MAKING BUSINESS SUCCEED, PART FOUR: VICTORY FOR VACATIONLAND

An abbreviated version of this article was published in the October 2013 edition of the Maine Eagle, a local community magazine serving the central Maine area. Get your free copy at many local businesses.

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Tourism Is Maine’s Largest Industry

Tourism and related businesses dominate the economy of Vacationland. According to the 2012 Annual Report (Click here) recently published by Maine’s Office of Tourism this important industry employs approximately 85,000 Mainers with $5 billion in spending by visitors.

Most of these tourism dollars are spent on lodging (25%) and food (27%). Most tourists (over 83%) are repeat visitors who have been to Maine before. And most visitors (over 65%) come to Maine for leisure trips.

Down, but Not Out

Maine’s tourism industry is very sensitive to changes in gas prices since most people drive here. Over 40% of all overnight visitors to our state are from Massachusetts and New York. The Great Recession of 2008 hit Maine tourism hard, since discretionary spending on trips is one of the first things to get cut during bad economic times.

But the proof of strength is the ability to take a punch as well as give one. One of the greatest heavyweight boxers in history, Fighting Joe Lewis, knew this well.

While the number of visitors to Maine in 2012 increased, their average spending was down. Poor weather in 2012, including less snow in February and March, a rainy June, and Hurricane Sandy all hit Maine tourism hard. In-­state visits (Mainers travelling to locations in Maine) were down 5.2% from 2011. And on October 1 of this year (2013) the sales tax rate on lodging (including campgrounds) and meals will jump from 7% to 8%.

Maine’s tourism businesses must respond by rolling with the punches, and fighting back. Adapt and adjust to new conditions if you wish to survive.

Here then is a fistful of five key suggestions to help those in the tourism business get off their bottoms and fight back:

Use Precision-­Targeted Discounts

The volume of tourism in Maine strongly correlates with gas prices. When you do offer discounts to encourage customers to patronize your hotel, bed and breakfast, or resort, focus the discount on the greatest concern of your potential customers. This is likely to be the high cost of gas driving to your establishment.

A generic “10% off” discount will not resonate nearly as much as an equivalent discount that tells a customer “we will pay 10% of your gas costs up to XX.” Give the customer who shows up a prepaid gas card (ideally from a local gas station that you form a strategic partnership with.)

Build Hyper-­Efficiency

Physics teaches us that energy cannot be destroyed: it only changes form. I believe the same principle holds true for costs. Costs don’t disappear on their own. You can cut costs only by spending less and becoming more efficient. Whether you own a bed and breakfast, hotel, motel or resort here are some highly effective ways to cut costs and make your business stronger (there are tax credits and other incentives for many of these efficiency improvements – visit EfficiencyMaine.com):

(1) LED (light emitting diode) lights use 90% less electricity than regular incandescent bulbs and LED bulbs last about 18 years. Yes, they cost more but are worth it. The typical payback period is 3 to 5 years. After that you are saving money. See:

LED Bulbs

(2) Heating and cooling costs can be cut by conducting an energy audit of your business. Better insulation, heat pumps, and zone controls over heating and cooling can achieve significant gains in efficiency. How much of your hard-­earned money is slipping through the cracks?

(3) Telephone expenses can be cut by switching to the new Voice Over Internet Protocol (“VOIP”) technology used by Vonage, Magic Jack, etc. Land lines are expensive and rapidly becoming obsolete. If you have good Internet service then you can have virtually free unlimited telephone service which you can offer to customers as well as use for conducting your business.

Take Advantage of All Available Tax Credits

One of the most over-­‐looked tax credits is the Disabled Access Credit of up to $5,000 for qualifying improvements you make to your business that help disabled people. See IRS Form 8826.

The rehabilitation tax credit is 20% of qualifying improvements to historic buildings. Maine has many such structures.

The IRS has recently issued new rules on how to handle repair expenses that may favorably impact many tourism and restaurant businesses.

Maine offers a rebate program for personal property taxes called the Business Equipment Tax Reimbursement (BETR) Program. See:

BETR

Sell Fun, Not a Zip Code

Market research on people who visit our state confirms that they come here not only because of Maine’s natural treasures and scenery but also to get away from what they deal with back home. Your advertising must capitalize on these facts and present the story of your business and its products and services BOTH as an escape and a destination.

If you merely compete on price and ignore these qualitative factors your business will appear to prospective customers as just an impersonal commodity: a zip code that costs money to visit.

Also consider selling travel insurance that sells peace of mind to customers. We live in a world of uncertainty and risk. If you can delete some risks from the lives of your customers you will be a hero. People will pay for such a thing. Offer travel insurance and profit accordingly. Take care of your customers and let them know this. They will remember you and your business.

A’la Mode is Better than A’la Carte

Service businesses routinely use “bundling” to sell a complete package to customers instead of just one item. Bundling products and services together offers greater value and convenience.

Tourism businesses can bundle lodging and food with recreational activities, special events, massage, local florists, and others. Network with related and supporting businesses to create a complete vacation package for visitors that offers intangible but real value.

Bundling works because it has the quality of being readily available. Customers don’t need to spend extra time searching for, examining and buying additional services. Visitors should see you as an informed local guide and authority they can trust who will create the vacation experience they want.

Conclusion

This article concludes my four-­part series over the past four months on how to make business succeed here in Maine. My previous three articles covered retail, the service sector, and farming. According to Forbes business magazine (and many others) Maine is the toughest state in the country to operate a business in. And things won’t get easier anytime soon.

All we can do is follow the example of Fighting Joe Lewis and be prepared to take a punch as well as give one. Business in Maine will succeed in the long run by being tough, resilient, and adaptable.

Maine must become the one place in the entire country where the smartest businesses of all thrive despite adversity and harsh conditions.

The human mind packs the biggest punch of all:

Chance favors the prepared mind.

Louis Pasteur

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