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The internal and external challenges that are slowing down Brand USA

@denschaal

Oct 09, 2012 12:56 pm

Skift Take

An old boys’ club mentality and careless spending practices won’t cut it, if indeed the latest Congressional allegations about Brand USA are true. Meanwhile, it is premature to pass judgment on Brand USA’s marketing efforts. That verdict will come when visitors’ numbers come out next year.

— Dennis Schaal

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Brand USA’s motto is “Discover this land, like never before,” but the year-and-a-half old public-private partnership to promote inbound tourism to the U.S. is under scrutiny like never before.

The offspring of the 2010 Travel Promotion Act, the Corporation for Travel Promotion began operating as Brand USA in May 2011, and saw CEO Jim Evans step down after only a year, with the organization chalking it all up to startup pains. The group brought in an interim CEO, and now is in the process of transitioning to the leadership of Christopher Thompson, who heads Visit Florida, and will start at Brand USA on November 1.

Meanwhile, Brand USA, which is subject to political haymakers and a reauthorization vote when its term expires toward the end of 2015, has been castigated by Senators for lavish spending, questionable in-kind contributions, cronyism, and a lack of accountability.

Brand USA’s Discover America consumer site.

Brand USA, with board members appointed by the U.S. Commerce Department, can raise up to $200 million per year through private investment and matching contributions funded by a $14 tax on those visitors who enter the U.S. without needing visas.

With an assist from advertising agency JWT, Brand USA’s signature effort to date has been a tourism marketing campaign launched in May in the UK, Canada and Japan, replete with a “Land of Dreams” song from Rosanne Cash.

In a preliminary report, released in September, Brand USA indicated that in the three months since the initiation of its tourism marketing campaign, intent to visit has climbed 13 points in Canada, 17 points in the UK, and 11 points in Japan.

It is too soon to tell — and the industry will have to wait until the official numbers come in next year — whether that uptick in intent to visit will translate into an influx of real-life, free-spending tourists.

“Brand USA is actively engaged with our Federal agencies in a coordinated effort to grow our economy through boosting tourism to all parts of the United States, and we are pleased with the progress to date,” stated Brand USA’s interim CEO, Caroline Beteta, who doubles as CEO of Visit California.

Behind the scenes

What has been going on behind the scenes since the Wasshington, D.C.-based organization got up to speed?

Insiders, who declined to be identified, paint a picture of a struggling organization that had to deal with endless bureaucratic red tape from the Commerce Department and Congress, in-fighting among competing constituencies, personality clashes, and the pains of starting an international marketing organization from scratch despite the promise of a massive, $200 million budget.

“There was a knockdown, drag-out battle almost every day,” says one person close to the organization, who recalls marathon struggles with the Commerce Department over whether routine spending by U.S.-based CVBs for exhibition space at World Travel Market in London in November 2011, for example, should be considered contributions to Brand USA and trigger federal-matching funds.

Brand USA’s founding CEO, Jim Evans, who was formerly CEO of Best Western, resigned after about 13 months in office last June, soon after six Republican Senators blasted the fledgling organization for “holding lavish parties in London, for subsidizing travel corporations’ advertising budgets, a misguided ad campaign, and struggling to meet federal matching funds requirements.”

Indeed, the GOP Senators charge that Brand USA members have been trying to pass off hotel bills, gratuities, and taxi fares as contributions to tourism promotion, triggering federal matching funds.

One person who would speak on the record about Brand USA is George Zimmermann, vice president for Travel Michigan at the Michigan Economic Development Corp. Zimmermann has served on Brand USA’s marketing advisory committee.

Zimmermann didn’t address the allegations of malfeasance, and offered that he really doesn’t know why Evans departed after such a short stint.

“It’s unfortunate from an industry perspective, but things happen,” Zimmermann said.
But Zimmermann said he has “great respect for what they are doing” in terms of the international marketing campaign.

“We are pleased with what they are doing, we think they are on the right track,” Zimmermann said. “But, we think they are on a treadmill, and there are lots of balls they are juggling. Given their relationship with Commerce, with Congress, the reauthorization and all of those things on top of each other, it is a little daunting, frankly.”

Thompson of Visit Florida is the incoming CEO of Brand USA, and he’s expected to assume his duties November 1.

Like some of the other large CVBs, Thompson’s Visit Florida already does international marketing on its own.

“That sensibility will be very helpful to Chris because the statute demands it,” Zimmermann said, adding that Thompson already “has relationships with the Disneys and Universals.”

The critics

Meanwhile, in the current political climate, given previous General Services Administration travel-spending scandals and the recent allegations about Brand USA, the Travel Promotion Act that spawned the international tourism marketing effort could end up being a one-act show if Brand USA doesn’t get its fiscal practices in gear.

In the October 4 “Initial Investigation of Brand USA and the Department of Commerce’s Oversight,” Senators Jim DeMint and Tom Coburn, both Republicans, chide Brand USA for “lavish event costs” and lack of transparency related to its London event at the National Maritime Museum while the World Travel Market was under way. The costs just for the room, where the event took place for 560 VIP guests was about $17,000, the report claims.

One the key areas of contention is what qualifies as in-kind donations, which would have brought 2:1 federal matching dollars up to October 1, 2012, but would elicit merely a 1:1 match for qualifying in-kind donations atter that date.

The senators charged that Brand USA submitted as in-kind donations an Orlando-London British Airways flight costing $6,799 for Randy Garfield of Disney Destinations, as well as his $1.60 tip to a doorman at the Park Plaza Westminster Bridge; and a $365.26 Capitol Hilton hotel stay for Sabre Holdings executive Tom Klein, as well as his $4.77 bottled water purchase in the hotel lobby.

Regarding Klein’s room rate at the Capitol Hilton in Washington, D.C., the senators noted that the GSA’s maximum per diem is $183.

In response to a query, Brand USA issued the following statement about the senators’ accusations:

“We appreciate the oversight responsibilities of Congress, and we appreciate the importance of operating at a high public standard. The reality is that Brand USA enjoys strong industry support and is working with more than 260 partners. We have received approximately $59 million in cash and in-kind contributions from private businesses and organizations across the country. In-kind donations are vetted scrupulously ­first by Brand USA, then by an independent accounting firm, before receiving a final review by the government.

“Brand USA has been committed to holding administrative and overhead expenses to under 15% — ensuring that at least 85% of spending goes directly toward attracting international visitors to create jobs and economic growth. The private sector, including members of the board, have donated countless hours, dollars and other resources because of their commitment to creating jobs and economic growth for America. We have and will continue to work with the Senator and his staff to address any further concerns they have.”

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