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Just How Do You Mean

Thursday, February 19, 2015

There’s an old saying that people that speak the same language should never be allowed to marry...because there exists an underlying assumption that each party understands what the other is saying.

Using statistics to prove the feasibility or validity of a project, a marketing campaign, a sales effort or, indeed, a Destination Marketing Organization can often be fraught with the same challenge. What ROI is to you may mean something completely different to the person listening.

Case in point: DMOs often utilize ROI comparisons such as, “for every dollar invested in our sales and marketing program, we return $7 in visitor spending." And, we do not, for a moment, doubt such a statement.

But, that’s us. We understand how the math works. We understand that virtually nothing else in which a governmental unit invests can have such a profound impact on the economy of a region. That $1 has an impact on job creation, quality of life, community buzz and the potential to attract new residents if they fall in love with the destination. And, yes, some of that dollar is returned to government in the form of sales, room and property taxes.

However, if you are talking to an elected official, chances are that they are utilizing a completely different filter when their ears hear “ROI.” While DMO pros look at the big picture, many politicians can’t get past balancing their own budgets.

Thus, when we say 7:1, they say, “show me the $7 back to our bottom line.” They don’t see ROI as job creation, business starts and increased community investment from entrepreneurs. They only see ROI as, “I give you a dollar and I want to see that dollar come back to my budget.”

This conundrum was recently showcased in a study by The Florida Legislature Office of Economic and Demographic Research that challenged the wisdom of the State’s financial support for Sports Stadiums. When the researchers assessed the ROI of investing in stadiums and incentives for pro sports teams, they found that for every dollar invested, the State got back 30 cents.

Which, of course, is missing the whole point. If the only reason for government to invest a dollar is to get that dollar back, why should government even bother?

If it is important to residents, it should be important to government to invest tax revenues without the need for a full and complete payback. Indeed, most of what government spends money on has no fiscal return (trash collection, water, plowing snow covered streets). So, why the singular focus on this type of ROI when it comes to infrastructure projects?

Clearly, it’s about buying cover in case constituents pitch a fit about their taxes being used to fund a stadium (or other supposed “non-essential” projects). And, in most cases, I’d agree. Spending $100 million on a stadium designed for 17 days of Spring Training games during a destination’s high season sounds sorta foolish. I mean, really, how many additional visitors are you going to attract when your hotels are already at 90% occupancy?

But, let’s be honest about this type of ROI. It’s significantly more than simply returning tax revenue to a government’s bottom line. And, we need to build a significantly better story than simply 7:1 if we’re going to resonate with people who choose to utilize a different definition.

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