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Surviving the Great Recession - Lessons from a Caribbean Hotel

I am going to go a little off topic with this addition to my blog and go back a little bit to my accounting and finance routes. Yes, online marketing is more fun to talk about but the fact of the matter is we are in the midst of a recession that just does not seem to be going away. According to The Economist, 2012 is likely to be the year of "self-induced sluggishness" for the world economy. http://www.economist.com/node/21542411. With the sovereign debt crisis in Europe, the erratic pace of the job recovery in the US and the potential damper on summer and fall travel that may be brought about by the Summer Olympics and the US Election respectively I think most of us in the Caribbean hospitality industry agree that 2012 will another difficult year.

Our situation at Bay Gardens Resorts is no different from anyone else's. Many persons who are on the outside looking in marvel at our high year round occupancy and see us winning bids for catering for major international events (CHTA Marketplace, St. Lucia Jazz Festival, World Cup Cricket etc etc) and assume that we are doing well and generating substantial profits in the midst of this recession. What they don't realize is the level of discounting that is needed to generate such occupancies or the effect of rising commodities and energy costs on our margins. When you experience a reduction in revenue along with a dramatic increase in costs in a recession, the result is predictable: a constant flow of red ink that starts around late April/May and lasts well into mid December (our slow season here in the Caribbean)!

This has been extremely difficult on hotel owners and our owners at Bay Gardens Resorts have had a hard time dealing with it at times as even they have never seen a situation like this one in their 30+ years as entrepreneurs (including 17 years in the hospitality industry). Having owners with uncanny business instincts and vision, hiring great management and staff, offering a superior, personalized service and simply being best in class at anything that they did has worked flawlessly for our owners (my parents) over the years but even that has not been enough to generate any profits from our 3 hotels for the last 3 years.

Yet in spite of all of this, I remain extremely optimistic about the future and actually believe that the recession has been good for us in some ways. Maybe my optimism stems from youthful inexperience and naivete that comes from being directly involved in the industry for a mere 3 years. Or maybe its simply the fact that all I have known for most of my short working life is this dreadful recession and I have learned to adjust my expectations accordingly.

For in the midst of all of this I have seen one clear advantage of coming into a leadership position in an environment like this: people are much more willing to rethink their way of doing business when things are difficult and new ideas that would not have been looked at before when the business was profitable suddenly make more sense when you are faced with losses.

Embracing new ideas has allowed us as a small, locally owned hotel chain to find new sources of business especially online (as you can tell from the more traditional online marketing articles on this blog) which has been great but what we have also been able to do is find over $0.7 million (about $250,000 USD) worth of annual cost savings without changing our longstanding policy of not laying off staff no matter how difficult things get and without sacrificing quality or customer satisfaction. These savings will be there when the world economy turns around (which in all likelihood will start to happen sometime in the first half of this decade) and we will be better off for having put in the effort to uncover these savings during the recession.

How does a small business achieve savings of this magnitude without cutting headcount? Here are a few of the lessons learned:

1. Get buy-in from owners and management - I have the distinct pleasure of working daily with a former CHA President and Caribbean Hotelier of the Year (Berthia Parle), a former SLHTA Hotelier of the Year (Waltrude Patrick) and of course our owner, Joyce Destang O.B.E. These are three very successful ladies with a almost a century of business and hospitality experience between them (see  http://www.baygardensresorts.com/company-profile.html). I make this point to illustrate that there is only so much that they have not seen or tried before so convincing them that your new cost cutting scheme will work without sacrificing guest quality is not easy. The fact that I share the same last name as the owners is no licence to force my ideas and will upon the company. You need to get buy-in (or at least a willingness to consider something new) starting at the top! If you aren't able to make your case successfully to the owners, management and in many cases employees, then any change effort (cost cutting or otherwise) is doomed to fail. That is why every new major initiative that I propose is accompanied by a robust business case followed by lots of discussion and asking for feedback from the key players and decision makers and polling others in the industry who have tried it. I spend a lot of time researching any new idea and I suppose my accounting/finance background dictates that my business case is accompanied by a robust and thoughtful financial analysis (how much will the program cost to implement, how much will the company save, what is the payback period, impact on other aspects of the operation etc). Moreover, you should not just start a project and not report back on its performance. I believe that I should be held accountable for anything that I implement so I report frequently on how we are performing and what's working and what isn't. 
2. Use competition to your advantage - No supplier relationship is so sacred that you should not entertain a competitive quote from a reputable competitor (locally or internationally) who is able to match the incumbent in terms of quality and reliability of service. Note how I qualified my statement as cheaper is not always better! But we have successfully used increased competition in the telecommunications, banking and insurance industries to negotiate savings of upwards of $250,000 EC per year on these three items alone. Never mind the constant search for the best combination of price and quality from food and beverage and general suppliers. In this recessionary environment, smart suppliers are willing to work with you as they cannot afford to lose business and in many cases we have been able to negotiate savings just by showing a willingness to switch if our demands are not met. Are we playing hardball a bit? Maybe. But our guests do the same on a daily basis which has led to a reduction in ADRs in the global hospitality industry so you have to excuse me if I don't feel sorry for our suppliers as we are all learning to live with less for now until the economy turns around. 
3. Go after the big expenditures first - avoid the tendency to be "penny-wise" but "pound-foolish". Sometimes we go after savings of a few hundred dollars a month and ignore the low hanging fruit that can save you tens of thousands! That was why our approach over the last 3 years has been to focus on the areas that will make the biggest impact: utilities, insurance, debt service, food and beverage purchases, general supplies among others. 
4. But realize that the little things count - notwithstanding what I mentioned above, you can't lose sight of some of the smaller expenditures either as sometimes with one policy change you can save a little on several smaller expenditures that leads to thousands in total annual savings. 
5. Use the experience of your team - remember what I said about getting buy-in? Recently I held an emergency meeting with some of my managers and basically reminded them that they have all seen many more recessions than I have and challenged them to think of cost cutting measures in their own departments. The result? Some very good and clever ideas (rechargeable LED tea candles instead of lamp fuel, making canvas linen bags instead of using garbage bags) and approximately $30,000 in annual savings after one meeting!
6. Bring certain functions in-house - usually the consultants encourage you to outsource to cut costs but some things make more sense to do in house. Without any significant increase in our payroll we have able to save about $120,000 annually by bringing payroll processing, management of OTA extranets, graphic design and pool maintenance in-house. In addition to cost savings a side benefit has been greater quality control over all of these items as our in-house employees feel a greater sense of ownership for getting the job done right! That being said some attempts to do things in-house have not fared as well and one has to have the humility to admit when a course of action is not working and cut your losses. 
7. Look out for hidden costs - there are some silent killers that don't show up in your profit and loss but are costing you nonetheless and you have to attend to these as well. In our case the biggest one was a booking engine on our website provided by a tour operator who through their net rates were essentially charging us a 20% commission on every booking that came through our website. A 20% commission for doing nothing and benefiting from our online marketing efforts! That was something that I changed almost immediately and the result has been an increase in ADR (or reduction in commissions, however you want to look at it) that contributes hundreds of thousands in incremental profit to the bottom line as online bookings (through our commission-free booking engine) make up the largest source of our business. 
8. Realize that your suppliers are hurting too - I have been truly amazed at the sudden willingness of several suppliers to get into deals that they would never have considered when the economy was booming. We have seen this especially in the advertising world (print and online in particular). We have been able to take advantage of several well-priced last minute opportunities as a result and many advertisers are more than willing to negotiate or even consider barter (which is not free but is certainly cheaper than paying cash!). Some suppliers are also cash hungry as the recession has led to them experiencing an increase in bad debts. I am always surprised what kind of discount can be negotiated when one offers to pay cash upfront or within a week! One supplier offered us a 5% discount on all invoices paid within 7 days. This has led to approximately $1,000 in savings per month from this one supplier. Well worth it! Wish others would offer the same terms. 
9. Look beyond your shores for the best prices on products and services - I know that I am going to get into trouble with someone for this. Why don't the hotels support the local suppliers? They import virtually everything from overseas and only call on us when they are in a jam! They don't buy from us but expect us and our employees to patronize their restaurants, conference facilities, local events etc. And on and on. I just want to be clear that Bay Gardens Resorts is 100% St. Lucian owned and managed and every single one of our 225 team members is a St. Lucian or Caricom national. More than 85% of our purchases are from local suppliers and we support local farmers and fishermen by not just buying hundreds of thousands of dollars worth of goods from them annually but by actually paying them not just on time but very quickly (within a week or two and in some cases within a day or two if we get a good deal). But we live in a globalized world and we in the hotel industry have to deal with global competition from the rest of the Caribbean and other sun, sea and sand destinations daily. But some local suppliers have gotten lazy in their procurement and in setting their markups. The common example that I like to use is ink cartridges. If I can bring in an ink toner cartridge for a price of $210 EC landed (duties, shipping and brokerage included) how does one justify a wholesale price of $400 EC from a local supplier for the exact same item? Surely if we can bring the item in from overseas for $210, a local supplier can source a better price and benefit from economies of scale and bring the same item for maybe 10% cheaper at least. If that same supplier then charges $250 for the item one can live with that and pay an additional $40 for the convenience and service, but $400? Pure madness! The suppliers who work well with us are aggressive in their procurement and are able to bring items in from overseas or make them locally for prices below or very near our cost. We have analyzed the potential of bringing maybe 60 different items at some point or other and most good suppliers are able to come up to prices very similar to our cost. So these are the suppliers who we continue to work with. 
10. Cash flow is king (or is it?) - I am a big believer in the primacy of cash flow over profitability (there is a difference, but that is for another show) but I have seen some business-people make some very short sighted decisions due to cash flow considerations. It is better to make an upfront investment of say $10,000 and buy a (non-perishable) item in bulk so long as you have the storage capacity if it will yield $20,000 in savings within a relatively short time period (in this recessionary, fast changing environment I generally look at a payback period of 1-2 years or less for such investments). The same applies to other cost saving investments such as purchasing energy-saving LED bulbs which are very costly ($45-$70 EC each) but cut your lighting costs by about 90% and have a 6-12 month payback period. Concerned about going into overdraft? So long as you are not pushing your business to the brink of bankruptcy a temporary dip into the red-zone for major savings in the near term is not a big deal from my standpoint so long as the interest on the overdrawn balance is less than the savings at stake. 

Notice that I did not tackle some major expenditures above. In my opinion, there are some things that you just do not sacrifice, not even during a recession. If you have to cut these down to bare-bones then you have to consider whether it is worth being in business at all! What not to cut back on:

1. Headcount - payroll and benefits is our biggest expenditure ($5-$6 million EC a year) and it is the one area I have been guilty of not cutting back on substantially or at all. In fact in some areas it has actually increased. It always amazes me how successful companies who engage in cost cutting (re-engineering, right-sizing whatever you want to call it) always go after this area first when looking for savings. That's the easy way out and shows a lack of creativity and initiative when it comes to cutting costs! If you have hired well and have not over-hired then there is no need to do this! Now if you have an employee who is not performing well then they don't belong there in the first place and should be dismissed, recession or not! But laying off a strong employee is not a smart long term business strategy. We don't send talent, knowledge and years of investment in training out the door. It makes no sense. If things are slow in a particular department, rotations (shorter work weeks) or reassigning to another department are a better option until things improve. Our hard working staff are appreciative of the level of job security that exists at our family-owned business and it pays dividends for us now in the recession and will pay off even more when the economy turns around. 
2. HR, Training and Employee Relations - again, I have been ridiculously lenient in this area and have actually used the savings generated in other areas and have tripled the staff relations and training budget, only to see that increased budget exceeded! Staff birthday breakfasts, quarterly and annual "Grammy-style" employee awards gala celebrations, staff parties, management dinners offsite have all been introduced or resurrected in the last few years at the suggestion of many of our employees and while some staff (like our guests) may never seem satisfied, the majority of our staff have responded very well to these initiatives and we have seen a reduction in turnover in certain departments. It is a simple equation from our perspective. Happy staff = happy customers = increased profits = happy (happier?) owners. 
3. Marketing - we have used the savings generated elsewhere to increase our expenditure on certain types of marketing (online marketing and PR in particular) which is already paying off this year in terms of increased direct bookings. We are of course more careful now when making marketing decisions and more keen to measure the results of our marketing campaigns but simply cutting the marketing budget without consideration for the short and long term benefits of the marketing activities only leads to a downward spiral. 
4. Anything that would sacrifice service or product quality - if you want to lose credibility and customers this is the way to do it! The last thing that should be sacrificed is the customer experience. There may be more efficient ways to achieve the same result but cutting back on anything that would affect customer satisfaction or lowering your property's maintenance and service standards is a recipe for long term disaster and clients will notice the difference!

We certainly can't wait to see the back of this recession. Even now there are some promising signs in the US that give one hope and in Saint Lucia we have seen double digit growth in our tourist arrivals for the winter so far. But there is still a lot of uncertainty and while occupancy is coming back and we may be at least two to three years away from seeing our ADRs recover from the rampant discounting that started a few years ago. 

So in the meantime we continue to use this difficult period as a learning opportunity and as an opportunity to get leaner for when the rebound inevitably occurs. 

Google Adwords - a Primer for Hoteliers

When your company's name becomes a verb and gets added to the Merriam Webster Collegiate Dictionary you know you have become a household name. Given the ubiquity of the Google brand one would have thought that everyone would understand at a basic level how they generate revenue of almost $30 billion, profits of $8.5 billion and why they possess a staggering $106 billion stock market valuation!

Yet it still amazes me how little the average person knows about how Google makes money. But maybe it shouldn't as until about 3 years ago, I admittedly understood very little about Google's business model beyond the fact that they generate revenue from some form of online advertising. 

I suspect that many hoteliers in the Caribbean are in the same position that I was a few short years ago and understand very little about Google's advertising platform, Google Adwords, and how to use it to their optimal benefit. To better understand Google Adwords' potential benefit to a hotel or any business for that matter one has to put the following in perspective:

1. The internet has a major impact on travel research and traveler buying decisions. According to a recent survey conducted by WIHP Hotel, a hotel internet marketing company, more than 60% of customers first find out about a hotel through online sources, particularly Online Travel Agents and Tripadvisor. The remaining 40% of the time, travelers usually first discover a hotel through referrals by friends and family. This was based on a survey of actual travelers that was conducted recently. You can read the entire article here http://www.wihphotel.com/mag/2011/stimulus-moment-of-truth-hotel-marketing-part-1-of-4/. 
2. Once a potential customer has become aware of your hotel, they will then use the internet for research and according to a the above mentioned survey they will use an internet Search Engine such as Google, Bing or Yahoo more than 72% of the time. http://www.wihphotel.com/mag/2011/zero-moment-of-truth-in-hotel-marketing-part-2-of-4/
3. As a result of its dominance of the search engine market, Google is the world's largest website (albeit with Facebook closing in on them) with about 1 billion monthly visitors. 

Given the above facts and given that using a search engine is such an important part of travel research, clearly a hotel's presence and ranking on Google is critical.

When someone searches for "St. Lucia Beach Resorts" for example you get two kinds of results: "organic" or "natural" search results and "Sponsored" or paid search results. See the screen shot below:

As you can see, the Sponsored Search Results are the most prominently displayed search results. They are displayed to the top against a coloured background as well as on the right hand and a clearly labelled as "Ads". Just under the sponsored search results are the organic search results which are not paid for.

There are thus two ways to improve your presence on Google. The first way is to aim for a higher position in the organic search rankings by investing in Search Engine Optimization (SEO) services. Long term this probably provides the best return on investment and is the best way to improve your Google ranking. But this can take quite a bit of time and don't look for instant results if you go this route. SEO basically uses several techniques including making your content more search engine friendly and getting links to your website from relevant, "authoritative" websites to improve your organic ranking on search terms that you consider important: "St. Lucia hotels", "St. Lucia Weddings", "St. Lucia Diving" etc.

The other option is to invest in Search Engine Marketing (SEM) via Google's Adwords platform. Google Adwords basically allows you to take a "short cut" of sorts and just pay for premium position by bidding on those same key search terms ("keywords" to use the jargon). Google Adwords uses a "Pay Per Click" or "Pay Per Impression" billing model so that you only pay whenever someone clicks on your ad and thus visits your website or when your ad is displayed (in this case you would pay a rate per thousand impressions). Some of the advantages of Google Adwords advertising over traditional print, television or radio advertising or even some other forms of online advertising include:

1. It is highly targeted - you choose the keywords that matter to you and your ad will only be shown if someone searches for one of those keywords. This way you know that the person who sees or clicks on your ad is more than likely to be interested in your product or service. This is unlike advertising in a mass market travel publication for example where you might find that several of the readers may not even be interested in travel to your destination, let alone your hotel. 
2. Ability to geo-target and target by demographics - With Google Adwords you can have your ad target persons from a particular country, state, city or zip code as well as target by gender, age groups, specific interests and even bid more for targeting these persons at certain times of the day! This is a feature of Google Adwords that is virtually impossible to replicate via any other offline medium and very few online advertisers (perhaps Facebook and Bing/Yahoo are the only ones who come close) are able to achieve this with the same level of detail. 
3. You are in control of your advertising budget - you determine how much you want to bid on each keyword as well as your daily and monthly budget. 
4. Reporting and Analytics - whoever designed the Google Adwords platform is speaking my language! What's the point of paying for an ad if you can't find out how it is performing. This is a clear limitation of traditional advertising but it really surprises me how many online advertising platforms provide very little information beyond impressions and clicks. Not so with Google Adwords. You get real time reporting on impressions, click throughs to your website, which keywords are performing best, which countries and demographic groups are responding best to your ads and even conversions (see below). A treasure trove of information of you love to delve into the detail or high level "dashboard" style reports for busy executives. If you link Google Adwords to your Google Analytics account you can get even more detailed information user behaviour on your website. For example did persons spend more time browsing your website when they came via the keyword "St. Lucia hotels" or "Soufriere hotels". This information can further help you to fine tune your advertising campaign. 
5. Ability to measure your ROI - this is one of the more advanced features of Google Adwords but one that I would advise even beginners to use. How often do we wonder whether our ads are really helping us to generate revenue? Well Google Adwords' Conversion Tracking feature allows you to determine whether persons who clicked on your ad are signing up for your newsletters, completing wedding or conference inquiry forms or making a booking on your website (and even determine the value of that booking with a little basic programming from a reasonably skilled webmaster). This information has been invaluable to us at Bay Gardens Resorts. With this information I was able to determine that one of our ads was generating a 1000% ROI ($10 in revenue for every $1 of ad dollars spent) and thus allocate more advertising funds to this ad away from ads that were not converting as well. 

With so many advantages, high potential ROIs and given the instant gratification that one can get from seeing their ads in the top spot for certain search terms would I advise hoteliers to dump more traditional offline and online advertising and put everything into the world's largest online advertising medium? Not exactly. Offline (magazine, newspaper, television, public relations) advertising still has its place in the marketing mix and for some niche markets it is absolutely critical. Moreover, it is possible to end up wasting a lot of money on Google Adwords without generating any results by among other things:

1. Bidding on keywords that are too broad or too competitive and hence too expensive to be worth bidding on. For example, I used "St. Lucia hotels" as an example of a keyword but the fact is you are competing against the major tour operators and OTAs who are bidding $2 per click and more to get premium placement. Better to bid on keywords that are less competitive but more relevant to your hotel's niche e.g. "Boutique Saint Lucia Hotels" or "St. Lucia All Inclusive Hotels"
2. Using poorly designed landing pages that do not provide relevant information. When someone clicks on an ad that advertises your wedding packages for example they don't want to end up on your home page that has information on all your service offerings. Better to send them to the "Weddings" section of your website where they can get the information they were searching for in fewer clicks. The easier it is for potential customers to find relevant information the more likely you are to get them to convert.
3. Poorly constructed ads - Google Adwords has a strict word limitation so you would think there would not be much room for error but it amazes me how many ads are constructed without the relevant keywords and key selling points in the ads. This in turn leads to low click through rates (the percentage of ad impressions that lead to a click) which in turn leads to you paying more per click that you should.

Google Adwords tend to "punish" poorly constructed ads that bid on inappropriate keywords and send persons to websites (landing pages) with irrelevant content. This is to protect the integrity of the Adwords platform and to discourage advertisers from trying to steal traffic by bidding on popular but irrelevant keywords (a online shoe retailer bidding on the keyword "Barack Obama" for example would be one extreme example). They assign such ads and the keywords they are bidding on lower "Quality Scores" which in turn leads to them having to bid more per click for the top position. So it is entirely possible that competitors who are better versed in Google Adwords are going to end up paying less than you for a better position as they are able to achieve better Quality Scores. 

Therefore, before shifting a large portion of your marketing budget to Google Adwords I would advise any hotelier to first do the following:

1. Determine what your goals are - Are you trying to generate traffic to your website? Fill rooms during a soft period? Generate leads? This is important as there may well be more efficient ways to achieve your goals (SEO for example). 
2. Invest some time in educating yourself and your staff - if you are reading this article this is a start but I am by no means the authority on this! There are lots of articles out there as well as the Google Adwords Learning Centre. I actually decided to go as far as getting the Google Adwords Certification but this is by no means a necessity for anyone!
3. Experiment - Try different ad formats and different keywords.Target different demographics, countries etc to determine which respond best. There is even an "Experiment" option in Google Adwords that allows you to determine which combinations work without spending your valuable ad dollars!
4. Measure your results - use Conversion tracking and Google Analytics to determine how the ads are performing. There is no point spending on online marketing if you cannot determine if it is generating returns!
5. Consider getting outside help - it may make sense to outsource but make sure you are clear on what you want your marketing consultant to achieve and avoid compensation structures that are based on a % of ad spend. My preference is to pay based on results and there are some who are willing to have a portion of their compensation tied to results. 

This article is really just an introduction into Google Adwords and how it can be a valuable part of your online marketing mix. I will be writing a series of articles that delve into more advanced topics and share some the lessons we have learned the hard way at times. Many businesses have used Google Adwords to generate fantastic returns but I have also seen some hotels in the Caribbean use it incorrectly and end up wasting thousands of dollars. 

At Bay Gardens Resorts, Google Adwords makes up between 4-8% of our advertising budget on a monthly basis so it is by no means our largest advertising expenditure. It is a part of our marketing toolkit that we use for particular niche markets and I would encourage hoteliers to look at it in the same light. 

Assessing Online Advertising Opportunities - Using Alexa.com to Uncover the Truth

I must get at least one or two unsolicited online advertising requests a week. All from sites who claim to be leaders in their niche with thousands of unique visitors a day, guaranteed to generate very high returns on investment all for a fee of $X per month or per year. Sound familiar?

There are lots of travel sites out there. Some are better known than others and are no-brainers (think Tripadvisor, Kayak.com, major OTAs like Expedia, Orbitz etc) but how do you know who will actually produce.

There's no crystal ball that will tell you which online marketing activities will produce bookings, but there are a variety of tools that I use to determine the potential of a website to generate referral traffic and hence bookings. Chief among them is Alexa.com.

Alexa, a subsidiary of Amazon.com, calls itself the "Web Information Company" and produces a wealth of information about tens of millions of sites on the world wide web. The most important one for my purposes is the Alexa Global Traffic Rank. Lest I misquote Alexa.com or botch up the explanation of this rank, here is Alexa.com's definition: 

Alexa Traffic Rank

An estimate of brand.com's popularity.

The rank is calculated using a combination of average daily visitors to brand.com and pageviews on brand.com over the past 3 months. The site with the highest combination of visitors and pageviews is ranked #1. 

All things being equal, the higher a website's Alexa.com traffic rank, the higher the potential traffic it can refer to your site. Of course, the site has to be relevant to your market and your placement on the site is and important factor as well.

Let's look at the ranking of a few popular travel-related sites to determine if the Alexa ranking makes sense intuitively:

Tripadvisor.com - 288th in the world

Expedia.com - 413th

Travelocity.com - 1228th

Kayak.com - 835th

Bookit.com - 9,774th

Makes sense, right? Expedia is the market leader among OTAs in the North American market (although Booking.com is actually a bit larger according to Alexa.com, perhaps displaying its dominance in Europe) and Travelocity.com is a large but much smaller player. Bookit.com's ranking is nothing to sneeze at, but it is clearly much smaller than either of these two. But if you work with all of these OTAs already then you already know that. So when I get a request from yet another travel site who claims to be a market leader and Alexa.com shows me a ranking of 583,380th in the world (true story, I just got this today), you can understand that I would politely decline their offer of an low introductory rate of $750/year! I will probably not see enough web traffic to even break even! 

But as I have always said, with any statistical tool, you have to understand where it gets its information from and what its limitations are. Some professional Search Engine Optimization (SEO) consultants don't consider Alexa.com to be worth the effort because it gets most of its information from a few million persons who have the Alexa toolbar on their browser. Not a bad sample in my opinion and it is international in scope (unlike Compete.com which focuses almost exclusively on US traffic) but some claim that those who download the Alexa toolbar are "techies" and not a typical sample. There are also some who claim that some companies can manipulate their Alexa ranking by downloading the toolbar onto their own browser and visit their own site several times a day to boost up their ranking!

Be that as it may, if you have two proposals in front of me for online advertising, one from a site with a ranking of say 1200th and the other with a ranking of 200,000th in the world and the cost is pretty close, which one would you spend your limited marketing budget on?

I also like to use Alexa.com to research top sites in a particular niche. Want to find out who are the top adventure travel sites in the world? Use Alexa.com's Top Sites tool to help narrow your search. http://www.alexa.com/topsites/category.

But be careful not to discount "small" sites, especially in niche markets. The size of a website is not the only indication of the site's ability to generate high quality, relevant traffic that converts into sales. It is also not necessarily an indication of the relative size of the company behind the site. One of our top five clients is a niche tour operator with a Global Alexa Traffic Rank of 1,015,094! There were over a million sites with more traffic than this tour operator's site and maybe thousands of travel sites and tour operators ahead of them but yet still they are and have been one of our top 5 sources of business for over a decade!  

Using Google Analytics to Make Better Marketing and Business Decisions

Let's be honest. A lot of hoteliers and marketing managers are just not comfortable with number crunching or data analysis at all. Who has time for spreadsheets and interpreting stats? Don't we have accountants and analysts in place for that kind of work?

But even arithmophobiacs (a real word, I looked it up) have to admit that you can't run a business entirely based on gut instinct and intuition (important as these skills are!). You need reliable information and you need to know how to interpret that information at some basic level to be able to make informed and profitable business decisions.

So on top of the daily management reports, occupancy forecasts revenue & expense budgets, income statements, guest satisfaction scores etc that hoteliers have to pour over, here's another often overlooked source of mission critical data to add to your toolkit: Google Analytics.

In a previous post I highlighted some of the benefits of using Google Analytics and how to set it up. Just to recap quickly Google Analytics is a free tool offered by Google that provides detailed information on traffic to your website. Some persons are happy just having an idea of how many "hits" they get to their website on a monthly basis and whether it is growing or not. But why would you not want a little more detail on how persons interact with your website or how they get there in the first place?

There are hundreds of articles out there describing Google Analytics and how it can be used. But what I am going to do here is highlight three ways in which paying attention to trends noted on Google Analytics has allowed us to make better marketing and business decisions and to improve our profitability:

1. Demographic information:


What the report shows - where does your traffic come from? Which countries, regions, cities? What languages do they speak? You might be very surprised at the results gleaned from the Demographics section under the "Audience" tab in Google Analytics (see screen shot below).

What we noticed - We were not surprised that the US made up our largest source of visitors, but Canada and Trinidad and Tobago being ahead of the UK? Given that traditionally the UK has been our largest source of business, this was a surprise to us. What was also surprising was that upon drilling down into the US data we found out that one of our largest sources of web traffic from the US came from California. Again surprising given the distance and the length of the flight to St. Lucia.

How we used this data to increase profits - focus additional marketing efforts (both on and offline) on locations that show significant interest in our properties and find ways to convert "looks" to "books" for these locations. We have continued to see our business from Trinidad grow and we have also been able to determine (using Google Analytics) that a lot of our online bookings from Trinidad are being influenced by our marketing efforts on Facebook and Google Adwords.

2. Sources of Traffic:


What the report shows - there are 3 basic ways that persons get to your website. Direct (someone typed in your url directly into the browser or got there via a bookmark), Referral Traffic (via a link from a listing on another website such as Tripadvisor), Search (from a search engine such as Google or Bing, both paid and organic). This report breaks it down for you (see screenshot).

What we noticed - we noticed very quickly that some sites who claimed to be sending us significant "hits" to our website were not sending us enough traffic to justify the cost. We continue to be amazed at the amount of high quality referral traffic that is generated by Facebook and we even know which key search terms are generating hits to our website (what are persons searching for when they find our site on Google or Bing).

How we used this data to increase profits - we immediately cancelled marketing campaigns that were not working for us and no longer need to guess if a listing on a website will generate profits. We can simply ask for a 1 or 2 month free trial listing and then see how it performs via Google Analytics to determine whether to continue. This has helped us to increase our ROI from our online marketing activities tremendously and we have seen bookings from our website double over last year (it is now our largest source of business) and this had a lot to do with tweaking that took place after reviewing these reports. We also noticed that most persons who were getting to our website via Google (organic) searches were getting there by searching for Bay Gardens Resorts, Bay Gardens Hotel or other Bay Gardens specific search terms. Not bad in and of itself but it did mean that we were dependent on the person knowing about our properties in the first place. Ideally you want persons to find your website after searching for "St. Lucia hotels" or "Saint Lucia resorts" or other similar search terms. We have therefore invested more in search engine optimization (SEO) through both in-house and external efforts which is producing better results for us. There are so many other ways that you can use traffic sources reports. It almost deserves an article to itself!

3. Conversions

What the report shows - what's the point of a website if it does not generate revenue? Google Analytics Conversion reporting helps you to determine if your site is achieving its true potential. There are two basic types of conversions from Google's standpoint. Actual bookings from your website (if you have a booking engine hosted on your website) also known as "e-commerce" conversions can be tracked via Google Analytics. This requires a bit of assistance from your website administrator as some tracking code needs to be installed on the booking engine's pages. If you use a booking engine hosted on another site (Sabre, Globekey, Siteminder etc) you can still do this but you would have to ask the booking engine that you work with to set up a Google Analytics account for your hotel's booking engine website which would be seperate from the GA account for your hotel's website. A little more complicated but still worth looking into. If you don't have a booking engine on your site, you can still track other "conversions" that you consider important such signing up for a newsletter, completing a wedding or conference inquiry form or watching a promotional video.

What we noticed - we took a listing with a well known destination wedding portal and were a little dissappointed at first when we noticed that we were getting very few inquiries from our profile listing on this site. We would have probably pulled this listing after the year's contract was up if we had not set up conversion tracking on our wedding inquiries on our own site. We soon noticed that quite a few persons who were referred to our website from this site were inquiring with us directly rather than with the destination wedding portal. We also know exactly how much online revenue is generated via our website by property, by room category, by country, by state and by city. Great information to have at your finger tips.

How we used this data to increase profits - it has helped us to better determine our ROI from our marketing activities. As mentioned above we were able to determine that a destination wedding listing was in fact driving valuable traffic that was converting into leads and sales. Same for our Tripadvisor Business Listing (although it worked better for some of our properties than for others). We were able use a combination of Demographic and Traffic Sources reports to determine that 80% of our Trinidadian web traffic was coming from our Facebook ads and this was behind the dramatic increase we had seen in revenue from this market. We also cancelled a lot of online marketing contracts that were costing us thousands but not producing enough traffic to be justified by the cost. Finally, by linking our Google Analytics account to our Google Adwords campaigns we were able to determine which ads were working and which keywords were converting and which were not. I was very disappointed for example that a Google Adwords campaign targetting the conference and events market was not working out and paused it to refocus our efforts on a Weddings campaign that was producing fantastic results in terms of the quality of the traffic and conversions. Google Analytics helped us to determine what worked and what didn't.

There are many other uses of Google Analytics and at it will require another posting for sure. But just to highlight a few:

1. Quality of traffic - sure a particular ad campaign sent a lot of traffic but was it high quality? By that I mean,  how much time did they spend on the website on average, how many pages did they visit on average? Did they get to critical pages ("Book Now" or "Sign up for our Newsletter") and how often?
2. Effectiveness of your web design team or SEO consultant - so you paid a web designer thousands to redesign your website. Did it work? Are visitors more engaged than they were before? Are they getting to the critical conversion pages more often. Same for your SEO consultants. If you don't see an increase in organic search traffic (it may take a few months so be patient) then you need to question how effective their efforts were. 
3. Effectiveness of your selling cycle - at what point in the booking process are persons "abandoning" the shopping cart? Are there too many steps in the booking process? Are persons stopping right at the point that they have to put in their credit card (in which case some sort of online security seal such as Verisign should be considered to increase customers comfort levels)? Google Analytics' "Funnel Visualization" helps you to determine this. 
4. Technology - what devices are being used to get to your website? We have noticed a significant increase in the use of iPads and iPhones by visitors to our site but alas quite a few of the features on our site are Flash dependent. So we may long term have to change some of these Flash rotating banners to Javascript or something that can be viewed on an iPad. 
5. Exit pages - at what point are persons leaving your website? If a page has a high exit rate, then perhaps it is a page that needs to be tweaked or "optimized" as the online marketing experts call it. It may be as simple as changing a few photos!

There are so many other uses of this valuable tool. The key with any analytic tool is to understand what it represents and what it doesn't. It is important that you focus on long term trends. Don't get overly excited by one-off events. 

I don't expect every hotel GM or owner to start using this tool every day. But certainly invest some time in understanding it and ensure that someone in-house is looking at it daily and providing weekly reports to the management team. Google's "Conversion University" provides a full online training portal (there's even an exam and Google Analytics Qualification!). 

These insights into your web traffic will help you make better decisions with how you allocate your limited online marketing resources and will help you generate higher profits. Even if you aren't a fan of numbers and analysis that has to be music to your ears!

Social Media for Small Business - Is it Worth the Effort?

I have to admit that on a personal level I was a very late adopter of social media. I must have been one of the last of my friends to open a Facebook account and I have all of two followers on my Twitter page which was last updated in 2010! I have never left a review on Tripadvisor (or any review site for that matter) and let's not even talk about Google+, Digg, Reddit and all the other social media tools out there. Who has the time for all that?

But despite my late adoption of social media on a personal level I realized from very early the importance of social media for a business, especially a small hotel with a limited marketing budget. I am sure that most of you have read many an article espousing the benefits of social media and why you should jump on this trend before you get left behind by your trendier competitors. I am not going to do that here, but what I will do is highlight how embracing social media has benefited us at Bay Gardens Resorts.

But first let us start with some of the reasons why many small businesses are still holding out on implementing a properly planned social media strategy:

1. It is just a passing fad - yes, even with 800 million active users, the world's second most visited website (after the online marketing giant, Google) and $4.3 billion in revenue (with $1 billion in profit according to some sources) there are still some who doubt the long term viability of the world's largest social media company (Facebook of course!) and of its potential as a marketing tool. Yes larger companies have failed after initial success, but clearly those who still believe that Facebook is just a passing fad only popular among persons born after 1980 are in the minority.

2. It takes too much time - there are hundreds of social networking sites out there and monitoring and making use of all of them can be daunting. Some claim that monitoring social media is a full time job and in the midst of this Great Recession, small businesses cannot hire additional staff for something as frivolous as social media that will not generate additional revenue. And adding social media to the task list of the few staff who remain after several rounds of lay-offs and cost cutting would just be unfair.

3. You can't control it - its not like traditional marketing where you can control the message. How do you plan for something like that?

4. It won't generate additional profit - and isn't that why we are in business in the first place?

There is some merit to most of these arguments so why jump into this? And successful businesses-people don't like to go into anything half-heartedly. If you can't do it right, don't do it at all!

But here are three of the best reasons (from my perspective) why small businesses (especially hotels) should get started:

1. Be part of the conversation - I am sure that no hotelier reading this would be surprised to know that many studies show that almost of 1 in 3 clients first become aware of their hotel through referrals from friends and family. Referrals and word of mouth advertising has been recognized as one of the most important sources of new and repeat business long before "social media" was even in the dictionary. The difference now is that with social media you (and everyone else) can monitor what others are saying about your brand online. Good and bad experiences are documented in real time on Facebook and Twitter and review sites such as Tripadvisor and Yelp have rendered manual comment cards almost obsolete (though some people still use these so don't throw them out just yet!). Tripadvisor, in particular is probably mentioned at Bay Gardens Resorts by someone on our team at least ten times a day. Did you see what the Johnson family said about us on Tripadvisor? Fantastic! Show it to all the staff! Can you believe that last Tripadvisor review? Completely untrue and off the mark! Must have been written by a competitor or disgruntled employee! And, our General Manager's favourite: We are ranked #2 on Tripadvisor, let's get to #1! Love it or loath it, what guests say about you on Tripadvisor and other social media sites means more to potential clients than anything you put on your website or on a brochure and on television or radio. It has a feeling of authenticity and independence and in this environment where persons have options and limited funds, that means everything. So don't think for a minute that these sites have little or no influence on persons travel plans. They do. So rather than stay on the sidelines, it is best to be part of the conversation and understand that while you can't control it you can turn it to your advantage in many ways. Be proactive in managing your own reputation online!

2. Increase traffic to your website - this does not happen right away, but having an active, consistent presence on the major social media sites will help to drive high quality traffic to your site and will help improve your overall search rankings on Google and Bing as these are certainly seen by the search engines as links from "authoritative sites" (SEO geek-speak that I will discuss in a subsequent blog). It is interesting to note that according to Alexa.com, 3 of the12 largest sites in the world are social media sites: Facebook (#2), Twitter (#9) and Linkedin (#12). Also in the top 12 are sites such as Youtube (#3), Wikipedia (#6) and Blogspot (#7) which are also considered social media in some circles. See http://www.alexa.com/topsites for a full list of the Top 500 Global Sites.

3. Potential to generate sales - believe it or not we have been able to generate a positive ROI from our time and financial commitment to social media and we are able to measure it. It is not going to increase your sales overnight but it is possible to generate exposure from social media which will in turn lead to increased revenue and profits and because of the newness of this medium it is still relatively inexpensive compared to other forms of online and offline advertising. I will discuss this in more detail in a separate post.

There are many other potential benefits as well such as the ability to glean useful information from potential customers in real time on new product ideas, share important news instantly and the ability to gain exposure and brand awareness in a cost effective manner that larger businesses spend millions trying to gain. I always remind our guests that leaving a good review on Tripadvisor helps small businesses like ours who can't afford a prime time ad on CNN to get the word out there.

Now that you are hopefully convinced on the need to make a start, here are a few practical tips from my experience over the last two years:

1. Focus on a few key social media sites - there are so many out there and if you try to focus on too many at once you will become overwhelmed. My advice is to focus on Facebook, Tripadvisor (or if you are not a hotel, restaurant or attraction whatever is the top review site for your industry and your market) and probably Twitter if you have time (if you want to take a shortcut, you can download this app that allows your posts on Facebook to be posted automatically to Twitter http://apps.facebook.com/twitter/). It would not be a bad idea to have a presence on Youtube as well, the world's second largest search engine but I would give priority to the first three first.

2. Setup the right kind of account - several persons set their businesses up as personal profiles with "Friends" on Facebook rather than as a business profile page with "Fans" (or "Likes" as they are now called) on Facebook. I am seeing a lot of restaurants and hotels with hundreds of Friends now having to cancel their profile page and set it up the right way. Better to get it right the first time. See http://www.facebook.com/pages/create.php. If you are looking to set up a profile on Tripadvisor, what you want to do is "claim" your listing as an "owner" so that you can manage it. See http://www.tripadvisor.com/Owners.

3. Be committed and update frequently - it does not have to take a lot of time. But if you don't update your Facebook page at least once a day you will not see your fan base grow and persons will lose interest an "Unlike" your page. One update a day takes a matter of minutes.

4. Don't be overly focused on selling and marketing your product - at least not right away. I have found that our 4900+ Facebook fans are more interested in our "Wacky Wednesday Riddles" or random photos of our garden or cocktails than they are in our latest specials. Build a relationship with your fan base first and they are more likely to respond positively to marketing-related posts. People don't want to feel like they are constantly being marketed to on Facebook. I would say have at least as many (maybe more) "conversational" or "social" posts as "marketing" posts on Facebook and Twitter.

5. Measure your results - don't just set this up and hope that it works. Facebook offers "Insights" that allow you to measure the size of your fan base, how engaged they are, where they are from, gender, age among other interesting stats. Use this as well as Google Analytics to determine how much traffic these various media are sending to your site and whether they are converting into sales. Even Tripadvisor offers analytical reports comparing your review performance to your competition. Read them, understand them and share the results with your team. There are more sophisticated tools out there offered by companies such as Revinate that allow you to monitor all social media sites at once and this provides a wealth of data but I would not advise such tools starting off.

6. Get your team involved - I started off doing 90% of the updates on my own but when you are a GM, owner or director in a business beyond a certain size, you have to delegate this. Within a few months I had handed control over to staff in the marketing department who were younger (I am only 30 and already getting obsolete!) and more, let's say "social" (pardon the obvious pun) than myself and the results were remarkable! I still monitor daily, assist and provide guidance but management of our Facebook and Twitter pages and responding to reviews on Tripadvisor is no longer solely my responsibility and the diversity is good for the medium. But even here rules and guidelines apply and be careful that the person who is responsible for this has appropriate knowledge of the business and writing skills. Even on Facebook and Twitter grammar and spelling mistakes are frowned upon when coming from a company!

I will be going into more depth in future posts on how we have been able to monetize our time and financial investment in Facebook and other social media tools but suffice it to say that we have been very satisfied with the results so far. Referrals from Facebook and Tripadvisor make up a substantial portion of our site traffic and thus account for a decent portion of our online bookings as well as bookings made offline.

Social media represents one of the best marketing opportunities for small businesses. Embrace this tool and "Friend" it. You won't regret it.

Redjet Now Flying to St. Lucia - Discount Airlines and Regional Travel

Yesterday Redjet, a Barbados-based discount airline owned by Irishman Ian Burns, announced the start of its much anticipated route between St. Lucia (UVF) and Barbados (BGI). With fares starting at $9.99 (one-way before taxes) this is great news for the small hotels in St. Lucia who rely heavily on the Barbados market. It also breaks the nearly decade-long stranglehold that LIAT (the largest regional airline operating in St. Lucia) has had on the busy St. Lucia-Barbados route. 

A press release yesterday from the low fares carrier said that it will be flying from the 16th December in time for the Christmas and New Year break.

It is interesting to note that with taxes included, this fare of $9.99 each way quickly balloons to $75 return. Clearly further work is needed on the part of the regional governments to reduce the taxes and fees that often account for more than 50% of the cost of a regional flight. 

For the last 5 years, St. Lucia has witnessed double digit declines in arrivals from the Caribbean market. Regional leisure travel as all but dried up with many Barbadians preferring to pay an additional $100 to fly to Miami rather than pay $300 and up for a 40 minute flight to St. Lucia. 

The arrival of Redjet into St. Lucia hopefully marks the beginning of a turnaround in arrivals out of the 

critical Barbados market. But the small hotels who rely on this should not celebrate too quickly. While Redjet's fares are substantially lower than LIAT's there are other hidden costs (beyond the taxes alluded to earlier). There are additional charges for checked baggage (between $10-$20 per bag). Persons who are used to flying with Europen discount airlines such as Easyjet or Ryan Air would not doubt be accustomed to this but this would be new to Barbadians and St. Lucians. 

It will also be interesting to see how Bajans who have become accustomed to the 20 minute, $20 USD taxi ride from George FL Charles Airport to the hotels in the north of the island adjust to the 90 minute, $80 USD taxi trip from Hewannora International Airport. The idea of a 90 minute drive after a 40 minute flight may not appeal to all and the additional taxi fare may cause some to  be indifferent between LIAT and Redjet. Only time will tell but it brings into focus the need to create an faster, alternate route from Vieux Fort in the south (where Hewannora International is located) to Castries/Gros Islet in the North (where many of St. Lucia's 

hotels are located). Some hotels in the north (primarily Barbadian favourites Bay Gardens Resorts and Coco Resorts) may well consider including airport transfers in their packages to defray that additional cost. Moreover, some of the hotels near to UVF in Vieux Fort are likely to benefit greatly from having Bajan arrivals so close to their doorstep (Coconut Bay in particular). 

So celebrations of Redjet's arrivals to our shores should be tempered but nonetheless this is good news for both St. Lucia and Barbados.