Who Are Your Customers? Where are They From?

This blogpost was written by Vito Fiore, Director of Marketing and Research for Visit Alexandria.  It provides some very valuable marketing research information for Alexandria’s small business community. As the tourism marketing agency for the City of Alexandria, we at Visit Alexandria are always trying to better understand questions such as: “Who is visiting Alexandria?”… Read more »

The post Who Are Your Customers? Where are They From? appeared first on Alexandria Small Business Development Center.

This blogpost was written by Vito Fiore, Director of Marketing and Research for Visit Alexandria.  It provides some very valuable marketing research information for Alexandria’s small business community.

As the tourism marketing agency for the City of Alexandria, we at Visit Alexandria are always trying to better understand questions such as: “Who is visiting Alexandria?” “How much money are they spending?” “On what are they spending their money?” and “How important is visitor spending to the Alexandria economy?”. In the past, we answered these questions by relying on data sources like website analytics, advertising tracking pixels, visitor center traffic, and survey data.

Out of all these methods, survey data provides the most detail on how money is spent, but it is imprecise and reliant on human recall. Let’s say we ask someone if they’ve visited Alexandria in the past year. They respond, “Yes, I visited 8 months ago.”  We can ask them what they spent on lodging, restaurants, shopping, etc., and they almost certainly won’t be able to do better than a rough estimate. Furthermore, this method is subject to sampling error.

For several years, Visit Alexandria has been looking at ways to gather more reliable information.  We discovered that the nation’s largest credit card provider, Visa, has a “big data” product known as VisaVue. This product provides spending data for a given location in 24 different merchant categories. Perhaps most interestingly, the spending is broken down by the cardholder’s source location (at the metropolitan statistical area level). By partnering with Virginia Tourism Corporation and Visit Virginia Beach, Visit Alexandria was able to purchase the VisaVue product recently at an affordable price.

Visit Alexandria breaks its marketing campaign into two broad categories: 1) Destination, targeting those overnight guests from outside of the DC region, and 2) Regional, targeting those daytrippers that live outside of Alexandria but within the DC region. Our destination campaign is by far the larger effort, as our primary mission is to drive overnight stays in Alexandria and increase visitor spending. According to a 2014 survey-based study conducted by Destination Analysts, on a per person basis, overnight visitors to Alexandria spend about 3 times as much per trip as day visitors. That said, we were excited because the VisaVue data could give us a better understanding of how big the spending (and thereby tax revenue) impact is in key sectors from locals, regional visitors, and destination visitors.

The VisaVue data represents all domestic Visa credit and debit transactions, which were over $1 billion in City of Alexandria spending in calendar year 2016. This represents about 1/3 of all spending in lodging, restaurant, and retail categories.  Because Visa is widely used for both business and consumer spending at many income levels, we feel that this data is generally reflective of spending in Alexandria as a whole. And, because it is an accounting of ACTUAL consumer spending, it does not have the limitations discussed earlier that relate to self-reported data from surveys.

By determining Visa spending patterns according to source location, we can then extrapolate these patterns out to all spending (under the assumption that Visa spending in Alexandria is generally reflective of all spending behavior). Then we can apply these patterns to tax collection data from the City of Alexandria in order to determine the estimated share of local taxes that are paid by Destination visitors (from outside the region), Regional visitors (people from the DC region but outside of Alexandria), and those local to Alexandria. The results are below:

The headline here is that 71% of consumption taxes (restaurant, lodging, and sales) paid to the City of Alexandria come directly from people who are non-residents.  That $44 million translates to a savings of about $590 per Alexandria household. The revenue generated by visitor spending reduces the pressure on other taxes on residents like property taxes. You’ll notice that the consumption spending by destination visitors is roughly the same as that by all Alexandria residents.  And perhaps most surprisingly, spending from regional visitors have the largest impact, with 43% of all spending in these categories.

As you might expect, when it comes to lodging, destination visitors do the vast majority of the spending. However, there is still a share of spending that comes from within the region, presumably for staycations, business travel booked by companies within the region for those travelling to Alexandria, or locals booking a hotel for friends and relatives staying in Alexandria.

For the meals tax, which includes spending at both full-service restaurants and quick-service establishments, half is paid by regional visitors and 19% is paid by those visiting from outside the DC region.  Remember that this data is citywide; we would expect that the share of destination visitor spending would likely be much greater than the chart above in Old Town, and smaller than the chart above in locally-driven neighborhoods (e.g., Potomac Yard, West End).

The story is similar when it comes to the sales tax. Since the sales tax is applied to a wide range of spending, we combined VisaVue data from a whole host of retail and restaurant categories for this calculation.  This chart shows us that while retail is a bit more locally driven than lodging and dining, it still owes the majority of economic activity to non-Alexandrians.  That’s remarkable given that a huge portion of this tax is paid at places like supermarkets where spending is predominantly locally-driven.

There’s much more to learn from this rich data set. In the coming months, we’ll be doing a more detailed analysis at the metropolitan area level to inform our advertising marketing selection for the upcoming year.  Does Norfolk provide more visitor spending per capita than Philadelphia? Once they arrive, do people from New York City spend more per trip than people from Atlanta?  How much of our visitation comes from a closer, smaller city like Richmond versus a more distant, large metropolis like Chicago? We’ll be using the VisaVue data, among other sources, to better understand the answers to these questions.

What we already have learned, however, is significant. Marketing to destination visitors will always be our primary task, but given the scale of the impact on our tax revenue from regional visitors we are looking for opportunities to increase our efforts there as well. And the broader finding that 71% of retail, restaurant, and lodging spending comes from non-residents tells us that Alexandria’s economy is dependent on being welcoming to all, whether they are from Arlington, Virginia or Arlington, Texas.

Vito Fiore is the Director of Marketing and Research at Visit Alexandria. He can be contacted at [email protected].

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