MAKE MINNESOTA TOURISM COMPETITIVE
Tourism supports economic vitality in communities across the state and has a positive impact in
virtually every county of Minnesota. The face of tourism is diverse - from small family
businesses to major corporations.
Tourism in Minnesota:
 Generates jobs in communities across the state.
 Brings new spending and associated tax revenues to Minnesota.
 Supports community “quality of life” assets enjoyed by both residents and visitors.
 Helps portray Minnesota as a good place to live, work and do business.
However, the potential positive impact of tourism in Minnesota is limited by its ability to
compete in today’s complex marketplace for travelers.
Each year, a wave of travel advertising from other states washes over Minnesota. Are the
people in those states seeing an array of ads inviting them to Explore Minnesota? The answer,
simply, is no.
Wisconsin, South Dakota, Michigan, Montana and Colorado spend millions of dollars luring
Minnesotans to their states. Minnesota is being vastly outspent by its competitors in the effort
to draw visitors and their dollars. What’s at risk? By losing market share, by drawing a smaller
part of the pool of travelers, Minnesota is also losing the opportunity to grow the revenue and
jobs that tourism generates.
In order to grow tourism and increase its positive economic benefits, the state’s tourism
promotion programs require a growing source of revenue.
Background:
States invest in tourism marketing because they understand that this investment reaps
economic benefits, drawing an influx of traveler spending. On the national level, as well, a new
marketing campaign is underway to increase domestic and international travel in the U.S.,
recognizing the economic payback of this investment. The goal is to reclaim the U.S. share of
global travel lost since September 2001.
More than 20 years ago, Minnesota’s tourism budget was $8 million (FY 90). Adjusted for
inflation, that would be over $14 million today. The actual FY13 budget for Explore Minnesota
Tourism is $8.4 million. This includes $500,000 in conditional state funding available when
private sector support generated by Explore Minnesota Tourism is at least $1.5 million.
Minnesota’s tourism office budget ranks 30th nationally. The tourism budget for the state is
about 40% lower than the average state tourism budget.
While the budget is modest, these resources are being invested in tourism promotion very costeffectively and contribute significantly to the state. Minnesota ranks 22nd in traveler
expenditures in the state, 28th in employment generated by travel, 14th in travel-generated
payroll, and 9th in travel-generated tax receipts.
Tourism contributes greatly to the Minnesota economy. The leisure and hospitality industry
has $11.3 billion in annual sales and employs nearly 240,000 people (nearly 11% of total private
sector employment). Tourism also generates support for the state of Minnesota. Over $730
million in sales taxes is collected on leisure and hospitality sales, accounting for 17% of
Minnesota’s sales tax revenues. Over the period 2003 to 2010, Minnesota’s leisure and
hospitality state sales tax revenues grew nearly 35%, compared with 11% for all other
industries.
The tourism industry is recovering from impacts of the recession, but key indicators such as
lodging performance suggest that Minnesota tourism may be growing at a slower pace in 2012
than the previous year, lagging behind the lodging performance of the country as a whole.
Impact of Declining Tourism Budget:
As the Minnesota tourism promotion budget has declined over the years, the reach of its ad
campaigns has become more limited. The “Explore Minnesota” message is reaching a smaller
audience.
As a result of the smaller tourism promotion budget, Explore Minnesota Tourism has:
 Reduced the number of advertising markets, largely pulling out of several markets,
including Chicago and Sioux Falls
 Has been unable to expand to markets with good potential, including Kansas City, St.
Louis and Omaha
 Reduced the frequency of broadcast advertising, which reduces its impact and reach.
While the target markets for Minnesota have traditionally been throughout the upper Midwest,
Minnesota advertising now focuses primarily on Milwaukee, Madison, Des Moines, Winnipeg
and the Twin Cities.
There have been reductions in other areas of tourism office programming, such as partnership
grants for community tourism promotion, but the most visible impact has been in advertising.
Minnesota tourism advertising is reaching fewer markets, being seen by fewer people, and
having less impact. Ultimately, this means fewer people traveling to Minnesota and spending
their vacation dollars here. It means the loss of potential revenue to Minnesota communities
and businesses, supporting fewer jobs.
Current Tourism Picture:
After declines in travel and travel revenues resulting from the Great Recession, tourism has
experienced a gradual recovery in Minnesota and across the country, with moderate increases
in travel each of the past three years. For years, consumers have been travelling closer to
home and spending less on their trips. However, as they gain more confidence in the economy,
consumers are beginning to spend more on travel, partly as a result of pent-up demand for
vacations and leisure trips.
With consumers poised to spend more on travel and travel farther from home, they will
become even more receptive to the advertising messages of travel destinations. If Minnesota is
not able to have its message heard as the tourism marketplace revs up, our state could miss the
chance to increase the number of visitors it attracts, especially from other states.
Funding Proposal:
The Minnesota tourism industry is proposing a source of tourism promotion funding that has
the capacity to grow and build on past success.
Minnesota has a motor vehicle tax on car rentals, which was originally instituted to support
Super Bowl XXVI, a major tourism-related event held in Minnesota in 1992. Car rentals are, in
large part, supported by travelers. Funds from the motor vehicle rental tax, which is 6.2% of the
rental charge, currently goes to the general fund for broad uses. (State and local sales taxes also
apply to car rentals.) For FY 2014, an estimated $15.7 million will go to the general fund from
this portion of rental car taxes.
An alliance of tourism industry representatives is proposing that the 6.2% motor vehicle tax on
rental cars be dedicated to tourism promotion, replacing the general fund appropriation for
Explore Minnesota Tourism, the state’s tourism promotion agency. Explore Minnesota Tourism
currently relies on the general fund for about $8.4 million each year. The 6.2% motor vehicle
rental tax would generate approximately $15.7 million annually for Explore Minnesota Tourism.
Explore Minnesota Tourism’s general fund appropriation could be eliminated, thus saving the
state $8.4 million each year. This would result in a net decrease of $7.3 million to the general
fund.
This proposal is offered as an alternative way to fund travel promotion in Minnesota in order to
grow travel and tourism throughout the state without increasing taxes. Travelers, the primary
customer base of car rentals, pay the motor vehicle rental tax. This traveler-generated
resource would then be dedicated to travel promotion. The increased travel generated by such
promotion could, in turn, increase revenue generated through the motor vehicle rental tax.
This funding mechanism would allow tourism to grow, using a funding resource that has a
potential to grow based on the performance of the tourism industry.
In addition, it is also proposed that the private-sector match required of Explore Minnesota
Tourism be increased from $1.5 million to $3 million per year. Up to half of the total match
requirement could be in-kind contributions. Cash match would be defined as revenue
generated or documented cash expenditures directly expended to support Explore Minnesota
Tourism programs. This increase in private support for state tourism promotion would increase
the impact of the state’s investment in tourism.
Marketing Impact of Increased Tourism Funding:
Increased funding for tourism promotion would support several strategies to grow tourism in
Minnesota. Expanded marketing in current markets would increase the impact of the
advertising message and position Minnesota as a destination of choice for consumers. Adding
new markets would raise the awareness of Minnesota as a vacation destination. Overall, an
increased presence of Minnesota in targeted markets would influence consumer leisure travel
and drive demand to travel to Minnesota.
Increased funding would enable Explore Minnesota Tourism to:
 Expand Minnesota tourism advertising into target markets beyond our neighboring
states, including Chicago, Kansas City, Denver, and Detroit.
 Strengthen Minnesota tourism marketing in drive markets such as Des Moines,
Milwaukee, Madison, and Winnipeg.
 Expand partnerships with public and private sector organizations to leverage resources
and increase market presence. Increased funds for cooperative programs could enable
partnerships with large companies (i.e., car manufacturers, health insurance companies,
credit card companies, mobile service providers) with potential for enormous pay-off.
 Support international marketing and expand activities in emerging markets, including
China, Mexico, and possibly some South American markets.
 Expand outreach to niche markets, including meetings & conventions, sports marketing,
GLBT, and promotions targeted to ethnic minority groups in and around Minnesota.
Outcomes of Increased Tourism Marketing:
The additional funding would allow the state to significantly expand its marketing, increasing
advertising in current markets and expanding to new markets where there has been little
Minnesota promotion.
Investing in Minnesota tourism marketing has been shown to generate a significant return.
Every $1 invested in state tourism marketing generates an estimated $84 in traveler spending,
$22 in income and $8 in state and local taxes (based on a study of the ROI of EMT’s
spring/summer 2012 advertising campaign, conducted by Longwoods International and
Tourism Economics).*
Based on this past performance, an increased investment in tourism marketing would have a
significant positive impact on Minnesota. An additional $7 million in tourism advertising would
generate an estimated $590 million in traveler spending for Minnesota, 7,100 jobs, $150 million
in income, and $56 million in new state and local tax revenues. These are impacts that would
benefit businesses and communities across the state.
According to a new study from the U.S. Travel Association, workers who begin their careers in
the travel industry have greater access to educational opportunities, enjoy better career
progression and achieve higher wages. A lead generator of jobs in the U.S., travel supports
more jobs than many other major industries such as finance, construction, real estate and
transportation.
By failing to stay competitive in the tourism marketplace, Minnesota puts at risk the benefits
that tourism generates for all of us. Alternatively, investing more substantially in tourism
marketing would keep Minnesota competitive, drawing more travelers to our state. The
spending by these additional travelers would be a significant return on the state’s investment,
and would have a positive impact on jobs, businesses and communities across Minnesota.
* The ROI estimates and projected impacts of $7 million additional funding conservatively
reflect direct impacts only. Including indirect and induced impacts would, for example,
increase the 8:1 direct tax ROI to 11.5:1 total ROI.
The Minnesota Tourism Growth Coalition was created to coordinate activities to increase
the marketing budget for Explore Minnesota Tourism through an increase in awareness
of the importance of the tourism industry in Minnesota. The Coalition has support from more than 100
tourism organizations and businesses throughout the state.