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Home My WebLink About2013-08-20; City Council; 21328; Proposal Economic Analysis Tourism IndustryCITY OF CARLSBAD - AGENDA BILL 1 AB# 21.328 AUTHORIZATION TO ISSUE A REQUEST FOR PROPOSAL FOR AN ECONOMIC ANALYSIS OF THE TOURISM INDUSTRY DEPT. DIRECTOR ^pLrf MTG. 8/20/13 AUTHORIZATION TO ISSUE A REQUEST FOR PROPOSAL FOR AN ECONOMIC ANALYSIS OF THE TOURISM INDUSTRY CITY ATTORNEY D^h DEPT. CED AUTHORIZATION TO ISSUE A REQUEST FOR PROPOSAL FOR AN ECONOMIC ANALYSIS OF THE TOURISM INDUSTRY CITY MANAGER / RECOMMENDED ACTION: Direct staff to prepare and issue a Request for Proposal (RFP) for professional services to develop an economic analysis of the tourism industry in Carlsbad, as compared with other California destination cities. ITEM EXPLANATION: The tourism industry is a strong economic driver in the City of Carlsbad. Transient Occupancy Taxes (TOT) provide 12 percent of the city's general fund revenue, in addition to sales and property tax revenue generated by the industry. Carlsbad attracts 2.7 million visitors each year, and there are over 1,500 businesses that serve these visitors, providing jobs for over 11,000 employees. The tourism industry in Carlsbad was hit hard by the recession, with TOT dropping from a high of $14.3 million in FY 2007-08 to a low of $12.9 million in FY 2009-10. The industry has now completely recovered, and TOT was at an all-time high in FY 2012-13 with $14.7 million in revenue. Room nights sold in FY 2012-13 were 917,000, compared to 856,000 last year (FY 2011-12). In FY 2009-10, room nights sold were 776,000. Room rates have also recovered, with the average daily rate (ADR) for rooms rising to $147 for the period from January to June 2013, up from $145 the prior calendar year. In 2010, ADR was $134. Even though we have seen a strong recovery in the tourism market, there are still some weaknesses in this sector that should be addressed. Carlsbad tends to have a low annual occupancy rate when compared with other California destination cities. Our current average annual occupancy rate for hotel rooms is 66 percent, which is above the national average of 61 percent. This compares with San Diego/La Jolla at 72 percent, Anaheim at 75 percent and Santa Monica claiming an 84 percent average annual occupancy rate. Occupancy rates in Carlsbad are extremely variable over the course of a year, with occupancies above 80 percent in the peak summer months and falling to below 50 percent during the winter (Exhibit 1). Given Carlsbad's year-round good weather and attractions such as the beach, LEGOLAND California, golf courses, and great shopping options, we have the opportunity to improve our occupancy rates in the off-season. To better understand where these opportunities are, staff is recommending the completion of an economic study of Carlsbad's tourism industry that compares our city with similar destination cities and analyzes occupancy rates by room type, tourism marketing spending return on investment and other tourism data that would provide strategic recommendations to improve upon our strengths and weaknesses. DEPARTIVIENT CONTACT: Kathy Dodson, 760-602-2744, kathv.dodson(5)carlsbadca.gov FOR C/ry CLERKS USE ONLY. COUNCIL ACTION: APPROVED DENIED CONTINUED WITHDRAWN AMENDED CONTINUED TO DATE SPECIFIC • CONTINUED TO DATE UNKNOWN • RETURNED TO STAFF • OTHER-SEE MINUTES • Page 2 The study would look at the following type of criteria: Comparison with similar California destination cities • Hotel occupancy rate comparison • Hotel Occupancy Tax revenue comparison • Number of rooms by category per visitor and TOT revenue • Tourism marketing spending by category • Return on investment in tourism marketing spending • Market segmentation comparison with successful destination cities • Room rate comparison by type Economic Analvsis • Economic impact of a 5 percent and a 10 percent increase in occupancy • Analysis of potential increases in occupancy, TOT and spending • Potential return on investment of tourism marketing spending • Segmentation analysis - spending and stay duration by segment Additional analvsis • Qualitative report on successful marketing programs of destination cities in California Provide implementation actions • Recommend actions and strategy to improve and prepare for future opportunities This is an opportunity to improve Carlsbad's economy without building additional tourism infrastructure, as we already have the hotel rooms, shops and restaurants that tourists need, they are just underutilized in the off-season. A five percent increase in tourism would result in an additional $735,000 in annual TOT revenue alone. Just as importantly, it would add stability to many of our businesses which operate in our current "feast or famine" tourism cycle, increase jobs and add to the economic diversity and future prosperity of our community. FISCAL IMPACT: At this point in time the fiscal impact of a study is unknown. Staff is requesting that an RFP be issued and that a discussion of cost sharing continue with the Carlsbad Tourism Business Improvement District. As the project affects the broader economy of Carlsbad, staff is recommending that any city funding necessary for this project come from the City Council Contingency fund. Economic development staff would manage the RFP process using the City's best value selection process. Through the RFP process, staff will return to city council with a firm cost ofthe study to request contract and funding authority. ENVIRONMENTAL IMPACT: Pursuant to Public Resources Code section 21065, this action does not constitute a "project" within the meaning of CEQA in that it has no potential to cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, and therefore does not require environmental review. EXHIBITS: 1. Carlsbad Tourism Information and Data Sheet 2. Hospitality and Tourism Industry Cluster Infographic Carlsbad Tourism Information and Data August 2013 Exhibit 1 Chart 1: Transient Occupancy Tax (in millions) $16.0 $14.0 $12.0 $10.0 $8.0 $6.0 $4.0 $2.0 $0.0 jy jy jy Chart 2: Transient Occupancy Tax (in millions) Revenue separated between hotel and timeshare $16.0 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 3 Exhibit 1 Chart 3: Hotel Occupancy Rate Variance in Hotel Occupancy Rate by IVIonth (two highest years) »2012 M:«2008 85% 80% 75% 70% 65% 60% 55% 50% 45% 40% Jan Feb Mar April May June July Aug Sept Oct Nov Dec -page break- Chart 4: Hotels in Carlsbad Exhibit 1 Hotels (citywide) # Rooms 1 BEACH TERRACE 48 2 BEACH VIEW 41 3 BEACHWALK VILLAS 9 4 CARLSBAD BY THE SEA RESORT 149 5 CARLSBAD INN HOTEL 62 6 COMFORT INN 46 7 COURTYARD BY MARRIOTT 145 8 ECONO LODGE 39 9 EXTENDED STAY AMERICA 106 10 GRAND PACIFIC PALISADES HOTEL 90 11 HAMPTON INN 94 12 HILTON CARLSBAD OCEANFRONT RESORT AND SPA 215 13 HILTON GARDEN INN 161 14 HOMEWOOD SUITES 145 15 HYATT HOUSE 94 16 LA COSTA RESORT 610 17 LA QUINTA CARLSBAD 112 18 LEGOLAND HOTEL 250 19 OCEAN VILLA AT CARLSBAD 8 20 MOTEL 6 #1021 109 21 MOTEL 6 #1351 138 22 MOTEL 6 #471 160 23 OCEAN PALMS BEACH RESORT 50 24 PARK HYATT AVIARA RESORT 329 25 PELICAN COVE 10 26 QUALITY INN AND SUITES 126 27 RAMADA INNS 121 28 RESIDENCE INN 121 29 ROADWAY INN 66 30 SCANDIA MOTEL 15 31 SEASHORE RESORT 9 32 SHERATON CARLSBAD 250 33 SURF MOTEL 28 34 TAMARACK BEACH RESORT 25 35 WEST INN 86 TOTAL 4,067 5 Exhibit 1 Chart 5: Major Timeshare Properties in Carlsbad Major Timeshare Properties # Rooms 1 CARLSBAD INN HOTEL 132 2 CARLSBAD SEAPOINTE 95 3 FOUR SEASONS TIME SHARES 246 4 GRAND PACIFIC MARBRISA 155 5 GRAND PACIFIC PALISADES 161 6 HELM / TAMARACK BEACH RENTALS 56 7 LA COSTA RESORT AND SPA* 58 TOTAL *fractional ownership Chart 6: Future potential hotel projects 903 Properties # Hotel Rooms # Timeshare Rooms 1 DKN HOTEL - SPRINGHILL SUITES 104 2 FAIRFIELD INN 100 3 FOUR SEASONS AVIARA 108 4 GRAND PACIFIC MARBRISA 116 5 HOLIDAY INN 133 6 LA COSTA RESORT AND SPA 234 7 LUMIERE HOTEL 39 8 SHERATON PHASE II 100 9 STAYBRIDGE SUITES 106 TOTAL 816 224 6 Exhibit 2 CITY OF CARLSBAD 2 More than... 2 J million Annual Visitors 11,000 Employees 1,500 Establishniients 3,800 Hotel Roonfis Top 3 hotels McClellan-Palomar Airport ^'^^rAirpot^^^ 7 miles of Beautiful Beaches Coastal Scenery Park Hyatt Aviara ResOTt 25 Parks & 45 miles of Trails by number of rooms La Costa Resort & Spa Park Hyatt Aviara Resort Sheraton Carlsbad Resorts Spa Golf Courses, Spa & Resorts Hilton Carlsbad La Costa Resort & Spa ^•{^iy Oceanfront Resort & Spa CA Hilton Garden Inn www.carlsbadca.gov The Forum 1 Carlsbad Tourism Study RFP Proposal Kathy Dodson August 20, 2013 Carlsbad Tourism Overview Tourism in Carlsbad provides: •12% of the city’s General Fund revenue •Support for over 1,500 local businesses •11,000 jobs Carlsbad’s Tourism Industry Size •4,067 hotel rooms •903 time share units •$14,702,411 in FY 2012-13 TOT revenue •2nd largest TOT revenue generator in San Diego County ($150,000,000 – City of San Diego TOT revenue) CTBID Assessment Revenue $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 Jan Feb Mar April May June July Aug Sept Oct Nov Dec 2008 2009 2012 Comparison Data Table TOT Rate FY 2012 TOT Rev. Avg. Annual Occ. Rate Carlsbad 10% $12,863,391 66% San Diego/La Jolla 10.50% $150,819,218 72% Santa Barbara 12% $13,661,701 68% Santa Monica 14% $34,874,000 84% Anaheim 15% $82,605,000 75% Carlsbad Tourism •How do we straighten out the curve? 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% Jan Feb Mar April May June July Aug Sept Oct Nov Dec Hotel Occupancy Rate 2012 2008 Occupancy Rate Swings •Summer occupancies are typically above 80% •Off season occupancy rates dip below 50% Amenities •Carlsbad has year round good weather •Carlsbad attractions such as LEGOLAND California, the beach, golf courses and shopping venues such as the Carlsbad Premium Outlets are open year round Comparison Conclusions •Tourism occupancy rates are lower than in similar destination cities •Off season drop doesn’t match with our year- round weather and amenities •Comparative industry data is needed to develop a strategic plan to improve performance Request for Proposal Objective •Gain an understanding of how Carlsbad’s tourism industry performs related to similar destination cities •Identify opportunities to improve Carlsbad’s annual occupancy rate, which will help existing businesses within current infrastructure Tourism Study - Comparison Comparison with similar California destination cities •Hotel occupancy rate and TOT revenue •Number of rooms by category per visitor and TOT revenue •Tourism marketing spending by category •Return on investment in tourism marketing spending •Market segmentation •Room rate by type Tourism Study - Analysis Economic Analysis •Analysis of potential increases in occupancy, TOT and spending •Potential return on investment of tourism marketing spending •Segmentation analysis – spending and stay duration by segment Marketing Analysis •Qualitative report on successful marketing program of destination cities in California Tourism Study – Action Plan Based on the analyses, provide recommended actions and strategies to improve and prepare for future opportunities. Recommendation Direct staff to prepare and issue a Request for Proposal for professional services to develop an economic analysis of the tourism industry in Carlsbad