Bed-Tax Revenue Shortfall Hits OC Cities, Visitor Bureaus
By SANDI CAIN
The downturn in tourist revenue since last fall put a dent in some city budgets and resulted in belt-tightening at visitor bureaus funded partly by tourist dollars.
Slightly more than 40 million people visited Orange County last year, spending more than $6 billion.
But cities across the county reported reduced revenue from transient occupancy taxes, or so-called “bed taxes,” ranging from 8% to 30% since September.
In Anaheim,the county’s tourism hub,the city is projecting a 15% drop in annual bed tax revenue to $57.6 million for the fiscal year.
But compared with the way things looked a few months ago, the shortfall is almost a relief.
“Year to date, we’re at 84% of budget. That’s better than earlier projections,” said John Nicoletti, public information manager for Anaheim.
March numbers were even better, coming in at 98% of budget.
“That was huge,” Nicoletti said.
With more than 400 hotels, bed taxes are Anaheim’s largest source of revenue. As a result, the shortfall led to cost-cutting measures that included a hiring freeze and curbs on travel for city workers. Nicoletti said there has been no effect on city projects, partly because the city still has $3 million in resort funds for parks and other public works.
The impact has been more pronounced at the Anaheim/Orange County Visitor & Convention Bureau, the county’s largest bureau.
“We expected $4.9 million from the city, but we’re getting much less,” said Charles Ahlers, president of the bureau. “It looks like about $4.5 million for next year.”
Ahlers said the bureau reduced its budget by about 11%, putting a freeze on hiring, cutting back on sales trips and holding back funds for some programs.
Overall funding was down about 20%, he said.
Visitor bureaus aren’t just for visitors. The business they bring in puts money in city coffers and helps add name recognition to the area. So the recent cutbacks,coming at a time when visitor bureau salespeople need to work harder to attract reluctant travelers,is an additional blow to their efforts, according to Ahlers.
“The big issue,” he said, “is unfilled positions in sales.”
Other cities are facing shortfalls, too.
The biggest bed-tax gap by far is a 30% shortfall reported by Garden Grove, which has added seven hotels in the past two years,most in a redevelopment area where the tax revenue is shared by hotels.
Garden Grove Controller Pam Gillis said that because some of the hotels just opened in 2001, total bed-tax revenue is up, even though it has not met projections. And since the taxes go into the city’s general fund, no specific projects have been curtailed.
“The hotels get a portion back, so their revenue is down, too,” she said.
One of those hotels,the Embassy Suites,opened just two months after the terrorist attacks. But another,the Marriott Suites,pushed back its projected January opening to July.
The Buena Park Convention & Visitors Office remains unaffected by a drop in bed taxes, because its funding comes from the city’s general fund rather than bed-tax revenue.
Beach cities appear to have fared a little better than convention-dependent Anaheim and Garden Grove.
Newport Beach has seen bed-tax revenue drop 10%,partly as a result of a downturn in business travel,but hopes to regain at least half that loss in 2003. Meanwhile, the city may take a look at reducing capital expenditures. And property taxes are helping to offset the downturn, a city official said.
But property taxes don’t help the Newport Beach Conference and Visitor’s Bureau, which gets 1% of bed taxes. And that has meant some cost-cutting there, too.
In Huntington Beach, bed-tax revenue was off by 28% in September, a shortfall that has been reduced to about 8% since January.
“(Performance) is tied to the economy as much as anything,” said Doug Traub, president of the Huntington Beach Conference & Visitors Bureau, which had its budget slashed from $270,000 to $200,000 last summer,well before the September disasters.
“We used a lot of cash reserves,” Traub said.
Now Traub is looking beyond 2002 to next year when the 519-room Hyatt Regency Huntington Beach opens.
The Hyatt will increase the number of rooms in Surf City by 40%, he said, meaning more bed-tax revenue for the city.
“Overnight guest spending will explode due to the pent-up demand,” he said.
In Laguna Beach, bed-tax revenue in the past year was 8% short of the $3.7 million goal, but the city is sticking with the same projection for fiscal 2002-2003.
Last summer, Laguna Beach passed a special assessment of 2% that is added to the bed taxes to help promote the arts. The first distribution of those funds will come later this month, but the shortfall means there won’t be as much to go around as initially hoped.
Meanwhile, Costa Mesa,heavily reliant on groups and business travel,is still hoping to meet its $4.1 million estimated bed-tax revenue for the 2002 fiscal year.
“It will be tight,” said budget and research officer Agnes Walker. “Our current receipts are about 15% behind the prior year.”
Tourism Industry Stays Cautious on Hiring
Layoffs and cutbacks were widespread in the tourism industry last year.
Area attractions cut back on hours and staff, hotels laid off employees and about 10% of restaurant jobs were lost statewide.
We took a serious hit on sales in the fall,” said Mark Martin, spokesman for the Sacramento-based California Restaurant Association. Sales have improved this year.
Martin said about 10,000 restaurant jobs were lost in California after Sept. 11.
“The industry isn’t growing as fast as some others,” Martin said. “And jobs aren’t being replaced very fast.” There were 150,000 tourism jobs in OC last year.
Hotels are still watching employment numbers to keep their costs down, said Jim Abrams, executive director of the Sacramento-based California Hotel & Lodging Association.
The Walt Disney Co. said recently that some of the cost-cutting measures it took at its theme parks and resorts last fall could become permanent.
Disneyland officials said they are hiring for the summer at a normal pace, though they declined to give numbers.
Knott’s Berry Farm is looking to hire about 1,000 people for the summer.
“Everybody’s bottom line is under pressure,” said Jack Kyser, chief economist for the Los Angeles Economic Development Corporation.
There were 247,200 retail jobs, 99,600 restaurant jobs and 19,900 hotel jobs in California last year, according to the state Employment Development Department. The retail/restaurant and hotel sectors will grow by about 15% by 2006, according to the department.
,Sandi Cain
