News Story

Summertime, And The Spending Is Easy For Tax-Funded Tourism Ads

But some analysts say the programs are unfair and ineffective

The warm weather is here, and with it the latest taxpayer-funded marketing campaigns to promote the state tourism industry. With a price tag of $2.5 million, the current campaign’s “Meanwhile in Michigan” theme aims to portray the Great Lake state as an escape from the grind of daily life.

But some independent analysts who have studied these government marketing programs conclude that policymakers should let taxpayers escape from having to pay for what amounts to ineffective spending on behalf of a special interest. Michigan’s version is called Pure Michigan, and its spending is overseen by the Michigan Economic Development Corporation, the state agency in charge of giving state subsidies to select businesses.

According to a website created for the promotion, Meanwhile in Michigan ads and images are appearing on radio, billboards, buses and airports, television broadcasts, digital ads and other venues. The promotions will appear in 20 different markets, including Minneapolis, St. Louis, Louisville and Pittsburgh, and are also streamed on Pandora radio.

MEDC spokesman Otie McKinley said, “This particular piece focuses on the hidden gems around the state. Not unlike Long Live Summer or Fall Filter, these specific strategies outline and highlight the different and unique elements of Michigan as a four-seasons destination.”

According to McKinley, the money allocated to this specific project is part of the overall Pure Michigan advertising budget, not in addition to it. “The Meanwhile in Michigan campaign is part of the overarching Pure Michigan campaign,” he said.

McKinley cited a return on investment of $9.28 for every $1 spent on advertising, generating $2.5 billion in visitor spending and $153 million in state taxes.

But Michael LaFaive, a fiscal analyst at the Mackinac Center for Public Policy, challenges these figures, which he said are produced by paid vendors whose work cannot be verified. In a 2016 analysis of state-funded tourism promotion programs, LaFaive pointed out that “return on investment” figures produced by one of these vendors, Longwoods International, were not subject to any type of review or third-party validation. That’s largely because the company refused to disclose the methods used to generate the claims.

“The claims made by the state as to an ROI of $9.28 strain credulity,” LaFaive said. “First, their consultants who come up with this figure ignore substantial costs associated with it. Second, our study comes to a different conclusion, and we use publicly available data going back decades.”

LaFaive’s study looked at nearly four decades of tourism promotion spending across 48 states. It found that for every $1 million increase in state spending to promote tourism, there was a corresponding increase in statewide economic activity of just $20,000 – basically a negative 98% return on investment. LaFaive emphasized that that the $20,000 figure is just the increase in gross economic activity, not the number of extra tax dollars collected by the state treasury.

Other independent researchers have produced findings that challenge the validity of spending on government tourism promotions. One such study was published by the Journal of Travel Research in 2011. The authors discovered that while additional funding for tourism promotion increases out-of-state traffic and employment growth for states that have low levels of initial tourism expenditures, the effect diminishes as spending increases.

This state will spend $36 million on Pure Michigan this year and LaFaive said lawmakers should stop funding tourism marketing programs entirely.

“They are demonstrably ineffective and unfair. The money dedicated to tourism promotion would be better spent fixing Michigan’s roads and bridges,” LaFaive said.

Gov. Gretchen Whitmer has proposed cutting state tourism promotion by $5 million next year, and House budget leaders want to cut it by $4 million. The Senate has voted to increase it $1.5 million.