Impact of Tourism Marketing Authority

The Legislature created the Washington Tourism Marketing Authority in 2018

Washington's state tourism office closed in 2011 after state funding was eliminated. The state operated without an official tourism agency until 2018, when the Legislature created a new Washington Tourism Marketing Authority (Authority).

The Authority is a 13-member volunteer board that is responsible for promoting statewide tourism. Statute requires the Authority to contract for marketing services and to manage its state and non-state resources. The board is made up of nine representatives from tourism-related industries and four legislators. The Department of Commerce (Commerce) provides legal and administrative support.

For each state dollar spent, the Authority must receive two dollars in matching funds

The Authority is funded with public and private dollars that can total $4.5 million per fiscal year. This funding pays for marketing and administrative expenses, including the support from Commerce staff.

• $1.5 million comes from sales tax collected on retail sales of lodging, car rentals, and restaurants. These funds are transferred from the state general fund to a dedicated tourism account. The Authority's ability to spend this public funding is contingent on its ability to secure matching funds.
• $3 million comes from the Authority's matching funds (e.g., cash, in-kind contributions). For each state dollar spent, the Authority must receive two dollars in matching funds (e.g., cash, in-kind contributions). Commerce verifies the match before releasing state funds to the Authority. In 2019, over 99% of the match came from in-kind activities, such as the state tourism guide.

In Washington, local governments spend more on tourism marketing than the state spends on it

Cities, towns, and counties pay for local/regional tourism marketing with lodging tax revenueAdditional sales tax on short-term lodging stays.. The Authority does not receive any funding from this revenue source.

In calendar year 2018, local governments outside of King CountyKing County is exempt from the lodging tax reporting requirements. It may have undertaken tourism promotion efforts. received $57 million in lodging tax revenue and reported using $21.5 million (38%) for tourism marketing. Some local governments spent the revenue directly and others awarded it to local or regional tourism marketing organizations. These organizations include:

• Local entities, such as chambers of commerce, theaters, and museums.
• Regional entities, such as visitor bureaus and destination marketing organizations, often referred to as DMOs (e.g., Visit San Juans and the Long Beach Peninsula Visitors Bureau).

Local governments reported spending the remainder of lodging tax revenue to promote specific events or pay for tourism-related facilities (see 2018 Lodging Tax Data). King County currently uses its lodging tax revenue to pay the debt for stadiums.

Some cities and counties also have formed tourism promotion areas (TPAs) to generate additional revenue. Local governments with populations over 40,000 can form a TPA. This allows them to charge up to $2 per room per night on certain lodging businesses. In 2018, TPAs generated over $14 million for local and regional tourism promotion. This amount is in addition to the $57 million noted above.

Neighboring states report different approaches to funding state and local/regional tourism marketing

Oregon, Idaho, and Montana report using lodging tax revenue to fund their state tourism authorities. The revenue is shared between the state and regional or local organizations, and the state tourism authorities may oversee state, local, and regional spending. In contrast, Washington's lodging tax revenue funds only regional or local tourism marketing.

• Each state also has other revenue (e.g., tourism promotion areas, resort taxes) that may support state, regional, or local tourism marketing. These funds also may be used for non-marketing purposes such as events and tourism-related infrastructure. In Idaho, for example, a portion of the funds is used to support a regional airport.

The different funding approaches make comparisons across states challenging. However, it is possible to compare funding in Washington to how other states use lodging tax revenue:

• Washington allocates fewer tourism dollars to statewide tourism marketing efforts than it does to local/regional efforts.

• When factoring in the sales tax revenue that Washington's new Authority receives, the state's combined annual funding for state and local/regional tourism marketing in calendar year 2018 was $26 million. This is similar to the combined amount spent in Montana. It is about $10 million less than in Oregon and more than double the amount spent in Idaho.

Exhibit 1.1: In contrast to Washington, neighboring states distribute more funding to their statewide tourism marketing office than to local/regional entities

Source: Calendar year 2018 lodging tax data from each state and Washington's lodging tax and state sales tax and matching fund data. Dollar figures for Oregon, Montana, and Idaho reflect lodging tax revenue only, which is distributed between the state and local/regional entities. Washington figures include lodging tax revenue for the local entities and sales tax and industry match for the state office (i.e., Washington's equivalent state revenue source).

❮ Previous    Next ❯   

Legislature specified five focus areas for statewide tourism marketing

The lawRCW 43.384.050 creating the Washington Tourism Marketing Authority (Authority) requires it to focus on five key areas for tourism promotion.

Washington Tourism Alliance is developing a marketing plan

As required by statute, the Authority is under contract with a marketing nonprofit to develop and implement a marketing plan. In December 2018, the Authority selected the WTA to perform the work, noting that it was the only entity that met the statutory requirements.

WTA is building off of a statewide marketing plan that Commerce and WTA published in 2018. The goals of the plan are consistent with the five focus areas that the Legislature identified.

Authority and WTA have started their work, but have not yet identified specific marketing strategies

The Authority and WTA report that they are using the 2018 statewide marketing plan as guidance. They have identified key areas of emphasis, which are typical for statewide tourism offices:

• Travel trade development (e.g., trade shows, working with tour operators).
• Consumer marketing (e.g., visitor's guide).
• Travel publicity and communication (e.g., press kits).
• Destination development (e.g., marketing grants for rural areas).
• Crisis management (e.g., marketing assistance for areas affected by fire).

Within these areas, the Authority and WTA priorities include identifying needs and gaps in the current approaches, working with regional marketing organizations, updating the state's tourism website, and developing a new brand for the state. The Authority and WTA have not yet identified the specific marketing strategies that they will use to target and attract new visitors to the state.

The 2018 Legislature directed JLARC staff to evaluate the performance of the Tourism Marketing Authority (Authority) by December 2023. JLARC staff originally planned to provide the Legislature with study design options in this briefing report. However, because the Authority is still developing its detailed marketing strategies and has not identified metrics, we are not yet able to do so.

The Washington Tourism Alliance (WTA) must report to the Authority in March 2020 on the metrics it will use to assess its marketing strategies. Once these are identified, JLARC staff will work with our consulting economist to review the detailed marketing strategies and determine the most appropriate study options to evaluate the Authority's impact.

Assuming the Authority has completed these steps by early 2020, JLARC staff will provide the Legislature with a second briefing report by December 2020 outlining study options, the amount of time needed to complete each, and estimated costs.

Authority can use metrics to demonstrate its progress to the Legislature

WTA has indicated that it intends to use two types of metrics, both of which are commonly used by other states and by local/regional tourism promotion organizations in Washington. While WTA has discussed these general categories, neither the WTA nor the Authority has yet identified the specific metrics that they will use.

Program metrics track implementation and measure interactions with consumers or travelers

While these types of metrics do not directly measure the outcomes that will answer the Legislature's questions, they can indicate whether the Authority is meeting milestones (e.g., launching new website). They also measure steps toward increasing visitor arrivals and spending in the state (e.g., visits to the website).  

Destination metrics convert the program metrics into outcomes such as visitor arrival and spending

It may take more than a year after marketing to see a change in destination metrics. Destination metrics should address the statutory goals (e.g., economic development) and areas of focus.

Statewide marketing is one of many factors that may impact tourism

In preparation for the future JLARC study, JLARC staff have begun working with an economist who specializes in travel and tourism to identify potential evaluation approaches.

The study must measure the extent to which the Authority's marketing efforts:

• Address the five focus areasRural tourism-dependent counties, natural wonders and outdoor recreation opportunities, international travel, identification of local offerings for tourists, and areas adversely impacted by natural disasters. identified in statute.
• Increase demand for travel to Washington.
• Impact the tourism industry and economic development in the state.

While most state and local marketing organizations report on measures such as visitor spending or volume, few attempt to isolate the impact of specific marketing activities. To do so, the study must be designed to control for other factors that may affect travel and tourism spending. These include:

• Disposable income of travelers.
• Macroeconomic indicatorsIncludes consumer price index, unemployment rates, gross domestic product. at the travelers' location of origin.
• Transportation costs.
• Relative pricesRatio of prices in WA to prices in the travelers' location of origin or alternative destinations..
• Exchange rates.
• Consumer preferences.

In addition to these factors, the study approach must account for the fact that the Authority is one of many entities that is focused on tourism marketing in Washington. For example:

• Local governments also promote tourism activities and reported spending approximately five times more than the Authority spent in 2018.
• The nonprofit destination marketing organizations also have private funds available for marketing.
• The WTA and other tourism industry representatives have been engaged in marketing efforts since the state's tourism office closed in 2011. These efforts will need to be addressed in any study that aims to isolate the impact of the Authority's new marketing plan.

Several study approaches could potentially measure the Authority's impact on tourism

Choosing an appropriate study approach will ultimately depend on the specific strategies and actions that the Authority chooses to use in its marketing plan.

The following two examples of study approaches highlight some differences in data needs and potential results.

1. Econometric studies use statistical methods to estimate quantitative relationships between different factors. For example, the study may estimate the relationship between number of visitors and marketing expenditures.

• Data is typically collected from secondary sources such as organizational records or government agencies.

• Econometric modeling estimates the relationship between variables and does not prove causation.
• Econometric modelling often relies on regression-based analyses. These analyses can estimate quantitative relationships between a particular outcome (e.g., number of visitors) and multiple variables (e.g., marketing expenditures, travel costs). Researchers can use regression analysis to "control for," or take into consideration, other variables that may also impact the outcome (e.g., unemployment rates).

2. Conversion studies use surveys to determine whether identified travelers' behaviors are influenced by a particular marketing effort.

• Studies may take the form of a comparison between two groups of travelers: one exposed to the tourism marketing and one not exposed to the marketing. This approach can potentially estimate the degree to which the marketing influenced or caused traveling and spending decisions. It also may allow for regional analysis of travelers' behaviors.
• Results can be combined with economic impact studies to estimate how travelers' behaviors affect measures such as jobs and economic activity.

• Results of conversion studies are limited to the population from which the survey is drawn. Thus, they can be limited when the survey under-represents important groups. For example, a survey sample may be representative of the domestic U.S. population but may not capture international travelers.

Timing of the Authority's marketing plan will impact study approach

The timing of the Authority's new marketing plan will impact the amount of data available for an evaluation of its impact.

Washington had no state tourism office between 2011 and 2018. The soonest the Authority will begin active marketing is 2020, and there is likely to be a lag between the initial marketing expenditures and any potential changes in visitor arrivals or spending.

For example, in northern states like Washington, marketing to encourage summer visits typically takes place in the winter and spring. As a result, a study due in 2023 may only have two years of data to analyze. Data limitations can have different impacts on study results depending on the approach used:

• For an econometric study, limited data can mean that the results may have less explanatory value. If the relevant data for the study is reported monthly, two years may be sufficient time for analysis. On the other hand, if the data is collected quarterly, at least five years of data will be needed to ensure meaningful results.
• For a conversion study, there needs to be sufficient time to develop and implement survey tools. Achieving a suitable sample size likely will require data collection over 12 to 18 months.

The final study approach may use one of these methods, a combination of approaches, or an alternative not yet discussed. JLARC staff plan to issue a second briefing report by December 2020 that identifies study design options, time needed to conduct each, and estimated costs.

❮ Previous    Next ❯