Paradise Valley evaluates Experience Scottsdale effectiveness down to the last dollar

Brass tax: independent auditor narrows return on investment

Posted 6/15/20

As a new contract between Experience Scottsdale and the Town of Paradise Valley is set to be inked later this month, new parameters and working plans have been set to allow the local municipality to …

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Paradise Valley evaluates Experience Scottsdale effectiveness down to the last dollar

Brass tax: independent auditor narrows return on investment

Posted

As a new contract between Experience Scottsdale and the Town of Paradise Valley is set to be inked later this month, new parameters and working plans have been set to allow the local municipality to have a seat at the table as future destination and marketing efforts are pursued.

Experience Scottsdale is doing a satisfactory job bringing tourism to the Town of Paradise Valley an outside audit report evaluating the destination marketing organization found.

During a Paradise Valley Town Council study session on June 11, independent destination marketing consultant, DMOproz, presented its findings on the efficacy of Experience Scottsdale.

The audit comes as the town considers renewing its contract for marketing and tourism services through Experience Scottsdale. Vice Mayor Julie Pace and Councilmember Mark Stanton recused themselves from the conversation due to conflicts of interest.

Experience Scottsdale is a 501(c)6 nonprofit destination marketing organization that maintains contracts with both the City of Scottsdale and Town of Paradise Valley to conduct destination marketing efforts on behalf of both communities.

Through advertising, promotional campaigns, social media and a variety of marketing and sales tactics, Experience Scottsdale markets the region as a world-class destination. Their efforts include bringing in visitors and business meetings and conventions to the area.

Town Manager Jill Keimach says the town hired DMOproz following a request for proposals because of the uniqueness of Experience Scottsdale, and wanting to accurately evaluate the tourism organization.

“What we were trying to do is look at how to develop future performance metrics, look at the town’s return on investment and compare Experience Scottsdale with like-minded destination marketing organizations,” Ms. Keimach explained.

The town’s agreement with Experience Scottsdale is up on June 30.
Bill Geist, who lists himself as chief instigator for DMOproz, says overall Experience Scottsdale is providing a valuable service to Paradise Valley.

A month earlier, Experience Scottsdale President and CEO Rachel Sacco and her team provided the town with a plan for regaining summer travelers after the COVID-19 fallout.

Paradise Valley is home to nine world-class resorts, while many others call Scottsdale home. The Town of Paradise Valley makes a majority of its revenue through sales tax and hotel occupancy tax. In the 2019-20 fiscal year budget, sales tax accounted for $15.9 million of revenue; while bed tax totaled $4.6 million.

“Despite all of the reports Experience Scottsdale has been providing on a quarterly basis, one of the things we realized as we talked with council and with Experience Scottsdale, is Experience Scottsdale reports out and speaks in a language that is foreign to government,” Mr. Geist said. “So while they believed they were showing you, and very proud of what they were showing you, it just wasn’t connecting the dots. So our job really was to become interpretors --- are you getting a good ROI for the revenues you have put into this organization?”

The data and information presented was based on pre-COVID-19 numbers.

Officials say DMOproz and Mr. Geist were in town conducting their audit research the first week the pandemic began to effect Arizona.

Do we stay or do we go?

Mr. Geist presented Experience Scottsdale’s budget as $15 million, made up by 70% of funds from City of Scottsdale’s bed tax, and 10% from Paradise Valley’s bed tax.

In May, Ms. Sacco said their budget for fiscal year 2019-20 was $16.2 million.

Paradise Valley invests 40.9% of its bed-tax collections into the Experience Scottsdale contract; while Scottsdale invests 50% of its bed tax revenue.

Experience Scottsdale is a regional destination marketing organization for both municipalities, as well as contributing to the Salt River Pima Maricopa Indian Community area.

There are three benefits to being a part of a regional DMO, Mr. Geist says, which includes broader name recognition and a favorable financial contribution.

For similar areas, Experience Scottsdale’s $15 million budget is in the middle of the pack.

“You’ve got some Florida destinations investing up to $30 million to try and attract the same kind of visitors that you are, but they also have, generally, a larger hotel inventory to pull hotel room tax from,” Mr. Geist explained.

Experience Scottsdale’s competitive set, which looks at cities that are competing for meeting, convention event business includes Nashville, San Antonio, Kissimmee, Palm Springs and Anaheim.

“With the exception of Tucson, in your competitive set, all are investing more money into their destination and marketing effort,” Mr. Geist said.

The third way to compare DMOs across the country is to look at like-hotel-room inventory. For Experience Scottsdale, that’s between 11,500-15,000 rooms.

Mr. Geist says Scottsdale falls slightly above the average of this pack, with only Seattle, Louisville and Fort Myers spending more annually to attract about the same amount of guests.

Further, comparing the budget of Experience Scottsdale to other DMOs, the local tourism organization has fewer staff positions than the average.

Mr. Geist says data shows the average DMO budget is $15.5 million, with 53 staff positions. Experience Scottsdale’s budget is $15 million with 40 staff positions.

The contract

The town’s contract metrics includes four primary goals that Paradise Valley expected in return for their investment of room tax.

They include:

  • Generate at least 195 travel articles annually that mentions Paradise Valley or its resorts;
  • Generate at least 80 booked meetings annually into Paradise Valley resorts or hotels;
  • Develop a $1 million annual marketing and advertising program to benefit Experience Scottsdale members, including Paradise Valley resorts and hotels; and
  • Assist Paradise Valley resorts and hotels in generating at least $40 million in Paradise Valley bed tax.

According to Mr. Geist, Experience Scottsdale exceeded all of the goals for each of the five years of the contract.

“At the end of the day, the real goal ... it really came down to what we want is to make sure we aren’t in a position to increase taxes on residents. So to do that, we needed Paradise Valley to benefit from $40 million outside, non-resident bed and sales tax during the term of the contract July 2015 --- and they did it with $41.7 million by the end of second quarter. So they had blown past that number as well,” Mr. Geist said.

“I think that’s what this essentially said, because that’s the true goal, I think the articles and the bookings are a means to an end, but the goal is sales and tax revenue that is not being paid by residents. The residents are benefiting really, from a $15 million marketing and sales operating for an investment of 1.5 --- I think for the residents of Paradise Valley, that’s a deal.”

Mutual respect

Following DMOproz’s analysis, Ms. Keimach says the town began working with Experience Scottsdale to establish parameters to work together toward the same end goal.

The mutual respect and purposes outlined include working together for the unique character of the residents, maintain quiet and enjoyable neighborhoods for residents and helping resorts every way possible.

A new contract is set to come before Town Council at their next meeting, on Thursday, June 25.

The new contract term is three years, with two 1-year extensions, and will have a sliding-scale compensation.

“The existing contract says that out of the revenue that comes into the town for resort, bed tax and sales tax, 40.9% of that goes to Experience Scottsdale. Given what we’re experiencing now with the economic downtown, the layoffs that Experience Scottsdale has had to endure, and the importance of working with our resorts to bring in as much revenue as we can at this point, we changed a flat percentage to a sliding scale,” Ms. Keimach explained.

The scale begins at 45% of the bed and sales tax, and will decrease to 35% and 25% as more tax is collected.

For the first $2 million of tax that the town collects, 45% of that will be given to Experience Scottsdale --- which Ms. Keimach says is 10% more than they receive now. For the next $2 million in tax collected, Experience Scottsdale will receive 35%; and when it goes above $4 million of tax collected, the remaining will be 25% given to the tourism organization.

Further, Ms. Keimach expects to go over a flexible process for scope of services and parameters at a later date.

“As far as the scope of services and parameters, I think what Bill Geist said is we have a number of parameters, and Experience Scottsdale can ‘blow by them rather quickly,’ I think was the quote,” Ms. Keimach said. “What we want is more of a negotiation and partnership with Experience Scottsdale going forward.”

The town is also requesting representation on policy advisory or other committees.

“In effect, we want to be a stronger partner with Experience Scottsdale and we have talked about creating a new position --- a public policy committee with Experience Scottsdale,” Ms. Keimach said. “Either our liaison or a member of the council that’s selected by the full council and the mayor, would then be the town’s representative on this public policy committee. That way we can work together on legislation, whether it be short-term rental legislation or a DMO authority working with state legislature in the future.”

In addition, instead of having concrete number of mentions in the media per year, a process has been developed to have an annual meeting between Experience Scottsdale, town representatives and Paradise Valley resort general managers to share input on priorities, trends and insights related to the coming year’s program of work.

Ms. Keimach says this will allow for greater input from all parties involved.

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