May 28, 2014 The ROI of the PA Dutch Convention & Visitors Bureau Promotional Activities
To document the important role of Pennsylvania Dutch Convention and Visitors Bureau (PDCVB) promotional activities, and to provide robust, current economic impact analysis of the tourism sector in Lancaster County, Tourism Economics has conducted a multi-layered analysis. As part of this analysis we: considered the vital role of destination promotion generally, and in Lancaster County in particular; analyzed PDCVB s key performance indicators; conducted a tourism market share analysis; prepared a case study review on the importance of destination marketing and marketing returns; analyzed the economic impacts of tourism in Lancaster County and the estimated PDCVB contribution to these impacts. The key findings of our research are summarized as follows. A detailed report is available from PDCVB. Destination Marketing Organizations Play a Vital Role The rationale for destination marketing and the particular importance of the PDCVB for Lancaster County is based on the following key factors. The Lancaster County tourism sector is made up of small businesses, most of which lack the financial wherewithal to independently conduct true destination marketing. Additionally, the benefits of destination marketing accrue across the economy rather than just an individual business. As a result, there is a role for effective destination marketing that is not filled by individual businesses. The PDCVB communicates a coordinated, sustained message regarding the overall destination experience. It is a message to potential visitors that extends beyond the offering of a single business, and that is amplified and reinforced over time by the more efficient scale of PDCVB marketing and the significant, consistent funding that is leveraged by PDCVB s existing infrastructure, brand awareness, and relationships. Competing destinations are actively marketing, and a failure to engage with travel markets results in lost market share. The importance of such competitive dynamics is made clear by case studies. For example, in the 1990s, Colorado lost 30% of its US visitor market share within two years of repealing its destination marketing funding. The sheer size of the global travel market makes a compelling case for destination marketing, with international tourist arrivals reaching 1.1 billion in 2013. Many of these travelers have limited initial familiarity with the offerings of Lancaster County and PDCVB helps reach visitors from these growing markets in ways that extend 2
beyond the capabilities of many small or medium-sized tourism businesses. Destination marketing plays a role in boosting demand during shoulder periods, thus extending duration of seasonal employment and building a better base for year-round jobs. Key Performance Indicators Show Effective Promotional Activities As a window to recent PDCVB promotional activities, Tourism Economics analyzed a set of key performance indicators. Based on Tourism Economics analysis of marketing activities 1 and budget information, we observed that marketing activities were strategically focused on key target markets. We observed that advertising and public relations functions were effective, resulting in trip planning that was evident in PDCVB metrics such as website activity (2.3 million visits and over 33,000 sign-ups for email communications), Facebook (over 26,000 measures of engagement such as likes and shares) and offline (over 106,000 visitors recorded at the two visitor centers combined, and distribution of over 755,000 copies of the Lancaster County Getaway Guide). We noted that PDCVB is also active in sales functions, generating over 52,000 room nights booked in 2013 through its sales team and over 24,000 room nights booked through its reservation center. Market Share Analysis Shows Gains Tourism Economics conducted a market share analysis across four measures of tourism activity, supporting the following findings. Lancaster County has grown its market share as measured by visitor spending and accommodations revenue as tracked by room rental taxes, and maintained its share of employment. These market share improvements between 2007 and 2012 translated into $51.5 million of additional visitor spending and $7.9 million of additional room rental revenue. Lancaster County hotels have posted stronger occupancy and RevPAR (revenue per available room) gains than comparable regions. 1 Harmelin Media (2013, November) PA Dutch Convention & Visitors Bureau 2013 Media Recap & Post Analysis. 3
Case Studies Show Destination Promotion Effectiveness Tourism Economics compiled case studies that document the importance of destination marketing in the following key ways. Marketing effectiveness studies show recent marketing campaigns by destination marketing organizations at the metro and regional level have generated approximately $54 of incremental visitor spending for each dollar of destination marketing spending. This is based on 16 third-party studies that Tourism Economics analyzed. Examples of lapses in destination marketing activities in other markets have resulted in reductions in travel activity. These include Colorado (example provided above), as well as the recent situation in San Diego in which a pause in destination promotion spending in 2013 quickly impacted visitor spending. Recent activities of Brand USA have had a positive impact supporting incremental visits to the US by international travelers, as found in analysis performed by Tourism Economics. Tourism has a Sizable Economic Impact in Lancaster County As part of its annual analysis for the Commonwealth of Pennsylvania, Tourism Economics analyzes the economic impact of travel and tourism in Lancaster County. 2 For the purpose of this PDCVB analysis, Tourism Economics updated its research to provide a preliminary assessment of the economic contribution of travel and tourism in Lancaster County during 2013. As part of this analysis, Tourism Economics used the IMPLAN modeling system, a well-respected economic impact analysis tool. Tourism Economics annual report for the Commonwealth provides further discussion of the economic impact methodology. Based on this analysis, Tourism Economics estimates the following. Lancaster County attracted 7.9 million visitors during 2013, generating an estimated $1.9 billion of visitor spending at an average of $235 per visitor, including a mix of day and overnight visitors. The total impact of travel and tourism in terms of output, or business sales in Lancaster County, including indirect and induced sales, during 2013 was $2.5 billion. 2 Tourism Economics (2013, December). The Economic Impact of Travel and Tourism in Pennsylvania, Tourism Satellite Account Calendar Year 2012. 4
Tourism Supports Lancaster County Jobs Tourism Economics finds that tourism supports a substantial number of Lancaster County jobs. Visitor spending supported almost 23,700 Lancaster County jobs, with $755.9 million of wages and salaries. Of these total jobs, approximately 15,600 were direct tourism industry jobs, such as at restaurants, hotels, and visitor attractions, while the remaining approximately 8,100 jobs were supported by the indirect and induced effects of visitor spending, such as jobs at businesses providing goods and services to tourism sector businesses or their employees. Tourism ranks as the fifth largest sector in Lancaster County in terms of private non-agriculture employment, ahead of mining and construction. The tourism sector directly accounts for 1 out of every 15 nonagriculture private sector jobs in Lancaster County. Tourism Supports the Tax Base in Lancaster County Tourism Economics estimates the Lancaster County tourism sector supported $178.8 million in Federal taxes and $184.7 million in state and local taxes. PDCVB Makes a Significant Contribution to Tourism Sector Activity Tourism Economics estimated the portion of the total tourism economy impact that represents the PDCVB contribution. The following summarizes our method and findings. We approached the analysis by considering several perspectives, one of which was to consider how the PDCVB impacts potential travelers. Specifically, we considered a representative funnel from a wide number of marketing and public relations impressions, to a moderate set of interested potential travelers, and finally to a more narrow set of visitors influenced by PDCVB marketing to visit Lancaster County, to extend their stay, or to make additional purchases while visiting. We also considered the typical levels of destination marketing effectiveness estimated in other markets. On this basis, we assumed that PDCVB generated incremental visitor spending that represents a similar order of magnitude of marketing return as the average of $54 dollars of visitor spending per dollar of marketing spending observed for metro and regional destinations in case studies. Based on financial information provided by PDCVB, we calculated average 5
annual PDCVB marketing spend of $2.2 million during the last two years. 3 Thus, we estimated that $2.2 million of annual marketing spending supported approximately $120.9 million of annual visitor spending in 2013, representing 6.5% of total direct visitor spending in Lancaster County. This estimate supports economic impact calculations that set the return on investment on PDCVB activities in the context of the Lancaster County tourism economy and the broader economy in the county. PDCVB Activities Support Substantial Economic Impact Tourism Economics estimates PDCVB activities supported approximately: Conclusion $161.1 million in tourism-related business sales in 2013, including $120.9 million of direct visitor spending (equivalent to 515,000 visitors); over 1,500 jobs in Lancaster County, including almost 1,200 in the tourism sector; $42.8 million of wages and other labor income; and, $19.9 million of Federal, state and local taxes. Tourism Economics analysis of key performance indicators shows PDCVB is an organization that continues to succeed at not only creating brand awareness through advertising, but also driving interest among potential visitors that results in (1) interaction with the PDCVB as a source of information on the destination, and (2) valuable economic benefits for residents and businesses in Lancaster County. Background on Tourism Economics Tourism Economics is part of Oxford Economics, one of the world s leading providers of economic analysis, forecasts and consulting advice. More than 300 leading companies, associations, and destinations work with Tourism Economics as a partner for economic impact, forecasting, and market assessments every year. 3 Includes co-op advertising in 2012. We used a two-year average to reflect the expectation that visitor spending depends on spending over time, not just the current year. 6
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