More Rooms at the Inn : Many Bed and Breakfasts Are Seeing Spotty Business in Wake of Recession

For anyone who has ever fantasized that running a quaint bed and breakfast on the misty Northern California coast would be an idyllic route to Easy Street, here’s a reality check from longtime innkeeper Rachel Binah.

In the best of times, inn-keeping is a business with high overhead, long hours and, often, meager profits. Toss in an earthquake or two, a war and a recession, and the livelihood becomes even more of a cliffhanger.

“The people who have been most hit by this recession are middle managers, owners of small businesses and young professionals--people who would be my clients,” said Binah, owner of Rachel’s Inn in Littleriver, a woodsy, coastal community two miles south of Mendocino.

Like a temblor that collapses one building but leaves the one next door standing, the economic downturn has been capricious with Mendocino coast innkeepers. While some B&B; operators are struggling to make ends meet, others report that business is fine. The most hurt, it appears, are those outside Mendocino.

The uneven business that Binah has experienced, starting especially with the Persian Gulf War early last year, makes her hanker for the rip-roaring 1980s, when the inn would be booked a month in advance and she would turn away 30 to 40 couples during a weekend.

These days, price-conscious guests reserve at the last minute or just drop in. Occupancy rates are down, although late August and early September showed improvements. Binah occasionally waives the weekend requirement of a two-night stay, and no-shows have increased--a particular problem for her because she accepts cash and personal checks but no credit cards.

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“If you don’t have the advance reservations, it sets a psychological tone of panic,” said Binah, 50, as she stirred a skillet of ratatouille and whipped up scrambled eggs with pesto for a dozen guests.

Binah hasn’t raised her rates in three years and recently started paying commissions to travel agents.

Despite the squeeze, she hasn’t scrimped on amenities. The fresh flowers are as plentiful as ever, and the breakfasts as sumptuous.

“A recession--that’s the time when you absolutely should not cut back,” she said.

For Rachel’s Inn and Glendeven, another 1860s-vintage inn just across California 1, that has also seen its business slip, the problem seems to have been a smaller-than-usual overflow from Mendocino village. The B&Bs; in town, however, managed a healthy summer business, with a handful of inns reporting no vacancies in August, the key month for tourism.

Inns on the fringes--in Littleriver and Westport, north of Fort Bragg--have generally lower room rates and occupancy rates. The area’s highest-cost rooms traditionally have the best occupancies. “And that has been the case in the recession,” said Barry Cusick, a broker with Mendo Realty who has handled numerous sales of local inns.

In general, Cusick said, the recession has had surprisingly little negative effect on inns along the Mendocino coast, although occupancy was soft during the “shoulder” spring months. Over the last two winters, the area benefited from poor snow in the mountains as would-be skiers opted for long weekends in the picturesque former timber town, with its wind-swept headlands and 1850s-vintage buildings.

However, Cusick noted, high-end retailers in Mendocino have suffered declines in sales of jewelry, clothing and artwork. Travelers are spending money on accommodations but little else. Rather than eat out, many tourists are packing picnics or eating in their rooms.

With the employment picture uncertain and the dollar weak against other currencies, Cusick said, Mendocino has looked like a bargain compared to some destinations, particularly Europe. “Mendocino, face it, is as foreign as you can get in California without having to get your passport,” he added. “When times are bad, it still seems to be good here.”

B&Bs; have caught on in a big way since the 1970s, and the economics of operating and staying at an inn have changed accordingly.

When Binah and her ex-husband first moved to the Mendocino coast in 1970, they put $1,700 down on a $34,000 property just north of Westport called DeHaven Valley Farm, with 20 acres, a house, a barn, two cottages and a stream, across Highway 1 from the ocean. They spent $20,000 to remodel it and turn it into a B&B;, with rooms going for $15 a night.

Today there are 130 lodging places between Gualala and Westport, including 49 B&Bs.; Rooms at the inns now range from $80 to more than $200 for luxurious suites with amenities such as fireplaces and Jacuzzis.

In the 1970s, bed and breakfasts were “a new idea for people who were sick of chains (and) wanted to experience life the way the people in the communities lived,” Binah said. “It was very personalized. Now, it’s an industry.”

In 1983, when Binah set out on her own, she paid $125,000 for two derelict structures on a little less than an acre, bordering on Van Damme State Park. Over the next year, she spent $150,000 to remodel the existing main house and $250,000 to enlarge and repair the barn, which was literally falling apart. They are nestled amid informal gardens and cypress trees, a quick stroll through a hayfield to bluffs overlooking the ocean.

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Because her bank would not lend her enough money, she brought in three limited partners, whom she is in the process of buying out. “I am invested in it up to my ears and beyond,” she said, adding that with prices continuing to rise “it’s much harder for someone to even fantasize about getting into this business if they’re undercapitalized.”

For Janet deVries, who owns Glendeven with her husband Jan, the last year has been a struggle that she finds puzzling and almost unacceptable.

“We should be creating during July, August and the fall our reserve” for subsidizing slow winter months of the year, she said. “(But) we didn’t build up any reserve at all. It is scary.”

Still, something makes the innkeepers of Littleriver hang on.

“From the moment I opened, I have been so terrified of going under that I have been very frugal about personal expenses,” Binah said. “But (now I feel) I can weather whatever is coming because ultimately I think everything will be all right.”