Tourism marketing return on investment

Interpret ROI with care!

Return on investment (ROI) is a commonly employed measure of performance that can be used to evaluate the efficiency of an investment, or to compare the efficiency of a number of different investments. By dividing the benefit or outcomes of an investment by its cost, its utility becomes immediately clear. Tourism is one of a multitude of industries that employs ROI measures. Numerous public and private entities – including state tourism offices – generate ROI data, and then use those data to advocate for or justify increased investment in marketing, development and other activities.

ROI figures should, however, be interpreted with care – different states use different companies and methodologies to calculate their ROI figures, and report different types of ROI. The ROI on the Pure Michigan campaign is calculated for Travel Michigan by Longwoods International, a market research consultancy with expertise in brand strategy and ROI research, and is defined as the numbers of dollars returned to the state treasury in the form of state sales taxes for every dollar invested in spring/summer Pure Michigan advertising. In 2006, the first year of the Pure Michigan campaign, ROI was estimated at $2.11. By 2009, the first year of national advertising, ROI had increased to $3.44. For 2012, an ROI of $5.76 was reported by Longwoods International. Longwoods has profiled their work with Travel Michigan in a 2011 white paper, “The Power of Destination Marketing” by Bill Siegel. Raising Pure Michigan’s ROI to $6 is one of the six objectives identified within the area of promotion, marketing and communications in the 2012-2017 Michigan Tourism Strategic Plan

These figures cannot, however, be readily compared to other states. Michigan’s ROI appears to pale in comparison to Alaska’s reported ROI of $72, until one realizes that this figure represents the return on public relations (PR) activities. The Alaska tourism marketing team generated 456 Alaska tourism stories in 2012, with an advertising value of $72 million, which represents a $72 return on every one PR dollar expended. Similarly, the effectiveness of California’s domestic advertising campaign would seem to be far higher than Michigan’s based on the 2011 tax ROI of $19 – but these calculations include the generation of not only state but also local tax revenues according to Strategic Marketing & Research, Inc. As such, extreme caution is necessary when reviewing and comparing ROI figures – it is critical to identify not only the type of ROI presented, but the type and range of costs and benefits incorporated into the calculations.

For more information about the 2012-2017 Michigan Tourism Strategic Plan, please contact MSU faculty member Dr. Sarah Nicholls at Michigan State University Extension also has experts in tourism working throughout Michigan that can assist communities and counties in tourism development.

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