DMOs obtain alternative methods of funding to support promotional efforts for the tourism industry.
In 2018 alone, travel and tourism was the second-highest-growing sector of the global economy, contributing $8.8 trillion to the global GDP. Even better, the industry is projected to continue to grow in revenue and jobs created through 2025.
Tourism occupies nearly every corner of the world, bringing people together from different continents, cultures, languages and backgrounds while stimulating local economies everywhere. And every year, we celebrate World Tourism Day on September 27 to mark the positive impact that the tourism industry has on the world.
Despite growth, U.S.-based tourism marketers are still facing challenges, including a growing trend of shrinking budgets and a need to prove marketing effectiveness to decision-makers from various funding sources.
In a time when government budgets are under intense scrutiny and cuts are looming, Destination Marketing Organizations (DMOs) are fighting for every dollar of funding available.
For example, in 2017, the Alaska Travel Industry Association experienced a 90% budget reduction from two years prior, leaving the organization with just $1.5 million to market the state as a tourist destination.
When tourism budgets are reduced, those areas have a decline in visitors and revenue. Colorado is a great example of the direct impact tourism funding has on visitors. An analysis by Longwoods International found the state experienced a loss of over $1.4 billion in tourism revenue as a result of the complete elimination of their $12 million tourism budget.
To avoid a decline like Colorado, many DMOs have responded to potential budget cuts by looking for ways to generate funding from non-government entities using creative tactics, such as Tourism Improvement Districts (TID).
What are TIDs?
TIDs are programs that involve a partnership with government organizations, like DMOs, and local private businesses, where private businesses opt-in to fund tourism budgets in their areas.
In the agreement, businesses commit to support the DMO so they can continue their marketing efforts to promote tourism in the region even if government funding goes away. TIDs use this money for promotional efforts to bring in all types of tourists to the area as well as large-scale events such as conventions and conferences.
The relationship between DMOs and local businesses through TIDs is beneficial for both parties:
- For local businesses:
- More tourists visiting the area
- Promotion of the business to new and returning visitors
- Increased visibility throughout the area
- For DMOs:
- Additional funding source outside of government budget
- Direct connection and accountability to local business
- Ability to prioritize marketing efforts and measure its effectiveness
As of July 2019, TIDs are active in 15 states, and 15 additional states are in the process of implementing a TID in at least one city.
As of 2015, TIDs have generated over $250 million in funding for the US tourism industry, showing there is ample opportunity to grow this source of funding as a sufficient revenue stream for DMOs.
Challenges for dmos in establishing TIDs
Despite the benefits that TIDs bring to both parties, there are challenges that DMOs have to be thinking about to ensure the stability of the program long-term.
Imagine you are partnering with a small business owner on investment in the local TID and want to make sure local businesses join and benefit from the new program as much as possible. However, you are aware that small businesses will be reluctant to invest in a new program without knowing what results it will drive for their business specifically.
As a tourism bureau, the key question to answer for businesses in your TID is: If they invest, how will this benefit them?
If there isn’t a way to track incremental spend to individual businesses and attribute it to your marketing efforts, it may be difficult to prove the value a TID brings to your locale. But, if you can show exactly who you’re bringing in and how those people spend when they visit, you can help small businesses in your area rest easy, knowing the TID is generating new business for them every day.
The problem? This type of data requires an advanced level of customer identification and extremely accurate attribution to be successful. Unfortunately, many marketing solutions that claim to show marketers this information are pretty limited in their capabilities.
Many tourism marketers focus on hotel and flight booking transactions to show impact, but that measurement doesn’t give you the full understanding of who you’re bringing to the area and how much they’re actually spending in a TID.
Using transaction-based measurement to show net economic impact
The good news is there are partners out there that can help you measure the net economic impact of your marketing spend through transactional data across hotels, restaurants, nightlife, groceries, events and more.
This holistic view helps you as a marketer and the local business owner understand who came to your location, where they shopped, what they did and how they spent while in your area.
All of this is available through transactional data tied back to the individual, and these metrics tie real spending in the area back to the individuals who were exposed to your marketing campaign, helping make the case for TID funding.
As an example of how this measurement works in real time, let’s look at Visit Savannah, the official destination marketing organization for the greater Savannah, Georgia, area, who we worked with to help understand the full impact of their marketing spend.
They wanted to “get heads in beds” but were having issues understanding the full impact of their marketing spend. “We need to trust that we’re getting additional new people to visit, not the people that are already planning to come here,” Zeek Coleman, interactive marketing manager at Visit Savannah, said in an article with Phocuswire.
They started using our Net Economic Impact (NEI) solution earlier this year. After a three-month run using a solution that focuses on accurate, measurable identity-based marketing as the main driver for performance, Visit Savannah was able to measure:
- How they influenced potential visitors to decide to come to their destination
- Once they visited, how those people spent while they were in their market, across all categories
In total, Visit Savannah saw a $133:1 return on ad spend (ROAS) for their campaign with an initial investment of $182,000. For lodging alone, the ROAS was $21:1, which was double the amount they typically see for this category. “In light of the political pressures some of our peers have faced, this sort of reporting is essential to prove the impact of our work,” Coleman said in the article.
As destination marketing organizations across the U.S. continue to secure funding through alternate methods with the implementation of TIDs, it will be increasingly important for you to have a full view of your visitors and how they spend in your location.