DMOs: Stop “Defending Your Budget” — Go on Offense

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 agriculture-rich 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.

Is your DMO ready to go on offense? Join us for a webinar – Wednesday, May 23rd at 11am PST/2pm EST as we review tools and sustainable funding strategies that will empower your DMO. Register at civitasadvisors.com/offense

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