New Pure Michigan Return-on-Investment Figure Won’t Include All Costs

Previous estimation excluded 50 percent-plus of program costs

Monday, March 26, 2018

Holly Wetzel
Marketing and Communications Associate

MIDLAND — State tourism industry officials will meet for the annual Pure Michigan Governor’s Conference on Tourism this week, its first since an investigation by the Office of the Auditor General last year. Their review found that more than $13 million in state tax dollars were excluded from the return-on-investment calculations made by the state’s tourism consultant for the Pure Michigan program in 2016. The Mackinac Center for Public Policy encourages lawmakers to scrutinize the effectiveness of the Pure Michigan program.

Following a review of the Auditor General’s examination of Pure Michigan-related spending, the Mackinac Center confirmed that the state’s new tourism consultant has likewise excluded costs not associated with out-of-state media spending. That report and its findings are expected to be released soon.

“It is all too convenient that the state has its consultant zero in on the effectiveness of out-of-state tourism advertisements while ignoring pertinent costs associated with creating them,” said Michael LaFaive, senior director of the Morey Fiscal Policy Initiative. “These claims about high returns would be much less impressive if all costs were included,” he said.

LaFaive —a long-time critic of state-financed tourism promotion— recently published an article further detailing the information ignored in the state’s return on investment analysis of Pure Michigan spending.

One example of the misleading information being spread involves the 2016 out-of-state advertisement campaign. This campaign spent $12.9 million, of which $4.3 million went towards producing the ads. However, these production costs were omitted from the consultant’s ROI calculations.

In a 2016 study published by the Mackinac Center, it was found that for every $1 million increase in tourism promotion spending, economic activity in the state’s lodging industry increased by a meager $20,000. Other tourism sectors fared no better.

“It would be far more cost effective to end these handouts for the state’s tourism industry — which should buy its own ads — and redirect it to fixing Michigan roads or rolling back the state’s personal income tax rate,” LaFaive said.

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