After three years of flat funding from a city-allotted hotel room tax collection, the Carlsbad Convention & Visitors Bureau , intent on boosting hotel occupancy and gaining independence from City Hall , is proposing a self-assessed lodging industry fee to recharge the agency’s stagnant budget.
The plan calls for hotels in Carlsbad and the community of La Costa to add a $1 fee for each nightly room rental. In theory, it would create a cash infusion for the agency’s budget that city government can’t tap, unlike the transient occupancy tax, which is unrestricted and can be used to fuel the city’s general fund.
With more money to spend on advertising and marketing, the agency expects to lure more overnight guests to Carlsbad hotels. At their current annual occupancy rate of 65 percent, it’s conceivable that some 34 Carlsbad hotels with a total of 3,500 rooms could generate about $835,000 annually from the proposed fee assessment. And that sum would nearly double the bureau’s current yearly operating budget, said Pat Fearn, its chairman.
Fearn is the president of Vista-based Certified Folder Display Service Inc., a company that sets up and maintains display racks for tourism brochures at hotels, airports and public facilities across the country.
At present, about 30 percent of the bureau’s fiscal 2004-05 budget of $439,000 pays for the salaries of three staff members , a director, a public relations executive and the manager for the Carlsbad Visitors Information Center. About half the budget supports the information center, which is housed in the bureau’s headquarters in the historic, city-owned Carlsbad Train Depot. The remainder of the budget is spent on advertising and marketing. The bureau’s fiscal year ends June 30.
The city’s allocation for the bureau’s budget is $409,000. The rest comes from contributions from local hotels, Fearn said. No dues are collected because it is not a membership association.
Under the proposal, the city would still be called on to support the visitor center at a cost of about $200,000 a year, Fearn added.
“The bottom line is it (the proposal) would be a win for the city because they stand to realize a substantial savings at the current TOT level,” Fearn said. “But they’d reap even greater rewards as marketing improves and TOT collections go up.”
Fearn anticipates the proposed fee system could increase occupancy rates at local hotels by 10 percent annually. In fiscal 2003-04, Carlsbad’s 10 percent hotel room tax collection totaled $9.2 million.
Aside from boosting the bureau’s marketing muscle, Fearn said additional funds could be used to hire a salesperson to attract more group meeting business for local hotels. However, its focus will continue to be on leisure tourism.
“And that will never change,” he said, adding that Carlsbad has 12 hotels with meeting space.
Talks also are under way to merge the bureau with the Carlsbad Chamber of Commerce. However, the two would maintain separate identities and be housed in different quarters. Funds would be kept separate, but the merger would give the tourism bureau the clout of the chamber’s membership base.
“It makes sense to be affiliated with the chamber because we’d be gaining a membership base,” Fearn said. “But most importantly it will create a unified voice for business and tourism.”
Under California law, if a particular industry wants to set up a self-assessed fee, a business improvement district must be created. It first requires that a majority of the companies affected agree to it and the proposal must pass muster with a governing authority in this case the Carlsbad City Council. Under the plan, hotel operators would be on the proposed business district’s board and control how funds are spent.
Michael Flickinger, the general manager for the Grand Pacific Palisades Resort & Hotel, which has 93 rooms and 143 time-share condos, believes the entire Carlsbad hotel community will back the business improvement district proposal.
“Individual hoteliers will have the choice of increasing their room rate by $1 nightly or absorbing the fee as a sales and marketing cost,” Flickinger said.
Rick Smock, general manager for both the 49-room Best Western Beach Terrace Inn and the 41-room Best Western Beach View Lodge in Carlsbad, said he supports the proposal of a self-assessed fee. But he’s not sure the tourism bureau would benefit from a merger with the chamber, particularly if it had to pay the chamber for any administrative services.
“The bureau will already have to pay the city to collect the fee for the BID, so any other costs would just take more money from tourism marketing,” Smock said.
The idea of a hotel-related business improvement district is nothing new, Fearn said, citing Costa Mesa, San Mateo, Santa Cruz and Sacramento as cities that use them.
Kurt Burkhart, the executive director for the Carlsbad Convention & Visitors Bureau, said tourism-related business improvement districts have become a trend in California because cash-strapped municipal and county governments have siphoned more money from hotel room tax collections in recent years for general fund purposes.
“But we’d be the first tourism BID in San Diego County,” Burkhart said.
Meanwhile, the San Diego Convention & Visitors Bureau is grappling with the effects of two flat budget years followed by two years of cuts. A spring summit is being planned for tourism industry executives to devise a plan to boost advertising and marketing for the destination and the San Diego Convention Center. But whether a tourism business improvement district might be posed as a way to do that is uncertain, said bureau spokesman Sal Giametta.
“A BID could be one of several potential revenue generating models that would be looked at as possibilities,” he said.