Okaloosa County BOCC — March 17, 2015 — 76127 economic evaluation of florida s investment in beaches — reading text

the Department of Business and Professional Regulation (DBPR) and serves as a reasonable proxy for the number of visitors. Weighting the previously quantified rankings by the number of accommodations in each area provides a measure with which each feature can be ranked over all geographic areas. Taking each measure as a percent of the total provides a strong concept of the state’s brand and each feature’s contribution to it. The results are shown in Table 1. 9 Dwyer, Larry, Peter Forsyth and Wayne Dwyer, Tourism Economic and Policy. (Buffalo, NY: Channel View Publications, 2010) 10 The ten activities were: Access to International Destinations, Amusement Parks/Themed Attractions, Beaches, Festivals/Cultural/Annual Rally Events, Historical Significance, Outdoor Recreation, Retail/Dining/Nightlife, Sporting Events, State/Federal Parks/Nature Sites and Television/Feature Film Locations. 8  Table 1. Features of Florida that Attract Tourists Feature Portion of State Brand Beaches 25.5% Theme Park 24.3% Retail/Dining/Nightlife 21.8% Outdoor Recreation 7.1% Access to International Ports or Airports 6.7% Sports 6.0% Festivals 4.3% Parks/Natural Site 2.7% Historical Significance 1.6% Source: EDR analysis of self-conducted survey results Results... The results indicate that beaches are the most important feature of Florida’s brand and have the strongest effect in terms of attracting tourists. The beaches are followed closely by theme parks and retail, dining and nightlife, after which there is as significant drop to the remaining six features. It may be noted that, while beaches are the most attractive feature to visitors, they generally do not directly generate revenue. Instead, they facilitate an array of expenditures that collectively comprise the cost of the tourism experience. In addition, most visitors do not engage in only one feature, but it is a combination of features, or the state’s brand as a whole, that draws tourists to Florida. These features are the product that Florida has to offer its potential visitors. Beach restoration is essentially a form of quality control for that product, and VISIT FLORIDA and other advertising sources market the product to consumers. In conjunction, these are the tools that sell Florida to visitors. Understanding all of the tools used to induce tourism is important when determining a return on investment, specifically when crediting tourism revenue to the various programs in a mutually exclusive manner. 9  RETURN ON THE STATE’S INVESTMENT IN BEACH RESTORATION Purpose... EDR was tasked with calculating the state’s overall return on investment (ROI) from its current expenditures on beach management and restoration projects. To accurately evaluate this ROI, two pieces of information are required: the amount of money the state has spent on beach restoration over a period and the additional revenue received by the state over that period. To remain consistent with EDR’s other ROI projects, beach restoration was evaluated over a three year period. Specifically, the three year period includes Fiscal Years 2010-11, 2011-12, and 2012-13. Data and Methodology... Beach restoration is a lengthy process, generally lasting multiple years from first determining the need for the project to the project’s completion. This makes legislative appropriations for a given year a poor indicator of the state’s full investment in beach restoration for that year. Frequently, appropriations for restoration made in one year will be spent gradually over the next six years. Instead of appropriations, actual expenditure data, collected from the LASPBS ledgers and verified by the Florida Department of Environmental Protection (DEP), are used to indicate the state’s investment in beach restoration for a given year. For the three year period, these expenditures, broken down by year of appropriation, can be seen in Table 2. Table 2. Actual State Expenditures on Beach Restoration Actual Expenditures by Fiscal Year Fiscal Year Funds Were Appropriated FY 10-11 FY 11-12 FY 12-13 FY04-05 $2,048.64 FY05-06 $690,742.06 $121,575.24 $162,585.81 FY06-07 $3,892,199.07 $5,275,730.63 $445,149.18 FY07-08 $4,089,792.26 $727,222.37 $660,459.12 FY08-09 $1,157,970.10 $5,330,690.48 $3,254,281.89 FY09-10 $653,058.46 $1,106,891.39 $924,505.09 FY10-11 $1,980,574.33 $2,407,347.29 $3,465,693.54 FY11-12 $1,001,820.50 $3,924,456.53 FY12-13 $2,682,635.63 Total Expenditures $12,466,384.92 $15,971,277.90 $15,519,766.79 Source: LASPBS Ledger Determining the increase in revenue to the state from beach restoration is a much more challenging process. Additional revenue resulting from beach restoration comes from international and domestic tourists. Data regarding international and domestic visitor counts, their spending habits and activity choices were made available to EDR by VISIT FLORIDA. This data is used to develop a total tourism revenue figure, which can then be credited to beach restoration and other tourism drivers in a mutually exclusive manner. 10  Consider the question, “what influences a visitor’s decision to come to Florida?” A portion of the visitors come because they saw an advertisement for some feature of the state’s brand, while the remaining came for non-advertising related reasons. Some fraction of both groups comes to visit the beaches in Florida but would not have visited if there were no beaches or if the beaches were not pristine. In this case, the pristine condition of the beaches is accomplished by restoration and maintenance. A decision tree illustrating this breakdown can be seen in Figure 2. Figure 2. Florida Visitor Influence Tree Did advertising influence the visitor’s decision to come to Florida? Yes No If there were no pristine beaches in Florida, If there were no pristine beaches in Florida, would the visitor vacation elsewhere? would the visitor vacation elsewhere? Yes No Yes No A B C D Visitors to the state are categorized into four mutually exclusive groups: group A consists of visitors who came to Florida as a result of advertising efforts and would have vacationed elsewhere if there were no pristine beaches in Florida, group B consists of visitors who came to Florida as a result of advertising efforts and would have come regardless of the beaches, group C consists of visitors who came to Florida regardless of advertising efforts but would have vacationed elsewhere if there were no pristine beaches in Florida and group D consists of visitors who came to Florida regardless of advertising efforts and would have come regardless of the beaches. For the purposes of this study, only the visitors of groups A and C are of interest because those visitors were influenced by Florida’s pristine beaches. Table 3 provides a breakout of advertising related beach visitors (group A) and non-advertising related beach visitors (group C). The number of beach visitors and their spending are results of EDR’s study evaluating the ROI of state advertising dollars.11 For the relevant methodology from that study, see APPENDIX B. Table 3. Total Beach Visitors and Spending FY 2010-2011 FY 2011-2012 FY 2012-2013 Advertising related beach visitors 9,327,421 9,625,638 10,243,074 Non-advertising related beach visitors 7,921,503 8,131,931 8,391,405 Total Beach Visitors 17,248,924 17,757,569 18,634,480 Total beach visitor spending credited to the state’s investment in beaches $1,770,413,796 $1,788,264,102 $2,011,342,436 11 See EDR 2015 report on the Return on Investment for VISIT FLORIDA for a detailed description of the data used. 11 The visitors that make up group A are influenced by a greater number of factors than those of group C, and thus a smaller fraction of the increased revenue from group A visitors can be credited to beach restoration than of the increased revenue from group C visitors. Additionally, the state’s investment only represents approximately 30% of the total beach restoration expenditures. The majority of beach restoration is funded by the federal and local governments and thus the majority of beach induced tourism revenue is credited to those sources. See Figure 1 for a breakdown of the state, local and federal share of total beach restoration expenditures. For the visitors of group C, it is then assumed that approximately 30% of their spending is credited to the state’s investment in beach restoration. For group A, however, it is assumed that approximately 3% of their spending can be credited to the State’s investment in beach restoration because they were also influenced by advertising. Using 30% of the group A revenue would cause a portion of the tourism revenue to be double counted towards beach restoration and advertising and would thus overstate the ROI from beach restoration and the ROI of a similar study EDR conducted regarding state funded advertising. Table 3 illustrates how the share of tourism revenue credited to state funded beach restoration is determined for Fiscal Year 2012-13. Table 4. Funding Required to Induce Beach Visitors