KEYS TOURISM AGENCY CANCELS WEBSITE CONTRACT; AUDIT STATES IT WAS ‘SIGNIFICANTLY OVERPAYING’ FOR DIGITAL SERVICES

Florida Keys tourism officials acknowledged this week that contracts negotiated 30 years ago haven’t aged well for the local Tourist Development Council (TDC) — particularly as they involve internet technology, websites, digital marketing and advertising.

The TDC board on Oct. 29 voted to cancel its contract with Two Oceans Digital, the company that manages the Keys’ tourism website, fla-keys.com; handles all digital marketing and retains all advertising revenue from the website. The move was recommended by a county audit of Two Oceans’ contract with the TDC, which revealed that the TDC was significantly overpaying for website and digital services given the payment structure of the contract.

The TDC board also voted to issue a new RFP to seek bids from advertising agencies, but board members opted not to cancel its current, 40-year-old contract with Tinsley Advertising yet. More on that in a bit.

The county clerk’s audit of the TDC’s contract with Two Oceans found that the outdated and lopsided payment structure in which Two Oceans keeps all ad revenue from the TDC’s website made more sense for the TDC in 1995, when the internet was in its infancy and online advertising was nearly non-existent.

“This contract has been in place since 1995, when the TDC had no money and digital advertising had no value” so the then-TDC board agreed to give the vendor all ad revenue in exchange for the website, TDC chair Diane Schmidt said at the Oct. 29 meeting.

Times have changed

Times — and technology — have changed dramatically since 1995. And while the contract for the TDC’s website and digital services has been renewed every three to five years, the compensation terms have never changed. 

The audit report estimates that Two Oceans likely now earns $1 million to $1.5 million a year from online advertising on fla-keys.com. Two Oceans representatives told auditors the company makes an estimated $600,000 a year in ad revenue, but refused to provide auditors with documentation to support that claim, the audit report states.

“I think this board should consider what steps we need to take to regain control and ownership of this website,” Kara Franker, the TDC’s new president and CEO, who started work in September, told the board before they voted to cancel the Two Oceans contract. “We can now do some of these things in-house, so the new RFP we issue for the website and digital services can look very different.”

Franker and Schmidt both said they had spoken with attorney Robert Spottswood, who is representing Two Oceans. He told them his client is willing to renegotiate and wants to try to work things out. 

“But I think this is a time to start fresh,” Franker said. “They, of course, are welcome to compete, submit a bid and see what happens.”

The board then voted unanimously to terminate the current contract with Two Oceans Digital, effective in 90 days. The board also authorized Franker to issue a new RFP and finalize a transition plan that includes solidifying the TDC’s ownership of its domain names and intellectual property, such as photos, videos and editorial content on the website.

What about the ad agency?

Now back to the advertising agency and its contract.

Later in the meeting, board member Vicki Tashjian asked Franker how the TDC would pay for the four new positions and temporary consultants Franker is hiring, as well as the hiring of a legal team for the TDC, which has previously relied on the county attorney’s office.

Franker quickly agreed with the board members, who emphasized that no funding should come out of the TDC’s advertising budget, which could jeopardize tourism.

“Vicki has pointed out the elephant in the room, and this will be a tough, but necessary conversation,” Franker said. “As we’ve dug into finances, we’ve become aware of how much money certain agencies are making in fees. There’s been a lot of negotiations, but no one wants to give up the money they’ve always made. To get control of our budget, we need to get a hold of the fees we’re paying.”

She then suggested that she prepare a new RFP for the TDC’s advertising services to re-bid its 40-year contract with Tinsley Advertising, at the same time the RFP for the website and digital service is being prepared.

“We need contracts that aren’t from 1995, that are built for today,” Franker said, getting immediate support from county Mayor Holly Raschein and Key West Mayor DeeDee Henriquez, who are both on the TDC board.

“In our effort to be more transparent and accountable I don’t know why we wouldn’t take that same step with the advertising contract,” Raschein said. “I know change is hard, but it’s the business we’re in. I mean, we were in high school in the ’90s.” 

Henriquez agreed, saying, “We should go out for RFPs for everyone. We can’t have contracts from the ’90s, and our current vendors are welcome to apply.”

But the momentum of that discussion waned when other board members hesitated to cancel the contract with Tinsley Advertising — whether out of allegiance to the agency, whose owner, John Underwood, was in the room, or out of concern for the TDC’s marketing and advertising efforts.

In the end, the board agreed to issue a new RFP for advertising, but to keep the Tinsley contract in place while that occurs.

During the meeting, Franker never specified the agency whose fees concerned her, but the Keys Weekly submitted a public records request after the meeting, seeking the amount of commission fees Tinsley Advertising receives according to its contract with the TDC.

According to the records Franker provided, Tinsley Advertising received $4.5 million in commission fees from the TDC this year, an amount that is significantly more than what other tourism bureaus in Florida pay for advertising services, Franker told the Keys Weekly. But she is currently gathering information from other Florida TDCs about their costs for advertising and website-related services.

According to its contract, Tinsley is entitled to a 15% commission fee on all advertising Tinsley buys and places for the TDC, be it magazine ads, TV commercials, digital videos and other forms of advertising. In other words, if Tinsley buys an ad placement that costs $7,000, they charge the TDC $7,000 plus 15%, or $8,050.

Each year during the budget process, the TDC provides Tinsley with an advertising budget based on the county’s tourism revenue. In 2023, Tinsley was allotted an advertising budget of $31 million, all of which was spent, meaning Tinsley received 15% of $31 million, or $4.5 million, in commission fees.

That figure has been increasing each year as tourism revenue — and the TDC’s advertising budget — has increased in the Florida Keys. The advertising budget has increased by 88% in the past four years, according to the county audit.

When reached the day after the meeting, John Underwood, owner and CEO of Tinsley Advertising, said his company’s fees are more than fair for the award-winning services provided. “The $4.5 million is based on an agreed upon contract that was negotiated with the TDC and approved by the BOCC in 2021,” Underwood told the Keys Weekly. “There is nothing to hide here. These commissions cover the costs of a full-service advertising agency that includes multiple creative teams, media negotiating and buying, research and strategy and more. 

“The agency works on commissions only and does not receive a monthly retainer,” he said, emphasizing that the agency has to spend all the money up front for expensive media buys and then wait to be reimbursed by the TDC.

“Our revenue is directly tied to the bed tax collections,” Underwood said. “So when there is a decrease in bed tax revenue, this not only affects the destination, but the agency as well, including a $2 million advertising cut during COVID and many revenue fluctuations throughout the years due to hurricanes, oil spills and other occurrences.

“We have been good stewards of the budget supplied to us,” he said, emphasizing that Tinsley does not determine the annual budget the agency can spend on ad buys and media placement.

“This ($4.5 million) fee represents 6% of the overall total budget for the TDC. We believe this to be a fair price to pay for the quality of work the destination has received as part of an international marketing program that has yielded numerous awards and the highest occupancy and average daily rates in the country.”

He added that since Visit Florida, the statewide tourism marketing agency, implemented its Flagler Awards for marketing, Tinsley and the Florida Keys have won more Flagler awards than any other destination marketing organizations in the state, including larger locations like Orlando and Miami.

The Tinsley contract remains in effect and if it is not terminated early by either party, it is valid until September 2026. But Franker is preparing an RFP to solicit additional proposals. 

She expects to present the revised RFPs for website and digital services and advertising to the board at their next meeting in December.