Opponents of funding state tourism marketing in Florida present two broad arguments in their quest to eliminate VISIT FLORIDA.
- State tourism marketing neither works nor is necessary; and
- Funding state tourism marketing equates to corporate welfare, expressed most often by the phrase “government shouldn’t pick winners and losers.”
The criticism that tourism marketing does not work has relied on two separate mathematical approaches. One is a set of oversimplified calculations that concludes Florida’s tourism marketing has failed because increases in tourism funding (expressed as a percentage of the previous year’s funding) failed to reap proportional increases in visitors (also expressed as percentage increases). A simple analogy demonstrates the problem with this logic. Imagine a friend who is considering closing his 401K account because the 50% increases in his annual contribution during 2008 failed to deliver a 50% increase in the balance of his account.
Another set of calculations, far more complex by comparison, garnered press coverage twice in less than three weeks. Mr. Michael LaFaive and Dr. Michael Hicks, publishing under the auspices of the Mackinac Center in Michigan, were cited in a Tallahassee Democrat article and appeared again as a guest column in the Tampa Bay Times. Here’s an excerpt of their damning analysis:
“Our 2016 study, ‘An Analysis of State Tourism Promotion Funding,’ examined the economic impact of state promotional efforts in 48 states, including Florida. We examined economic activity and incomes of employees in the three sectors of the economy most likely to benefit from state marketing efforts. These were the accommodations industry (hotels and motels); amusement and recreation; and arts and entertainment.”
“We found that when a state spent $1 million in taxpayer funds to promote itself, its accommodations industry saw its economic activity go up by $20,000. That’s no typo. It’s not $200,000 or $2 million, nor does it refer to the total taxes that flow to state treasuries as a result of the promotional efforts….”
This econometric analysis invites scrutiny. Limiting the evaluation of the economic activity resulting from tourism marketing to only three industries is the equivalent of a farmer assessing the value of purchasing hay for his farm in winter to a calculation of the economic activity of the farm’s cattle operation and ignoring the economic activity produced by the sheep, horses, mules, llamas, and goats who also added value to the farm as a result of the investment in hay.
Even more concerning is the shift in both perspective and methodology the Mackinac study represents for Dr. Hicks in comparison to his 2009 econometric analysis of Indiana’s tourism industry. In the Indiana study, he includes 40 industries—or all of the farmer’s animals—in his model and concluded:
“Using a model that specifically accounts for the reverse causation problem of tourism taxes and tourism expenditures we found that a dollar spent on tourism promotion generates roughly 15 dollars in additional tax revenues for state and local governments.”
It is noteworthy that this Indiana assessment was produced under the auspices of Ball State University’s Center for Business and Economic Research, not the Mackinac Center.
Further, in a May 2009 column for the Indianapolis Business Journal, Professor Hicks wrote:
“The case for government advertising of a region has a long pedigree. It is found in the argument most economists make for any appropriate government spending: Regional advertising is a public good. A public good is something only the government will produce because of what we call the ‘free-rider’ problem. Even if a business were to voluntarily pony up money for a marketing campaign, those that did not will benefit from the increased tourism traffic. There is no financially compelling reason to contribute. So, if Indiana is to be marketed as a region, government will be the one to do it.”
“I have read lots and lots of tourism studies by academics. I have also done several of my own. The consensus seems to be that every dollar spent marketing tourism returns $9 to $21 in tax revenue back to state and local governments. The differences are based on the type of location and the quality of marketing.”
It appears, given the shifting conclusions, that tourism marketing worked before it didn’t. Or, more accurately, it works when you take into account its impact throughout the economy, rather than selectively choosing what to measure.
Next, let me address the flawed treatment of state tourism marketing (VISIT FLORIDA) and business incentives (Enterprise Florida) as equivalent economic development strategies. They are not, especially when the measure of “picking winners and losers” is applied.
By justifying the elimination of budget support for VISIT FLORIDA, the House bill supporters are on record stipulating that the industry will thrive on its own. In other words, the tourism industry is already a winner—and with distributional benefits that make us all winners by triggering state-wide sales volume of $183.5 billion (2015) responsible for $11.3 billion in state and local tax revenues.
Strengthening Florida’s global and national competitiveness via investing in tourism marketing does not negatively impact other Florida industries. To the contrary, tourism supports all industries riding along on the consumption that it triggers. Therefore, funding state tourism marketing does not determine losers either.
The bet being placed is whether Florida can continue to win when the Legislature withdraws the state’s tourism brand from a competitive marketplace. Ten years of evidence suggest otherwise. My testimony to the Senate Appropriations Committee on January 26 demonstrated that Florida lost tourism market share from 2005-2012, coincidentally under conditions in which competitor sun states increased their marketing as we decreased ours.
Arguing that tourists came before the state started marketing—and will continue to do so—fails to recognize the competitive nature of the marketplace and, more importantly, that the scale of positive impact generated by tourism in the last 20 years depends on volume. Will individual resorts and attractions continue to market themselves? Indeed, some will. The problem is that only the largest and strongest of the state’s tourism stakeholders have the budgets to go it alone. So ironically, those seeking to prevent a marketplace that benefits a narrow set of corporations in Florida will be creating the very conditions that will.
With the stipulation that VISIT FLORIDA has some realigning to do to regain the trust of the Legislature and tax payers, the focused dialogue can only begin in earnest when we discard disingenuous analysis and stop equating tourism marketing with the practice of awarding cash and tax incentives to individual companies.
Dr. Dale Brill is the founder of Thinkspot Inc., a Florida-based policy research and development consultancy. Previously, he served as the Director of the Governor’s Office of Tourism, Trade, and Economic Development, as well as Chief Marketing Officer for VISIT FLORIDA. Thinkspot’s revenue streams are not generated by the tourism industry nor public funds. Dale can be reached at [email protected]