The following article is section of DMAI’s e-book The Evolving Role of DMOs in a Shifting Marketplace. To read the entire e-book, click here.
From an industry standpoint, DMOs are developing new revenue models, new partnership strategies with corporate and community stakeholders, and closer alignments with economic development agencies to bolster and protect operating budgets constantly under threat. In many communities, when local, regional or national governments change hands, there's a review of subsidies for destination marketing, or the existing governments are sometimes shifting bed tax revenue away from tourism promotion.
"Municipalities and local governments are under such pressure, although the really sophisticated ones understand that you don't mess with room tax and hospitality taxes," says Bill Geist, chief instigator at Zeitgeist Consulting, who specializes in strategic planning for DMOs and tourism-focused cities. "But that is such a difficult thing for politicians to stick to in this day and age. I think that for those bureaus in communities that get it, I think that funding is probably going to be pretty solid. But there are an awful lot of destinations that don't believe in subsidizing destinations, or at least their political leaders don't."
With 79% of DMAI member DMOs receiving an average of 75% of their funding from bed tax collections, many bureaus are clearly overly reliant on a single funding source. Furthermore, shifting economic, geopolitical, socioeconomic and other global forces on local markets can hinder a DMO's ability to budget year-over-year, with so much potential for disruption impacting hotel occupancy and rate, often without warning.
Geist says DMOs have always relied on a sort of chamber-of-commerce membership model, which has long undervalued what a DMO can bring to the table. That fee-based mechanism peaked in the last half of the 20th century when hotels and tourism suppliers were eager to be included in the destination print guides created by the convention and visitors bureaus. However, that created a heavily biased overview of a destination, which still somewhat plagues the reputation of the destination marketing industry to this day.
Over the last decade, the destination marketing industry has witnessed a steady shift away from those traditional membership funding models toward a hybrid arrangement of membership and partnership organizational structures. By partnering with hotels, restaurants and attractions to develop more customized and strategic co-marketing programs, DMOs can negotiate individual marketing packages providing a wider array of business drivers.
"I think Salt Lake City is a fascinating example of the fact that the private sector invests a lot of money into that organization through a number of different revenue models and streams," says Geist. "Primarily because Scott Beck, the CEO at Visit Salt Lake, and his team created a better mousetrap. They have the most robust marketing platform for businesses to jump onto and benefit from, far more robust than some of the traditional local marketing opportunities that have always been out there."
Geist says modern DMOs also need to embrace the fact that they're in the business of telling stories, and more importantly, “They're the best equipped to tell the best stories with the most impact and reach.” Just like large media companies, DMOs offer enhanced visibility for partners directed toward targeted audiences across a wide spectrum of source markets 365 days a year. And because DMOs can grab higher engagement numbers online than many other traditional advertising vehicles, that provides a lot of interesting incentives for local businesses.
"DMOs are becoming content curation platforms," says Andy Levine, president and chief creative officer of Development Counsellors International, which provides strategic consultation for DMOs globally. "Visit California’s Dream 365 TV is an exceptional example of a DMO meeting the need for 24/7 information and inspiration, because content is experience driven rather than product focused."
Levine adds that the pay-to-play model designed to drive hotel occupancy has worked exceedingly well for a long time, but many DMOs have been slow to develop "alternative funding strategies to decrease their reliance on a sole source of revenue." He says advanced DMOs are reassessing their membership models primarily because those models “limit a destination's ability to tell its complete story.”