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@Corinne Orde our b&b with just 3 suites and staffed only by the owners sounds as if it may be like yours. We too work our butts off at busy times with heavy turn around.
I understand the guilt you feel but you must do what is best for yourself. If you overwork for too long you will burn out and all future guests will miss out. If you should aspire to growing to become a larger hotel with staff to handle increased turnaround then you must make more money to cover those improvements and wages. Thus one night stays or 3 night minimum, the best is whatever gives the most profitable outcome. If you have a one night is ok policy and yet you only book a room for one night on a weekend (and it is empty the other night) then you make less than if you had a two night policy, even with a discount to effect more two night bookings.
Regarding 3 night policy and overflow from competitors, it is an individual situation that we each need to consider and perhaps test. Whatever fills the most rooms in the most profitable manner will give you the best freedom to offer the most people a pleasant holiday. We always keep one of our suites open for one night stays, while others are minimum two nights in busy times. Weekdays are often times with empty rooms and we will take anyone! I sometimes try to move guests to an alternate suite to align empty nights (Thus allowing an extra two night stay, even if change over becomes more hectic) this process, even if it involves a free upgrade can make more money if it frees up a suit for an extended stay.
Put yourself in the position of a guest before they book.
Type into Google "accomodation" and the name of your district. See what potential guests see. Choose an accomodation provider with similar facilities to yours, a guest might book with them, or with you. You need to set your price the same or just below your competition. If you need a higher price then you will need to improve your property and facilities.