Policy & Positions Manual
Provincial Issues - Jobs, Tourism And Innnovation
Predictability for Provincial and Regional Destination Marketing Organizations (2010)
The global tourism environment is rapidly evolving, and in order to remain competitive British Columbia must have demand generating systems in place to convert our province's unparalleled comparative advantages as a destination into competitive advantages.
According to BC Stats, tourism is now the largest “primary resource industry” in British Columbia, contributing $6.6 billion in real GDP in 2008 with visitor expenditures equalling $13.8 billion for the year. The industry is the backbone of the economies of many communities throughout BC.
A progressive marketing plan with adequate and stable funding is a basic necessity for the health and growth of the industry. While this is always true, it is especially important in order to leverage the immense international exposure the province received during the 2010 winter Olympic Games. Capitalizing on this opportunity will only be realized by converting the new awareness of British Columbia as a destination into new visitations.
British Columbia’s Destination Marketing network consists of the Provincial Destination Marketing Organization (PDMO), six Regional Destination Marketing Organizations (RDMO) and 37 Community Destination Marketing Organizations (CDMO). Many or perhaps most of marketing agency activities related to product development, pricing, supply chain management, and promotions require multi-year agreements and predictability in order to undertake their most core functions.
Funding for the provincial and regional marketing system has been provided through the dedication of three points of the eight point tax on accommodation purchases in British Columbia. RDMOs have historically been funded under contract with the PDMO to deliver various tourism programs, to the benefit of tourism stakeholders within their respective regions. CDMOs have been funded in part through the Additional Hotel Room Tax (AHRT) at up to 2% of accommodation fees. For the 2008/09 fiscal year, destination marketing funding in the form of the Hotel Room Tax and the Additional Hotel Room Tax equalled $85.5 million. This was then leveraged with more than $100 million in additional business expenditures for co-operative marketing, as well as partnership funding with the Canadian Tourism Commission.
The funding environment for all three levels of the DMO network has changed significantly with the announcement of the Harmonized Sales Tax (HST) set to be implemented in British Columbia on July 1, 2010. The HST was proposed to replace both the 5% GST and the 8% Hotel Room Tax, and essentially does away with the stable, predictable and dedicated stream of funding for tourism marketing in British Columbia at all levels.
After announcement of the HST, the Council of Tourism Association of BC released a paper titled The Impact of Sales Tax Harmonization on the British Columbia Tourism Industry, which clearly articulated concerns of the industry related to the new tax model. The BC Government quickly acknowledged the concerns of the industry related to continuity of marketing programs, and extended the AHRT until June 30, 2011 to allow time to plan for a replacement funding model for the community level of DMOs. In Budget 2009, the extension of the AHRT beyond 2011 was announced to ensure stable, long-term and dedicated funding to CDMOs, but concerns still remain as to the stability of funding for the provincial and regional marketing organizations.
In a parallel process, the BC Government announced the dissolution of the Crown Corporation, Tourism British Columbia (TBC), and assumed direct control of all provincial marketing efforts as of April 1, 2010. Concerns over the uncertainty of future marketing endeavours and direction are top of mind for the industry professionals.
The Chamber supports a funding formula for tourism marketing that provides a stable, reliable, and performance driven pool of funds allocated specifically to tourism. It is critical that funding for tourism marketing not be a part of the government annual budget appropriation cycle in terms of competing funding requests. Rather that the performance based formula is protected in legislation, making the funding levels predictable for industry. It is imperative that funding levels as per previous amounts allocated to TBC be committed to tourism funding to the Ministry of Tourism, Culture and the Arts.
The unpredictability of annual appropriation outside of legislative protection would bring a level of uncertainly to funding stability. Such instability would jeopardize the ability of DMOs, both the internal provincial body and the six regional bodies, to implement long-range marketing initiatives necessary to achieve marketplace recognition and industry growth. It is imperative that the funding be predictable so that the industry can execute marketing necessary for success.
In addition to having a stable and secure source of funding, it is important to maintain the attributes that industry experience shows will support an effective PDMO, such as:
- Adequate funding relative to potential market share and competitor marketing agency funding levels;
- Performance targets and overall guidance of the organization through a qualified group of independent tourism professionals; and
- A commitment to utilizing market research and analysis as the basis of program expenditures.
THE CHAMBER RECOMMENDS
That the Provincial Government:
- set funding for the provincial and regional destination marketing organizations at a minimum funding level as per previous amounts allocated to TBC;
- protect the performance-based formula through legislation;
- ensure that the executive leadership of the PDMO be comprised of a majority of independent tourism professionals;
- ensure strategic goals flow from independent market research and provide flexible program development to meet market demands; and
- establish measurable performance targets for the PDMO and conduct regular performance reviews in a comprehensive and transparent manner.
