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| October 20, 2020 |
Transforming Tourism Funding
Tourism Improvement Districts
W E L C O M E
AGENDAImportance of Tourism Promotion
Tourism Improvement Districts
Taxation in Japan and America
Case Studies
TIDs in Japan55
44
33
22
11
The Future is Built with Travel Promotion
Source: US Travel
The Vital Role of Destination Promotion
The primary motivator of a trip is usually the experience of a destination
1
Effective marketing requires scale to reach potential visitors
1
2
Destination promotion to articulate the brand message that is consistent with consumer motivations
Destination promotion to pool sustained resources to generate impact
Source: Tourism Economics
2
Funding Sufficiency vs. Funding Stability
Source: Advertising Age & US Travel Association 2015
in Marketing Spending
$0.0b $0.5b $1.0b $1.5b $2.0b $2.5b $3.0b $3.5b $4.0b $4.5b $5.0b
JNTO
Three Levels of Sufficiency
What the industry is givenWhat the industry is given
Comparing budgets to other organizationsComparing budgets to other organizations
Funding based on economic activityFunding based on economic activity
Level 1
Level 2
Level 3
Tourism Funding
• Membership• Sponsorships• Event revenue• Contract services• Licensing
• Untethered tax allocations• Tethered tax allocations• Sales tax increment financing• Assessment (TID)
Tax Increment Financing
Increment is differential between baseline and actual collection plus a growth factorIncrement diverted back to areaIn Tokyo, there is something similar know as Land Value Capture (LVC), that to funds better public transportation. LVC is a process of “capturing” the increase in the value of land generated by constructing better transportation methods and increasing accessibility, thus adding value to an area.
Collected by the local government or prefecture
Managed by the DMO
Tourism business pays an assessment
Tourism Improvement Districts
Level playing field—no free ridersTransparencyReliabilityLow cost of implementationPass-through to guests more compelling
Global District Statistics
185 TIDsMost Recent: Feather River, CA
(October 2020)
44%Fixed $ Amount
56%Gross Revenue %
AMOUNT RAISED
Low ¥1,102,671
Median ¥81,594,060
High ¥4,520,752,021
Average ¥256,673,081
Total ¥45,174,478,599
17 STATES
Tax vs. TID: - Key Differences -
TIDs are based on benefit to the tourism businessesTIDs generally require approval of a majority of payors and the local governmentTID funds cannot be diverted
Public/Private PartnershipsIn Japan, governance of promotion is centralized and generally remains with government.
In the US, governance is shared between the public and private sector. While government retains, oversight, many of the month to month decisions are made by the private sector.
Recognizing Some Key Differences
• Consumption tax is similar to sales tax in America, and paid by consumers when they purchase goods or services.
• The current total rate is 10%, raised from 8% in October 2019. The entire 10% of consumption tax is collected by the national government.
• However, 7.8% of consumption tax goes towards the national government and 2.2% goes towards a “local consumption tax” fund, which is allocated to prefectures.
Consumption Tax
Accommodation Tax in JapanIn addition to consumption tax, an accommodations tax is levied on stays in the cities below and also Kanazawa city in Ishikawa Prefecture, Kucchan Town in Hokkaido, Fukuoka Prefecture, Fukuoka City
and Kita Kyushu City in Fukuoka Prefecture. The tax is levied per person per night.
TokyoRoom Night Price Accommodations
TaxLess than ¥10,000 Not Taxed
Between ¥10,000 and ¥14,999
¥100
Between ¥15,000 and ¥19,999
¥200
KyotoRoom Night Price Accommodations TaxLess than ¥20,000 ¥200
Between ¥20,000 and ¥49,999
¥500
¥50,000 or more ¥1,000
OsakaRoom Night Price Accommodations
TaxBetween ¥7,000 and ¥14,999 ¥100
Between ¥15,000 and ¥19,999
¥200
Over ¥20,000 ¥300
I remember when I was governor last time, the tourism industry was always asking me for more money from the state budget…You know I don’t
like to spend money very much, so I’m glad you figured out how to spend your own
money. That’s a lot better, because if you had to deal with me, your life would be more difficult.
-Former California Governor Jerry Brown - May 3, 2017
Return on Investment(ROI)
Most TIDs measure return based on hotel room revenue, some on visitor spending, tax revenue, and group sales.
Industry average on room revenue is approximately 7.5:1 and range
from 3:1 to 25:1.
Effective, efficient destination promotion has a significant positive impact on the return on investment.
• TID formed in 2011.
• Includes all lodging businesses with 50+ rooms in the City of Los Angeles.
• Assessment rate is 1.5% of room revenue.
• Raises $26.6 million annually (¥2,902,592,000).
• Los Angeles reached 50+ million visitors for the first time in 2018.
• TID formed in 1989.• Includes all lodging businesses in the City of West
Hollywood.• Assessment rate is 3% of room revenue.• Raises $6 million annually (¥654,796,673).• In FY 2016-17, lodging business occupancy grew to
86.1%, ranking first amongst the competitive set of Los Angeles, Hollywood, Beverly Hills, West LA, and Santa Monica.
USA TIDs to Prefectures
Sacramento TIDSize: 2,574 km²Population: 1.5MTID Budget: ¥331,231,241
Visit CaliforniaSize: 423,970 km²Population: 39,557,045TID Budget: ¥13,231,860,000
Monterey County TID
Size: 9,770 km²Population: 415,057TID Budget: ¥474,913,508
LATMDSize: 1,302 km²Population: 3,792,621TID Budget: ¥3,065,380,900
Okayama PrefectureSize: 7,115 km²Population: 1,921,525Prefectural Marketing Budget: ¥386,551,000
Ehime PrefectureSize: 5,676 km²Population: 1,360,507Prefectural Marketing Budget: ¥642,179,000
Setouchi RegionSize: 29,259 km²Population: 8,495,907Regional Marketing Budget: ¥306,763,000
Kagawa PrefectureSize: 1,877 km²Population: 976,236Prefectural Marketing Budget: ¥1,167,387,000
Generated $1.7 Billion for clients globally.
Completed over 125 BID & TMD formation projects throughout the world.
Drafted BID/TMD legislation in 16 states.
Passionate about raising stable, dependable fundingfor destination promotion.
