In order to market the city’s hotels to attract meetings and conventions, it’s

out with the TBID and in with the MAP

By GARY SHERWIN

It wasn’t that long ago that we had some very rough times here in town, and I’m not talking about the pandemic.

That happened way back during the Great Recession when a group of Newport Beach’s largest hotels got together in a boardroom and discussed how they would survive, which was, at the time, the biggest economic disruption in our recent history.

Beginning in the summer of 2008, business was headed for an epic freefall, and during those discussions, they had decided that they needed to get back on their feet – and do it fast – but they needed to work harder, smarter and more competitively.

Those were dark days, and many hotels had begun layoffs and other downsizing activities. Until the pandemic 12 years later, no hotel executive had ever seen a collapse on such a widespread basis. It was frightening.

Click on photo for a larger image

Courtesy of Visit Newport Beach

Gary Sherwin

After considerable back and forth, they decided at that fateful meeting that they needed a new sustainable plan to marshal more financial resources specifically aimed at the meetings and conventions segment, which is the most profitable part of a large hotel’s portfolio.

Thus was born the Newport Beach Tourism Business Improvement District (TBID), and this month that program earned a new milestone that no other city in America has been able to achieve.

First, before we get there, a little background on kind of a complicated subject, which I’m going to try and simplify.

TBIDs, as they are called, are voluntary assessments, which are small fees attached to a visitor’s bill. The hotels agreed to join and form the TBID, which was then sanctioned by the City Council’s action.

In this first step, they formed this district for five years at 2%, meaning that amount would be passed on to the guests, and those funds would be used for group marketing. Hotels collected the funds and remitted them to the city, which, in turn, provided the funds to Visit Newport Beach.

These funds are not to be confused with Transient Occupancy Taxes (TOT), which are actual taxes collected by the city, most of which support vital city services like police and fire. Visit Newport Beach receives 18% of those funds for marketing.

As wonderful and important as the TOT is, the hotels felt that Newport Beach was not holding its own in a competitive landscape, especially with meetings and conventions, which took the biggest hit during the recession.

Rather than ask the city for more money, the hotels took matters into their own hands and formed the TBID. The difference between a tax and an assessment is that government entities can impose permanent mandatory taxes that fund certain programs.

Stay with me here – assessments are voluntary agreements by businesses to “tax” themselves and they can determine if these assessments are to continue after a predetermined length of time. More than 125 other California cities are doing such TBID assessments, and this program is spreading throughout the country.

The process is pretty straightforward and for Newport Beach this decision was powerful. The benefit is that the funds can greatly supplement existing TOT funding without asking the city for more resources.

Here’s what that means for Newport Beach: Since the TBID was formed, more than 600,000 meetings and convention room nights have been generated for the city, providing tens of millions in economic benefit for the city and local businesses at no cost to taxpayers. I say that is a very good deal.

You may have heard that the New Orleans Saints will be holding their summer training camp here in town this summer. The team would not have come had it not been for the TBID, and that business is going to generate 5,400 room nights and tens of millions of dollars in revenue.

It’s also important to note that the TBID and (now MAP) cover seven employee sales managers’ salaries as well as a significant amount of executive overhead. The MAP budget and its annual audit will be overseen by a MAP board as they are the assessed businesses. These are private dollars used to supplement the marketing of the city.

Now, here is the latest news: Every TBID has an expiration date and ours was at the end of January. Ten years ago, that TBID was increased to 3% by the participating hotels and now that funding mechanism is officially over.

However, that isn’t the end. About six months ago, the nine TBID hotels got together and decided that they really, really like the program and wanted to continue it but instead of working through the city, they decided they could privatize it and do it themselves.

In fact, they increased the assessment again – this time to 5% – and went to individual contracts with Visit Newport Beach to provide the existing services. With the additional percentage, the hotels will also have more resources at their disposal to help close group business.

Most people in town only think we are a vacation destination and people coming here with their family for a few days is certainly important.

But what pays the bills at hotels are meetings and conferences that generate not only overnight stays but food and beverage revenue, which is the lifeblood of our large properties.

While many cities have TBIDs, none of them are privatized like ours. What makes us different from, say, Los Angeles is that we have a small number of large hotels where this process is feasible. L.A. has so many hotels that individual contracts would definitely be cumbersome.

Instead of being called a TBID, the new private program is called Meetings Assessment Partnership (MAP), since it reflects the focus on using these resources to secure meetings business. For the city of Newport Beach, this is a big win since there are millions of dollars in marketing resources that generate TOT at no cost to the city.

And what about those TOT dollars? The 18% given to Visit Newport Beach is critical to supporting all the other valuable tourism assets like restaurants, small hotels, retail and attractions, and is used to market to leisure visitors and overall city branding activities.

TOT and MAP work hand-in-hand to provide a delicious public/private partnership blend for marketing Newport Beach to the world and bring valuable dollars to town.

Newport Beach is blessed with a strong and vital group of hotel owners and general managers who know what it takes to succeed in a competitive marketplace. MAP is their bold vision, and another reason Newport Beach continues to run budget surpluses at City Hall.

But the real winners are the people of Newport Beach, who are blessed to have a resourceful hospitality industry whose creative thinking has real-world economic benefits for every resident.

Gary Sherwin is President & CEO of Visit Newport Beach and Newport Beach & Company.

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