Very few initiatives pass through the Santa Monica City Council as smoothly as the proposal to establish the Santa Monica Tourism Marketing District (SMTMD). Yet, despite a process that began in October, the SMTMD is finally in effect after council members unanimously approved last Tuesday the newly created entity to promote tourism to Santa Monica.
According to City staff, the new assessment district “would be a self-imposed and self-governed benefit assessment district designed to help fund marketing and sales promotion efforts for Santa Monica hotels” and was essentially created to bring in more tourism dollars to the city.
The SMTMD would complement Santa Monica’s Convention and Visitors Bureau (CVB) as a sustainable funding source providing additional revenues to promote tourism. A non-profit organization that receives funding from City Hall, the CVB “has been marketing Santa Monica as a visitor destination since 1982.”
According to City staff, the council allocated $2,562,744 to the CVB for the current fiscal year.
The initial term of the SMTMD-CVB partnership is five years beginning Jan. 1, 2013.
Council members considered he SMTMD for a third time since Oct. 23, when the matter was first brought to the dais as a proposed idea. An initial public hearing was held Nov. 13, yet a second public hearing – held Dec. 11 – was required before council members could formally vote on the proposed tourism-marketing district.
With a brief staff report and two residents speaking during public testimony, the council expeditiously adopted the creation of the SMTMD.
Under the new directive, the SMTMD would include all lodging businesses located within the boundaries of the City of Santa Monica with an average daily room rate of $100 and above and be in effect for five years. According to City staff, 30 hotels would pass that threshold and be subject to an assessment.
The assessment rate would be $2 per room night for hotels with an average daily rate between $100 and $199.99. For hotels where the average daily rate is between $200 and $300, the assessment rate would be $3 per room night. If the average daily rate exceeds $300, the assessment rate would be $4 per room night.
Assessment rates, which would be collected by City Hall on a quarterly basis, could potentially be increased by no more than 25 cents per year.
“The SMTMD is estimated to generate approximately $3,129,000 in its first year,” City staff stated, of which $16,500 would be allocated “as an administration fee to cover the City’s cost associated with the monthly collection and transmittal of the SMTMD assessments to the CVB.”
That administration fee may increase five percent annually.
City staff stated the funds would be used for marketing and sales promotions to increase tourism and to market Santa Monica lodging businesses as tourist, meeting, and event destinations.
“The programs and services provided with the district funds will be designed specifically to drive room night sales at assessed lodging businesses,” a report issued to the CVB by Civitas stated. “Only assessed lodging businesses will be featured in marketing materials, receive sales leads generated from district-funded activities, be featured in advertising campaigns, and benefit from other district-funded services. Non-assessed lodging businesses will not receive these and any other district-funded services.”
According to City staff, tourism and the Transient Occupancy Tax (TOT) has long been a significant General Fund revenue stream that supports basic City services and functions. In the 2010-2011 Fiscal Year, City Hall reported the TOT generated about $36 million.
City Hall also reported allocating more than $2.5 million to the CVB for the 2012-2013 Fiscal Year.
According to Jason Harrison, the City’s economic development manager, the TOT accounts for 13 percent of City Hall’s budget.
Similar districts were created in other cities, including Long Beach, Los Angeles, and West Hollywood and, as City staff pointed out, have been used to help promote their communities as tourism destinations.
Among the activities the SMTMD would partake in to promote tourism to Santa Monica: print advertisements in magazines and newspapers; television and radio advertisements; attendance at trade shows; and, partnerships with public relations firms.
Logistically, the CVB would serve as a standing advisory committee with four to nine members, with at least four of those members representing the assessed hotel. The SMTMD could potentially be disestablished should existing levels of funding for marketing programs be reduced.
The SMTMD is expected to have an average annual budget of about $3.13 million to supplement, not supplant, existing City funding for tourism marketing.