Tourism and advertising: Evidence from Virginia beach

In recent years, the City of Virginia Beach, Virginia, has been spending more than two million dollars per year to promote tourism for the city. However, very little is known about the effects of such advertising on overnight visitors. On the basis of a survey of 1,200 overnight visitors during the summer of 1991, this study estimates the effect on tourism and the subsequent fiscal effect of tourism advertising expenditures. The study also calculates a rate of return from advertising from the perspective of a governmental revenue maximization objective function. This paper develops a travel cost model of the impact of advertising on overnight visitation to the city. The model provides, ceteris paribus, that advertising expenditures of 2.4 million dollars in 1991 resulted in an estimated 600,000 additional visitors. The paper concludes that if the City's objective is to maximize public profit, then it should expand its advertising budget. An earlier version of this paper was presented at the Forty-Fourth International Atlantic Economic Society Conference, Philadelphia, Pennsylvania, October 9–12, 1997. The authors are equally responsible for the contents of this paper.