What the 2009 Ontario Budget Means for Tourism

The 2009 Provincial budget rolled out last Thursday and included, as expected, a significant deficit spending program to help the Provcince through tough times.

There's some good news on the tourism front in all of this. The massive infrastructure spending program is a start and improvements to municipal and regional roads and other projects could lead to improvements in visitor experiences to our community. Locally, the Ministry of Tourism's Fort William Historical Park will see $8 million in capital improvements over the next three years and although it is not certain if this is additional investment or part of the larger infrastructure budget, its good news for the attraction and the city. We have to remember that we can't build the entire Northern Ontario tourism economy around one attraction or experience and hopefully there will be investments made in other public and private sector attractions to help build critical mass within the region and develop experiences that cater to a wider audience.
The bigger announcement, however, is the creation of a new destination marketing fund. While details are thin on the source of revenue, it is likely they will come through an increase in the Provincial accommodations sales tax, currently at 5%. This move is essentially the implementation of a Province wide legislated destination marketing fee (DMF). I am in favour of the destination marketing fee and they have, in other communities, raised tourism marketing budgets substantially. Sault Ste Marie, Duluth, Toronto, Dryden and Winnipeg all have DMFs and they can, if re-invested wisely-increase tourism marketing and product development. The fact that Thunder Bay has not had one has put us at a competitive disadvantage against other communities for years.

The resistance by the industry locally has been due to a number of reasons. These include uncertainty of whether the funds collected will be reinvested entirely in tourism or used for wider city services, voluntary collection programs that benefit properties that don't collect it, fear that customers will turn away because they have to pay it and a general perception that commercial property taxes should pay for municipal tourism marketing. They are valid concerns but given the fact that hundreds of other communities collect them successfully means that they do work. The arguments against it all have solutions.

Having this legislated at the Provincial level is positive but there will be some details that have to be ironed out to alliviate the concerns this also brings. The move is positive in that every accommodation business has to collect, locally and across the Province, putting everyone on equal footing.

So what's the concern? Loss of local control on reinvestment. Wheras a locally collected DMF stays 100% in the community, the new collected funds going into the Provincial Pool means the risk of loss of local control increases substantially. There is a rationale that $1 million collected by Thunder Bay municipal properties locally means $1 million should flow back to the municipality to fund its tourism marketing.

The announcment states that the funds will be redistributed back to newly defined tourism regions. The proposed regions of the North in the Sorbera Report separate Northern Ontario into the Northeast and Northwest at Sault Ste Marie. These are two giant zones with a variety of communities and rural tourism experiences and there is a lot of debate going on as to whether these zones are too big. There are also a lot of small individual tourism marketing organizations and people are afraid of losing their jobs. The truth is, is that there is a lot of duplication in the delivery of tourism marketing in the North and it must be streamlined.

Where today's announcement gets interesting is that, just month's ago, the Sorbera report, a great blueprint for the future of the industry, states that a Province wide DMF could collect upwards of $100 million annually. Thats significantly higher than the $40 million reinvestment in today's budget. Assuming that the balance , $60 million, will be used for Province wide marketing that could bring increased benefit. However, it should not be a complete replacement for tourism marketing allocations presently asigned to province wide marketing efforts. We have to remember that there are tens of thousands of attractions, restaurants, festivals and retails involved in the tourism economy that collect PST and pay Provincial taxes. As a result, a proportion of what they pay should be redirected back into Proivincial tourism marketing and Ontario must remain a financial partner in the program.

So what's my overall assessment? These are a few positive developments and I for one, am pleased to see the results of the Sorbera report already being acted upon. However, the announcment is the easy part. Implementing these programs will take an emmense amount of industry input and co-operation to ensure the benefit spreads across the entire regional industry equitably.