FACE THE STATE
DENVER — The Colorado Tourism Office touts a 13 to 1 return on investment for its $10+ million marketing budget, leading local economists to question how the state could even arrive at such a statistic.
According to state tourism officials, Colorado government received $13 in taxes and other revenue for every dollar spent on marketing in 2003, which jumped to $18 the following year. It dropped back to $13 in 2007, the last year figures were available. By comparison, a successful online advertising campaign might approach a 5 to 1 return.
“That sounds astronomical to me,” said Barry Poulson, a CU-Boulder economics professor. “When the government spends a dollar it is about one fifth as productive as the when the private sector spends a dollar.”
The S&P 500 boasted an annual return of only 5.49 percent in 2007.
Longwood International, the research firm that calculated the 13 to 1 ROI, provided Face The State a 2003 presentation explaining its methodology (PDF). “A benchmark study was conducted following the advertising period to measure detailed awareness of specific ads, estimate the impact of awareness on intentions to visit and image, and estimate short-term conversion that occurred during and shortly after the campaign period,” the presentation explains. Surveys were mailed to members of a national consumer panel in targeted regions, asking respondents to identify whether they were familiar with particular advertising campaigns, including Colorado’s.
The methodology for determining ROI was summarized by the state auditor in a recent report: “ROI is calculated by adding state and local tax revenue related to tourism and dividing the total by Tourism Office marketing expenditures during the year.”
“If I had a student turning this [methodology] in to me, I would tell them this doesn’t make any sense,” said Dale R. DeBoer, chairman for Department of Economics at CU-Colorado Springs. “You don’t know that all of that additional spending is due to the advertising. You’re prescribing causality without proving that it is there.”
Michael Erdman, of Longwood International, defended the figure. “In our methodology we actually show people the advertising and obtain [their] measure of recognition,” he said. “We do online surveys in their advertising market. These people are members of a very large national consumer panel.”
In addition to questioning the statistic itself, Poulson said state spending on tourism is a “corporate welfare problem.”
“What they’re really saying is that the state is going to spend this money instead of relying on the private sector to do it,” Poulson said.
According to a recent report from the state auditor’s office, the number of trips to Colorado increased from 27 million in 2006 to 28 million in 2007, generating $9.8 billion in tourism related expenses. That same report criticizes the Colorado Tourism Office for not setting more measurable goals for managing its budget. The state has dedicated $500,000 for promotion of a new Web site, HotDealsColorado.com, but a recent Face The State investigative report found the tourism office has no system in place to monitor the booking of deals featured there.
“It is pretty clear that most Colorado tourism comes from people from Colorado,” DeBoer said. “If all the advertising does is cause a Coloradan to spend their money on tourism instead of going to the Cherry Creek mall, all that is doing is changing the distribution of the spending”
DeBoer said without a control sample in which the state spends no money on tourism advertising it is difficult to estimate the true benefit of its marketing campaign. “If you had tracked behavior over a 50 year period, then you could control for all those other potential variables,” he said.
Distributed by Colorado Capitol Reporters
