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Are Large Scale, State-Funded Social Tourism Programmes Desirable?

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For decades tourism industry growth has been a major contributor to increased economic activity throughout the U.S. and the world. It has created jobs in both large and small communities and is a major industry in many places. It is the dominant economic activity in some communities. Yet, the impacts of tourism to a community are not widely understood – even where tourism is growing dramatically and should be of the greatest interest or concern.

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Tourism is considered a significant part of the state economy. However, it is difficult to distinguish tourism, which would typically be described as leisure travel by persons from outside the area, from business travel or retail purchases of leisure goods by residents of an area. Tourism contracts with Longwoods International and Tourism Economics to research annual traveler expenditures and resulting economic impacts. The contract cost for this research was $233,000 in 2017-18. Longwoods International's Travel USA program randomly solicits survey participation each quarter from a national sample. For the study of the 2017 travel year and its impacts, Longwoods International received responses describing approximately 329,500 total overnight or day trips nationally. For Wisconsin, the sample yielded approximately 4,700 overnight trips and 3,000 day trips. Analysis of these responses forms the basis of estimates of total visitors, visitor spending, and other visitor characteristics. Tourism provides $160,000 tribal gaming PR annually for a competitive grant program to support local tourism promotion organizations, such as convention and visitor bureaus and chambers of commerce. TICs are required to provide informational or promotional materials on area attractions, and must be in a place that a visitor to the area would be reasonably assumed to stop while traveling to a cultural or recreational destination. TICs must also track visitors and provide staffing to assist travelers. A TIC must be likely to generate increased visitors to the region or state and to make a positive economic impact in the state. Tourism offers grants on a semiannual basis, with January 1 and July 1 application deadlines.

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These sectors do not capture the entirety of the potential economic impact of taxpayer-funded state tourism promotion, but they are the sectors most likely to benefit. The impact to all other sectors of this spending is likely to be less. In other words, if tourism promotion spending produces large impacts in these sectors, it’s possible that it has an overall positive effect on the general economy. If, on the other hand, a large impact cannot be found in these sectors, it is unlikely that this spending produces meaningful benefits in other sectors or for the economy as a whole. The results of this econometric analysis, based on data from 48 contiguous states over a 39-year period, find only a small positive impact of state-funded tourism promotion on the hotels and accommodations industry, no impact on amusement and recreation, and a microscopic one on arts and entertainment incomes. In all cases, the net results — after subtracting out government promotion costs — were negative. The Michigan-specific results did not vary from these national averages. Based on these results and the failure of the MEDC to provide verifiable evidence on the effectiveness of taxpayer-funded tourism promotion spending, the Legislature should stop allocating money for the purpose of tourism promotion. State lawmakers have shuttered other failed economic development programs, such as the Michigan Economic Growth Authority and the Michigan film incentive program, and it should do the same with Pure Michigan (Michigan 2015). Short of its elimination, the state Legislature should demand a new review of the evidence. The analysis provided in this report suggests that state-funded tourism promotion is a net loser for states, including Michigan, whereas the MEDC-funded study based on a secret methodology shows wildly positive returns. In light of these two contrasting outcomes, the Legislature should commission a study, overseen by department other than the MEDC and contracted out via a robust competitive bidding process, to further study the economic impacts of spending on the Pure Michigan tourism promotion campaign (Michelle Begnoche, 2011). Additional spending on the program should be suspended until the Legislature can demonstrate with reliable and verifiable evidence that taxpayers are benefiting from this program.

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Summing up, the Department of Tourism has four tourism specialists located in regions throughout the state to assist local areas in growing their tourism economies. The specialists generally are responsible for assisting an area in developing its tourism resources, including informing local businesses and organizations of grant and other resources available through the Department and other public and private sources.

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Emily Guerrant, Michigan Economic Development Corporation, email correspondence with Michael LaFaive, Mackinac Center for Public Policy, Nov. 29, 2015.

Michelle Begnoche, “Zimmermann Named State Tourism Director of the Year,” Press Release (Lansing, Mich.: Michigan Economic Development Corporation, Aug. 29, 2011), https://perma.cc/4VES-X5VD.

“Michigan 2015 Tourism Advertising Evaluation and Image Study” (Longwoods International, April 2016), 60, https://perma.cc/P85Q-RGYS.

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Are Large Scale, State-Funded Social Tourism Programmes Desirable?
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