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Home My WebLink AboutCAO-07-019 - Proposal for Tourism Destination Marketing Organization for Waterloo Region~ ~~~ 1 _ ~ C:~i~~,~/~~'~~r~i~~~is~~~~~~r~r`~ (~ffi~: Report To: Councillor Berry Vrbanovic, Chair and Members of Finance and Corporate Services Committee Date of Meeting: April 23, 2007 Submitted By: Carla Ladd, CAO Prepared By: Carla Ladd, CAO Ward(s~ Involved: ALL Date of Report: April 18, 2007 Report No.: CAO-07-019 Subject: PROPOSAL FOR A TOURISM DESTINATION MARKETING ORGANIZATION FOR WATERLOO REGION RECOMMENDATION: That the Council of the City of Kitchener endorse the establishment of The Waterloo Region Tourism 1Vlarketing Corporation as set out in the report attached hereto entitled "A Destination 1Vlarketing Organization for Waterloo Region" BACKGROUND: For several years, discussion has been ongoing about the future of tourism in the region because there was clear recognition that the success of our local tourism industry could be enhanced by a more comprehensive approach to the delivery of tourism services. In 2005, the regional CAD's began discussions about a collaborative approach to tourism and after obtaining support from all of the municipal Council's in the Region, a Steering Committee was formed in May 2006, consisting of municipal and industry representatives for the purpose of advancing this initiative. The primary purpose of the proposed new organization is to market the Region in an effort to attract more tourists, and once here, to keep them in the area longer. The organization would be established as anot-for-profit corporation governed by a Board of Directors consisting of municipal and industry representatives, fashioned after the structure of CTT. Finally, it would be membership based and would be jointly funded by the members and partner municipalities. While visitor services would be coordinated by the new tourism organization, Visitor Information Centres would continue to be the responsibility of each of the municipalities. In this regard, a detailed review of the function and operation of KW Tourism will be undertaken should the new organization proceed. Further details about the proposed new tourism organization are included in the attached report. Prior to finalizing the proposal for the new organization, meetings were held with the tourism industry to provide information, obtain feedback and gauge support. Through these meetings and subsequent written submissions to the Steering Committee, the industry expressed clear support for this initiative. As a result, this final recommendation to proceed with the creation of a Tourism Destination Marketing Organization is being made to all Municipal Councils in the Region. Financial Implications The City of Kitchener's share of the funding for the new organization is $90,000 on an annual basis for the first 3 years, 2008-2010. In order to ensure a successful start to the new organization, a 3 year commitment is being requested for this initiative, acknowledging that annual funding must be formally approved through the annual budget process. Funding in the amount of $45,000 has been provided for in the City's 2007 budget. Currently the City of Kitchener spends approximately $200,000 on tourism for both destination marketing and visitor services. While some of our current funding is directed to destination marketing, much of this funding is offset by revenues received from memberships and advertising which will now be directed to the proposed new organization. Consideration will be given to our ability to redirect existing tourism funding to the propose3d organization, however some additional funding may be required to support the new organization and a local Visitor Information Centre. Further information will be brought to Council once a review of KW Tourism has been undertaken. Conclusion Interest in creating a more cohesive approach to tourism is shared by all municipalities and the tourism industry collectively and the proposed new organization is being recommended as the best model to achieve success and enhance our local tourism industry. Carla Ladd ,CAO ATTACHMENT 1 I A Destination Marketing Organization For Waterloo Region ~~y.~~s ,F ,. t ~ Y ~ w~fi.,m N -: „~,. it °" .4 ?~, M Y/ ~~ Report from the Municipal Chief Administrative Officers in Waterloo Region In Support of the New Tourism Organization Steering Committee Y '! y,~ ~. ~4~ ~ yam` ~R 5 +S' ~. I`" F un .~ E y~,. M .y 1 ~ F, ~~ ~~~ ~, ~ ~; -~ ~rjx 1 i ~ iE ~ X11 ~3 ~~~ ~~ I~ ~ Rp !~ ~,yi+`a rw Apri12007 ~lf~ I'~~~1{.-rl~r ~~;_~~~ ~~~'~I,~ ~'~I'~~~~_~~~~`~ ~~.~~~ ~I~i~~~~!~~~~ ~'~~ ~ ~~~ l~`~.~~1~1~'~1~~4~ ~_: ~l~tt ~=~t:'I~~~~I~1~~~-~111~~~' .. ~~~I~.'~I ~ ~I1 ~~~4~~~1~ ~~~,1 ll. ~: ~ }1 +~ f A ( ff v:.>... 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Y fi ~ ie~l I ~ J / f ~ a ~~ 4 ,t r . ~ __ { r 4 ._ i ~ f ~ . r. r' Id j. ~_ytdl~~il L~~~~~ a a _ _ ~_ily~tll~ ~T~'1~b~1J~~~~~~~1 ~. ~.I~]I~'`~~~'~~~I~71IlI~~Ii~~I~'~ ~f~1~~I+ ~~llt'~f ,:~l~II~~I~I~t'~~~I~'~ ~.~~lt,'~.I° ~_~~1~~~ ~~f ~`~1~.~°~~.~I~~'~ T~-~`~~'il~~~l~:~ ~_~f~ ~~' 1~i11(~~: ~a ~, r~ a :; 4 ~ , i + r ' __, _r ,f } I,: _-_~,ix i; t -1 ' i .,;J #"~II~1+:)I1 ~'~~.lE~l~~~~1~I` ~~~~,'IC~ I`~~lI1~I11~~.I1 ~Y~~i~Yf~,~~~r1~iI1~~~.I~~~t.~~r~ ~?~~~~~~~ ~~~ii~~~~,~~~~I~~LI~i~tr~~~ie~~~ ~_~~~~~'~t~ RECOMMENDING A DESTINATION MARKETING ORGANIZATION FOR WATERLOO REGION 1.0 Background Tourism is a significant industry in Waterloo Region. Statistics Canada data indicate that in 2004 this Region attracted almost 2.4 million person trips, which generated $390 million in revenue, supported 3,200 jobs and contributed $5 million in total municipal taxes. While this economic activity is significant, it has been declining in recent years, particularly with the precipitous drop incross-border travel from the united States. It also lags behind comparable municipalities such as Namilton and London, which have municipally-supported tourism destination marketing organizations (DMO). Currently the three cities and two of the Townships provide individual tourism-related services, primarily through Visitor Centres. As a result, tourism promotion in the Region faces several challenges including: • Fragmented approach with no overall brand or marketing strategy; • Limited destination marketing activities, resulting in low external profile; • Duplication of some efforts, such as visitor guides; • No central body to develop partnerships and participate in provincial initiatives. 2.0 Steps to Date Recognizing these challenges, a consensus has developed within the tourism industry and the municipal administration in Waterloo Region that there is a need and opportunity to improve the delivery of tourism services, particularly destination marketing, in this community. Over the past 15 months, these groups have worked to define, develop and consult on a tourism initiative, as outlined below. • Municipal and Regional Chief Administrative Officers ICAO) assessed current tourism initiatives, organizations in other municipalities, and possible funding sources to develop a proposal which was documented in `A Discussion Paper Regarding Delivery of Tourism Services in Waterloo Region', May 2006. • Municipal Councils endorsed the proposal in principal. • CAOs held two consultation sessions with the tourism industry in June 2006. Approximately 90 people attended. Responses were documented in the report `Continuing the Development of a Tourism Organization for Waterloo Region', June 2006. • Municipal Councils endorsed the creation of a Steering Committee to continue the development of a new Tourism Organization in July 2006. • The Steering Committee, comprised of six tourism industry representatives and the CAQs of Cambridge, Kitchener, Waterloo, Wilmot, Woolwich and the Region, met initially in August 2006, and has met 9 times since then. • A consultant was engaged to assist the Committee in developing a Business Plan, and a timeline for organization start-up. • A second set of industry consultation sessions was held in February 2007 to gauge industry response to the business plan and budget. • The Business Plan highlights and Industry response are summarized in this report. The industry is very supportive of the proposed initiative 3.0 Proposed Tourism Organization Overview Based on a review of initiatives in other communities, and considerable discussion among local tourism industry and municipal leaders, the creation of a new Tourism Destination Marketing Qrganization for Waterloo Region is proposed. The interim working title for the organization is "The Waterloo Regional Tourism Marketing Corporation". The new organization would focus primarily on marketing tourism opportunities in Waterloo Region -encouraging more people to visit this area, and encouraging visitors to stay longer. The organization would replace the existing municipal destination marketing activities currently being provided by K-W Tourism and Cambridge Tourism. The organization would be amembership-based, not-for-profit corporation, governed by aboard of directors comprised of tourism industry and municipal representatives. Its funding would be derived from a combination of municipal grants, industry membership fees and co-operative marketing opportunities. Further details regarding the proposed organization are provided below. Interim Mission Statement The following Mission Statement is proposed, but would be refined following development of the organization's Strategic Plan. Marketing Focus Four marketing priorities have been identified: • Conduct market research, create a marketing plan and develop an advertising campaign. • Build image and awareness through attendance at trade and consumer shows, development of lure brochures, etc. • Undertake Cooperative Marketing Programs, funded by the tourism industry and the DMO (with possible support from senior levels of government) which promote both Waterloo Region and the individual industries, using various media such as radio and TV spots, print, website banner ads, visitor guide, etc. • Undertake a branding initiative to develop the organization name, identifier, tag lines, etc. Visitor Service Focus The organization will provide the single point of contact for visitors requesting information about tourism opportunities in Waterloo Region. Visitor Information Services include: single telephone number, website, telephone and e-mail response, and literature fulfillment. These services would be coordinated by the DMO to ensure consistency across the region. The DMO will also produce a single visitors guide for Waterloo Region. Visitor Centres will continue to be operated and funded by the Local Municipalities. They will offer a core level of services and programs including tourism literature distribution and over-the-counter travel counseling. Local Municipalities may enhance the services offered. Governance The DMO would be amembership-based, not-for-profit corporation. The Board of Directors would be comprised of eight tourism industry members (one representative from each of five identified sectors, and three at-large) and six municipal representatives (the CAO or designate of the Region, Cambridge, Kitchener, Waterloo and two of the Townships). The existing Steering Committee has agreed to act as the interim Board of Directors until a full Board can be elected at the first Annual General Meeting, anticipated by year end 2007. Membership Fees The proposed membership fees are differentiated by industry type, and range from $150 to $750 per year. Membership provides the opportunity to participate in the DMO, and includes a basic website listing, visitor guide listing and brochure distribution. The DMO membership fee replaces the separate fees currently charged by Cambridge and K-W Tourism. Budget The proposed budget for the first three full years of operation is shown in Figure 1. The budget components are: Since the organization will be initiated mid-way through 2007, the estimated budget for 2007 is approximately $300,000. This will consist primarily of municipal grants, and will be used to fund salaries, and the development of initial marketing activities. Other sources of funding will be explored, both to support the start-up phase, and to supplement marketing revenues in the longerterm. Figure 1: Waterloo Regional Tourism Marketing Corporation Budget 12 months ending 12 months ending 12 months ending Dec 31 2008 Dec 31 2009 Dec 31 2010 Revenues Municipal Grant $600,000 61.1 % $600,000 54.6% $600,000 49.3% Basic Service Package Revenues $46,770 4.8% $63,438 5.8% $76,245 6.3% Partner Cooperative Marketing Revenues $250,000 25.5% $325,000 29.6% $400,000 32.9% Municipal in-kind services $25,000 2.5% $25,000 2.3% $25,000 2.1 visitor guide Licensing Fee (net) $25,000 2.5% $25,000 2.3% $25,000 2.1 Merchandise and local opportunities (net) $10,000 1.0% $20,000 1.8% $40,000 3.3% Partner in-kind services $25,000 2.5% $40,000 3.6% $50,000 4.1 Total $981,770 100.0% $1,098,438 100.0% $1,216,245 100.0% Expenses Payroll and benefits $260,000 26.5% $338,000 30.8% $351,520 28.9% Overhead & Administration $173,600 17.7% $172,100 15.7% $178,984 14.7% Marketing Initiatives Image & Awareness $120,000 12.2% $110,000 10.0% $100,000 8.2% Visitor Services $62,520 6.4% $88,040 8.0% $118,560 9.7% Cooperative marketing programs $350,000 35.6% $375,000 34.1 % $450,000 37.0% Total Ex erases $966,120 98.4% $1,083,140 98.6% $1,199,064 98.6% Total Sur lus/Deficit $15,650 1.6% $15,298 1.4% $17,181 1.4% 4.0 Comments from Tourism Industry Consultation Consultation sessions were held with the Tourism Industry on Wednesday, February 21, 2007 in Kitchener and Friday, February 23, 2007 in Cambridge. About 70 people attended, in addition to the Steering Committee. An Information handout and Comment Sheet were distributed, and subsequently emailed to all members of Cambridge and K-W Tourism. In addition to the comments made at the meeting, l5 comment sheets have been returned. A separate initiative led by the industry representatives onthe Steering Committee resulted in 22 signed letters of support from key industry members. The letters indicate full support for the Waterloo Regional Tourism Marketing Corporation goals, structure and marketing focus. They also pledge financial support in the form of paid membership, participating in cooperative programs, and "new and aggressively created programs thatwill clearly show benefitto our organization." The overall tone of the meetings and comments was clearly positive. Several industry members stated strongly that the initiative is needed and on the right track. They applauded the planned involvement of the municipalities, noting that it makes this initiative significantly different from previous attempts to establish a single DMO. The responses from the meetings and comment sheets are summarized below. Do you agree with this business concept? All respondents agreed with the concept, and some industry members expressed enthusiastic support. Caution was expressed about follow-through and the need to involve all partners. Previous attempts have failed, but having municipal funding/involvement this time is seen as a key difference. Some still questioned the reason for not including the operation of Visitor Centres in the business model. however, this issue has been extensively discussed by the Steering Committee, with the conclusion that Visitor Centres should be funded and operated by the Local Municipalities. Do you agree with the proposed Marketing Plan Goals, and the Marketing Priorities? Almost all respondents indicated agreement with the marketing approach. There is concern about when the branding initiative is planned, with some suggesting it should be started immediately. The Steering Committee's intention that the proposed marketing campaign will be tested with the industry in the third quarter of 2007 is seen as positive. Would you become a member, based on the proposed initiative and fee structure? All respondents indicated they would become a member of the organization. There is strong support for a single organization and one member fee. There were several comments about the fees proposed for some categories, and questions about how volunteer-run events would be included. The Board will have to re-visit and finalize the membership fees taking these comments into account. Would you allocate 5-10% of your marketing budget to the DMQ cooperative marketing plans? Most agreed that they could direct 5% to 10% of their current marketing budget toward cooperative marketing with the DMO. About two-thirds of the respondents indicated an amount which ranged from $1,000 to $15,000 and averaged $5,000. Concerns have been expressed both that the anticipated revenue amount of $250,000 in the first year is too high an expectation, and that the amount to be spent on cooperative marketing ($350,000} is too low. Although these projections are in keeping with the experience of other DMOs, it will be a challenge to engage the industry sufficiently to ensure success of the organization. Is the proposed budget appropriate? Almost all respondents agreed that the budget is appropriate. Some suggested that the percentage to be spent on staffing and office overhead seems to be high. Nowever, it was noted that there are only three staff included in the initial budget, and most of their time will be spent on marketing. Qther DMQs in comparable municipalities have 7 to 10 staff accounting for 70% of the budget. Qne respondent suggested that more than three staff would be required for an organization with this much responsibility. 5.0 Next Steps If municipal council approval and funding commitments are received, the next steps are outlined in the chart below. 2007 Transition Year Activities A ~ J J A S ~ N D Establish Qr anization X Develo Marketin Framework, Advertisin Cam ai n X X X X Recruit and Nire staff (3 positions} X X X X X X Ima e and Awareness initiatives X X X X X Solicit memberships, Board members X X X Nold first Annual General Meeting X 6.0 Conclusions and Recommendations The Business Plan developed by the Steering Committee provides sufficient detail on which to base the start-up of the Destination Marketing Qrganization. The proposal has been positively received by the Tourism Industry. There appears to be sufficient interest and support to expect that the cooperative marketing revenues anticipated in the budget can be achieved, provided that the right type of marketing campaign is offered. Based on these results, the Steering Committee recommends that Municipal Councils approve the establishment of the `Waterloo Regional Tourism Marketing Corporation'. Although the municipal funding required for the organization may need to be approved on an annual basis, it should be recognized that the Business Plan assumes a three year commitment (through 2010} to solidify the organization and assess its achievements. DOCS #: 368597-v5