It was hardly a surprise that the San Diego City Council , grappling with a $50 million budget shortfall , would once again take an ax to the San Diego Convention & Visitors Bureau.
But its tone in voting to pare the agency’s budget by 10 percent last week was almost apologetic , certainly a contrast to last year, when a much deeper cut was made in the city’s supplement following an audit of the bureau’s travel and entertainment expenses and executive salary packages.
City Councilwoman Toni Atkins went so far as to note that tourism is one of San Diego’s top industries and complimented the bureau on its job of marketing the destination and generating hotel-room tax revenue.
But cuts to an array of the tax recipients, including ConVis, had to be made, she stressed, in accordance with City Manager Lamont Ewell’s proposed $858 million operating budget for the fiscal year that begins in July.
City Councilman Jim Madaffer said: “I don’t think we’d have a lot of this money if it were not for ConVis. This place doesn’t market itself.”
ConVis recently released a report showing that the bureau’s operating budget of $12.5 million for fiscal 2005 , 78 percent of which comes from revenue generated by a 10.5 percent tax on hotel rooms within the city , puts it in 16th place among major U.S. destinations.
City Won’t Fall Apart
But Reint Reinders, the president and chief executive officer of a bureau that was found to be “substantially in compliance” following City Hall’s audit last year, said another budget reduction doesn’t mean the county will fall off travelers’ maps.
“San Diego as a travel brand is a consumer product,” Reinders said. “It’s like Coke or any other brand. Of course people know about it, but it has to be advertised and marketed.
“Will San Diego fall apart with less money to spend on marketing? The answer is no. We still have great weather and beautiful beaches that will attract visitors.”
Yet City Hall may not be the last stop on the route to finding money to pay for tourism marketing, if the city’s hotel community itself takes on the responsibility by creating a business improvement district, as Mike McDowell, the executive vice president of the San Diego Lodging Industry Association, has proposed.
Seeking Guidance
McDowell, who pitched the plan during last week’s budget hearings at City Hall, saw it as an important first step in bringing it to a vote of the San Diego City Council.
“All I wanted to do was ask the council to direct the city manager to work with us and tell us what to do to get a concrete proposal to bring to them in the form of a proposed ordinance that can be voted on,” McDowell said. “And at the meeting (City Councilman) Scott Peters asked the manager to do that.”
If the City Council affirms the decision it made last week, ConVis could lose $1 million of its $9.8 million supplement in the upcoming fiscal year. The council has until the end of June to finalize its budget decisions.
The proposed cut to ConVis would leave the 66-person agency with a total operating budget of $11.5 million for fiscal 2006 if the $2.7 million it receives in private revenue, coming primarily from dues paid by its 1,200 members, remains consistent.
“We (the hotel community) have got to take control of the revenue stream for marketing the destination,” McDowell said. “With two flat years, followed by three years of cuts in the ConVis budget, it appears there’s no light at the end of the tunnel.”
Declining Budget
In fiscal 2002 and 2003, ConVis had a total operating budget of $16.3 million and $16.2 million, respectively, while the city’s allotment was flat at $13.9 million. In the fiscal year that followed, ConVis saw its supplement reduced by 10 percent to $12.5 million, while its total operating budget was $14.9 million. In fiscal 2005, the city slashed its allotment by 21.5 percent to $9.8 million, and the total operating budget was $12.5 million
Following the cuts, the bureau eliminated 31 jobs, and City Hall handed its job of marketing the San Diego Convention Center over to the San Diego Convention Center Corp.
“If the trend of cuts (to ConVis) continues, even at 10 percent, we’ll be down to $5 million in the next few years,” said McDowell.
But if the City Council approves an ordinance to allow the creation of a tourism business improvement district that would give the city’s hotels the right to tax themselves a 2 percent assessment above the 10.5 percent nightly room tax, McDowell said about $24 million could be generated annually to pump into destination marketing.
“Then, 100 percent of the money would go to ConVis, the same as when the TOT (transient occupancy tax) was created 40 years ago,” he added. “Not 8 percent that currently goes to core tourism marketing.”
While there are 53,000 hotel rooms throughout the county, the city of San Diego accounts for about 35,000 of that figure. For calendar 2004, the county’s hotels averaged an occupancy rate of 72.2 percent. But the rate is slightly higher for hotels within the city limits, particularly in the Downtown convention hotels, said ConVis spokesman Sal Giametta.
If it passes muster with City Hall, the proposed tourism business improvement district would then need a simple majority , 50 percent plus one vote , to take effect.
McDowell said he met with a couple of council members and the staff members of others before the budget hearing, but he didn’t sample their opinions.
“I briefed the staffs from an idea perspective,” McDowell said. “But I didn’t shop the plan. It’s way too early for that. We don’t really know what the plan will look like.
“The response to the idea has been very positive, yet I expect it could take four to six months before it comes before hotels for a vote.”
A report that ConVis released last week on funding for convention and visitor bureaus shows that Las Vegas was first, with $190.4 million; Orlando, Fla., was second with $41.3 million; and Reno, Nev., was third with $36.8 million. San Diego’s spending was comparable to Philadelphia, which was No. 15, with $13.2 million, while San Antonio was No. 14 with $14 million.
“The civic leadership needs to come together and agree on a plan to increase revenue to support tourism,” Atkins said. “The problem now is we continue to do this dance and we’re not coming together.”
Atkins was referring to two subsequent ballot propositions in 2004 that would have raised the city’s hotel-room tax from 10.5 percent to 13 percent. While the March 2004 proposition would have set aside a portion of the revenue increase for ConVis, the last such measure brought before voters in November did not.
Yet the fact both failed to pass at the polls prompted some hoteliers, including Joe Terzi, a regional manager of Starwood Hotels and the immediate past chairman of ConVis, as well as Bill Evans, managing director of the Evans Hotel Group, to speak in favor of the proposed tourism business improvement district, even before it was formally announced.
Terzi and Evans are both members of the Lodging Industry Association, which McDowell said has 13 board members who represent 14,000 hotel rooms within the city. It is not a general membership association, he pointed out.
While cuts to hotel room tax recipients varied, a few community festivals saw budget boosts, including the La Jolla Festival of the Arts. First-time funding was also made available to two programs, the Coca-Cola Zero Rock ‘n’ Roll Marathon, which was awarded $19,500, and Accessible San Diego, which received $11,712 for a beach wheelchair program.
