May 1, 2018
I wince each time DMO leaders state that they must work harder to defend their
budgets. The threat and response assume a pattern. A new grab on tourism dollars
is met with a new call to rally supporters and to prepare yet another study. This
defensive approach waits on the doorstep to greet calamity. What if we start to
play offense?
For the last twenty years, we have lost the battle in our states and local destinations
to secure and protect reliable tourism promotion funding. Time and again, monies
are no sooner allocated than they are deallocated. The tourism industry often is
given a Hobson’s choice: face tourism budget cuts or accept a tax increase. They
usually opt for the latter after the municipality promises to earmark a portion of
the increase for destination promotion. Within a few years, these promises are
broken. The funding that was supposed to support tourism is spent elsewhere.
The tax, however, remains.
Elected officials should base tourism funding on benefits to the citizenry. How
many jobs does this investment create? How much revenue does it generate for
public coffers? Unfortunately, this is not the case. Instead, tourism funding is often
hijacked by political opportunism. At both the state and local level, an elected
official’s support for tourism seldom tips the outcome of an election. However,
elections are regularly swayed by deep-pocket interests that finance candidates
they know will fund programs dear to them. Where these candidates are elected,
they might siphon monies from weakly-defended industries and direct them to
programs that benefit their supporters. As the late California State Treasurer Jesse
Unruh famously stated, “Money is the mother’s milk of politics.” With this in mind,
it is not a coincidence that our industry has suffered.
So, what do we do to change things? Well, we can start by promoting travel and
tourism. I applaud those who have elevated this discussion, organizations such as
Destinations International and U.S. Travel. A few years ago, I changed my public
speeches to include a preamble: “The Importance of Travel and Tourism.” I
encourage my audiences to do the same. We must continually and tirelessly tell the
story of the positive impacts of travel and tourism. I also am an ardent supporter
of political action by tourism partners. We must be active in campaigns and
campaign funding. But this is not enough.
We must play offense. We must create mechanisms that protect the critical funding
needed for tourism promotion. We must create industry-led mechanisms that are
recognized as “industry funding”, not discretionary dollars. We must be able to
maintain that our industry has raised its own dedicated resources, not skimmed
funding away from an account that could have been used to buy children’s
textbooks.
The agriculture industry turned to stable promotion funding in the 1930’s. Industry
assessments, called agricultural marketing orders, have provided much needed
funding. Remember “Got Milk?” How is it that, even now, I can remember the
jingle to the “Incredible Edible Egg”? How do I know real California cheese comes
from happy cows? How do we all know that pork is the other white meat? The
answer: stable dedicated funding of agriculture promotion.
It is not a coincidence that agriculture and lodging produce a perishable product.
Losses from inadequate marketing in both industries can never be recouped. It is
also not a coincidence that California has been a leader in both. The agriculturerich
state of California produces approximately $46 billion dollars worth of
agricultural products annually and is one of the largest food exporters in the
world.
The agriculture industry did not secure these successes by stepping up their
advocacy or by “defending their budget”. They did so with a different paradigm -
industry assessments.
The downtown improvement community embraced this approach in the 1960’s. As
municipal funds flowed to the suburbs, so did investment in clean and safe
downtowns. Urban leaders fought back with their own dedicated, reliable source
of funding - the business improvement district. There are now about 2,500 BIDs
throughout North America. These districts are not competing for funding with
police, fire and parks. They raise their own independent stable source of revenue.
The tourism industry in the “Golden State” pioneered stable assessment funding in
the 1990’s. It did not defend budgets. California tourism went on offense. With a
statewide Tourism Improvement District (TID) and 101 TIDs at the local level,
destination promotion is forever changed. Let’s look at the results. $120 million per
year for promoting the state. Additionally, over $265 million per year has been
raised in supplemental funding for local destinations. This funding outpaces every
other state, even on a pro rata basis. It did not happen overnight, but it changed
the industry.
Some argue tax rates on lodging are higher in California than other places. Not
true. The average total charge in California’s 101 TIDs is 12.9% - lower than the
14.6% national average found in a study of 100 top destinations throughout the US.
Over the last 30 years rates inside and outside California have continued to grow
apace, the difference is in the allocation.
As it relates to local efforts, a few leaders in other states including Washington,
Montana, South Dakota and Colorado followed suit. Most recently, destinations in
Texas as well as local communities in Portland, Oregon; Wichita, Kansas;
Philadelphia, Pennsylvania and Newport, Rhode Island have embraced this
approach. It has been successful in liberal states like California and conservative
states like Kansas. It has worked in small communities, like Pacifica with one hotel
and a small TID budget of $65,000, and in big cities like San Diego, with dedicated
funding of over $35 million per year.
Some say if we embrace new dedicated funding, we will lose our underlying
funding. Not true. Aggressive agreements and industry control mechanisms have
preserved underlying funding. As a gesture of political independence, a few DMOs
have given up discretionary funding. Those that relinquish political allocations do
not miss calls from the Mayor asking the CVB to put dollars into the “Founders Day
Parade” even though it will have no effect on travel and tourism. There are no
more promotion decisions based on political expediency.
As Stephen Covey counsels us, we should “begin with the end in mind.” The end is
not a short-term victory for reduced temporary funding, to be revisited next year.
The end is stable dedicated funding so DMOs can focus on what they do best -
marketing. Just “defending” has led to, and will continue to lead to, certain defeat.
Now is the time to go on offense.
Sincerely,
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