ABSTRACT
In Colorado, a state government referendum in 1993 resulted in the abol ishment of the tax that funded the Colorado Tourism Board (CTB). Without such government funding the CTB was closed (Bonham & Mak, 1996). The state became the only one that did not have an STO. At the time tourism was the state’s second largest industry, worth an estimated $6.4 billion annually (La Page et al., 1995). The effects in the marketplace were sig nificant, with estimates that Colorado slipped from 3rd to 17th in terms of traveller recognition of state destinations, and that pleasure travellers decreased by up to 10% (Donnelly & Vaske, 1997). McGehee et al. (2006) cited a report indicating that Colorado’s share of domestic pleasure travel declined by 30% between 1993 and 1997. In 2004, the Illinois governor’s office proposed a 54% cut in tourism
funding to help offset the state deficit (Bolson, 2005). This was success fully opposed in an aggressive campaign by the tourism industry, led by the state’s CVB association. Such a withdrawal of government funding can lead to a tourism crisis. For example, in 2006 Tourism Waikato, one of New Zealand’s regional tourism organisations (RTO), had its budget unexpectedly cut in half by the local government (see Coventry, 2006, p. 1). Tourism Waikato’s Chief Executive Officer lamented: ‘It’s a very gut wrenching situation. Marketing of the whole of Waikato will be suspended until funding regenerates.’ The world average for NTA budgets was estimated at US$19 million
in 1997, which pales into insignificance in the global marketplace in
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comparison to leading consumer goods brands such as Sony and Philips. DMOs compete with such brands for a share of voice in discretionary spending categories. Morgan and Pritchard (2001) compared Sony’s annual advertising budget of US$300m with a WTO estimate of the total tourism advertising spend of all governments in the world to be US$350 million. Marketing destinations in a dynamic environment requires significant
financial and management resources. However, destination marketing is undertaken by organisations that often have no direct financial inter est in the visitor industry, and therefore have no income of their own. A key exception is in places where a bed tax regime operates, such as North America, where increased accommodation revenue can lead to an increased budget for CVBs. Of course the reverse also applies, as in the 9/11 aftermath when accommodation revenue decreased in many places. For example, in Las Vegas, a 10% decrease in visitors following 9/11 resulted in a similar decrease in the CVB’s $250 million annual budget. While Vallee (2005) reported Canada’s largest CVBs, such as Mon
treal, Toronto, and Vancouver, have budgets ranging from $10 million to $25 million, many DMOs have limited budgets. For example, Rogers (2005) found only one in five British CVBs had a budget greater than £100,000. Relative to RTOs in other major cities, the London Tourist Board (LTB) is poorly funded by government (Hopper, 2002). At the time the LTB received £1.85 million from central government and £241,000 from local authorities annually. The remainder of the £6 million annual budget was contributed by the private sector through subscriptions, partnership marketing, and sponsorship. Funding is a critical issue for DMOs. In fact for any marketing organ
isation without products or services of its own to gain sales revenue it is arguably the most important consideration. Non-business organisations usually cannot cover costs through sales, and often devote ongoing efforts to generate new tax revenues, sponsorships, and/or contributions from members. The high reliance on government funding leaves many DMOs at the mercy of political masters. A survey of USA CVBs identified the main impediment to financial management was future funding security (Sheehan & Ritchie, 1997). Security of long-term government funding is not only a challenge faced
by STOs and RTOs. WTO (1999a) estimated that collective worldwide NTA budgets declined during the 1993-1997 period, from US$2,224 million to US$1,791 million. The problem is global. RTO budgets in Australia have generally been modest, and in New South Wales many have strug gled to survive (Jenkins, 2000). Carson et al. (2003) found local author ity budget contributions to tourism in the state of Victoria, Australia, ranged from A$2,000 to A$6.5 million, with a median of $232,000. They found 40% of councils surveyed indicated a tourism budget of less than A$150,000. In Scotland, Kerr and Wood (2000) reported on the financial difficulty, including near bankruptcy, for some ATBs due to reduced lev els of local government funding. They cited the example of the Dumfries and Galloway Tourist Board, which was £1.2 million in debt in 1998. One of the problems was that the ATB areas did not match local government
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boundaries, and so ATBs were forced to lobby several councils for funding support.
