Easy Money?The Art and Science of Guesthouse Management

The main reason travelers choose guesthouses over hostels or hotels is that they offer the simple warmth and human touch of a real home, a deeper and more authentic travel experience, and the opportunity to share a roof with locals.

Guesthouse owners run them as a sideline business in their own home, which they always keep spick and span to welcome guests. When they have guests they are happy and when they don't, they go about their life. It is best not to be too businesslike and professional. Mutual respect between host and guest is key.

At the end of 2001, the ROC Tourism Bureau issued its "Regulations Governing Guesthouses." The regulations state that guesthouses are sideline businesses run by people whose main occupation is an agricultural, forestry, fisheries or livestock activity, who make available rooms in their own country homes to travelers, and who are well integrated in the local cultural and natural environment. This makes it sound like guesthouses are a new way for townspeople to experience the country by staying in farmers' homes.

The fact that guesthouses are private homes and sideline businesses is indeed the main difference between them and hotels. But many Taiwanese guesthouse owners think too big and try to position themselves as something between a guesthouse and a hotel, which leads to all sorts of problems.

Chingching in Nantou County is known as "Little Switzerland," and the guesthouses there are known for their European style. But there are many problems associated with their existence.

Licensed? Unlicensed?

Guesthouses are private homes, but because they are also open to the public, they must be regulated to protect the environment and the safety of guests.

In European countries with a well developed guesthouse tradition, guesthouses are no less regulated than hotels. In Britain, which is famous for its bed and breakfasts, the government not only rates and licenses B&Bs but also offers training and guidance to owners. The German government has also established a rating system for guesthouses that ranks them according to quality, amenities, and service.

In Taiwan the government worries that to obtain tax reductions and other advantages some people pretending to run a guesthouse are actually running a hotel, and that unfair competitive practices are spreading to the unspoiled countryside. The guesthouse regulations therefore lay down a series of sanitation, fire prevention, and public safety norms and, most importantly, set strict limits on the size of guesthouses.

Article 2 stipulates that guesthouses must have no more than five rooms and that guest quarters must not exceed 150 square meters. Guesthouses located in Aboriginal reserved land, recreational agriculture areas, tourist areas, remote districts, or small islands are allowed up to 15 rooms and guest quarters not exceeding 200 square meters. This makes guesthouses much smaller and more attractive than hotels, which often have more than 100 rooms.

When the regulations were issued, guesthouse owners in conformance flocked to county and city government offices to register. Owners whose guesthouses were not in conformance stayed in business illegally. Although the fines for running an unlicensed guesthouse range between NT$30,000-150,000, and some people have been fined repeatedly for sums of up to NT$450,000, it is difficult to dispel the notion that it is acceptable to own an unlicensed guesthouse. Seeing that the housing market was in a slump, some construction companies immediately tried to enter the guesthouse market by breaking up their holdings. Some people even rent out properties to be managed as guesthouses. It is by no means rare for registered guesthouse locations to be completely different from the real ones. Hampered by a limited number of inspectors, local governments cannot stem the flood of new guesthouses, and are forced to turn a blind eye.

Bringing together local character and the surrounding environment to attract foreign clients is the long-term goal of many guesthouses. This photo shows the open-air Tingpayen Hot Springs at Chinshan, their jumble of pipes still waiting to be cleaned up.

Chingching's madding crowd

The Chingching Recreational Farm in Jen-ai Township, Nantou County, has become very popular in recent years. Almost 40% of the more than 100 guesthouses in the area are unlicensed.

An official who licenses guesthouses for the Nantou Transportation and Tourism Bureau notes that most unlicensed guesthouses violate the building code.

Because Chingching used to be Aboriginal and national forest land, many guesthouses stand on non-buildable land and cannot obtain a license. Some are larger, and have more guest rooms, than is allowed, raising concerns about environmental damage.

In fact, the environmental damage and traffic congestion caused by too many guesthouses with too many people staying in them is what most worries Taiwanese experts.

Pollution is a serious problem in Chingching because although it is a protected water source area, only two or three of its almost 100 guesthouses have wastewater treatment systems. What's more, most of them draw water illegally from springs on Mt. Hehuan, which is not just an eyesore but also impairs water intake.

Provincial Highway 14A, the only highway between Puli and Chingching, measures only 6.5-7.5 meters across and winds its way along steep cliffs. It's a dangerous drive at the best of times, and during holidays traffic is jammed in both directions.

It is also difficult to get building permits in Luku Township, Nantou, and Chiufen Village near Chinkuashih in northern Taiwan. But because the first is near an experimental forest owned by National Taiwan University and the second is in a picturesque old mining area, there are many unlicensed guesthouses in these villages.

Weekday lull

It is not just unlicensed guesthouses that are bigger than regulations permit. Cost considerations prompt many guesthouses to expand like octopuses once they get their license.

The holiday rush is the main reason guesthouse owners infringe regulations.

According to a Tourism Bureau survey, more than 60% of Taiwanese people travel within the country on weekends. Three years ago, the government launched the national travel card program to encourage some 540,000 military personnel, government employees, and teachers to take weekday recreational trips. But other than parents taking children on day trips during the winter and summer vacations, there has been no marked increase in weekday recreational travel.

Consequently, many guesthouses are empty on weekdays and overbooked on weekends. To accommodate more weekend travelers, some owners have increased their room numbers in contravention of regulations.

"I often tell our members not to rush into growth," says Shen Fang-lien, who runs the website of the Ilan Guesthouse League, whose members are all licensed. Guesthouses with too many rooms are empty on weekdays and are breeding grounds for mosquitoes. But during the weekend rush the owners are too busy to manage on their own and have to hire help. It is often not worth the expense.

But Shen admits that competition is intense, running a guesthouse involves ever-growing investments, and everyone is doing whatever it takes to succeed. For example, during the 40 days of last year's Ilan International Children's Folklore and Folkgame Festival, she made more than NT$200,000. But to become more competitive and make her guesthouse more comfortable for her guests, she spent NT$300,000 on converting every room into a suite (which involved installing more bathroom amenities).

"All told, I haven't made any money from my guesthouse, but I have made quite a few friends," says Shen.

Competition is not just intense among guesthouse owners, but also increasingly tense between guesthouses and hotels. Shen Fang-lien admits that it costs less to run a guesthouse because unlike hotels they don't pay a business tax and don't have to bother with the hotel star-ranking system. Hotel owners therefore complain of an "uneven playing field." Shen says that guesthouse owners ought to know where to stop and not steal business away from hotels.

A saturated market?

Seeing one guesthouse after another open in Taiwan's mountain areas, countryside, and seaside one cannot help worrying that the bubble will eventually burst.

Lin Kun-yuan, director of the Tourism Bureau's Hotel Industry Supervisory Center, notes that in 2005, Hualien, Ilan, and Nantou counties experienced their fastest guesthouse growth ever. But running a guesthouse is not as easy as people imagine. It requires a lot of skill and initiative, and is not as profitable as new owners expect. Guesthouses that don't have something special to offer or are located in a less-than-desirable area attract few guests even during the holidays. Owners who cannot maintain their guesthouse as a sideline business or hobby in their own home, but try to turn it into their main source of income run the risk of having to close shop in short order.

"Guesthouses need long-term business strategies. The right concept and direction are very important," says Lin Kun-yuan. Travelers may initially choose to stay in a country guesthouse to experience a rural environment, but to avoid being squeezed out by the competition, a guesthouse has to blend harmoniously into its natural surroundings and cultural setting and develop a distinguishing feature. That is how you plan for the future. A particularly successful example is the Aboriginal art village formed by the guesthouses of Wutai Township in Pingtung, where visitors are treated to beautiful stone and wood carvings.

To provide better service, guesthouse owners must not only integrate with their surroundings and offer better amenities, but they must also be highly versatile.

Chang Li-chen, a guesthouse owner in Ilan, says she took coffee-making and tea ceremony classes at the local community college. To be able to answer questions from curious guests, she also learned what she could about Ilan's cultural and natural environment. "If you don't grow, you won't survive," she explains.

But despite her hard work, business is getting worse year after year.

"If both husband and wife depend on the guesthouse as their main source of income, they will go hungry," says Chang, who feels that it is much harder to make a living from her guesthouse today than it was when she started four years ago. She explains that in the past year there have been many typhoons and that guesthouses have proliferated so fast that since 2004 there has been a fivefold increase in the number of rooms in the Tungshan River area. During previous Ilan Children's Festivals, guesthouses used to be full throughout the week, but this year the occupancy rate was down by half.

Learning from experience

Even in a highly competitive atmosphere, some people stick to their original plan. Mr. Chen, who opened the Rising Sun guesthouse in Hualien after his retirement, thinks of his work as a "second springtime." He runs his guesthouse on a shoestring, steadily and surely, and is not in thrall to change for the sake of change. He says that when he retired to Hualien from Taipei, he opened his guesthouse to keep himself busy and make a little money. He certainly was not planning to strike it rich.

In a guesthouse the emphasis ought to be on mutual respect between host and guests. To maintain the principle that "this is my home, please take good care of it" some owners have to learn how to "prod" certain guests to leave.

"At first it was hard to see strangers traipsing through my own home. But when I began to treat guests as friends, it got much easier." Chiu Fu-mei, owner of the Spring Villa guesthouse in Ilan, says that because her website makes it clear that smoking and drinking are not allowed, most of her guests are of a certain quality. But occasionally she does get someone who does not know how to behave or is unpleasant in some other way. She once had a group of college freshmen partying loudly till 1 or 2 a.m. Some were even making out in plain view of everyone. They had planned to stay two nights, but Chiu persuaded them to leave the next day.

Chen Chung-chun, who owns a guesthouse in Chi-an Township near Hualien, says his biggest concerns are his guests' security and intentions. Last Chinese New Year he had a guest who arrived alone and spent three days cooped up in his room without making a sound. Chen spent a very agitated holiday.

Going international

Looking into the future, once the domestic market is saturated, guesthouse owners will have to attract foreign guests. Kao Yuan-chen, who has run a small guesthouse in Hualien for eight years, believes that rather than adding rooms to try to lodge more weekend guests, she is better off focusing her efforts on weekday guests.

Huang Cheng-tung, owner of the Tranquil Garden guesthouse in Ilan, which caters to a high-end clientele, is now thinking about forging partnerships with other businesses and developing the international traveler market. He explains that although guesthouses that conform to regulations are not big enough to cater to tour groups, given that a third of foreign tourists in Taiwan are Japanese, and he speaks the language and has Japanese-style rooms, he can certainly set up a Japanese-language website to attract Japanese guests. Huang loves golf and plans to build a driving range on a nearby vacant lot to offer special golf deals to his guests. He is also looking at establishing partnerships with wedding businesses. Newlyweds could honeymoon in his guesthouse and have their wedding photos taken in its beautiful environs.

To encourage guesthouse owners to keep improving, from time to time the Tourism Bureau offers seminars on various laws and regulations, how to receive guests, and the ins and outs of selling a guesthouse.

A year and a half ago, a group of more than 100 guesthouse owners took a Tourism Bureau seminar on "going international." Initial results are encouraging. Tourism Bureau head Lin Kun-yuan says that for guesthouses the advantage of lodging foreign guests is that they fill rooms not just during Taiwanese holidays. This promises to ease the problem of over-occupancy during weekends and holidays. But to receive foreign guests, guesthouse owners must have basic foreign language skills and set up English and Japanese-language websites. In its offices abroad and on its website, the Tourism Bureau has begun promoting guesthouses that can cater to foreign guests. This year, a good number of Southeast Asian travelers have chosen to stay in guesthouses.

Taiwan's guesthouse landscape is as diverse as it is disorderly, but the future offers endless opportunities. It remains to be seen how guesthouse owners will position themselves and what new directions they will take.