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Tough Times Tourism

Tourism states reconsider advertising budget in tough economic times  Dec 21, 2008

A struggling economy has state governments considering whether advertising a luxury or a necessity.

For states that are heavily dependent on tourism, the matter is taking on a new urgency as every expense is closely examined by elected officials who have rapidly declining revenues and a slew of worthwhile programs to fund. All 50 state legislatures will meet next year, with most facing budget cuts.

Here in the snow-covered mountains of Utah, Gov. Jon Huntsman's proposed budget calls for slashing the state's tourism advertising by $4.7 million — or 38 percent — next year as the state grapples with a $1 billion shortfall.

"I think what will happen is we'll have to spend the money even smarter than we have in the past," said Kim McClelland, chairman of the Utah Board of Tourism. "I think all the states across the country, I just have to believe, are dealing with similar budget challenges."

States have similar challenges, but are taking different approaches.

Hawaii, which is projecting a $900 million budget shortfall, is increasing its marketing budget by $12 million through March to lure additional visitors.

In Nevada, state officials abruptly canceled a state tourism conference earlier this month that would have focused on nine straight months of declining casino revenues. The state has a $331 million budget shortfall.

Vermont is considering closing four highway rest areas that serve as tourist information centers as part of a cost-cutting measure as it faces a $60 million budget gap.

Tourism — like all industries — is being hurt by the global economic crisis. State revenue from transportation, sales and hotel taxes have plummeted and many companies have been forced to lay off workers.

The Washington, D.C.-based Travel Industry Association is forecasting that nationwide, business travel will decline 2.7 percent in 2009 and leisure travel will drop 1.3 percent.

Traditionally, those who advertise during hard times are the most likely to weather an economic downturn, experts say.

After the Sept. 11, 2001, attacks, Florida increased its ad spending by $21 million to get people traveling and spending again. Later studies showed that infusion brought in $63 million in new tax revenue, according to Visit Florida, the state's tourism arm.

Still, many states are cutting. Maryland is reducing its spending on TV ads as part of a $2.15 million cut to its tourism department.

"Whether it's state government or business, in times of recession the first thing (corporate finance officers) do is look at advertising and cut it," said Jon Morris, a University of Florida advertising professor. "It's an easy thing to get rid of. ... The problem is, once you do that it's hard to get back to where you were. You start losing image, you start losing traction.

"In the case of a particular destination and a particular product, it could lose enough of its image that it may never recoup it completely because something else takes its place."

That presents opportunities for states that increase or even maintain their spending to make significant gains over their competitors, he said.

Losing momentum could hurt Utah. For years, the state spent about $900,000 a year on advertising, or roughly the same that the ski resort town of Vail, Colo., spent advertising itself as a summer destination.

When Huntsman took office in 2005 and made tourism a cornerstone of his economic development plans. Advertising spending topped $11 million this year and the state is beginning to chip away at Colorado's lead as the nation's top ski destination.

State tourism officials say Utah is getting back $11 in tax revenue for every $1 it spends, according to study results released last month.

State leaders say they're aware of the importance of advertising. Incoming Senate Majority Leader Sheldon Killpack, R-Syracuse, said cutting advertising during a down economic period is one of the worst things a business can do.

It remains unclear how much of the state's advertising budget lawmakers will cut when they convene next month. He said lawmakers want to focus on the largest, most immediate returns on investment when spending money, such as building roads and offering tax incentives to businesses to move to Utah.

"The subcommittees haven't delved into the budget to see if there are other areas that can afford more cuts, that can save more money than advertising, but certainly the principle is sound in terms of economic development that you need to be very cautious when you start cutting," he said.

If there is a silver lining to declining advertising budgets, it is that many companies are offering ads at bargain basement prices and technological advances provide unprecedented opportunities for states and companies to circumvent traditional media advertising, said John Sweeney, head of the advertising sequence at the University of North Carolina.

Becoming too dependent on viral marketing, though, is risky, he said.

Utah began placing some humorous ads featuring human snowflakes on YouTube, hoping they will be e-mailed around and posted on Facebook and Myspace pages. So far, the ads have been viewed about 5,000 times.

"You can do it for a fraction of the cost, but you know what? I can budget by saying I'm going to win a lottery and it makes perfect sense. But what are my odds? Everyone is trying to get these viral hits," Sweeney said. "We all know that happens every now and then and we all know people win lotteries, but if I buy space in a magazine with my target audience, I know I should gain some benefit."

Tourism states reconsider advertising budget in tough economic times
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