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HomeMy WebLinkAbout02. Vail Destination Marketing Organization Discussion Memo - 07.02.2024 To: Vail Town Council From: Mia Vlaar, Economic Development Director and Carl Ribaudo, SMG Consulting Date: July 2, 2024 Subject: Vail Destination Marketing Organization (DMO) Discussion I. PURPOSE The purpose of this memo is to share the outcome of SMG Consulting’s recommended reorganization of Vail’s current tourism organization structure as managed by the Economic Development Department. The purpose of the consultation was to provide alternatives for an organizational format for the town council to consider in the evolution of the department into a comprehensive and strategic Destination Marketing Organization. An overriding objective in developing an organizational review for Discover Vail and the Town of Vail is to develop an organizational structure that seeks alignment, efficiency, and impact within a competitive marketplace. The tourism industry has changed over the last decade, and the competitiveness of various mountain and non-mountain destinations has increased significantly. Additionally, tourism destinations face challenges never imagined, including sustainability and stewardship, crowding and congestion, the need for employee housing, and wages and benefits for the local workforce to keep pace. In this rapidly changing environment, the Town of Vail has taken significant steps to address and mitigate a variety of these issues. It is also critical for the Town to assess its current tourism promotion structure. The goal is to identify potential options that may improve its alignment and competitiveness, and most importantly, ensure that tourism efforts are in sync with broader town strategies and community values. The analysis was comprehensive, including an assessment of current programs' staffing levels, a review of various destinations and their organizational structures, and a review of the current funding mechanism and tax rates compared to other tourism destinations II. BACKGROUND EXECUTIVE SUMMARY The current organizational structure developed organically over time, and alignment between the Town Council, Vail Local Marketing District Advisory Council (VLDMAC), and staff is overly complex. It can be better aligned with the broader goals for the Town and within Discover Vail’s marketing efforts. Town of Vail Page 2 A review of Discover Vail’s current staffing and comparable destinations with similar budgets, particularly in the mountain resort industry, suggests that staffing levels may be low. Being understaffed has several implications, including the ability of staff to manage outside vendors and having sufficient time to plan, strategize, and execute necessary programs. Increasing headcount in municipal government can be challenging from both political and budgetary perspectives. This raises the question of whether Discover Vail is at a competitive disadvantage in the long term due to lower staffing levels compared to other competitive destinations. By augmenting staff as needed, the organization can better adapt to a changing marketplace in a timely manner. The proposed changes aim to organize Discover Vail's efforts into three core areas: destination marketing, the Vail experience, and business development. Additionally, the proposed structure seeks to integrate the broader community through the formation of collaborative efforts in marketing, special events, and arts and culture. The final area of observation is the current funding mechanism. The bed tax rate, currently at 1.4%, has remained unchanged for 25 years. A review of the Town of Vail and other competitive resorts shows that Vail's total lodging tax rates are below those of key competitor destinations. The Town may want to consider increasing the bed tax rate to reduce reliance on general fund contributions, which could be redirected towards other town purposes, including quality-of-life improvements for residents. These suggested changes are significant, and the town should proceed in an orderly manner, reviewing and analyzing each step. However, it is essential not to lose sight of the alignment between Discover Vail's organizational structure, the rapidly changing competitive environment, and the broader strategic direction of the town and community values. The report recommends a phased approach to implementing changes, which allows for assessment at each stage. Ultimately, the goal is to improve the alignment, efficiency, and effectiveness of Discover Vail. A BRIEF HISTORY OF THE VLMD/VLMDAC In 1999, the Vail lodging community came together to create the Vail Local Marketing District. Approved by voters in November 1999, the district came into being, funded by a marketing and promotions tax of 1.4% per night tax on overnight stays of less than 30 days in Vail. The statute defines the power of the district to provide the following services: • Organization, promotion, marketing and management of public events, • Activities in support of business recruitment, management and development, • Coordinating tourism promotion activities The evolution of the VLMD has several significant milestones that have shaped its trajectory: • 1999 The Vail Local Marketing District was created, tax collected beginning in 2000. • 2006 Management of the VLMD moved from Vail Valley Partnership to Town of Vail. • 2007 VLMD partners with Vail Resorts and uses Vail.com as primary call to action. • 2020 VLMD creates independent presence online with DiscoverVail.com, establishes customer relationship management system. • 2022 Colorado House Bill 1117 passes; VLMD reaffirms its commitment to utilizing its funding for marketing and promotions. • 2024 VLMD is poised to evolve into a strategic comprehensive Destination Marketing Organization, directing the tourism work of the economic development department. Town of Vail Page 3 WHAT IS A DESTINATION MARKETING ORGANIZATION • A Destination Marketing Organization (DMO) brings together marketing, promotion, special events, visitor education/experience, and destination/business development. • The overarching goal of the DMO is to nurture and protect a robust tourism economy, healthy environment, strong infrastructure, and a thriving community. • Efficiency results from a clear and seamless structure that prioritizes the community's needs and town council priorities in marketing the destination and delivering on the experience. • A DMO structure will best serve the goals of the town council as it pulls together the diverse elements within a destination and aligns them strategically to a set of clear goals and deliverables. WHY THE TOWN NEEDS A DMO STRUCTURE • The DMO will provide a framework for strategic direction and structure vs. the current organic evolution of the organization • The DMO will prioritize alignment to the Town of Vail strategic plan. • The DMO, at the direction of the VLMDAC, will oversee and manage all elements of the tourism economy including special events, welcome centers and business development through their strategic plan. • The aggregation of tourism related functions provides a foundation to consider future funding sources for sustainability over time. • The DMO is best equipped to optimize its competitive position vis a vis other mountain destinations. • The DMO structure is scalable and adaptable to changing market conditions. • The DMO structure allows the organization to deploy internal and external resources to optimize results. DMO RESPONSIBLITIES – KEY OBJECTIVES 1). Bringing Guests to Vail. Advertising, social media, public relations, airline relations, group sales, lodging relationships, research/data and analytics and special events to support marketing and optimize guest visitation. 2). Delivering on the Vail Experience. The DMO oversees the guest experience. This includes customer service training, employee recognition and engagement, special events, community engagement through facilities, the Vail community and trail host program, and stewardship education. 3). Business Development includes supporting local entrepreneurship, collaborating with the Vail Chamber and Business Association, and the Vail Valley Partnership, to provide leadership and professional development for small businesses. Town of Vail Page 4 CURRENT AND RECOMMENDED STRUCTURE Current Direction and Governance: Recommended Strategic Direction and Governance: Town of Vail Page 5 Current Econ Dev Department Structure: Proposed Long Term: Tourism & Econ Dev Structure: Town of Vail Page 6 ROLES AND RESPONSIBILITIES The following represents proposed changes in relative roles and responsibilities among the governance of the DMO. Town of Vail Page 7 DMO FUNDING AND IMPLEMENTATION: SHORT TERM Funding for tourism promotion, events, economic development and visitor services is provided through the general fund, marketing fund and the Vail Local Marketing District. Expenditures have grown over time with the introduction of DiscoverVail.com and year-round marketing. The following graph illustrates town expenditures associated with tourism promotion, economic development and visitor services vis a vis other town expenditures from 2015 to 2024 (budget). The graph below illustrates town expenditures by type for tourism promotion, events, economic development and visitor services from 2015 to 2024 (budget). Town of Vail Page 8 Phased Implementation: Short Term • Change the name of the Economic Development Department to Discover Vail: Tourism and Economic Development • Adopt new organizational structure with VLMDAC providing strategic guidance to all tourism development efforts, including signing contracts. • Discover Vail continues marketing and adds special events, visitor services, and business development to the VLMDAC strategic plan • VLMDAC meets in October to develop a new organizational strategic plan. • Discover Vail creates the new Marketing, Special Events, Arts and Culture (MSAC) Collaborative committee In summary, the benefits of a DMO structure include strategic alignment, specialized expertise, agility and flexibility, ability to staff appropriately, industry focus, increased competitiveness, brand management, objectivity and fresh perspective, effectiveness and efficiency and marketing as it relates to the Vail experience. III. ACTION REQUESTED OF COUNCIL Action Requested: Does town council support this proposed structure for a Destination Marketing Organization?