Promoting tourism is a significant driver of regional economic, social, and cultural development, and effective tourism administration can successfully foster the development of local tourism. Despite the importance of regional tourism administration, the existing research on the performance determinants of tourism administration is limited. To understand the performance gap, this study adopted the theory of organizational capabilities to create a case study of the Mud Festival in Boryeong city. This study examined the influence of the organizational structure, specialized human resources, and organizational routines, which are the core organizational capabilities of local tourism administration. The case analysis of Boryeong city not only revealed the organizational limitations of traditional tourism administration but also showed the role and effect of public foundation organization to solve problems. Based on the study of the historical evolution of the Boryeong Mud Festival Organizing Committee to the Boryeong Festival Tourism Foundation, this research shows the crucial role of permanent foundation organizations in acquiring specialized human resources, constructing social networks, and instituting a profit-based accounting system in public administration. The research results present not only theoretical implications to academic researchers but also provide crucial practical implications to the leaders of regional governments and tourism administrators.