The annual CVB budget has two primary revenue sources--the annual anticipated lodging tax proceeds and carry-over or fund balance built up from previous years. The lodging tax proceeds are variable with the economy and it is common to have some good years and other less good years for revenues. Because there is often less need to run advertising during good years when hotel occupancy rates are high, the CVB has in some good years built up a carry-over that can be used to help pay for advertising during less good years when the benefit from additional advertising is greater. Due to high occupancy rates in 2015, concerns about the effectiveness of some planned advertisement activity, and indications of a potential negative tourism economy in 2016, some additional funds were carried over into 2016.
The CVB is responsive to the input from its business partners. With both hotels undergoing construction and running at high occupancy levels in 2015, those partners were in favor of postponing some planned advertising as it would be of little benefit to them at that time. In addition, the CVB projects what types of advertisement opportunities will be available in the coming year. With the advent of on-line advertising campaigns, the terms and conditions of the campaigns are often developed during the year. In 2015, decisions on conditions were made by both the Explore MN website and the Metro CVB Partnership that made the CVB members believe that the advertising would not be a good value. There are growing concerns that the tourist economy could be significantly hurt by global recession and fears surrounding travel in general. Anticipating that lodging receipts may suffer in 2016 and 2017, the saved carry-over funds would allow for projected advertising campaigns, even if there was a revenue shortfall.
The 2016 budget projects total expenditures of $94,000, up from $90,000 in 2015 on the assumption that more aggressive advertising will be needed to counter a sagging global economy. The administration expenses remain at $16,000. The remaining funds are for direct marketing activities. The attached marketing plan prepared by Chamber President Ed Kearney explains in more detail why certain ad campaigns were postponed and the rationale for the proposed 2016 campaigns.
The CVB has begun the transition to on-line based advertising for the majority of its marketing. Important steps were accomplished in populating the CVB website and social media sites in preparation for advertising on these platforms. The CVB also ran a test on-line campaign in the small scale to test its effectiveness and to help adjust the marketing materials. Because the costs such campaigns are "by the click", the campaigns can end up running for very short periods of time before the funds for that campaign are fully expended. In the $80 test campaign, slightly more than 3,000 users were reached with 74 people who interacted with the ad in some form.