Property owners have a great asset. It does not lose value like a vehicle or equipment, and although the revenue from a sale is market-dependent, it appreciates over time. But there’s more than one way to generate an income from a property, other than selling it. Why not open a guesthouse?
Difference Between a Guesthouse and BnB
If you start a guesthouse in South Africa, you may wonder what the difference is between a guesthouse and a B&B – and there are a few.
Firstly, size might be the obvious difference between the two. A guesthouse operates on a much larger scale than a bed and breakfast. The former can have between four and sixteen rooms with en suite bathrooms and a bed or two (in the case of double rooms). More often than not, there’s a formal reception area where guests can check in. On the other hand, B&Bs rarely exceed three rooms, and sometimes, the bathroom is a shared facility like the dining room where the ‘second B’ is served.
Guesthouses sometimes also have other amenities, like a swimming pool, bar, restaurant or even a spa.
Secondly, a B&B is usually owner-run and operated, whereas a guesthouse has a formal organisational structure with staff who have clear roles and responsibilities.
Thirdly, a guesthouse can be viewed as a facility that operates on a more professional level. But what exactly this looks like differs from one guesthouse to the next. One might believe that ‘professional’ means complimentary coffee and tea, whereas others can define it as branded stationery and communication.
However, both have daily cleaning staff and might have the owner living on the property.
Is Opening A Guesthouse in South Africa A Good Idea?
South Africa is still the place to be for local and international travellers. Receiving clients is thus not about whether people travel or not but about whether you are offering what they are looking for and whether they can find you (but more about that later).
To decide whether you should open a guesthouse, ask yourself:
- Do you have a concept?
- Do you know who your competitors are?
- Do you know what your offering will consist of?
- Is this something you can see yourself doing for the majority of your time?
- Does your property meet the criteria for a guest house (rooms and bathrooms)?
Create a Business Plan
A business plan is both the roadmap and the true north of where your business will go. Your comprehensive business plan will explain the concept, include a market and competitor analysis, have an explanation of the products and services your business will offer, outline your business structure, financial projections, and any additional documentation related to the mentioned elements.
As you will note, your business plan includes a section on market research. This will look like identifying and analysing your target market and studying your competitors by looking at their prices, offerings, and occupancy metrics.
Investigate the Legal Aspects
If you are converting an existing house to a guesthouse, check to see what the zoning of your property is. Depending on your current zoning laws, you will need to apply for the right zoning rights.
Next, you need to apply to your local municipality for a trade license for your guesthouse.
Some laws that the guesthouse needs to comply with include:
(a) The National Building Regulations and Building Standards Act, 1977 (Act No. 103 of 1977), where all buildings constructed on the premises must comply with this Act and its regulations.
(b) The council of the local municipality applicable Town Planning Scheme with specific reference to parking, floor area ratio, height, coverage and zoning, number of rooms, if prescribed by a Town Planning Scheme applicable to the area where the property is located and with Council’s Outdoor Advertising Bylaws concerning signage.
(c) The Foodstuffs, Cosmetics and Disinfectants Act, 1972 (Act No. 54 of 1972) and the Regulations governing general hygiene requirements for food premises and the transport of food, formulated under the Health Act, 1977 (Act No. 63 of 1977), where a Certificate of Acceptability must be obtained from the Council’s Senior Health Inspector.
(d) The Broadcasting Act, 1999 (Act No. 4 of 1999) if the lettable room is supplied with a television set; (e) the South African Music Rights Organisation (SAMRO) where a licence is required if background music is to be played to the guests;
(f) Your Provincial Gambling and Liquor Act, 2010, (Act No. 6 of 2010) if liquor, including complimentary drinks, is served to guests.
(g) The Tobacco Products Control Act, 1993 (Act No. 83 of 1993), where it is a requirement that signs are displayed in areas designated for smoking and no-smoking signs are displayed elsewhere.
You will also need to register your business with the CIPC and SARS, as well as open a business bank account.
Take a Look at Your Finances
When you compiled your market research, you should have found a rough idea of how much it would cost to set up your business. This includes all the necessities for your guesthouse such as basic furniture, bedding and decor, as well as marketing costs, the costs of registering your business, developing a business website and ensuring that you have any software or management software.
This is the starting point for your budget.
Once you have the final amount you require calculated, determine how you will fund your business. You might need to apply for funding if you cannot afford it with savings, but many business lenders can help you with this.
Market Your Business
The hardest part of starting your guesthouse in South Africa is gaining customers, because after you host your first few guests, it’s much easier to start gaining traction via word of mouth or even ratings.
Use social media and community groups to your advantage to market your business. You can also leverage AI to improve your search visibility on Google.
Don’t forget to claim your Google Business Profile.
If you don’t own property and would like to find out how to start an Airbnb without a property, then you should check out our article.
