Skift Take

There is simply no historical precedent for what the tourism marketing industry is currently going through. Some argue that makes it a perfect time for the industry to reinvent itself.

It’s a striking sign of the times that only five months ago, if you’d asked anyone what the biggest challenge facing the tourism marketing world is, the likely answer would’ve been simple: overtourism.

Today, that same industry faces a diametrically opposed new reality, wherein in a matter of weeks — if not days — all business and leisure travel stopped. There is no tourism to market, and no sense or guarantee of when it might return.

Though many tourism boards have been remarkably creative in their efforts to stay relevant during travel’s deep freeze, uncomfortable longer-term questions can’t be avoided. In absence of its main source of revenue, how will tourism marketing find a way to survive? When (and if) it gets to the other side, will it be a changed industry, or one that quickly tries to regain the glory days?

Those questions are underpinned by the reality of tourism marketing’s primary funding source: lodging and tourism-related taxes. In the absence of tourists, that funding has dried up. Meanwhile, governments coffers are strapped responding to an unprecedented public health epidemic, with little money to spare for tourism — an industry that’s always struggled to assert itself even in the best of times.

“The jury is out in terms of whether or not there are any useful historic comparisons here,” Tim Fairhurst, secretary general of the European Tourism Association said. “I tend to think not.”

The Grim Reality of Cuts

It may seem dramatic to frame tourism marketing in terms of survival, but unfortunately there are already signs of deep hardship across many destination marketing organizations, so-called DMOs, and tourism boards.

Don Welsh, president and CEO of membership organization Destinations International, told Skift that “most destinations have gone into extensive furloughs and permanent layoffs to minimize the labor expense.” Destinations International itself has also made cuts to its own staff, eliminating 13 open and full-time positions and scaling back operations. The trade group works to further the interests of DMOs, with a majority of its membership in North America.

In addition, staff cuts at the DMOs of Los Angeles, New York City, San Francisco, Toronto, and Seattle show that even well-funded shops in large gateway cities are struggling. The reason for the job losses are quite simple: A great majority of destination marketing outfits get their funding from lodging and tourism-related taxes. In the United States and Canada, 95 percent of Destination International’s members get funding from such taxes. In an era where hotels are closing and no one is booking rooms, it’s not hard to see the gaping hole.

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“It’s had a profound impaction a lot of cities,” Welsh said. “We’ve been tracking very closely in the U.S. and Canada. In certain cases we’re down 90, 95, 98 percent of revenues.”

A survey sent by Destinations International to its members examined how long DMOs can survive in absence of such funding. Just more than 50 percent said could not go beyond six months without additional funding.

All of this has forced some DMOs in the unenviable position of forecasting their own funding shortfalls. As is common in other destinations, Visit Seattle’s funding mechanism is not instantaneous, meaning it won’t receive its hotel and tourism tax disbursement from the months when the crisis kicked off until May.

CEO and President Tom Norwalk told Skift that 90 percent of the DMOs funding comes from such taxes. Though it did have reserves set aside, it still took advance measures in early March to reduce staff 20 percent and reduce pay and hours for the rest of the team. Norwalk says he knows that this revenue stream will be cut considerably, but he still doesn’t know exactly how much.

“We can guess that we probably will be getting 15 percent of what we might normally have anticipated from a standpoint of lodging tax collected in May, June, and July.”

From July onwards, the state of travel is anyone’s guess.

Can the Government Lend a Hand?

When the U.S. government passed the CARES Act in March, Destinations International went to work figuring out how DMOs could make use of it. The answer was not encouraging.

In the bill, lawmakers differentiated between a 501(c)(3), which is a traditional charitable non-profit, and a 501(c)(6), which operate to promote a common business interest. “Very few of our members are 5013(c)(3) — about 97 percent are 501(c)(6) and right now the way the law is written, we are not entitled to federal assistance.”

Welsh said the omission is a huge hurdle for the industry — and one that points to the fact that lawmakers don’t understand the value that destination marketers have to the tourism economy. While he understands the thinking behind providing assistance to hotels and airlines, “it’s the destination organizations that are driving awareness and the desirability of their city. And for them not be included it is somewhat illogical.”

As a result of that reality, Destinations International said it is working closely with the U.S. Travel Association to help position the importance of the destination marketing industry in front of lawmakers. It is also providing best practice to members through bi-weekly webinars and its blog.

A closed Florida beach

In Europe, the picture might be ever so slightly better. Fairhurst of ETOA said that since tourism promotion falls under many regional and local governments, direct funding is likely to remain even if service and sponsorship revenue streams dry up. The same may play out in Asia, where government tends to be more involved in tourism promotion. In the U.S., where using the public purse for tourism marketing tends to be anathema, the likelihood of DMOs being saved by local governments is much lower. In fact, Welsh said there’s even a likelihood that what remains of some DMO’s law-mandated funding could be diverted elsewhere in these times of urgent need.

“They’re not under existential threat in the same way that businesses are because regions or cities will need some sort of tourism management and promotion capability here on,” Fairhurst said of Europe. “So there’s a lot of fire fighting and a lot of stress in that world, but also trying to think how can we best orient ourselves to plan for recovery and where do we see that coming from.”

One example of that is in England, where the Department for Digital, Culture, Media, and Sport announced a £1.3 million ($1.6 million) scheme on April 7 to assist the nation’s DMOs. A statement from the government said, “DMOs provide expert advice and guidance to local businesses and are a crucial part of developing and promoting English tourism … This funding will ensure that DMOs can continue to provide critical business support and start to prepare for recovery.”

That said, there are still casualties. Marketing Edinburgh has been put into “hibernation” — a word used by the City of Edinburgh Council who made the decision — and its staff laid off. The decision was controversial, says Anna Leask, a tourism management professor at Edinburgh Napier University, and came despite the fact that the DMO “has been pretty effective in raising alternative sources of funding” outside of tourism taxes.

“Currently the plan is for there to be no marketing activity for the city at all now or in the future,” Leask said. “While I can see that it is difficult to manage council budgets, it does seem shortsighted, particularly as it seems likely that hotel tax revenues won’t be forthcoming either.”

Where Do We Go From Here

For some time, the critique around DMOs has gone something like this: The key performance metric can’t just be increasing arrival numbers. Marketing has to shift to prioritize management. Tourism marketers have to become destination stewards.

With that in mind, the Covid-19 crisis could provide an opportunity for a great “reset,” of sorts, said Glenn McCartney, a professor of tourism management at the University of Macau. He says now is the time for DMOs to make the case for themselves more than ever, particularly the policy-shaping role they play in many destinations.

To those people arguing that DMOs are unnecessary, McCartney said, “you still need tourism policy delivery. So you have to look at who is going to do that? Do you democratize tourism a lot more? Who is going to be responsible for the city branding?”

However, McCartney adds a crucial caveat: In proving their value, DMOs must also move sharply away from the mindset that ever-increasing arrivals — and thus ever-increasing hotel taxes — is a valid raison d’etre. That unsustainable mindset, which led to overtourism in some places, has now also revealed itself to be extremely risky in the context of coronavirus. Yet McCartney concedes there might be a resurgence of that when the recovery comes.

“The industry suffered so harshly right now. How do we frame coming out of it? We should be thinking about environment social issues, community issues,” McCartney said. “But the industry has been hit so hard, there is going to be a big propensity to get back to normal, get money back in again. So I think there might be a bigger drive to get commercial success again.”

Kevin Molony worries about that, too. He is the co-founder of the New Orleans Sustainable Tourism Task Force, an independent group of citizens that began working with stakeholders as well as city and state leaders in 2018 to try and alter the community’s approach to tourism. Molony has been critical of the tourism marketing industry generally, arguing that it puts profit over the health of the destination and that it proves its success by using data and figures that are commissioned with a certain result in mind.

“How might the current crisis bring about a wave of destination stewardship around the world? It’s got to start with the facts,” Molony said. “Civic and governmental leaders in destinations need to demand … independently audited measurements of tourism impacts on their communities, both positive and negative — not paid market research results commissioned by reckless profiteers to support their ongoing operations.”

You could argue that a time of economic survival isn’t the best time to invent entirely new funding models and structures. But one could also argue the opposite: Universal disruption is the perfect time for reinvention.

Fairhurst says that this global disruption has proven how important to the economy travel and tourism is. For that, he’s somewhat optimistic that DMOs will find a way to pull through.

“I think one of the interesting feelings about the current time is that competition has become a bit more subordinate to a much more creative, collaborative approach,
Fairhurst said. “So I think I think there’s a very good chance that we’ll see much more innovative good practice sharing initiatives … DMOs are absolutely instrumental in helping support recovery and some of that is going to be around preparing the ground ahead of time.”

Norwalk of Visit Seattle believes survival will depend on a recasting of the role — and size — of the DMO, and a recognition that the good ol’ days might not be coming back any time soon.

“We’ve all grown so accustomed to this model,” Norwalk of Visit Seattle said.”And I think we were lured into a decade of amazing growth in our industry and I think it was almost an embarrassment of riches of the performance doing so well.”

Norwalk adds that even the DMOs that prudently set money aside during the good times are learning that even that is not enough of an insurance policy — meaning transformation is essential.

“I think that the DMO world will change forever. We’ll be doing business differently, more agile, smaller, laser-focused on what’s critically important to build economic development through travel.”

UPDATED: This story was updated to include details of the UK’s assistance for DMOs. 


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Tags: coronavirus, destination marketing, dmos, tourism, tourism tax

Photo credit: St Peter's Basilica in Rome Jacob Surland Fine Art Photographer / VisualHunt

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