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The Power of Promotion in a Challenging Economical
Climate:
Will it keep them coming?Presented by:
Jeffrey EslingerSenior Manager, Research
SETRA Spring ConferenceMontgomery, AL
March 24 – 25, 2009
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About DKSA
Founded in 1982 by Douglas Shifflet
Client support
PERFORMANCE/MonitorSM, Image, ROI, Forecasting, Concept/Ad Testing, etc.
Industry’s Largest Historical, Comprehensive Traveler Database
Monthly detail for over 150 variables trending back to 1992
Contact 165,000 U.S. households for each month – projectable
Mail and Online
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DKSA Clients & Partners
Clients – 50+ destinations CVB’s and State Tourism Offices– 30+ hotel brands and hotel organizations– U.S. government and travel associations– Airlines and financial organizations
Partners– IHS Global Insight– Acxiom – CRM, overlays, segmentation, lists, custom models– American Hotel and Lodging Association (AHL&A)– Hospitality Sales and Marketing Association (HSMAI)– Pacific Asia Travel Association (PATA)– MSW Research – Advertising Testing
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DKSA Data Applications
Understand market changes• Volume and Trends• Competitive Satisfaction and Value
Determine competitive positioning
Develop competitive strategies
Develop targeting strategies
Legislative resource
PR and promotional messaging resource
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Overview
Who is using Promotion Snapshot of Where we are as well as Where we
are going
Develop competitive strategies
Public Tourism Promotion
Colorado Experience and other case studies
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Brands that are Promoting
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Why Not Just Discount?
Discounting without promotion isn’t always enough
Discounting alone does not differentiate
Any promotional offering needs to show what makes your offer stand out
Focus on market segments that traditionally bring in incremental business
Reward your best customers with the best promotions (upgrades, shipboard credits, discounted parking, personal recognition)
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Best Practice Promotion – Carnival Cruise Lines
Targeted Promotions Yields Record Setting Results
One-week period ending March 1, Carnival recorded the highest number of bookings in its history
On a cumulative basis since mid-January, bookings are up 10 percent over 2008.
Carnival attributes its success on its travel agent partners and the consumer’s appreciation for inherent value and affordability of a Fun Ship vacation, as well as marketing efforts.
According to Gary Cahill, CEO, while bookings are at lower pricing, It tells us that despite uncertain economic times, consumers clearly need more fun in their lives and view a vacation as an essential part.
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Person-Trips, Direct Spending & Room-Nights Definitions
Domestic Person-Trips This metric tells you how many unique people visited your
destination. Does not account for multiple visits on a trip or multiple
destinations within a state. Person-Trips are simply the number of people on the trip.
(i.e. if the travel party consists of 4 people then the trip would consist of 4 Person-Trips)
Domestic Direct Spending DKSA collects spending information in 5 major categories
from each Total Direct Spending and Daily Personal Spending are calculated• Transportation• Lodging• Entertainment• Other
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Person-Trips, Direct Spending & Room-Nights Definitions (cont.)
Domestic Hotel Room-Nights This metric tell you how many nights were spent in hotel
rooms and is primarily used by lodging clients. Since hotel rooms house multiple people the "person"
element is not important for this metric. Thus, Room-Nights are the number of nights spent in a
hotel during each Stay (i.e. if 1 night was spent in a hotel in San Jose and 2 nights each were spent in Bend and Portland, the total number of Room-Nights on this trip would be 5 - 1 California and 4 in Oregon)
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Person-Trips, Direct Spending & Room-Nights – Annual % Change
Domestic Person-Trips 2008P/2007 2009F/2008
Total -2.7% -3.9%
Business -7.1% -9.3%
Leisure -1.3% -2.2%
Domestic Direct Spending
Total 3.1% -8.3%
Business -0.8% -11.2%
Leisure 4.7% -7.2%
Domestic Hotel Room-Nights 2008/2007 2009F/2008
Total -1.6% -2.5%
Business 0.3% -3.9%
Leisure -3.3% -1.2%
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Hotel Room-Nights Volume & Forecast
350
400
450
500
550
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009F
Ho
tel
Ro
om
-Nig
hts
in
Mil
lio
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Leisure
Business
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Three Segments – Hotel Room-Nights & Forecast
200
250
300
350
400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009F*
Mid-Level
High End
Economy
Ho
tel
Ro
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-Nig
hts
in
Mil
lio
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Traveler Behavior in the Past Three Months – Travel Segments
7%
16%
5%
4%
73%
8%
12%
7%
2%
72%
10%
11%
9%
2%
68%
December Total February Total March Total
Cancelled a trip due to expenses
Kept planed trip but reduced expenses
Took advantage of a discount travel offer
Other trip changes
No changes
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Traveler Behavior in the Past Three Months – Travel Segments
7%
16%
5%
4%
73%
12%
25%
5%
13%
55%
6%
14%
5%
2%
77%
4%
10%
5%
4%
80%
Total Business Leisure Paid Hotel
Cancelled a trip due to expenses
Kept planed trip but reduced expenses
Took Advantage of a discount travel offer
Other trip changes
No changes
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Traveler Behavior in the Past Three Months – Purpose of Stay
4%
9%
6%
1%
84%
6%
10%
8%
2%
79%
7%
18%
5%
1%
73%
Getaway Wknd. General Vacation VFR
Cancelled a trip due to expenses
Kept planed trip but reduced expenses
Other trip changes
No changes
Took Advantage of a discount travel offer
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Traveler Behavior in the Past Three Months – Mode of Transportation
4%
11%
8%
8%
74%
8%
15%
4%
3%
75%
Air Auto/Van/Small Truck
Cancelled a trip due to expenses
Kept planed trip but reduced expenses
Other trip changes
No changes
Took Advantage of a discount travel offer
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Traveler Behavior in the Past Three Months – Age Groups
10%
9%
5%
1%
80%
9%
16%
7%
1%
72%
4%
10%
4%
5%
81%
18-35 Years 36-54 Years 55+ Years
Cancelled a trip due to expenses
Kept planed trip but reduced expenses
Other trip changes
No changes
Took Advantage of a discount travel offer
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Traveler Behavior in the Past Three Months – HH Income
8%
8%
3%
0%
83%
9%
14%
6%
1%
75%
4%
14%
7%
5%
75%
Under $50,000 $50,000-$100,000 $101,000+
Cancelled a trip due to expenses
Kept planed trip but reduced expenses
Other trip changes
No changes
Took Advantage of a discount travel offer
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Public Tourism Promotion & ROI: Introduction
Introduction
Expenses are on the minds of virtually all decision-makers in business and government today. Alternative uses of scarce public and private funds are being scrutinized from every direction.
Most state and local governments are aggressively cutting departmental programs and expenditures
State and local tourism programs have not been exempt – some have even questioned the need for a state tourism office (STO) at all! Others are significantly cutting back in staff, welcome centers, and (especially) promotional spending.
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Public Tourism Promotion: Is it worth it?
Travel Promotion Spending – An Easy Target
Promotional spending is perhaps the easiest target for budget authorities. It is thought that spending cuts are more benevolent in terms of direct job losses.
More importantly, it is has been hypothesized that the destination is already known and that by reducing/postponing promotional activities will NOT result in appreciable loss in visitation.
Finally they hope and expect the private sector will pick-up much of the promotional slack if public promotion is cut or eliminate entirely.
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Public Tourism Promotion & ROI
Understanding ROI
Knowing if and/or how much to carve out of the STO, CVB or DMO promotional budget is an exercise in understanding the ROI of such activities.
The concept of ROI is widely understood, but the missing ingredient is often solid, comprehensive measures of promotional benefits and systematically comparing them to costs.
ROI studies seek a positive correlation between specific advertising expenditures and resulting visitation/spending.
The ROI answer is more elusive – the measure of a single campaign is not representative of all promotional efforts
Finally, travel and destination decisions are influenced by many more factors than simply, advertising and promotion
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Public Tourism Promotion & ROI
Can the ROI of public promotion spending be estimated?
The challenge lies in having enough data to fuel the process of finding a statistically significant correlation between promotional spending and resulting visitation.
An economic approach provides a less expensive alternative, as well as other research benefits.
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Role of ROI in Public Tourism Promotion
Example of Economic Approach
Highlighted in the February 2009 Journal of Tourism Research entitled Measuring the Return from Australian Tourism Expenditure by Kulendram and Dwyer. The goals of the study were to:
Estimate demand for travel to Australia from various key origins
Estimate visitation from origin markets by income, travel prices, and marketing by the Australian Tourism Board (ATC) in each origin market
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Role of ROI in Public Tourism Promotion
The Result
Significant and quite favorable
Incremental visitation (tourist arrivals) from each key origin was positively related to incremental changes to ATC marketing spending
Once visitor volume was converted into spending, the benefit-to-cost ratio ranged from 3 –to-1 for the UK, 7-to-1 for the US, and 36-to-1 for New Zealand.
Note:This approach works best when promotional data spending history
exists
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Role of ROI in Public Tourism Promotion: The Colorado Experience (1993-1997)
The best “study” of promotional effectiveness
In 1993, Colorado dropped all funding for tourism promotion to shore up the State’s budget
By 1997, Colorado’s overnight leisure visitation dropped by almost 30%
The State’s rank for summer resort travel dropped from # 1 to #17
Expenditures by about $2.4 billion and state/local tax receipts fell by 134 million during that four year period.
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Role of ROI in Public Tourism Promotion: The Colorado Experience (1993-1997)
IHS Global Insight & DKSA Analysis of the situation
According to DKSA historical data, leisure visitation declined -8.4% or 2.6 million visitors
Comprised about 7.7% Colorado’s leisure visitation
Competitive Set – Idaho, Montana, California, Oregon, and Utah
Losses for that time period were not unique to Colorado. Both the U.S. as well as key competitive states also lost Person-Trips, just not at such a high of percentage
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Role of ROI in Public Tourism Promotion: The Colorado Experience (1993-1997)
Example of Economic Approach
Leisure Travel Performance:The Colorado Experience
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Yr-
to-Y
r P
erce
nt
%
US Total Leisure
Colorado LeisureCompetitive Set
Moving Avg -Colorado
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Role of ROI in Public Tourism Promotion: The Colorado Experience (1993-1997)
Leisure Visitation Comparison:Promotional Momentum
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Ind
ex
19
94
=1
00
US
Colorado
Competitive Set
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Role of ROI in Public Tourism Promotion: The New Jersey Example
If New Jersey were to cut its promotional budget
New Jersey’s projected budget shortfall for FY2009 is $1.2 billion
Tourism cuts would result in expenditure savings of about $15 million for FY 2009
If NJ went dark and followed Colorado’s lead, 4 years savings would total $60 million.
See a decline of 4.8M Person-Trips (7.7% of all Leisure visitors)
Highlighted on following chart
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Role of ROI in Public Tourism Promotion: The Colorado Experience applied to New Jersey
SituationLeisure Visitor Loss
Tourism Expenditure
Loss
State & Local Tax Loss
Impact on NJ State Budget
Full CO Experience
-4.8M
(7.7%)-$2.42B -$269M -$254M
½ Colorado-2.4M
(-3.8%)-$1.21B -$134M -$119M
How many lost visitors to negate savings?
268,000
(or 0.4% of NJ total)
-$135M -$15M 0
2007 NJ Leisure Visitor Volume 62.4M Person-Trips
2007 Tourism Spend per Visitor $505
2007 NJ State & Local Tax Receipts per Visitor
$56
2007 NJDTT Budget $15M
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Role of ROI in Public Tourism Promotion
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ith D
.K. S
hiffl
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Ass
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Role of ROI in Public Tourism Promotion
ConclusionConclusion: :
If you want to reduce the deficit, If you want to reduce the deficit, invest more in tourism invest more in tourism
promotionpromotion
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.K. S
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.K. S
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Discussion & Thank You!
Jeffrey EslingerSenior Manager, Research
D.K. Shifflet & Associates, Ltd. Phone: 703.536.09211750 Old Meadow Rd. Suite 620 Fax: 703.536.0580McLean, VA 22102 Email: [email protected]