Post Labor Day Weekend Good Time for Tourism Talk

There have been some recent developments and debates on the tourism front. They involve empty criticism of the Mackinac Center’s tourism study; an Auditor General investigation into a Pure Michigan consultant’s reports and the announcement that the Michigan Economic Development Corporation will again bid out the right to calculate a return on investment for the Pure Michigan program. They are worth sharing with the public.

Last November, the Mackinac Center released a study of state tourism promotion efforts. It found for every $1 million increase in state spending on tourism promotion, there is a bump in economic activity of just $20,000 in the average state’s accommodations industry. Michigan is average. Other sectors of the tourism economy actually fared worse. Our study has been met with some criticism for which we have offered rejoinders.

The most technical criticism leveled at our paper was posted without fanfare in late March and later republished on June 26 with additional commentary. It zeroed in on our statistical model. The short critique was posted on the for-profit Oxford Economics website. The tiresome talking points presented in the memo suggested the reviewer(s) had not even read our actual paper or related work. The Mackinac Center’s full rejoinder, “A Response to Oxford Economics," was written by my co-author Michael Hicks.

Oxford Economics, incidentally, has an economic dog in the fight. A company it owns, Tourism Economics, has been one of Michigan’s no-bid tourism contractors. In 2015, the president of Tourism Economics wrote an email to the MEDC about a Mackinac Center study he knew would soon be released. In the email, Adam Sacks offered to write a critique. Sacks claimed it wasn’t possible to estimate an impact from ongoing advertising with our techniques, saying econometrics is a “blunt tool” for such a thing.

If that were true, however, top academic journals would not publish papers that employ econometrics. We cited several studies in our own report that use econometric measuring techniques, and one was even of United States-specific, taxpayer-funded tourism promotion programs. That study, titled “Are State Expenditures to Promote Tourism Effective?” was published in the Journal of Travel Research, once ranked the third-most influential journal in the field by one accounting.

Sacks was not the first person to criticize our work. The first was brief and from the MEDC’s secretive consultant. He claimed in a newspaper interview that the Center’s study did not take into account such things as the economy or weather. These charges were in error and we said as much in our written rejoinder, “Tourism Promotion Study Criticism Absurd, Ironic.”

The second criticism came from a former tourism marketing boss in Florida. At the time, Visit Florida, that state’s equivalent of Pure Michigan, was under fire and under threat of being defunded. The Mackinac Center’s report was cited publicly in the Sunshine State during this debate. We defended our research in a piece titled “Studies of Government-funded Tourism Promotion Withstand Criticism.”

The Michigan Economic Development Corporation, which oversees the Pure Michigan program, has in the past hired a contractor on a no-bid basis to estimate the program’s alleged return on investment. That consultant’s conclusions are wildly different from the Mackinac Center’s. His report claims a credulity-straining $8.00-plus in tax revenue returned for every dollar spent. Unfortunately, he refuses to precisely explain how the ROI is derived. He and the MEDC are basically saying, “You’ll just have to take our word for it.” We have never done so and are skeptical for a number of reasons.

Several lawmakers may be as well, as two have asked the Auditor General of Michigan to review the current consultant’s reports and the office has agreed. This new investigation made headlines in July. Around the same time, other news reports indicated that the MEDC was going to seek competitive bids for contractors to estimate the return-on-investment estimates, placing its current, secretive consultant in the position of needing to compete for the right to provide this service.

The Mackinac Center’s study on tourism promotion remains a defensible, scholarly work. Its methodology is 100 percent transparent and its data set is comprised of publicly available information. The state’s secretive consultant can’t make the same claim and neither can the MEDC or other apologists for subsidized promotional activities for the tourism industry.