Del Mar’s Tourism Business Improvement District to be dissolved

With Del Mar’s Tourism Business Improvement District set to expire this month, the Del Mar City Council on Sept. 21 decided not to renew the district, but rather promote downtown through the transient occupancy tax.

“From a city perspective, we still dedicate the same amount of fee to the effort,” said Mayor Al Corti. “You can get more dollars to the bottom line.”

Formed in 2010, the district allows hotel operators to charge guests a 1 percent fee that is collected with the transient occupancy tax and must be used to attract more visitors to the city. It was authorized for five years and automatically expires at the end of September unless the council has approved an extension.

A representative from each of Del Mar’s hotels, motels and inns — Del Mar Inn/Clarion, Del Mar Motel on the Beach, Hotel Indigo, L’Auberge Del Mar, Les Artistes Inn and Secret Garden Inn — make up Visit Del Mar, the nonprofit created by the district to manage the assessments. Visit Del Mar was incorporated in 2010 and received tax-exempt status in March 2011.

The district admittedly got off to a slow start. It took about three years to connect with the right marketing company, and the district didn’t launch its site — — until 2013.

Still, the district has shown signs of success.

After the Dream Del Mar online marketing campaign commenced in February 2014, there were 119 million total ad impressions, resulting in nearly 125,000 site visitors, according to the district’s annual report, which was presented in June. From those visitors, on average, there were 200 hotel booking clicks per month.

Hotel occupancy and TOT funds have also increased, but only slightly.

The report by Strategic Marketing Group Consulting estimated that the incremental increase resulting from the district’s marketing programs has generated about $16 million in travel spending, of which $2.7 million is in increased lodging revenues. The programs have also generated an estimated $342,000 in incremental tax revenue, including transient occupancy tax and sales tax.

Overall, overnight visitors to Del Mar have increased from 78,873 in 2011 to 82,629 in 2014, a 5 percent increase, according to the report.

Occupancy rates, as reported by the lodging properties, have increased from 63 percent in 2011 to 66 percent in 2014, a 3 percent increase. Overall travel spending generated by overnight visitors staying in Del Mar was an estimated $111 million in 2014.

On July 6, the council declared its intention to renew the district, prompting a public meeting on July 20 regarding the renewal.

The district initially requested a 10-year extension, but the council, at that time, asked the district to bring back a proposal for a five-year term with a reopener and to identify metrics and performance goals that would allow early termination. The council also asked for an alternate proposal on how to support the ongoing marketing efforts without the district.

The council on Sept. 8 continued the second public meeting on the subject to Sept. 21, directing staff to return with three alternatives.

Since then, city staff has worked with district liaisons Mayor Al Corti and Councilman Don Mosier, as well as Del Mar Village Association, which represented hoteliers, to develop alternative models to fund and manage downtown business marketing.

On Sept. 21, the council considered three options. The first option would have extended the district for five years. It would have also been governed by the Management District Plan, which included the proposed boundary of the district, a service plan, a budget and a proposed means of governance. A city representative would have had to sit on the district committee. The council also would have had the ability to terminate the agreement and disestablish the district following DMVA’s annual report each May.

The second option would have reduced the district, which also would have been governed by the Management District Plan. Based on recommendations from the Finance Committee, this model would have eliminated funding for all programs except online marketing. The district would have been up for renewal annually and would have been required to produce quarterly performance metric reports.

The third option, which the council ultimately approved, will allow the district to automatically expire. With the council’s vote, the 1 percent assessment presently levied on lodging businesses will be abolished.

Instead, transient occupancy tax will be increased by 1 percent and dedicated to marketing efforts, creating a funding level similar to the district model. An 18-month initial agreement will be established with DMVA to facilitate marketing of the city’s hotels and other commercial entities, which would evolve to a fiscal year agreement after 2017 to coincide with the city’s budgeting cycle.

This model also requires annual DMVA performance reporting. Annual funding allocation will also be subject to the city’s budget approval process, similar to DMVA’s current funding arrangement.

“You would have the capability of listening to their annual report,” City Manager Scott Huth said to the council. “You would have the ability to fund them, as you do right now, during the budget process. So you could decide during the budget process, which is in May, as to whether or not you want to fund all or a portion of the money that’s there.”

DMVA would have acted as the management entity for marketing under all scenarios. DMVA Executive Director Jen Grove said she preferred the first or third alternative, as the second option reduced funding.

“Originally, we had worked on the TBID model and were comfortable with that,” Grove said. “But after conversations with council, we would be comfortable with option three, also, if that’s the direction that council would like to go.

“We just want to get started with the programming and keep promoting downtown.”

Grove also insisted that the hotels should still be involved.

Up until now, general managers of each of the hotels, as well as L’Auberge Del Mar’s director of sales and marketing, have served on the Visit Del Mar board. The board has met monthly at one of the hotels.

Man Lai Tam, general manager of Hotel Indigo, already serves on DMVA’s board, Grove noted.

“We really want to support the hotels, and we want their involvement,” she said. “I do not see any difference in that. I work with them all the time and I have the utmost respect for their input on any marketing we would be doing.”

In a 4-0 vote with Councilman Terry Sinnott absent, council members agreed that the third option would allow DMVA to manage the funds more effectively.

“TBID is cumbersome,” Corti said. “It’s problematic. It’s not as efficient or effective, and it’s time-consuming.

“I think it’s a pretty easy solution,” he added. “We try it and see how it works. I have all the confidence the DMVA can do it well.”

The district will dissolve automatically. The council is expected to adjust the transient occupancy tax at a later date.

“We understand the need to have the source of funds moving quickly to keep the programs going,” Huth said. “So we would take whatever expeditious manner we’d have to do, to do that.”