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Tour Agencies On the Hunt for Funding Streams

Reint Reinders needed no rehearsal when he addressed a panel on the topic of doing more with less in financially tough times at the annual meeting of the Professional Convention Management Association in Philadelphia recently.

As the president and chief executive officer of the San Diego Convention & Visitors Bureau, the county’s primary tourism marketing arm, Reinders knows the subject chapter and verse. Within the last three fiscal years, he has seen the agency’s budget pared by 37 percent, or $5.1 million, to $12.3 million. The city contributes $8.8 million; the remainder comes primarily from membership dues. And he’s spoken to just about anyone who will listen , from politicians to business groups , about the difficulties such deep cuts have on maketing San Diego as a tourism destination.

“The question we currently face is how do we preserve the professionalism of the CVB as we continue to have funding pressure.”

Within the last year, ConVis toyed with the idea of marketing and selling some software that it had developed to streamline hotels’ group business reservations. It also came up with a “pay-to-play” plan to generate referral fees from North County hotels that do not contribute to the city of San Diego’s hotel room tax. Neither idea panned out, but as Reinders said, the amount of money they would have brought in is miniscule compared to what is needed.

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“We need hundreds of thousands of dollars, not tens of thousands of dollars,” he added.

Meanwhile, sponsorships, such as those with Ford Motor Co. and American Express that amount to cross promotions, have been an effective way to leverage marketing dollars for the bureau in recent years. But officials are uncertain whether ConVis will be able to come up with its share of the cost to continue such promotions.

As ConVis spokesman Sal Giametta pointed out, the bureau recently had to turn down the Smithsonian Institution’s offer of a cross promotion involving Balboa Park, since it would have required $1.2 million in matching funds.

According to Reinders, “plugging the hole” in the ConVis budget will require one of two things: convincing City Hall to increase its current $8.8 million supplement, or putting a tourism business improvement district in place that would have the ability to assess a 2 percent nightly fee on hotel rooms within the city limits.

Both prospects face an uncertain future. The plan to create a tourism business improvement district, which could generate $24 million annually, has been floated for more than a year.

How much of that sum would go to ConVis is undetermined. A proposal is still in the works.

Yet even its backers, including members of the San Diego Lodging Industry Association and the San Diego County Hotel-Motel Association, don’t know how much support it has within the local hotel community. Before such a district can be created, it must be approved by City Hall. Then it needs a 50 percent plus-one majority vote of the hotels affected to pass.

Bob Rauch, co-owner of the Homewood Suites by Hilton San Diego/Del Mar, said he is heading up an effort by the Lodging Industry Association to “educate” local hoteliers on the relative merits of the proposed district.

“We are conducting an outreach to make sure every hotel owner and operator is contacted and we encourage everyone to get involved and weigh in, so that we can determine if this is what the hotel community wants,” Rauch said.


An Easier Row To Hoe?

The San Diego Convention Center Corp., which oversees the 2.6 million-square-foot Downtown facility, reported total operating revenue of $24.8 million in the fiscal year ended in June, including revenues from rentals and contract services. For the current fiscal year, its projected revenue is $28 million. But agency officials have made it clear that the center has less money than others in its class to offer discounts to lure big conventions. Of the $4.3 million it will receive from the city, $2.5 million will be for rental buy-downs.

“Some (convention centers) are giving away space,” said Carol Wallace, the San Diego Convention Center Corp.’s president and chief executive officer.

Unlike ConVis, which depends on City Hall for the lion’s share of its budget, the Convention Center, which will derive about 45 percent of its revenue from contracted services, including food and beverage, telecom, utilities and electrical services, apparently has the ability to expand those services to generate additional revenue.

Wallace announced that the agency has awarded Quantum Productions Inc. a contract to be its “preferred” production company in exchange for a commission from business referrals.

Exactly how much revenue that contract will generate is uncertain. The commissions paid by contractors generally range from 5 percent to 36 percent. Quantum Productions will pay from 5 percent to 15 percent for various services it will provide, including d & #233;cor, props, linens, floral arrangements, lighting and talent, Wallace added.

“We have no ballpark estimate on the amount of revenue this could create,” Wallace said.

Pam Navarre, the president and chief executive officer of Quantum Productions, said she expects to see a “significant increase” in her firm’s bottom line as a result.

“We are projecting a $1.5 million increase in our gross sales for 2006,” she said. “Keep in mind, there is no history to work with, so we have no way of really knowing.”

Yet creation of the preferred post met with controversy. Several destination management companies, which make their money by acting as the local arm for out-of-town meeting planners, complained that the appointment would give one firm an unfair advantage over the others. They also objected to the city-owned facility engaging in a partnership that would compete with local small businesses. Several that were solicited to participate in the bid virtually boycotted the process.

As Reinders said, “Politicians are going to deal with a city’s financial problems first before they consider funding tourism marketing.”

Wallace agrees with Reinders that both ConVis and the Convention Center Corp. need to find ways to become less reliant on public funds.

“Everyone’s being asked to do that,” she said. “But it doesn’t make it any easier.”

Could that entail bringing on more preferred contractors?

“We have no specific plan right now, but we wouldn’t dismiss the idea,” she said.

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