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Wednesday, Feb 28, 2024

Tourism Marketing District to Allow Hotels to Increase Promotional Funds

With the passage of a proposed tourism marketing district that gives local hotels the ability to assess themselves to raise destination marketing funds rather than relying on annual supplements from cash strapped City Hall, the San Diego Convention & Visitors Bureau is preparing to do more with more, instead of more with less as it has for the past few years.

“We’re about 85 percent of the way toward making a new plan,” said David Peckinpaugh, the bureau’s president and chief executive, adding that the specifics need approval from the bureau’s board of directors.

Among ways to “grow incremental demand” for hotel rooms, the primary objective of the TMD, he said plans are to increase advertising spending on cable TV stations, newspapers and magazines, as well as the Internet. Network television advertising is still out of reach, he added.

The total dollar amount for the revised marketing budget has yet to be set. However, Peckinpaugh anticipates that it will be significantly higher than the $3.2 million budgeted for the fiscal year which began in July. The media buy portion of that sum currently stands at $2.6 million.

In 2003 when ConVis had reached a funding apex, it had a total operating budget of $16.2 million, of which $13.9 million came from City Hall via a 10.5 Transient Occupancy Tax, or hotel room tax. The remainder came from private sources, primarily membership dues. At that time, the bureau’s marketing budget was about $6 million. “That’s a benchmark” for augmenting the spending, Peckinpaugh said.

Target Cities

As in the past, the national advertising would target the cities of Los Angeles, Las Vegas, Sacramento, San Francisco, Phoenix and Tucson, Ariz., which are the county’s biggest suppliers of leisure tourists.

Between fiscal 2004 and 2006, the bureau lost 37 percent of its funding, or $5.1 million, and reduced its staff from 102 to the current total of 65 people. Part of the reason for the staff reduction was that ConVis lost one of its main jobs, marketing space at the 2.6-million-square-foot San Diego Convention Center, however in addition to the task of luring leisure tourists, it still markets space for in-hotel meetings and events.

While City Hall has slashed budgets for services and agencies in order to deal with an under-funded municipal pension system, the bureau’s supplement was left intact in fiscal 2007 and remained flat in fiscal 2008 at $8.8 million.

Its total operational budget of $14.6 million is made up from private sources, primarily dues.

Meanwhile, ConVis pulled back marketing on the international front. Yet that is about to change. “They (California Travel and Tourism Commission) have $50 million to spend annually over the next seven years, with 40 percent plus going to international tourism development,” Peckinpaugh said, explaining that ConVis expects to piggyback on the state’s program.

Again, how much money ConVis would direct to overseas marketing is uncertain.

However, he said the emerging travel markets of China, South Korea and India will likely be targeted.

Peckinpaugh said new money would also be allocated to building the bureau’s staff up again, starting with the number of salespeople stationed at different locales across the country. At present, ConVis has 16 people in such positions.

“It’s too preliminary to say how many more would be added,” he said. “But I’d say there’s the potential of doubling that force.”

The “help wanted” sign may also be visible in the window of the bureau’s Little Italy offices as more personnel will be needed to help the additional marketing workload, he added, yet how many is uncertain.

Projections are that the TMD, which goes into effect in January, could rake in from $26 million to $30 million annually from a 2 percent assessment tacked onto the rate guests pay for daily hotel room stays.

Of the total, ConVis would receive 50 percent, but it could request additional funding for specific events, while the San Diego North Convention & Visitors Bureau would get a set 10 percent, about 8 percent of which would cover the cost of administering the program and the remainder of which would be directed to other promotional programs and events that spur tourism.

For the first year, those that are already in place, such as the Holiday Bowl, are guaranteed TMD funding, but afterward their funding would be based on their ability to show a return on investment, according to the TMD proposal.

The 2 percent assessment that funds the district would be in addition to the 10.5 percent TOT on hotel room bills that the city collects. Because the self-assessment technically is not a tax, it did not require a public vote to pass.

North County Joining In

Cami Mattson, president and chief executive officer of the smaller, Escondido-based bureau that markets the North County’s hotels and attractions, said it too plans to augment its marketing.

She couldn’t give details, but said a likely focus would be on so-called “new media” advertising, such as Internet sites and blogs, that target social exchanges as opposed to advertising in “old media,” or traditional broadcasting or print media outlets.

For the current fiscal year the San Diego North Convention and Visitors Bureau has a total budget of $1.1 million, including $380,900 from the city of San Diego.

During a City Council meeting last week, the weighted ballots from 173 hotels within the city limits gave 91.2 percent approval to the proposed TMD.

The vote followed a lengthy marketing push from the proposal’s backers, the San Diego County Hotel-Motel Association and the San Diego Lodging Industry Association, which together include the owners and operators of most of the properties.

Because the marketing district is essentially a business district, state law required that it had to pass muster with a governing authority, in this case City Hall.


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