In this Newsletter
Is Your CVB’s Top Source of Funding Really Your Money?

If your primary funding source is the accommodations tax, (sometimes referred to as the transient occupancy tax) it’s a situation that doesn’t always find community consensus. In this issue, we discuss why-- and what we should be doing about it to assure success.

Today, most United States CVBs are primarily funded by the accommodations tax that is paid by overnight visitors. Yet in many quarters, there's really very little consensus about how these monies should be allocated, specifically used or valued.

From the CVBs perspective, it seems to make perfect sense. Visitors who come to your destination principally stay in accommodations. A tax that is usually Ok'd by the state and put in place locally or regionally, produces a special occupancy tax from visitors.

in most cases, after the tax is collected by the municipality, a portion of it comes back to the CVB, which reinvests it in destination marketing to produce still more visitors for the community, and resultant economic travel benefits for local residents.

The hotel tax: abuses and misuses

Instead, the accommodations tax may go to the government's catch-all general fund, with portions later allocated to local social services as the government determines annually what to dole out and to whom—much based on a variety of constituent inputs.

In other cases, the CVB may arbitrarily get 50% of the tax one year and 45% the next—thus effectively penalizing the DMO and limiting its ability to generate still more visitors and the important tax revenues that these new travelers would produce.

With literally dozens of different local CVB government funding allocation plans being carried out throughout the country, some make very little common sense from an economic development perspective. And In many cases, local officials don't always understand why, either.

For examples, the monies now collected from the visitor accommodations tax are being deployed by governments for diverse uses as police and fire protection, beach sand replenishment, park and recreation programs and maintenance, arts programs, building construction such as arena and sports facility development, and many others.

When we recently suggested that a community could double its CVB budget and correspondingly its performance deliverables in new visitor receipts, one hotelier hit the roof. "You can't increase the tax", he warned ominously. "If you do, you'll actually decrease the number of visitors who now come here. And I've got the study to prove it", he said. Actually, he didn't.

The national study he referred to said the opposite: that if monies went to CVB marketing, the city would be the beneficiary. But if the taxes were instead allocated to anything else, visitors and their expenditures would be resultantly reduced—thus adversely affecting the local tourism economy.

Fortunately, other area accommodations execs helped the wary hotelier gain a better understanding of the dynamics of local taxation, and the modest proposed accommodations tax increase gained traction and finally passed. As a result, the CVB has a much stronger and effective budget—and the increased support of its residents, city government and travel partners.

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Is your community's hotel taxation formula on target?

If your funding program isn't properly dedicated or aligned by the municipality, then it's your job to help fix it. One avenue is to develop a strategic plan with a local consortium of interests, (hotels, restaurants, retail, sports and cultural institutions, etc.) to correct the problem for your community's log term benefit.

Who are stakeholders for the hotel visitor tax?

A major stumbling block may be the potentially diverse local perceptions and opinions of just who has ownership of that visitor tax; who are its principal stakeholders?

Hoteliers sometimes believe they have some vested rights because they collect the tax.

DMOs have often made the case that some if not all of the monies collected belong to the industry for re-spending through the CVB; after all, they reason, this is tourism money for enhancing the community's economic and social well-being.

Government believes it's their money, provided by municipal decision--and it should be expended for the jurisdiction's greater good. Of course, we should help them answer this question: just what constitutes the public's greater good?

For starters, the public's benefits from tourism should be stated in real, quantifiable numbers:

It should also go without saying that CVB's ROI results from marketing efforts and programs must be tracked and reported—clarifying specifically what it delivers in quantifiable results: visitors and their expenditures produced through ad conversion, meeting delegates through CVB bookings, etc.

Enhancing City/CVB Contracts

Next, more communities are requiring contracts with their DMOs for the successful delivery of marketing work designed to achieve results.

Contract terms--In our judgment, the terms of those contracts are much too brief, with about half having an annually approved contract. That just doesn't allow for long range planning needs. And while others do provide for multiple year agreements, we think there should be further consideration for "evergreen contracts" that evaluate the CVB and then roll over to continue their important work in perpetuity.

Performance Goals--Another missing ingredient in half of today's contracts are quantifiable performance goals from the CVB. But we see that requirement showing further advances as the industry continues to mature.

Industry Accreditation--We'd also favor a provision requiring that for contract renewal, the CVB be professionally accredited by the Destination Marketing Association International's DMAP program. In our judgment, that would put an end to some governments sending out RFPs to other third-party potential marketing providers who are always unqualified when compared to the community's own destination marketing organization.

Success through flourishing partnerships

In summary, partnerships with government and industry must flourish in order for the CVB to be consistently successful. And that may require some fundamental new thinking from your CVB in addressing the hotel tax and its benefits for the community and those you serve.

Need market planning assistance in enhancing performance? Call Marshall Murdaugh at: (901) 336-9170.

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