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Despite stalled growth in China, Brazil and Russia, a wave of newly middle-class travelers from the BRICs and beyond will start visiting international destinations in the coming decades — dwarfing the numbers we’ve seen thus far.
There’s lots of goodwill around Brand USA, but that could quickly dissipate if the marketing organization continues to take credit for others’ work in an attempt to win new funding from Congress.
With Brand USA looking to get re-authorized by Congress for 2015, the official U.S. tourism-marketing group commissioned a study that claims it produced $47 in international visitor receipts for every $1 it spent in marketing — a return on investment that even the group’s supporters say defies belief.
Travel industry analyst and researcher Henry Harteveldt calls Oxford Economics’ 47 to 1 ROI calculation attributed to Brand USA “disingenuous” and “incredibly aggressive.”
Joe Buhler, a tourism consultant and former North America director of Switzerland Tourism, says the Oxford Economics analysis is “hard to prove or disprove but not entirely satisfactory,” adding he’s always skeptical about “numbers claiming billions of dollars of directly attributable spending, especially to brand marketing.”
A tourism official who declined to be identified because the official’s group partners with Brand USA, read the Oxford Economics study [embedded below], and labels its claims “overstated.”
Brand USA Gets Credit for Everything Else
The study’s methodologies are complex, but in layman’s terms Oxford Economics measured the economic environment and other trends that would have impacted international arrivals to the U.S. and visitor spending without Brand USA’s involvement, and basically attributed virtually ALL other incremental visitor arrivals and spending to Brand USA.
Oxford Economics also used two additional analyses, including a survey of consumers in Mexico and Brazil, and a market share study, to validate its findings.
But even Oxford Economics includes a caveat in the study.
“Assuming that all of the difference between observed growth and counterfactual [Oxford’s term for its economic and trends analysis] is due to marketing activity [by Brand USA] arguably provides an upper estimate of Marketing Return on Investment (ROI),” the report states.
Analyzing the year ended September 30, 2013, the study commissioned by Brand USA found that its $72 million in marketing spend in Australia, Brazil, Canada, Germany, Japan, South Korea, Mexico and the United Kingdom led to 1.1 million additional visitors to the U.S., a 2.3 percent jump, and $3.4 billion in incremental spending in the U.S. for a nifty 47 to 1 ROI.
It was purportedly only 34 to 1 if you include Brand USA’s overhead, and 49 to 1 if you consider only the results of the traveler intent surveys in Brazil and Mexico.
In calendar year 2013, foreign visitors spent a record $181 billion, according to the U.S. Department of Commerce, a 9 percent increase over 2012. The National Travel & Tourism Office has not yet released numbers on the total number of foreign visitors to the U.S. in 2013.
Brand USA receives matching funds generated by the $14 fees that international travelers from visa waiver countries must pay when they enter the U.S., and Brand USA also receives tens of millions of dollars in the form of in-kind contributions from tourism partners.
These in-kind contributions, which were not considered in the ROI analysis, might include video content from Hawaii Tourism or British Airways tickets for a Brand USA-led familiarization trip for travel agents.
“We measured the ROI of Brand USA’s marketing expenditures as well as their total budget,” says Adam Sacks, president of Tourism Economics, the Oxford Economics subsidiary that conducted the study. “The in-kind contributions are not relevant (i.e. not part of the equation) since they are not resources being ‘invested’ into the markets.”
These in-kind contributions, though, cut two ways. To the extent they indeed served to boost Brand USA’s marketing activities, then they may have elevated Brand USA’s ROI without adding to its actual marketing spend.
On the other hand, Brand USA can argue to Congress that these in-kind contributions from travel partners help it to efficiently achieve scale without resorting to additional spending.
Brand USA is not scheduled to disclose for another couple of months precisely how much it received in such in-kind contributions last year, but they are expected to be in the $50 to $75 million-dollar range.
“Of all the in-kind we received in fiscal year 2013, a substantial portion (but not the vast majority) was related to marketing activity (media and trade support like the British Airways tickets),” says Carroll Rheem, vice president of research and analytics at Brand USA. “The rest were assets like photos, videos and research.”
Rheem concedes that no individual methodology for determining marketing impact is perfect, and that’s why Oxford Economics measured Brand USA’s ROI using three types of methodologies.
If some view the Oxford Economics study as overly favorable to Brand USA, Rheem counters that the study was candid in that it portrayed some of Brand USA’s shortcomings, including its campaign in Mexico.
An ad-tracking survey conducted by Ipsos as part of the study found that Brand USA’s ROI in Mexico was a $3 loss for every $1 it spent on marketing in the country, for example.
On the other hand, the same ad-tracking survey claimed in Brazil, Brand USA’s “ROI is projected to be significant at 96 to 1 in visitor spending per dollar of advertising,” the study says.
Did Anyone or Anything Else Contribute to the Visitor Increase?
Beyond Brand USA’s own marketing efforts, what about all of the myriad other factors, including marketing by state and local tourism boards, eased visa policies, increased lift by airlines, the value of the dollar versus other currencies or a Justin Bieber concert that might have contributed to the increase in international visitors and spending, independent of Brand USA’s efforts?
Rheem says Oxford Economics’ methodology took these types of factors into account.
On the issue of the contributions of state and local tourism boards, Rheem says that the majority of Brand USA’s marketing spend is done cooperatively with state and local tourism boards such as Visit Florida, for example.
Without Brand USA, some of the destination marketing organizations might not have invested the same amount of money as they did in marketing, Rheem says.
“We amplify that spend,” she adds.
Sacks of Oxford Economics defends its “counterfactual growth estimate,” which considered travel trends in the eight origin markets and the economic climate, and attributed all of the other visitor growth and spend to Brand USA’s marketing.
“The counterfactual versus actual modeling is a reasonable methodology and one that is regularly employed in assessing the impact of a new activity,” Sacks says. “However, there is room for noise in the model caused by other factors.”
He believes this “noise,” or factors apart from Brand USA’s efforts, however, was accounted for in the two parallel analyses conducted as part of the study.
Even Supporters Doubt the Numbers
Henry Harteveldt, the travel analyst and researcher, supports the aims of Brand USA and believes it should be credited with accomplishments.
“I don’t question for a moment that the efforts of Brand USA have paid off,” Harteveldt says. “Brand USA has helped make the U.S. a more visible and appealing destination.”
However, Harteveldt says there are lots of other factors, from the efforts of city and state tourism boards to improved visa rules and air service, that the study may not have given enough weight to.
“The U.S. is so vast and there are so many other factors at play that I think it is disingenuous for Brand USA to take complete credit for all the growth of inbound international visitors,” Harteveldt says.
Harteveldt argues that he hopes the federal government — through the $14 fees — will continue to fund Brand USA.
Of the ROI study, however, he says: “The 47 to 1 payoff ratio seems incredibly aggressive to the point that it is almost not credible.”
Joe Buhler, the tourism consultant and former director of Switzerland Tourism in North America, says there is “no question in my mind that the Brand USA marketing effort in the target markets has moved the needle,” and he wishes “more power” to the group in its quest to get its funding newly authorized.
The study is “quite detailed and full of numbers that should please the skeptics and bean-counting types who often question the validity of destination marketing or marketing, in general,” Buhler says.
Buhler says, though, that he’s skeptical of studies that purport to show that brand marketing is directly responsible for billions of dollars in visitor spending.
“Even more doubt creeps up in my mind when ad recall is used as proof of actual visits having been influenced,” Buhler says.
“Their counterfactual — whatever that means — measure seems to be used as a tool to compare possible outcomes without marketing and compare them to those based on such activities,” Buhler says. “It’s hard to prove or disprove, but not entirely satisfactory to me.”
Note: Below is an additional Brand USA statement on some of the issues:
“The strong results (detailed in the Oxford Economics ROI study) demonstrate that Brand USA provides value to its stakeholders and the U.S. economy at large by executing effective and efficient marketing. Building on its solid marketing practices, Brand USA’s efficiency is enhanced by our ability to build partnerships that leverage our scale, which includes the utilization of in-kind contributions that have real value.
“Ultimately, the results reflect that Brand USA has done a great job of executing the vision of what the Travel Promotion Act was designed to deliver – a public-private partnership that generates new value. We’ve focused on building partnerships that cultivate the best of what each side brings to the table, and it is clearly working.”