What the Lack of Tourism Marketing Meant

What the Lack of  Tourism Marketing Meant

Photo by Sam Hodgson

The Bahia Resort Hotel

San Diego’s beaches and top attractions haven’t gone anywhere but travel industry leaders have said for months that the city’s losing out on thousands of visitors because of weak marketing.

Their argument won over the City Council late last month. A majority agreed to release $6 million collected as part of a tax on hotel stays for promotional efforts mostly sidelined since January.

Not everyone’s convinced the dearth of television ads and other previously organized marketing strategies have really impacted San Diego tourism.

After all, visitors are still coming. In fact, there are even more of them than last year.

The city’s hotel occupancy rates were slightly up for the first 10 months of the year – 73.6 percent this year versus 73 percent last year, according to a national tourism industry group. San Diego remains one of California’s top four travel markets.

And yet many hoteliers, tourism experts and city leaders – including some who were initially leery – are now almost certain the forced pullback in promotions had a significant effect on San Diego tourism.

Jerry Morrison, an Encinitas-based tourism who regularly crunches visitor data, is one of them.

Months ago, I talked to Morrison about a Tourism Authority executive’s March claim that hotel occupancy was down due to a lack of marketing.

At the time, he wasn’t convinced. A trend hadn’t been established and San Diego hoteliers had only missed out on marketing cash for about three months. Morrison wanted to see more numbers.

Ten months later, he’s got them.

A recent report by Smith Travel Research, which produces regular reviews of tourism across the country, showed an average of a 6.5 percent year-over-year hike in revenue per available hotel room for the nation’s top 25 travel markets. That review measured January through October.

San Diego hasn’t performed quite as well. It’s up just 3.7 percent, less than California’s other top travel markets.

 

Hotel Room Revenue Growth in Top California Markets

 

Morrison said there’s not much else that could explain why San Diego isn’t seeing the same year-over-year increases as other markets.

“If it isn’t marketing, I don’t know what else it is,” he said.

But he was still a bit noncommittal, particularly when it comes to a recent statement from mayoral candidate Kevin Faulconer’s campaign.

Here’s that snippet, from a Faulconer press release:

“A lack of marketing has already resulted in the city of San Diego losing out on more than $3 million in tourism revenue when compared to tourism growth in the rest of the country – money that could have gone to street repair and other neighborhood services.”

Faulconer’s camp seems more certain of the impact of the reduced tourism marketing cash. I asked to see their math.

A spokesman provided me with a breakdown of city transient occupancy tax collections for the first eight months of the year.

According to those records, the city collected about $110.2 million in so-called hotel taxes during the first eight months of 2012 and about $114.6 million during the same period in 2013. That’s about a 3.9 percent increase.

The Faulconer campaign assumes San Diego would’ve brought seen a larger hike – the same 6.8 percent increase in tourism revenue that other top 25 travel markets saw through September – if hoteliers had been able to access hotel taxes held back due to the previous tourism marketing deal.

Morrison generally didn’t dispute the Faulconer team’s methodology, though he noted they used a September statistic but only looked at tax collections through August.

Still, he said it’s a responsible way to tabulate how San Diego might have performed and the result is about the same using the September numbers.

But as for Faulconer’s conclusion that the lack of marketing is responsible for money the city didn’t see?

“It’s probably true but I can’t prove it,” Morrison said. “And he can’t either.”

The chairman of the San Diego County Hotel-Motel Association and North County-based tourism marketing guru each took a more conservative view of how the decrease in marketing might have affected San Diego tourism earlier this year.

They’re now both sure the pullback in marketing had some impact, though neither was willing to say how much.

David Brudney, a Carlsbad-based marketing consultant who has counseled cities including Baltimore and Vancouver on tactics to draw tourists, noted that Faulconer’s math added up but said there are several other factors to be considered.

For example, Brudney said, perhaps other top 25 cities did a better job promoting their destinations before the tourism marketing fight ever materialized.

Jim Durbin, a Faulconer supporter and general manager of the San Diego Marriott Gaslamp Quarter, thinks the impact of the decreased marketing and staffing cuts at the Tourism Authority will be felt for some time.

Even the initial impact could be far more than Faulconer’s campaign projected, Durbin said.

The several months of reduced staffing created an opportunity for travel executives elsewhere to secure conventions and larger group visits for their cities, said Durbin, who chairs the hotel association.

And other cities may still have an opening.

“When you gut 40 percent of your sales force and have to let them go, it takes a while to ramp back up,” Durbin said.

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Lisa Halverstadt

Lisa Halverstadt

Lisa Halverstadt is a reporter at Voice of San Diego. Know of something she should check out? You can contact her directly at lisa@vosd.org or 619.325.0528.

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14 comments
Richard Ross
Richard Ross

The problem is that the city shouldn't be involved in the collection of TMD funds. Let the hotels collectively raise the promo money and spend it as they see fit. This would eliminate the city's legal liability under the present system.

Richard Ross
Richard Ross subscribermember

The problem is that the city shouldn't be involved in the collection of TMD funds. Let the hotels collectively raise the promo money and spend it as they see fit. This would eliminate the city's legal liability under the present system.

Bob McDaniel
Bob McDaniel

If I understand this correctly, Councilman Faulconer wants to spend $30 million in taxpayer's dollars so the City can increase hotel tax revenues by $3 million dollars. No wonder the Tourism Marketing District doesn't want to spend their own money when the City collects 10 cents for every dollar spent.

Bob McDaniel
Bob McDaniel subscriber

If I understand this correctly, Councilman Faulconer wants to spend $30 million in taxpayer's dollars so the City can increase hotel tax revenues by $3 million dollars. No wonder the Tourism Marketing District doesn't want to spend their own money when the City collects 10 cents for every dollar spent.

Don Wood
Don Wood

I'm sure the local hotel owners appreciate VOSD helping spread their propaganda and supporting diverting more city tax money to their use.

Don Wood
Don Wood subscriber

I'm sure the local hotel owners appreciate VOSD helping spread their propaganda and supporting diverting more city tax money to their use.

Erik Bruvold
Erik Bruvold

Part of the problem is that it is really hard (impossible?) to disentangle the impacts. NUSIPR did some research that showed that San Diego hotel/motel employment off about 8% from 2007 levels. Meanwhile a few other markets (LA, Orlando, Hawaii) have fully recovered from the dip and as of 2012 annual figures are back above it. Ultimately as a City we likely invest in tourism first and foremost for its economic development impacts and measured by employment we haven't seen a full recovery.

But the problem is that there are things going on in addition to the waxing and waning of marketing. Both LA (since the data combined OC and LA counties) and Orlando have both benefited from what amounts to an unprecedented arms race in the themepark industry, with Disney and Comcast (parent to Universal) investing MULTIPLE Billions in themepark upgrades and promotions that dwarf the relatively modest investments made by San Diego's operators. All of the major markets that have fully recovered have strong international air infrastructure, allowing those markets to more fully benefit from continued increases in the number of middle class leisure travelers from Asia and Latin America. Key drive markets for San Diego (Phoenix and Las Vegas) got HAMMERED by the housing recession, driving down demand. What would be required, ultimately is really good public opinion research to try to determine "share of mind" in key markets...and research done multiple times in the past so you could see if the absence from the market actually had an impact.

Erik Bruvold
Erik Bruvold subscribermember

Part of the problem is that it is really hard (impossible?) to disentangle the impacts. NUSIPR did some research that showed that San Diego hotel/motel employment off about 8% from 2007 levels. Meanwhile a few other markets (LA, Orlando, Hawaii) have fully recovered from the dip and as of 2012 annual figures are back above it. Ultimately as a City we likely invest in tourism first and foremost for its economic development impacts and measured by employment we haven't seen a full recovery.

But the problem is that there are things going on in addition to the waxing and waning of marketing. Both LA (since the data combined OC and LA counties) and Orlando have both benefited from what amounts to an unprecedented arms race in the themepark industry, with Disney and Comcast (parent to Universal) investing MULTIPLE Billions in themepark upgrades and promotions that dwarf the relatively modest investments made by San Diego's operators. All of the major markets that have fully recovered have strong international air infrastructure, allowing those markets to more fully benefit from continued increases in the number of middle class leisure travelers from Asia and Latin America. Key drive markets for San Diego (Phoenix and Las Vegas) got HAMMERED by the housing recession, driving down demand. What would be required, ultimately is really good public opinion research to try to determine "share of mind" in key markets...and research done multiple times in the past so you could see if the absence from the market actually had an impact.

La Playa Heritage
La Playa Heritage

http://tinyurl.com/20130417

For the first 5 years of the TMD (2008-2012) when the money was flowing for advertisement, San Diego still did relatively worse than other the average in the United States, and relatively worse than other California cities. See Pages 5, 10 and 11. For example in December 2012 when the money was still flowing San Diego Occupancy and ADR changed negative -2%, compared to ALL other California areas which increased an average of + 6%.

Page 7 from Smith Travel Research presentation at the SDTA Annual Meeting shows that for 2012 out of 162 Markets, San Diego only ranked between Number 10 to 101 on metrics.

For 2008 to 2012 San Diego did worse all 5 years than Los Angeles and Seattle. And worse 4 of the 5 years than San Francisco and Anaheim.

La Playa Heritage
La Playa Heritage subscribermember

http://tinyurl.com/20130417

For the first 5 years of the TMD (2008-2012) when the money was flowing for advertisement, San Diego still did relatively worse than other the average in the United States, and relatively worse than other California cities. See Pages 5, 10 and 11. For example in December 2012 when the money was still flowing San Diego Occupancy and ADR changed negative -2%, compared to ALL other California areas which increased an average of + 6%.

Page 7 from Smith Travel Research presentation at the SDTA Annual Meeting shows that for 2012 out of 162 Markets, San Diego only ranked between Number 10 to 101 on metrics.

For 2008 to 2012 San Diego did worse all 5 years than Los Angeles and Seattle. And worse 4 of the 5 years than San Francisco and Anaheim.

Bill Bradshaw
Bill Bradshaw

Did the Filner saga hurt? Who knows, but our ex-mayor can’t be accused of over-promoting tourism, that’s for sure. As for Chris Brewster’s comments, are there other cities which allow hotels (and short term house rentals, by the way) to opt out of collecting bed taxes? You’ll have to show me those.

On the inability to measure the impact of marketing, these numbers seem pretty conclusive to me. Remember, we were gradually coming out of a recession in both 2012 and 2013 (still are, for that matter), so the very slight increase in hotel occupancy isn’t a contrary indicator to other factoids in the story. I love the statement that “...San Diego is one of California’s top four travel markets”.... One would certainly hope so, being the second largest city, with the most convenient airport in the country, loads of attractions including Mexico right next door and miles of beaches with free parking nearby.

What struck me was the increase in hotel revenue, not only 43% lower than the average of the top 25 markets nationwide, but look at the other three California markets, up not 6.5% but an average of 9% compared to our 3.7%.

Bill Bradshaw
Bill Bradshaw subscribermember

Did the Filner saga hurt? Who knows, but our ex-mayor can’t be accused of over-promoting tourism, that’s for sure. As for Chris Brewster’s comments, are there other cities which allow hotels (and short term house rentals, by the way) to opt out of collecting bed taxes? You’ll have to show me those.

On the inability to measure the impact of marketing, these numbers seem pretty conclusive to me. Remember, we were gradually coming out of a recession in both 2012 and 2013 (still are, for that matter), so the very slight increase in hotel occupancy isn’t a contrary indicator to other factoids in the story. I love the statement that “...San Diego is one of California’s top four travel markets”.... One would certainly hope so, being the second largest city, with the most convenient airport in the country, loads of attractions including Mexico right next door and miles of beaches with free parking nearby.

What struck me was the increase in hotel revenue, not only 43% lower than the average of the top 25 markets nationwide, but look at the other three California markets, up not 6.5% but an average of 9% compared to our 3.7%.

Chris Brewster
Chris Brewster

As I recall, part of the reason this tax was created was based upon an effort of boosters of tourism promotion to force some of their reluctant fellow tourism businesses to join in a collective effort. That is, were they to have created an opt-in system, some would have opted not to pay for the effort. That could be because they are freeloaders. It could also be that they don't see the utility of the efforts or consider them cost-effective. In any case the market is not driving the promotional work in this instance it seems, since no one seems able to meaningfully measure the impact of marketing. Meanwhile, every nationally televised Chargers game on a nice day reminds those freezing up in Buffalo of where they might like to be.

Chris Brewster
Chris Brewster subscribermember

As I recall, part of the reason this tax was created was based upon an effort of boosters of tourism promotion to force some of their reluctant fellow tourism businesses to join in a collective effort. That is, were they to have created an opt-in system, some would have opted not to pay for the effort. That could be because they are freeloaders. It could also be that they don't see the utility of the efforts or consider them cost-effective. In any case the market is not driving the promotional work in this instance it seems, since no one seems able to meaningfully measure the impact of marketing. Meanwhile, every nationally televised Chargers game on a nice day reminds those freezing up in Buffalo of where they might like to be.