The one true factor in tough economic times is that most businesses, especially Innkeepers, need to increase their marketing budgets to retain market share and hopefully maintain or even increase revenue.  No question that this is getting harder to do as more internet companies shift from “free services” to business models designed to produce revenue.  Simply put, in this world of ever more complicated electronic marketing outlets, it is more important than ever to stay connected and at the cutting edge of all of this technology.  This means a commitment of time, and since Innkeepers have little available time, this means more marketing spending.  What follows are some thoughts on putting planning behind this effort rather than chasing ever more expensive trends.

Google is perhaps the best example of an internet company that made itself indispensible as a “free service” and then married this success with paid advertising strategies (Google Adwords) designed to make it one of the biggest revenue producing companies in the world.  It is no surprise that this business model is now being copied by other “free service” outlets.   It is clear that this trend will continue in 2010 and beyond and lead to increased marketing costs. 

The Social Media world holds some clues to where these costs will come.  It is also clear now that the growth of the three major Social Media outlets, Twitter, Facebook, and LinkedIn, are not going to slow down any time soon.  There are tremendous business opportunities in those short 140 character tweets and on the fan pages of Facebook.  LinkedIn has become the business-to-business networking choice.  Each of these internet outlets is using a “free service” strategy to increase their utilization.  Google and the other search engines will now take those strategies to the stars with search results for relevant individual postings.  Now it is time for Social Media to cash in on this.  Just think of the data mining and advertising possibilities with all of that personal information stored on Social Media servers.  This can also be done on a fee for service basis for users if the fees are small enough to not inhibit the continued growth of the service.  Time will tell which business model these companies will eventually choose, but it is evident that, like Google in its earlier days, these Social Media outlets are becoming indispensible to businesses in reaching customers and gaining trust.  Once that has been accomplished, it will be time for payback, and these marketing outlets will start to achieve revenue, and in some cases, very significant revenue. 

Let’s look at a couple of examples closer to Innkeeping.  TripAdvisor (“TA”) has clearly positioned itself as a very important consumer outlet in the travel industry.  Calling itself the “World’s most trusted travel advice,” it is one of the best examples of Consumer Generated Media (“CGM”) that has evolved in the Internet World.  All of its reviews are written by consumers and are published with little editorial work by TA.  Some would say this causes problems of scamming the system, where good reviews are manufactured by the reviewed site or bad reviews are posted by their competitors, in each case using false user names.  TA and some of the other CGM travel sites make an attempt to stop this practice, but it still may be present and hard to totally eliminate.  Some forecasters have said that this CGM trend is going to fade as more “professional” reviews come to the forefront on review sites or people look to more instant, “real-time” reviews on Twitter and Facebook, when making travel decisions.  Time will tell, but my sense is that all of these different types of reviews will continue to be very important for Innkeepers to monitor; particularly to make certain that they have good systems for alerts and reputation management.

TA is a part of the larger Expedia Travel group network of companies, and itself owns at least 14 brands of different travel sites, including the very popular IndependantTraveler.com brand in Europe.  They announced recently that they are going to add Business Listings for hotels and bed and breakfast inns to their review sites at a minimum cost of $600 per year.  This will add the ability for consumers to follow the url link directly from the reviews to the Inn’s website.  Some Innkeepers are aghast at this move, which they see as forcing the smaller bed and breakfast inns to spend at least $600 a year on such listings.  They see this move as a total conflict of interest.  Others in the Industry, frankly genuflected when this was announced at the PAII Northeast Conference in Mid-November, profusely thanking the TA people for their thoughtfulness towards our industry.  The real bottom line is that this announcement is nothing out of the ordinary.  A popular “free service” internet outlet has set itself on line to becoming a more profitable business model.  This should be both expected and understood.  There simply is no free lunch; never was, and never will be!

For our second example, even closer to home, we chose BedandBreakfast.com’s new Diamond Collection.  This is a perfect example of an internet company increasing its revenue stream by highlighting the popularity of its directory listings and CGM reviews and creating an even higher listing level which it calls its Diamond Collection.  Look carefully at this set up.  Professional Independent Annual Inspections are required, but can be done on a “virtual” basis if the Bed and Breakfast Inn is already inspected by Select Registry (inspection only once every 4 years), Relais & Chateau, AAA Four Diamond, and Mobil and Forbes Three Stars.  The cost of this level includes a non-refundable initiation fee of $999 – $1999 plus $199 per month including the cost of annual inspections.  The other requirements are clearly geared to including luxury properties with high levels of Innkeeping services and amenities, and, of course, top notch CGM reviews.  Will this be another Innkeeping marketing expense that cannot be avoided for Inns which maintain this level of service?  Clearly, the popularity of BedandBreakfast.com will force Innkeepers to decide whether this is yet another marketing expense that they must somehow afford. 

The long and short of this exercise is to make sure that Innkeepers plan their marketing budgets carefully.  They need to clearly anticipate that over the course of 2010 there will be more “essential” marketing purchases and services that they will incur as costs, as the various internet outlets move towards more profitable business models.  This will be another example of the narrowing profit margin in the Inn Industry as Innkeepers get squeezed by rising costs and flat revenue streams.  In the end, increasing marketing budgets in tough time is still the one clear essential to ultimate profitability.

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