Street Talk

Street Talk: Pure Michigan: boon or bust?

Tour group.

March 31, 2017
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While the Michigan Economic Development Corporation was touting another year of positive impact for the state’s tourism industry thanks to the Pure Michigan campaign, a statewide policy organization was making the rounds with a different narrative.

The Mackinac Center for Public Policy, a nonprofit that advocates for conservative and libertarian policies, called into question the findings of Longwoods International, the Canadian firm hired to conduct the economic impact study on behalf of the MEDC.

Michael LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, said Longwoods International shrouds its numbers in mystery, because the firm limits the information it shares about its methodology.

“We can’t tell whether they are accurate or not because of the secretive methodology,” he said. “The MEDC seems perfectly comfortable with this secrecy. We are not.”

He added, “The MEDC has an incentive to puff up their own success, and they have a history of buying studies that comport with their worldview, but which fall apart upon scrutiny.”

Therefore, the Mackinac Center for Public Policy conducted its own study and found strikingly different results.

LaFaive said the study used 40 years of state tourism promotion spending data across 48 states in three prominent sectors of travel and tourism: hotels and motels; entertainment and arts; and recreation. He also said the methodology is thoroughly explained in the report’s appendix.

“The Mackinac Center’s research has found that for every $1 million increase in state spending on promoting tourism, only $20,000 in extra economic activity is generated by the lodging industry as a result,” LaFaive said. “To lose 98 cents on the dollar is a hugely negative return on investment and should really cause us to reconsider this massive expenditure.”

He added, “With this $20,000 in economic activity, we also found it led to no increase in the number of hours worked by hotel and motel employees or had an effect on their wages; it didn’t increase or decrease wages associated with people in that industry.

“With regard to artists, we found no increase in economic activity, but we did find an increase in personal income of just $35,000 shared by all artists in the average state, and Michigan was average; a few states did much better. We found zero impact in the recreation and amusements sector.”

The Mackinac Center for Public Policy is calling for the end to taxpayer funding for the Pure Michigan campaign, as well as any other state tourism promotion, because of its findings.

“It’s a net loss for taxpayers,” LaFaive said. “We recommend eliminating the program and using it where it might be better spent on infrastructure investment or personal income tax cuts. These are much more likely to have a positive impact on the economy than this tourism spending.”

David Lorenz, MEDC vice president, stands by the Longwoods study and its findings, saying the study conducted by the Mackinac Center was not a fair evaluation of the Pure Michigan campaign because it was too limited. He also chalked the effort up to “anti-government bias.”

“They did a 48-state, extremely simple analysis of only three of the tourism sectors,” he said. “There are way more sectors that a professional ROI researcher would evaluate.”

Lorenz said the MEDC also considers other data alongside the Longwoods findings in evaluating the Pure Michigan campaign’s success.

“We also back it up with other tangible data,” he said. “If you look up hotel occupancy and daily rates and if you talk to anyone in the travel industry about their improving businesses over the past decade of the campaign — they hear the feedback that Pure Michigan drew travelers here.”

Lorenz disagreed with the Mackinac Center that funding travel and tourism promotion with taxpayer dollars is essentially giving taxpayer money to a special interest group. He said promoting the state has benefits far beyond the travel and tourism industry and that it is the most effective way to fund this type of campaign.

He also pointed to the plethora of other states following Pure Michigan’s example as evidence of the campaign’s impact and the commonplace use of taxpayer funding for tourism promotion.

“Whenever we are out there saying this is a great place for travel and tourism, we are also saying this is a great place to live, work and play and to invest in, move to and build a house. This halo effect of the Pure Michigan campaign affects us all in a positive fashion.”

He added, “If you don’t invest and you aren’t serious about improving awareness and changing perceptions, you will suffer, and that means less jobs, less attractive perceptually for people to move to, to stay, to invest and to be a part of our future.”

First local

A group of Japanese professionals spent a day in Grand Rapids last week visiting social enterprises and B Corps in the community.

Meiji University, a prominent Tokyo university, organized the trip, which included a visit to the Harvard Social Enterprise Summit in Boston followed by a stop March 28 in Grand Rapids hosted by Local First.

The group, which consisted of a professor, urban farmer, arts nonprofit director and two business consultants, toured Gluten Free Bar, Cascade Engineering, 616 Development, New City Urban Farm, Brewery Vivant and Essence Restaurant Group.

The Business Journal tagged along for the tour of Gluten Free Bar, a food manufacturer that produces gluten-free snacks and sells them across the country and abroad.

Elliott Rader, who co-founded the company with his brother Marshall Rader, said it made sense for Gluten Free Bar to pursue B Corp certification because the company was founded on the principles for which B Corp advocates.

“We were already worried about recycling and paying people living wages and treating people fairly when I heard about B Corp. Those values aligned really well, and it made sense for us to go out and get that B Corp certification,” he said.

The tour group particularly was interested in how Gluten Free Bar plans to maintain its local commitments while growing across the globe.

“For us to grow and to be able to support and hire more people and buy more equipment from local companies and more local services, we have to be able to sell our products farther and farther away from here,” Rader said. “We are a local company that focuses on local, but we have to sell our products far outside to be sustainable for our company.”

Rader said while it was initially challenging to set up a production facility and sell and market products at the same time, Gluten Free Bar has hit its stride and now has the resources to fully support all of its operations, from production and packaging to shipping and receiving and sales and marketing.

“A lot of our competitors don’t actually make the product. They market and sell it and outsource the production. We do everything here in this one facility.”

He added, “We employ a local workforce; otherwise, we’d outsource like other companies do. We try to bring jobs to Grand Rapids and support the local economy.”

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