How to Start a Homestay Business

If you love hosting and have spare space in your house, monetise it by starting a bed and breakfast business
Entrepreneur Staff
Chief Correspondent
6 min read

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In 2018, Shivam Chaudhary enlisted a spare bedroom in his Dehradun flat on AirBnb to make some extra money. Two years later, the entire three-BHK apartment is on the online marketplace platform with each room priced at INR 1,400 per night. “Initial income from one room listing was 5 times more than what I had anticipated. The potential business model prompted me to list the entire apartment,” says Chaudhary.

Homestays, bed and breakfast (B&B) or guesthouses—the concept of B&B lodging is fast becoming a popular business model for homeowners who have extra space in their property to spare. As of February 2019, Airbnb alone has about 45,000 listings in India, as announced by the platform’s co-founder and chief strategy officer, Nathan Blecharczyk during a summit.

The concept of homestays is quite simple. You rent out your unused property for short spans to guests travelling in your city. It is different than a hotel as you as a host share the house with your guest and do not have to provide round the clock room or restaurant service, as is the case with a hotel. It does not require heavy infrastructure either and, hence is easy on your pocket.

So, if you love hosting and want to start your own homestay business, here’s a guide on how to go about it.

Also Read: 20 Business Ideas for Stay-at-Home Parents

List on Online Platforms

The easiest way to start is to list your house on platforms such as Airbnb, Booking.com, Trip Advisor and Homestays.com. Alternatively, you can also post ads directly on Facebook, Instagram and Google to save on the commission charged on such platforms.

As part of the signing up process, you need to upload identification and property-related documents. You don’t have to pay anything for listing yourself on these portals but they charge a commission of 3-6 per cent for each booking.

There are no restrictions on how much space can be let out. From a single room to an entire floor to a villa, you can let out as much space as you want. Take the case of Goa-based couple Latika Singh and Rahul Singh, who are full-time hosts to a three-story homestay. The duo has let out two floors in their house, keeping the ground floor for their use.

Platforms such as Airbnb let you set your own rate. To begin with, check prices of listings in your area to get an idea about how much can you charge for your space.

Rates are not sacrosanct and can be changed by the owner depending on demand and season. Singhs lower price of their homestay during May-August, as that’s the off season in Goa. Whereas during Christmas and New Year week, they mark-up their prices by 15-20 per cent because of higher demand due to the Sunburn festival. 

Chaudhary, on the contrary, doesn’t tinker much with his apartment’s rates. “I get bookings all year round as Dehradun is both a travel destination and a business hub. Bookings drop barely 10-15 per cent during winters, so I don’t usually reset price of my listings,” says the 30-year-old businessman.

If you need the space for your personal use, you can block those dates on the platforms in advance.

Most importantly, before you enlist, figure out the permissions, registration process and other legal requirements of a homestay business in your city. The concept of Airbnb in India is fairly new and so there are no defined rules on whether a homestay qualifies as a commercial business or not. The rules vary across states so it is recommended that you visit the nearest district tourism office to understand the regulations.

Costs of Setting up

Setting up a homestay can cost you anywhere between INR 30,000-50,000. Here’s a breakdown of all the costs involved:

One-time Costs

  • Furnishing: To begin with, you will have to set up the space with basic furniture such as bed, table, a pack table, a chair and linens like curtains, bed sheet, bed cover, etc. Furnishing can cost you INR 10,00015,000, depending on how much you want to decorate your space.
  • Basic amenities: Water kettle, towels, basic cutlery are basic amenities, which is another INR 3,0004,000.
  • Optional amenities: Additional facilities such as airconditioner, cooler, geyser, air-purifiers, etc., can further cost you upwards of INR 20,000.

Recurring Monthly Costs

  • Bills: Electricity and Internet bills will be INR 5,0006,000.
  • Cleaning: Laundry (bedsheets, towels) and cleaning is another INR 6,0007,000.
  • Grocery and Utilities: Groceries for breakfast and basic items to include in the room such as toiletries, tea and coffee pouches, milk pouches, salt and pepper, etc., will cost you INR 1,5002,000 per month.
  • Staff: You can hire an assistant for help with smaller tasks or managing the homestay. For instance, Chaudhary has hired a fulltime assistant who hosts guests as he himself doesn’t stay in the apartment. He is paid INR 15,000.

Earning Potential

Income from homestay business will typically depend on how much space you have let out, amenities provided and location of your house. A single room with all basic amenities can be priced anywhere between INR 1,500-2,000.

Bigger spaces like a villa or an entire floor will obviously be priced higher, but gets fewer bookings compared to single rooms. “We have two listings—two rooms on second floor for INR 1,700 each and third floor apartment for INR 3,800. But, we get more bookings for single rooms,” points out Latika. During full season, she gets an average 20 bookings every month for the bedrooms and 10 bookings for entire floor, earning the Singhs INR 40,000-80,000 a month.

If your property is close to tourist spots and gives easy access to public transport, you can price it higher. Also, added amenities such as air-conditioning, running hot water, air-purifier and a functional kitchen usually attract more tourists as opposed to a basic lodging option.

Delhi-based Anmol Bagga has installed air-purifiers in his homestay to tackle air pollution. “I have seen an increase in bookings from foreign tourists ever since I’ve installed air purifiers,” says Bagga, who has listed a two-BHK on Airbnb for INR 3,200 per night.

To give you a ballpark figure, an average booking of 15 days per month of a single room can fetch you INR 18,000-20,000, after removing operational costs and commission of online platforms.

Drawbacks

Your can have lean periods depending on the tourist season of your city. For instance, if you are in Rajasthan, you will get very few guests during summers. On the other hand, homestays in Shimla will get few travelers during winters.

For this reason, if your sole income depends on this business be prepared to plan your yearly finances accordingly.

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