This presentation delves into the trends, threats, and goals behind funding and developing your destination marketplace. John Lambeth guides the viewer through the future of tourism and CVB's.
4. Three E’s of Travel Impact
- Economic -
SOURCE: US Travel
$2.5 Trillion Economy
$171 billion in total tax
revenue.
Without this impact, each
U.S. household would pay
$1,300 more in taxes every
year.
5. Three E’s of Travel Impact
- Employment -
SOURCE: US Travel
Putting 1 in every 10 people to
work in the U.S.
6. Three E’s of Travel
- Experience -
Breaks down barriers
Draws new investments
Provides infrastructure,
transportation and attractions for
locals
Family vacations leads to
happier kids
Gift of an experience more
meaningful than things
7. In 2017, visitors to Minnesota spent $15.3
billion, which supported 270,000+ jobs.
Travel to Minnesota generated $996 million in
state sales tax and saw 73 million visitors in
overnight/day trips.
SOURCE: Explore
Minnesota
8. The Future is Built with Travel
Promotion
Source: US Travel
9. CHALLENGE
SOLUTION:
DESTINATION
PROMOTION
The primary motivator of a trip is
usually the experience of a
destination
Articulates the destination brand
message that is consistent with
consumer motivations
Effective marketing requires scale
to reach potential visitors
Pools sustained resources to
achieve scale
2
1
The Vital Role of Destination
Promotion
Source: Tourism Economics
10. Do you have enough to
adequately market your
destination?
How reliable are your
funding streams? Can they
be diverted?
Funding Sufficiency vs. Funding
Stability
Sufficiency Stability
11. $0.0b $0.5b $1.0b $1.5b $2.0b $2.5b $3.0b $3.5b $4.0b $4.5b $5.0b
State Travel Prom otion
CompaniesSpendingBillionsPromotingTheir Brands
Source: Advertising Age & US Travel Association 2015
Billions in Marketing Spending
12. Three Levels of Sufficiency
What the industry is given
Comparing budgets to other organizations
(Compare MPAR)
Funding based on economic activity
Level 1
Level 2
Level 3
13. Can a vote of the
local or state government
re-direct tourism promotion funds?
Tourism Funding Stability
15. How Tourism Improvement Districts
Work
Tourism businesses
pay an assessment
Collected by the
local government
Managed by the DMO
Characteristics
• Level playing field—no free riders
• Transparency
• Reliability
• Pass-through to customer
16. “I remember when I was governor last time,
the tourism industry was always asking me
for more money from the state budget…You
know I don’t like to spend money very much,
so I’m glad you figured out how to spend
your own money. That’s a lot better,
because if you had to deal with me, your life
would be more difficult.”
Former California Governor
Jerry Brown -- May 3, 2017
17. National District Statistics
177 TIDs
Most Recent: San Gabriel, CA
(March 2019)
15 STATES
AMOUNT RAISED
Low $10,000
Median $785,000
High $41,000,000
Total $405,242,806
44%
Fixed $
Amount
56%
Gross
Revenue %
20. Jurisdictions that have desired to retain baseline
funding has done so.
Some DMO’s have chosen to return funds for other
purposes to free themselves from government
allocations.
TIDs have led to widespread significant budget
increases.
Preventing Funding Loss
22. Preventing Existing Funding Loss
Beg-A-Thon Partnership
Annual or Multi-Year request
Competition with other priorities
Funding = variable & unreliable
Funding may be withheld entirely
Multi-Year agreement
No Competition
Funding = multi-year & reliable
Local government required to
provide baseline funding
Loss of partnership = TID
termination
**
23. In 2017, Civitas and SMG
conducted a survey of TIDs
throughout the United States.
On average destinations
increased their tourism
funding by 192% after the
formation of a tourism
district.
The chart on the left
illustrates the primary
reasons destinations formed
TIDs.
National TID Survey Results
24. What will your organization’s primary expected
measure of success be five years from now?
The top 5 (out of 18) responses:
Destination Next Futures Study 2019
Source: Destinations International & MMGY NextFactor
25. How would you see the revenue sources in your
organization’s annual budget change five years from now?
The top 3 responses (out of 12)
for U.S. DMOs:
1) Tourism Improvement District
2) Sponsorship / Partnership
3) Room Tax
Destination Next Futures Study 2019
Source: Destinations International & MMGY NextFactor
26. Civitas Report on Lodging Charges
We studied taxes and lodging
charges in 100 cities
throughout the country.
Average tax rate on
destinations: 14.6%.
49.9% of lodging tax revenue
dedicated to general funds.
Less than 20% dedicated to
tourism promotion.
27. U.S. Tourism District Law Study
I. Studied legal framework for
TIDs in 50 states and
Washington D.C.
II. Analyzed BID statutes and
home rule authority.
III. Ranked each state “green”,
“yellow”, or “red” based on
the likelihood of forming a
TID with the existing legal
framework.
29. TID began in 2008.
Includes all lodging businesses with 70+ rooms in
the City of San Diego.
Assessment rate is 2% of room revenue.
Raises $41 million annually.
Average ROI on TID expenditures is 23.1:1
(comparing lodging business revenue to TID
expenditures).
MPAR: $673.67, Room Count: 62,590
30. What Happens Without Promotion: San Diego
Established in 2008, San Diego
Tourism Marketing District allocated
$25 million in marketing and
promotion. However, litigation over
the SDTMD held up 84% of funds in
2013. The lack of marketing during
this short term had a clear, negative
impact on San Diego overall.
$216 million in lost
room revenue
Lost ADR of
$7.94/per night
$24.3 million in lost
tax revenue
$1.3 billion in lost
business sales
31. 31
TMD funds held in limbo
during much of 2013
3.8
3.9
4.0
4.1
15.0
15.5
16.0
16.5
11 12 13 14 15
Comp set (L)
Top 25 (R)
San Diego room demand market share
San Diego's % of total room nights, relative to...
Sources: STR, Tourism Economics
Defunding of
SDTA
13.6
14.1
14.6
15.1
15.6
16.1
16.6
17.1
Jan -11 Jan -12 Jan -13 Jan-14 Jan-15
San Diego Room Demand
Room nights, millions, 12-month rolling sum
Sources: STR, Tourism Economics
Immediate and significant slowdown in demand
and a loss of pricing power
33. Civitas lead an effort to raise the hotel tax by 1.8%
for improvements to the convention center, and to
levy a $2 TID room charge dedicated to marketing.
The Memphis TID began in January 2016 and since
then, they have experienced 3.5% visitation growth
per year and a 4.8% visitor spending growth per
year.
In December 2018, renovation began on the
Memphis Convention Center. Expected completion
date is Fall of 2020.
34. “Whenever you add a fee or another charge to a
hotel room night your hotel operators and general
managers get very concerned. But if you can
demonstrate to them that the return on investment is
going to be such that it will be negligible as it relates
to rate and will actually allow them to grow rate in
the future, you will get their support and their trust. I
think we’ve been able to do that in Memphis and I
think most TIDs around the country have been
successful at doing that as well.”
– Kevin Kane
President & CEO, Memphis TID
35. TBID formed in 2009.
Includes 9 lodging businesses in the
City of Newport Beach.
Assessment rate is 3.0% of room
revenue.
Raises $4.1 million annually
MPAR: $2,834.97, Room Count: 3,351
37. Philadelphia Hospitality
Investment Levy (PHiL)
After hosting the 2015 Papal Visit, 2016 Democratic
National Convention, and 2017 NFL Draft, Philly
experienced “donor-fatigue” and funding from public
and private sector was reduced.
Attracting conventions and events became more
competitive and had increased costs, and they didn’t
have any kind of “Event Attraction Fund”.
In 2017 PHiL was formed primarily a funding
mechanism to attract large conventions and
events, but a portion of the funds raised could
also be used for other programs and initiatives
as decided by the BOD.
38. Philadelphia Hospitality
Investment Levy (PHiL)
Funded by a 0.75% assessment fee on the daily
rate paid by hotel guests.
Recommends an ROI of 8:1 for funds allocated.
$5.6 Million collected in their first year
92 Large conventions & events funded
Resulted in $1.6 Billion in economic impact
PHiL is already looking at getting re-authorized
beyond the initial five-year period it was
approved for (through 2022).
MPAR: $878.21, Room Count: 37,000
39. Prior to TID formation, Visit Wichita was
primarily funded by bed taxes.
The State’s BID Law was used to establish the
first TID in Kansas in 2015.
Budget doubled from $2.8m to $5.4m.
$53 Million in economic impact
In 2015, they bumped their ROI to 42:1. In
2018 their reported ROI was 52:1.
40. How is Visit California Funded?
The California Tourism Marketing Act was enacted
to increase California’s share of the travel and
tourism market. The legislation authorized self-
imposition of an assessment by businesses that
benefit from travel and tourism. The statute
became operative upon industry wide approval in
1997 and the assessment program was initiated in
1998. Since initial industry approval, the
assessment program has been renewed three
times with overwhelming industry approval.
40
YEAR
RENEWED
INDUSTRY
APPROVAL
2001 84%
2007 91%
2013 93%
41. Visit California
Category Amount Percent Change
Travel-Related
Spending
$140.6 Billion +5.4% over 2017
State and Local Tax
Revenue
$11.8 Billion +7.3% over 2017
Employment $1.2 Million
+3.5% per year since
2010
“Tourism continues to play an indispensable role in the California economy. In local communities, the tourism
industry lifts up businesses and supports job opportunities vital to regional success.”
- Caroline Beteta, Visit California, President & CEO
2018 was the ninth record breaking year in a row for the California tourism industry.
42. BID Law
• In Minnesota =
TID Legal Authority
1
2 Home Rule
• In Minnesota =
Yellow
Yellow
43. Business Improvement Districts in Minnesota
Special Services District Statute
Property or business based
Petition to form signed by 25% of land area and amount raised
District managed by non-profit corporation
Annual report to Council on budget and services
Prohibits assessment based on % of room revenue, but may
allow fixed rate per room per night
44. Home Rule in Minnesota
Minnesota has home rule and statutory cities.
Statutory cities derive their powers from Chapter 412 of Minnesota
Statues, or the Statutory city code.
Home rule cities obtain their powers from a home rule charter.
Home rule charter cities are authorized to adopt local
ordinances to finance local improvements by special
assessments against benefitted property.
They are, in effect, local constitutions that allow for the specific needs of
the community.
This authority may be suitable for establishing a TID.
Source: League of Minnesota Cities Handbook
45. Home Rule in Minnesota
General Powers
Minnesota Supreme Court decisions generally have given a
liberal construction to all-powers grants in city charters.
A home rule charter may provide any municipal powers the
Legislature could have delegated to the city, as long as the
powers are consistent with state statutes.
Presumably, a charter may grant a home rule city power to
tax although the state has largely pre-empted the authority to
impose a tax.
46. Steps to TID Formation
1. Identify SSD Law or home rule authorization
2. Hotel & local government outreach
3. Stakeholders determine parameters and service plan
4. Service plan prepared
5. Hotel approval process – Gain 25% petition from Hotels
6. City Council hearing and approval
47. Next Steps for Minnesota
1. Continue dialogue about TIDs in Minnesota
2. Form a TID under existing home rule or statutory authority
3. Consider drafting legislation to specifically authorize TIDs
48. Possible Draft Language
New 428A.02, Subd. 6
The governing body of a city may choose to establish a special
serve district for the promotion of tourism and levy a service
charge on only lodging properties or lodging businesses within
the district, even if the district includes the entire city.
The service charges for such a district may be calculated based
on a percentage of gross room revenue or on a fixed rate per
occupied room per night, and may be limited to certain hotels
meeting a minimum room count threshold.
49.
50. Generated $1.7 Billion for clients
globally.
Completed over 125 BID & TMD
formation projects throughout the
world.
Drafted BID/TMD legislation in 15
states.
Passionate about raising
stable, dependable funding
for DMOs.
