Reforming destination management organisations and financing

The fast changes of the tourism markets make it necessary to adapt destination management organisations, their functions and financing. The paper tries to develop a model for an optimal, efficient destination management system, especially to cope with the problem of limiting the necessary government influence and transfer as many decisions as possible to the individual private entrepreneurs. In this model the two tasks of destination management organisations — product development and marketing — are separated and are financed by two different taxes or levies, which are necessary for the function of producing public goods on the one side and internalizing external effects on the other side. The distribution of the levy payments to the different purposes is left to a large extent to the free choice of the individual levy‐payer, the entreprises profiting from tourism. This will induce a competition process between different destination management organisations to find the most efficient system.