The DMO's Business Model May Be Its Biggest Strategic Risk

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What Happens When the Way You're Funded No Longer Matches the Work You're Expected to Do?

During my years as a destination marketing organization (DMO) CEO, I spent considerable time thinking about budgets, revenue projections, hotel occupancy, and the financial health of the organization. That's part of the job. But looking back, I believe DMO leadership should pay more attention to a larger financial question: Is the way we're funded still appropriate for the work we're being asked to do?

For many DMOs, the business model is relatively straightforward. Lodging-related tax revenues, membership dues, and other tourism-generated income support an organization primarily responsible for attracting visitors. When hotel rooms are occupied and visitors spend money, the organization benefits. When tourism slows, revenues decline. But something important has changed. The responsibilities of destination organizations have expanded considerably, while many of their funding structures have remained essentially the same.

Today's DMO CEO is increasingly expected to participate in workforce development, community planning, destination stewardship, economic development, resident engagement, and even conversations about housing and transportation. These are legitimate responsibilities, and they reflect tourism's growing influence on the broader community. But they also raise a fundamental question: Who pays for this expanding mission? I believe this is one of the most overlooked strategic risks facing our industry.

Consider a destination organization that depends heavily on hotel tax revenues. A downturn in business travel, a major convention cancellation, or an unexpected economic disruption can quickly reduce available funding. Yet the organization's responsibilities don't necessarily decline with its revenues. In fact, during difficult economic periods, community leaders may expect the DMO to do even more. That's not simply a budgeting problem. It's a business model problem.

There's another consideration. When an organization's funding is tied primarily to overnight visitation, its performance measures naturally emphasize room nights, occupancy, and visitor spending. But when its mission expands to include community well-being and destination management, those traditional measures no longer tell the entire story. We may be asking organizations to deliver outcomes their financial structures were never designed to support.

I don't believe the answer is necessarily abandoning traditional funding sources. Those revenues remain essential. But CEOs should ask whether their organizations need a more diversified financial foundation, stronger partnerships, or clearly defined agreements that link expanded responsibilities to appropriate resources. Just as importantly, boards need to understand the distinction between approving a broader mission and providing the financial capacity to accomplish it.

A strategic plan can identify ambitious priorities. It cannot manufacture the resources necessary to deliver them.

After years in this profession, I've come to believe that financial sustainability is not simply the responsibility of the finance committee. It's one of the CEO's most important leadership obligations. And perhaps the greatest risk isn't that our revenues will decline tomorrow. It's that our responsibilities will continue expanding while we quietly assume yesterday's business model can support them.

Three Questions Every DMO CEO Should Ask

  1. If our primary funding source declined by 20 percent next year, which responsibilities could we realistically continue to fulfill?

  2. Are we accepting new community responsibilities without identifying the financial and organizational resources required to deliver them?

  3. Does our board understand the difference between funding a marketing organization and sustaining a destination leadership organization?

The future of destination leadership will require more than creative marketing and sound financial management. It will require the courage to question whether the business model we've inherited can support the organization we're becoming.

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