measuring return on investment of tourism marketing

7/22/2019 MEASURING RETURN ON INVESTMENT OF TOURISM MARKETING

1/24

MEASURINGRETURN

ONINVESTMENTOF

TOURISMMARKETING

AReviewofSixteenStateTourismOffices

AdeelAhmed

AssistantExtensionProfessor

UniversityofMinnesotaExtension

CenterforCommunityVitality

12/24/2010

PreparedforExploreMinnesotaTourism,withfundingprovidedbyExploreMinnesotaTourism

andtheCarlsonChairforTravel,Tourism&Hospitality


2/24

TableofContents

ExecutiveSummary 1

Introduction 4

Methodology 5

Table1SummaryofRecentStateLevelTourismAssessmentsofSelectedStates 6

Table2

Table2

Comparisonof

Selected

States

that

have

Measured

ROI

of

TourismMarketinginthelast10years.11

AnalysisandDiscussion 12

BriefMethodologyofLongwoodsInternationalandStrategicMarketing&

ResearchInc(SMARI)

14

FurtherInvestigationintoStates 16

California

16

Michigan 17

NorthDakota 18

SouthDakota 19

Conclusions 19

Appendix TourismMarketingROIStudyInitialAgreement 21


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ExecutiveSummary

Statetravelofficesjustificationsforfundingareincreasinglybeingscrutinizedasstatesseekto

balancebudgets.Thesejustificationsareexpectedtocontainwellstatedobjectivesand

measurableresults,includingindicationsofcosteffectiveness.Advertisingisabigportionof

thebudget

for

state

travel

offices

and

is

perhaps

the

budgetary

consideration

most

frequently

investigatedforitscosteffectiveness. InorderforExploreMinnesotaTourism(EMT),thestate

agencyresponsibleforpromotingtraveltoandwithinMinnesota,tobettergaugethereturnon

investment(ROI)ofitsrecentmarketingactivities,areviewofstatelevelreportsand

assessmentsforthetourismmarketingofMinnesotaand15otherstateswascompletedin

December2010andispresentedinthisreport.

ThisreportdoesnotreplacetheneedtoconductanROIstudyoftourismmarketingforthe

stateofMinnesota,whichhasnotbeendonesincetheyear2000.Tourismtrends,tourism

marketing,

and

measuring

ROI

have

changed

considerably

since

the

last

study

was

conducted.

Theincreasingcomplexityandintegrationofmarketingandcommunicationstacticsmakesan

ROIstudyamajorundertakingrequiringsignificantfinancialresources.EMTisincreasingly

awareoftheneedtoupdateMinnesotasROImeasurementsandintendstoconductanROI

studywhentheresourcesallowforit.EMTcollaboratedwiththeUniversityofMinnesota

TourismCenterandUniversityofMinnesotaExtensiontocompletethisprojectefficiently.The

studyandreportwerepaidforbyEMTandtheCarlsonChairforTravel,Tourism&Hospitality

andwasundertakenasaninterimmeasuretodeterminearangeofwhatMinnesotasROIlikely

isbycomparingtheROIanalysesofotherstates.

Themost

recent

ROI

study

of

tourism

marketing

in

Minnesota

was

conducted

for

the

spring/summerof2000advertisingcampaign(6months).TheMinnesotaDepartmentofTrade

andEconomicDevelopment(nowknownasMNDepartmentofEmploymentandEconomic

Development)wascontractedtodothestudywhichsurveyedcustomerswhohadaskedthe

travelofficetosendthemtravelinformationaboutMinnesota.Estimatesofvisitorsdaysand

dailyexpendituresfromthesurveyservedastheprimaryinputparameters,whileoutputfrom

theREMIeconometricinputoutputmodelprovidedtheeconomicimpactmeasuresthatwere

centraltotheROIanalysis.Theresultingimpactsincludeddirect,indirectandinducedimpacts.

Resultsshowedthateverydollarspentinmarketinggenerated$52.64inincrementalgross

salesand

$4.62

in

incremental

state

and

local

tax

revenues1.

ThedetailsregardingMinnesotasROIanalysisserveasacautionwhencomparingwiththeROI

resultsforotherstates.Forexample,somestudiesinthisreportmeasuredtheROIofasingle

seasonaladvertisingcampaign(likeMinnesota),othersmeasuredtheROIofanumberof

1AnalysisoftheMinnesotaOfficeofTourismsReturnonInvestmentforConsumersReceivingMailFulfillment,

Spring/Summer2000byMNDeptofTradeandEconomicDevelopment

1


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campaignsconductedoverthecourseofayear,whileafewmeasuredtheROIofcampaigns

thatspannedmultipleyears. Secondly,manyofthereportsfromwhichROIinformationwas

derivedwerebereftofdetails.ThuswhencomparingthemarketingROImeasurements(see

Table1andTable2)betweenthedifferentstatetourismofficespleasetakeintoaccountthe

followingfactors:

Whethertheinvestmentportionconsideredintheanalysiscoversallcostsassociatedwithmarketingandfulfillment;includingsalariesandofficesupplies,orjustthecostof

theadvertising?

CompaniescontractedtodoROIanalysishavevaryingmethodologiesonhowtomeasureincrementalvisitsandvisitorspending.

Whethertheeconomicimpactmeasurementsjustincludedirectspending onindustriesthattouchthevisitor(i.e.hotels,restaurants,museums),oralsoincludeindirect

spendingthatconsidersindustriesthatsupplythosethattouchthevisitor,andinduced

spendingthataffectsworkersofindustriesthatsupplythosethattouchthevisitor?

Doesincrementaltaxrevenueduetoadvertisingincludestatetax,localtaxorboth? WhetherROImeasurementsarebasedonlongtermorshorttermeffectsof

advertising?Oregonwastheonlystateinthestudytoexplicitlystateandgivebothlong

termandshorttermresults.

Thefifteenstatesthatservedasthestartingpointforthisinvestigationoftourismmarketing

ROIwereselectedbasedonthefollowingfactors:geographicproximitytoMinnesota,similarity

ofproductand/ormarketingeffortstoMinnesotas,prominencewithinthetourismmarketing

community,and

indications

that

an

ROI

study

or

studies

had

been

undertaken

for

the

state.

Thisreviewfoundthatmoststatesareusinganumberofmarketresearchorganizationsto

determinethreedistinctpiecesofdataintheirattemptstomeasuremarketingROI:(1)visitor

ortravelerprofiles,(2)economicimpactduetovisitorspending,and(3)effectivenessofthe

advertisingcampaign(s)onincrementalvisits.

IncludingMinnesota,elevenstatesmeasuredtheeffectsofadvertisingcampaignson

incrementalvisitsandtheresultingROIofmarketing. Ofthesestates,sevenhiredLongwoods

International,threehiredStrategicMarketing&ResearchInc(SMARI),whileone,Minnesota,

utilizedagovernment

agency

2

.Additionally,

different

organizations,

and

hence

methodologies,

wereusedtomeasurevisitorexpendituresandtheeconomicimpactoftourism.

ROIestimatesofvisitorspendingperadvertisementdollarrangedfrom$48.53(Michigan)to

$305.00(California),withanaverageof$122.80andmedianof$123.Fivestates(MI,MT,VA,

MN,andMO)hadaspendingROIoflessthan$70peradvertisingdollarwhilesixstates(ND,

2EconomicDevelopmentandEvaluationOfficeofMNDeptofTradeandEconomicDevelopment

2


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OR,AZ,CO,FL,andCA)hadaspendingROIofmorethan$123peradvertisingdollar.Similarly,

ROIestimatesofstateandlocaltaxrevenueperadvertisementdollarrangedfrom$2.54

(Missouri)to$20(California),withanaverageof$8.18andmedianof$5.00.Fivestates(ND,

AZ,CO,FLandCA)hadataxROIofmorethan$9peradvertisingdollar,whilesixstates(MI,OR,

MT,VA,MN,andMO)hadataxROIoflessthan$5peradvertisingdollar.

FurtherexplorationofCalifornia,Michigan,NorthDakota,andSouthDakotaillustratethe

differingwaysstatesconducttourismmarketingresearch.Itwouldbequiteproblematicfor

anotherstatetravelofficetoattempttoestimateitsmarketingROIbasedonthestatelevel

informationprovidedinthisreport.Advertisingeffectiveness,targetmarkets,visitorspending

profiles,thecostofgoodsandservices,andmanyothervariablesallservetolimitthedegreeto

whichcomparisoncanbemade.However,thedetailedassessmentofotherstatestourism

marketingROImeasurementsfoundinthisreportprovidesExploreMinnesotaTourismwith

therangeoflikelyROIestimatesforitsownmarketingactivities.

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Introduction

ConsiderableresourcesareinvestedinmarketingMinnesotaasadestinationtopotential

travelers.Theexpectationisthatmarketingeffortswillenhancepositiveperceptionsof

Minnesotaasatraveldestination,increasebrandawareness,andincreasetraveland

associatedeconomic

impacts

throughout

the

state.

State

travel

offices

justifications

for

fundingareincreasinglybeingscrutinizedasstatesseektobalancebudgets.Thesejustifications

areexpectedtocontainwellstatedobjectivesandmeasurableresults,includingindicationsof

costeffectiveness.InorderforExploreMinnesotaTourism(EMT),thestateagencyresponsible

formarketingthestateasatraveldestination,tobetterestimatethereturnoninvestment

(ROI)ofitsmarketingactivities,areviewofstatelevelreportsandassessmentsfortourism

marketingofMinnesotaand15otherstatelevelagencieswascompletedinDecember2010

andispresentedinthisreport.

This

report

does

not

replace

the

need

to

conduct

an

ROI

study

of

tourism

marketing

for

the

stateofMinnesota,whichhasnotbeendonesincetheyear2000.Tourismtrends,tourism

marketing,andmeasuringROIhavechangedconsiderablysincethelaststudywasconducted.

Theincreasingcomplexityandintegrationofmarketingandcommunicationstacticsmakesan

ROIstudyamajorundertakingrequiringsignificantfinancialresources.EMTisincreasingly

awareoftheneedtoupdateMinnesotasROImeasurementsandintendstoconductanROI

studywhentheresourcesallowforit.EMTcollaboratedwiththeUniversityofMinnesota

TourismCenterandUniversityofMinnesotaExtensiontocompletethisprojectefficiently.The

studyandreportwerepaidforbyEMTandtheCarlsonChairforTravel,Tourism&Hospitality

and

was

undertaken

as

an

interim

measure

to

determine

a

range

of

what

Minnesotas

ROI

likely

isbycomparingtheROIanalysesofotherstates.

ThemostrecentROIstudyoftourismmarketinginMinnesotawasconductedforthe

spring/summerof2000advertisingcampaign(6months).TheMinnesotaDepartmentofTrade

andEconomicDevelopment(nowknownasMNDepartmentofEmploymentandEconomic

Development)wascontractedtodothestudywhichsurveyedcustomerswhohadaskedthe

travelofficetosendthemtravelinformationaboutMinnesota.Thesurveywasconductedvia

mailandphoneandmeasuredtravelvolumeandtravelexpendituresasthereturncomponent

oftheanalysis.Theinvestmentportionwasbasedonexpendituresformarketingandall

fulfillmentfunctions

(mailing,

printing,

staffing)

to

U.S.

residents.

Lastly,

the

REMI

econometric

inputoutputmodelwasusedtosimulatetheeffectoftravelspendingontheMinnesota

economy.Estimatesofvisitorsdaysanddailyexpendituresfromthesurveyservedasthe

primaryinputparameters,whileoutputfromREMIprovidedtheeconomicimpactmeasures

thatwerecentraltotheROIanalysis.Theresultingimpactsincludeddirect,indirectand

4


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inducedimpacts. Resultsshowedthateverydollarspentinmarketinggenerated$52.64in

incrementalgrosssalesand$4.62inincrementalstateandlocaltaxrevenues3.

ThedetailsregardingMinnesotasROIanalysisserveasacautionwhencomparingwiththeROI

resultsforotherstates.Forexample,somestudiesinthisreportmeasuredtheROIofasingle

seasonaladvertising

campaign

(like

Minnesota),

others

measured

the

ROI

of

anumber

of

campaignsconductedoverthecourseofayear,whileafewmeasuredtheROIofcampaigns

thatspannedmultipleyears. Secondly,manyofthereportsfromwhichROIinformationwas

derivedwerebereftofdetails.Thuswhencomparing themarketingROImeasurements(see

Table1andTable2)betweenthedifferentstatetourismofficespleasetakeintoaccountthe

followingfactors:

Whethertheinvestmentportionconsideredintheanalysiscoversallcostsassociatedwithmarketingandfulfillment;includingsalariesandofficesupplies,orjustthecostof

theadvertising?

CompaniescontractedtodoROIanalysishavevaryingmethodologiesonhowto

measureincrementalvisitsandvisitorspending.

Whethertheeconomicimpactmeasurementsjustincludedirectspending onindustriesthattouchthevisitor(i.e.hotels,restaurants,museums),oralsoincludeindirect

spendingthatconsidersindustriesthatsupplythosethattouchthevisitor,andinduced

spendingthataffectsworkersofindustriesthatsupplythosethattouchthevisitor?

Doesincrementaltaxrevenueduetoadvertisingincludestatetax,localtaxorboth? WhetherROImeasurementsarebasedonlongtermorshorttermeffectsof

advertising?Oregonwastheonlystateinthestudytoexplicitlystateandgivebothlong

termandshorttermresults.

Methodology

Thefifteenstatesthatservedasthestartingpointforthisinvestigationoftourismmarketing

ROIwereselectedbasedonthefollowingfactors:geographicproximitytoMinnesota,similarity

ofproductand/ormarketingeffortstoMinnesotas,prominencewithinthetourismmarketing

community,andindicationsthatanROIstudyorstudieshadbeenundertakenforthestate.The

sixstatesincludedduetotheirgeographicproximitytoMinnesotawereWisconsin,Michigan,

Iowa,NorthDakota,SouthDakotaandMissouri. Additionalstatesonthelistincluded

Pennsylvania,Oregon,

Florida,

Arizona,

Montana,

California,

Colorado,

Kentucky

and

Virginia.

Thestatesrespectivetourismwebsitesweresearchedforstudiesfocusingonthe

measurementofROI.Wherenonewerefoundtheresearchdirectorofthestatetourism

officewascontacteddirectlyforinformation.Therelevantreportsandsubsequentfindingsare

summarizedinTable1andTable2.

3AnalysisoftheMinnesotaOfficeofTourismsReturnonInvestmentforConsumersReceivingMailFulfillment,

Spring/Summer2000byMNDeptofTradeandEconomicDevelopment

5


8/24


9/24


10/24


11/24


12/24

SouthDakota:

HasnotdoneanalysisonROIoftourismmarketing

howevertheyareexaminingvariousscenarios

followingtheColoradoexampletoseehowthe

eliminationoftheOfficeofTourismwouldaffectthe

numberofvisits,tourismexpendituresofvisitors,and

stateandlocaltaxrevenue.COhadstoppedtheir

promotionaleffortsfrom1993to1997andhadseen

theirleisure

travel

decline

by

7.7%

for

those

4years.

EconomicimpactanalysisdonebyIHSGlobalInsight

2009

SDOTbudget:$11.3M

Directeconomicimpact:$1.2billion

Main

Acco

2010

Furt

http

State

http

Virginia

ROIinformationisavailablefromanexcerptof2006

LongwoodsIntlevaluationinthe2009marketing

plan.

EconomicimpactdataisprovidedbytheU.S.Travel

Associationandfocusesondomestictravelers.

2006advertisingcampaigns

Advertisingexpenditure:$2.5M

Incrementalvisits:688,000

Avgspendingfordaytrips:$112

Avgspendingforovernighttrips:$338

Incrementalvisitorspending:$177M

Incrementalstatetaxrevenue:$7.2M

Incrementallocaltaxrevenue$5.2M

ROI:Visitorspendingperaddollar:$70.8

ROI:Stateandlocaltaxrevenueperaddollar:$5

Economicimpact2009totaldirecttravelspending:

$17.7B

Main

Mar

Furt

http

State

http

Wisconsin:

HasnotdoneanyformalresearchtodetermineROI

ontourismbutannuallycontracts DavidsonPeterson

Associatestoconducteconomicimpactsof

expendituresbytravelerstoWisconsin.

WITourismDeptbudgetFY10:$13M

WITourismDeptbudgetFY09:$15M

2009Marketingbudget:$10M

2009Tourismgeneratedexpenditures:$12B

2009Taxrevenuetostate:$1.36B

2009TaxRevenuetolocal:$611M

2008Tourismgeneratedexpenditures:$13.1B

2007Tourism

generated

expenditures:

$12.8

B

Main

ofTr

2009

Furt

http

http

State

http


13/24

able2 ComparisonofSelecedStatesthathaveMeasuredROIofTourismMarkeinginthelast10years.

Duetovaryingmethodologiesandunitsofmeasurement,pleaserefertomoredetailedpresentationofthedataelse

whenusingthisinformationforcomparativepurposes,suchaswhen makingcomparisonsbetweenstates.

tate AZ CA CO FL MI MN MO MT

Organzationmeasuring

heROI

Longwoods

Int'l

Strategic

Marketing&

Research

(SMARI)

Longwoods

Int'l

Strategic

Marketing&

Research

(SMARI)

Longwoods

Int'l

MNDept.of

Trade&

Economic

Development

Strategic

Marketing&

Research

(SMARI)

Longwoods

Int'l

Mostrecentyear 2007 2009 2008 2010 2005 2000 2009 2004

OIVisitorspending

erAddollar 180.00$ 305.00$ 193.00$ 147.00$ 48.53$ 52.64 46.81$ 50.00$

OIStateandlocaltax

evenueperAddollar 14.95$ 20.00$ 12.96$ 9.00$ $3.43 $4.62 $2.54 3.50$

isits(millions) 5.5 3.35 5.97 0.18 0.89 1.957 0.5

isitors

per

Ad

dollar 1.25 0.24 0.56 0.06 0.26 0.56

0.35 ampaignlength

months) 21 12 15 5 12 6 12 12

dvertisingexpenses

millions) 4.40$ 13.70$ 10.74$ 2.78$ 3.40$ 3.50$ 7.60$ 1.41$

Annualeconomicimpact

falltravel totaldirect

ravelspending(billions) 16.60$ 97.60$ 13.40$ 60.90$ 17.50$ $12.10 7.87$ 3.18$

Organizationmeasuring

conomicImpact

DeanRunyan

andTourism

Economics DeanRunyan DeanRunyan

VisitFlorida

Research

Dept.

D.K.Shifflet&

Associates

MNDept.of

Trade&

Economic

Development

TNSTravels

Americaand

Universityof

Missouri

Univeristyof

Montana

ourismofficebudget

millions) 31.00$ 50.00$ 15.80$ 67.50$ 30.00$ 8.90$ 10.00$ 11.60$

ear 2009 2010 2009 2010 2009 2010 2010 2011

Includesdirect,indirectandinducedimpacts VisitorDaysperAdDolla

UniversityofMontana InstituteforTourism&RecreationResearch Onlyincludesstatetax

GrossSalesperAdDollar Includesonlyshortterm

VisitorDays


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AnalysisandDiscussion

Thisreviewofsixteenstatetourismagencies,includingMinnesotas,showsthatstatesare

usinganumberofmarketresearchorganizationstodeterminethreedistinctpiecesofdatain

theirattemptstomeasuremarketingROI:(1)visitorortravelerprofiles,(2)economicimpact

modelof

that

spending,

and

(3)

effects

of

an

advertising

campaign

on

incremental

visits.

(1)Visitorortravelerprofilesthisseeksanswerstoquestionslike:howmuchdovisitorsspend,whattheybuy,andwhataretheirdemographics. Companiesthatprovidemarket

researchservices,likeMarketToolsInc.4,areoftenusedtogathersuchinformation.These

companiesmaintainconsumerpanels,whosedemographicsareclaimedtoresemblethe

overallpopulationthatothercompaniescansurveywithdetailedquestionsabouttheir

consumptionhabits,suchasspendingonvacations.

(2)Economicimpactmodelthisexplainshowvisitorexpendituresimpacttheeconomybothdirectly

and

indirectly.

The

two

principal

methods

for

estimating

recreation

and

tourism

relatedspendingandeconomicimpactsare(a)satelliteaccountsand(b)visitor

surveys/inputoutputmodels. Satelliteaccountsareprimarilyusedtogiveanoverall

aggregateestimateofthecontributionoftourismactivitytostateandnationaleconomies.

Theyextracttourismrelatedactivityfromasystemofnational(orstate)accounts.When

spendingandimpactsaredesiredforparticularmarketsegmentsorforlocalregions,

surveyapproachesaregenerallyused.Spendingdataisgatheredinvisitorsurveysand

appliedtoestimatesofthevolumeoftouristactivityinanarea.Spendingtotalsarethen

appliedtoregionaleconomicmodelsormultiplierstoestimateeconomicimpactsonthe

localarea,

usually

including

secondary

or

"multiplier

effects".

5

(3)Effectivenessoftheadvertisingcampaign(s)onIncrementalvisits Acertainamountofvisitorswilltraveltoadestinationwhethertheyhaveorhavenotbeenexposedto

advertisementsofthatdestination.ForROIstudiesitisrelevanttoknowhowmanyvisitors

cameasaresultoftheadvertisingcampaign.Thetwoprevailingmethodsfordetermining

destinationadvertisingeffectivenessandROIare(1)surveysofhouseholdsorpersonsin

marketsexposedtoadvertisingandwhoresemblethetargetsofadvertisingand,(2)

surveysofpersonswhocontactedthedestinationinresponsetoadvertising.Respondents

areaskediftheyremembertheads,howitaffectedtheirimageofthedestination,and

howlikelytheyweretotraveltotheadvertisedarea.Afewmonthslater(toallowtimeto

4LongwoodsintltendstosubcontractthisworktoMarketToolsInc.SeeLongwoodsTravelUSA2008Visitor

ReportforWestVirginia

http://www.wvcommerce.org/App_Media/assets/pdf/industryinformation/reports/West_Virginia_

_2008_Overnight.pdf5MichiganStateUniversityEconomicImpactsofRecreation&TourismWebSite

http://web4.msue.msu.edu/mgm2/econ/methods.htm#sat

12


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travel)thelikelytravelersaresurveyedagaintoseeiftheydidindeedtravelandhowmuch

theyspentduringtheirtravels.

Thus(3)incrementalvisitsandthedemographicsofthevisitorsaremultipliedby(1)visitor

spendingprofilestoprovideameasurementofincrementalspendingduetoadvertising.

Economicimpactmodeling(2)thenprovidestheeconomicimpactofthatspending.Common

ROImeasuresincludeincrementaltravelspendingperdollarofadvertisinginvestment,and

incrementalstateandlocaltaxrevenueperdollarofadvertisinginvestment.

Allofthesixteenstatescoveredinthisstudyhavehadatleastaneconomicimpactanalysis

oftourismcompletedinthelasttenyears.Elevenstateshavegoneonestepfurtherandhave

measuredtheeffectsofadvertisingcampaignsonincrementalvisitsandmarketingROI. Of

theseelevenstates,sevenhiredLongwoodsInternational,threehiredStrategicMarketing&

ResearchInc(SMARI),whileone,Minnesota,utilizedagovernmentagency6tomeasureROI.

Theresearch

organizations

employed

to

measure

economic

impact

were

more

numerous

and

included:DeanRunyan,IHSGlobalInsight,D.K.Shifflet,OxfordTourismEconomics,universities,

andstateagencies.Intermsofvisitorprofiles,CaliforniaemployedD.K.Shifflet,MarketTools

Inc.wasusedinthestatesthatcommissionedLongwoodsIntl,whileSMARImaintainsitsown

consumerpanelsfromwhichitdevelopsvisitorprofiles.

ROIestimatesofvisitorspendingperadvertisementdollarrangedfrom$48.53(Michigan)to

$305.00(California),withanaverageof$122.80andmedianof$123.Fivestates(MI,MT,VA,

MN,andMO)hadaspendingROIoflessthan$70peradvertisingdollarwhilesixstates(ND,

OR,AZ,CO,FL,andCA)hadaspendingROIofmorethan$123peradvertisingdollar.Similarly,

ROIestimatesofstateandlocaltaxrevenueperadvertisementdollarrangedfrom$2.54

(Missouri)to$20(California),withanaverageof$8.18andmedianof$5.00.Fivestates(ND,

AZ,CO,FLandCA)hadataxROIofmorethan$9peradvertisingdollar,whilesixstates(MI,OR,

MT,VA,MN,andMO)hadataxROIoflessthan$5peradvertisingdollar.

ThevariationinthetwomainaspectsofmarketingROI,visitorexpendituresandtaxrevenue,in

eachstatemaybeduetoanynumberoffactorsincluding:

Howcreativeandeffectivetheadvertisingwasininducingpeopletovisitthetargetdestination?

Variationinvisitorssocioeconomicprofiles(i.e.discretionaryincome)fromthetargetmarket.

Thestatesuniquetourismproducts forinstancevisitorsspendmoreatskiresortsthantheydocampinginthewilderness.

Howrelativelyexpensivegoodsandservicesareinthestate.6AnalysisandEvaluationOfficeofMNDeptofTradeandEconomicDevelopment

13


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Whethertheincrementaltaxrevenuegeneratedincludesstatetax,localtaxorboth?MIandMOonlymeasuredstatetaxrevenueswhiletherestofthestatesmeasured

bothstateandlocaltaxrevenues.CompleteresultscanbeseeninTable2.

Whethertheinvestmentportionconsideredintheanalysiscoversallcostsassociatedwith

marketing;

including

salaries

and

office

supplies,

or

just

the

cost

of

the

advertising?

CompaniescontractedtodoROIanalyseshaveslightlyvaryingmethodologiesonhowtomeasureincrementalvisitsandvisitorspending.

Whethertheeconomicimpactmeasurementsjustincludedirectspending onindustriesthattouchthevisitor(i.e.hotels,restaurants,museums),oralsoindirectspending

thatconsidersindustriesthatsupplythosethattouchthevisitor,andinducedspending

thataffectsthewagesofworkersinindustriesthatsupplythosethattouchthevisitor?

WhetherROImeasurementsarebasedonlongtermorshorttermeffectsofadvertising?Oregonwastheonlystateinthestudytoexplicitlystateandgivethe

results

both

long

term

and

short

term

results.

Thedifferentandvaryingwaysstatesandlocalitiestaxvisitors.Forinstance,istherealodgingtaxandisitlocalorstatewide.

BriefMethodologyofLongwoodsInternationalandStrategicMarketing&ResearchInc(SMARI)

StatetourismofficesengagedLongwoodsInternationalprimarilytodeterminethestates

imageasatourismdestinationwithinitsadvertisingmarketsandtoevaluatetourism

marketing

campaigns.

Longwoods

evaluates

tourism

marketing

campaigns

in

terms

of

awarenessinthemindofthepotentialvisitor,theimpactoftheadvertisingondestination

image,andtheimpactoftheadvertisingontheincrementaltraveltothestateandthe

associatedincremental/additionalvisitorspending.Longwoodssurveystravelersinthestates

primaryadvertisingmarketstoprofilethestatesimageascomparedtokeyregional

competitors anddeterminetheimpact(shortorlongterm)ofaparticularadvertising

campaign(s)7.

LongwoodsInternationalhasconductedlargescalesyndicatedvisitorresearchsince1990.In

2007themethodologychangedfrommailsurveystoonlinesurveysandcontinuestoutilizea

proprietaryquestionnaire8.

The

survey

is

distributed

to

arepresentative

sample,

with

the

desiredattributes,throughamarketresearchcompanycalledMarketTools,Inc.Thiscompany

maintainsasizeablenumberofondemandpaneliststhatLongwoodsprofiles,intermsoftravel

7NorthDakotaTourism:AnEvaluationofNorthDakotas2007AdvertisingCampaignpg3,4

https://www.ndtourism.com/uploads/resources/592/ndbm07finalreport.pdf8LongwoodsTravelUSA 2008VisitorReport,WestVirginia,April2008

http://www.wvcommerce.org/App_Media/assets/pdf/industryinformation/reports/West_Virginia_

_2008_Overnight.pdf

14


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spendingandotherdemographicandtravelrelatedbehavioralcharacteristics.Theirresponses

areweightedandextrapolatedtotheoveralltravellingpublic.

StrategicMarketing&ResearchInc(SMARI)measuresawarenessthroughamultistepprocess

astherearemanywaysinwhichadvertisingcanimpactconsumers.Phase1oftheresearch

measures:(1)

exposure

through

advertising

awareness,

(2)

messaging

through

creative

evaluation,(3)shiftinattitudesthroughcomparativeimageassessments,and(4)buildingof

interestthroughcomparativeinterestinvisitation.Phase2oftheresearchisdonesometime

later,soastohaveallowedtimefortraveltohaveoccurred,andmeasuresincrementaltravel

bycomparingtherateoftravelamongthosewhowereawareoftheadvertisingandtherateof

travelbythosewhowereunawareofthecampaign9.

SMARImaintainsitsownconsumerpanelfromwhichitdevelopsvisitorprofilesbutusesa

similarapproachtothatofLongwoodsinmeasuringincrementalvisits.Bothfocuson

destination

image,

recall

of

the

advertisement,

and

likelihood

of

travel.

Where

they

differ

is

in

whatquestionsareasked. Forexample,Longwoods10

asksrespondentstorate,fromStrongly

AgreetoStronglyDisagree,asamplingofdestinationattributeswhichthenintheanalysis

arecomparedtoratingsofotherdestinationsfrompastLongwoodsengagements.

Mustseedestination Lotstoseeanddo Afunplaceforavacation Excellentvacationvalue Anexcitingplace

ExamplesofSMARIsquestionsareexcerptedfromCaliforniasDomesticAdvertising Total

2009ROIResearchSummary11.Respondentsareaskedtorateeachchoicefrom1to5.

AfterseeingtheseadsIammoreinterestedinvisitingthisstate Theseadsshowexperiencesandplacesthatyouareinterestedin Theseadsshowaplacewithauniqueattitudetowardlife Theseadsportrayaplacethatoffersvacationersthebestlifehastoofferallinone

place

Fromthe

sampling

of

sixteen

states

Longwoods

appears

to

have

greater

depth

and

breadth

in

thenumberofvisitorstheyhavesurveyedandprofiledandtheamountoftimetheyhavebeen

9SMARIAdvertisingEffectiveness&ROI2007/2008SnowCampaignPg5

http://tourism.visitcalifornia.com/media/uploads/files/editor/Research/CTTC_CASnow2007_ROI.pdf10

ExcerptedfromLongwoodsEvaluationofNorthDakotas2007advertisingcampaign:

https://www.ndtourism.com/uploads/resources/592/ndbm07finalreport.pdf11

CaliforniasDomesticAdvertising Total2009ROIResearchSummaryPg16

http://tourism.visitcalifornia.com/media/uploads/files/editor/Research/california%202009%20Total%20domestic

%20ROI%2003_25_10.pdf

15


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doingthiswork,comparedtoSMARI.Bothcompaniestendtouseeconomicimpactdata

providedbytheclient12

onpercapitavisitorspending,andtherelationshipbetweenvisitor

spendingandstateandlocaltaxes,forROImeasurementsofvisitorspendingandstateand

localtaxrevenue.

FurtherInvestigationintoStatesSeeTable1and2formoredetailedcomparisons

Californiahasthemostvisibleandaccessiblecatalogoftourismmarketandimpactresearch

ofthestatescoveredinthisstudy.Californiasbrandadvertisinghasbeencontinuouslytracked

fromaquantitativestandpointoverthepastdecadebyD.K.Shifflet&AssociatesandStrategic

Marketing&Research,Inc.(SMARI). CaliforniaTourism(CTTC)hastrackedtheeffectiveness

andROIofitsadvertisingeffortsformanyyears,usingthesamemethodologysince2004.The

researcheffortsfollowthesamepatternsothatresultswillbecomparabletopastyears.

Advertisingresearchisconductedintwophases.Phase1isconductedimmediatelyafterthe

conclusionofanadvertisementrunandmeasures:(1)thereachofthecampaign;(2)reactions

tothecreativeaspectsofthecampaign;(3)theimpactofthecampaignonchangingattitudes

towardCaliforniaand;(4)thewaysinwhichthecampaigninfluencedconsumerinterestin

visitingthestate.

Phase2oftheadvertisingresearchisconductedafteraperiodoftimedeemedreasonableto

allowfortravelthatisrelatedtoadvertisingexposure.Itmeasures:(1)incrementaltraveland

spendingassociatedwithCaliforniaTourismsmarketingeffortsand(2)ROIasdeterminedby

thistravelspendinginrelationtocampaignexpenditures.

CTTCutilizedD.K.Shifflettoprepareanextensivevisitorprofilein200913

.Thiswasafterthe

SMARI2009advertisingevaluationandthustheeconomicimpactnumberswerenotusedin

calculatingtheROIfromthe2009campaign.CTTCemploysDeanRunyantomeasurethe

economicimpact14

fromtourismonayearlybasisandSMARItomeasureincrementalvisitation

andROI.The$13.7million2009advertisingcampaign15

generated3.35incrementalvisitsper

addollar,$305invisitorspendingperaddollar,and$20instateandlocaltaxrevenueperad

12MichiganImageand2005AdvertisingEvaluationStudy:http://ref.michigan.org/cm/attach/7FCE50AA 1D21

411DA4CEB2C55EE09612/2005_ROI_report.pdf13

California2009VisitorProfileReport:

http://tourism.visitcalifornia.com/media/uploads/files/editor/Research/2009%20California%20Data%20Report%2

0%20Public%20Version.pdf14

EconomicImpactofTourisminCalifornia2009

http://tourism.visitcalifornia.com/media/uploads/files/editor/Research/CA09pRptrev.pdf15

CaliforniasDomesticAdvertising Total2009ROIResearchSummary

http://tourism.visitcalifornia.com/media/uploads/files/editor/Research/california%202009%20Total%20domestic

%20ROI%2003_25_10.pdf

16


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dollar.ThiswasthehighestROIgeneratedforanyoftheeleveninvestigatedstatesthathad

undertakenROIstudies.

CaliforniaTourismhashadalotoftourismmarketingresearchdoneinthepastdecade.Their

strategyhasbeentoevaluatelargeandfocusedmarketinginitiatives.Thereportslistedbelow

illustratethis

approach.

Their

website16

allows

others

to

easily

find

and

access

this

information.

SomeofthetourismmarketingresearchCaliforniahasdonesince2005are:

Domesticadvertisingeffectiveness 2006Spring,2007Spring,2008Fall,2009Fall,2009Spring,and2010SpringbySMARI

DomesticROIonmarketing 2006Spring,2007Spring,2008Spring,2008Total,2009Spring,2009TotalbySMARI

Wintertraveladvertisingeffectiveness 2007,2008,2009,2010bySMARI WintertravelmarketingROI 2007bySMARI Digitaladvertisingeffectiveness 2009bySMARI EconomicimpactsoftravelinCalifornia CaliforniaTravelImpactsbyCounty2009,by

DeanRunyanAssociates,April2009.Prioryears:2008,2007,2006,2005

DomesticTraveltoCalifornia CaliforniaDomesticTravelReport,2009,byD.K.Shifflet&Associates,July,2009.Prioryears: 2008,2007,2006,2005

MichiganThoughMichiganhashadLongwoodsIntlconductROIstudiesannuallyfrom2004

to2007,theyonlypublishedthreereportsontheirtravelresearchwebsite17;onefrom2004,a

briefsummaryfrom2005,andtheotherisasummaryofthecombinedfouryears2004

200718

.TravelMichigansmarketingactivitiesin2004and2005involvedtheGreatLakesGreat

TimesadvertisingcampaignrunintheChicago,Cleveland,andIndianapolisLafayetteDMAs

(DesignatedMarketingAreas).For2006,themarketswereexpandedtoincludetheDMAsof

Cincinnati,MilwaukeeandSouthWesternOntarioandthelaunchofthePureMichigan

campaigninthosemarkets.In2007,thePureMichigancampaignreplacedGreatLakesGreat

TimescampaigninChicago,Cleveland,andIndianapolisLafayette.

Thepurposeoftheimageandadvertisingevaluationstudieswastoprovide:fundamental

strategicinsights

about

the

image

of

Michigan

and

its

key

competitors

with

respect

to

key

destinationchoicefactors;anevaluationoftheimpactoftheTravelMichiganadvertising

campaignincludingthefinancialreturnontheadvertisinginvestment(ROI); messagingand

16VisitCaliforniawebsite researchpage:http://tourism.visitcalifornia.com/Research/

17MichiganTourismResearchWebsite:http://ref.michigan.org/mtr/research/

18MichiganTourismandAdvertisingEvaluationStudies2004to2007:

http://ref.michigan.org/cm/attach/7FCE50AA1D21411DA4CE

B2C55EE09612/LongwoodSummary_final_04to07.pdf

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mediadiagnosticstoilluminatecontributingfactorstocampaignperformanceand,inturn,

insightstohelpoptimizetheimpactandyieldoffutureactivities.

TheobjectivesoftheongoingadvertisingevaluationresearcharetoprofileMichigansimageas

atraveldestination,includingitsstrengthsandweaknessesamongkeycompetitors,andto

identifywhat

is

important

to

travelers

in

choosing

Michigan

and

key

competitors

as

destinationsfortravel.Secondly,TravelMichigansadvertisingcampaignswereevaluatedin

termsof:theawarenessthattheygenerate;theirimpactonMichigansimageandontravelto

thestate;theincrementalbottomlineimpactofthattravel,andtheresultingrateofreturnon

theadvertisinginvestment(ROI).

From2004to2007,TravelMichiganinvested$19.97millioninadvertising.Thisinvestment

generated3.8millionincrementalvisits,$40.29invisitorspendingperadvertisingdollar,and

$2.82instatetaxrevenueperadvertisingdollar.The2005LongwoodsROIevaluationresulted

in

slightly

better

numbers

with

$48.53

in

visitor

spending

per

advertising

dollar,

and

$3.43

in

statetaxrevenueperadvertisingdollar19

.ThisisthelowestintermsofROIofvisitorspending

peradvertisingdollar.KeepinmindthattheotherninestateswhomeasuredROIalsoincluded

localtaxrevenueinadditiontothestatetaxrevenueandthatisprobablywhyMIandMOare

atthebottomofthepackintaxrevenue.

Otherrecenttourismmarketingresearchpublications(allbyLongwoodsIntl)TravelMichigan

hasreleasedare20

:

2004TO2007MichiganTourismAdvertisingEvaluationStudies 2007ResearchandReview 2004AdvertisingEvaluationandROIStudy 2005MichiganImageandAdvertisingStudy

NorthDakota TheNorthDakotaTourismDivisionutilizesmultitudeofresearch

methodologies,andorganizations.Theseinclude21:

CanadianTravel ProvidedbyStatisticsCanada,measurestravelandspendingbyCanadians

to

the

United

States;

gathered

through

Stats

Canadas

International

Travel

Survey.

DomesticTravelExpenditures ComparativedataprovidedbytheUnitedStatesTravelAssociation,usingtaxrevenuefromtheU.S.BureauofLaborStatistics.

19MichiganImageand2005AdvertisingEvaluationStudy: http://ref.michigan.org/cm/attach/7FCE50AA1D21

411DA4CEB2C55EE09612/2005_ROI_report.pdf20

Allofthesestudiescanbefoundat:http://ref.michigan.org/mtr/research/21

NorthDakotaTourismDivision:http://www.ndtourism.com/industry/research/

18


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EconomicBase ComparativeanalysisprovidedbyNorthDakotaStateUniversity(NDSU)ofthestatessixprimaryindustries;measuresnonresidenttravelspending.

ReturnonInvestment(ROI) ContractedthroughLongwoodsInternational,measurestheawarenessandeffectivenessofadvertisingcampaigns.

Tourism

Satellite

Account

A

measurement

of

the

economic

impact

of

travel

and

tourism,contractedbyIHSGlobalInsightthatusesjobs,wagesandtaxestoquantifythe

contributiontourismmakestothegrossstateproduct(GSP).

VisitorStudies AsurveyofrecentvisitorstoNorthDakota,documentingtheirtravelhabitsandspendingandcomparingtoU.S.traveldata;contractedthroughLongwoods

International.

The2007campaigninvested$1.7millioninadvertisingthatgenerated$203.9millionin

incrementalvisitorspendingand$14.7millioninstateandlocaltaxes.ThisamountedtoanROI

of$123invisitorspendingperaddollarand$9instateandlocaltaxrevenueperaddollar.

TheseresultsarerightaboutaverageforthestatesthathaveinformationavailableonROI.

SouthDakota SouthDakotaTourismemploysIHSGlobalInsighttomaintainatourismsatellite

accountthatmeasurestheeconomicimpactfromtourismbuthavenotyetformallytriedto

measuretheROIoftourismmarketing/advertising.Theyarehowevertakinganovelapproach

tocomparethemselvestoColoradowhohadstoppedtheirpromotionaleffortsfrom1993to

1997andthushadseentheirleisuretraveldeclineby7.7%forthose4years. SDisbasically

looking

at

various

scenarios

following

the

Colorado

22

example

to

estimate

how

much

visitor

loss,tourismexpendituredeclines,andstateandlocaltaxlosseswouldfolloweliminationof

thetourismoffice.

Conclusions

Statetravelofficejustificationsforannualallocationsofstatefundsareincreasinglybeing

scrutinizedasstatesseektobalancebudgets.Thus,thesejustificationsareexpectedtocontain

wellstatedobjectives,measurableresults,andclearstandardsofcosteffectiveness.

Advertisingis

abig

portion

of

the

budget

for

state

travel

offices

and

they

need

to

justify

this

expensebymeasuringandshowingthereturnoninvestment.

Ofthesixteenstatetravelofficesreviewedinthisstudy,elevenofthemhadconductedROI

studiessince2000,includingMinnesota.LongwoodsIntlandSMARIarethedominant

companiesthatstatetravelofficeshiretoconductthestudies.Sevenoutofelevenstateshired

22COhadtourismmarketingROIstudiesdonebyLongwoodsIntlandeconomicimpactoftourismbyIHSGlobal

19


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LongwoodsIntlwhilethreehiredSMARI.Onlyonestate,Minnesota,hiredadifferententity

MNDept.ofTrade&EconomicAnalysisin2000toconducttheROIandeconomicimpact

research.ThetwomainmeasurementsofROIwereincrementalstateandlocaltaxrevenue

generatedperadvertisingdollarandincrementalvisitorspendinggeneratedper

advertisementdollar.

Visitorexpendituresvaryineachstatedependingonthevisitorssocioeconomicprofileand

thestatesuniquetourismproducts.Butanotherlikelyreasonthatmayartificiallyincreasethe

spreadmaybethepracticeofstatetravelofficestohireavarietyofthirdpartiestoconduct

economicimpactassessmentstoestimatepercapitavisitorspendingandtherelationship

betweenvisitorspendingandstatetaxes.ThecompanieshiredtomeasureROItendtousethe

economicimpactdataprovidedtothembythestatewhilestatesemployavarietyof

organizationstomeasuretheeconomicimpactoftourism.Thevaryingorganizationsthat

performtheeconomicimpactstudiesandthemethodologiestheyutilizecontributetothe

variationin

ROI.

FurtherexplorationofCalifornia,Michigan,NorthDakota,andSouthDakotaillustratethe

differingwaysstatesconducttourismmarketingresearch.Itwouldbequiteproblematicfor

anotherstatetravelofficetoattempttoestimateitsmarketingROIbasedonthestatelevel

informationprovidedinthisreport.Advertisingeffectiveness,targetmarkets,visitorspending

profiles,thecostofgoodsandservices,andmanyothervariablesallservetolimitthedegreeto

whichcomparisoncanbemade.However,thedetailedassessmentofotherstatestourism

marketingROImeasurementsfoundinthisreportprovidesExploreMinnesotaTourismwith

the

range

of

likely

ROI

estimates

for

its

own

marketing

activities.

20


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October 1, 2010

Tourism Marketing ROI study

Overview: Explore Minnesota Tourism (EMT) is the state agency responsible for

promoting travel to and within Minnesota. Considerable resources are invested in

marketing Minnesota as a destination to potential travelers. The expectation is that

marketing efforts will enhance positive perceptions of Minnesota as a travel

destination, increase brand awareness, and increase travel and associated economic

impacts throughout the state. In order for EMT to better estimate the return on

investment (ROI) of its marketing activities a review of state-level reports and

assessments for tourism marketing of other states is proposed until budgetary

constraints allow for more direct assessments.

Purpose: To identify and compare state-level approaches, and results of tourism

marketing return on investment analyses

Methods: Review of state-level reports and assessments for tourism marketing to

document:

Marketing budgets (total)

Marketing strategies where return on investment (ROI) is calculated

Methodologies used to calculate ROI

Results of ROI studies

Initial state tourism agencies assessed:

*Wisconsin

*Michigan

*Iowa

*North Dakota

*South Dakota

*Missouri Pennsylvania

Oregon

Florida

Arizona

Montana

California

Colorado

Kentucky

Virginia

Extension Regional

Office, St. Cloud

Midtown Office Building

3400 First Street N, Suite 400St. Cloud, MN 56303-4000

PHONE

(320) 203-6050

FAX

(320) 203-6110

EMAIL

[email protected]

WEB

www.extension.umn.edu

Making a difference for

Communities

the Environment

Families

Food and Agriculture

Youth

Appendix - Tourism Marketing ROI Study Initial Agreement

21


24/24

Process:For this study, different state marketing programs are of varying levels ofinterest due to geographic proximity (e.g., the first six states listed above with

asterisks) similarity of product and/or marketing efforts, and prominence within the

tourism marketing community. In addition, it is anticipated that states will vary

considerably in how they address tourism marketing ROI, including instances where

multiple states may be very similar due to using the same research contractor,

impacting their relevance to this study. With this in mind, a higher level review of

the ROI efforts of states will be useful in paring the list to states that warrant

additional, more in-depth investigation. An initial comparative table of higher level

ROI-related information will provide information for all of the states listed above,

and will facilitate the paring down process.

Adeel AhmedAssistant Extension Professor

University of Minnesota Extension - Center for Community Vitality

Office: 320-203-6109

Email: [email protected]

Website:http://www.extension.umn.edu/Community/
mailto:[email protected]:[email protected]://www.extension.umn.edu/Community/http://www.extension.umn.edu/Community/http://www.extension.umn.edu/Community/http://www.extension.umn.edu/Community/mailto:[email protected]

measuring return on investment of tourism marketing

Documents