100 Years of Advancing Destinations

Seven Surprises from the Economic Engine Study

Author: Guest Adam Sacks, President, Tourism Economics
Posted: May 07, 2015
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A connection between destination marketing and broader economic development has been touted by DMOs for decades. It makes intuitive sense that promoting a destination to visitors would provide benefits to broader economic developments. But DMOs have never been able to quantify these benefits or clearly define the channels through which they are realized. 

Destination Promotion: An Engine of Economic Development was designed to be the first study of its kind to assess how (and to what extent) the work of DMOs drives broader economic development. By combining in-depth interviews, an academic literature review, and economic modeling, we sought to test the hypothesis that destination marketing has a catalytic role in economic development AND define how this works in the real world.

Our team has been measuring the economic impact of destination marketing, events, and leisure tourism for nearly twenty years. But this was our first attempt to assess the effect of destination promotion on investment and economic progress through broader channels.

This would be a new challenge without much research precedent. However, I was personally convinced this was a vital topic for the DMO community. Through the upturns and downturns of business cycles, DMOs have worked hard to quantify and communicate the value they bring to their local economies. Typically, these involve economic impact studies of various kinds, showing the benefits of visitor and event-related spending. This study, if successful, would go beyond standard economic impact and equip DMOs with an entirely new communications arsenal.

And tactically, if indeed destination marketing supports economic development, we wanted to identify specific ways that these synergies can be leveraged. So the pursuit of best practices in the coordination of destination marketing and economic development was embedded into the research program.  The goal here was to provide a set of best practices that DMOs and their economic development counterparts could follow to fully realize their collaborative potential.

Given the uniqueness of the project, our team didn’t know what to expect as the research progressed. Here is a catalogue of the biggest surprises we encountered:

1.Early interest in the study. Once the Destination and Travel Foundation agreed to seed fund the study, we needed at least five DMOs to participate as sponsors. These destinations would represent the focus of the case studies. The surprise for us was how quickly we received seven confirmations. This was our first indication that this research had the potential to be truly useful.

2.Cooperation from economic development organizations. We reached out to EDOs within each of the sponsor destinations. In all cases, the CEO/Executive Director from the agency agreed to meet with us and shared openly about their views on destination marketing and the role it plays in economic development. We encountered no reluctance at all.

3.EDO’s appreciation for DMOs. We couldn’t have anticipated the near-universal kudos that EDOs expressed for their destination counterparts. Exhibit A from Jeff Malehorn, President & CEO of World Business Chicago: “I can’t imagine running World Business Chicago without support from Choose Chicago.”

4.Consistency with academic literature. One of the goals of the research was to determine if success as a visitor destination tended to yield dividends in areas like talent and investment acquisition. The case studies confirmed this but so did a number of academic papers.

5.Clarity of catalytic channels. As we progressed through the research and interview process, the ways in which destination marketing drives economic development crystalized quickly. The breadth of the halo effect of destination marketing was encompassed in these four “catalytic channels”:

    • Building transportation networks and connecting to new markets
    • Raising the destination profile
    • Targeted economic development through conventions and trade shows
    • Raising the quality of life

6.Value of collaboration between DMOs and EDOs. Top executives with DMOs and EDOs confirmed a significant opportunity to work together in strategic areas. Synergies emerged on how the two organizations could work together on air service development, branding, courting investment, and selling major events. This collaboration consistently generated big wins. 

7.What an analysis of 237 cities over 23 years told us. The ultimate test of the “engine project” was whether it could be proven that destinations that outperformed their peers in attracting visitors tended to outperform in the broader economy AND that causality could be established. So we build a massive econometric model spanning more than 200 cities and two decades to determine if this relationship exists. Indeed it does. The model showed that employment shifts in the visitor economy are consistently followed in subsequent years by sustained changes in growth in other parts of the economy.

Fortunately, all of the surprises were of the good variety and the feedback since the release of the study has been tremendous. We’ve heard stories of how DMOs are incorporating the findings into their messaging and grant applications as well as employing some of the collaborative tactics detailed in the study.  All of this has been truly encouraging since the value of research should always be measured by its usefulness.  Perhaps we won’t be surprised to hear how, in the coming years; DMOs continue to solidify their position as an engine of economic development.