Commentary

Study on Arkansas Tourism Campaign Should Make You Scratch Your Head about Pure Michigan

If economic impacts are as stated, the tourism industry should pay for its own ad campaign

Does Arkansas’ tourism campaign provide more return on investment than Pure Michigan? That’s one implication of a study that looked at the returns of the Arkansas campaign, Arkansas: The Natural State. It said that the campaign returns $144 for every dollar spent. A taxpayer-funded study of the Pure Michigan national marketing push, meanwhile, says that Michigan’s advertising campaign returns $119 in tourism spending for each dollar spent.

The difference between the two campaigns — they are different but not that different — means that their results should be viewed with skepticism. Studies of this sort exaggerate the economic impact of state efforts. As one academic put it, “Most economic impact studies are commissioned to legitimize a political position rather than to search for economic truth. Often the result is mischievous procedures that produce large numbers that study sponsors seek to support a predetermined position.”

The incentives are all wrong when the people paying for the studies have a vested interest in promoting the benefits of the campaign the study examines. Some of the authors of these economic impact studies, like those who produced past studies for Pure Michigan, won’t even share how they come up with their figures. You have to trust them.

A different look at the data, though, finds more costs than benefits. Spending an extra $1 million on ads results in $20,000 in extra activity in the state’s lodging industry, a poor return on the money.

If the people in the tourism industry think that such things were an effective use of money, they can come together to keep the campaign alive. That way, the direct beneficiaries of spending will be the people paying for it, even if industry interests have opposed it in the past.

It might be a challenge for the interested parties to find a way to split the bill, though. This would be difficult if the returns on the campaign were small. If a campaign had only a 50 percent return, for example, business owners may be wary that a cost-splitting decision would assign their business more costs than they would get in benefits. But if there really are 11,800 percent returns — the implication of the Pure Michigan report — there should be interest in keeping the campaign alive even without a fully fair way to divvy the costs. The remarkable returns could help lead to a compromise funding solution.

If Pure Michigan interests believe these impact studies, maybe they could also talk about how they can boost their returns up to Arkansas levels. But if they don’t believe the studies, then it’s more likely those reports are just an effort to get something at taxpayer expense, even if the returns aren’t great.