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In-depth Analysis on Operation Trends and Financial Structure of DMOs 2. Organizational Structure and Budget of DMO

2. Organizational Structure and Budget of DMO

The Operational Structure: Mostly Independent and Not-for-profit Organization

First of all, the operational structure of DMOs can be categorized into four types depending on their characteristics: not-for-profit organizations, regional government, quasi-public agencies, and private agencies. The finding shows that most DMOs are independent and not-for-profit organizations. To be more specific, organizations with 501(c)(6)s (an economic organization, a chamber of commerce, and a real estate committee) categorized as a not-for-profit organization and association exempted from taxes under the provisions of IRS count 137, accounting for 62.8%. Organizations with 501(c)(3) (religious groups, educational institutes, charities, science groups, literature groups, amateur sports-promoting organizations, children’s organizations, and societies against animal abuse) are1.8%. Non-profit (non-American) organizations contribute by 9.3%. Afterall, 73.8% of DMOs are not-for-profit organizations in total. Next, 14.6% of DMOs are governments such as city governments (5.0%), county governments (7.3%), and state/province governments (2.3%). Quasi-public agencies including a chamber of commerce (4.6%) and authorities (4.1%) represent 8.7%. Additionally, DMOs in a format of private-public partnership take up 2.8%, which is the lowest percentage.

Budget: Average Budget Revenue of US$6.02 million in 2013

In 2003, the average budget of DMOs was approximately 3 million US dollars, which is an increase of 3% compared with the previous year. Changes in budget shows a downtrend for three years from 2008 to 2010, but the budget finally rebounded in 2011, reaching the largest amount ever in 2013. Though lots of DMOs faced a budget crisis because of reduced hotel taxes, funds, and support funds for facility operation from governments and quasi-governments, it seems that the DMO budget has been stabilized and increased even since summer 2011, entering its recovery cycle.

The DMOs’ average revenue and expenses show that the budget revenue and budget expenditure in 2013 are 602 million US dollars and 606 million US dollars respectively. The size of the budget revenue has been increasing since 2011, but the rate of increase in 2013 was 3.2%, which is less than the preceding year’s rate of 5.5%. In detail, whereas financing from the public sector is increased by 5.7% and 3.5% in 2012 and 2013 respectively, private funding showed a 0.9% increase but a 0.4% decrease in 2012 and 2013 respectively. The rate of increase of the average budget expenditure in 2013 is 6.1%, which is rather higher than the increase rate of 5.4% in 2010. The number exceeds the budget revenue by almost a twofold.

Holding Facilities and Affiliate Companies: 11% Has Own Facilities, and 22% Has Affiliate Companies

Some DMOs have their own facilities or a partnership with an affiliated corporation. The survey on the facility holding status of DMOs shows that only 11% of all respondents hold related facilities and most respondents (89.0%) do not. Types of holding facilities, in order of percentage, are convention centers (55.6%), sports facilities (22.2%), museum/culture center (22.2%), and parking facilities (16.7).

In regard of affiliate companies, 22.2% of all respondents answer that they have affiliate companies or additional company, and 77.8% operate DMOs solely. Types of organizations that DMOs have a partnership with are mostly not-for-profit organizations, the majority of which is 501(c)(3) (73.9%), followed by 501(c)(6) (15.2%) and 501(c)(4) (2.2%). On the other hand, profit-making companies represent just 10.9% of the total.

Contract Type, Period, and Objectives: Most of DMOs Conclude a Contract for Years without Request for Proposal (RFP)

To the question whether a DMO concludes a contract with the primary funding source when they progress affairs, more than half (59.1%) answer they do. In terms of contract type, only 9.9% presents a RFP, but the other 90.1% use government agencies or make a contract without an RFP. Namely, most DMOs conclude a contract without an RFP. The period of a contract varies; one-year contracts account for 39.1% whereas multi-year (more than 1 year) contracts are 60.9%. Most of the contracts are for more than one year. In the case of having a multi-year contract, the average period of the contract is six years. Meanwhile, to the question that asks if there are any quantitative objectives which DMOs should achieve by the contract, 27.6% of DMOs use the number of hotel stays, 21.3% use ROI, and 16.5% use the amount of tourists’ expenditures. Almost half (44.1%) of all the respondents answered that no quantitative goals are given.


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