Friday, June 04, 2010

First In – Apparently First Out

Durham’s tourism sector is the “canary”  for any economic challenges befalling the community, particularly because Durham has been successful drawing a significantly  higher proportion of air travelers than other destinations, including those served by the airport Durham co-owns (miners used to take a canary along as an early warning for gas build up in mines.)

Realizing this, during the last decade, DCVB was one of the first Destination Marketing Organizations in the country to secure custom third-party research reports documenting not only monthly indicators but preliminary weekly and daily indicators to aid forecasting but to also measure the impact of various initiatives.

Durham’s tourism sector (foodservice, lodging, retail, transportation, entertainment etc. including DCVB were first to sense the current downturn back in 2007 and had to dramatically cut back as much as 30% when it hit full force in late 2008.  Other sectors like schools and government that rely in part on $40 million annually in tourism generated tax revenue are feeling a delayed reaction.


Now some of the first, tangible, sustained results of the recovery can be seen in Durham’s tourism sector.  It has been percolating inconsistently for months but now it is sustained.

Keep in mind that in tourism, the “bodies” come first and as they increase the revenues amplify, slowly at first and tax revenues are based on revenues and rates not just an increase in traffic.

Based on audited reports through the first third of the calendar year, the number of commercial guest rooms (20% of Durham’s visitors and a bellwether) “sold” is up nearly 8% and that increased demand is beginning to slowly have an impact on revenues as rates recover, off now just 1.6% for the same period.  That improvement in demand or rooms sold in Durham is better than the national and state-wide figures, better than similar sized metro areas in the state.

Now the really good news.

While May and May year-to-date YTD data is still being audited, there is further good news from preliminary daily and weekly unaudited reports, showing the last week of May (clear of graduations) was up 42% for the week and 18% for the month.  And reflecting the increased visitor traffic, revenue was up 37% for the week and 11% for the month.  The traditional days for business travel are up as much as 100% on one day while traditional leisure travel days were up more than a third.

These are definite signs of a revival even if based on the lows of last year and because Durham is typically bellwether, it means other communities including those nearby will also begin to rehydrate more quickly even though they draw visitors more by highway and from different origins for different purposes.

Every additional dollar that flows from visitors back into DCVB community marketing spearheads generation of 16 more in local tax revenues here.  That pure and simple is the reason smart communities promote tourism and like Durham have key indicators in place to measure performance.

Destination marketing is at its essence, an engine to pump revenues through the private sector and into the public and ultimately non-profit sectors.

But the “elephant in the room” in Durham continues to be the nearly $20 million in visitor generated tax revenue for local governments that is “left on the table” because dollars intended or marketing are diverted to other uses.

The additional $20 million sure would come in handy right now as local governments and schools struggle to close gaps in funding and there are signs that officials will revisit the formula in the near future.

No doubt the other uses are worthwhile but they could be even better and more broadly funded if the dollars were leveraged through stronger community marketing first.  Yields Durham can reap by merely more closely conforming to State House Finance guidelines for use of the special “room occupancy and tourism development tax” levied here on visitors using commercial guest rooms.

But before you’re too quick to ask why Durham doesn’t get it, at least we’re not among the places where officials irrationally “cut tourism” during times like this and that is thanks to the way the NC General Assembly and particularly the House Finance Committee that structures provisions for granting local option taxes on tourism.

Study after study of communities and entire states that suspended tourism marketing show how wise our House Finance Committee is to to stipulate tourism marketing as a part of granting authority to collect a special tax on tourism.  But the motive is not altruistic.  State government reaps as much or more tax revenue than local government in return from every dollar invested in local destination community marketing.

It is just that many administrators and elected officials fall victim to the pressures of dividing up the pie that they seem to totally forget the forces that “grow” the pie.  This zero sum thinking fruitlessly pits uses against one another.

Destination marketing, self funded by revenues from the visitors themselves is all about growing the pie by drawing in outside revenues….but to do that requires tourism marketing and good destination marketing organizations like DCVB…but especially when they are truly funded at the level sufficient to reap the optimal amount of revenues for the community.

Unfortunately, this well proven formula with tourism as a solution to drive revenue growth is too often buried during crisis fueled rage about “you can’t cut that,” but “you can’t raise taxes,” or more likely “you can’t raise my taxes to pay for that.”

In the meantime Destination Marketing Organizations just keep pumping as fast as they can to generate increased revenues for local and state and federal governments.

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