Hotels Press for Spending More Money to Earn Tourist Dollars : Tourism: Occupancy rates, already low, are predicted to get worse if the city doesn’t become more aggressive in competing for visitors.

Under the cover of anonymity, one of San Diego County’s better-known hoteliers recently complained that, not too many years ago, the local hotel industry’s marketing plan was to “open the doors and wait for the crowds to arrive.”

Hoteliers responded to occasional slowdowns by having “someone answer the telephone and take reservations,” the hotel operator said. “Only when things were really bad would they spend a dime on marketing and advertising.”

That era--if it ever really existed--is gone, both in San Diego County and at competing tourist destinations. And, cash-strapped hoteliers are pushing the San Diego City Council to increase city funds used to polish San Diego’s domestic and international image as a tourism and convention mecca.

Unfortunately, San Diego isn’t alone in its fight for tourist dollars.

“We’re all going to have to work a lot harder for tourists’ dollars,” said Lovester Law, vice president of marketing for the San Francisco Convention and Visitors Bureau, one of San Diego’s major competitors for free-spending tourists and conventioneers. “There’s a different consumer out there now . . . recession, the Gulf War crisis . . . (have) shaped a new consumer spending pattern.”

That dramatic shift in consumer spending comes at a time when San Diego is awash in hotel rooms.

Room occupancy rates that historically ranked among the nation’s highest have tumbled to 63%, according to the San Diego Convention & Visitors Bureau. More bad news is on the horizon: Occupancy rates will fall to an estimated 58.3% during the next five years as more rooms come on line, according to ConVis projections.

That dramatic increase in hotel rooms--the room supply has grown by 42% during the past six years--has masked the fact that overnight visits have risen by 18% during the past six years, a respectable gain during uncertain economic times.

But, because of the glut of new hotel rooms, on average 10,000 of the county’s 28,591 rooms sit empty each night, according to ConVis estimates.

Hotel operators believe that the most effective way to cure that room glut is to increase marketing and advertising that is designed to lure tourists into the county. And cash-strapped operators are pressing the city to increase its financial support for ConVis, which is charged with marketing San Diego as a tourist and convention destination.

In a presentation last week to the San Diego City Council, ConVis officials proposed a five-year, $21.6-million package that, if approved, would give ConVis funds needed to market the county as a tourist destination among East Coast and international tourists.

The city now provides $6.5 million, or about 80% of ConVis’ $8.5-million budget. ConVis members contribute about $1 million, and the rest is generated by donations from municipal and county government agencies.

ConVis officials argue that a funding increase wouldn’t necessarily generate a tax increase because the added funds would be drawn from the 9% Transient Occupancy Tax (TOT) that is levied on overnight visitors at hotels and motels. The tax will raise an estimated $42 million during 1991.

During a special City Council meeting Nov. 7, ConVis Chairwoman Anne Evans predicted that increased funding for ConVis would pay off because, with additional marketing, San Diego will attract more tourists. Occupancy tax receipts would grow by $40.3 million over the next five years if the city were to increase ConVis’ funding by $21.6 million during that same time period, Evans said.

ConVis made its most recent pitch for more funding at the Nov. 7 City Council meeting in response to a council request for information about how ConVis could bolster its marketing programs.

The council’s request also rekindled a long-running debate on the most effective way to use TOT funds. When first approved by city voters in 1965, TOT receipts were earmarked exclusively for promoting San Diego’s tourist industry.

However, “the city has loosely interpreted the original ordinance . . . and funds have been allocated to a number of projects and agencies that have questionable benefits to the area’s industry,” according to a 1983 report prepared by ConVis.

The city continues to use TOT funds for a wide variety of programs, some of which, observers maintain, are a far cry from promoting the city to tourists and conventioneers.

During 1991, the city will spend about $16 million in TOT funds on the maintenance and improvement of tourist and convention-related facilities. About $9 million will be turned over to ConVis, the Motion Picture and Television Bureau and a handful of other agencies that promote the city. About $5 million is spent on city-administered programs, and about $5 million goes to museums and arts programs.

Tourism industry observers agree that San Diego will have to increase its budget for marketing because of similar increases at better-endowed tourism and convention bureaus in other cities.

A case in point is Las Vegas, which will spend $24 million annually to market the city to domestic and foreign travelers.

Local tourism officials note that Las Vegas uses all of its $60 million in TOT receipts to market the city or to operate and maintain convention facilities. That spending is augmented by individual marketing and advertising campaigns conducted by Las Vegas’ hotels and casinos.

“We’re competing with any city worldwide that has a convention center,” said Rossi Ralenkotter, director of marketing for the Las Vegas Convention and Visitors Bureau. Las Vegas, which opened a tourism office in Japan five years ago, now has similar facilities in Taiwan, Frankfurt and London.

In contrast, “there’s been an erosion of the TOT in San Diego,” said Bruce Goodwin, a San Diego-based tourism industry consultant, who believes that the city’s economy would be better served if more of the tax receipts were earmarked for ConVis.

“You have to spend to get the telephone ringing” at local hotels, Goodwin said. “Just about all of (ConVis’) counterparts are spending significantly more dollars on marketing because consumers do have their pockets sewn up.”

ConVis officials would use additional funds to bolster marketing aimed at tourists in East Coast and Midwest cities, as well as in Western Canada and other international markets. Because of funding shortages, ConVis has historically concentrated on nearby markets in Arizona and Southern California that generate the lion’s share of visitors to the county.

Although San Francisco will continue to court visitors around the world, tourism officials are bolstering campaigns aimed at visitors who live within an hour’s drive from the city.

“You can reach out to New York, or across the Atlantic and Pacific, but you can never ignore the home market,” Law said. “That’s what we’re making sure of . . . that regional visitors get back in touch with San Francisco.”

Increasingly, however, tourist officials are acknowledging that “we’re all in competition together,” Ralenkotter said “Any city with resorts or convention centers are competing” for tourists with limited discretionary dollars, he said.

The 9% Transient Occupancy Tax The 9% Transient Occupancy Tax is levied on overnight accommodations. It raises $.09 for each taxable dollar. It is split up this way:

Four cents used to promote San Diego as a tourist and convention destination.

One cent is at the City Council’s discretion.

Three cents go to general fund.

One cent is deposited into the general fund to help cover tourism-related expenses.

SOURCE: San Diego City Managers Office.

Budgets of selected visitors bureaus and convention facilities.

City Convention & Convention Visitors Bureau funding Center Funding San Diego $8.5 million $14 million Atlanta $7 million $14 million Los Angeles $11 million- $10 million Las Vegas $54 million -- New Orleans $3 million $8 million San Francisco $9.3 million $8 million Toronto $10 million $21 million

-Los Angeles also has $4.8-million in additional funds to market special events. --Convention and marketing are handled through a single budget in Las Vegas.

Source: San Diego Convention and Visitors Bureau.