2015 Summer Advertising Effectiveness

– Return on Investment

November 2015

The Colorado Tourism Office (CTO) promotes the state as a premier travel destination in the United States using seasonal advertising campaigns that target leisure travelers. To be accountable for the dollars invested in its campaigns, Colorado Tourism has contracted with Strategic Marketing & Research Insights (SMARInsights) to conduct research that quantifies the impact of its advertising.

This research is designed to measure the effectiveness of Colorado’s summer advertising and is conducted in multiple waves. The first wave was an evaluation of the reach of the advertising, while this second wave measures the impact on travel.

This ROI wave quantifies the level of incremental travel generated in response to the state’s marketing efforts. The result will be the economic impact and return on investment generated by the summer advertising.

The following report includes:

• The number of incremental trips generated by the advertising;

• The effectiveness of the marketing at reaching the target audience;

• The impact of exposure to multiple elements of the campaign;

• Information about the trips from the target markets, including spending;

• The resultant economic impact and return on investment of the summer campaign; and

• Recommendations for refining the marketing effort.

2

Background & Objectives

SMARInsights has developed a research methodology based on the cycle of how consumers make their travel decisions. The graphic outlines each step of the process and the measure used to evaluate the effectiveness of a destination’s marketing efforts.

This awareness wave of research looked at the steps, clockwise, from Prevailing Image through Build Interest. The second wave will measure Travel through Sharing and Advocacy.

By looking at each part of the process, CTO can assess the campaign and plan for future refinement.

3

Methodology

The advertising effectiveness methodology requires respondents to view the actual ads in order to gauge awareness, so SMARInsights developed and programmed an online survey. National sample vendors provided a link to the survey to potential respondents in CTO’s target markets. CTO has targeted a handful of markets it considers Tier 1 performers, which receive the bulk of the advertising investment. The Tier 1 markets changed this year with the addition of San Diego. However, a national audience has the ability to be exposed to the campaign through a number of media sources. Markets and the sample distribution are:

Tier 1: Chicago, Dallas, Houston, Indianapolis, Milwaukee, San Diego and St. Louis

National: All others

4

Methodology

Market Completed Interviews

Chicago 408

Dallas 405

Houston 406

Indianapolis 412

Milwaukee 409

San Diego 401

St. Louis 411

National 402

Total 3,254

In order to qualify for the survey, respondents had to be travelers who take overnight leisure trips and are travel decision makers for their household. Data were collected October and November 2015 after consumers exposed to the advertising would have had a chance to visit Colorado.

Upon completion of data collection, the data were cleaned, coded, and weighted to be representative of the population.

The following summarizes the results of the survey. A copy of the questionnaire used for data collection appears in the Appendix to this report.

Awareness in the Tier 1 markets has been able grow in spite of less investment due to a sustained presence with superior creative. The campaign Colorado Tourism has had in place for four years receives some of the strongest ratings of all destination creative evaluated by SMARInsights, ranking in the top 10% of all campaigns. By placing this campaign for multiple years, it has been able to create “wear in,” retaining awareness from previous years’ investment.

5

Insights

2.1 million

Influenced

trips

64%

$2.6

billion

Influenced

visitor

spending

44%

$490

Return on

investment

42%

Colorado Tourism’s spring/summer media campaign made significant gains on past performance, with 2.1 million influenced trips resulting in $2.6 billion in visitor spending.

The campaign’s success is attributable to the move away from spot market advertising to a national campaign focused on the cable and satellite RFI TV, a highly targetable medium that enables direct response from a consumer via a Visitor’s Guide order.

The national campaign was augmented in the Tier 1 markets with some spot market TV and outdoor.

Although most of the Tier 1 markets performed well, there were two areas of concern:

• Dallas was the only large market receiving spot TV, and awareness there was lower than Chicago and Houston, two other big markets that did not receive dedicated TV. Because of this, it had the highest cost to reach an aware household. But it is also the Tier 1 market with the highest rate of travel to Colorado, making it difficult to generate incremental travel. As a result, it has the lowest rate of incremental travel of all the spot markets and has the lowest return on investment.

• San Diego was a new spot market for Colorado. Because the media has not had a chance to “wear in” as it has in other Tier 1 markets, it has a higher cost per aware household and generates the fewest influenced trips. However, continued investment here could result in improved performance.

Visitation to marijuana dispensaries and participation in marijuana-based events have not changed, but more trips are motivated by these activities. Consumers have now had time to plan trips and travel since the legislation went into effect.

6

Insights

The creative for 2015 was an extension of what was placed for the previous three years with a nearly identical media spend and some shifting of dollars. The target markets continued to evolve, with the addition of San Diego. In 2015, spending was spread across seven markets, with Chicago and Houston again receiving no TV investment, and with OOH only in Chicago, Houston, and Dallas. Expenditures on the spot markets were reduced and money moved into the national television buy.

The TV investment included brand spots, and placements again allowed consumers to order a Colorado Tourism Travel Guide directly from their TV through partnerships with cable companies.

7

Campaign Overview

Online Outdoor PrintTV

Spending Change

2012 2013 2014 2015

Tier 1 $2,654,924 $1,929,533 $2,125,674 $1,562,347

National $1,813,111 $3,382,445 $3,161,422 $3,770,228

Total $4,468,035 $5,311,978 $5,287,096 $5,332,575

Spending TV Print Outdoor Digital Total

National $1,149,600 $1,445,628 $1,175,000 $3,770,228

Chicago $222,100 $222,100

Dallas $526,329 $118,315 $644,644

Houston $164,175 $164,175

Indianapolis $99,425 $99,425

Milwaukee $84,516 $84,516

San Diego $193,894 $193,894

St. Louis $153,595 $153,595

Totals $2,207,359 $1,445,628 $504,590 $1,175,000 $5,332,577

AWARENESS REVIEW

8

Colorado Tourism had more aware households in targeted spot markets, al though there was less dedicated investment. This is primarily the result of three factors:

• More households were targeted with the addition of the San Diego market.

• Consumers continue to be willing to consider leisure travel.

9

The number of aware households in Tier 1 grew, even with less investment.

3,613 3,388

4,378

2013 2014 2015

Tier 1 Aware Households

Tier 1 2013 2014 2015

Households 6,972,305 9,401,738 11,131,711

Awareness 52% 36% 39%

Aware HHs 3,612,634 3,388,369 4,377,888

Spending $1,929,533 $2,125,674 $1,562,347

Cost per Aware HH $0.53 $0.63 $0.36

• Colorado creative receives ratings in the top 10% of all destination advertising evaluated by SMARInsights. With this creative in some of the Tier 1 markets for four years, there has been significant wear in.

The Tier 1 advertising had strong awareness, although there was less investment dedicated to spot markets. With this, the cost per aware household fell to only $0.36 to reach an aware household, far below the SMARInsights benchmark of $0.67 for DMO campaigns targeting spot markets.

Th

ou

san

ds

Colorado Tourism’s largest spot market targets are Chicago, Houston, and Dallas. Of these, Dallas was the only market to receive targeted TV. Even with the additional investment, awareness was lower here.

Chicago and Houston were exposed to TV via the national cable and satellite RFI buy. Given stronger levels of awareness in these two markets than in Dallas, it is likely the dollars dedicated to spot TV could be reallocated while retaining similar levels of awareness.

San Diego had the next highest cost per aware household, but this was the first year in the market. Continued targeting would likely raise awareness and lower the CPH.

10

With a high cost per aware household, investment in Dallas should be evaluated.

53% 55%

36%40%

37% 35% 34%31%

44%39% 37%

33%

45%

26%

34%

Chicago Dallas Indy St.Louis

Houston Milwaukee SanDiego

Awareness within Tier 1 Markets

2013 2014 2015

Tier 1 Markets Chicago Dallas Indy St. Louis Houston Milwaukee San Diego

Aware HHs 1,356,687 896,611 354,721 354,412 901,903 202,175 311,078

Spending $222,100 $644,644 $99,425 $153,595 $164,175 $84,516 $193,894

Cost/Aware HH $0.16 $0.72 $0.28 $0.43 $0.18 $0.42 $0.62

Colorado Tourism has been on the leading edge of moving beyond spot market campaigns with the cable and satellite RFI strategy.

With an increase in investment in this highly targeted media, awareness grew by more than 1.7 million households.

11

The RFI strategy has been effective at reaching a national audience.

31,227 31,104 32,857

2013 2014 2015

National Aware Households

National 2013 2014 2015

Households 75,032,714 83,490,802 89,102,469

Awareness 41% 37% 37%

Aware HHs 31,227,003 31,104,417 32,856,535

Spending $3,382,445 $3,161,422 $3,770,228

Cost per Aware $0.10 $0.10 $0.11

SMARInsights has developed a separate benchmark for destination campaigns with a national strategy. For those attempting to reach a broader audience, the average cost per aware household is $0.22.

Colorado is well below this with a CPH of only $0.11.

Th

ou

san

ds

IMPACT OF THE ADVERTISING

12

Though there were more aware households from the Tier 1 markets, the rate of incremental travel was less. But with less investment dedicated to spot markets, the return on investment was actually higher.

More than $200 million was spent in Colorado between April and September from the Tier 1 markets that is attributable to awareness of the advertising. This is not all aware trips, but only those additional trips that the advertising was able to generate.

13

There were fewer influenced trips from the Tier 1 markets but a higher ROI.

Tier 1 2013 2014 2015

Influenced Trips 136,542 215,227 170,828

Visitor Spending $1,372 $1,241 $1,278

Economic Impact $187,369,508 $267,142,979 $218,318,486

Media spending $1,929,533 $2,125,674 $1,562,347

ROI $97 $126 $140

3.8%

6.4%

3.9%

136,542

215,227

170,828

-

50,000

100,000

150,000

200,000

250,000

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2013 2014 2015

Tier 1 Influenced Trips

Increment Influenced Trips5.4%

9.3%

Unaware Aware

Tier 1 Incremental Travel

3.9%

Increment = Aware - Unaware

As the market with the highest rate of unaware travel to Colorado, it is difficult to generate additional travel with awareness. Because of this, Dallas has the lowest rate of incremental travel. This, combined with significant investment in spot TV, results in the lowest ROI for the market.

14

Chicago has the most influenced trips and the highest ROI.

Tier 1 Markets Chicago Houston Dallas Indy St. Louis Milwaukee San Diego

Influenced Trips 70,836 29,114 19,682 16,834 13,859 11,101 9,402

Economic Impact $90,528,837 $37,207,215 $25,153,219 $21,514,355 $17,711,834 $14,186,778 $12,016,247

Media Spending $222,100 $164,175 $644,644 $99,425 $153,595 $84,516 $193,894

ROI $408 $227 $39 $216 $115 $168 $62

5.2% 3.2% 2.2% 4.7% 3.9% 5.5% 3.0%

70,836

29,114

19,682 16,834

13,859 11,101 9,402

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Chicago Houston Dallas Indy St. Louis Milwaukee San Diego

Tier 1 Markets Influenced Travel

Increment Influenced Trips

With such a large population among the national audience, even a small increase in incremental travel can result in numerous trips. But with the increment nearly doubled, the summer campaign influenced nearly 1 million more additional trips over 2014.

This resulted in $2.4 billion in visitor spending between April and September, for a return on investment of $636 for every $1 invested in the national campaign.

15

Nearly 1 million more trips were influenced from the national audience.

3.8%3.1%

5.8%

1,145,9971,064,639

1,921,820

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

0%

1%

2%

3%

4%

5%

6%

7%

2013 2014 2014

National Influenced Travel

Increment Influenced Trips

National 2013 2014 2015

Influenced Trips 1,145,997 1,064,639 1,921,820

Visitor Spending $1,048 $1,456 $1,247

Economic Impact $1,200,718,601 $1,549,594,400 $2,396,509,540

Media spending $2,918,939 $3,161,422 $3,770,228

ROI $412 $490 $636

Colorado has seen unprecedented growth in visitation in recent years. 2014 was a record-breaking year for the state, with 71.3 million visitors. Destinations and attractions around the state are reporting another strong year, with Rocky Mountain National Park on pace to welcome the most visitors ever in a single year.

By continually revising targeting strategies, Colorado Tourism has been able to market in a way that improves visitor volume. For 2015, nearly 2.1 million trips were attributable to the advertising, resulting in $2.6 billion in spending. As a result, for every $1 Colorado Tourism spent on paid media, $490 was returned via out-of-state spending between April and September.

16

The campaign generates $2.6 billion in visitor spending, for an ROI of $490.

Year-over-Year Comparisons 2013 2014 2015

Influenced Trips 1,658,417 1,279,866 2,092,649

Economic Impact $1,844,144,456 $1,816,737,379 $2,614,828,026

Media spending $5,567,194 $5,287,096 $5,332,575

ROI $331 $344 $490

TRIP SPECIFICS

17

When Colorado Tourism began advertising to Tier 1 markets, there were only a handful of spot markets receiving media. Because of this, the trips from these markets looked very different from those elsewhere cross the U.S. But as the spot media effort has expanded to include seven markets – spanning much of Midwest and now pushing into the West – the trips are not very different.

Most notable is that the length of trip and spending are similar. In the past, the national audience has taken longer trips or spent more than those from the spot markets. But with less differentiation between audiences, the specifics are nearly identical, especially trip spending.

18

As the Tier 1 markets expand, there are fewer differences with the national audience.

Tier 1 Specifics 2013 2014 2015

Nights in Colorado 4.6 4.2 4.5

People in travel party 2.6 2.9 2.9

Children in party 18% 28% 32%

Trip spending $1,372 $1,241 $1,278

National 2013 2014 2015

Nights in Colorado 5.3 4.5 4.2

People in travel party 2.7 3.0 2.6

Children in party 17% 33% 42%

Trip spending $1,097 $1,456 $1,247

Winter visitors often visit specifically for skiing and winter activities; thus they visit fewer regions and are primarily focused in the Northwest.

Summer visitors see more of the state, often basing themselves out of Denver and traveling through a number of regions on their trip.

19

Seasonality is highly influential on trip specifics, especially for regional visitation.

Region Winter Summer

Denver Metro 40% 53%

Front Range 31% 32%

Northwest 41% 28%

Northeast 11% 13%

Southeast 9% 15%

South Central 14% 26%

Southwest 11% 20%

1.5 Regions 1.8 Regions

It’s useful to understand the activities visitors are participating in during their trips, but it’s also good to know what is motivating them to visit. Destination marketers must strike a balance in their creative between what is motivating and what has the most appeal.

With an understanding of participation and motivation, Colorado Tourism can craft messages for delivery in a variety of ways.

It’s essential to ensure the paid media hits the iconic product that motivates trips and has a large audience.

Industry partners should be encouraged to focus promotion on those products in their communities that are highly motivating, even if there is a smaller audience.

In-destination marketing, often delivered via hotels and attractions, can focus on those things that have a large audience but did not motivate a trip.

20

Products featured in destination marketing can be tailored based on trip participation and motivation.

In-Destination Marketing(Large Audience/Low Motivation)

ShoppingLocally owned restaurants

Sightseeing toursWildlife watching

MuseumsWinery tours

Farmers’ markets/U-picks

Paid Media Marketing(Large Audience/High Motivation)

Scenic drivesState or national parks

Historic sitesHiking and backpacking

In-Destination Niche Marketing(Small Audience/ Low Motivation)

Rock climbingBird watching

Canoeing/kayakingBoating

River raftingFestivals and fairs

Farm to table dinnerNoteworthy bars and nightclubs

Paid (Partner) Niche Marketing(Small Audience/High Motivation)

FishingHuntingCamping

Horseback ridingBicycling or mountain biking

Mountain climbingPerforming arts

Marijuana dispensariesMarijuana-related activities

HighLow Trip Motivation

High

LowV

isit

or

Pa

rtic

ipa

tio

n

While there was no increase is visitors indicating they visited a marijuana dispensary, there was significant growth in those who say its availability was a primary trip motivator.

Winter trips, primarily focused on snow and ski activities, had a quarter of visitors indicating the availability of marijuana was at least somewhat influential on their decision to visit. That grew to nearly 50% for all spring/summer trips. Consumer have now had time to plan for and take Colorado trips since the legislation went into effect.

21

Participation in marijuana activities has not increased, but more trips are motivated by its availability.

8% 8%

29%

85%

2014 2015

Marijuana Dispensary Visitation & Trip Motivation

Visitation Motivate

7%

22%7%

20%

12%

7%

0%

10%

20%

30%

40%

50%

60%

Winter Summer

Marijuana's Influence on Decision to Visit

Extremely influential Very much influential

Somewhat influential

26%

48%

Colorado has seen tremendous change in the past three years, with significant increases in overall travel. It is rare for such significant swings in visitation given travel product rarely changes.

But with a change in product as well as a strong marketing campaign, both the rate of visitation and who is coming has changed tremendously.

Most significantly is that visitors are younger. This results in a less affluent audience; hence the drop in visitor spending.

22

Demographics shifted for 2015, with visitors younger than previous years.

Visitor Demographics 2013 2014 2015

Marital Status

Married 52% 66% 69%

Divorced/Separated 12% 15% 4%

Widowed 0% 1% 7%

Single/Never married 35% 18% 20%

Education

High school or less 3% 5% 14%

Some college/technical school 9% 18% 23%

College graduate 49% 49% 47%

Post graduate degree 38% 28% 16%

Income

Less than $35,000 12% 13% 15%

$35,000 but less than $60,000 26% 22% 19%

$60,000 but less than $75,000 9% 11% 27%

$75,000 but less than $100,000 18% 23% 29%

$100,000 or more 35% 30% 10%

Kids Under 18 in House 16% 36% 45%

Age 47 47 41

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