The Hoteliers’ Convention Center Gambit

The Hoteliers’ Convention Center Gambit

Photo by Sam Hodgson

Hotels on San Diego's downtown waterfront

 

Before agreeing to support a tax increase to pay for a Convention Center expansion, San Diego’s hoteliers want something first: more control over the Convention Center.

And when you rely on a powerful interest group to raise taxes, you have to try to give the powerful interest group what it wants.

San Diego Mayor Jerry Sanders and other supporters of expanding the facility have decided hoteliers, not the public, should vote on a hotel-room tax hike to pay for most of the project. Ballots for the hoteliers’ vote are scheduled to go out later this month.

First, though, hoteliers are asking the city for greater power over the Convention Center’s sales and marketing. Right now, a city-created nonprofit board handles those duties. Hoteliers want a private tourism promotion organization to do it instead.

The region’s umbrella labor group and the center’s staff oppose the switch, saying sales and marketing should be left in public hands. But at Sanders’ behest, the City Council will vote on the shift Tuesday.

You wouldn’t think Convention Center sales and marketing would create such a dustup. It’s just a $3.1 million annual contract. But the issue has turned into a major flashpoint, one that could threaten the expansion. Both sides claim that their position is better for city taxpayers. Here’s a rundown of why this became a big deal and why you should care.

Why Make The Change?

Right now, two organizations are responsible for marketing San Diego to visitors. The Convention Center Corp., a nonprofit public agency, promotes the center to trade groups. The San Diego Convention & Visitors Bureau (or ConVis) promotes the city to all tourists. The proposed change will privatize the center’s sales and marketing by running it through one organization, ConVis.

“It’s the most efficient way to do sales and marketing,” said Steve Cushman, Sanders’ expansion point man.

Sanders’ office noted that organizations like ConVis handle promotions for 80 percent of municipal convention centers in the country.

The change will allow ConVis to focus on getting bigger organizations into the center, said Bill Evans, a prominent Mission Bay hotelier.

“We’re trying to make it so it’s more efficient so there’s more money available for marketing to fill the center even more,” Evans said.

Efficiency might be the hoteliers’ buzzword, but there’s another reason they’re so interested: their own bottom lines.

Private control over Convention Center’s booking will allow ConVis to direct smaller events to hotels, instead of the center. Hotels would reap those profits.

More business at hotels means more tax dollars into city coffers, the hoteliers contend. In essence, hoteliers argue what’s good for the hotel industry is good for the city.

“The thing that everybody has to remember is every resident in the city of San Diego gets a return,” said John Schafer, vice president of the Manchester Grand Hyatt, the city’s largest hotel. “You and I would be paying more to the city in taxes if we didn’t have visitors visiting our city every single day and leaving money here that helps us buy police cars and fire trucks and pave the roads.”

Why Keep Things As They Are?

No one has made more than a superficial case that the marketing needs to be changed.

In fact, the city took the center’s booking away from ConVis eight years ago, citing inefficiencies with marketing. The switch came after a scandal involving thousands in public dollars being spent on liquor and a golf trip for ConVis’ then-executive director.

After the change, the center had an immediate uptick in business and exceeded sales goals every year thereafter, according to a Convention Center Corp. report released Monday.

“I think the decision they made in 2004 was the right one,” said Convention Center CEO Carol Wallace, who opposes any changes. “I think the performance has proven that out.”

A Sanders-created task force praised the center’s marketing when it made the case for an expansion. It cited the center’s “highly focused marketing process” as one of the eight reasons the Convention Center was successful.

Taxpayers have a direct stake in the decision. The city’s day-to-day operating budget, which pays for police, fire and other general services, subsidizes the center’s operations at $3.4 million a year. Wallace isn’t sure where ConVis’ $3.1 million sales and marketing contract will come from. But if it’s the city subsidy, the center will have little cash left over.

Wallace said she fears taxpayers will be on the hook for greater Convention Center subsidies so that the center can continue to fulfill other commitments. The corporation has drained its reserves to cover expansion costs and has $20 million worth of improvements and repairs scheduled over the next five years.

“In budgeting when you have less money, you can’t do more with less,” Wallace said. “You do less with less is what really happens.”

Meantime, labor has balked over the proposal. Seven unions operate in the Convention Center and less business there could hurt their members.

Lorena Gonzalez, who heads the region’s labor umbrella group, said she’s opposed to what she called the center’s privatization. She referred to the proposal as “the most blatant, ridiculous giveaway I have ever seen since I’ve gotten to San Diego.”

“If this City Council represents hotel owners, they’re doing a really good job if they pass this,” Gonzalez said. “It’s clear that the Mayor’s Office does now.”

Is Someone Really Going To Kill The Expansion Over This?

It would be stunning if the city’s hoteliers, who stand to see hundreds of millions of dollars in new revenues from the expansion, oppose it because they didn’t get control of the center’s booking. It would be equally stunning if labor tries to kill the project if the booking gets switched to ConVis.

But neither side is saying that now.

Schafer, the Hyatt vice president, said he isn’t sure if his parent company, Host Hotels & Resorts, will vote yes on the tax hike without greater control over the center’s business. And it’s possible Host might be able to block the vote on its own. Other hoteliers have sounded similar notes.

Gonzalez said the marketing switch violates one of the deal points labor told the mayor it needed for its support.

“Will we work on opposing the Convention Center if it’s tied to this? Absolutely,” she said.

Labor could draw out the expansion through lawsuits over its questionable financing plan or use its influence at the California Coastal Commission, a state regulatory body, to potentially halt the project.

Sanders’ office is working as if this issue is a deal-breaker. It pushed the proposal onto the council agenda late last week, then re-posted it under a special provision Monday after it disappeared from the council website Friday evening.

On Monday, the Convention Center Corp., which also needs to approve the deal, held a meeting that was scheduled so late its members had to meet by telephone. The meeting lasted 20 minutes, half of which were spent determining if the board’s nine members were actually on the phone. Three of them weren’t.

Once the meeting started, a board member immediately asked to postpone the meeting until Tuesday at noon, citing only “personal reasons.” The postponement passed unanimously without any discussion among the board members on the conference call. A few hours after the corporation votes on Tuesday, the council is scheduled to vote.

One More Thing Worth Noting

No one has produced any financial analysis for what the marketing switch means for the bottom lines of the hoteliers, the Convention Center or city taxpayers.

And if the switch passes, the change will occur with or without the expansion. The project itself faces numerous legal and other questions before it becomes a reality.

Liam Dillon is a news reporter for voiceofsandiego.org. He covers San Diego City Hall, the 2012 mayor’s race and big building projects. What should he write about next?

Please contact him directly at liam.dillon@voiceofsandiego.org or 619.550.5663.

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Liam Dillon

Liam Dillon

Liam Dillon is senior reporter and assistant editor for Voice of San Diego. He leads VOSD’s investigations and writes about how regular people interact with local government. What should he write about next? Please contact him directly at liam.dillon@voiceofsandiego.org or 619.550.5663.

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6 comments
Elmer Walker
Elmer Walker subscriber

So much for the Mayor's promise that any new or increased tax/fee would be voted on by citizens. You can not rationalize this as not qualifying for a popular vote. Why do I not trust politicians?

elmerew
elmerew

So much for the Mayor's promise that any new or increased tax/fee would be voted on by citizens. You can not rationalize this as not qualifying for a popular vote. Why do I not trust politicians?

Ian Trowbridge
Ian Trowbridge subscribermember

The Convention Center Board meeting yesterday was an " Alice in Wonderland" event. Phil Blair made a motion for a continuation and the zombies voted to do that over my objection. They could have heard public testimony, closed public testimony and continued the item. They chose not to screwing the public present who wished to speak. Open honest government-I think not.

iantrowbridge
iantrowbridge

The Convention Center Board meeting yesterday was an " Alice in Wonderland" event. Phil Blair made a motion for a continuation and the zombies voted to do that over my objection. They could have heard public testimony, closed public testimony and continued the item. They chose not to screwing the public present who wished to speak. Open honest government-I think not.

Lucas OConnor
Lucas OConnor subscriber

3. oppressive or illegal exaction, as of excessive price or interest:

lucasoconnor
lucasoconnor

3. oppressive or illegal exaction, as of excessive price or interest: