RTOs and Councils. Asking the right questions David Hammond and Lyn Cheyne. 1 P a g e

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1 RTOs and Councils Asking the right questions 2018 David Hammond and Lyn Cheyne 1 P a g e

2 About the authors Lyn and David collaborate in tourism destination management projects in New Zealand and Australia. Lyn comes from an RTO management background and David has been the CEO of three councils involved in tourism. Together they discuss what a great relationship is between RTOs and councils and foster better understanding. David Hammond established Hammond Robertson Ltd in 2016 with a mix of community and regional regeneration and tourism destination planning projects as its focus. In David has completed the following related projects: Waratah Wynyard Tasmania Destination Management Priorities Plan 2016 Nelson City Council Freedom Camping Strategic Plan 2016 Workshop training in destination management of over 90 councils in New Zealand and Australia Horowhenua District Destination Management Priorities Plan 2017 Waratah Community Advisory Board development, Promotions Group formation and Promotions Plan 2017 Nelson City Council Reserves Site Assessment and Freedom Camping Bylaw 2017 New Zealand Freedom Camping Good Practice Guide, LGNZ, 2018 Lyn Cheyne re-established Lyn Cheyne Marketing Ltd in 2017 trading as Strategy Works. Lyn has networks within the New Zealand tourism, economic development and wine industries where there is a strong focus on regional and destination positioning and marketing. Specific projects managed or engaged in include: Strategic Lead Destination Marketing for Whanganui and Partners RTO Developed and implemented the Red Wine Strategy for the Hawke s Bay wine region. Event Management of four international NZ Syrah Symposium s in association with NZ Winegrowers and the Pinot Noir NZ event held every 4 years Development and implementation of an Arts, Culture and Heritage destination strategy for the Whanganui District Waratah Community Promotions Group formation and Promotions Plan 2017 with David 2018 development of a Regional Events Strategy for CEDA and stakeholders 2018 development and positioning of an Investment Prospectus for the Ruapehu District 2 P a g e

3 Executive Summary This document is a tourism thought-piece to guide better relationships between Regional Tourism Organisations (RTOs) and Territorial Local Authorities (TLAs) for better understanding of both parties. As the authors, we want to stress that it is a guide but not a recipe. This report provides practice advice guide for both TLAs and RTOs to have an informed conversation on structure, funding, promotions strategies and value for ratepayer funding of tourism activities. The RTO and EDA space is in flux at time of writing with more conversations around RTOs about the delivery of destination management and the role of RTOs in placemaking, and the introduction of the Provincial Growth Fund contemplating regionally-based, joined-up thinking in delivery of projects. With councils investment in tourism topping $140M in 2015/16 the need for assurance in the sector of value for public money grows more significant annually. Equally, the more confident the councils can be in their performance measures the more security there is for the Regional Tourism Organisation (RTO) or the Economic Development Agency (EDA) with RTO functions. Parts One and Two focus on defining structures and measurement for successful Council s tourism activities - RTOs or EDAs with RTO functions. It notes the key KPIs for tourism measurement and also the factors which moderate the choice of KPIs. Parts Three and Four concentrate on RTO destination analysis, positioning, branding and funding building the understanding that these are complex disciplines not just advertising - need a robust process and the right partners, but also innovative use of different funding sources for these costs. This work follows the publication of the national report released in 2016, A-Tourism-Investment-2015-Hammond- Robertson.pdf by Hammond Robertson Ltd assessing the tourism spend of all councils in New Zealand which emerged from the work of the New Zealand Tourism Councils Workgroup (NZTCW) in All regions and TLAs in New Zealand need to be refining the effectiveness of the structures they have in place for delivering economic development and tourism. And this process needs to be done on a basis of mutual understanding of the role and processes of the RTO or EDA with RTO functions as a partner in destination marketing and management. Key questions to ask are: What are the key economic drivers of the Region? What are the right KPIs? What is local government s role in economic development in this region and how does that dovetail into central government and private sector planning? How well are current economic development activities, structures and funding delivering? How can we do better? 3 P a g e

4 The report provides 28 recommendations for TLAs and RTOs covering structures, funding, partnership, destination analysis, branding and promotions. The most visible part of RTO activity is national promotion of the destination, be it regional, district or city-wide. As a result councils and communities tend to informally measure or assess the effectiveness of the RTO based on the quantity and quality of this promotion, comparing it to other New Zealand destinations. Many RTO s were initially established to solely promote and market a destination and this was the limit of their activity. Promotion meant advertising, public relations, media visits and developing trade relationships. For tourism, trade consists of wholesalers and retailers including travel agents and travel package and tour companies. Market disruptors such as AirBnB, online travel agents, bloggers, TripAdvisor and Uber have increased peer promotion and direct to consumer activity. In turn this has lessened the reliance on trade distribution channels for destinations and tourism operators and increased the requirement for online and social media strategies. It has also forced destination promotion to better understand visitor behaviour, demand and flow. Attributing measures only to what is seen and experienced by a collective of individuals does not take into account the complexity of RTO activity and is not valid. As each TLA has different governance models and structures, RTOs and community based tourism associations face individual challenges based on the circumstances, resources and natural attractions each unique destination has. Parts Four and Five of the report provide a series of considerations that take into account the wider role of an RTO and the circumstances of the destination it is tasked with promoting. All regions and TLAs in New Zealand need to begin educating themselves about the tourism sector to successfully understand how it relates to a specific destination and that destination s community. Only then can a valid assessment and effective measurement be put in place for successful destination promotion. Key questions to ask are: What is local government s role in tourism and how is that manifested and communicated? What are the TLAs distinctive assets and competitive advantages? To what extent can these be controlled and influenced? How well does tourism integrate with the local community and business development initiatives to ensure social and economic growth and innovation? How can local government improve destination promotion and effectively contribute to tourism growth? What are local government expectations for tourism? Are those expectations matched to the resources available? 4 P a g e

5 The following are key findings from the report: (a) A regional economic development and tourism review should be undertaken before structures, funding and governance of tourism and economic development are determined. Districts do not act in isolation from each other and tourism and economic flows cross TLA boundaries. (b) Delivery of tourism is recommended by an outside Board including appointees with successful commercial track records. Appointees to Boards should be on the basis of their skills and demonstrated success, and be through a transparent public process of appointment. (c) Tourism or economic development rating begins with a Tourism Strategic Plan. The Plan needs to go to the extent of identifying Base Levels of Service (BLOS) funded by public monies, and Increased Levels of Service (ILOS) which is the opportunity for sector or other partner funding. The setting of the Plan and its funding strategy be a partnership with the affected funding sectors. (d) Funding for RTOs should be sufficient to achieve the Tourism Strategic Plan and multi-year, with three years funding commitments being the minimum. Councils need to understand that outcomes are related to the degree of funding provided. Different tourism funding methods are proposed for metros, consolidated tourism areas, diffuse tourism areas. (e) All metros and Districts need to be identifying a strong user-pays strategy for facilities used by visitors such as toilets, carparks, or venues, and a portion of revenue from facilities like campgrounds sheeted back to tourism marketing or events. (f) The basic suite of documents that need to be in place with an RTO are: Statement of Intent between council(s) and the RTO Three Year Plan of the RTO Annual Business Plan of the RTO Annual Report from the RTO Stakeholder engagement plan and annual communications plan Resolutions of council establishing the structure and under what terms Resolutions of council appointing governance to the board and term Delegations to a Committee or full council to monitor the performance of the RTO to the core KPIs and Plans (g) The seven Core KPIs to measure the performance of the RTO and that should be in every RTOs performance framework are: 1. Increase domestic visitor nights spent in commercial accommodation 2. Increase international visitor nights spent in commercial accommodation 3. Increase attractions, activities visits 4. Increase visitor expenditure per person per day 5. Increase average length of visitor stay 6. Increase the social media profile of the destination 7. Visitor perception of the area (h) The activities of RTOs in promotions, branding and destination marketing cannot be simplified to advertising. The staff provide a highly analytic and systematic approach to the advice and needs to be respected. (i) RTOs and TLAs do not operate in isolation from their communities and business sectors and need to find models of collaborative agreement to priorities and funding. 5 P a g e

6 Contents Introduction... 8 Purpose of the report... 9 PART ONE: Reviewing Structures Reviewing economic development or tourism structures Regional or local service delivery outcomes 11 Key issues in tourism structure review 12 (a) Separate RTO or combined with an EDA (b) RTO funding arrangements.15 (c) Membership funding or council rates...17 (d) Rate funding methods for tourism (e) Governance arrangements: Elected or appointed PART TWO: Demonstrating Return on Investment (a) The business framework of an RTO (b) Performance measurement of RTOs (c) Six core measures of KPIs for an RTO (d) Adaptable (Tailored) KPIs PART THREE: Destination Promotion Analysis Phase 1 Offerings and Experiences Phase 2 National Context Phase 3 Role and Responsibilities of Local Government PART FOUR: Destination Positioning and Funding Phase 4 Destination Positioning and Brand Review Phase 5 Sustainable Funding Models Conclusion More Information Appendix: Data Measurement Sources P a g e

7 Acknowledgements This report has been prepared by Hammond Robertson Ltd ( and Lyn Cheyne Marketing Ltd ( ). We would like to acknowledge the New Zealand Tourism Council s Workgroup, Scott Summerfield of Thames-Coromandel District Council, Elke Thompson of Gisborne District Council and Charlie Ives of RTONZ for the preparation provided over several years of development. Disclaimer Any representation, statement, opinion or advice, expressed or implicit in this document is made in good faith but on the basis that Hammond Robertson and Lyn Cheyne Marketing Ltd are not liable to any person for any damage or loss whatsoever which has occurred or may occurs in relation to that person taking or not taking action in respect of any representation, statement or advice referred to in this document. 7 P a g e

8 Introduction This document is a tourism thought-piece to guide future relationships between RTOs and councils. It is not a blueprint or a recipe. David and Lyn bring together their RTO and council perspectives for a Guide helps the partners to ask the right questions. The authors understand that not all will agree, but it is their aim to provide an informed conversation starter and fill a communication gap they both observe in New Zealand. All regions and TLAs in New Zealand need to be asking about the effectiveness of the structures they have in place for delivering economic development and tourism. The key questions councils need to address are: What are the key economic drivers of the Region and how should the region s councils respond to these? What is Local Government s role in economic development in this Region and how does that dovetail into central government and private sector planning? How well are current economic development activities, structures and funding delivering for the Region and its priorities? How can we deliver economic and tourism development priorities and projects better than we currently do? With some 14 EDAs and 15 RTOs and additional activities of many councils themselves, New Zealand has a substantial number of structures. Often the conversation can become adversarial between RTOs and councils and needs better understanding of both parties. Most RTOs in New Zealand were established in the 1980s when local government became more active in the economic development space. By the 1990s the number (which amounted to some 25) was described as fragmented, unfocussed, self-seeking and disorganized 1 By 2001 the New Zealand Tourism Strategy called for a rationalization of the number, but by 2007 the number actually increased from 25 to With the rise of EDAs we have not yet seen a total rationalization in the number but a split of that total 29 between RTOs and EDAs. In New Zealand the establishment of RTOs is not controlled under Law but is a matter for local decision-making. Not all areas are covered by an RTO. Some TLA areas have what they call an RTO but the scope is only district in scale and is in reality a DTO (District Tourism Organisation), not regional. There is also a substantial amount of community led tourism activity not captured under the RTO umbrella including Promotions Groups, industry associations and Tourism Boards. This report follows-on from several good practice guides released over the 2000s: February 2004 LGNZ Recommended Good Practice for Governance of Regional Tourism Organisations which is a comprehensive view of RTO governance options and good practice management for councils. 1 Chamberlain J (1992). On the Tourism Trail: A nice little earner but what about the cost? North & South. Sept pp P a g e

9 March 2010 RTONZ, Funding Models for Regional Tourism Organisations that sets out different funding models for RTOs and councils to consider, including strengths and weaknesses of those models. Purpose of the Report The purpose of this report is a guide for conversations between councils and RTOs and to bridge the gap of understanding of both organisations. This report began in 2016 with the New Zealand Tourism Councils Workgroup (NZTCW). The collaboration existed in to identify the key issues impacting on tourism councils, share knowledge and collaborate on priorities. The measurement of value from rate funded investment emerged from the list of priorities of the NZTCW. The work has been continued by sector tourism leaders David Hammond and Lyn Cheyne. David comes from a TLA perspective and Lyn from the RTO perspective in collaborating in the writing of this report. The objectives of this report are: Part One: Reviewing Structures Service Delivery Reviews of tourism and economic development Clarifying key choices for tourism structures Identifying funding and governance board issues to consider in council arrangements Part Two: Demonstrating Return on Investment Recommending KPIs nationally for RTOs and councils to demonstrate performance Providing good practice examples of reporting performance to councils Part Three: Destination Analysis Develops a methodology for tourism promotion assessment by the RTO and TLA to provide a solid foundation on which to build, identify and determine what outcomes are required from marketing and promotion and who is responsible for what. Part Four: Positioning and Funding Develops a methodology for tourism promotion assessment by the RTO and TLA to provide a solid foundation on which to build, identify and determine what outcomes are required from marketing and promotion and who is responsible for what. 9 P a g e

10 Part One: Reviewing Structures Reviewing Economic Development or Tourism Performance All areas of New Zealand need to review the performance of tourism structures to ensure they have the most effective strategy, structures, funding and governance to guide the spend of public monies on tourism. The key processes for a review of tourism and economic development in a district, city or region are recommended as follows: 1. Assessment of key economic drivers in the region and locally 2. Service Delivery Review of current arrangements, performance and strategies 3. Design of governance and structures 4. Formation of a Strategic Plan informed by the above Why not just start with an Economic Development or Tourism Strategic Plan? It is our recommendation that review be done in this order. A review of tourism or economic development performance cannot start with a Strategic Plan. To start with a Strategic Plan presupposes that the geographic area has already been determined. New Zealand has a proliferation of top-down Tourism Strategic Plans but little alignment with tourism distribution channels, markets and destination capability. The Review needs to step up in geographic scope and look in a broader scale before the Strategic Plan is entered into. Why not just design the form of governance and then do a Strategic Plan? Again while this may make political sense in a single council or council partnership, the form of how to deliver the most effective economic development and tourism services needs to follow a review identifying the geographic area which should be considered and also the strategic priorities of a Strategic Plan. If governance is formed first, then it limits the ability to look at a wider geographic area, and the right skill sets for the Strategic Plan may not be a round the governance table. The contents of an Economic Development or Tourism Service Delivery Review embeds the structure of the Section 17A Local Government Act The Act structures a service delivery review in three parts; how the service is governed, how it is funded and how it is delivered? As a precursor to these questions is a review of scale and scope which needs to involve other TLAs and an evaluation of the effectiveness of existing structures and delivery. 10 P a g e

11 Regional or Local Service Delivery Review Outcomes The recommended structure for a tourism or economic development service delivery review is as follows: Phase 1: Regional Economic Development Study undertaken to identify key trends and priorities to inform local and regional priorities and strategies. A scan to be done of all existing plans and reports to avoid duplication of the same consulting advice and unnecessary time spent. Phase 2: This review takes place within a context of a Government s Provincial Growth Fund and desire for joined-up regional-based delivery of projects. There is a need to ensure that the review dovetails in with this work. This phase will review current structures and strategies across all councils to determine how they align with priorities, assess their effectiveness, funding and governance. This is a collaborative process involving councils, agencies, ministries, regional and local stakeholders. Embedded in this approach is a Section 17a (Local Government Act) service delivery review structure. The Section 17A review needs to consider the entire tourism framework of the area. To simply review the council s own involvement in tourism is extremely poor practice. The review needs to take into account the local structures of tourism and their needs and neighbouring TLA areas to identify common themes, gaps, capabilities before council s role can be identified. Phase 3: Develop options and recommendations for both structures, funding and for strategic planning at regional and local levels. The outcomes from a review can be described as: A guiding document that clarifies the best options to realise the opportunities for regional economic growth and what the competitive advantage and differentiation is as a destination; A practically actionable report where we use our hands-on local government experience to combine with your knowledge of your Region to produce a fit-for-purpose approach, embedding a Section 17A structure; A well-researched and collaborative co-design approach to future economic development in the region which aims for stronger relationships between local communities, Iwi, councils and other stakeholders for more comprehensive partnership; A Report that is attested by all parties as well considered and identifying the right options, even if not accepted by all; An approach that balances national and regional objectives with the identification and prioritising of local objectives also. 11 P a g e

12 Key Issues in Tourism Structure Review The following section identifies some, not all, of the key questions when undertaking a regional or local economic development service delivery review: (a) Structure A thorough piece of work by Steven Pike (2008) who is a former Chief Executive of Tourism Rotorua has identified the following factors as important in the decision on final funding of a tourism structure, but seem to us to also be a good guide to deciding on structures themselves 3 : How strong is tourism to the area? What are the local politics? To what extent does the community accept tourism as a priority industry compared to other industries? How much support does the tourism industry need (financial, time, physical resources)? How effective has tourism been when it was delivered in-house? Other questions not identified by Steven Pike would be: What is the extent of free versus commissionable product? What is the relationship between tourism and economic development are they separate or combined? What are the geographic tourism flows and proximity to a regional hub? A major question which will emerge from a regional service delivery review will be the future structure of an RTO or its merger with a wider EDA. The broad structure options for local tourism are: 1. EDA: Economic Development Agency an entity tasked with delivering on a council s or multiple councils E.D. Strategies. These can contain tourism functions such as Nelson Regional Development Agency, Venture Southland or Venture Taranaki. 14 in New Zealand 2. RTO: Regional Tourism Organisation in NZ. Manages promotions, events, I-Sites on a local council or wider regional scale such as Destination Coromandel incorporating Coromandel and Hauraki areas. 15 in New Zealand. Now increasingly taking up the challenge of destination management. 3. Council Direct Delivery: A council can operate tourism or economic development as a department inside council or as a Business Unit. Most move away from this structure for more effective delivery 4. Service Delivery Contract: A council can have a Service Delivery Agreement with another RTO for tourism functions as defined under contract. The following table outlines the merits of each of these structures: 3 Pike S. (2008) Destination Marketing, p P a g e

13 RTO Arguments for Sharpest focus on tourism industry development Are now involved and committing to do more in destination management Can develop stronger tourism industry partnerships No direct conflicts of funding or resourcing for other E.D. priorities Tourism is the nation s biggest sector so deserves its own focus E.D. is a misunderstood concept and deliverables are often hard to measure Arguments against RTOs have not delivered strongly (historically) on destination management nationwide which is the key issue facing communities management of the effects of tourism from freedom camping to lack of tourism infrastructure RTOs are variable at their ability to both coordinate local industries and support them, favouring stakeholder engagement Combined RTO and EDA Tourism should not be seen as separate from E.D. as they have so many interconnections Government Ministries and other partners want to deal with one agency for all their conversations and projects RTOs have not been trusted by TLAs with the whole scope of tourism including planning, bylaws management, infrastructure development so are an intermediate structure delegated to deliver promotions and manage tourism sector relationships The contemporary trend is to shift to destination marketing and management which combines the RTO and EDA activities Integrates more strategic focus for growth of an area not just one industry More resources and capabilities could potentially be directed to overall destination growth from a bigger agency with tourism playing a leading role Tourism is viewed more holistically as a valued partner and lead Opens up funding for broader regional development of which tourism benefits Provincial Growth Fund requires integrated thinking RTO functions can be lost in the emphasis on E.D. projects or regional identity work Tourism is not just another sector it has the highest combined value and employs a lot of people in communities so needs a specific focus E.D. expertise may not have the specific skills required to develop a tourism sector in areas such as destination marketing and capability The tourism sector may oppose the merger Neighbouring TLA areas may share services in tourism but not be interested in a joint E.D. structure representing their needs 13 P a g e

14 Council Department Service Delivery Contract Arguments for Closest to political and senior management control Stronger reporting, KPI alignment, budgeting disciplines Closest relationship to the Mayoral Office Integrates better into broader council alignments e.g. strategic policy or community development Clear outcomes are stated for fixed amount of money Suits a council bureaucratic system well Can demonstrate transparency and accountability to the public Can engage expertise (such as in marketing) from out of the area at a level not able to be provided locally Arguments against Too political and does not focus strongly enough on the industry s actual priorities Too bureaucratic, not affording the flexibility to make decisions and deals as the private sector requires, and often without the commercial or specific industry acumen required Industry generally does not support this structure Sees the tourism industry as a transactional matter of expectations and outcomes for the council s priorities, rather than a relational industry with join outcomes required For an industry to have their priorities included in the contract they need to engage politically to leverage Industry players who leverage council for contract outcomes don t necessarily represent the industry or its key development needs Parties in this form of contract invariably demand more than the contract for services or their expectations of the delivery are far higher than the contracted scope of services Parties in this arrangement are often unwilling or unable to enter into joint collaborations for the good of the wider area and are too parochial for sector development 14 P a g e

15 Guidance Notes: Separate or Combined Structure? To arrive at an answer to this question a regional economic development service delivery review is required. A council department or Service Delivery Contract are NOT recommended. Good tourism sector performance only comes from an environment which is not regulatory or reactive in nature. Alignment to bureaucracy is not as important as having the right commercial Board skills directing the entity and allowing it to operate in a commercial way, guided by a good Statement of Intent. The private sector cannot develop long term meaningful relationships with a council staff structure. Growing the sector means join outcomes required to be developed, not simply a council formed Contract for Services. If the RTO is to be combined into a broader EDA then the functions of the RTO and its identity to the private tourism sector need to be retained, as do separate KPIs for the tourism activity within that EDA. (b) RTO Funding arrangements Local authorities are the primary funders of economic development and RTOs, contributing an average of 83% or $42 million per year of RTOs total budget in 2015/16. Being the major contributor means that strong links between RTOs and local authorities are crucial as the removal or reduction of this funding has major impacts on RTO operations. The relationship needs to engage the council s Chief Executive, senior management and department heads. It needs to be understood that there are differences between promoting the tourism businesses of the district versus promoting the district itself. There are very different tactical approaches and focusses in each. The RTO is not primarily a membership organisation driven by member interests, but by the needs of promoting the destination. Councils are under financial and other accountability pressures, and continually look at the value of their investments in RTOs. There is influence from political decisions, and as discretionary services under the Local Government Act can be tempting targets for budget cuts. Councils can try to achieve too much and need to consider what is possible and what the priorities are in tourism and economic development. If a small number of priorities are achieved, the partners are more satisfied. There are a range of possible funding scenarios which increase in complexity as more councils become involved. The following table outlines the main considerations: 15 P a g e

16 RTO funders Key Advantages Key Challenges One principal funding council Least complex structure and arrangements. Targeted to local needs / priorities. High funding reliance can lead to political risk of funding cuts after election. High funding reliance can lead to the RTO being beholden to funders priorities which may not be the best for the sector. The council may be too small for the RTO to raise good marketing budgets. The RTO may not win the support of larger funders who see the area as too small to do the job well. Restricted in the ability to leverage regional opportunities One major, one or more minor council funding partners One or More Equal council funding Partners Small area may have iconic tourism features which is an advantage to a larger partner to add to marketing collateral and to the smaller partner to attract more funding for marketing and facilities. Consistency in communication and messaging. Provides more effective and sustainable funding for the RTO. If the arrangements for governance, strategic direction and performance are locked into an effective Statement of Intent, this can work very well. Most complex and challenging arrangement to make work. Major partner can dominate and parochialism can damage relationships and confuse the focus of the RTO. The RTO is beholden to different TLA budget processes which is high-risk to a funding model. Minor partners may not be able to increase funding, leaving the RTO less effective, or the major partner dominating by funding more. Minor partners can demand more than their funding level. If the minor partners are dissatisfied they may start their own organisation and fragment the sector more. The arrangement dealing with multiple strategic, governance, funding and performance expectations and more complex and can give rise to lengthy negotiations. The physical location of the RTO and staff can be influence perceptions as well as actual activities and outputs. Different councils funding arrangements can lead to risk. Requires a greater overview and knowledge of destination marketing requirements than strict adherence that a localised perspective 16 P a g e

17 (c) Membership Funding or Council Rates? It was noted above that 85% of funding for RTOs currently comes from council rates. This is a huge reliance on public funding. Pike (2008) describes this as the reality internationally and outlines funding alternatives to public funding for RTOs across the world as 4 : 1. Bed Taxes: Commonly used in the United States, Mexico, parts of Europe but not yet used in the UK, Australia or New Zealand. The revenue generated can be as high as 72% of funding. 2. Tax on Business: In New Zealand this method is used in areas such as Taupo and Queenstown as a levy on all business, which prevents the need to define a percentage rate of capital value. 3. Member Subscriptions: In the UK 58% of RTOs (or equivalent structure) receive revenue from memberships. However the amount of revenue this generated was only some 5% of total revenue required. Areas have abandoned the membership model due to the difficulty of collection and low rate of payment. Research suggests that the factors involved in payment of memberships by business are their ability to pay, knowledge about destination marketing and belief about the value they would receive. 4. Commercial Activities: RTOs internationally have clipped the ticket on conference and event bookings and run events. It is reasonably common that co-funding or user-pays arrangements are offered around specific activities and promotions. It still remains a small amount of funding compared to that required. Running events comes with the risk of failure and accountability for public money lost in a failed event. It also runs the risk of loss of the destination focus. RTO funders Key Advantages Key Challenges Membership Individual operators perceive the linkage matches their priorities more closely. Funding is more closely matched to benefit The general ratepayer is not called on to fund the sector, which is often seen as propping up tourism. Members don t pay up consistently. However if the method of funding is considered not a voluntary levy but a compulsory one collected by the council, it can work. To convince members of value of some strategies can require extreme amounts of time as a small SME does not always see as much value from the RTO. Most areas tourism industries are small SMEs and can t fund the amount required into broader marketing campaigns. The RTO may not be recognised as part of economic development. Public Funding Funding is sufficient. Funding is guaranteed through an SOI Focusses on the destination not individual businesses. Tourism is recognised as a component of economic development. Ratepayers see their contribution as subsiding tourism and requires a considerable education effort by councils to show value. Other industry sectors point out that they are not being funded for their industry. The linkage with industry is not as strong because the funders are the councils. Can lead to priorities of council funders not reflecting strongly industry. 4 Pike S. (2008) Destination Marketing, pp P a g e

18 Guidance Notes: RTO Funding Clarity in funding arrangements and expectations at the outset through a good Statement of Intent is important to ensuring a smooth working relationship, regardless if this relationship is between only the RTO and one council or multiple. RTOs and councils should not be seeking to go-it-alone because of the ease of the arrangements. This should be a decision taken after considering the tourism product from a visitor perspective and how the area fits in with a broader approach to customer expectation, brand and products. Multi-year funding needs to be agreed by funding councils and three-year funding as a minimum. This saves large amounts of time annually between funding partners negotiating the quantum of the annual increase and fitting with annual budgeting processes. When it comes to funding a RTO, the council will only get out what it is prepared to put in. This relates to what the council can expect if it is the junior partner in a funding arrangement, as well as to the ability of the RTO to grow. It is important to negotiate the long term expectations of funding partners early before setting the strategic direction and performance expectations of the RTO. Requests for funding increase from the RTO need to be accompanied by a robust Business Case for the increase, including outlining how they will seek additional co-funding opportunities outside of rates funding. (d) Rate Funding Methods for Tourism In most local government areas the potential economic returns to a community from tourism can justify the allocation of council rate funding. Throughout New Zealand and Australia there are a variety of ways councils fund tourism usually based on local needs, aspirations, resources and collaborative partnerships. These can include: 1. Rate revenue for tourism or as part of Council s economic development 2. Special rate charge or levy applied to commercial properties 3. Percentage of rate revenue: a fixed percentage of rate revenue allocated to tourism and economic development 4. Council grants 5. The allocation of revenue from other council assets, e.g. campgrounds The tools for rating of tourism will vary significantly between areas in New Zealand. Commonly a mix of the following rate methods can be used as determined by elected members: Business Targeted Levies: A structured levy approach on all businesses in an area to achieve activities agreed by those businesses. Effectively the council collects levies on behalf of the tourism industry for its priorities. Commercial (and Industrial) Rates on Capital Value: This common method of visitor funding is over a broad category of properties as a proxy for value received from the visitor industry. This will often be supplemented by a general rate on all ratepayers. 18 P a g e

19 General Rate on Capital Value: This method of rating is District-wide and captures all rateable assessments. Capital Value is a proxy for benefit received from the tourism industry. Flat Rates on whole population: This method is in recognition that all people in an area benefit from tourism in some way or another so instead of a proxy on capital value, all contribute exactly the same dollar figure. Tourism Rate Key Advantages Key Challenges Business Targeted Rate Commercial (and Industrial) Rate on CV Flat Rate on all Rateable Assessments General Rate on Capital Value, District-wide Council is the best collection agency for levies. Industry remains in control of the sector, its priorities and funding. Costs sheet home better to where there is direct benefit. This is a proxy for benefit from tourism. It uses well established council property classes to rate on so is easy to administer. The method recognises that all benefit from economic development and tourism. The amount levied e.g. $100 per rateable assessment is clear and debateable. It moves away from endless and pointless arguments about who gets greater benefit and pay more. This is a proxy for benefit from tourism. It uses well established council rating methods so is easy to administer. The business sector s priorities are only a part of the needed funding in tourism so the council still needs to rate additionally. This can be very unpopular and seen as double rating. The method works in a compact tourism area with sufficient money in the businesses such as Queenstown, but not so well in nongateway regions. The method misses portions of the commercial market such as online rental accommodation. It is a blunt rating tool not matching cost to benefits very well. It often misses sectors such as B&B, online rental accommodation. It does not rise sufficient funding for all tourism needs and a general rate is often applied to all other properties. The method does not allow greater benefit to some ratepayers from tourism to be charged more. All are charged the same. The retiree or the farmer who think that they see little benefit from the tourism industry pay the same. At the end of the day, it is just another proxy. It is a blunt rating tool not matching cost to benefits very well. It captures classes of properties with high capital value (such as farms, dams) who do not benefit significantly from the tourism industry. 19 P a g e

20 The starting point for a conversation on funding is the Tourism or Economic Development Strategy for the City or District, or wider region if more partners are involved. However a Strategic Plan needs to go beyond where they current end. The Strategic Plan needs to go to the extent of identifying what the base level of service (BLOS) is that will be funded from public rates, and the increased level of service (ILOS) or parent opportunities to be funded by sector partnerships. That Strategic Plan with the level of detail recommended then needs endorsement by both the tourism sector and the general public if both are funding partners into the Plan. In arriving at what rates should fund in tourism the steps are: 1. Establish the Tourism Strategic Plan. The Strategic Plan should be done in collaboration with the tourism, accommodation and hospitality industries, and other economic development stakeholders, and be clear about what will be covered by BLOS base funding (public rates) and what will be covered by partner funding or ILOS. 2. Establish the BLOS: The traditional Strategic Plan process needs to expand to include establishing what the BLOS is that will be from public funding. What remains in projects, marketing campaigns and the like over and above BLOS is to be funded by partner funding. 3. Establish the Governance Structure: This approach invites a strong sector influence into the governance of tourism through partnership structures. With a significant portion of a Tourism Strategic Plan to be delivered through partner funding, an accountability structure which brings them into governance needs to be established. Rate Funding Scenarios The following examples are our recommendation of the funding methods to be used in different areas of New Zealand. Note that these examples do not include Bed Tax or other methods which we agree should be pursued to offset rates funding and target visitors more directly. (a) Consolidated Tourism Area: this is an area where the tourism sector is the primary industry and where there is a high acceptance of the value of tourism to the economy. The areas also have high net worth tourism businesses which are bigger than an SME. Examples are Queenstown, Rotorua, and Taupo. In this area the steps to decide on the funding method are to develop a Strategic Plan which identifies the industry levy programme, ILOS projects and the remainder as a BLOS from public funding. Primary funding methods we suggest are: Tourism Levy on the commercial sector. This may or may not be differentiated by some factor. An ILOS Partner Funding Programme. Whole-of-District Flat Targeted Rate which funds the remainder BLOS portion. User Fees and Charges for facilities, carparks, toilets or a portion of revenue from facilities like campgrounds sheeted back to tourism marketing or events. (b) Diffuse Tourism Area: These are areas where the tourism ventures are spread throughout the area and are often SMEs. The district may have a mix of economies and tourism is recognized as one of the most important of those economies. 20 P a g e

21 In this area the steps to decide on the funding method are to develop a Strategic Plan which identifies the BLOS from public funding, and the ILOS from partner industry funding. Primary funding methods we suggest are: Commercial Sector rate which is capped. The funding from the sector is tied to programmes, projects of structures like the RTO in the Strategic Plan. Either a Flat Targeted Rate across the District, or a General Rate CV. This is tagged to the BLOS identified in the Strategic Plan. An ILOS Partner Funding Programme. User Fees and Charges for facilities, carparks, toilets or a portion of revenue from facilities like campgrounds sheeted back to tourism marketing or events. (c) Metropolitan Areas: These are large provincial centres or cities where tourism is one of a large range of economic activities. Typically the current spend per head of population is low in comparison to the national average. In this area the steps to decide on the funding method are to develop a Strategic Plan which identifies the BLOS from public funding, and the ILOS from partner industry funding. Primary funding methods we suggest are: Either a Flat Targeted Rate across the District, or a General Rate CV. This is tagged to the BLOS identified in the Strategic Plan. An ILOS Partner Funding Programme which can engage the larger high net value premises in a co-design programme. User Fees and Charges for facilities, carparks, toilets or a portion of revenue from facilities like campgrounds sheeted back to tourism marketing or events. (d) Low Tourism / Rural Areas: These are areas of New Zealand which are largely rural with a small tourism economy. Typically spend on tourism per head of population by the council is low, tourism related infrastructure (such as toilets, carparks or Walkways) are largely used by the resident public more than visitors. Small increases in funding for tourism projects can significantly impact on the area s rates. In this area the steps to decide on the funding model are to develop an Economic Development Strategy which represents the priorities and identified partners in each priority. Tourism may or may not form a priority area to engage in further. Primary methods of funding we suggest are: Commercial Sector rate which is capped. The funding from the sector is tied to Strategic Plan programmes, projects or structures like an EDA. There may be a contract for some services with a neighbouring RTO but the council needs to carefully consider whether its primary needs are marketing, or growing the capability of the local industry (which an RTO in this case would not do) Either a Flat Targeted Rate across the District, or a General Rate CV. This is tagged to the BLOS identified in the Strategic Plan. An ILOS Partner Funding Programme for various economic development sector partners. Development of council campgrounds to meet the facility needs of tourists user funding returns sheeted back into facility development at the campgrounds. 21 P a g e

22 Guidance Notes: Rate Funding Tourism or economic development rating starts with the Strategic Plan. The Plan needs to go to the extent of identifying BLOS, ILOS and Partner Funding and be endorsed through consultation with the specific funding sectors. Public funding should only be directed to BLOS, or to an agreed Partner Programme. A Flat Targeted Rate should be considered alongside the usual General Rate CV for the BLOS component of tourism or economic development funding. All metros and Districts need to be identifying a strong user pays strategy for facilities used by visitors such as toilets, carparks, or venues, and a portion of revenue from facilities like campgrounds sheeted back to tourism marketing or events. Smaller areas not involved in the tourism industry would not develop a strong user-pays strategy unless they have sites under significant visitor destination pressure. (e) Governance Arrangements: Elected or Appointed? There are a diverse range of governance arrangements for EDAs and RTOs throughout the country, reflecting differing priorities from individual councils and other factors. This range of different governance structures presents a challenge in developing a set of common performance measures across EDAs or RTOs. A conversation on governance arrangements follows a review of tourism and economic development at a broader scale, an assessment of data showing economic priorities and a Section 17a Service Delivery Review. From this process comes recommendations of form and functions, and the governance arrangements. The following table outlines the advantages and disadvantages for three main options for governance boards; all elected, a mix of appointed and elected, or, all appointed. The last option is not common in New Zealand, but Wanganui and Partners is an example where all members are appointed. The following table compares the relative merits of each arrangement: 22 P a g e

23 Governance Boards All are elected members Appointed plus elected members Key Advantages Straight line between public funding and accountability for outcomes to ratepayers. Experienced governance. Tourism or economic development expertise is brought into decisionmaking. More elements of a commercial board are introduced and more comfort for operating the RTO or EDA in a semicommercial manner. All Appointed Tourism or economic development expertise is brought into decisionmaking. The Board is an industry voice. Guidance Notes: Governance Boards Key Challenges Lack of tourism or economic development expertise. Lack of flexibility to operate commercially. Political motivations are not necessarily most suited to successful tourism or economic development. Tensions around the Council table play out in relationships around the RTO or EDA table. Criticism from members of the public that resource decisions are being made by nonelected members. Criticism that Boards are being stacked with political favourites. No guarantee that appointees will be selected on the basis of their skills or demonstrated success in business. Criticism that the Board is being stacked with political favourites. Risk of a lack of political acumen and failing by not understanding the needs of the public nor council well enough. An adversarial environment develops where council are treated as just a funder, not a partner, and are regarded by the Board as a handbrake on progress. Potential for lack of accountability to ratepayer funding. 13 Boards should include appointees Appointees be on the basis of their skills and demonstrated success, and be through a transparent public process of appointment. There does not have to be a majority of elected members on a Board as long as the council has a clear Statement of Intent to operate within and agreed budget delegations. Members of the RTO or EDA structure should not also sit on the Council Committee charged with monitoring the performance of that entity. This is a conflict of interest. The Chairman of the Board would be an elected member only if they have the commercial background to support them in this role. 23 P a g e

24 Part Two: Demonstrating Return on Investment (a) The Business Framework of an RTO The RTO and the council should work together on the development of a Statement of Intent which aligns to funding (multi-year), priorities, relationship management and KPIs. The bases set of documents in our opinion for a council and RTO relationship should be: Statement of Intent between council(s) and the RTO Three Year Plan of the RTO Annual Business Plan of the RTO Annual Report from the RTO Stakeholder engagement plan and annual communications plan Resolutions of council establishing the structure and under what terms Resolutions of council appointing governance to the board and term Delegations to a Committee or full council to monitor the performance of the RTO to the core KPIs and Plans These documents relate less to the work the RTO undertakes in increasing regional tourism but do underpin good governance practice by a publicly funded entity. The KPIs set by the council need to be achievable in the period and developed together by the partners. Ideally the measures should be outcome based as well as some specific outputs. It needs to be understood that to grow a great tourism sector there are a lot of activities such as relationship building that do not neatly fit into output KPIs. We note that the Three Year Strategic Plan should not be done out-of-sequence from the Tourism or Economic Development Strategic Plan outlined in the previous section of this report. The RTOs Three Year Plan shows how it will achieve the council s plan and should actually be developed in a concurrent process so that the two documents can inform one another and so that no additional expenditure surprises emerge. Achieving buy-in to the work of the RTO from the tourism sector, wider business community and residents and ratepayers is key to the success of any RTO. This is what could be termed the social licence to operate but is different from validation of the performance of the RTO. There will always be voices of disapproval and discontent because the RTO needs to make choices over scare resource and over tactics. Communication back to their community stakeholders is therefore incredibly important. Communication to visitors is also an essential part of a successful RTO - both elements should be expected inside of a Stakeholder Engagement or Communications Plan. 24 P a g e

25 Guidance Notes: Minimum Documentation 18 The minimum documentation that an RTO / Council relationship should have in place are: Statement of Intent between council(s) and the RTO Three Year Plan of the RTO Annual Business Plan of the RTO Annual Report from the RTO Stakeholder engagement plan and annual communications plan Resolutions of council establishing the structure and under what terms Resolutions of council appointing governance to the board and term Delegations to a Committee or full council to monitor the performance of the RTO to the core KPIs and Plans (b) Performance Measurement of RTOs This section provides a set of core KPIs which have relevance for all RTOs despite differences in governance structures and funding models, and a number of recommendations for adaptable KPIs which can be tailored to reflect the different circumstances which RTOs operate in. There are a few points about the function that KPIs fulfil which need to be raised first. (a) The Long Term Goal is Mandatory: The KPIs a council and RTO set together should lead towards a longer term goal, so that they are meaningful measurements of steps on a journey rather than just measurement of a snapshot year without context. It is our view that this is a mandatory requirement. For example, if a council has set a goal of growing visitor expenditure to $200 million by 2025, then the years between now and 2025 should be measuring realistic steps annually to meet that goal. Arbitrarily setting annual KPIs around increasing visitor expenditure risks losing sight of the big picture: the required annual increase to meet the $200 million goal may not be sufficient, or an annual goal that is too high may become overly consuming of the RTO's resources at the risk of other performance indicators. DESTINATION ROTORUA Destination Rotorua sets a clear vision and goal by 2030 and then also sets goals for the core KPIs that they identify will achieve that vision. The key goal is visitor expenditure and there are also goals set for Rotorua Partners, Events and Attractions and Business Partners events. (b) KPI Achievement Links to Support: Councils need to be realistic in the performance they expect of a RTO (and that the RTO expects of themselves) relative to the level of support they offer. A stretching KPI requires the funding with it to realistically achieve. The key message is that councils can only expect to get out what they are prepared to put in when it comes to investing in their RTO. 25 P a g e

26 (c) Consistent KPI Measurement is required: When it comes to a number of the national metrics used by councils, such as visitor spend and visitor nights, there are multiple tools available which yield different results. Decide on which to use and stick with it, otherwise the story told from year to year may not be consistent and paint a warped picture of just what the RTO has managed to achieve. If the council is wanting to try a new measurement tool then they also need to look at the KPI and make sure that the measurement system and what is being measured still match up. (d) The Danger of Comparison: When looking at the performance of different RTOs it is important to make sure to compare like with like. This means ensuring that RTOs are compared on the same metrics, but also factoring in to that comparison the different drivers that make each RTO function in a different way, like geography, the tourism offering, seasonality, scale and measurement system. While acknowledging that each RTO will look and act differently, the following KPIs are designed to bring a level of comparability and make understanding the performance of RTOs easier for councils, elected members and ratepayers. Also, should not compare with neighbouring RTOs but with RTOs which have similar capacity, accessibility and product. Recommendations for assessing and measuring tourism destination performance are highly dependent on the status of the destination and the abilities and resources allocated for the implementation of a visitor strategy. Specific KPI measurements are covered in Part (c) and these will act as indicators for the success of tourism promotion and marketing. All KPI setting is recommended to be conducted in consultation with the dedicated RTO. Measures or KPIs should be discarded if the RTO or TLA has no control or influence over the outcome and also if the information collected or measured is unable to be used to inform, educate or add value to tourism promotion and marketing. Nice to know can be an expensive and time consuming use of resource and is best avoided. The goals or KPI s selected should assist in answering the below questions for both the TLA and RTO where one is in place. This will also guide smaller towns and areas in relationships with larger metropolitan and provincial agencies. What is local government s role in tourism and how is that manifested and communicated? What are the TLA s distinctive assets and competitive advantages? To what extent can these be controlled and influenced? How well does tourism integrate with the local community and business development initiatives to ensure social and economic growth and innovation? How can local government improve destination promotion and effectively contribute to tourism growth? What are local government expectations for tourism? Are those expectations matched to the resources available? There are a variety of approaches in use for measuring KPIs. The following list was suggested by Elke Thompson of Gisborne District Council wrestling with the triple bottom line approach to KPIs. There are some exceptional recommendations in this table to consider: 26 P a g e

27 Possible KPIs What are we capturing Rationale Local Sector Support Economic Value Social and Cultural Value Environmental Value % of participation from RTO providers to deliver tourism strategy. Visitor Survey (bespoke or there are currently available surveys done nationally each year) Tourism sector satisfaction survey. Number of commercial nights (domestic and international) per month. 5 Commercial Occupancy Rate. Monthly visitor expenditure. Ratio of Residents: Visitors. For council-owned attractions: Visitor : Local use Accessibility for people with limited abilities. Economic value of events. Resident feedback on tourism impact. Participation of tourism organisations in sustainable waste management, retaining biodiversity. Regional tourism success depends heavily on working together with the RTO. Understand your market. Targeted marketing. Making sure the level of engagement and strategies are supported locally. Core measure but need to provide context. Accommodation providers are ratepayers so increased occupancy shows that they are getting a return on the activity of the RTO or EDA Core measure but need to provide context. Context will help benchmarking with other regions. Understand the relevance of local attractions to the visitor market (which may impact who pays for the attraction and therefore what council internal budget it comes from). Develop an inclusive tourism landscape, future proof. Every event funded by public monies need to be measured for ROI value for public funding. Involve the community if tourists are amongst welcoming residents it will enhance their experience. Ensure the RTO contributes to a sustainable tourism landscape; future proof. 5 If the RTO is in an area of low commercial accommodation but high non-commercial use (such as Freedom Camping) then the value of non-commercial should be measured. 27 P a g e

28 The following 7 KPIs were seen by the NZTCW as core KPIs of the outcomes from RTOs. They provide a tangible understanding of the dollar value and visitor numbers that tourism in the region has experienced in that year - which is important to elected members and the public. These KPIs are simple to understand, and are clear to see the value that the RTO has added to the region if they are being met. It is important to set up a robust measurement system for these and to understand the date that is yielded within the KPI framework from that system. Note that not all commercial accommodation monitoring systems will count informal (e.g. online bach rental) accommodation providers. CORE KPIs Source Rationale "Increase domestic visitor nights spent in commercial accommodation" "Increase international visitor nights spent in commercial accommodation" "Increase attractions and activities visits, and ROI on events" "Increased visitor expenditure per month" "Increase average length of visitor stay and Occupancy" "Increase the social media profile of the destination" Perception of the region Commercial Accommodation Monitor Commercial Accommodation Monitor Counters or targeted surveys of each event that you fund or hold, Marketview Event Reports. MBIE website under Monthly Regional Tourism Estimates by RTO and Region Commercial Accommodation Monitor Online analytics of engagement and reach Bespoke research, biannually Important to distinguish domestic and international as the investment into destination marketing and the tactics to reach each is different. Measured in $ terms. Important to identify the value from your events that you publicly fund. The most important measure of value. The benefit from visitors staying another night in your area is huge. Measurement of your effectiveness in the largest and most popular channel of information social media. Perception of the region is critical to tourist visitation KPIs have to be realistic. A council cannot expect a doubling of the baseline in year one, but with peaks and troughs, should expect positive movement towards the long term goal over a number of years. It is natural to experience troughs or years where visitor numbers and expenditure drop. This is not necessarily a failing of the RTO but more likely a national trend. Councils should be aware that if they make too much of the good years being linked to their RTO performance, then in a bad year for the country s visitor industry they send the message that the RTO must have been performing badly. 28 P a g e

29 It is our guidance that in a year of poor visitor industry results in an area that council determine whether: The results a national trend? Domestic and international markets were both effected in your area? A change of tactics, shift of focus between domestic and international, or investment may be required to do better? It is a result of shifting visitor and travel behavior (such as increased use on AirBnB)? 6 Your destination is an emerging destination of a mature destination? Even with the poor results, the overall future goal is still on-track for achievement. The setting of RTO KPIs is also dependent on the significance of tourism to the area as the following tables of rural and provincial area demonstrate: PROVINCIAL SECTOR GROUP Population between 20,000 and 90,000. Consideration Status Potential Measurement Source How diverse is the mix of tourism offerings for visitors? HIGH Ratio of visitor experiences to attractions Paid v. unpaid attractions Package v. stand-alone tourism products Ratio of TLA owned attractions to privately owned attractions Percentage of national and international visitors RTO MBIE Stats NZ How mature is the destination within the national and international visitor markets? How much capacity is there? Events Accommodation How does the destination compare nationally and with other regions? HIGH Growth of visitor segments in volume and value Growth of visits to TLA owned attractions Growth of visitor and business events by volume and value HIGH Growth of visitor and business events by volume and value ROI on event seed funding, grants or sponsorship Occupancy, length of stay and guest nights Non-commercial accommodation growth Self-contained motorhome and campervan activity Growth by volume and value v. national growth Growth by volume and value v. wider RTO or TLA RTO MBIE Stats NZ RTO MBIE Stats NZ Event specific measurement - TLA RTO MBIE Stats NZ 6 This question is also applicable to the i-sites which are affected by changing trends in online booking 29 P a g e

30 Where and how do visitors come to the destination? What tourism alliances and partnerships are the destination part of? What is the national perception of the destination as a place to visit? How well do the TLA elected members and senior staff understand the tourism sector for the destination? How well is the destination s community informed about the sector importance and activity? Is the visitor strategy aligned with infrastructure, economic development, policy and regulatory plans? Growth by volume and value v. comparative destination capacity MEDIUM Level of connectivity Volume of visitors and users by access point Direction of flow HIGH Number of shared promotions by national and international HIGH Annual or biennial commissioned survey for visit intention National and international media publicity and sentiment for the destination Social media sentiment MEDIUM Number of elected members and/or staff attendance at workshops and training forums MEDIUM Annual Community Views survey Local media publicity and sentiment for the destination TLA social media channels MEDIUM Number of projects listed as influencing local tourism sector RTO TLA Infrastructure NZTA Destination Airport RTO RTO TLA TLA TLA Not all considerations listed should become core KPIs however these examples provide some direction towards understanding priorities of promotional activity. If a destination has low national awareness, some negative publicity and few tourism businesses outside of TLA owned attractions and the natural environment KPI s relating to international tourism and trade, partnership alliances and destination comparisons may have little relevance. 30 P a g e

31 Promotion in this case would focus on awareness and positive publicity on visitor activities available. RURAL SECTOR GROUP Population of less than 20,000 and no dedicated RTO for the destination. Consideration Status Potential Measurement Source How diverse is the mix of tourism offerings for visitors? LOW Growth of tourism attractions and experiences Ratio of TLA owned attractions to privately owned attractions Percentage of national and international visitors MBIE Stats NZ How mature is the destination within the national and international visitor markets? How much capacity is there? Events Accommodation How does the destination compare nationally and with other regions? Where and how do visitors come to the destination? What tourism alliances and partnerships are the destination part of? What is the national perception of the destination as a place to visit? 31 P a g e LOW Growth of visitors in volume and value national and international LOW Growth of visitor events ROI on event seed funding, grants or sponsorship Occupancy, length of stay and guest nights Non-commercial accommodation growth Self-contained motorhome and campervan activity LOW Growth by volume and value v. wider RTO or TLA Growth by volume and value v. comparative destination capacity MEDIUM Level of connectivity Direction of flow LOW Growth in number of shared promotions LOW Annual or biennial commissioned survey for awareness National media publicity and sentiment for the destination MBIE Stats NZ MBIE Stats NZ Event specific measurement - TLA MBIE Stats NZ TLA Infrastructure NZTA Destination Airport TLA TLA

32 How well do the TLA elected members and senior staff understand the tourism sector for the destination? How well is the destination s community informed about the sector importance and activity? Is the visitor strategy aligned with infrastructure, economic development, policy and regulatory plans? LOW Number of elected members and/or staff attendance at workshops and training forums MEDIUM Annual Community Views survey Local media publicity and sentiment for the destination TLA social media channels MEDIUM Number of projects listed as influencing local tourism sector TLA TLA TLA (c) Adaptable (Tailored) KPIs The following sets of KPIs are identified as examples only of those which can be tailored to meet the specific needs of councils and their RTOs. Core KPIs are unlikely to be the only KPIs adopted. Others will be of high importance also, however it is the strong advice of the NZTCW that the following adaptive or tailored KPIS do not replace the core KPIs. Adaptive KPIS are in addition to the six core KPIs. (a) Funding KPIs The degree to which RTOs are reliant on council funding is variable but in almost all cases there is significant funding provided. Nationally the percentage of council funding is 84%. For a range of reasons, councils may wish to see their RTO also funded by private, community or government partners. A council may like to set a KPI limiting rates input to a percentage of the total RTP budget. This may work in consolidated tourism areas (such as Queenstown) or Metros better than other areas. The following KPIs may be selected if they suit the economic conditions and political priorities of a particular area. "Secure $xxx in annual funding from non-council sources" "Operate a member funding levy which will meet 25% of the annual operating costs of the RTO" "Online marketing revenue provides 10% of the annual operating costs of the RTO" 32 P a g e

33 (b) Partnership KPIs RTOs seldom operate in a bubble and are usually one of a number of key players in regional tourism. The success of the RTO, and the value of the RTO to the region, are often dependent on how they engage other tourism, funding or governance organisations in the area. These can also be relationships which are important to the council, such as with government departments like the Department of Conservation and with tangata whenua. It's also useful to keep partners from within the tourism industry engaged in the work of the RTO and to provide a forum for sharing information and networking. "Develop a partnership agreement with DOC which provides for regional tourism activities on conservation land" "Provide links to iwi websites on main page of RTO website and vice versa" "Host quarterly partner events for local tourism operators." (c) Offering-specific indicators RTOs in different regions have differing focuses which is often dictated by what that region has to offer. For the Coromandel it may be beaches, for Wellington it might be cultural opportunities and for the Hawkes Bay it might be wine. Some councils and their RTOs may opt for KPIs which are specifically targeted at leveraging what their offering is in order to make growth in that area a key function of the RTO. More simply, it may be that the full suite of performance measures for one RTO, such as for a significant visitor centre like Auckland, may not be reflective of the offering available in a smaller centre and so some KPIs, for example relating to business tourism, may not be relevant. "Business events leads generated" "Increase visitor awareness of regional wineries" "Increase distribution of RTO annual publication" (d) Reporting on KPIs We recommend the following format for reporting annually on the core KPIs. This is again taken from Destination Rotorua. Clear and simple layout Starts with the long term goal expressed at the top and in expenditure terms Graphs visitor expenditure that the NZTCW identifies as the most important KPI Tracks actual performance against target, and against the baseline performance Includes the core KPIs (to Rotorua) on the table 33 P a g e

34 Guidance Notes: KPIs and Reporting The Six Core KPIs to measure the performance of the RTO and that should be in every RTOs performance framework are: Increase domestic visitor nights spent in commercial accommodation Increase international visitor nights spent in commercial accommodation Increase attractions and activities visits Increase visitor expenditure per person per day Increase average length of visitor stay Increase the social media profile of the RTO and regional tourism network The single most important KPI is: Increase visitor expenditure per person per day. Other KPIs are tailored to suit the area s own situation and need to be treated as secondary performance indicators. Achievement of the KPIs should NOT be determined on an annual basis. They should be measured against the Ten Year goal and trend-line to meet that goal. Results which do not meet the trend-line in a given year should lead to a reevaluation of tactics to return the RTO back to the trend-line. The reporting on RTOs achievement of KPIs should be visible on a single page and we recommend that the Rotorua reporting model be followed for all RTOs. 34 P a g e

35 Part Three: Destination Analysis Part Three of the report develops a methodology for tourism promotion assessment by the RTO and TLA to provide a solid foundation on which to build, identify and determine what outcomes are required from marketing and promotion and who is responsible for what. A destination s reputation is built from visitor s perceptions. This is determined by the experiences people have, the ease of getting to and from the destination, how they would describe it, how easy it is to get around and also how likely they are to return or stay. Coupled with the atmosphere, feel and values a community exhibits, these perceptions are part of a destination s DNA. Perception is built from experience and attraction to a destination comes before the experience. This is the traditional role of a RTO. Assessment of promotional activity has for some time plagued the marketing and advertising industries as they have struggled to accurately measure attributable sales. With online advertising, social media and big data there is also the possibility of over-measuring through endless analytics and variables. Regardless, local authorities cannot achieve their destination tourism and economic development objectives alone and with RTO collaboration must attract visitors through promotion before their experiences build a reputation. Destination management challenges are fragmentation, duplication and lack of understanding about the roles each local government, RTO s and EDA s, have to play. Local government elected members and staff often lament performance and progress of regional tourism organisations. They may begin to doubt the value of investment and wonder why more visitors are not coming. Tourism businesses might want to know why they don t have more visitors than the previous month or year. How well is local government engaging with tourism marketing and promotion? RTOs and their personnel can struggle to communicate the complexities of the sector, its role and integration with international tourism, the rapidly changing trends, the amount of resources required to meet stakeholder expectations and their role in destination marketing. Not, as many believe, their obligation to build and grow individual tourism businesses. Local government feel their expectation of performance, communication and respect as elected representatives of the community is not too much to ask given the investment they 35 P a g e

36 are making. Elected members of councils know the individual community members will come to them asking the hard questions expecting to receive concise answers and action. To assist with these challenges, this section aims to provide a series of actions enabling a better understanding of roles, environments and promotional activity for the visitor market. In turn, realistic and achievable goals can be identified that are relevant to a specific destination and its promotion. Local government services are not intended to replace RTO existing organisations specialising in the delivery of tourism, destination marketing and economic development but instead be able to engage as committed and knowledgeable partners and owners. Understanding the Factors Influencing Tourism Promotion Visitor or tourism promotion is not simply telling every person that can be reached about all the things a community loves and enjoys in the place they have chosen to live, work, study and play. Promotional decisions are made based on several factors relevant to the audience, the positioning of the destination, the affordability, the skills and resources available to manage the promotion and maturity of the destination within the tourism sector. It is also essential to ensure tourism promotion makes sense in the eyes of the potential visitor. This means providing promotional content at all stages of the decision-making process. The stages of the visitor purchasing journey generally fit into the stages below 7 : Share Inspire VISIT The Customer Journey Research Post Rationalise Convert To understand how this is done effectively local government must first understand where their destination fits and what its strengths and weaknesses are. This should be developed as part of a destination or visitor strategy by the RTO management and staff using their specialist skill and expertise. Governance boards and stakeholders would usually provide direction, 7 Keep It Real for Destinations, VisitBritain.org and Leeds Metropolitan University, pp P a g e

37 input and feedback to these strategies however the effectiveness of this direction will be reliant on their knowledge of how their destination relates to the tourism market. It is recommended that an assessment of the destination be done as a partnership between council and RTO and that the assessment provides a clear understanding of the tourism offerings, the destination fit within the national and international visitor markets and the factors influenced and understood by TLA executive management teams. Isn t it just advertising? Some of this work will have already been undertaken through the previous Government s Regional Growth Strategies and associated reports and action plans. This work is valid but addresses opportunities and makes recommendations at a broad and generic regional level. These recommendations tend to be harder to implement at a TLA level without first understanding and assessing the local environment of the TLA. Phase 1: Offerings and Experiences Every destination will have a different mix of visitor offerings, tourism products and businesses. Each destination will also have a mix of free and paid attractions available to the visitor as well as the resident community. How established these visitor offerings and experiences will also influence the effectiveness of visitor promotion and marketing strategies. It is recommended a matrix of tourism offerings is developed including these measures: Ratio of visitor experiences to visitor attractions Paid and free tourism offerings Packaged and stand-alone tourism products TLA owned and private tourism attractions Ratio of national to international visitors including spend Accessibility and connectivity of the destination and offerings The completion of this exercise will identify gaps in what the destination has to offer the visitor, comparative strengths and weaknesses to other places, and how well the destination can be promoted within the tourism trade distribution channels. What have we got to offer visitors? 37 P a g e

38 Phase 2: National Context Setting performance measures for tourism must be aligned to the current situation and desired growth outcomes that are realistic for the sector and community. Tourism is now New Zealand s largest export earner and revenue from both domestic and international visitors was calculated at $36 billion for the year ended March There are 230,793 New Zealanders directly employed in the tourism sector interacting with over 3.6 million international visitors. Not all of these visitors are here for a holiday, want to do the same things or stay in the same places. Not of all these visitors will visit each island, region, district, city or town. How well do we compare with everyone else? Four gateway regions or RTO s are recognised Auckland, Wellington, Christchurch and Dunedin and together they account for 65% of overall tourism spending. 9 Destinations outside the gateway regions may not attract or experience the same levels of awareness, growth and visitor promotion these places do. To determine a destination fit and comparison for promotion the following questions should be asked: 1. What stage is the destination in the tourism product life cycle? 2. What capacity does the destination have for overnight visitation? Commercial and noncommercial? 8 Tourism Satellite Account: 2017, Stats NZ 9 Regional and Seasonal Dispersal of International Tourists, Tourism Insight Series, November 2016, MBIE. 38 P a g e

39 3. How do the current occupancy and length of stay rates compare to other destinations, regions and islands? 4. Has the destination kept pace with national growth statistics and market trends? 5. What destination or TLA shares the most commonalities with the destination under assessment? 6. What is the ratepayer to visitor ratio for the destination? 7. What are the partnerships and alliances available to the destination for visitor attraction and promotion? 8. Where does the destination fit for visitor flow? Is the destination close to a large population base? Is the destination on an existing tourism route or easily accessed from an existing route? 9. What trends in visitor demand match the destination offering? The recommended analysis provides a basis for marketing and promotional decision-making which can then be assessed for outcomes and KPI s. Phase 3: Role and Responsibilities of Local Government Effective promotion and growth only comes from the collaboration and integration of organisations and parties with a long term commitment to tourism development. Part one of this paper reviews the structures available for successful tourism and the advantages and disadvantages of those structures. Regardless of governance structure TLA s need to take the lead in ensuring council management, elected members and the destination s resident community are informed on the importance of tourism and how it works. RTO management and staff have the expertise coupled with specialist consultancy services to develop and implement visitor strategies and promotional campaigns. The TLA acts as a funder, employer, manager of assets and infrastructure and community promoter for those strategies and campaigns. The TLA may also act as the community champion for the development and growth of a destination s tourism by providing resident communication, training and education, advocacy and by being a connector of the different communities, industries and agencies. Who does what and why? Recommendations for this phase include: Assessing elected members and senior management staff knowledge of the importance of the visitor industry for the destination Assessing senior management staff understanding of how council departments and regulatory activity influences the visitor industry Working with the destination RTO to identify trends and activities within the TLA 10 year plan that may impact the visitor industry and delivery of tourism marketing and promotion 39 P a g e

40 With the destination RTO, conducting a review of communication to the resident communities to inform, educate and strengthen the tourism sector Identifying and addressing gaps in communication and collaboration between the elected members, TLA management, RTO, EDA and communities within the destination Completion of Phase Three in the tourism promotion assessment provides a solid foundation on which to build, identify and determine what outcomes are required from marketing and promotion and who is responsible for what. All these relationships can be complex, timeconsuming and assumed to be in place. By conducting this analysis, KPI s and measurement outcomes will be better tailored to the unique destination attributes, requirements and market share. Documentation of the findings to the end of Phase Three provides for sustainable and consistent promotional activity based on a shared understanding of roles and activity able to be influenced. It will also provide potential benchmarks for performance measurement and identify projects to improve promotional performance. Guidance Notes: Destination Analysis An assessment of the destination be done as a partnership between council and RTO and that the assessment provides a clear understanding of the tourism offerings, the destination fit within the national and international visitor markets and the factors influenced and understood by TLA executive management teams. A matrix of tourism offerings is developed including these measures: Ratio of visitor experiences to visitor attractions Paid and free tourism offerings Packaged and stand-alone tourism products TLA owned and private tourism attractions Ratio of national to international visitors including spend Accessibility and connectivity of the destination and offerings An assessment of the respective roles of RTOs and TLAs in tourism should include: Assessing elected members and senior management staff knowledge of the importance of the visitor industry for the destination Assessing senior management staff understanding of how council departments and regulatory activity influences the visitor industry Working with the destination RTO to identify trends and activities within the TLA 10 year plan that may impact the visitor industry and delivery of tourism marketing and promotion With the destination RTO, conducting a review of communication to the resident communities to inform, educate and strengthen the tourism sector Identifying and addressing gaps in communication and collaboration between the elected members, TLA management, RTO, EDA and communities within the destination. 40 P a g e

41 Part Four: Positioning and Funding Part Four is a continuation of the development of the destination marketing approach which focusses on how to arrive at an area s accepted brand and the role of RTOs and TLAs in that process, funding for marketing and alternative revenue sources. Phase 4: Destination Positioning and Brand Review Determining the promotional message and positioning for a destination is complex. Destination branding attempts to tie up all the attractions, visitor activities, natural features, community cultures and aspirations for a place. Destinations rely on the development of a single message, brand or position for effective, sustainable and meaningful promotion. Promotion and communication must also be distinctive, provide a competitive advantage, encourage visitor engagement and action and be consistent over time. Destination brands are the biggest toy in the toy box and politically squabbled over equally as much. Destination branding requires specific expertise, knowledge and experience in marketing a collection of experiences. Destination promotion consists of a series of activities (one of which is advertising) including seasonal and/or themed campaigns. The connecting thread across these campaigns should be the destination brand. Who are we and what are we saying? It is recommended the responsibility for brand development is with the destination RTO and as such the RTO should lead any branding exercise with TLA input. Reviewing the destination brand and positioning requires an understanding of visitor perceptions, competing attractions and place DNA. The review process should also be undertaken with the destination RTO or those responsible for developing economic growth including tourism. It is not recommended a TLA undertake this review in isolation. The first step in conducting a review of this nature is the collation of promotional material and channels relevant to the destination. RTO visitor and trade brochures, fliers, posters RTO advertisements and choice of publication or channel Council publications, brochures and fliers Council mission and vision statements EDA publications, guides, brochures and brand 41 P a g e

42 Past destination branding and design projects Online websites, articles and references to the destination Visitor and community research Questions to be asked include: 1. What are the common themes or ideas across the collateral and documentation? 2. Is there conflict or confusion in the messaging across all sources? 3. What specifically is being said about the destination? 4. Can any other New Zealand destination compete with what you are promoting? 5. Are the visual images identifiable as the destination? 6. Does the messaging reflect the community perceptions of the destination? 7. Is the messaging authentic and meaningful to the visitor audience? 8. Is the positioning and messaging supported across tourism and accommodation operators? 9. Will the promotional message last over time? Emphasis should be placed on alignment with visitor perceptions, community aspirations and on a distinct competitive advantage. If promotion cannot deliver a message or uniqueness or destination strength then the product (destination) becomes a commodity and commodities are only able to compete on price. TLA s often struggle with what is called brand architecture. Brand architecture describes how a destination s brands are organised and relate to each other and is an important strategic issue. Consider the differences and relationships between a corporate brand, a master brand, a hybrid brand and a product brand in the following example from Auckland and other: TLA: A corporate brand logo RTO/EDA: A corporate and hybrid brand logo Destination: A product (destination) brand logo Tourism Product: An individual product (business) logo 42 P a g e