Pure Michigan Spent $295 Million and Even Hotels Only Got Scraps Back

Researchers find taxpayers get back only two cents on the dollar

In over a decade, the state has appropriated $295 million to its advertising campaign — known as “Pure Michigan” — to draw tourists to the Great Lake state. But a new study shows that state-funded efforts to promote tourism are mostly a blunder.

The marketing ploy is widely recognized thanks to its iconic commercials portraying localities narrated by Tim Allen of “Home Improvement” and “Toy Story” fame.

Michigan’s Legislature for 2017 appropriated $34 million — $1 million more than last year — for the program overseen by the Michigan Economic Development Corporation, which is the state’s economic development agency. This means since 2006, the state will have spent $295 million to draw in tourism.

The study’s authors are Mike LaFaive, director of fiscal policy at the Mackinac Center for Public Policy, and Michael Hicks, a Ball State University professor and a member of the Board of Scholars at the Mackinac Center. The two analyzed decades worth of tourism promotion data from almost every state. They then asked whether such programs have had an economic payoff.

“After analyzing 39 years’ worth of tourism promotion data from 48 states, we believe the answer is a resounding no,” LaFaive and Hicks said.

They conclude that the Pure Michigan initiative should cease.

The authors created a national statistical model to test whether tourism promotion had any negligible impact on industries that typically benefit from tourism — lodging, arts, amusements and recreation.

They found that “for every $1 million in additional spending by a state on tourism promotion, there was an associated increase of $20,000 in additional economic activity shared by the entire accommodations industry in that state.” 

Although their statistical model looked at the country, “Michigan did not differentiate itself from the average.”

In 2016, Michigan’s Legislature bumped spending on the program up to $33 million — a 14 percent increase from the year before — resulting in $80,000 in fresh business for the state’s lodging establishments.

For fiscal year 2017, state spending on the campaign will raise by $1 million, thanks to lawmakers, to $34 million.

“Our study suggests that will only result in an increase in economic activity of $20,000 shared by all hotels and motels in Michigan,” LaFaive said in an email.

For art incomes, the model discovered that “for every $1 million increase in state tourism promotion, artists shared less than an additional $35,000 in the average state.”

Despite these findings, the MEDC has claimed Pure Michigan has been successful. Recently the MEDC claimed that in 2015, for every dollar spent by the Pure Michigan campaign, $7.67 was made in additional tax revenue.

But LaFaive and Hicks dispute the MEDC’s methods for determining the successfulness of the campaign, saying they’re “steeped in secrecy.”

For one, the MEDC contracted Longwoods International, a consulting firm, to find the program’s return on investment. The firm, however, hasn’t exactly explained how it generates its numbers.

MEDC documents also show the agency hired the firm “on a no-bid basis.” Since Michigan law typically requires bidding for contracts, the MEDC had to submit a “Sole Source Justification” form. The completed form said: “The objective of this contract is to prove that the benefits for conducting a paid advertising program for tourism out weight [sic] the costs.”

The MEDC also has a history of buying studies to reinforce its agenda, LaFaive and Hicks say. It did not return a request for comment.