Destination Marketing Organisation Best Practices and Benchmarking Study: Tourism Vancouver. Prepared by InterVISTAS Consulting Inc.

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1 Destination Marketing Organisation Best Practices and Benchmarking Study: Prepared by InterVISTAS Consulting Inc. August 2012

2 TABLE OF CONTENTS Page 1. PROJECT OVERVIEW 3 Objectives 3 List of Participants 4 Approach & Methodology 5 2. ORGANISATIONAL RESOURCES 7 Budget 7 Staffing 9 3. DESTINATION STRATEGY 10 Budget Allocation 10 Sales and Marketing Strategy DESTINATION PERFORMANCE 16 Hotel Room Revenue PRODUCTIVITY & EFFICIENCY 17 Availability of Resources 17 Sales and Marketing Effectiveness CONCLUSIONS 22 2

3 PROJECT OVERVIEW Objectives This annual nation-wide DMO Best Practices and Benchmarking study is commissioned by the Destination Marketing Association of Canada (DMAC). The objectives of this study are to: Provide a basis for DMO performance benchmarking across Canada which takes into account differences in organisational/market size and funding levels; Provide a platform for DMOs to benchmark their own performance over time using metrics that are relevant to specific needs; and Provides a strategic organisational tool that assists in business and marketing plan development, and in ongoing stakeholder and community consultations. 3

4 PROJECT OVERVIEW List of Participants Thank you to the following destination marketing organisations for participating in this study: Banff/Lake Louise Tourism Destination Halifax Destination St. John's Edmonton Economic Development Corporation Fredericton Tourism Ottawa Tourism and Convention Authority Saint John Destination Marketing Inc. Tourism Calgary Tourism Jasper Tourism Kelowna Tourisme Montréal Tourism Partnership Niagara Tourism Richmond Tourism Saskatoon Tourism Toronto Tourism Whistler Tourism Winnipeg 4

5 PROJECT OVERVIEW Approach & Methodology Identification and Selection of Benchmarking Metrics The metrics have been selected based on research of best practices in organisational benchmarking, and input received from individual DMO representatives. Over 24 metrics have been developed to benchmark DMO performance in almost every major category. Data Collection The data was collected via a survey questionnaire sent out to individual DMO respondents electronically. Where applicable, DMO financial statements were also used to supplement the survey data provided. To ensure data quality and consistency, follow-up was conducted with individual participating DMOs to verify and clarify survey data as required. 5

6 PROJECT OVERVIEW Approach & Methodology Analysis and Presentation of Benchmarking Results For the purposes of comparison, the benchmarking metrics have been presented by DMO budget category as follows: Less than $2 million (<$2Mn) $2 million to less than $5 million ($2Mn - <$5Mn) Greater than $5 million (>$5Mn) belongs in the (>$5Mn) budget category. Hotel room revenue is used as the core measure of destination performance. Although it is recognised that not all destination hotel room revenue can be attributed to DMO initiatives and activity, this is one of the most commonly available and consistently defined measures of performance for benchmarking purposes. 6

7 Total Organisation Funding ($Mn) ORGANISATIONAL RESOURCES Budget has experienced fluctuations in funding over the last several years. In general, DMO organisation funding tends to follow the same pattern as the economy and destination business performance. $16 $14 $12 Total Organisation Funding (Average) > $5Mn Economic uncertainty and recessionary challenges have resulted in fluctuations in organisational funding for Tourism Vancouver. $10 $8 $6 $4 All DMOs $2Mn - <$5Mn Specifically, this includes a marked decrease following the financial crises of 2008, followed by a recovery in $2 < $2Mn $ $13.3 $11.6 $14.1 $12.7 < $2Mn $1.3 $1.3 $1.4 $1.3 $2Mn - <$5Mn $2.5 $2.6 $2.4 $3.0 > $5Mn $12.0 $11.4 $12.7 $12.7 All DMOs $6.7 $6.5 $6.5 $6.9 7

8 ORGANISATIONAL RESOURCES Budget The majority of s funding continues to be sourced from hotel levies. In general, smaller budget DMOs tend to have a higher proportion of total organisation funding from public grants and other public sources, while larger budget DMOs usually source a greater proportion of organisation funding from hotel levies. However, recent trends suggest that many DMOs have been diversifying their revenue sources smaller DMOs seem to be obtaining an increasing proportion of their budget from hotel levies, while larger DMOs are increasing their proportion of revenue from public grants and other public sources. s proportion of total organisational funding from hotel levies is higher than the average for its peer group. 100% 80% 60% 40% 20% 0% DMO Funding Profile (Average) Hotel Levies Public Grants and Other Public Sources Member Fees, Commissions and Other Revenue 21% 20% 17% 17% 18% 21% 18% 13% 15% 17% 13% 10% 5% 7% 6% 2% 13% 25% 26% 31% 51% 59% 60% 52% 33% 25% 26% 23% 22% 36% 35% 35% 20% 24% 27% 19% 31% 26% 29% 31% 30% 35% 75% 73% 77% 81% 72% 62% 64% 52% 48% 44% 42% 44% 48% 48% 47% 38% 22% 20% < $2Mn $2Mn - <$5Mn > $5Mn All DMOs DMO Budget Category 8

9 Average Number of Staff (FTE) ORGANISATIONAL RESOURCES Staffing In general, larger DMOs tend to have more staff. This makes intuitive sense as these DMOs are usually responsible for destinations that need to service more visitors and members. The level of staffing at has declined over the last couple of years. Average Number of Full-Time Equivalent (FTE) Staff Although there have been year-to-year fluctuations for some organisations, staffing levels have remained largely unchanged for most DMOs over the last four years > $5Mn All DMOs $2Mn - <$5Mn < $2Mn After peaking in 2009, s level of staffing has declined over the last couple of years < $2Mn $2Mn - <$5Mn > $5Mn All DMOs

10 DESTINATION STRATEGY Budget Allocation allocates the majority of its budget to sales and marketing and personnel expenses. The largest budget expense category for most DMOs is sales and marketing and personnel expenses. Market research expenses make up the smallest proportion of overall budget expenses for most DMOs. The budget allocation for is similar to that of DMOs in its peer group, with the majority of funding allocated to sales and marketing and personnel expenses. Overall Budget Allocation by Major Expense Category (Average) General & Administrative Personnel Sales and Marketing Other Expenses Market Research 1% 1% 1% 1% 1% 1% 1% 2% 1% 1% 1% 2% 1% 1% 1% 1% 1% 1% 1% 1% 100% 13% 9% 9% 9% 17% 18% 20% 14% 11% 7% 6% 12% 12% 11% 10% 10% 11% 9% 8% 11% 80% 30% 29% 35% 32% 26% 51% 32% 34% 45% 56% 34% 46% 50% 51% 55% 55% 44% 47% 52% 47% 60% 40% 44% 44% 51% 53% 44% 37% 43% 37% 34% 33% 30% 33% 27% 27% 34% 34% 31% 32% 20% 25% 26% Over the last couple of years, Tourism Vancouver s proportion of budget allocated personnel expenses has decreased this is due to the decline in staffing during this time. 0% 10% 12% 9% 8% 8% 8% 11% 8% 9% 8% 7% 8% 10% 10% 9% 9% 9% 9% 9% 8% < $2Mn $2Mn - <$5Mn > $5Mn All DMOs DMO Budget Category 10

11 Total Sales & Marketing Expense (Mn$) DESTINATION STRATEGY Sales and Marketing Strategy s level of investment in sales and marketing has increased over the last several years. Total sales and marketing expense has remained fairly consistent for most DMOs, with the exception of the largest DMOs, which reported an increase between 2009 and has been able to increase its level of sales and marketing investment over the past several years which is consistent with the trend for its DMO peers. Average Total Sales and Marketing Expense ($) $8 $7 > $5Mn $6 $5 $4 All DMOs $3 $2 $2Mn - <$5Mn $1 < $2Mn $ $4.0 $3.0 $4.6 $5.0 < $2Mn $0.4 $0.3 $0.3 $0.4 $2Mn - <$5Mn $1.0 $1.3 $1.2 $1.2 > $5Mn $5.9 $5.4 $6.6 $7.1 All DMOs $3.2 $3.1 $3.3 $3.6 11

12 DESTINATION STRATEGY Sales and Marketing Strategy Most DMOs invest the majority of their sales and marketing budget to consumer marketing and meetings & conventions development. The larger DMOs tend to have a higher proportion of their sales and marketing budget allocated to travel trade activity relative to smaller DMOs. invests a larger proportion of its budget to meetings and conventions development relative to its peers. allocates the majority of its sales and marketing budget to meetings and conventions development, followed by consumer marketing. Sales and Marketing Budget Allocation by Function (Average) 100% 80% 60% 40% 20% 0% 18% 51% 9% 56% Travel Trade Meeting & Convention Consumer Marketing Media & Communications 8% 9% 6% 9% 27% 26% 37% 42% 39% 40% 52% 49% 5% 5% 6% 5% 4% 45% 44% 42% 45% 32% 23% 25% 15% 16% 13% 10% 13% 10% 9% 8% 7% 8% 10% 9% 9% 7% 7% 8% 8% 7% 55% 58% 65% 56% 45% 47% 51% 55% 47% 50% 55% 53% 29% 20% 28% 5% 8% 7% 26% 25% 22% 20% 32% 30% 25% 28% 18% 20% 18% 17% 14% 13% 13% 12% < $2Mn $2Mn - <$5Mn > $5Mn All DMOs DMO Budget Category 12

13 DESTINATION STRATEGY Sales and Marketing Strategy In general, larger DMOs tend to focus more on the U.S. and International markets relative to smaller DMOs as reflected in their sales and marketing budget allocation. Smaller DMOs usually focus more on into intraprovincial and other domestic markets. s sales and marketing strategy is focused primarily on the U.S. and international markets. Sales and Marketing Budget by Geographic Market (Average) 100% 80% 60% 40% 26% Intra-Provincial Other Domestic U.S. International 23% 23% 5% 6% 4% 3% 3% 4% 7% 8% 17% 11% 10% 15% 18% 17% 11% 12% 42% 35% 23% 18% 18% 20% 13% 11% 11% 12% 31% 33% 33% 29% 24% 23% 20% 20% s primary target markets include the U.S. and international markets as reflected in its allocation of sales and marketing budget. has a stronger U.S. market focus compared to DMOs in its peer group. 40% 20% 0% 60% 71% 73% 58% 63% 57% 40% 34% 64% 69% 44% 68% 23% 24% 45% 46% 23% 26% 39% 45% 11% 18% 23% 22% 12% 14% 17% 20% 27% 26% 33% 2% 28% 29% 10% 18% 22% 5% 5% 4% 1% 3% < $2Mn $2Mn - <$5Mn > $5Mn All DMOs DMO Budget Category 13

14 Share (%) of Total Sales and Marketing Budget Allocated to Web & Social Media DESTINATION STRATEGY Sales and Marketing Strategy In general, the proportion of sales and marketing budget allocated to web and social media is relatively small for most DMOs, but has increased in recent years. s proportion of sales and marketing budget allocated to web and social media applications is relatively low compared to its peers. allocates a relatively small proportion of its sales and marketing budget to web and social media relative to its peers. Average Share (%) of Total Sales and Marketing Budget Spent on Web and Social Media Applications 16% 14% 12% 10% 8% 6% 4% 2% 0% % 3% 1% 2% < $2Mn 8% 4% 6% 9% $2Mn - <$5Mn 10% 14% 12% 14% > $5Mn 7% 9% 13% 11% All DMOs 8% 10% 12% 12% $2Mn - <$5Mn All DMOs > $5Mn < $2Mn 14

15 Share (%) of Total Sales and Marketing Budget Allocated to Co-Op Initiatives DESTINATION STRATEGY Sales and Marketing Strategy works closely with industry partners and stakeholders via co-op marketing. Most DMOs allocate about 10%-25% of their sales and marketing budget to co-op marketing initiatives. In general, larger DMOs tend to have a higher proportion of co-op marketing investment relative to smaller DMOs. Detailed co-op marketing data for was not available for recent years. Historical data shows that roughly 50% of marketing initiatives were launched in partnership with industry stakeholders. Average Share (%) of Total Sales and Marketing Budget Spent on Co-op Initiatives 60% 50% 40% 30% 20% 10% 0% % < $2Mn 7% 7% 8% 8% $2Mn - <$5Mn 23% 22% 23% 26% > $5Mn 18% 14% 15% 24% All DMOs 18% 15% 17% 22% $2Mn - <$5Mn > $5Mn All DMOs < $2Mn 15

16 Average Destination Hotel Room Revenue ($) DESTINATION PERFORMANCE Hotel Room Revenue has been able to achieve industryleading hotel room revenue levels relative to its peers. Total hotel room revenue dropped for a number of destinations after the financial crises of Average Total Destination Hotel Room Revenue ($) $1,000 $900 Although many destinations have experienced an improvement in destination demand, hotel room revenue is still generally below pre-crises levels for most destinations. Despite the recent global economic challenges, Tourism Vancouver has been able to generate a consistently high level of hotel room revenues relative to its peers. $800 $700 $600 $500 > $5Mn $400 $300 All DMOs $200 $2Mn - <$5Mn $100 < $2Mn $ $875 $764 $909 $842 < $2Mn $49 $49 $50 $51 $2Mn - <$5Mn $118 $109 $140 $161 > $5Mn $466 $415 $454 $445 All DMOs $267 $240 $253 $265 16

17 Average Organisation Funding Per Room ($) PRODUCTIVITY & EFFICIENCY Availability of Resources Organisation funding per available hotel room is used as a measure of DMO funding relative to destination capacity. In general, larger DMOs tend to have a higher level of funding, even when destination capacity is taken into account, relative to smaller DMOs. s ratio suggests that the organisation s level of funding is low compared to its peers relative to destination capacity. This suggests that an increase in funding may be required to maximise destination potential. has a lower level of funding relative to destination capacity compared to its peers. Average Organisation Funding ($) Per Available Hotel Room $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $ $545 $468 $568 $505 < $2Mn $735 $722 $774 $748 $2Mn - <$5Mn $560 $592 $576 $612 > $5Mn $945 $926 $948 $939 All DMOs $775 $774 $764 $781 > $5Mn All DMOs < $2Mn $2Mn - <$5Mn 17

18 Total Organisation Funding Per Capita ($) PRODUCTIVITY & EFFICIENCY Availability of Resources has a lower level of funding relative to destination size relative to its DMO peers. Organisation funding per capita is used as a measure of organisation funding relative to destination size. Larger DMOs tend to have a larger ratio of organisation funding per capita ratio relative to smaller DMOs, which suggests a higher level of funding even when respective destination size is taken into account. $30 $25 $20 $15 $10 $5 Average Organisation Funding Per Capita ($) > $5Mn All DMOs $2Mn - <$5Mn < $2Mn has a lower ratio relative to DMOs in its own peer category, which suggests that organisational funding may be low relative to destination size compared to its peers. $ $21.6 $18.5 $22.0 $21.1 < $2Mn $8.7 $8.7 $9.4 $8.9 $2Mn - <$5Mn $8.6 $9.7 $11.1 $9.1 > $5Mn $24.7 $22.7 $24.3 $24.1 All DMOs $15.5 $15.0 $16.0 $

19 Average Hotel Room Revenue Per Dollar of Organisation Expense ($) PRODUCTIVITY & EFFICIENCY Sales and Marketing Effectiveness Average hotel room revenue per dollar of organisation expense is used as a measure of productivity and efficiency. This ratio has fluctuated for some DMOs. has outperformed its DMO peers in terms of generating hotel room revenue relative to organisational expenditures. This implies a strong return on investment for the destination from DMO activity. has been able to achieve a consistently higher level of hotel room revenue relative to organisational expenditures compared to its peers. Average Hotel Room Revenue ($) Per Dollar of Organisation Expense $80 $70 $60 $50 $40 $30 $20 $10 $ $69 $67 $68 $57 < $2Mn $45 $49 $51 $40 $2Mn - <$5Mn $53 $42 $45 $55 > $5Mn $44 $41 $41 $39 All DMOs $47 $43 $44 $44 $2Mn - <$5Mn All DMOs < $2Mn > $5Mn 19

20 Average Hotel Room Revenue Per FTE ($Mn) PRODUCTIVITY & EFFICIENCY Sales and Marketing Effectiveness Average hotel room revenue per FTE (full-time equivalent) employee is used as a measure of productivity and efficiency. In general, larger DMOs tend to generate a higher ratio relative to smaller DMOs this may be due to economies of scale. has been able to achieve a higher level of employee productivity relative to its peers as measured by hotel room revenue generation over the last several years. has been able to generate a higher level of employee productivity as measured by hotel room revenue production relative to its peers. Average Hotel Room Revenue ($) Per Full-Time Equivalent Employee $20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $ $18.6 $10.2 $15.1 $14.0 < $2Mn $9.2 $6.3 $8.3 $7.3 $2Mn - <$5Mn $9.1 $7.3 $7.8 $9.2 > $5Mn $12.6 $8.1 $10.5 $10.6 All DMOs $10.8 $8.1 $9.1 $8.9 > $5Mn $2Mn - <$5Mn All DMOs < $2Mn 20

21 Average Hotel Room Revenue Per Dollar of Sales and Marketing Expense ($) PRODUCTIVITY & EFFICIENCY Sales and Marketing Effectiveness This ratio examines sales and marketing expenses specifically relative to hotel room revenue as a measure of productivity and efficiency. This ratio has fluctuated for a number of DMOs. has been able to achieve a higher level of hotel room revenue relative to its sales & marketing investment and activities over the past several years compared to its peers. has been able to achieve a higher level of hotel room revenue relative to sales and marketing investment compared to its peers. Average Hotel Room Revenue Per Dollar of Sales and Marketing Expense $300 $250 $200 $150 $100 $50 $ $217 $255 $198 $168 < $2Mn $176 $256 $196 $190 $2Mn - <$5Mn $129 $86 $108 $126 > $5Mn $111 $98 $88 $82 All DMOs $130 $126 $116 $118 < $2Mn $2Mn - <$5Mn All DMOs > $5Mn 21

22 CONCLUSIONS obtains the majority of its organisational funding from hotel levies which is driven by destination demand. Total organisational funding has fluctuated over the last several years due to the economic downturn. Tourism Vancouver may wish to explore opportunities to diversify its revenue sources. Sales and marketing is concentrated on U.S. and international markets. In terms of market type, has a strong focus on the meetings and conventions segment which tends to produce higher-yield visitors. The DMO has been able to generate an industry leading level of hotel room revenue relative to organisational expenditures. This implies a strong return on investment to destination stakeholders from DMO activity. Of note is that s level of funding relative to destination size is low compared to its peers. This suggests that an increase in funding may be required to maximise destination potential. 22