USE OF THE INTERNET As expected, given the maturing of the medium, respondents have more experience with the Web this year. Two-thirds (2/3) of all respondents are "Early Surfers" -- those who have had a Home Page for more that one year. About half (28%) of those have been on the Internet now for two years or more. About one third - 33% (vs. 54% last year) of the B&B's have been on the Internet for less than one year. A significantly higher number of B&B's interviewed this year - 87% (vs. 72% last year) - have their own Home Page. Of those that did not have a Home Page, once again a significantly higher number 87% (vs. 75% last year) expect to have one in the next 12 months. Innkeepers overall are using the Internet more aggressively to market their properties. B&B Internet Profile:

Do you have a Home Page 87% Have a Home Page Domain Hosting Strategies used: 53% Own Domain Name 17% On a regional site 16% Listing Service URL 14% Hosted elsewhere

How long HP on Internet 33% Less than 1 year 39% 1 to 2 years 28% 2 years or more

Innkeeper marketing activity 74% Use Meta Words 65% Register with search engines themselves 71% Are paying to be on a listing service 83% List URL on promotional material 98% Have pictures on Home Page 62% Have more than 6 pictures on HP

USE OF LISTING SERVICES An incremental marketing tool many B&B owners use is listing services to create traffic for their sites. Seventy-seven percent (77%) of B&B's are listed with at least one listing service. The majority are of these are listed on more than one listing service - 75% are listed on more than five listing services; a significant number - 56% - are listed on 10 or more listing services. Asked what their future plans are regarding paid-for listing services, 94% either plan to increase the number that they are listed on or maintain current levels. Clearly Innkeepers continue to view Listing Services as an important component of their Internet presence along with their own Home Pages. Attitudes towards utility of Listing Services:

How many on-line listing services/guides are you currently in? Average = 9 Listing services Future use of on-line listing services 41% Will increase the number paid for 6% Decrease the number of listing services paid for 53% Neither more or less/but will be more selective about which ones paid for

ADVERTISING EXPENDITURE LEVELS This subject is new to this year's survey, therefore we do not know what percentage of last year's advertising budget was spent on digital medium. This year B&B's have committed almost 40% of their advertising expenditures to this new medium (the Internet). Similarly, another indicator of the growing importance of the Internet as part of Innkeepers' marketing strategy is that 76% of the Innkeepers interviewed plan to increase Internet advertising expenditures. An additional 20% will hold their advertising expenditures to their current levels. Only 4% indicated that they would reduce spending levels. Attitudes towards paid advertising on the Internet:

PROFILE OF GUESTS FROM THE INTERNET Wanting to quantify whether guests from the Internet differ from non-Internet guests, Innkeepers were asked whether Internet guests were different on three sets of desirability measurements - amount they spend, length of stay and upscale. "Do guests that find the B&B on the Internet differ in any way from guests that find the B&B through other sources?" This year there was even greater agreement/concurrence as to the positive characteristics of guests coming to B&B's as a result of the Internet. (Prior year agreement ratings are included in parenthesis for ease of comparison below.) Innkeepers perceptions about Guests via the Internet How much do you agree of disagree that guests that found your B&B via the Internet are more upscale? stay longer? spend more? Agree (last year) 52% (46%) 28% (14%) 32% (17%) Neither Agree nor Disagree (last year) 40% (47%) 62% (79%) 57% (74%) Disagree (last year) 8% (7%) 10% (7%) 11% (9%)

SOURCE OF BUSINESS Guest characteristics aside, there is no ambiguity about the importance of the Internet as an increasing source of new guests for their Inn. There is agreement - 96% (vs. 90% Last Year) - that this is an increasing important source. Moreover 96% believe that the importance of the Internet as a source of new business will continue to increase in the future. Somewhat predictably 100% of Innkeepers who have a Home Page agree on these two points. Seventy-four percent (74%) of Innkeepers will be making additional investments to update and revise their sites within the next year. Sixty-four percent (64%) of Innkeepers intend to upgrade their existing site so that they will be able to take reservations on-line. In order to quantify the importance of the Internet, Innkeepers were asked to provide percentage of business coming from various sources. ("Where does your business come from?") The results were even more eye-opening than last year. The nine sources of guests were: Tour Guides/Books, Word of Mouth, Advertising, Chamber of Commerce, B&B Associations, Other B&B referrals, Reservation Services, Travel Agencies and The Internet. One of the more significant findings is that the Internet now has fully emerged as the most important source of new guests for Innkeepers. Last year Innkeepers indicated that the Internet was as important a source of business as the next most important source "Word of Mouth." This year overall 26% (vs. 23% last year) of business comes from "The Internet" while another 21% (vs. 23% last year) comes through Word of Mouth. Ranking of top 5 Sources of Guests: Two questions: How B&B's ranked importance of differing sources of business? How much of your business comes from this source? Ranking Source Contribution 1 The Internet 26% 2 Word of Mouth 21% 3 Travel Guides/Books 15% 4 Print Media Advertising 14% 5 Visitors calling the Chamber of Commerce 9% Based on the survey we cannot conclude a direct causal relationship between the Internet and a higher occupancy rate, however the data is provocative and strongly suggests that one exists. What is clear is that on almost every measure that was looked at, Innkeepers that actively used the Internet to market their properties had higher occupancy rates. Occupancy rates Average Occupancy Rates - Overall = 47% How long on Internet 41% Less than 1 year 52% 1 year plus Have a Home Page 48% Yes 37% No Who maintains Home Page 61% Innkeeper does 50% Others do

How do your Internet guests find you?
An area of significant interest relates to where do Innkeepers think their Web visitors come from; do visitors find the B&B from conducting a search engine query, or do they get found directly through listing services, links from regional pages, or directly through their own Home Pages. The low response level to this question would seem to indicate that a significant number of Innkeepers are not sure. (Only about half the respondents answered this question.) Given the low response rates, results should only be used as indicators and not as statistically projectable measures.

What is clear is that the two most important sources of guests are from Search Engines and Listing Services. Slightly more than one third indicate visitors found them through search engines and slightly less than one third believe their guests found them through listing services.

USE OF INTERNET ADDRESSES IN COLLATERAL PROMOTIONAL MATERIALS

A cross media marketing tool a B&B can employ is the inclusion of the their Web site address (URL) and e-mail and the Home Page/URL addresses on their printed promotional material. The most significant change from last year occurred on this question. Last year surprisingly there was a large group - 42% - who had not included their URL in their promotional material. This year an overall 83% have and 90% of those who have been on the Internet one year of more now include their URL on all brochures and promotional material. As noted last year this seems to be more a timing issue of printing promotional material rather than other reasons that Innkeepers have not included these new addresses on printed material. Note: These figures are consistent with other research as reported in Adweek of 4/20/98: percentage of business magazines ads that include a Web Site address (URL) 1992 - 0%; 1997 - 60%. MAINTAINING AND MARKETING A HOME PAGE As regards maintenance, once the home page was created, 29% of the owners (down significantly from 37% last year) are maintaining the site while the remainder are looking to another party (a design firm or Internet Service Provider) to perform these activities. The implication is that Innkeepers are outsourcing maintenance to 3rd parties. 'Maintenance' includes refreshing the copy, rates and design, arranging for links to other sites. Innkeepers are not out-sourcing marketing functions to the same degree. For example Innkeepers are still more actively involved in registering sites on search engines. About two thirds of Innkeepers (similar to last year) continue to remain involved in marketing the site within the Web community by actively registering the sites with search engines and focusing on building traffic through the use of metatags and with cross links. Nearly four out of five B&B owners have registered with global and regional search engines. The most commonly used search engines are: Alta Vista, Infoseek, Yahoo, WebCraweler and Excite. An interesting fact to note is that 82% of the B&B's with an occupancy rate of over 41% reported that they had registered with search engines while only 44% of those with under 25% occupancy had registered. While this is not to suggest that registering with search engines can directly improve occupancy rates from 25 to over 40%, the difference probably is more accurately a barometer of level of marketing effort overall. Many more Innkeepers - (74% vs. 65% last year) are using metatags to increase the odds of being found in a search. The most common embedded words, also known as metatags, include the phrases: "Bed & Breakfast," ,"Inns", "City name," "State name." As noted earlier listing services continue to be an important part of the marketing strategy for the Internet. Asked what their future plans were regarding listing services that B&B's pay something to be listed on, 41% plan to increase the number that they are listed on; 53% said that they would remain on the same number of listing services and only 6% said they would decrease the number of listing services that they pay for. Clearly Innkeepers continue to view Listing Services as an important part of their Internet presence along with their own Home Pages. NEW EMERGING TRENDS USE OF E-MAIL AND ON-LINE RESERVATION FORMS When asked what percent of guests or potential guests contact them by e-mail, Innkeepers indicated that 15% did. While there are no comparable figures available from last year, we suspect that this is a new and fast growing trend. This was somewhat confirmed by a follow up question relating to how many Innkeepers encourage electronic contact either by having a reservation form on their Home Pages or directly encouraging e-mail contact. Twenty seven percent (27%) of participating Innkeepers either currently have a reservation form or plan to have one within the next 12 months. An additional 38% indicated that they encourage e-mail contact. USE OF THE INTERNET FOR OPERATING COST SAVINGS As previously noted, a growing number of Innkeepers are using less expensive e-mail in lieu of telephonic means to contact, talk to and confirm reservations with guests. A growing number of B&B's are using their Home Pages in lieu of sending out printed brochures and not mailing promotional material to inquiring potential guests. Only 23% of Innkeepers are still sending brochures to everyone who found them through the Internet. Thirty two percent (32%) of Innkeepers are sending additional marketing material to less than 25% of potential guests who found them through the Internet. CONCLUSIONS One Innkeeper e-mailed us saying that he was sorry that he did not have time to participate in the survey, but to inform his fellow Innkeepers that: "The Internet is the greatest thing that has ever happened for B&B owners." The survey findings again validate and quantify the extent to which this Innkeeper's comments are true. The Internet increasingly continues to offer Innkeepers an opportunity to find new guests and business. It is evident that those Innkeepers who have actively decided to have a Web presence and who are managing the details of search engines and links are seeing results. They are finding new guests at a low acquisition cost. Lessons from their experiences are: 1. Get on the Internet; create your own Home Page, 2. Work on getting yourself on the Search Engines, and 3. Get on as many listing services as you can on the Internet. The Internet appears to be delivering on it's potential promise to "level the playing field" for B&B's. The Internet enables Innkeepers to cost effectively compete with other types of accommodation providers within the lodging industry (e.g., large luxury hotels) for these travelers. It allows even small B&B properties to do what only the largest Hotels could do prior to the Internet - advertise to potential guests on a nationwide basis. The survey results clearly quantify that Innkeepers are taking advantage of the opportunity and benefiting: the number of B&B's that are now on the Internet has grown significantly, they are reporting that an increasing number of their guests come off the Web, and the number of travelers who now use this medium to find a B&B continues to grow significantly. However, the growing success of this new medium will now begin to pose a problem for those NOT on it. Two years ago being on the Internet was a choice -- Innkeepers could choose to be there or not. Things are now changing. The adoption of the technology is becoming so pervasive as to change from being a "want" to a "need". Telephones were an example of this, as were faxes. This shift ("want" to "need") is now happening with the Internet for Innkeepers. A B&B is going to have to use this medium to survive. Both the full time professional Innkeeper, and the part-time/supplement-my-income Innkeeper will have to adopt this technology. For the less well established B&B who is not listed in multiple B&B print directories and who does not have significant referral business as a result of "word of mouth," it's not a choice anymore. Being on the Internet in the near future will become a necessary defensive survival strategy. You will have to be there and work it. For a growing segment of travelers, if a B&B can't be found through the Internet - the B&B won't exist. And just being there - having a Home Page - is not enough. Innkeepers need to get themselves listed on the major listing services as well as the search engines (together they account for almost 70% of how B&B's are being found on the Internet). Innkeepers who are using a presence on listing services as part of their marketing strategy for the Internet clearly understand their importance. This is evidenced by the fact that 94% either plan to increase the number that they are listed on or maintain current levels. Clearly Innkeepers continue to view Listing Services as an important component of their Internet presence along with their own Home Pages. Trends also point to the expanding use of other digital tools: use of reservation forms and e-mail contact with potential guests. As person-to-person communications diminish, another issue emerges: how will the Innkeeper maintain the unique "B&B experience" during the initial contact period. This presents a new challenge for the Innkeeper: "How to continue to create personalized service and maintain the unique one-to-one guest relationship within this digital environment." The last challenge we identified relates to tracking advertising and promotion on the Internet. It presents some of the same problems inherent in any print advertising - how to track which advertisements and creative treatments are working. Identifying the path through which guests find a B&B on the Internet continues to be one of the most frustrating and elusive characteristics of the Web. This again was one of the survey questions which Innkeepers found difficult to answer. When people find a B&B through the Internet, rarely are they able to describe "where" they initially found the B&B, other than in generic terms -- "On the Web," "A B&B Web site." Guests frequently don't recall the specific site or link through which they found the B&B. As a result -- it is very difficult to trace the exact path through which the digital visitor found you. Despite these challenges, the Internet increasingly promises to become what that Innkeeper said: "...the greatest thing that has ever happened for B&B owners.". We would like to thank the many Innkeepers who contributed their time and input. As in all good research, you often raise more new questions than you help answer, so these may form the basis of future research surveys that we may conduct and share with you. If you have additional questions you would want to include in future surveys, or if you want to participate on future surveys, please drop us a note by e-mail: DDMonWWW@aol.com or write us at: DDM, A Communications Agency, Inc., P.O. Box 1039, Kingston, NY 12402. Please visit us on the Web at "http://www.bbgetaways.com" A word about the authors: Peter Schleim and Paula Saint-Amour are principals of DDM, A Communications Agency, Inc, who helps companies develop solutions for strategic marketing problems using the Internet. DDM also has created and maintains B&B Getaways™ an Internet Listing Site which has over 16,000 Bed & Breakfasts in the United States. DDM was assisted in conducting the survey by Tell-Us, Corp. an Internet marketing research surveying company located in Kingston, NY. Nothing contained in the above article can be used or reprinted without the express prior permission of the authors.