California May Cut Tourism Dollars

Gov. Davis proposes slashing $7.3 million in marketing funds to ease $34 billion deficit

By: R. Scott Macintosh

With California facing a multi-billion dollar shortfall, Gov. Gray Davis has proposed massive tax hikes and drastic spending cuts in a budget that would eliminate promotional funds for one of the state’s biggest breadwinners: tourism.

Tourism is a $75 billion industry in California, and the fifth largest contributor to an economy rivaling that of France. Those involved with state tourism say the marketing budget currently $7.3 million is a drop in the bucket compared to the return on the state’s investment.

California’s deficit, fueled by a loss in income tax revenue and increased spending, has been pegged at $34 billion by the governor, who is proposing $21 billion in cuts.

“In my estimation it’s very short-sighted,” said John Marks, the president and CEO of the San Francisco Convention and Business Bureau. “Obviously all of us in the state recognize the severity of the budget gap. It’s more than most countries have to deal with. But what the governor and his people are missing is that tourism is a provider of revenue, not a consumer.”

California Tourism, the program that creates and executes the state’s tourism promotion, runs on a $12 million marketing budget. A little more than half that amount comes from the state, the rest from an assessment on the private sector.

In 1997 California became the first state to have an industry-approved assessment to be spent on tourism marketing. Florida has since approved a similar program.

According to California Tourism’s own performance evaluation, state tourism promotion works. Its study shows that over the last four years, the state successfully increased market share against states with larger tourism budgets, resulting in an additional $8.7 billion in tourism revenue.

The commission also says it returned $196 for every dollar spent on its national television and print advertising campaigns. Although California remains the number one travel destination in the United States, its marketing budget is one of the smallest. For example, Las Vegas alone spends roughly $58 million annually on advertising and promotion.

“Without funding from the state, we won’t have money to make a dent with a campaign,” said Anastasia Mann, owner of Corniche Travel in West Hollywood and a member of California Tourism’s board of directors. “This is a humongous problem to deal with, but we can show that this is one budget that needs to be protected.”

Marks, who has suggested that the federal government adopt an assessment program similar to the California and Florida models, fears that if state funding is cut assessment money might follow.

“There may be those in the industry who will walk away and say they’re just going to look out for themselves,” he said. “We got a good thing that we started. It’s a miserable time to be doing this.”

Although California has difficult decisions to make, it is hardly alone. Virtually every state in the nation is struggling to cope with budget deficits. How those states view tourism varies wildly.

According to the Travel Industry Association of America (TIA), which is conducting a survey on how states are handing their tourism budgets, total elimination of the budget is unusual. Many states are cutting, but Colorado is seeking an additional $10 million to its current $9 million fund.

“The governor had a challenge and it’s not an easy challenge,” Marks said. “It’s not over. It’s a hard way to begin the process, but it’s by no means over.”