About 15 years ago, four friends pooled their resources and purchased a Victorian mansion in Washington’s Shaw neighborhood, joking that if they ever fell on hard times, they could always turn the elegant four-story showplace into a bed-and-breakfast.

A few years later, after two of them had lost their jobs, that’s exactly what they did. DC GuestHouse opened in 2003. Within a few years, the B&B was winning rave reviews on influential travel Web sites such as TripAdvisor.com and in Oprah magazine. The four friends were soon hosting thousands of guests a year, including Hollywood celebrities Mario Van Peebles and Meg Tilly, and British primatologist Jane Goodall.

Nevertheless, they shuttered the business in December 2011 and sold the property, adding DC GuestHouse to the list of downtown bed-and-breakfasts that have closed their doors in the past few years.

“It had sort of run its course,” said Tom Bell, one of the four friends who ran the DC GuestHouse during its eight-year run. “When you reach your revenue capacity, what are you going to do?”

Such is the dilemma of the bed-and-breakfast operator, a business that by its very mom- and-pop nature demands a labor-intensive personal touch that doesn’t come cheap and, at the same time, limits the size of the operation and thus its revenue. Adding to that burden, B&B operators say, is the cost of real estate in D.C.’s more visitor-friendly neighborhoods — which happen to have among the most expensive housing prices in the country.

A few blocks from the former Shaw guesthouse, the owners of the Artists Inn, just outside Dupont Circle, closed in 2010. Aaron Shipman House near Logan Circle and the Bed and Breakfast on U Street have also closed recently. The Inn at Dupont Circle on 19th Street NW was seized by the city last December. Others have languished on the real estate market without finding buyers.

And the Swann House, one of the city’s oldest B&Bs, closed for a few months this winter after its longtime owners were forced to sell the stately red-brick mansion in a bankruptcy auction held on its front stoop.

The operators of several D.C. B&Bs, which number about three dozen in the city today, say filling their rooms has never been a problem. Nationwide, occupancy rates for B&Bs and small inns hover around 40 percent, significantly lower than the occupancy rates at several downtown D.C. B&Bs, a testament to the city’s attraction for tourists and business travelers, alike.

“D.C. is a unique destination,” says Richard Ross, former owner of the Swann House, which he says averaged 70 percent occupancy rates during the two decades he and his wife, Mary, owned it. “Even during the recession, our numbers were flat but they didn’t go down. When we’d go to national [hotel industry] meetings and tell them what our occupancy rate was, they’d say, ‘Wow. How do you do that?’ ”

Tough competition in D.C.

Competition is tougher and business expenses higher here than in most places, innkeepers and industry experts say, pointing to such challenges as adhering to city zoning regulations and appeasing disgruntled neighbors. But it’s the cost of real estate that innkeepers point to as the biggest reason few new B&Bs have opened in recent years, while at least half a dozen have closed.

“Real estate prices are definitely a barrier to entry,” says Laura Saba, who runs the Embassy Circle Guest House, one of the newer B&Bs in the city. She opened the B&B with her husband, Raymond, in 2008. The couple considered purchasing the Swann House, the American Guest House on Columbia Road NW and Woodley Park’s Kalorama Guest House when each of those nearby inns came up for sale in recent years.

“It always comes down to the numbers. Today real estate is so expensive, it would really require high room rates” just to keep up with mortgage payments, she says. “You can buy it, but can you make any money?”

Today B&Bs aren’t cut-rate establishments, in any event. While they once may have provided more economical alternatives to hotels, the entire B&B segment of the U.S. lodging industry has gone upscale and been professionalized in recent years, according to the Charleston, S.C.-based Professional Association of Innkeepers International.

The District’s B&Bs are no exception. It could cost you as much as $300 a night for a room at Embassy Circle in the city’s ritzy Embassy Row neighborhood. At the inn’s sister establishment, Woodley Park Guesthouse, operated by Saba’s sister Courtney Lodico and her husband, Joe, prices start at the mid-$100s a night.

A few others, such as the quirky Dupont Circle area’s Mansion on O Street, rent some of their suites for thousands of dollars a night. Like many D.C. B&Bs, the Mansion banks on the allure of stately architecture, original artwork and antique furnishings and the local color of staying in a trendy residential neighborhood.

If today’s B&B guests aren’t necessarily seeking a cut-rate room, they are looking for a more homey and intimate travel experience, say Saba and Lodico, D.C. natives who grew up playing in the hallways of the Smithsonian Institution, where their father worked as a curator.

They lavish their guests with another sort of “inside the Beltway” treatment, steering them toward less traveled D.C. sights. British guests partial to touring formal gardens, for instance, get directions to the Hillwood Estate, Museum and Gardens in Northwest. They also recommend local favorites — book readings at Politics and Prose, Dupont Circle’s weekend farmers’ market, and their first-name relationships with the sommeliers at neighborhood restaurants.

A slow attrition

Unlike the majority of B&B operators a few decades ago, Saba and Lodico work full time at running their guesthouses, echoing a national trend. While B&B operators still pride themselves on an “everybody knows your name” atmosphere, it’s no longer a purely hobbyist pursuit, says Jay Karen, president and chief executive of the Professional Association of Innkeepers International. Today, a growing number of the country’s 15,000 B&Bs are operated by professional innkeepers who have eschewed quaint country inn stereotypes for hipper interiors and operations more akin to boutique hotels.

“They are transcending the doily,” according to Karen, who says that Pottery Barn décor is in, while Laura Ashley is increasingly out.

They also operate in an increasingly crowded, if fragmented, lodging industry. When once the only options were hotels or B&Bs, today’s travelers can choose from a plethora of short-term accommodation options from corporate housing services to furnished apartments advertised on Craig’s List and “couchsurfing” services such as airbnb, which lists more than 1,000 rooms in D.C. neighborhoods south of the Columbia Heights Metro station.

Those upstart “sharing” services have a number of advantages over the lodging industry’s old guard, which today includes B&Bs: They can avoid expenses such as obtaining a business license, passing fire inspections and paying the 14.5 percent room tax. And their low profile means less scrutiny from the neighbors and civic groups that have opposed new B&Bs in the past. At least one proposed B&B, the Toutorsky Mansion on 16th Street NW, faced staunch opposition from the Advisory Neighborhood Commission several years ago. The Sabas, meanwhile, decided not to hold weddings and other special events at Embassy Circle to address their neighbors’ concerns about scarce street parking.

But for the few dozen B&Bs in the downtown area, lack of profit doesn’t appear to be the principal factor in the attrition rate.

Even the Swann House’s longtime owners, who were forced to sell the property at auction to pay creditors last December, attributed losses to Richard Ross’s unrelated construction business, not the B&B operation. Similarly, burnout and retirement — not financial woes — apparently led to the closures of DC Guest House, the Aaron Shipman House and the Artists Inn.

Terry Gerace, who operated the Artists Inn with his parents Terry Sr. and Holly, says the inn was usually completely booked. But after four years operating the six-bedroom inn, where the rooms fetched as much as $300 a night, he says the family decided to close in 2010, after he received a diagnosis of cancer.

“It’s a very labor-intensive job. And when you are successful at it, you can never leave,” says Gerace, who enjoyed the experience but found it isolating, too. In fact, he says there were times — particularly during presidential inauguration season — when he felt like Cinderella sans the fairy godmother.

“I would do it again under different circumstances. Right now the D.C. real estate market isn’t conducive, at least not in Dupont,” says Gerace, who has recovered and returned to working in the public health field.

For some, a bumpy exit

If today’s real estate prices are to blame for waning interest in opening new B&Bs in the city, it would follow that those high prices would also provide a parachute to cushion innkeepers’ landing when they finally bail out of the business, but the reality hasn’t quite played out that smoothly in recent years.

The Geraces originally listed the five-story townhouse on R Street NW for nearly $11 million. They finalized the sale in February for $8.45 million after two years and a couple of price reductions. If he had it to over again, Terry Gerace says he and his parents might have been less lavish with renovations. He says they “over-improved the building,” investing about $1.5 million in elegant antique flooring and other finishes, as well as an art collection.

Still, those former innkeepers aren’t complaining. After their B&B was sold to the Republic of Georgia, which plans a new embassy in the District, the Geraces started hunting for a smaller home in the Dupont Circle area.

The Swann House and DC GuestHouse also spent years on the market and were sold after steep price cuts, the latter was first listed in 2010 for $4 million and eventually sold in 2012 for $1.85 million.

Bell and his friends used the proceeds from DC GuestHouse’s sale to purchase a new house in Southeast. “It was time for us to do something else,” says Bell, who has no regrets about giving up his host duties.

“It’s nice to be able to get up and walk through your own house in your skivvies if you want to,” he says. As an innkeeper, he says, “that was not something you could do. You had to be on and a good host all of the time.”

The Swann House fetched more than $3 million at auction in December, less than half of the $7 million price tag it first carried in 2012.

Mary and Richard Ross, who had operated the Swann House since the early 1990s, sold the business, along with the Swann House name and furnishings, to the investor who bought the house at auction, Reston patent attorney Hae-Chan Park. Mary Ross has launched a new career as a life coach, while consulting for Park on the inn’s day-to-day operation.

“It had been loved by all these people as a good bed-and-breakfast and I wanted to save it,” Park said, referring to the property’s financial difficulty. “As time goes on, we’ll figure out how to improve it.”

Christine MacDonald is a freelance writer.