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The real estate scramble

Whether they're seeking to build box stores, banks, homes, or restaurants, everyone's throwing elbows in a rush to stick their flag into what seem to be the last remaining bits of real estate on the planet.

Following a year where some thought real estate prices had finally hit the ceiling, brokers are calling for more increases in 2005.

"I don't see anything too dramatic, but real estate should be trending up a bit in some markets, and a bit more in others," says restaurant real estate broker Tom McCarty.

So it's many the restaurant operator who's scratched his head and wondered what sort of side venture could be dreamed up to bring in extra revenue to help cover his rent or mortgage. For some, the supplemental stream has come from a spare room—which has been cleaned out to sell trinkets from, teach classes in, or perhaps outfit with a bed and rent to lodgers.

That last scheme has emerged as an essential element of business at the Fredericksburg Brewing Co., a brewpub and inn located midway between Austin and San Antonio in Fredericksburg, TX. The concept is styled after the brewery/hostels that are common in Europe, serving up dishes like schnitzel, burgers, and pizza from $6 to $15, along with homemade beer at $3.75 a pint, in a 116-seat restaurant.

But what sets the "bed and brew," as the operators call it, apart from most sudsy American counterparts is the guest rooms. Billed as an "adult retreat" (no kids), the Fredericksburg offers 12 themed guest rooms; the Bordello Room, done up in gauzy curtains and canopies, catches the eye, as does the rose-tinted Red Stallion Room. For $99 a night, the guest gets a beer sampler and a bed.

"It's like a bed and breakfast, only with beer in lieu of breakfast," says Chris Sullivan, the director of operations.

The operators own the building outright, and Sullivan says the prospect of turning the extra space into lodging was an option that was too good to pass up. The rooms, which are half full on weekdays and booked on weekends, take a big bite out of the Fredericksburg's costs. "It's a pretty significant part of our income," says Sullivan. "Most of the bills would be covered anyway by the brewery, so we like to think of it as passive income."

Of course, the operators don't get to be passive about running the side biz. Since they don't have dedicated staff for the guest rooms, it means the brew crew has to do double-duty to run the inn—taking reservations, changing linens—on top of their regular restaurant jobs.

"It's 24-hour service," says Sullivan. "The restaurant may close, but with the rooms, the responsibility never stops."

Besides that, Sullivan says the rooms are relatively low maintenance. There are no additional insurance costs, and, knock on wood, no guest has ever flooded their room after getting skunked on hefeweizen. In fact, Sullivan says the lodging is crucial to the Brewing Co.'s profitability. So much so, in fact, that the operators recently opened their second beers/burgers/beds hybrid in town: The Airport Diner and Hangar Hotel, a full-service restaurant and World War II-themed boutique hotel with 50 guest rooms.

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