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Monday, Jan 30, 2023
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City Attorney on Board With Hotel Room-Tax Plan

A sometimes contentious city attorney who recently threw cold water on a proposal for a tourism business improvement district that could help market San Diego as a destination appears to have changed his tune.

San Diego City Attorney Michael Aguirre now says he will try to help its backers craft a proposal that will pass muster , at least legally.

The plan , touted by several hotel owners and operators as a way to shore up a dwindling share of the nation’s burgeoning tourism market , calls for a self-imposed 2 percent surcharge on nightly room rentals at 300-plus hotels within the city limits. If approved, they project that a tourism business improvement district could generate some $26 million in marketing funds annually.

Aguirre said the proposed fee would have to be absorbed in hoteliers’ business costs. If it were to appear as a line item on a guest’s bill, it would have to be put to a citywide vote and garner a two-thirds majority to pass.

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Under California law, if an industry wants to set up a self-assessed fee, a business improvement district must be created. A simple majority of the firms affected has to agree to it and the proposal also needs approval from a governing authority , in this case the San Diego City Council.

Several California cities have initiated tourism business improvement districts to jump-start marketing and advertising to attract visitors in budget strapped times, including Sacramento, Vallejo and, earlier this month, Carlsbad.

The self-assessment would be in addition to the city’s 10.5 percent hotel room tax.

During the fiscal year that ended in June, revenue generated from the city’s hotel room-tax collection amounted to $121 million. Projections are that the figure will jump to $128 million during the current fiscal year.

The San Diego Convention & Visitors Bureau, the destination’s primary tourism marketing arm, has seen the city slash its budget 37 percent in the past three years. In fiscal 2003, ConVis received $13.9 million in hotel room-tax funds from the city. This year, the city subsidy dropped to $8.8 million.

Mayor-elect Jerry Sanders was somewhat noncommittal on the topic of a tourism business improvement district.

“Two failed attempts to secure voter approval last year demonstrated that any plans to increase the TOT (transient occupancy tax) will require the support and cooperation of the lodging industry,” he said. “I understand members of that industry are studying a proposal to assess themselves through a business improvement district to fund promotion efforts.

“I will work with this group to ensure any proposal they put forward is in the best interest of San Diego residents.”

City Councilwoman Donna Frye, who lost the mayoral race, said, “I would like to have them come and present it and hear the pros and cons of this particular proposal.

“I heard a little bit about it during the campaign, but nothing in great detail, and I’d like to read the fine print. New sources of revenue should all be looked at, especially if the people proposing it are doing it voluntarily.”

Starwood Hotels Regional Manager Joe Terzi, who is one of the plan’s proponents, said hoteliers would “rather not impose a fee on themselves.” If done properly, however, he thinks it will benefit the city because it will increase tourism and the hotel room-tax collection at the same time.

Bob Rauch, co-owner of Homewood Suites by Hilton San Diego/Del Mar and director of San Diego State University’s Center for Hospitality and Tourism Research, also backs the proposal. But he said it needs the support of both the 13-member Lodging Industry Association and the 100-member San

Diego County Hotel-Motel Association if it is to pass. To that end, the Lodging Industry Association has formed a working group tasked with educating hotel owners and operators on the merits of the plan during the next couple of months.

But one hotelier they’re not likely to sway is Doug Manchester, who owns the Manchester Grand Hyatt Hotel and the Marriott Hotel & Marina, the city’s two largest convention center hotels.

“The plan is flawed,” said Manchester, who has been credited with helping to defeat last year’s ballot measures to increase the city’s hotel room tax to 13 percent.

Another prominent hotelier, Bill Evans, the president and managing director of Evans Hotel Group, which includes the Catamaran Hotel in Mission Beach, said, “The plan is a win-win for everybody from the smallest to the largest hotels.”

Unlike the hotel room tax, which originated in the early 1960s to provide tourism marketing but has been siphoned off through the years, Evans said that 100 percent of the funds raised by a tourism business improvement district would be directed toward marketing. He also said that ConVis likely would be a funding recipient.

“A determination would be made on the best way, the best model to market, and I personally think ConVis is a great institution and most deserving,” Evans said.

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