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Despite losing more than half of its budget, Tourism Office remains optimistic

Arizona Office of Tourism Travel Counselor Sarah Reinke looks over a few of the several hundred travel brochures available for free at the agency’s visitor center, located inside the Phoenix Convention Center. (Photo by Ryan Cook/RJ Cook Photography)

Arizona Office of Tourism Travel Counselor Sarah Reinke looks over a few of the several hundred travel brochures available for free at the agency’s visitor center, located inside the Phoenix Convention Center. (Photo by Ryan Cook/RJ Cook Photography)

Despite losing about 65 percent of its budget in the midst of a severe statewide economic crunch, the outlook at the Arizona Office of Tourism seems as bright as the Arizona sun.

Even so, the heavy lifting – deciding which programs to keep, which to reduce, and which to eliminate – remains. Tourism’s strongest supporters recognize budget cuts were inevitable, while arguing the money spent by the agency promoting Arizona generates a return on investment many times over.

Still, since lawmakers were cutting such things as KidsCare, a health insurance program for children of poor families, tourism was not going to escape the budget ax.

The agency’s budget is fueled from three sources: a tourism formula that draws from amusement, restaurant and hotel bed taxes; a percentage of tribal gaming proceeds, and a share of Sports and Tourism Authority taxes.

Barry Aarons, a lobbyist for the Arizona Tourism Alliance, an independent, nonprofit organization that advocates on behalf of the tourism industry, says the Legislature swept the entire $14 million from the tourism formula. Had there been no sweep, the Tourism Office would have had a total budget of approximately $24 million in fiscal 2011, he says.

Sherry Henry, the director of the Tourism Office, figures she has about $8 million to spend in the fiscal year that starts July 1, compared to $13.4 million in fiscal 2010, a year in which the agency also underwent serious budget cuts.

Henry, a 30-year veteran of the Arizona tourism industry who has seen her share of economic ups and downs, says Arizona hotels had a good first quarter this year, much better than 2009, but still well below where they would like to be. “We try to be realistic and conservative and still be optimistic,” she says.

Now that occupancy is improving, the biggest challenge involves getting room rates up. When the economy plunged, hotels cut their rates to attract visitors. “It’s definitely a catch-22,” she says.
Brushing aside the potential impact of steep budget cuts, Henry is quick to thank her boss, Gov. Jan Brewer, and the Legislature for continuing to support tourism and keep her agency viable.
“We’re so thankful that they do understand the value of the tourism industry and they appreciate that it has a positive impact to our state’s economy,” Henry says.

For the most part, legislative support of the agency is fairly solid.

Rep. Michele Reagan, a Republican from Scottsdale, whose district benefits mightily from tourism, says, “I’m a big promoter of the tourism people, but we all have to do more with less. They’re no different.”

Reagan noted that Scottsdale voters approved raising the city’s bed tax to 5 percent from 3 percent on March 9, a move designed to pick up some of the slack stemming from the Tourism Office’s budget cuts.

But that doesn’t mean the state can do without the Tourism Office, she says. “The answer needs to be a coordinated effort,” Reagan says. “We can’t have local CVBs (convention and visitor bureaus) doing their own thing, where they’re not having a cohesive message. It’s important to have a state agency. How big it is, how much it does, and should it be consolidated with another department – those are all very fair questions to ask. I’m open to discussing them.”

Sen. Rebecca Rios, a Democrat from Apache Junction, laments: “We severely crippled them with budget cuts. It’s another example of where we’ve made cuts in an area where the investment would have paid off multi-times. We need to give them the resources and tools they need to ensure we can continue a flow of visitors to Arizona.”

Rios, assistant minority leader in the Senate, called the agency’s budget cut short-sighted, similar to other cuts that resulted in the closing of rest stops along interstate highways and several state parks. “In the long run, it costs us a heck of a lot more than they are saving us,” she says.
She says the “craziness of what some of our politicians are doing,” combined with the closures of parks and rest stops, will give the state a bad name.

Two Republicans, Sens. Jack Harper of Surprise and Ron Gould of Lake Havasu City, have expressed reservations about the Tourism Office in the past. But an aide to Harper replied via e-mail that the senator is not interested in discussing the agency, and Gould did not respond to phone and e-mail messages.

Henry acknowledges the agency’s overall “program of work” will change – programs that include advertising, Native American tourism development, trade shows and missions, international marketing, visitor services and grants.

Henry and her staff are exploring potential changes based on a smaller budget that will still enable the agency to continue fulfilling its mission – to enhance “the state economy and the quality of life for all Arizonans by expanding travel activity and increasing related revenues through tourism promotion and development.”

“As we figure out a new program of work to accommodate budget cuts, obviously there will be adjustments in grants, operations and staffing,” Henry says. “What our program of work has been is not going to be the same going forward, but it will still have all the same elements.”

A year ago, for example, the agency awarded $1.1 million in matching grants to 78 tourism organizations and tribal entities across the state for fiscal year 2010. It’s not known how much will be available for grants this year. And regarding staffing, the tourism Office has 30 full-time employees today, compared to 37 in fiscal 2007.

The office intends to cope with a slimmer budget by exploring ways to leverage the money the agency receives and maximizing its return on investment. “In any business, you should always be doing that,” Henry says. “One of the advantages is that this industry and our partners are so intertwined, we stay in touch. We’re all on the same mission. We want people to spend travel dollars in Arizona.”

For instance, if one of the local convention and visitor bureaus is planning a media buy in a popular travel magazine, the Tourism Office would partner with that group “to get a better buy and a bigger prominence by combining our dollars,” Henry says.

Because the state has many local convention and visitor bureaus, one question often comes up: Is the Arizona Office of Tourism necessary?

Henry hears that question often. “The Office of Tourism is the only entity that exclusively markets the entire state,” she says. “It’s about branding Arizona as a premier leisure destination. The others are all selling their own product – and they do a fabulous job. We represent all 15 counties.”

Another partnership involves the Greater Phoenix Convention and Visitors Bureau, which maintains an information center in the Phoenix Convention Center. The Tourism Office provides a staff member at the center five days a week, and on weekends during major events, such as the recent WrestleMania extravaganza. The agency previously maintained an information center in its offices on the Capitol Mall, but the one at the Convention Center gets much more traffic, according to Henry.

Conventioneers often have an extra day before going home, and the Tourism Office is ready with brochures and other displays, including videos shown on a nearly floor-to-ceiling array of nine TVs, to promote the rest of the state.

Some of the agency’s shrinking budget will be spent on inviting media representatives from major cities in the U.S. and abroad, to give them a personal tour of the state. As a result of a recent invitation to journalists from France, a premier French golf magazine is running a 10-page spread on Arizona, Henry says. The cost of the journalists’ trip was about $5,000, but the publicity in the magazine was worth $500,000, she says.

“No way could we afford to buy that many pages in a national or international publication,” Henry says.

She says her agency will continue to find ways to attract more visitors to the state.

“Nothing really has changed,” she says. “It’s just a matter of adapting and still finding a way to align with our mission. Even in these difficult times, we are going to be out there finding ways to drive the most visitors and the most visitor dollars to Arizona. I’m very optimistic. Wherever those budget dollars are, we’ll find a way to maximize them.”

FOCUS: Tourism

Click here to read sidebar: “Regional tourism battles: Arizona versus the Southwest”

Click here to read sidebar: “Study: Tourism investment returns up to 10-to-1″

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