Anaheim Escalating the Battle for Tourism

Anaheim is gearing up to take on all comers next week in the battle for tourism supremacy, with Walt Disney Co. likely to announce an ambitious, long-anticipated addition to Disneyland and the city set to unveil its multimillion-dollar expansion of the convention center.

Disney management has scheduled meetings with members of the City Council on Friday to brief them on details of its project, which have been closely guarded. A public announcement is expected next week, perhaps to coincide with Disneyland’s 41st anniversary next Wednesday, several sources said.

Disney’s plans supersede the $3-billion Westcot resort the company announced with great fanfare in 1991 and abandoned last year as too ambitious. A scaled-down version was originally scheduled to be announced more than a year ago.

“When it happens, it will be one of the biggest announcements in the history of Anaheim,” said Mayor Tom Daly. “It will be a great start toward progress into the 21st century.”

On Tuesday, designers will release architectural plans for the first phase of a convention center project that will double the size of the facility over the next 20 years. The convention center, which currently measures nearly 1 million square feet, was last expanded in 1993 and now ranks as the seventh largest in the country.

The developments will give Orange County and all of Southern California new firepower in the nationwide battle for tourist dollars. Industry experts view Anaheim as a catalyst to reverse a nearly decade-long tourism slide that has seen California lose market share to the bright lights and new billion-dollar attractions of destinations such as Las Vegas and Orlando, Fla.

“These projects, particularly the Disney expansion, are profoundly important to California’s future as a travel destination,” said John Poimiroo, director of the California Trade and Commerce Agency’s division of tourism. “Other places have convinced consumers that they are the fresh, new, hot places to go. [The new attractions] will create an electricity about California that will ripple all over the world.”

Anaheim plans to use proceeds from last year’s two-percentage-point hike in the hotel bed tax--now the third highest in the nation--to pay for part of the convention center, the cost of which it has not revealed.

The city and Disney possibly will team up in some way to pay for public improvements necessary for both projects. Anaheim City Manager James D. Ruth has been meeting with Disney officials for several months over the matter but has been tight-lipped about the discussions.

“What’s important about this is that we work together to be able to accomplish a common goal,” said Councilman Frank Feldhaus. “How can they get their second gate going and meet infrastructure requirements and how are we going to get our Convention Center project accomplished? I think there is a partnership that needs to happen.”

The epicenter of all the excitement is “Disney’s California Adventure,” the working title for the companion theme park to be constructed on the Disneyland parking lot.

Disney officials are mum about the details but sources familiar with the project say the California-themed development will celebrate the distinct architecture, culture, food and fun of the Golden State.

The park will combine some elements of existing Disney properties, such as the Hollywood movie-themed Disney-MGM Studios near Orlando, with new attractions such as a classic wooden-style roller coaster. The project will also contain a restaurant/nightlife component to appeal to adult revelers.

“I believe that our tourist area is in dire need of some additional entertainment,” said Anaheim Councilman Bob Zemel. “Adult nighttime entertainment would create a great benefit to our convention business, which creates a great benefit to the business people of Anaheim and Orange County.”

While the expanding Disneyland Resort will snare most of the limelight, the Anaheim Convention Center expansion is likewise deemed critical to the local economy.

The existing 985,000-square-foot convention center and the major hotels that surround it sustain 16,000 area jobs, according to Convention Center General Manager Greg Smith. Convention industry experts estimate that a four-day national convention with 5,000 attendees pumps an average of $5.6 million in direct spending into the host community.

But competition for the largest conventions is intense and getting tougher as cities nationwide expand their facilities to lure the big guns. A study by Coopers & Lybrand, one of the nation’s Big 6 accounting firms, showed that Anaheim’s facility is not keeping up with improvements being made to convention centers in cities such as San Diego, Chicago, Dallas and Atlanta.

Smith says the need for expansion was never more evident than last January during the National Assn. of Music Merchants’ annual trade show, the facility’s largest event each year with 80,000 attendees.

“They used just about every square inch of the convention center, including storage rooms and other areas that aren’t normally used for exhibit space,” Smith said.

The first phase of the expansion will add 100,000 square feet of exhibit space, 100,000 square feet of meeting space and a 40,000-square-foot ballroom. Only convention centers in Chicago, Las Vegas and Atlanta will be larger following the first wave of construction in Anaheim.

Although city officials and California tourism experts anticipate an economic windfall in Anaheim’s renaissance, potential hurdles exist.

Anaheim’s hotel bed tax, which was increased to 15% from 13% in 1995, could put a drag on the city’s ability to compete for convention business.

“If bed taxes get too high, meeting planners have shown a willingness to send their conventions to other cities,” said Shawn Flaherty, spokesperson for the Travel Industry Assn.

Anaheim plans to use the bed tax hike for the convention center and for public service improvements related to the new theme park, city officials said. But threatening that funding is a statewide anti-tax initiative on the November ballot. Sponsored by the Howard Jarvis Taxpayers Assn., the measure calls for voters to retroactively approve all new taxes and tax increases implemented after January 1995, which would include Anaheim’s July 1995 increase.

The City Council voted last month to place a measure of its own on the November ballot asking voters to ratify the bed tax increase and counter the Jarvis initiative.

Councilman Feldhaus said the city would be “in big trouble” if the Jarvis initiative were to pass and the city’s measure did not.

Meanwhile, public opposition is virtually guaranteed from Home Owners Maintaining their Environment (HOME). The vocal group of Anaheim Disney critics want the company’s latest expansion plans to undergo the same rigorous public scrutiny as Westcot, Disney’s first attempt to build a companion park.

City officials have said the company’s alternative plans will not require such a lengthy approval process or a new environmental impact report, since it will be smaller in scope than the $3-billion Westcot resort.

But HOME members, concerned about the impact the project will have on traffic, air quality and local schools, believe that a new environmental review process should take place.

“We’d like to see those impacts addressed because we know they weren’t addressed the last time,” said HOME member Steve White. “We don’t believe the city has an open mind and we are going to raise our objections.”

Perhaps the biggest obstacle to the Anaheim expansion is Disney itself. The company hasn’t hesitated to pull the plug on projects in which the economics don’t shape up as originally projected or where public criticism becomes too intense.

In addition to dumping Westcot, Disney fled the money-losing Queen Mary in 1992 after residents’ objections and expensive environmental requirements made a waterfront theme park in Long Beach unworkable. In 1994, the company scuttled plans to build an American history theme park in rural Virginia in the face of a firestorm of criticism.

However, Anaheim officials are confident Disney’s latest project will become reality.

“I don’t think there’s reason to be concerned that this project won’t go,” Councilman Zemel said. “I gotta believe that the fact that they’ve downsized and come back with a more realistic project makes me feel that this is going to happen. I don’t think they are testing the waters anymore.”

And that is a relief to state tourism watchers, who believe the Disney tide will lift all boats.

“Most countries would like to have the development that Anaheim is going to see in the next few years,” said Poimiroo. “Disney is reasserting itself as the dominant destination in Southern California and the entire Pacific Rim. . . . This is going to ensure California’s long-term ability to compete with other destinations.”

California is still the nation’s most visited state. It hosted an estimated 295 million tourist visits last year, about 80% of them by California residents traveling within their own state.

Occupancy at Southland hotels is booming. The recession that hammered California’s tourist trade in the early ‘90s is but a fading memory in a state that saw record travel spending of $55.2 billion last year.

But a closer look reveals that California is attracting a smaller and smaller slice of the fast-growing global tourism market.

In 1989, California’s share of the U.S. domestic leisure travel market was 12.5%. By 1994, that share had eroded to 10.4% although it perked up slightly to 10.9% in 1995.

Experts say part of the erosion in market share can be attributed to the lingering effects of earthquakes, fires, floods and civil unrest that frightened tourists away from California in the early ‘90s. And they add it’s only natural that visitors, particularly foreigners, who’ve come to California before, would want to try other places on their next vacation.

Still, industry watchers say California hasn’t seen the degree of new investment that has visitors flocking to tourist hotbeds such as Las Vegas, Orlando and Branson, Mo.

Nearly $6 billion in new hotels, casinos and attractions are scheduled to open in Las Vegas in just the next three years alone. The Las Vegas Convention and Visitors Authority will spend $48.4 million to promote the city to tourists over the next year, compared to the California Division of Tourism’s $7.5-million marketing plan.

Bruce Baltin, a hospitality expert with PKF Consulting in Los Angeles, says few states can match California’s scenic wonders, but he says visitors are looking elsewhere for man-made excitement.

“We continue to lose market share to other destinations that are simply outspending us in terms of promotion and new products,” Baltin said. “We have done nothing on the scale of other markets to make a really big splash, either nationally or internationally. We need a shot in the arm. Something really worth talking about.”