Effective long-term strategy means weathering economic ups and downs, but many of today’s destination marketers work within a fragile funding model. Budgets can be volatile from year to year as many destination marketing organizations (DMOs) rely on government funding to stay in business. What alternatives do DMOs have to help them plan confidently for the future?
Switzerland Tourism addresses this challenge with a funding model that includes a robust network of public and private partnerships.
As part of our Leading Thinkers series (featuring the insights of those who participated in discussions at Destination Think! Forum 2016), we asked Martin Nydegger, Director of Business Development at Switzerland Tourism, to explain his organization’s funding model and approach to creating strong partnerships.
Destination Think!: Switzerland Tourism’s network of partnerships includes institutional partners, strategic, strategic “premium” and official partners, as well as members. Can you describe your mix of funding sources and how they are used?
Martin Nydegger: Switzerland Tourism (ST) maintains a multi-channel revenue system in order spread risk and to tap multiple funding channels. Our revenue streams are:
- Government 52%
- Tourism Partnerships 29%
- Strategic Partnerships 11%
- Membership Fee 5%
- Misc. 3%
ST pools the funds from Tourism Partnerships and carries out mutual marketing activities. Hence, those funds are earmarked for those particular activities. The funds from the Government are used in accordance with a significant service level agreement. Funds from other Strategic Partnerships are deposited into the general cashier and can be freely used for any kind projects, activities and overhead costs.
Can you describe some of the challenges or issues that led to the creation of this partnership model and how it continues to evolve?
Government funds allow stability and even intervention in a downward economic cycle. This helps us in times of crisis that would lead most companies to cut marketing expenses. But there is a downside. Public money is very sensitive and we have to be careful when we allocate these funds.
Funding from Strategic Partners relies much more on the economic success of Switzerland. Lately we have discovered that our most likely potential partners are the so called “challengers” (who are number 2, 3 or 4 in their industries) and companies who are in trouble (insurance companies with image issues, for example).
Funding is an every-day task and requires management attention. This might seem obvious, but marketing companies usually prefer to think about how to spend the money rather than acquiring funding.
The most difficult challenge is actually an internal issue. We have to constantly insist on using our own marketing platforms for our strategic partners, especially when the marketing department or the markets don’t get the return directly, because the funding flows into a main pot at HQ.
What is your approach to bringing new partners in, and how do you communicate your value as a DMO to newcomers?
We have a clear list containing the main advantages for our partners. These points are:
- Strengthen Swissness (Swiss Made)
- Access to tourism content and tourism network
- Emotionalize own brand
- Strengthen brand awareness
- Positive image transfer with tourism and vacation
- Reduce costs by making use of synergies
What advice do you have for DMOs that wish to create a healthy framework around partnerships?
Ensure that everyone who profits from tourism is contributing to it. In Switzerland, shopping, finance, medical services, watch making, etc., are making big bucks from tourism, but just a few are actually supporting the industry.
Second, “pro up!” Tourism staff are seen as nice, friendly and creative people but often lack the image of tough negotiation partners. We had to learn this the hard way and too many times our partner was way ahead of us with tactical negotiation skills and rhetorical brilliance.
We also avoid the term “sponsoring” and have exchanged it with “partnership.”
As you look ahead to the next 5 years, how do you anticipate Switzerland Tourism’s role will change as it seeks to attract the right kind of visitors? And with those changes, how will your organization adapt?
Global turbulence leads to the fact that the Swiss currency is being used as a safe haven for investments. This means that the Swiss franc has become strong and expensive, and as a consequence, our prices are rising too fast and too high. The backbone of Switzerland’s tourism industry is the middle class of Western Europe (Germany, Italy, Netherland, France, UK). Switzerland has become unaffordable for most of those people.
Consequently, Switzerland Tourism has to more precisely segment its customers and point out its incomparable tourism offering. Generic marketing messages no longer work for us. This precision marketing is more difficult and more pricey to adapt. We’re on it.
Gain more valuable insights from speakers, panelists and participants from Destination Think! Forum, where the world’s leading destination marketers gathered to address their greatest challenges. Read more interviews with Forum’s Leading Thinkers.