1. The Power of Promotion in a Challenging Economical Climate: Will it keep them coming? Presented by: Jeffrey Eslinger Senior Manager, Research SETRA Spring Conference Montgomery, AL March 24 – 25, 2009

2. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. About DKSA Founded in 1982 by Douglas Shifflet  Client support  PERFORMANCE/Monitor SM, Image, ROI, Forecasting, Concept/Ad Testing, etc. Industry’s Largest Historical, Comprehensive Traveler Database  Monthly detail for over 150 variables trending back to 1992  Contact 165,000 U.S. households for each month – projectable  Mail and Online

3. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. DKSA Clients & Partners  Clients –50+ destinations CVB’s and State Tourism Offices –30+ hotel brands and hotel organizations –U.S. government and travel associations –Airlines and financial organizations  Partners –IHS Global Insight –Acxiom – CRM, overlays, segmentation, lists, custom models –American Hotel and Lodging Association (AHL&A) –Hospitality Sales and Marketing Association (HSMAI) –Pacific Asia Travel Association (PATA) –MSW Research – Advertising Testing

4. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. DKSA Data Applications  Understand market changes Volume and Trends Competitive Satisfaction and Value  Determine competitive positioning  Develop competitive strategies  Develop targeting strategies  Legislative resource  PR and promotional messaging resource

5. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Overview  Who is using Promotion  Snapshot of Where we are as well as Where we are going  Develop competitive strategies  Public Tourism Promotion  Colorado Experience and other case studies

6. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Brands that are Promoting

7. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Why Not Just Discount? Discounting without promotion isn’t always enough  Discounting alone does not differentiate  Any promotional offering needs to show what makes your offer stand out  Focus on market segments that traditionally bring in incremental business  Reward your best customers with the best promotions (upgrades, shipboard credits, discounted parking, personal recognition)

8. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Best Practice Promotion – Carnival Cruise Lines Targeted Promotions Yields Record Setting Results  One-week period ending March 1, Carnival recorded the highest number of bookings in its history  On a cumulative basis since mid-January, bookings are up 10 percent over 2008.  Carnival attributes its success on its travel agent partners and the consumer’s appreciation for inherent value and affordability of a Fun Ship vacation, as well as marketing efforts.  According to Gary Cahill, CEO, while bookings are at lower pricing, It tells us that despite uncertain economic times, consumers clearly need more fun in their lives and view a vacation as an essential part.

9. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Person-Trips, Direct Spending & Room-Nights Definitions Domestic Person-Trips  This metric tells you how many unique people visited your destination.  Does not account for multiple visits on a trip or multiple destinations within a state.  Person-Trips are simply the number of people on the trip. (i.e. if the travel party consists of 4 people then the trip would consist of 4 Person-Trips) Domestic Direct Spending  DKSA collects spending information in 5 major categories from each Total Direct Spending and Daily Personal Spending are calculated Transportation Lodging Entertainment Other

10. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Person-Trips, Direct Spending & Room-Nights Definitions (cont.) Domestic Hotel Room-Nights  This metric tell you how many nights were spent in hotel rooms and is primarily used by lodging clients.  Since hotel rooms house multiple people the "person" element is not important for this metric.  Thus, Room-Nights are the number of nights spent in a hotel during each Stay (i.e. if 1 night was spent in a hotel in San Jose and 2 nights each were spent in Bend and Portland, the total number of Room-Nights on this trip would be 5 - 1 California and 4 in Oregon)

11. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Person-Trips, Direct Spending & Room-Nights – Annual % Change Domestic Person-Trips2008P/20072009F/2008 Total-2.7%-3.9% Business-7.1%-9.3% Leisure-1.3%-2.2% Domestic Direct Spending Total3.1%-8.3% Business-0.8%-11.2% Leisure4.7%-7.2% Domestic Hotel Room-Nights2008/20072009F/2008 Total -1.6%-2.5% Business 0.3%-3.9% Leisure -3.3%-1.2%

12. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Hotel Room-Nights Volume & Forecast Hotel Room-Nights in Millions Leisure Business

13. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Three Segments – Hotel Room-Nights & Forecast Mid-Level High End Economy Hotel Room-Nights in Millions

14. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Traveler Behavior in the Past Three Months – Travel Segments Cancelled a trip due to expenses Kept planed trip but reduced expenses Took advantage of a discount travel offer Other trip changes No changes

15. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Traveler Behavior in the Past Three Months – Travel Segments Cancelled a trip due to expenses Kept planed trip but reduced expenses Took Advantage of a discount travel offer Other trip changes No changes

16. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Traveler Behavior in the Past Three Months – Purpose of Stay Cancelled a trip due to expenses Kept planed trip but reduced expenses Other trip changes No changes Took Advantage of a discount travel offer

17. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Traveler Behavior in the Past Three Months – Mode of Transportation Cancelled a trip due to expenses Kept planed trip but reduced expenses Other trip changes No changes Took Advantage of a discount travel offer

18. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Traveler Behavior in the Past Three Months – Age Groups Cancelled a trip due to expenses Kept planed trip but reduced expenses Other trip changes No changes Took Advantage of a discount travel offer

19. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Traveler Behavior in the Past Three Months – HH Income Cancelled a trip due to expenses Kept planed trip but reduced expenses Other trip changes No changes Took Advantage of a discount travel offer

20. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Public Tourism Promotion & ROI: Introduction Introduction  Expenses are on the minds of virtually all decision-makers in business and government today. Alternative uses of scarce public and private funds are being scrutinized from every direction.  Most state and local governments are aggressively cutting departmental programs and expenditures  State and local tourism programs have not been exempt – some have even questioned the need for a state tourism office (STO) at all! Others are significantly cutting back in staff, welcome centers, and (especially) promotional spending.

21. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Public Tourism Promotion: Is it worth it? Travel Promotion Spending – An Easy Target  Promotional spending is perhaps the easiest target for budget authorities. It is thought that spending cuts are more benevolent in terms of direct job losses.  More importantly, it is has been hypothesized that the destination is already known and that by reducing/postponing promotional activities will NOT result in appreciable loss in visitation.  Finally they hope and expect the private sector will pick-up much of the promotional slack if public promotion is cut or eliminate entirely.

22. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Public Tourism Promotion & ROI Understanding ROI  Knowing if and/or how much to carve out of the STO, CVB or DMO promotional budget is an exercise in understanding the ROI of such activities.  The concept of ROI is widely understood, but the missing ingredient is often solid, comprehensive measures of promotional benefits and systematically comparing them to costs.  ROI studies seek a positive correlation between specific advertising expenditures and resulting visitation/spending.  The ROI answer is more elusive – the measure of a single campaign is not representative of all promotional efforts  Finally, travel and destination decisions are influenced by many more factors than simply, advertising and promotion

23. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Public Tourism Promotion & ROI Can the ROI of public promotion spending be estimated?  The challenge lies in having enough data to fuel the process of finding a statistically significant correlation between promotional spending and resulting visitation.  An economic approach provides a less expensive alternative, as well as other research benefits.

24. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Role of ROI in Public Tourism Promotion Example of Economic Approach  Highlighted in the February 2009 Journal of Tourism Research entitled Measuring the Return from Australian Tourism Expenditure by Kulendram and Dwyer. The goals of the study were to:  Estimate demand for travel to Australia from various key origins  Estimate visitation from origin markets by income, travel prices, and marketing by the Australian Tourism Board (ATC) in each origin market

25. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Role of ROI in Public Tourism Promotion The Result  Significant and quite favorable  Incremental visitation (tourist arrivals) from each key origin was positively related to incremental changes to ATC marketing spending  Once visitor volume was converted into spending, the benefit-to- cost ratio ranged from 3 –to-1 for the UK, 7-to-1 for the US, and 36-to-1 for New Zealand. Note: This approach works best when promotional data spending history exists

26. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Role of ROI in Public Tourism Promotion: The Colorado Experience (1993-1997) The best “study” of promotional effectiveness  In 1993, Colorado dropped all funding for tourism promotion to shore up the State’s budget  By 1997, Colorado’s overnight leisure visitation dropped by almost 30%  The State’s rank for summer resort travel dropped from # 1 to #17  Expenditures by about $2.4 billion and state/local tax receipts fell by 134 million during that four year period.

27. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Role of ROI in Public Tourism Promotion: The Colorado Experience (1993-1997) IHS Global Insight & DKSA Analysis of the situation  According to DKSA historical data, leisure visitation declined -8.4% or 2.6 million visitors  Comprised about 7.7% Colorado’s leisure visitation  Competitive Set – Idaho, Montana, California, Oregon, and Utah  Losses for that time period were not unique to Colorado. Both the U.S. as well as key competitive states also lost Person-Trips, just not at such a high of percentage

28. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Role of ROI in Public Tourism Promotion: The Colorado Experience (1993-1997) Example of Economic Approach

29. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Role of ROI in Public Tourism Promotion: The Colorado Experience (1993-1997)

30. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Role of ROI in Public Tourism Promotion: The New Jersey Example If New Jersey were to cut its promotional budget  New Jersey’s projected budget shortfall for FY2009 is $1.2 billion  Tourism cuts would result in expenditure savings of about $15 million for FY 2009  If NJ went dark and followed Colorado’s lead, 4 years savings would total $60 million.  See a decline of 4.8M Person-Trips (7.7% of all Leisure visitors) Highlighted on following chart

31. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Role of ROI in Public Tourism Promotion: The Colorado Experience applied to New Jersey Situation Leisure Visitor Loss Tourism Expenditure Loss State & Local Tax Loss Impact on NJ State Budget Full CO Experience -4.8M (7.7%) -$2.42B-$269M-$254M ½ Colorado -2.4M (-3.8%) -$1.21B-$134M-$119M How many lost visitors to negate savings? 268,000 (or 0.4% of NJ total) -$135M-$15M0 2007 NJ Leisure Visitor Volume62.4M Person-Trips 2007 Tourism Spend per Visitor$505 2007 NJ State & Local Tax Receipts per Visitor $56 2007 NJDTT Budget$15M

32. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Role of ROI in Public Tourism Promotion

33. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Role of ROI in Public Tourism Promotion Conclusion: If you want to reduce the deficit, invest more in tourism promotion

34. © 2009 D.K. Shifflet & Associates, Ltd. All use, transmittal, and reproduction of these materials subject to contract with D.K. Shifflet & Associates, Ltd. Discussion & Thank You! Jeffrey Eslinger Senior Manager, Research D.K. Shifflet & Associates, Ltd.Phone:703.536.0921 1750 Old Meadow Rd. Suite 620Fax:703.536.0580 McLean, VA 22102Email:Jeslinger@dksa.com www.dksa.com