An Outlook

In last week’s column I documented that room tax dollars are intended to increase the occupancy of the lodging industry. No matter where you go in the country, the room tax you pay when you check out of your hotel has the exact same purpose. And all room tax legislation has an almost identical structure: a portion of the proceeds go to the municipality in which the tax is collected and the remainder goes to a marketing organization charged with promoting the municipality to bring more overnight visitors.

During the past week, several of you have asked me, “If the room tax is intended to benefit the lodging industry, how does it help the gift shops, the art galleries, or the restaurants?” And given the way that I structure my last column, this is a legitimate question. So let me answer this question here, for everyone, since I don’t have the opportunity to see all of you – at least in any sort of timely fashion.

In recent years, as tourism has declined on the peninsula, every business has suffered. The lodging industry, the gifts shops, the art community, and the restaurants all suffered. Other industries suffered as well, even those not directly involved in tourism, as fewer businesses opened and more businesses closed. As businesses (even long-time, well-established businesses) found their profit margin shrinking they had less money to invest in their business and the local economy. Whether we like it or not, tourism makes up a huge portion of this peninsula’s economy and thus the quality of life we experience.

In order to combat declining tourism 10 communities in the county formed a Tourism Zone to begin collecting a room tax in order to generate more marketing revenue. Washington Island joined the Zone a year ago in August, and Gardner joined earlier this year, bringing the total to 12 participating communities. Each participating municipality appoints a representative(s) to the Tourism Zone Commission (TZC) which oversees the collection and dispersal of the room tax revenues.

The structure of the room tax is the same in each of the communities: 30 percent of the revenue collected in a municipality is returned to the municipality, 4 percent is retained by the TZC to pay for administrative costs, and 66 percent is distributed to the Door County Visitor Bureau (DCVB) who is charged with spending their portion of the money on marketing efforts that generate more overnight stays in the Tourism Zone communities and longer stays in the Tourism Zone communities.

So this brings us back to the question that was posed at the outset of this column: how does a room tax benefit a restaurant, a gift shop, an art gallery, or a performing arts center?

Think back to the Tourism Assessment that the then, Door County Chamber of Commerce commissioned. One of the key points that assessment stressed was that scenic beauty wasn’t enough, in and of itself, to lure leisure vacation travelers to Door County. There are thousands of beautiful areas in this country and all of them are competing with Door County for leisure vacationers. So while scenic beauty is critically important (and is still the primary reason any one comes to our peninsula), in order for Door County to compete we have to offer more. As the Tourism Assessment noted, the vacation traveler needs to know what they can do once they arrive. And that’s where all the rest of the peninsula comes into play.

Among the initiatives the DCVB has undertaken on behalf of the Tourism Zone is a significantly ramped up presence on the internet. This includes email newsletters that are sent out regularly. These emails contain all manner of information on activities and events within the Zone that are cross-linked to additional information. For example, if the email mentions “kayaking” you can click on the word and be taken to additional information that includes where to kayak, where to rent kayaks, where to get kayaking instruction, etc.

Another initiative is the travel writer visits throughout the year. This involves bringing professional traveler writers to the peninsula and letting them choose what they would like to explore while they are here. Articles from these writers can appear in print at any time after their visit (occasionally several years after their visit) in publications across the country. And in the context of these articles the individual writer may single out individual businesses they experienced during their stay: they may mention a fish boil at the Viking Grill or Sandpiper; a play they saw at Peninsula Players; or an afternoon they spent at Sievers on Washington Island.

Of course, there are numerous other initiatives, but the central idea behind all of them is to bring more people to the peninsula for overnight stays, regardless of whether any one business or group of businesses is mentioned or highlighted in the context of the marketing effort.

As I noted last issue, the success or failure of any one or all of these initiatives is based on the quantifiable measurements of occupancy rates and average daily rate for our lodging industry as reported monthly by the TZC. If the initiatives are working the occupancy rate should go up compared to the same month in the previous year, while the average daily rate remains constant or goes up slightly.

So now let’s consider a hypothetical gift shop somewhere in the Tourism Zone. This shop has been in business for a number of years under the same ownership and the owner has a pretty good feel for his business. One of the things this owner knows, even if he can’t provide a solid statistic, is the amount of “sell-through” his store enjoys. In retail parlance, “sell-through” is the amount of sales in relation to the number of people who come through the door. There are seasonal fluctuations to “sell-through” and there are always aberrations that crop up. But in the long term, this owner knows how many sales he should realize from the number of people who come through his door.

There are a variety of things a business owner can do to improve his business’ bottom line, but the easiest, least painful way to see the bottom line improve is to get more people into the business. If more people come into the store and the “sell-through” remains relatively constant, then the bottom line improves.

And this, folks, is what increased occupancy rates can achieve. There are no guarantees for any one store, art gallery, restaurant, or performance center and it is not the responsibility of the DCVB or TZC to provide any such guarantee. What both groups can do is work to bring more leisure vacationers to the peninsula and to provide quantifiable information that will document their successes and allow for correction of any failures.

The rest is up to the individual business owner. If there are more people visiting the peninsula, well-run businesses, with interesting merchandise that lures customers in, will see improvement.