For 27 years, Scott Cowger has been fascinated by operational changes he’s witnessed in the innkeeping industry.
“In the old days, people would call, you’d have a conversation, you’d describe your rooms, talk about their plans, mail them a brochure,” says the co-owner of Maple Hill Farm Inn in Hallowell. “Now everything is instantaneous and online. You frequently never even have contact with the guests before they walk in the door.”
Cowger, a friendly fellow, strives to maintain the personal touch nevertheless. Still, online operations have him at his computer more than he’d like. He has to keep up with his own website, plus booking technologies through third-party “online travel agencies” and short-term rental sites, plus the latest “channel management” software to manage bookings through the multiple sites, plus pay much closer attention to daily rates with “revenue management.”
“It’s not what I thought I’d be doing 27 years ago,” he says. “I thought I’d be working in the flower garden and baking fresh cookies for our guests. I find, increasingly, we’re glued to the computer screen.”
Second careers
The real estate market for Maine’s small inns and B&Bs has been hot in recent years. As older innkeepers retire, newer ones, many with no experience in the lodging business, are eagerly stepping up. Buyers often come from the corporate world outside of Maine in search of a more relaxed lifestyle. Some couples see innkeeping as an opportunity to spend more time together. Many translate previous work experience into innkeeping. A former corporate marketer, for example, can easily use those skills to market an inn; nurses and development directors have the people skills useful in hospitality.
Coming from well-paid careers, buyers have the means to handle purchase prices that usually well exceed $1 million. In 2016, Higgins Beach Inn in Scarborough sold for $1.5 million. A year later, Bar Harbor’s Ullikana in the Field, a historic home-turned-inn, sold for $2.15 million.
An increasingly prevalent financing mechanism is the use of “ROBS” or “rollover for business startups” of self-directed 401(k)s or IRAs. This allows retirement account holders to roll money into a business without paying early withdrawal penalties or taxes, explains Rick Wolf, owner and partner at The B&B Team in Kennebunk.
“We’ve seen way more of that in recent years,” says Wolf. “That’s opened up an enormous resource people didn’t even know about before.”
In the game
Long-time and newer innkeepers see plenty of opportunity in a thriving market. Many are expanding revenue streams through new services and amenities.
But there are challenges. One of the biggest is the evolving nature of online operational realities. That includes maintaining effective websites and navigating third-party online travel agents, or OTAs. OTAs cut into revenue, charging inns 15% to 20% commission for each booking. That’s an expense innkeepers don’t have when travelers book directly through the inn’s website. But OTAs have excellent search engine optimization, which can make it difficult for travelers to find inn websites for direct booking.
“The effect of 15% to 20% commissions really puts a squeeze on the innkeepers’ subsistence income,” says Cowger.
Net income from running B&Bs, especially away from tourist areas, is already marginal in many cases, he says.
“Since the owner-operators are often doing a lot of hands-on work, and work that is increasing due to the addition of technological layers, it usually comes out to a sub-minimum wage when you look at all the hours that we put in,” he says. Tighter income also limits staff raises.
Innkeepers who don’t embrace technology lose relevance, experts agree. It requires a grasp of analytics to optimize the inn’s website and manage listings on multiple OTAs.
“It’s challenged innkeepers to keep up with the technology, understand marketing, understand how to price rooms competitively with other people with OTAs,” says Dana Moos, a lodging broker also with The B&B Team.
“Channel management” and reservation software help innkeepers manage bookings across sites.
“You can be on 10 OTAs and have them integrated on one calendar,” Moos explains. “You don’t need 10 calendars. But it costs more money.”
Stephen Coston, overall, favors the technology. Coston owns the Inn on Mount Desert in Bar Harbor; his family goes back three generations in hospitality.
“It’s hard to imagine going back and doing some things that are routine now, like analyzing prices and occupancy, without the property management tools available now,” he says.
“You’re losing revenue,” says Matthew Levin, director of hotels and marketing for Lord Camden, Grand Harbor and 16 Bay View inns in Camden. “But if you aren’t visible on those channels, you would have likely lost that reservation to another property that is participating. You have to pay to play.”
“If people know how to use OTAs to their advantage, they can provide benefits,” says Wolf. For example, OTAs offer exposure during low-booking periods like midweek and off-season.
“But putting rooms on OTAs during the season and weekends, why would you do that?” he continues. “Put your money into making your website better.”
Short-term rentals
The short-term rental market, through sites like Airbnb, also have an impact on inns, but not as much as might be expected, innkeepers say. In fact, innkeepers like Cowger use the sites to list their own rooms.
“I thought right away, ‘Here’s another option, why not?’” he recalls. “People talk about Airbnb competing, and that’s true. But you’re not going to beat them, so you might at least join them.”
Still, the proliferation of sites, and of listings on each site, results in some pressure, mainly in the off-season.
“There’s a whole wealth of options — homes, rooms, everything that costs less than what we can offer with our level of services,” Cowger says.
People talk about Airbnb competing, and that’s true. But you’re not going to beat them, so you might at least join them.” — Scott Cowger, co-owner of Maple Hill Farm Inn in Hallowell.
New data show short-term rentals may be affecting traditional lodging operators, says HospitalityMaine President and CEO Steve Hewins. This possible impact has to be discerned by piecing together various types of data.
Smith Travel Research year-over-year numbers, through February, show Maine’s occupancy rate, or percentage of rooms sold, is down 5%. Revenue per available room, known as Revpar, is down 3.8%. These two metrics don’t include short-term rentals like Airbnb.
But Maine lodging tax receipts are up 21.5% through February, according to the most recent reporting from the Maine Revenue Service. This metric does include short-term rentals.
“This is the concerning piece and indicates that the revenue growth appears to be mostly in the short-term rental segment,” explains Hewins. “It is early data, but bears watching as the peak tourism season unfolds.”
He adds, “It’s not something we look at negatively or positively yet. It’s just what’s changing.”
Strategies
Lodgings small and large have initiatives to get more people to book directly. Enticements include things like discounts, flexible cancellation policies and free parking.
“We offer specials, as well as special perks,” like group rates and a Tesla charging station, says Catherine Hobson, who bought the Blackberry Inn in Camden with her husband Bob in 2017. Along with deeper room discounts for direct bookers, they work with local businesses to create discount packages. They’ve grown the business by adding dinner service in the winter and monthly afternoon tea service, and are breaking into the wedding venue business.
For marketing, they manage costs by primarily using no-cost or low-cost promotional methods to get the word out through their website, social media channels and monthly newsletters. It ’s essential to have content people will act on and strong imagery, she adds.
“In this business, strong visuals are just as important as words,” Hobson says. “We recently launched our newly designed website for that exact reason, because we wanted a platform that could support and showcase bolder imagery.”
“You have seconds to make an impression,” agrees Moos. “Your landing page should have your money shot; then people will scroll. Keeping social media and website content fresh is important. If an innkeeper hasn’t posted something for three weeks, that’s not the worst thing. But for three months, forget it.”
Tech-savvy innkeepers, or innkeepers who hire marketers, have an edge.
“They can’t afford not to,” says Moos. “Twelve to 15 years ago, if you had a good reputation and you were in the guidebooks, before everything was online, you didn’t have to do this kind of marketing. You didn’t have to keep up with all the OTAs.”
Diversification is key
Maple Hill Farm added a conference and event center and targeted green initiatives. In 2016, it added four Level 2 electric vehicle-charging stations. Showing up on EV apps, the service has begun attracting EV users, says Cowger.
Bruce Moffit and Jon Hendrickson, who bought the Old Saco Inn, in Fryeburg, in 2018, expanded restaurant and bar hours, boosting local patronage within a year. They’ll soon complete construction of a wedding and event barn. They say it will be the largest in the area, accommodating 240 guests, and will offer things other area barns don’t, like a large kitchen and a bridal loft.
Even in today’s tech world, visibility sometimes still comes down to old-fashioned signs. Last January, a few snowmobilers found their way to Old Saco Inn on a newly cleared path.
“We put a sign on the trail pointing to us,” says Moffit. “By the end of February, we had as many as 50 sleds here.”