Destination Development and
Institutionalization Strategies
In the OIC Member Countries
169
DMO Funding
Having sufficient and sustainable funding is one of the main challenges of DMOs. Possible funding
models are discussed in detail in Section 2.4.
Typically, DMOs either receive direct funding from the government or receive funding from a
hotel room tax and membership fees, or a combination of all. Public DMOs typically receive
funding from the government in addition to hotel room taxes. Whereas public-private DMOs
mainly rely on the portion of hotel room taxes allocated to them in addition to membership fees,
and revenue from sponsorships and promotional activities.
In general, it is best for a DMO to diversify its funding sources to ensure financial stability and to
be better funded to support more projects. Ideally DMOs should receive a combination of direct
government funding, funding generated from tourism taxes, such as the hotel room tax, as well as
funding from local businesses, through membership fees, sponsorship, or joint funding for
projects. As destinations become more developed, DMOs should increasingly rely on self-funding.
Examples of self-funding include advertising revenue from both print as well as the DMO’s
website, membership revenue from fees charged to companies, revenue from selling city passes
online as well as commission from ticket sales. In the US, several DMOs obtain additional revenue
through ads on their website, in addition to attraction and activity bookings from the DMO
website. However, these revenue source are supplementary and the main funding sources are
tourism taxes and Tourism Improvement Districts (TIDs), which are discussed in detail in section
2.4. 449
There is not one correct funding model as it depends on each country’s overall tourism budget,
legislation, willingness of the industry to support the DMO and other factors. However, it is not
advised that the DMO generate revenue from selling products or services as this takes away from
its core role and also creates a conflict of interest with the local tourism industry.
In the US, there are small DMOs like in Salt City, Utah, with a $6 million budget, while Houston,
Texas has about a $75 million budget, while Las Vegas’ budget is $260 million. They all do a good
job, while there are bureaus that have a $75-100 million budget that do not do a good job, and it
mostly comes down to leadership, and the leadership’s ability to organize effectively, properly
staff the DMO and garner community support. Destinations that seem to do the best often have
extremely engaged communities. 450
Cross River Tourism Bureau in Nigeria recently lost its government funding and is expected to
run revenue-generating activities. It is also applying for international grants related to
environmental conservation.
In Nigeria, the government released a law called the Tourism Development Levy Law, which
made it mandatory for hospitality sector providers to charge an extra 5% of the consumer spend.
These funds go into a government managed fund and are used for events, industry training, and
other purposes.451 However, it is clear from interviews with tourism stakeholders in Nigeria that
449 SimpleView provides a tool that allows DMOs to display relevant ads on their websites. They also offer a solution that allows DMOs to
sell tickets to attractions, activities, and tours through their website.
450 Interview with CEO, SimpleView
451 Interview with Managing Director, Cross River Tourism Bureau