of nationalities. You also need to keep in mind that the major resort is Andorra and also Ryanair who service most of the local airports will be reducing their flights by half next year (see HERE)

[Boscoe]

We’re back from our ‘spying trip’ and it was to say the least, eye opening!

 

First the bad news, the buyer for our existing French house hasn’t been able to get a mortgage so it’s now back on the market, it wasn’t on long last time so hopefully it’ll sell quick and the house we’ve seen will still be available.

 

Thank you all for the responses, as always some great comments and things to think about, sorry this is a lengthy reply but as you all took the time to post and offer advice I believe it would be ungrateful not to reply in full…

 

Babbles, (great comments thanks!) having done some spying (competitor analysis for Dordogne Landlady) I have to say you are indeed correct, it’s not that any of the places we stayed were terrible, but we couldn’t find anywhere that offered that bit extra. We stayed at places ranging from 60 – 90 euros and really there was little differentiation between them with regard to standards of accommodation or their ‘offer’. In fact in our opinion the best place we stayed for standard of accommodation, breakfast, dinner and location was run by a french couple and were at the lower end of the bracket.

 

I stood in the middle of the largest ‘town’ in the area we are looking and did a small straw poll survey of visitors (I have to admit with my not perfect French I did sway towards the non French as much as I could) What I discovered is that  many of the non French found their accommodation on the internet, and although generally happy with their accommodation, did express surprise at a lack of  choice for ‘better level’ accommodation, be that CDH or Hotels and indeed said that within reason they would have been prepared to paid more for better. The French I talked to were generally happier with their accommodation, but those staying at a CDH put a high priority of how they perceived their satisfaction regarding their stay on the local knowledge of the host, in fact 9 out of the 11 French I talked to mentioned this against 3 out of 19 non French.

 

So although I think it will raise the cost of the renovation and obviously the COS we do now feel that this is the way we will go. Having looked at the plans again of the proposed property we will look at offering three suites and two large rooms. It will mean loosing the main salon for a bedroom, but we have a smaller area that will comfortably seat 6 that has a fireplace in addition to the dining room so this isn’t a massive compromise.

 

Quillan & Babbles regarding occupancy – I understand, and take on board all your comments on this however we did speak with two lots of English owners and (you’ll be happy to hear Dordogne Landlady) told them what we were looking to do. We found them very helpful and open, one offering his help in the future if we do go ahead and advice ‘anytime I want it’ over the telephone. Both owners said their main season was Summer and expected to be full from July through to September with September being a great month as many ‘older’ visitors stayed this month as it was less crowded as the schools had started back and it’s also a bit cooler if you are walking in the mountains.

 

They both also said that the winter season was much shorter than they had anticipate but have high occupancy Christmas/New year, in February for the school holidays (and a week either side) and at weekends.

 

Both claimed a ‘normal’ occupancy of around 60% (more in a good year) so I think that is around the level we’ll target, however as advised we are working our breakeven lower at 33% and with the higher price we hope to charge this is doable.

 

The Pyrenees is defiantly a tourist destination and other than the obvious attraction of the natural beauty, skiing, walking, cycling etc there are many other touristy attractions, wild life parks, aquariums, adventure parks, Lourdes etc etc all with in a 20 minute drive from the place. With this comes competition but we did have trouble getting into every place we wanted to as they were full and this is obviously encouraging. Also each place we did stay were either full or had just one room left.

 

 

Will, an accountant is already in the costs, but on your next point you’re right I was trying to squeeze the business idea into the AE regime, the reason being the research I’ve done tends to throw up some nasty flags regarding cotisations requested based on nothing but a figure someone has plucked out of the air. I have yet to talk to another Accountant but I will of course, my current thinking is to  suggest to him the idea of starting as an AE and then ‘upgrading’ hopefully when we see the turnover is possible and that we have our offer and pricing right. This will also allow us some real figures to run some numbers to assertain which regime will be best for the business.

 

Quillan –Renovation. The place we have in mind is actually structurally sound with a good roof and floors. The windows are all solid although they are only single glazed to replace them all with double glazing will be a major cost and I’ve still not decided if this is something I’d do, only one of the places we stayed had double glazing although I’d hate to think what their heating bills are in winter! It’ll need rewiring and re plumbing and a new kitchen. We wouldn’t need to knock down any walls but would need to erect some internal partitions for bathrooms etc Other than that it’s decoration and furnishing. I’ll do much of the non technical work myself and we have budgeted for the time the renovations will take. I’ll be honest I don’t have any where near 1500 per m2 budgeted but I have done renovations before and can’t imagine how it could cost that much unless you are going from a ruin!

 

I found this site http://www.france-renovation.com/costs-of-property-renovation/16 and I’m going with his estimates plus 30% (+10% contingency) as the prices are a few years old.

 

Dordogne Landlady – I used the term ‘spying’ tongue in cheek. In every business I’ve been involved in this is standard practice… IKEA call it ‘competitive shopping’ Motorola call it ‘competitor analysis’ Swissotel called it BCTA (brand, cost, trend analysis) In my former life I’d receive a twenty page report every month on my competitors, what they were doing, why they were doing it, how much they were spending and what return they were getting, the report was compiled by a large market research company and cost thousands… it’s business!

 

The Dordogne is full of B&Bs, more so than the Pyeneese, however some market research has indicated to me that the visitor numbers and the extended season justify an investment, maybe you should have done some?

 

I’m not willing to invest a significant amount of money and time into a business that I haven’t done my research into, succeed or fail at least I will be making an informed choice. Having said that I was open with the people I stayed with when appropriate (ie, they actually talked to me) and as I have said the results were positive, we will introduce ourselves around and try and build relationships (that goes without saying) however it’s still business and they will still be competitors.

 

A small anecdote for Dordogne Landlady

A client’s competitor once organised a conference at considerable cost, flying in delegates from around the world. On behalf of my client I bought all the advertising billboard space around the venue, booked the foyer of the venue for an expo of their products and employed people to hand out merchandise around the venue area. This gorilla marketing cost my client 10% of what it cost the competitor but the conference looked like my client had put it on. Many press reports even credited my client with the event. It’s business! Soon after the competitor sacked their agency and asked us to represent them.

 

I’m not saying I’d employ such tactics with the CDH, we want to become part of the community and I’m sure I’ll be referring gusts to other CDHs if we are full and would like this to be reciprocated, but staying a night it their place to check out what they are doing is hardly underhand… Quillan has the right idea, you gained the experience, charge for it!

 

 

Crazyfrog – We are looking at the end of the valley, before the climb into the mountains. I’m not thinking it’ll be a 5 month season, I’ve skied there and I know it quite well. Often the ski station is where you get the cable car up to the top and this can be another 30 minute trip. As Quillan says I’m certainly not just looking for Brits, the French are probably the biggest market (according to my research at least 50% with other nationalities taking up the other 50%) Interestingly I’m told there are as many Israelis as there are Brits, so I guess I’ll have to get my Kosher cookbook out!

 

 

 

Thanks again all, any feedback welcome.