Wednesday, December 30, 2009

Vetting Mega Sports Events Is No Slam Dunk

I’m a lifelong sports fan so I understand that decisions about sports, like other components of culture, often are emotional not logical, thus the term “fanatic,” I guess.

But when groups or communities go “big game hunting” as one Mayor termed it, in search of mega-sports events, the costs and benefits have to be weighted carefully by a destination marketing organization.

Unfortunately too many destination execs get caught up in the hype or they make or are cornered into making decisions based on “who’s asking” and “to go along to get along.” But that isn’t the role of a DMO. Our job is to provide communities, regardless of who’s asking, good, solid factual cost/benefit information.

Of course, this is much harder than it sounds. Many sports fanatics can’t take any scrutiny as this is thought to be criticism, so they typically form opinions without hard information. And the pushing and shoving often begins before any thoughtful analysis can be done. More than a few community officials and news outlets, for which sports can be big business, often become co-dependent with the hype.

There can be a lot of reasons for communities to host mega-sports events but two of the reasons most often cited, creating or rehabilitating community image and driving economic impact, are not guaranteed. Here are a handful of resources that any DMO with a destination contemplating mega-events should make sure are in the mix or resources used to vet the decision.

The first research I read was done by the researchers analyzing the impact on Göteborg, Sweden following a decade when that community hosted one mega-sports event after another to promote, shape and rehabilitate image. Any impact quickly dissipated.

The second was the book Major League Losers by an economist analyzing the realities behind the claims used to justify building major sports complexes for team owners. I guess the title gives away the findings. There is also one called Sports, Jobs and Taxes.

The third was an analysis by an economist at a Florida University looking at the impact of the a mega-sports-event on cities by comparing sales tax collections on the exact dates, the year prior, year of and year after hosting the mega-event. There was hardly a blip. The event displaced as much as it generated.

The fourth was a study of the Calgary Olympics which also found that any impact rapidly dissipated unless followed by mega-events within a year to 18 months.

Now comes an evaluation by the European Tour Operators Association that hosting the Olympics can hurt rather than help a country’s tourism economy in the long run for a variety of reasons.

There are many reasons to host a sports event but the decisions on behalf of a community are complicated. Regardless of who it might upset, a destination marketing organization executive must deliver the facts and probe behind the hyperbole.

Tuesday, December 29, 2009

Top 10 Reasons DMO’s Aren’t Accredited

Hats off to the 100 Destination Marketing Organizations (DMO’s) that have earned accreditation. But it is hard to fathom why some haven’t pursued this distinction. Here are 10 reasons that come to mind:
  1. Too “old school” to update to best practices.

  2. Misperceiving it as only for very small or very large DMO's.

  3. Disorganized and haven’t assigned someone to manage the project.

  4. Fearful of rejection rather than view it as a diagnostic to inform improvement.

  5. Too proud to ask for help or worried about revealing secrets.

  6. Overestimate the work involved or failure to view it as a process.

  7. Failure to grasp the importance as a signal of credibility.

  8. Cronies aren’t accredited either.

  9. Hoping to get in through the back door via who they know.

  10. Resistant to change…the old way has worked fine all these years.

Tuesday, December 22, 2009

Which Use Ultimately Yields More
In Local Tax Revenue?
Community Marketing or
“Build It And They Will Come?

The logic was clear when the “room occupancy and tourism development tax” was pioneered as a special tax by the NC General Assembly in 1982 specifically to self-fund local community destination visitor promotion as a pump to in turn fuel 13 times that amount in sales tax revenues alone to help fund local governments.

But from the minute the ink dried on the Governor’s signature, local officials have tried to divert it to other uses. Some egged on by individuals or organizations not original enough to propose a self-funded tax of their own or just plan envious. Others were hoodwinked by businesses that often didn’t collect or generate local sales taxes themselves but all too willing to push officials to divert revenues from this one as a subsidy for pet projects or to fund the public portion of a so-called partnership.

Actually many officials didn’t need encouragement to try to raid or end-run the fundamental purpose of the special tourism development tax. Some resent the strings attached to special taxes or refuse to accept how unfair it is to deploy them the same way as general tax revenues.

The concept of using a tax to generate an increase in overall tax revenues is lost on those who believe that the only way tax revenues can be generated or increased is by politically increasing the tax rate or levying a new tax.

Many don’t grasp or have flip flopped the law of supply and demand, failing to understand that only by generating “demand” as in “more visitors” can existing or new facilities be justified or made sustainable over the long-term.

Others are just too far left-brained to grasp the more right-brain notions of managing perceptions or overcoming objections to get on the list for consideration by visitors falling under the spell of “build it and they will come” so often used as a developer mantra…but as the New York Times revealed, “not for long.”

Below is a tale of three communities, taking three different approaches to deployment of the special tourism development tax:

  • The first uses 100% of the room occupancy and tourism development tax as intended. What it reaps in visitor generated tax revenue per 1,000 residents is used as the benchmark.

  • The second is Durham which expends half the State House Finance guideline for what should be designated for marketing alone and as a result reaps 36% less than the benchmark.

  • The third is a community that spends lavishly on brick and mortar facilities and less on marketing and reaps 50% less than the benchmark.

This is only one of many sources of evidence that communities with the discipline to follow the State’s guidelines are the winners. Those who siphon the special tax off for other purposes do so at a tremendous, hidden cost to their constituents and communities. It is also clear that “build it and they will come” ultimately results in far less overall revenue.

Politicians like the late Senator Swain and former Representative George Miller were farsighted when they pioneered the room occupancy and tourism development tax and established guidelines for its use. Present-day elected officials with that same grasp should be celebrated. Those who don’t need to be motivated to come up with similar win/win self-funding solutions.

Monday, December 14, 2009

Web 3.0 in 3-D

Web 3.0 will revolutionize search and surf (and television too) according to a blog on Friday by Fast Company writer Kit Eaton. The potential for marketing destination communities is huge.

Monday, December 07, 2009

My Two Least Favorite Subjects In College

My two least favorite subjects in college were statistics and microeconomics. Accounting at 7:30 a.m. may have bumped micro to third.

Ironically, as destination marketing has become more information or data-driven, I’ve ended up using statistics and microeconomics to unwrap problems, select solutions etc.

More than a bit ironic. But two recent books Freakonomics and Superfreakonomics each co-authored by Steven Levitt and Stephen Dubner illustrate not only why using these tools is far more effective than raw anecdotal opinions, so-called conventional wisdom or intuition but also much more fun.

Statistics and micro economics let you look behind what appear to be cause and effect to determine what really works and what just appears to work.

So my advice to anyone who wants to jump ahead in destination marketing? Take statistics and microeconomics and of course history and a good dose of consumer behavior psych as very, very practical background.

Friday, December 04, 2009

Social Media Replacing Email – Not!

People who bemoan email seem to believe that somehow social media would replace it. I don’t know why or how, really. They tend to be folks who have never really made the transition, and don’t understand the speed and effectiveness email can bring to everyday communications. Maybe they are still holding out that we’ll all revert the good old days of an in-basket full of mail and yellow stickies for calls to return?

But the Neilson research graph below reveals that people who are high social media consumers are even more--not less--likely to be high email consumers.

Thursday, December 03, 2009

Third Party Analysis of Visitor Spending
in Durham NC

Thanks to a partnership with D. K. Shifflet and IHS Global Insights, DCVB is able to benchmark the spending by visitors while in Durham, using the more accurate ImPlan Input-Output methodology.

There are some interesting shifts mostly up, but one down, between ’04 (when Durham fully emerged from the effects of 9/11) and 2008 before the full effects of the downturn.

  • Lodging is getting better at yield management and systematically increasing rates as demand increases (which of course have now been deflated.) The piece of the visitor spending pie in Durham increased from 18% to 21%.

  • Food and Beverage, the largest portion of overall spending while visitors are in Durham kept pace at 25%.

  • Of concern is that shopping--the largest activity by visitors nationwide--dropped in Durham both in real terms and as a proportion of visitor spending here from 21% to 18%, a sign that Durham visitors are being harvested by new centers close to Durham denying Durham retail businesses of their full due and local government of tax revenues.

  • Entertainment increased its portion of overall Durham visitor spending from 16% to nearly 18%, and this was really before the new DPAC had effect. Many Durham entertainment features are free-of-charge which makes this area lower than it could be.

  • And overall, visitor spending in Durham expanded by 11% between ’04 and ’08 confirming that Durham is drawing more visitors, who are circulating and spending more while they are here.

DCVB conducts this analysis every other year but in the interim years it is able to project the results within 1/10 of 1%. Not bad.