MEDC Downplayed Pure Michigan Return On Investment Claims? Oh Really

Secretive numbers used in claims have headlined many tales told to reporters and lawmakers

Editor's note: This ForTheRecord has been updated with a comment from the MEDC.

David Lorenz is the Michigan Economic Development Corporation official in charge of the state agency’s Travel Michigan tourism promotion bureau. Lorenz said in a recent news article that he wants to make sure the $35 million spent on Pure Michigan ads is used wisely.

The MEDC recently ended its relationship with Longwoods International, a company that provided alleged rate-of-return calculations on how much the ads added to state economic activity and tax collections.

Longwoods’ most recent report stated that the state received more than $8 in additional tax dollars for every dollar spent on Pure Michigan promotions. (The ads must have got better, because in 2010, Longwoods and the MEDC were claiming just an extra $2.23 collected per dollar spent.)

There’s just one catch: The company and the MEDC refuse to divulge the methods used to come up with those numbers, saying the process contained proprietary information. Essentially, what they have told both taxpayers and policymakers is, “Trust us.”

Yet Lorenz now says he never focused on how much return on investment the state gets from its Pure Michigan tourism campaign.

“People always focus on the (ROI) numbers. I never have,” Lorenz said in a Crain’s Detroit Business article.

The MEDC spokeswoman Michelle Grinnell stated, "We certainly get asked about the ROI frequently (the story you link to below is a great example) and we of course talk about it in those situations. And it is undoubtedly something that is important to share with stakeholders and legislators. Dave addressed that in his next quote saying the ROI is 'something we have to do because its expected and it does give us an idea of what is happening,' " 

"Bottom line, the ROI is a valuable benchmark as an overall snapshot of the impact of the Pure Michigan campaign in inspiring travel to the state," Grinnell said. "However, it is the marketing insights that make up the vast majority of this report and that inform the creative and strategic direction of the campaign – that is where our focus is. The fact that this report provides us with far more data than just the ROI often gets lost in the conversation, including the article you posted today. While the ROI gets the spotlight, it is the marketing insights that are integral understanding effectiveness of the campaign."

ForTheRecord says: Lorenz sure sounded like he was focusing on return on investment in a 2015 Crain’s article:

“And a strategy of talking about the campaign now is all part of pushing a more compelling business case, and showing an example of return on investment, for the Michigan Economic Development Corp.”

“‘We're showing our cards to our competition,’ said Dave Lorenz, the new vice president of Travel Michigan, the arm of the MEDC that manages the tourism campaign.

“For every dollar spent on Pure Michigan in 2014, Lorenz said, the state brought in an additional $6.87 in tax revenue. That’s the best result since the department started tracking ROI in 2006, he said.”

“Tracking Pure Michigan's ROI is important not only to determine whether the campaign is worth continued investment, Lorenz said, but also because Michigan’s tourism industry is trying to attract more visitors in hopes of turning them into residents — something he calls the ‘halo effect.’”

James Hohman, director of fiscal policy at the Mackinac Center for Public Policy, tracks exaggerated ROI claims from various givers and receivers of taxpayer largesse. Among the wildest are claims that rapid transit buses in Cleveland generate $114 in economic activity for every dollar spent on them and that Michigan arts subsidies generate $51 per tax dollar spent.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.