By Rick Garlick
There is an inherent logic to the idea that U.S. cities that consistently impress tourists with one-of-a-kind activities, delicious food, great hotels and smooth infrastructure will be rewarded with increased travel and tourism revenue. But how much is that perfectly pressed Cubano sandwich in Little Havana or great seats for the hottest show on the Las Vegas Strip really worth?
Try a billion dollars.
That's the number we came up with at J.D. Power when quantifying the relationship between traveler satisfaction and vacation-related spending. On average, we found that when travelers are 'delighted" with their overall travel destination experience, they spend $531.79 more per person on everything from dinner and drinks to entertainment than people who are "disappointed" with their travel destinations.
Among the many ratings captured in the study, visitors were asked to rate their overall experience on a 10-point scale that ranged from 1 (unacceptable) to 10 (outstanding.) For analysis purposes, the responses were collapsed into a smaller group of categories that included "disappointed" (1-5), "indifferent" (6-7), "pleased" (8-9), and "delighted" (10). Each respondent also reported how much he or she spent in total during their most recent visit to one of the top 50 destination cities as determined by total number of hotel room nights sold in the past year, as provided by Smith Travel Research (STR.)
While visitor spend in a given visit varies based on the size of the destination city, the data consistently showed a direct relationship between the destination experience and the average amount visitors report spending during a typical visit. The following table represents the percentage of visitors that fall into each satisfaction category over the course of the entire study, and the average amount those in the various categories report spending during their most recent visit.
Clearly, with approximately 69% of travelers falling into the "delighted" and "pleased" end of the traveler satisfaction spectrum in our study, many cities are doing lots of things right. Those with the highest overall traveler satisfaction scores by region were: New York (Northeast/Mid-Atlantic), Orlando (South), Austin (Southwest), Las Vegas (West) and Columbus (Midwest).
The real opportunity for hotels, restaurants, entertainment venues, and convention and visitors' bureaus, however, is converting just some of those travelers at the bottom of the satisfaction scale into higher categories.
Take, for example, Miami, a city that receives approximately 15 million visitors annually. Just by increasing total number of "delighted" visitors by five percentage points from 21% to 26%, keeping the percentage of "pleased" visitors flat, reducing the percentage of "indifferent" visitors from 22% down to 19% and lowering the percentage of "disappointed" visitors from 9% to 7%, Miami would realize an increased average spend of $84.74 per traveler. That translates to over $1.3 billion in potential new tourism revenue.
The effect is even more pronounced in Atlanta, a city that scored near the bottom of the pack for overall traveler satisfaction in the South region. Simply by increasing the number of "delighted" visitors by five percentage points and decreasing the number of "indifferent" and "disappointed" travelers by two and three percentage points, respectively, Atlanta would stand to gain more than $1.7 billion in new revenue. That's a $33.98 increase in spending for each of Atlanta's 51 million visitors annually.
There is a clear return on investment (ROI) story for improving the destination experience. That is not to say that moving the needle on improving the destination experience is easy. The overall travel experience is a complicated equation that involves a multitude of factors that can be controlled, such as traveler infrastructure, hotel inventory and access to special events and activities. But it also relies on several X-factors, like weather, moody family members and seasonality issues that can be harder to control. By investing now in the areas they can control which show a clear correlation with high levels of traveler satisfaction, cities and their tourism-related businesses can be much more deliberate about how they tap into the traveler revenue stream.
