Skift Take

Developing more innovative and stable sources of funding remains critical for this important, expanded destination management role to succeed. Some DMOs are on it, but many more continue to rely primarily on hotel bed taxes. Is the rapid return of travel dampening the sense of urgency?

During the spring of 2020, destination marketing organizations (DMO) saw their primary and often sole source of revenue vanish along with travelers, all while their roles ballooned from becoming a primary safety information hub to advocating for funding, embracing destination stewardship and forging new relationships with residents, government and businesses. 

Close to two years later, new data further cements what destination leaders have been sharing with Skift over the past year — that the transformed and expanded tourism board model is here to stay. Over 76 percent of U.S. tourism boards rank destination management among their top five key responsibilities, according to a newly released 2021 Funding Futures survey and report by strategic marketing firm Miles Partnership, in collaboration with Civitas, Tourism Economics, and Destination Analysts. The report will release in full later today, but results were announced in a webinar on Tuesday.

The survey is an update of an earlier 2020 report and analyzes responses from 80 U.S. DMOs, 21 U.S. state tourism offices and four Canadian tourism boards, with updated data and recommendations for DMOs in a post-pandemic world in which tourism is back yet changed.

U.S. tourism marketing offices also confirmed the three key areas where their roles have increased as compared to 2020: 1) engaging and aligning with key partners in private and public sectors, such as governments and economic development entities, 2) improving tourism by focusing on sustainability and resident engagement, and 3) making a greater commitment to DEI. 

And yet efforts to develop new sources of stable funding appear to lag — just 34 percent of tourism boards indicated they were working on this or have done so, against 25 percent of their Canadian counterparts. 

“It’s encouraging to see in the Future Funding report that more and more destination organizations are developing new funding sources, but there is more work to be done,” said Don Welsh, CEO of Destinations International, a DMO member organization. “We believe destination organizations should not be fully dependent on just one funding source, but instead diversify funding with a mix of public and private investments.” 

U.S. destinations have been recouping on their hotel bed taxes since vaccinations reopened the door for wider travel, but their Canadian counterparts continue to rely primarily on government support.

Understandably, on the U.S. side there’s optimism about 2022 budgets, with 61.8 percent of tourism boards saying their budget for next year will increase. Over half also indicated that they are working on building up a reserve fund with up to six months of operating budget, while a quarter are working on a full year’s reserve and about 10 percent are building up reserves worth two years of operating budget.

A Record Number of Tourism Improvement Districts in 2022

The top five funding sources at this time for U.S. tourism boards show the hotel bed tax in first place as a primary source, followed by Covid recovery funds, sponsorships, membership fees and advertising revenue, according to the 2021 Funding Futures survey. Government recovery funds dominated for Canada’s tourism boards.

In the U.S., a significant portion of destinations – up to 40 percent – indicated pursuing the tourism improvement district (TID) as a new sustainable source of funding, one which was recommended in the first Funding Futures report.

Looking at a sample size of 100 cities, 29 with TID mechanisms and consulting data on hotel performance by city, Tourism Economics said it showed that the cities with this funding tourism improvement district allocation outperformed their peers. 

“Once this increase in funding takes place, a change of performance also takes place in that city relative to its competitive set,” said Adam Sacks, CEO of Tourism Economics, at the launch of the Funding Futures report.  On average, TIDs produce a 4.5 percent lift in hotel room revenue, Saks added.

Looking at the U.S., tourism boards in at least a dozen states are currently pushing for TID legislation by 2022, including New York, Utah, Arizona and Illinois, among others. Three destinations — Virginia, Louisiana and Massachusetts — received TID legislation approval in 2021.

“The year of 2022 in my estimation may be the year of TIDs in the Midwest” said John Lambeth, CEO of Civitas, at the launch. “This is adding a new, very stable dedicated source of funding as another tool in our toolkit as something else that’s available to DMOs to provide increased supplemental funding.”

“Destination organizations that engage meaningfully with their communities are in the best position to find funding from traditional and nontraditional stakeholders,” said Destinations International’s Welsh. “We call this the Community Benefit Funding Model.”

Top Three Investment Priorities: Industry Partnerships, Community and Destination Planning

As tourism returned, doubts lingered as to whether tourism boards would keep prioritizing their residents and continue to market to them. At Skift Global Forum, leaders of California and Florida tourism indicated that the shift was here to stay, and that they would continue to market to their insiders as local marketing campaigns had been well received with pent up desire from locals to explore their backyard and support their homegrown businesses. 

Indeed, in ranking their investment priorities for the next two years, a whopping 67.4 percent of U.S. tourism boards said they plan to engage more closely with residents and community groups — second on the list after engaging more closely with businesses and industry partners. Up to 40.4 percent also said they would invest in conducting or updating resident sentiment research as a fourth priority, after developing or updating its destination master plan. DEI programs ranked fifth, with 37.1 percent planning to invest in those over the next two years, against 38 percent  state tourism offices. 

Just 12 percent of U.S. DMOs said they would invest in supporting sustainability initiatives in their destination.

Leading on Sustainable Tourism

Four ways in which the Futures Funding report recommends DMOs can take leadership in the sustainable tourism and regenerative tourism areas include: sustainable travel messaging, levying higher hotel or other taxes on the kind of tourism that has more impact such as daytripping, destination management and regenerative projects.

In 2020, tourism boards focused on proving their value as a key player supporting the visitor economy and communicating tourism’s contribution to the destination’s quality of life.

That push and the pandemic has helped cement tourism boards’ status as a central “all about the destination” place to consult and plan how to explore responsibly and safely.

“Starting in the Spring of this year, website activity on DMO sites was higher than 2019 in every single month and every single week,” said Saks. “So clearly travelers are going to DMOs as a means of planning and booking their trips.”

DMOs’ reponses in the Funding Futures survey also show a commitment to continuing to build relationships with their host communities for a more resilient industry on the other side of Covid. Over 80 percent of U.S. tourism boards surveyed agree that their organization “will  have a central role in improving tourism more on sustainability, resident and local business engagement,” with a 100 percent response rate from Canada’s four responding tourism boards.

The commitment to DEI is also greater, with 76 percent of DMOs in the U.S. and 75 percent of those surveyed in Canada stating “we are investing in a greater commitment to Diversity, Equity and Inclusion (e.g., training, staffing, working with partners and community groups).”

“But where help may still be needed is in moving forward the development of new and more sustainable sources of funding,” said Erin-Francis Cummings, CEO of Destination Analysts. 

Key DMO Recommendations

The 2021 Funding Futures report makes four recommendations for DMOs: to track funding available to tourism from various government mechanisms including through the Economic Development Administration, to manage future risks in funding, to stay tuned to resident industry and political sentiment, and to create or update the destination’s master or sustainable tourism plan.

The recommendations align quite a bit with the findings of a recent report out of the UK examining the new role and performance of the country’s tourism boards.

It’s clear from the data that the expanded role of tourism boards are here to stay — an average of 11 responsibilities for Canadian marketing offices and eight for those in the U.S. The question remains whether a larger number will also prioritize diversifying funding or whether they will fall into the lure of the returning deep pocketed international visitor in 2022. 

UPDATED: This story has been updated with comments from Destinations International.

Subscribe to Skift Pro

Subscribe to Skift Pro to get unlimited access to stories like these ($30/month)

Subscribe Now

Tags: coronavirus recovery, destination marketing organizations, dmos, tourism boards

Photo credit: Panoramic view of Cannon Beach in Oregon Courtesy of U.S. Department of State / Flickr Commons

Up Next

Loading next stories