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    DMAI-Oxford Economics Destination Promotion Study

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    © All Rights Reserved
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    52 views57 pages

    DMAI-Oxford Economics Destination Promotion Study

    Uploaded by

    Mike Cronin
    DMAI-Oxford Economics Destination Promotion Study

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    © All Rights Reserved
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    OXFORD ECONOMICS Destination Promotion: An Engine of Economic Development DSC RR CR CORSO drive broader economic growth November 2014 OXFORD ECONOMICS Destination Promotion: An Engine of Economic Development November 2014 Bovwono ecowomes Contents 1 2 Tho\ncroasing Value of the Visitor Economy 6 24 Lorgtam tends 6 22. Recent porormance 7 7 0 23. Vittor economy gains relative to other waded clusters 24 The simple cas fr destinaton promotion 4 3. Catalytic Impacts: How Does Destination Promotion Drive Economic Growth?. z 3.1 Buldng transportation networks and connecting to new markes....18 32 Raising the destination pric, 19 33 Tageted economic development trough conventions and ade ‘sows 2 34 Raising the quality of fo 1 4 The Economic Track Record of Cities that Prioritize Destination Promotion 37 41 Carelation 38 42 _Cavsaltyanaiyss: Does growin nthe visor economy lee 10 Growth other sectors? 40 421. Approach. “ 422 Overviw of thee tested models “ 423. Model suits a 43. Otberempiical research 46 5 Conclusions... AT 6 About Oxford Economics Appendix. Destination Promotion: An Engine of Economic Development. November 2014 Introduction ‘Stetes and cts across the US recognize he Importance of the vistor economy end colectvely invested neery $2. ilo estnation promotion last year Tce om ee ee 2 Spay ene na oe a ce Beatie tied wee cate, i Ah Tne td “amo oa However, the dividends of destination prometion exond far beyond the bereits. | Visitorrelated industries _2ccrung to vstor lated industies and ther supoters. This study, based on @ | and include significant combination of case studies, interviews, IReratue review, and statstcat | Sie locations and new ‘nals, fs that destination promation fuels development across the nite | investments In unrelated eeoseme spect ut ‘sectors. “The reason i hat n alton to atracing vistors, destination marketing die ‘broader economic growth by sustaining air sence, creating familar, ‘tracing decision makers, and moving the quality of ie in a place, [As a resut, cles and sites that prize destination marketing and coordinate these fforis with economic development intitves heve ‘experienced significant ste relocations and new investments as 2 drectresut Statstcal analysis covering more than 200 ctios over the past 23 yours confims broadly what case studies indicate ndvidualy- destinations wth substantial and growing itor economies tend to outperform tel peers, Its on this fundamental eve that dethation promotion has been found tobe an engine of ecenomse development The dividends of ‘Wowrono ecowcMeS ae Destination Promotion: An Engine of Economic Development November 2014. 1 Key Findings The visitor economy warrants investments in destination promotion [As incomes rise, consumer spending on travel has grown at an even fastr rate and ‘employment inthe travel eccnomy has led growth curing the recent econamic recovery. Hospitality and tourism has cutpertarmed the aggragate ofall other traded cluster export sectors since 1998, wih employment expanding nearly 10% wheal ther sank 1% As incomes rise and lobalzation continues, US destrations are poised to continue to ‘captatze trough target promeiral vestments Destination marketing plays aninepral and inispensable role in the competitiveness of ‘the vistor economy by pooling resources to provide the scale and marketing Infrastructure to promote a place to national and intetionel mantels [Destination promotion drives economic development through several channels Bung transportation networks and connecting to new markets Raising the dettnation profile “Targeted economic development through conventions and trade shows FReising the quality of fe Growth in the visitor economy drives growth in other areas of the economy Destinations with a higher concentration of visterelated indus tend to grow faster Econometric ests show that employment shits in the vstor economy are followed In subsequent years by sustained changes in growth in ther pars ofthe economy, [A 10% increase ina destinaton's stor-reated employment clave fo the US average tends to be followed by 2 15% ise m beoader employment inthe short-run, Economic development can be more effective through coordination with destination promotion Ar sence development intaives can be more effective wih destination marketing ‘organizations (DMOs) at the table, “The buling and adoption of a brand shouldbe cootdnated between OMOs and ‘ecanamé development erganizaions (ED0s), DOS and DMOs should maintain a platform fr regular communication, Forimpetantnew investment bids, EDOs coordination wth OMOs resuts nth best possible pitch, £EDOs and OMOs can jointly leverage sratenic conferences, rade shows ‘@owFon0 EcoNoMCs Destination Promotion: An Engine of Economic Development Novernber 2014 2 The Increasing Value of the Visitor Economy Koy Fincings "= As incomes have risen over the past hee decades, consumer spending on travel Mas grown at an even aster ae |= Through the most recent economic downtum and recovery, employment in tavel-elated sectors has outperformed the rest ofthe economy. |= Hospitality and tourism as 2 aded cluster of services has outperformed the aggregate of ‘al the trade cluster expon sectors since 1988, with employment expanding nearly 10% ‘whl all otersshran 1% '= As incomes rise and globalization continues, US destination are poised to continue to capitaize within 2 favorable growth envroement tough targeted promotional "= Destination marketing plays an integral and indispensable role in the competitiveness of ‘he visio economy by pooling resources to provide the scale and. marketing infrastructure to promote 2 place 1 national an intemational markets 2.4 Long teem trends Across the US, favorable ial winds have supported above average grout in the ‘ator economy. As income levels ise, consumers are dedicating a greater share of spending to travel and tour. For example, nthe span of sighty more than @ "generation, par capte consumer spending on hotel stays inthe US has inceated "200% since 1980, even as par capa GOP as a measure of Income levels ~ has increased onty 75% Spenaing on oo PTS OS beng onthe Pcie se 163 200% Spondon png nas ingesecs uo oe 280, percopea bas 75% (GDP has ncreseed 75% ance 100 (rea per capa bass). ‘Soon eooNOMIES Destination Promotion: An Engine of Economic Development November 2014 22. Recent performance ‘Travel has preven its resilence, with @ stong recovery from the most recant ‘economic dowrtu. As the aitor economy has recovered, t has contrite job {rOwen since the end ofthe recession at @ Taster ate than the US average. As of uly 2014, empoyment in key sectors ofthe visor economy’ was 7.9% ahead of ts lune 2009 eve compared to 6.1% gain forthe broader economy, The visitor economy thas grown faster than the US average since Visitor economy employment trends the end ofthe ‘Compaze to eal nonfarm employment recession. er (ne 200910) Vietor ‘00 | ‘08 2.3. Visitor economy gains relative to other traded clusters ‘The vistor economy represents © valuable locall-produced export for many regional economies. The resuting vstor spending supports Jobs, Incomes, tax revenues and local business sales that represent part ofthe region's econemic base, erically important in providing demand for local supporing sectors. In this * For this analysis of nationalemployment trends, we use the lesure and hosptalty sector, consisting e NAICS 71 A, entertainment and rerestion, and NAICS 72 Accommodations and fod sence, o represent the vistor economy, ‘Sow eNOS suarasTeniaNT Destination Promotion: An Engine of Economic Development November 2014 sense, whether refered to as an ‘export oa set of “traded” gpods and services, the vstereconomy plays an important ole the "base" economy of many regions * ‘The Impotance of such exports, oF trade, for regional economies has been fot Fecognize’ In recent decades. economists have added to tis concept wih esearch onthe mporance of ‘clusters’, referring to the collacon of local elements ‘and charatrstes that diferente 9 particular region's capsbity st producing paricular ype of goods and services.“ Michae! Porter, who is widely credited with [ “Regional economis popularizing the term, defnes a chster as ‘geographic concentrators of | perfermance is Intrconnectod companies and inttutons in a paiculr field Poner has futher | Strongly influenced by ‘aévancedthis concept through further reseerch to identy the importance of ‘waded | he waded clusters cust’, considenng the important role of traded industries, andthe oie of clusters | which appearto shape ‘with such sectors fo assec that “egional economic perfomance is stongly | wages in focal influenced bythe traded clusters which appear o shape wages m cal industies'* | industries.” “This rezanch haz haan vena 0 define ac lunar on the anf re recent infemation on US employment by sector and by geographic region ‘This course of research recognizes the impertance of ravel and ourém, species doting “oeptatty and toussm” a& one of 51 waded clusters." Indeed. the hosplaty and toursm traded cluster Is one of the largest nthe US behind oly * rarer bacpeson We cre acd goat rae posed gene agentes st adc serosa ein an te he cui, we nc ne oe gr arses panos ma aun Lectura Ears, Employer ang Peon A Caen Atemertot US Sli nd Res" Garay 8 re, € (209) 20-25 Mol Pat, “The Eran Prmanca ot Regen” Rag Ses 7) 67 200) 4548, “sen Cm Mair Senso Cats Reon Conpetiveress and Ezaorc Davee (The Bckgs nee ach 205 nw igs aurmeesers Meeps 20OLAeesN et gF000319 tr "chat Pore, Cates ante New zonanesf Copan va 78 (Havad uses ese ote. 168 "oagote M.A, Panera Sam 206 "cen Cater of Ret nites NBER Workin Pape Si, Nt eat * re us chap Pie ne egy anton cat wi ee ab nao ten rg eon esses ew she arpeaon, eevee cores rss ng i mapas ts (Bs eater when etic fun neta ocatee surg war pts *Fuver asso ee spies ofc bses bags sau avlae ne evn are Mak Mtr so.“ ate Drpmet ne Teun ay Pag Pests Ther” Ase esearch Ezoam Dereon ‘Gover ecowowes ae. ‘Destination Promotion: An Engine of Economic Development November 2014. business services, an distribution and electronic commer. There were 2 total of 25 millon jobs inthe sub-sectors that make up the hosptlty and toussm traded Cluster in 2012, representing 72% of otal employment in aded clusters in the US, (On a national bass, -in-14 oben aded cluster aa inthe hospaty and tourism belle Hospitality and feurism has ‘The US Cuister Mapping Project analysis also provides a valuable way tolookatsb | generated more jobs creation relative to ctr traded clusters. Based on this anabis, we find that | over the past 14 hosptalty and tours has generated more obs over the past 14 years than any | years than any other ther major traded cster of ts sie ‘mujor traded cluster As shown in the folowing char, the 267.500 jobs created in the hospitality and | fits size. touts sector since 1898 exceeds gains in sectors such aso and gas production; ‘marketing, design and pubishng; and financial services. From the perspective of local economic develpmentsrateges designed to expand the traded base of 2 region, growth in the hosptalty and toursm sector stands out relative to contraction In more actions waded goods sectors, such as pasts, production technology and neawy machinery; and automotive. ‘Job creation intraded clusters Netensge abe 90802012 aura esp andinran —— tages poet nd apr —=s eg en ee pay ce vee “ieroroonaroe cas ats Proce ‘ranean alga Foal pasrg and nents ‘Cimon pea ssa seman ror recaps rane nae ‘ocronn eeowoMes 4 Destination Promotion: An Engine of Economic Development Novernber 2014 ‘Tis ead li coin alo sans in contsovadod cerin saegt, Ova ce 1058, he fosptaity and touram a rade custo has expanded employment by 8S, compared io an actual dane in ‘waded listers in aggregate of-0 2% Traded cluster employment gains over time Index cumulative percentage pts of employment gow sce 1008 18% | Hespitality and id toursm traded clusters oe ‘other vase ™ cluster in eaaregete 908 2aco 0m 2004 moe om 010812 Sowc:US Chunar Mapping Pec Cone Bies Totem sonics ‘24 The simple case for destination promotion ‘The above average perfomance ofthe vitor acanomyy and ts eaperformance of caer traded clusters confirm the mers of cestination promotions sown right. AS incomes iso are lobalzaton continues, US destnatons ave poses to continue to | Destination Stine wifi gowhervonret Ans ace ce, vetor | rh plays an spending represents an export ee money ows ito he lca economy integral an meee eee 7 Indispensable roein ‘The cveraty an quality ofthe US product, both for leur and mestngs travel | the compotivences markets, posiions US destinations to crve further growth tough targeted | ofthe visitor promotional investments, ‘economy by Desinaon makeing lye an inegral and indapersabe cle in tne | #derossing ts competveness the visor conan by adress tee chalergs ‘nique chatonges. ‘@owoa0 Economies PoEeeeeeeeae: Destination Promotion: An Engine of Economic Development CChatlnge #1: the visitor economy is fragmented “The visitor economy is averse wih bene accruing 2cr08s various industries (€9, holes, resturais, ‘eal stores, transportation, performance venues and ther stactors), and in many cases, these establishments are operated as small businesses that lack the eapacty to conduct certain types of marketing, Moreover, cetan benelts accrue across the economy rater oust an indviual business. Because a vitor spending is spread across businesses, any single business may not capture sufflent share of & Wetors spending to lusty rmarkating to atract wstors to a destination. For f@ample, an ndvival hotel could market the atractveness ef a destination, but K would only benef from thse adaltonal vistors who not only chooee tho datnation, but alto choose. that Novernber 2014. Distribution of tourism spending in the US 00a shar cra neg Se: BEA Teal Touran Saale Asset particular hoe, and the hotel would only baneft cect from the vistors spending athe hotel In sther words, atthe level of an indivi Business, the return | Independent makeing fo tract visitors to a destraion can be less competing However, when vewed atthe level of the destinaton, there i a more dect ‘connection. The estnatin captures @ subsist dolar amount per vitor, ad in aggregate there are competing ens on effective destination marketing Solution: destination promotion provides the scope end strategic Vision supporting a wide array of individual businesses Destination promotion organization aso play role furthering the stratgic potential “of he vtor economy, Destination marketing organizations (OMOs) oan take lng ‘term vew of tho dealopment ofthe destination, and pursue tacts 1 help develop ‘visitor economy tat betor fis the goals of local residents and businesses. For ‘example, many destnations have a mx of peak, shoulder, and low season periods. DDMOs take steps fo build shoulder season and law season demand, and help fi ‘lower days ofthe waek, supporting @ moe sable base of employment and helping ‘ongoing operations sctieve a breakeven” level of profeabity, Smlary, OMOs can ‘play @ role helping o find scons that balance the development of the vstor ‘Secnomiy withthe constants and goals of given destinaton, suchas fostering the ‘Sovelopment of geographic areas with greater capscty for growth “The impetance of overarching destination marketing fs aso event within the group ‘meetings business. Meeting planners, especialy for larger events, requve support ‘2nd incentives that co wel beyond what a single business can offer However, the benefits are spread rss the ene spectrum ofthe itor economy, ‘Geom cows 7 Deetination Promotion: An Engine of Economic Development November 2014 Challenge #2: the primary motivator of a tip Is usually the experience of ‘destination, extending beyond the offerings marketed by a single business, ‘The fundamensl motvaton seing a Vit to 8 gen destination frequently not the oflerngs of @ single business—instead iis the destination, including @ ange of Stractons andthe oval expterce ofa place. This exparenc ie compraed ta | The fundamental ‘visitors interaction with, and patronage of, numerous businesses and local motivation driving a feiperences: Reel and. oer accomadations, reeauaris; ahoppng and | Visit not usually ‘galleries; conferences; performances and other events; family activities; sports and the offerings of a tthe recreation, and cara te and atracons single busines instoad iis the Market efots tat focus on ony one subsector of the vst mane, suchas | station communcating the offering of 2 specfc hotel or other business, do ot also dequstty adres the core motivation for potential vitor. Through cooednated ‘estnaton promotion, local businesses are able to represent the destination colocivaly, arin doing 20 die domond fora sogmonta ofthe visor economy. Stand-lone marketing efforts would almost ceainy be less efecive than 9 ‘collective desthation marketing campaign. Solution: destination promotion articulates the brand message that is, Consistent with consumer motivations ‘The same holds ve inthe case of group travel, such as coporste meetings and trade conventions, in which an event sponsor seeks @ destination that meets rutile success esteria. While the offerings ofan individual hesdquarier hotel or convention facity are cnticaly important, in many cases the mers of @ destination ‘overl are being considered rdative to other potential optons. In such stuatons, 2 coordinated strategy from intid marketing and touch pins that bud fame, to the dedicated sales team tha tes up the destnatin's best offer of facies, laments and servess, augments and rises beyond the message of @ single operation. CChallonge #3: effective marteting requlres scale to reach potential visitors sero3s multiple markets EMectve destination marketing requires signifcant and consistont funding witht The scale of fm of gaining @ suffeent “sree of vole” to be heard and maka an impact. | collaborative \Whather in the form of adverising, public rlaton efforts, or group sales, scale | destination produces effcioncies that maximize the share of funding that goes to scual | marketing is more marketing and advertising, ces down por unt advertising costs, and enables | etfoctive than what igner mpact, more specazet efor. As a resut, ho larger scale of ceuanoratve | jndvidual destination marketing is more effective than what indvidual businesses could — | businasses could accomplish. Simply put, the whol of dostnation marketing is greater than the sum | accomplish of ndvidual pars. Solution: destination promotion pools resources to provide the ‘economies of scale and marketing infrastructure required to generate impact, “@onv0A0 Econowes — a Destination Promotion: An Engine of Economic Development November 2014. (One ofthe benefits of coorénated marketing fected by 2 DMO isthe abity to have a stbleoxganzation ond funding base to soppnt destination marketing, As 8 resul, DMO'S ore able to efficiently leverage the brand, infrastructure and ‘elatonshps that have been bul over tne. For example, DMO: Sea 1 Consuct marketing tet leverages a base level of awareness ‘efficiently leverage of the destination has already been ertablehed with some the rand, infrastructure and target customers lowing annual marketing spend to be more cffetve at activating and renoring key message 1 Useexctng infrastructure, suchas webs ‘hat are updated ona recurring basis and publestons, = Engoy @ staff with ectabiched relationships wih local toursmsector businesses and marketing service providers: and, 1 Support market research, such a visor profle stusis, that help ndvival businesses beter target market opporuntes, but which would ikely not be economical for inchdual businesses to support independently “Through these ecoromic factors, destination promotion helps expand the visor ‘economy in ways tht are consistent wih kcal pons, building the types of ‘Spportunes that area etical par of economic development Sovvoao econowns rlaionships that ‘have been built over time. 8 Destination Promotion: An Engine of Economic Development November 2014 3 Catalytic Impacts: How Does Destination Promotion Drive Economic Growth? “The fist section ofthis report has defined the mportance of destination promotion in ts own right, enabling stakeholders in the vitor economy to Dene rm concerted marketing of place. However, the dvdends of desination promotion eend fe beyond the Bonefts that accrue vitor related industries and their supplies The dividends of Gramples of ena ator ince he sae of wren manutacing. hi gogeaghi variable caded facars such as proxy oa oan ox Great Lakos coast nd cme. Ines among uch varies, tse vi toda ate thes mest mprant prec population arth ver th 10 yee erg, nang blow fans mean mmiraton, ‘avin an cinate Basescn an evsustons rth Mer 2000 2068, i ar ats ur oe» good rector of growth Beyond te base sample poios ‘Soveonn economies ss 8 Destination Promotion: An Engine of Economic Development Noverbe: 2014 1 MSAs that attacted greater numbers of leisure vistors also atroctod a guster share of cologe educated residents, consistent wi the expectaton that leisure amenies can [Cities that atract greater contro toatracting high sled invauals oa ty numbers of flsure 1 Lainie veune ae now powmtar avai ian | Wor ao tracted population growth than previous measures of city amenities eee ee eee used by other researchers, such as the number of restaurants, educated reckdents, roe tesa and mune | Neighborhoods that are ‘central ecrestonal dts, defined 2 proxiate fe retetional and eisur-crenes amentes” | Sosingyaacislonto ‘ew faster hn other comparabe ress, ourshing even 2s | eyoente rs henguorters ther contra! ety areas lagged. Simiany, access to cental — | O'Cniave was howl, recreational dees was found fo be even more imporant | innumrssy by ne than proximty to the cenal business distict in explaining | nfuencad by the residential en price growth ‘Such research points tothe imparance of quay of Ife in tracing human capita that helps fostor valuable ecoromic growth. Looking ahead, the importance of knowledge, and skis, increases further, atracing human captal anticpated fo ‘become even more important, vibrancy ofthe city ‘The importance of quaty of He lays out In every business decisions being ‘made by fems that are cheosing new loatlons for expansions orto relocate, For example, Boving’s decision to relocate ts headquarters to Chicago was heavy influonced by the cutwral asses and vibrancy ofthe ety. This clatonship sel- tvidnto Jeff Malehor of Wd Business Chicago, who states “Traveler attractions are the same reason that (CEOs choose « place, itt walaorn Present "Every deck | present) a CEO, we buildin the cura assets. fhe famiy lant happy, I's & harer sell [The locaton} has to be a cool place wih OF course, quality of fe factors have diferent levels of importance depending onthe ‘ype of business and the company leadership making the ulimate decison, In some stustlon, t makes a temencous diference. Even # cera operating costs are higher in @ given location, they may not represent the most mporant factor fora company’s lation decision, Itmay be more imporant for an area to demonstrate the quality of Me chaacterstes that make the area atactve to the company's °*Facio ved to deine cental swan as insu proney wo ty cure ene, iar! tes, and ane recreational laces euen as museuns, aca atacon, jor esters, pars nd 2o08 ‘SoKFORD eoOWOWICS x Destination Promotion: An Engine of Economic Development November 2014 ‘executives and other relocating employees. Simi, quaity of ide has an inrect impoct on locaton decisions by helping a reson attract anc retain talented \wosforce Availabilty of sled labor is frequenty one ofthe tp citer in business location dicsons. and areas with high quaity of Ife are hata able to atract anc retain sus workers Observed best practice: For important new investment bids, EDOS will Coordinate with DMOs for the best possible pitch. Given the Importance of destination characteristics in the decisions of Investors and site locators, DMOs can provide the marketing contont and experiences to visitors to ‘strengthen the bid Al ofthe economic development organizations we studied reported coloration and contact wih thelocal DMO, including the use of colsteal and media onginally ‘developed by DMOs. For example, the Cleveland Department of Economic Development has arene secton is webste cated ‘Ling Here” that foeuses on amenities and atractonsinlucng arts, cuture, and entertainment Denver provides several examples of the collective impact of tourism on resident quay of fe and, nun, on economic development |&_TheDenver Economic Development Corporation (EDC) works wit Vist Denver to develop atractons in the mato area inctting urban packaging, destiation amenities. (including (Coon Field), 2 convention center, and urban actives. ‘Derver isa small market to we need everybody Colateraton is normal and required.” abeerves Tom Clark, Mate Denver EDC, 1 The reasons that people wait Denver, including @ vevant ‘entetainment and arts sector, ae the same reasons that ooze want 10 tve in Denver. The arpor. EDC, Vist Denver. stat tourism and state EOC all work together and mest on @ emiee The development of leisure stractions in 1= The Mevo Denver EDC lod the efor for funding of maior | jower downtown Denver funding requitements for a Major League Baseball team and | has boan instrumental in stadum, The stadium has been cataic in ower downtown, | the relocation of 20,090 ivi the development of entrainment and restaurants wih | residents fo the aroa. the convention center, Coors Stadium, and the Pepsi Center a anchors. This nas been a significant drew fr tourism but ha algo Jed to the celocation of 20000 people in lower ountown Denver ‘wouronn esoNMES % Destination Promotion: An Engine of Economic Development November 2014 In Cleveland, the CVE has taken the lad on destination development by creating partment soley focused on enhanc vitor expecences. For example, Destnaton Cleveland nas spearheaded the creation of anew ciy-wide way fring pcject David Gibert, President and CEO of Destination Cleveland. explains, “The stor experince is affected by a wise range of destination atactons. Wh the new way-fing inisive we are fecitaing exynde experiences for both vistore and resins, Ashevile recogrized the Importance of wor atvatons and amenties in 2001 by dedicating one percentage point of the occupancy fax toa Tour Product Development Fund. The OMO awards grants to capital projets thet generate jovemight Vstathn. Almost $20 millon i funding hae been provided for projects including spot aciives, conference canter renovations, and new atrecions, Since: the neepton of fund, allor spending inthe county increased E6%, compared to. | (ine Mision vistors 68% statewide ‘year. They support an ‘Tho Ashevile CYB directly supported economic development in plching the ety | amenity base—which estye to Now Baljum Brewery. Ben Teague, Execute Diecot of the Economie. | provides a desirable Development Coaltio for Ashevile- Buncombe County, states, “A vending tem for | lifestyle—that fs arcer ‘economic develment is ifesye,cuture and communty awareness. Our Cv is | than our population will the exper in premoing this” Stophanio Brown, Executive Drecr ofthe Ashevile | support. (6VB summarzed the pont “Nine milion vistors came to Ashevile lst year. They support an amenity base—which provides a desrableHestyle—hat is larger than 04" population wil support.* This was evidert in Ashevile's recent win of @ $125 milion investment trom GE Asiaion. The selection of Asheuile was heavily inuenced by He qUalty of Me. 201 related to bth outdoor activites and vibrant downtown, A& companies ‘00k to atc and retin tant, these location factors have becore more central investment decison "Nine milion visitors Stephane Broan Emeune ‘Aczording to Development CovoselosInlematonsl 2014 survey, 40% of corporate ‘executives te “quality of fe" information as one of the most ute features of an Economie Development Organization's website.” * Wining Sraiogesn Economie Dovolopmart Markating (Development Couette eaten 2016, hp sn bode comnang ete ‘Soom economies 8 Destination Promotion: An Engine of Economic Development November 2014 4 The Economic Track Record of Cities that Prioritize Destination Promotion Key Finding: ‘= Chie with a higher concertraton of vistor-elted industies ten to ‘fou faster than average, '= Recent research has found higherlevele of leisure ve postvely ‘fect populaton growth an employment grown tte cy level "= Econometric tests show that stuctra shi inthe visor economy, 1a folowed in subsequent years by sustained changes in grouth in cotter pats of the economy. A 10% increase in-a destination’ \sto-rlated employment thats achieved through an nerease in that destinations share o total US welor-elated employment (ie. market share gain), tends to be folowed by a 18% hcrease in fenployment in other sector: in that cy In the short mun (approximately wo year) Those metros which have experienced Having observe the various ways in which destnaton promation suppots broader | stronger performance economic development efforts, the quesion remains whether afacualeatonsnip | in visitr-related ‘can be deterred. Tat is. do ctes (and states) that ae succeeding 2s visitor | sectors have also Cestnations tend t succeed n economse development? fended to perform Wnte some researchers have previously invesigted the cousal maionsnin | Dr I 0 between tourism and economic growth at the national US level, few stsies have analyzed the rlatonship between tourism and economic growth atthe regional level” ® Therefore an important sep inthe path forvard isto use the wide range of experiences tha is found atthe regional level in the US as a base for fuer anaiysis* This nays ates todo jst hat. [As a stating poi. we provide context by summarizing the corelaion between ‘stor economy inensty atthe cty level and economic growth over the next ten yore. New. we secuss the resus of a dtaled causality analysis that we conducted o assess whether growth inthe vistor economy leads to growth nother * Chun-Hung Hug Tang ac ScoCheong Shawn Jang "The Torsm-ecoony Cusaiyin the Une Sates: A Sub- Inc Lov! Examination” Toutem Menapement30 ne 42000 $53-58. tara del PPato-Remero and Joat A. Melina, “Torsm a Economie Growth: A Rew of Epa Libre” Tours Manogoment Pespecves 82013} 28-41, ‘Sovrow0 economies eee ere Destination Promotion: An Engine of Economic Development November 2014 sectors. This i he crux of ene study. We fallow this with a biel summary of resuts fom a recent research paper that examined the infuence of lesure merits, quatfad by the number of leisure visa region atracts. and economic ‘growth over the exten years, controling fer a hos of actor. 44 Correlation “The visitor ecancmy is one of many factors that infuence region! economic growth [As shown in the folowing figure, @ simple correlation anys between the Importance ofa metro areas visitor ecanemy and subsequent ob growth shows & poste reationshp, but many other factors ae also at work In this grep, the Importance ofthe wstor economy is shown on the horzonal axis as measured based on he share of jobs accounted for by slecod hosptaty and tourism sectors: in 2008: Growth in total employment over the period trom 2004 to 2013 is shown ‘on the verical ais, Each ey i measured on the basis ofthe meroplan statistical ‘area (MSN), which represects specfealy defined set of econnmicaly-connected countes. hea, measures for 98 ties ae shown ** Each 1.0 percentage point increase in the sharoof visitor Based on his coreation, each 1.0 percentage point increase inthe share of vitor | econcmy jobs _economy.obs corresponds to total job growth over a nine yea" perod that is 30 | correspond to fotal porcontge points stonger Consiering San Francieco as an example. 30% of 20% | Job growth over a nine in the ecznomy were visitor economy jobs io 2004. Tis 11 parcatage ponts. | year puriod that is 2.0 ‘reater than the 1.9% share forthe 86 MSAS on average. San Francisco tial job | percentage points ‘growth was 2 4 percentage points faser than average ofthe seectod MSAs. This | Stronger. isa sight stower pace of incremental jb growth than imped by the coceation for ‘me MSAS overall) “inn nai vitor economy employmertinclees the hospitality an tute Wades cust sce 36 wall 2 a transporatonsub-cector. panel, NC rca nto sat fr tustabie pipes, Tvee SAS ar exude de othe dominant ro he visor eeanemy (Las Vega, rao, na Honiton exes Geto he 20 of non-vstor-elated a warspot scr, which bacures mesuteret of the wor economy a8 dered (Meehan New Oroans sexed because ‘he Hurcan Katina recovery ees mpact both measures. ‘Bowron economies Perera Destination Promotion: An Engine of Economic Development November 2014 Visitor economy and total employment growth sour = Thre nto = mig ‘aaa visiter-related ™ “eran = sapoyrenhre wean en a we ‘Soe: iano aner Stes ENS: Tora sori “This pris» sompaling hypothesis that the dynamice detersed inthe previoue ‘sectors ae evident in the actual perormance of cites. However, for he theory tobe Destination Promotion: An Engine of Economic Development November 2014 4.2 Causality analysis: Does growth inthe visitor economy lead to growth in other sectors? Determining the causal lationship between changes nthe vor economy and the breader economy represents the most important (and most detaled) part of our nati. nth step we developed a set of eccnometic models to discern whether ‘usa flows fom growth in the vitor ecanamy to growth in the ndusties The: ‘models use 2 set of panel data that consists of annual employment by dusty sector, and wage formation, fr more than two hundred US ees over mov than two decades The impact of tho visitor economy goes ‘beyond the standard ‘economic impact ‘analysis, with causality ‘analysis indicating that larger “catalytic” benefits are gonerated ‘by growth inthe visitor ‘That's, does destination perfomance and intensity dct inuence actvty nother | economy ats ofthe local exonomy? Oris destination performance ase consequence of booming activity eleauhere in the local economy? ‘The simple answer om our resus that visor act ie both consequence of ther economic acivty (corelaton) as well a an impertant preicive factor {causston) in wide economic development Ove this extonded period of tine and ‘acro8s hunsreds cf cites, developments vistorreated sector are tpicaly ‘alowed by gains in cther pars ofthe economy, This saistical observation lows ‘te theory that structural changes inthe tor economy, such a8 can be achieves 135 investments in desinaton promotion, lead to Improvements in. tansport ‘connec, amity, brand, stractons, amenities and infastrcture, Arc these improvemerts create an envionment where othe nduses grow in esponee. Similar tothe bask carelaton analysis, preliminary anaes of the panel data shows a clear corespondence between he vsitor economy and wider economic: ‘activity across the US. Those cies which have experienced stronger perfomance in vistorelated se:tors have also tended to perform beter in tems of goth in cer industries. However, ts not enaugh o look at just coelations to sett the Lunderying relatonship and dynamics at work Causalty must be specfcaly assessed Econometric tests show that employment shite in the visitor ‘economy ae followed In subsequent years by sustained changes in ‘growth in other parts of the economy. In this way, the impact ofthe vistor economy goes beyond the standard economic impact anaiysis, win this causality analysis indicating that lager ‘atlyic™ benefits tend to folow grout nthe vitor economy, * pa with colton al, cies in bs anaes are measuted using metocoltan tata arcs (MSAS) ‘@ovrono econowics 0 (Destination Promotion: An Engine of Economic Development November 2014 421 Approach ‘The specific aproach that we used to assess causally was a forn of economic anaysis rererea w 9s “Granger causally wats These tees measure. the Geterministc naure of the relationship between mutpio variates, in thie case employment in vstorelated sectors and employment and wages in other parte oF the econamy. To apply this approach, we developed a set of ecinometric modale based on pane! data consisting of employment by Industry sector, and wage level, covering 2 23 year pared (19902012) for 257 ete, In these model, wo uted an aggregate ofthe hotels, restaurans, and recreation sectors as a proxy fr the vistorelted economy In determining th speciicaton ofthe economic models and coresponding tess, we sought o capture the long-un structural properties of acy ty ety rather than ‘temporary movenent over the business eyele In addtion tothe staps described above, we aleo pefonmed slecied test to inform four anaiysis. Fer example, we carried cut necessary tess for unt roots and co- Integration to delermine that trend relationships are indeed val fer estimation The ‘moet saitcally relevant equation formats for regression were also informed by these tests. Medsing details can be found in the Appendix 422° Omniaw of he std medal FResuts ofthe Granger causalty tests show that he rlationship does inseod run in both rections. Cianges in economic actviy in sectors not associate with Vrs often coincide win some immedicte response in stor-eated sectos. Ths woul be expected as tusiness travel, at leas, influenced by economic acy inthe destination. More importantly, the tsis show that employment shits ithe vistor economy are followed in subsequent years by sustaned changes in vy in other parts of the econemy. ‘Specialy, we tsted three dierent specications, as outined inthe folowing paragraphs. Over the stongest resus wore evident forthe se:ond of these ‘specications. We focused the analysis on tho largest 200 cties. Teas were also cared out for ciferentsize-bases groups of tes, wth he cts groused according to helevel of tota empoyment © spacial, wo used th lose and heey set, cont o! NAICS 71 Ate, enetairment and rereton, and NAICS 72 Attanasio, 1 eestor ated Ora ‘Sorrono economies Destination Promotion: An Engine of Economic Development November 2014 Model #4: Changes in employment levels: causality confirmed wih low confidence In ti framoncrk, me tested Ure caved reais Uxtmeen the Ave of stor ‘olated empiomment for a given ety and the level of other, non-wsior-eatd, ‘employment inthat cy. Here he hypothesis was that cles that invest more hoavily in the visor exoncmy, indicated by move rapid development in vistorlate jobs, subsequently experience faster growth in othr sectors [Based on the results, this relationship is statistically vat and vitor related rpkpnent owe adeod “Glenyerceune” eanpoyment other sectors wih a short lag period. However, there are other causal facors and omied icleaters may ‘mean tet elaionship ar not a robust as other methods Model #2: Changes in employment shares: causality confirmed with strong confidence In this famework, we tested the causal relatonship between changes in vistors employment in a give cly as a shar of otal US valor lated employment anc changes: In ther employment that ely as @ sharo ofthe US total. Here the hypothesis erfor {othe fet framework, but the analyses structured to look at act's stare ofthe US ta Since such shares flow patterns that ae largely table, competitive changes, suchas. ‘advances in key sels that resut in signiicant shits in market's shave, are mere decorabl Using this equation fama, yitorselated employments observed to cause employment in other indstes. Test states aro stronger than in he rst ramewerk, ging grater confidence that results are valid. Relationships are more strongly denied when tesing {oc the group of smater ees than forthe largest ces ‘The resus incate that a 10% increase in vsorrelted employment thal is achieved through an increase in thet ciy’s share of total US visto-elates employment (ie. & ‘marketshare gain), tipeally causes a 15% increase in employment in ether sectors n that ey inthe shot run (approximately two years) ‘The analysis of impacts fra typical cy isa useful referenc point. The average cay inthe top 200 US MOAs hac £92,000 total jobs 2019, of whit 7,000, 10.7%, were fle hospitality and leisure sector being used to represent the vietorlated economy and ‘475,00 were in oer sector, For such acy, an improvement ie ety's share of total US ‘ystorrelsted employment. such 28 through an improved competitive postion, ht Increases vistocrelated employment by 10% isa gain of 6,700 jobs, and the implied gin in ctherjobs repcesents anther 7,100 obs (15% increase on 475,000 be). Thus, tefl ‘89 % 12,800 obs, epasenting a 2.4% increase in ttal employment in the shor un (approximately two yeas) ‘Soran ESoNIES Destination Promotion: An Engine of Economic Development November 2014 Model #2: Changes in employment shares relative to total employrnent and ‘wages: c1usalityconfiemed with reasonable confidence In this thd spectcation, we tested the causal relationship between changes in vsitorrelted employment in given city 98 shar of total employment in hat cp ‘and wages in other sectors in that cy relative to the US average. Here the hypothesis is that hose cies wih a higher, and rising, proportion of employment in ‘sored sectors experience more rapé wage growth inthe wider economy, ‘The resus sugges this isa va effect that average incomes rise in th broader economy 8 visor actity neeases, These resus pont fo an income effec rom sor atvy a wall ae an ampoymant eect, 423 Model resute We cared cut the sauslty anajsls for the three specications since each ‘equation passed te intl valty tests. However, the closest causal relationships ‘ate evident in tho sscand model, which is set up to measure vistor-rlated ‘employment and ether employment in @ cy 8 @ share of the US in total. This ‘pectaton analyzes shanges in the competitive poston of each cy relative tothe rest of th country. Futher background on this approach, 9s well as a mere deaied cussion of resus is provided as flows. ‘The second specieaton Is simple, but & picks up key information regarding the stor economy and Bader economy in relation to the US in aggregate. By using employment shares itis impick that travel demand foreach cy folows @ sar path 2s toal US travel demand. This speciation 1990 factors in mor demand shits forthe oly as 1981, ‘well as the overall grevth tend. Anais of 1952 the cata shows that shares are typically stable over time, Fo" example, economic cycles broadly impact the visor economy in most cis in ways tat are consstnt wih p19 Share of US. city __ciy2 crys ity 200 Visitor Related Employment the national oye. Hence, any signticant devatons ae atituble to struct factors, such a8 a change in the competitive my Givi Gly? Gy postion ofthe ety fae ‘Simlary, broader eccnome actly ie 155i ‘assumed to evolw 'n fine wih demand 9p aioisarteplayment trends at the national level Deviations in pen arte terms of changes in market share standout, and have the potnta to be atirbutable to ax ‘Soxrowo Econowies a Destination Promotion: An Engine of Economic Development November 2014 ‘structural changes, inclusng th catalytic pact of he wor economy, ‘Across the pane! 0 chies analyzed, when a ely oan market share, as mensurect bye incress in that c's share of US visor employment, apatiern of subsequent | When vsitonvated Increases in broader employment within that destination ie evident. The moda yess | gmploymentincroases {high degree of confidence tha the stucturalclationship between the visior and | relative to total US the broader ecoremy hes been identiied. Spectealy, the relstonship that it | visitor employoront cbserved is that 2 10% incwease in vsterceated employment in a cty that ie | then » subsequent achieved through an increase in that cys share of total US vistorceates | increase in broader employment. amaret share gain), ends to resut in 15% increase in roader | omploymont within employment in tht cy over the shortvun (approximately two years) Suc | thar destination is mamies can be seen in examples over tme and across the varout ettes | Svident considered. There are additonal posive eects over mutle years beyend the shor-un impacts, tut we have conservatively focused on the shortun impact. ‘There are several important aspects to note. Fis, while wave sa growth sector, ‘and creates new jobs on an ongoing basis, the spectc ype of gan we've quantified in this anatsis requres a city to grow faster than the natonal average, herby ‘growing ts market share, Rather than measuring the impact of tend grt of the ‘sio-economy, the impact of recessions, were measuring specfle marke: share gains oles. ‘Second, while we have communicated the estate rests in terms of employment Impacts, this 1s 9 brosder anelyis than tadtiona! economic impact arajee ‘Tradtional economic. impact anatysis relates 2 level of vstor spending to = coresponding evel of vistercelated employment and employment in ether tetos ofthe economy though nkages such as supply etaineflecs. In thi causally ‘anafysis, such multi effets are assumed to be part of what contibutes to the impact on other etcors, and the econometric analyse le open to capture the potential fr broader effects as wel Whether increased familiar, improved amenities, of ‘conventions that forge ‘pew connections for local businesses, the ‘mode! identifies benefits beyond aroct visitor spending. Factors that contrute tothe shit in competitive postion and increased vistor- related market share achieved by acy have the potent o impact other secore 3 well Whether is creased awareness and famiiaty of @ ct, 2 srategic Investment that not only boosts the vsitor economy but ago yes quay of Ke benefits that nep tract new residents, or sucess bulding convention seman that forges new connectons fr local businesses, the model denies benefits beyond ‘rect wstor spending. By tracking the extent fo which intial changes in vitor ‘elated market shar leads to changes in cher employment, this causality analysis hops capture that oader pure. “Tid, we bsorvedthat the benefits, while evident across the ul eto cis, were ‘more robust fr the largest or smallest cies. Similar coeicints were found for ‘each ety group but the explanatory power ofthe equations was strongest for the ‘70up of emai cis, alowed by the group of top 80 cies The explanstory power was woakest forthe group ofthe second 50 largest exes. ‘Wowroan econowes eee a Destination Promotion: An Engine of Economic Development. November 2014. “Toprovde futher background, the scempanyng figure ilustates the dynamics at work in the cvsaty stale, For the purposes of the fexampie, we have modeled the mpact of @ change invistoc-elated employment over 9 four- year prid,utimately reaching @ 10% inrease ‘above the bassine, For example, this coud be thought of athe result of an improvement in the compettvensss cf the destnaton that gradually leads to gaiss such as stronger awareness and (ater evel of visitation (Over time, this structural change int destination olds gain in other employment. Part of this impact is represented by the shot-un fects that occur wthin wo years of changes in stor-‘eates employment. For example in yosr- Modeled increase in visitor activity to % os ‘wo, the yea! ater vaitor-elated employment intial increased to 24% shead of ‘te baseline, we see les than a 1% increase in other employment Ancher part of ‘the gain n bis example, partcualy in lator years, reflects the edational poste impact captures by he economernc analysis as beng nereenta to tne shor-tan ‘effects. As aresut,by te ith yar, the impacto other employment exceeds 2%, ‘wonr van eeONTIES Destination Promotion: An Engine of Economic Development. November 2014 4.3 Other empirical research ‘third pary study iontied e similar explanatory Ink between 9 success visor feconemy and broader eccnomic growth wale conaling for othe factors thet help pain economic growth across MSAS. Ths recent study wat designed to independent pred, or explain, ferences in conome growth, ‘The Carino and Saiz analysis looks closely a the relationship betwesn leisure amenties, quantified by the number of gure vaitors @ region atracs, and {economic growth over the next ten years, aftr contrling to Rost of faces. The suvy t Uscussed more completely Inthe section of tis reported "Ralsng the {ual of fe, butts hepfl to repeat one ofthekey findings here as follows Population and employment growth wes sbout 2.0 percent higher over a ten year period in an MSA wth twice a8 many leisure visi atthe start of the perod as ancthor MSA. The nails considers 205 MSAe over the period from 1990 to 2000, and controls for atner economic and geographe factors typically considered in such research Carino and Sa2 fo2us on logue vss a a prmaryvarabe explaining porulaton ‘and employment gouth, However, the research also shows a sir ect for toursm employment growth, wih a doubing of toursm employment in a representative MSA relative to another estinated to inereaee population and ‘employment growth by approximately 3.0 percentage pont over ten-year perio, ter controling fer sther factors. This estimate elects a dec efec thats emater | emP/oyment have than the bese corlaion, as cll fora doubing of tourism employment toreacna | sorlealy grown ets eet lea eileen faster over the past 3.0 percentage pot boost in total er 9 (Cites with 2 higher concentration of Vistor-related sctvities and * carino nd Sz, Beat Oly “ exampae of econometrics he ehae of wore in muting, ie geographic arable induced factor. ‘102s proxy oan connor Gres! Lakes ens anda Indeed among sich variables, lore vs tod out ee ‘hed most mpotarpredctor of pepulaton growth over he "0 yer peed ony rat below face meagre, tax levels, ana climate Based onan evaluation of grow rm 200 o 206, ere ws ae azo fund tobe a good ‘Sowrono Eoowouies sounameannanaa” Destination Promotion: An Engine ot Economic Development Novernber 2014 5 Conclusions By the very nature of the topic, the forgoing research and ansyee fe complon Howover, wht t shows is relatively simple: tht prontizing destnaton promotion ‘makes good ecenomic sense, not only for developing the travel economy But for ving broader econami growth ‘The impleations are two-oks Implication #1: Prontize destination prometion ‘The funding for destination marketing and promaton shouldbe prontize in ight of the substential dividends that ti capable of producing. Indeed, ere may be few jer invesment which are capable of yielding sucha broad eet mpacts. Gen ‘he size, growth, and catalytic benefits of destination promotion, the development of both meetings std elsure tours markels should bea prionty when evaluating the ‘alocaton of indistry assessments or general fund tax dota Implication #2: Coordinate economic development and destination promotion Economic development organizations (EDOs) and destination marketing cxgarizatons (OMOs) are both nthe business of marketing a place. The decisions that hey aim to influence are ciferent: EDOs sek on ence invesiment cecsions whe OMOs ar focused on travel decions. However, te auionse they markt to | owas Econom and the products they promote have sgnifeant overap. AS a result, EDOs oten Sonica lock to OOS fr suppor of important investment bcs and in general promotona! | DMO Would collaborate cities. Our intrviews wth EDO and OMO executives ented key categories of cooperation, reveaing poweru synergies and recogiton tat thers even more to | en Teoove Excutve an trough coooeraton. “We dont work wih the DMO tothe extent that we cous.” | Ore Eesnamie bserved one esonemic development crector. Siar, Bon Teague, Exectve | Soiinmen Coston tor Dieter, Econo Development Coation fr Ashevile-Buncomee County nated | Asevie-Bunconoe Coty that twice monty meetings between the EDO, OMO and Chamber of Commerce: \wete valuable end that “Ideally, Economie Development and our DMO would

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