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The following article contains some key findings and recommendations from a recent global benchmark survey among convention & visitors bureaux (CVBs). The survey has been conducted by Dr. Dimitris Koutoulas, an Athens-based tourism and marketing consultant and lecturer at the Greek Open University.
A recent global benchmark survey among convention & visitors bureaux (CVBs) revealed several similarities and differences between bureaux based in and outside the USA. This survey has been conducted by Dr. Dimitris Koutoulas, a tourism and marketing consultant based in Athens, Greece, with the aim of establishing industry benchmarks especially from a European perspective .
“Most existing CVB surveys mainly reflect the situation in North America, which has by far the largest numbers of bureaux,” Dr. Koutoulas said. “There are fundamental differences between continents, especially in regard to financing CVB operations. The American concept of local tourism taxes, for instance, which is the major source of income for US-based bureaux, has yet to be implemented in other parts of the world.”
CVBs are a heterogeneous group of destination marketing organisations varying significantly in regard to their geographic scope, shareholders, membership, size, market orientation and funding. Some are independent, co-operative organisations bringing together numerous stakeholders of the tourism industry, while others are departments of government agencies dedicated exclusively to developing the MICE market. They all operate on a non-profit basis with the aim of attracting meetings and visitors to the destination.
Based on his own research as well as a IACVB survey from 2003, Koutoulas made the following comparisons between bureaux based in and outside the USA:
- Both American and non-American CVBs achieve similar average revenue. The average annual budget of CVBs from outside the USA is 5,380,188 Euros as compared to 5,315,615 Euros (US$6.4 million) of US-based bureaux.
- Non-US bureaux receive less public funding and tax income than their American counterparts (67.5% of total income for non-US vs. 84% for US-based bureaux). The share of private sources is twice as high in the case of non-US bureaux than US-based CVBs (32.5% vs. 16% of total income). Private sources of funding include membership dues, advertising, promotional participation, print and co-op advertising, donated (non-cash) services, interest etc.
- Bureaux in the USA and elsewhere spend about the same part of their budget for marketing purposes (56.4% by non-US bureaux vs. 53% by US-based CVBs).
- Non-US bureaux employ an average of 23.6 full-time staff members. The average staff size of US-based CVBs is 18 full-time employees.
- 60% of non-US bureaux accept individual businesses as their members vs. 51% of US-based CVBs.
From a European perspective it is interesting to assess the American experience in regard to dedicated tourism taxes . The major source of income of US-based bureaux is the local accommodation tax. This income either goes directly to the respective bureau or is included in the funding by local authorities.
Dedicated hotel room taxes have been used since the 1950s to fund both the construction and operation of convention centres as well as the activities of CVBs. According to IACVB data, 88% of U.S. bureaux receive 73% of their funding from hotel occupancy taxes – a tax which in most destinations is imposed upon visitors with one of the specific objectives being to market to future visitors. US-based CVBs receive, on average, a 54% share of locally collected room taxes. The mean hotel tax rate in the USA is 12.2%. Other taxes that may be used to finance bureau operations and/or tourism promotion include, among others, car rental taxes (with an average rate of 9.4%) and restaurant taxes (with an average rate of 7.9%).
This kind of funding secures a steady flow of income for the CVBs and motivates them to become more effective in order to maintain and further grow visitor flows and, as a consequence, their tax revenues. This particular taxation is borne by end consumers who actually live elsewhere and not by local residents. Thus, the tourism promotion undertaken by a CVB is paid for by re-investing part of the income generated by tourism, without using funds generated elsewhere in the local economy.
The concept of a tax dedicated to funding tourism promotion may be attractive for a CVB but difficult to adopt in countries lacking any experience in local or special-purpose taxation. For instance, it will be quite challenging to persuade local tourism associations that the benefits of introducing a tax outweigh any costs such as becoming a more expensive destination. Even when stakeholders and legislators agree with its introduction, it will be challenging to establish an efficient mechanism to enforce and collect the tax.
CVBs are increasingly under pressure to generate their own income. One of the main challenges faced by CVB management is to persuade government officials and legislators about the benefits derived by attracting MICE business and visitors to a destination and about the need to continue funding the marketing activities of CVBs.
Some CVBs manage to secure sufficient funding even without tax revenues. A good case in point is the Amsterdam Tourist Board. Its 5.9 million Euro budget has only a 22% contribution by the local government. The balance is generated by the Board’s commercial activities including its membership programme with 1,800 participating local businesses.
Dr. Koutoulas recommends that each CVB should exploit the full potential of earning income on the free market by offering its services to both businesses and tourists. He also considers it important that CVBs should keep track of their efficiency in using the available funds. One way to do this is by comparing their operation against industry benchmarks taken from surveys like the present one or against historical data from the bureau itself. CVB management should, for instance, constantly seek to limit overhead costs in order to free funds for destination marketing. Indicators such as marketing expenses as a percentage of the total budget or the budget-to-personnel ratio will provide guidelines for this objective.
For additional information regarding the full survey report, please contact the author directly at: d.koutoulas@ba.aegean.gr
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
