A friend — concerned about the ever-changing “facts” about the novel coronavirus, and the damage to the national economy by ‘stay-at-home’ orders — sent me a thoughtful email yesterday that included this statement:
I know you don’t like hearing this, but the media (and politicians responding to it) have aggravated this situation, and made it far worse than it would have been had nature been allowed to take its course through “herd immunity”. The economy of Pagosa Springs is being destroyed (may already be irreparably so) because this disease was mishandled in New York City…
I can certainly sympathize with those concerns — as can most folks, I assume, who are living through this weird disaster, here in Pagosa Springs.
Some of us lived through a similarly weird disaster back in 2009-2012, during a time when Archuleta County had one of the highest foreclosure rates in Colorado, and our population actually declined after two decades of rather remarkable growth. At the beginning of that previous disaster, in 2009, an economic consultant named Bill Siegel gave a keynote address at the Nevada Tourism Summit. The summit was organized by a group calling themselves ‘Save Nevada Tourism’, which had been founded in response to proposed legislation that would slash Nevada’s government-funded tourism budget by almost 60%.
Readers will remember Nevada and Colorado and every other state in the Union slashing their budgets during the Great Recession. Tourism marketing budgets were a prime target for some legislators, because… well, who was going to be taking a vacation in the midst of an economic meltdown?
Mr. Siegel’s keynote speech was titled, “What Happens When You Stop Marketing? The Rise and Fall of Colorado Tourism.” Mr. Siegel knew a bit about Colorado tourism, because his company Longwoods International had been tracking the success and failure of various state marketing campaigns since 1986.
From the text of Mr. Siegel’s 2009 keynote address:
Our case study begins in 1983, when the Colorado Tourism Board was created to promote the state. To generate dedicated promotional funding for the new tourism board, a small but broad tax of 0.1% on travel-related products and services was enacted. The original tourism tax had a five year sunset provision, but in 1988, because of the program’s success, the legislature increased the tax to 0.2% and extended it for five more years.
Longwoods International was first hired by the Colorado Tourism Board in 1986 to conduct image and visitor research for the state. We found that, with the exception of skiers, Colorado was largely a regional destination drawing people from neighboring states like Texas, Nebraska and Kansas who wanted to escape from prairies and flat farmland. Given the new marketing budget, and since Colorado was blessed with a unique travel generator – the Rocky Mountains – there was a significant opportunity to draw visitors from across the country and transform the state into a national “fly-in” destination.
By 1992, Colorado’s ‘tourism tax’ was generating about $12 million a year, to be spent by the Colorado Tourism Board on full-color magazine ads in glossy national publications.
“This is Where the Deer and the Antelope Play. But Why Let Them Have All the Fun?” You could play golf in a majestic setting high in the mountains. Or dig up some old pottery at an Indian ruins. Or stand 20 feet away from a mountain goat. Or eat in a restaurant; believe it or not, Colorado actually had restaurants.
But in 1993, “Colorado became the only state to eliminate its tourism marketing function”, Mr. Siegel explained, when voters cut the $12 million tourism marketing budget down to zero. The previous year, a group led by ‘small government’ champion Douglas Bruce had challenged the unbridled growth of Colorado’s governments by putting the Taxpayers Bill of Rights (TABOR) amendment on the ballot… and the state’s voters had approved it. So when the state’s tourism tax expired in 1993, the tax had to go back before the voters, and the supporters of a continued tax on tourism failed to convince the Colorado electorate — freshly granted some control, at last, over tax increases — that such a tax was a good idea. The tourism tax was defeated by a margin of 55% against.
From Mr. Siegel’s Nevada presentation:
As a result, Colorado’s domestic market share plunged 30% within two years, representing a loss of over $1.4 billion in tourism revenue annually… In the important summer resort segment, Colorado dropped from first place among states to 17th.
It took until 2000 for the industry to convince the legislature to reinstate funding with a modest $5 million budget. In 2006, Governor Bill Owens signed a bill upping the tourism promotion budget to $19 million. By 2007, travel to Colorado rebounded to an all-time high, with 28 million visitors spending $9.8 billion enjoying their trips to the state…
The Colorado saga provides a cautionary tale for financial decision-makers who, in these difficult economic times, are naturally looking at major cutbacks in all areas, including promotion. It clearly illustrates that marketing is an essential net generator of revenue and profits to the organization, not a cost.
In June 2008 — a few months before the Great Recession’s financial meltdown became obvious to everyone — reporter Elizabeth Aguilera wrote in the Denver Post:
“Travel to Colorado and Denver increased 4 percent in 2007, and travel spending jumped 10 percent from the previous year to $9.8 billion. According to data released Tuesday, 2007 marked the fourth consecutive year the state’s tourism industry saw an increase in domestic visitors and dollars spent.
“The most significant growth occurred in marketable leisure trips, which are not tied to business, family or friends,” said Kim McNulty, executive director of the Colorado Tourism Office…
“This is exciting for Colorado, and it validates the way we market the state. It’s great news — especially with all the economic downturns — to have gains in ‘07 over the great gains we saw in ‘06,” said Richard Scharf, president and chief executive of the Denver Metro Convention & Visitors Bureau.
Mr. Siegel’s keynote speech ended with his advice to the Nevada Tourism Summit.
In these challenging economic times, when marketing budgets are an easy target in the private sector and public sector alike, the lesson from this case is quite simple: THINK TWICE BEFORE SLASHING YOUR MARKETING BUDGET. DON’T BE THE NEXT COLORADO!