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"I think it gets in the way a lot," said Bill Rustem, president of Public Sector Consultants Inc., a Lansing nonpartisan public-policy think tank. "We are in a global competitive environment. And we're also in a U.S. competitive environment. And if people don't know the assets that you have, they're not going to come here.

"That's true for entrepreneurs, that's true for young people, that's true for corporations."

Three years ago, a study by Menlo Park, Calif.-based SRI International ranked Michigan second among Midwest states and ninth in the nation in competitiveness, with key strengths including a high-quality education system, worker productivity, technology activity and quality of life.

But business and economic officials say the word still needs to get out. They say too often, images of a heavily industrialized state, with its key auto industry in decline and struggling urban centers, supplant Michigan's natural and economic attributes.

"The image is worse than the reality," said Paul Hillegonds, senior vice president of corporate affairs for Detroit-based ,b>DTE Energy Co. and past president of Detroit Renaissance Inc.

Achieving a state "brand" that capitalizes on Michigan strengths could mean projecting Michigan's prominence in technology jobs and businesses, research and development expenditures, life-sciences growth, and natural resources.

But a positive image also goes deeper than marketing, to fundamental elements that range from state spending on education and technology to Detroit's persona to the state's tax climate.

Patrick Anderson, principal and founder of Anderson Economic Group L.L.C. in Lansing, said Michigan "has done a very good job of telling other investors about its good points. The problem is that those same investors are also able to find out about Michigan's bad points."

He said corporate executives decide where to put new plants not "by looking at an ad in Time magazine" but by evaluating elements like the Michigan economy, workforce, tax climate, and the potential to make money.

"We have to think about improving our schools, making our cities run better, getting our business taxes in line. These would go a long way to improving Michigan's image and would swamp the effects of any advertising campaign," Anderson said.

Rustem said Michigan's image is tied to that of Detroit - a link many in Michigan appear not to see. A 2002 survey by the Michigan State University Institute for Public Policy and Social Research found only 36 percent of Michigan residents polled view Detroit's health as very important to the well-being of the state.

"There's got to be more understanding in Michigan ... that as Detroit goes, so goes Michigan, in terms of our image," Rustem said.

Business officials say image can affect how investors and analysts view Michigan companies, and hamper the ability to recruit employees and high-level executives.

Image is everything in tourism, an industry key to Michigan's economy. According to Travel Michigan, the state's tourism-marketing agency, travelers spend $16 billion annually in Michigan, generating $853 million in state taxes.

And while other industry sectors such as manufacturing have registered wholesale drops in employment, leisure and hospitality service businesses have grown.

In 2005's first four months, leisure and hospitality jobs rose 1.2 percent over the same period in 2004. Employment was up 1.5 percent from the same January-April period in 2000, according to data from the Michigan Department of Labor and Economic Growth. The sector includes businesses that range from museums and casinos to golf courses, lodging establishments and restaurants.

"There are very, very few industry sectors that have recovered to prerecession levels. This would be one of them," said Jim Rhein, labor market analyst at the department.

But at the same time, Michigan hotel occupancies and room rates lag well behind the nation, and state tourism promotion has shrunk amid budget cuts. Travel Michigan's $7.9 million budget ranks 31st in the nation in total tourism-office spending, and promotional spending on activities such as advertising and public relations has dropped during the last five years from more than $8 million to $5.7 million.

Gov. Jennifer Granholm and House Republicans have recommended keeping promotional spending at $5.7 million in fiscal 2006, while the Senate has proposed an increase of about $700,000.

"We have a jewel here," said Michael O'Callaghan, executive vice president and COO of the Detroit Metro Convention & Visitors Bureau. "Our concern is that there is a big industry out there that just isn't being marketed as well as it should be.

"Why wouldn't the Legislature reinvest into promoting the greatest natural resource that we have, and that's our location and our lakes?"

O'Callaghan said Michigan businesses may need to consider ways to raise revenue to increase the tourism-promotion budget, such as a rental-car tax or a hotel tax.

"It's something that I think our industry is going to have to look very, very hard at, as much as we don't like additional taxes," he said.

But Steve Yencich, president and CEO of the Michigan Hotel, Motel and Resort Association, said hotel customers already support convention and visitors' bureaus through room assessments. "Neither our board nor our membership would be at all warm to the idea that we would once again be the sole funder of tourism marketing," he said.

Yencich said the association is willing to explore alternative funding mechanisms to promote tourism, with parameters: The proposal must be broad-based to provide stable and predictable funding; it can't target one component of the industry; and it must have a "reasonable impact" to avoid discouraging the very travelers Michigan wants to attract.

The association also wants assurance that any money raised would go exclusively to tourism promotion, and couldn't be redirected elsewhere.

Yencich said given the erosion of Michigan's manufacturing sector, "the service sector becomes all that much more important. And that's what tourism is all about."

Liz Boyd, Granholm's press secretary, said the administration is interested in seeing any proposal from the industry.

"We understand that we have to promote Michigan to grow, but we have to live within the budget realities that we find ourselves in," she said.

Amy Lane: (517) 371-5355, alane@crain.com

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