REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Eric G. Parra, Interim City Manager
VIA: Jennifer Villasenor, Director of Community Development
PREPARED BY: Christopher Kennedy, Economic Development Project Manager
Subject:
title
Approval of Huntington Beach Tourism Business Improvement District (HBTBID) Annual Report for Fiscal Year (FY) 2024-25
body
Statement of Issue:
The Huntington Beach Tourism Business Improvement District (HBTBID) was established in 2014 under the California Property and Business Improvement District Law of 1994. Its purpose is to increase overnight lodging through targeted marketing and promotions, funded by assessments collected from short-term lodging businesses within Huntington Beach. Each year, Visit Huntington Beach (VHB), the nonprofit organization managing the HBTBID, submits an annual report to the City Council for approval. This report outlines the district’s activities, programs, and budget for the upcoming fiscal year.
The FY 2024-25 Annual Report provides a detailed summary of how the collected assessments will be used to fund marketing, group sales, tourism enhancement programs, and operational costs, all aimed at boosting overnight stays in Huntington Beach. Approval of the report is required to meet state law and to ensure continued support for tourism growth in Huntington Beach.
Financial Impact:
There is no financial impact associated with the recommended action.
Recommended Action:
recommendation
Approve the HBTBID Annual Report for Fiscal Year 2024-25.
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Alternative Action(s):
Do not approve, and direct staff accordingly.
Analysis:
The Huntington Beach Tourism Business Improvement District (HBTBID) was created in 2014 under the California Property and Business Improvement District Law of 1994. This law allows the establishment of special assessment districts to fund specific improvements or services that benefit businesses within a defined area. The purpose of the HBTBID is to increase overnight room sales by promoting Huntington Beach through targeted marketing and public relations efforts.
The district includes 21 hotels and motels, along with 204 short-term rentals (STRs), all located within the City, including Sunset Beach. The current assessment rate is 6% of gross room rental revenue for stays of less than 30 days. This rate was increased in June 2024 to ensure Huntington Beach remains competitive with nearby cities. This assessment is separate from the City’s 10% Transient Occupancy Tax (TOT). Visit Huntington Beach (VHB), a nonprofit 501(c)6 organization, serves as the HBTBID’s Owners’ Association, responsible for managing funds and implementing marketing programs as outlined in the HBTBID Management District Plan (MDP).
In 2019, a formal TBID Management Agreement was established between the City and VHB, replacing an earlier Memorandum of Understanding (MOU). In June 2024, the MDP and TBID Management Agreement were updated to increase the assessment rate from 4% to 6%. Additionally, 10% of total assessments collected will fund tourism enhancement programs. The current term for the HBTBID runs through June 30, 2028.
Annual Report Summary
VHB has submitted its FY 2024-25 Annual Report (Attachment 1) which reflects key trends and challenges in the tourism industry. VHB worked closely with hotel partners, community stakeholders, and various Destination Marketing Organizations (DMOs) throughout the year to shape its work program and budget. They also collaborated with organizations such as Visit California, Brand USA, and the U.S. Travel Association to ensure alignment with broader tourism efforts.
This year’s report highlights several critical areas, including marketing, public relations, group sales, and tourism enhancement programs. The proposed budget reflects Huntington Beach’s position as a growing tourism destination and aims to strengthen the city’s competitiveness in an increasingly crowded market.
Key Trends and Observations
• Marketing, Public Relations and Communications - Road trips and staycations continue to dominate leisure travel due to economic conditions. The digital marketing landscape has become increasingly competitive and expensive. Additionally, the upcoming election year requires careful management of media coverage and public relations efforts.
• Group Sales - Competing Destination Marketing Organizations (DMOs) are operating with significantly larger budgets, putting pressure on VHB to maintain market share. Corporations typically delay decisions on large meetings during an election year, affecting group sales efforts.
• Tourism Enhancement Programs - Dedication of 10% of the assessment revenue towards projects aimed at enhancing the visitor experience.
• Advocacy - VHB will continue its efforts to educate both residents and visitors on the economic and cultural benefits of tourism. Engaging the community is critical to maintaining broad support for tourism initiatives.
• Operations - Inflation and the rising costs of goods and services are affecting VHB’s operational budget. Despite these challenges, VHB remains focused on maintaining the quality of its programs and services.
Budget Overview
The following is a breakdown of the proposed revenues and expenses for FY 2024-25:
|
INCOME |
|
Estimated TBID Assessments |
$ 10,693,446 |
|
Retail, Web Ad, Walking Tour Sales, Interest |
$ 140,250 |
|
Estimated Carryover from Previous Fiscal Year |
$ 456,000 |
|
TOTAL INCOME |
$ 11,289,696 |
|
EXPENSES |
|
Sales and Marketing |
$ 7,578,171 |
|
Tourism Enhancement Programs |
$ 1,062,647 |
|
Administration |
$ 1,959,838 |
|
Contingency/Reserve |
$ 843,000 |
|
City Collection Costs |
$ 101,149 |
|
TOTAL EXPENSES |
$ 11,544,805 |
Revenue Projections
VHB bases its revenue projections for FY 2024-25 on several factors, including anticipated group meeting bookings, weather conditions, hotel partner forecasts, and increased demand for short-term rentals. The projected assessment revenue for FY 2024-25 is $10,693,446, approximately 41% higher than the previous year due to the increase in the assessment rate and anticipated growth in the tourism sector. This amount includes a 1% administration fee retained by the City for collecting and disbursing assessment income. Total income to VHB ($11,289,696) includes $140,250 in additional revenues and a rollover of $456,000 from FY 2024-25.
Consistent with the MDP’s approved allocations for expenditures using assessment funds, expenses for each budget category are broken down as follows. Additional income is anticipated to supplement promotional efforts.
• Sales and Marketing (63%) - Marketing efforts will focus on key markets like San Francisco, Portland, and Phoenix. Campaigns such as #BeHere and #MoreHB will target new and repeat visitors. Strategies include expanding “FAM” (familiarization) trips inviting top media, travel agents, tour operators, meeting and event planners to experience the destination and raise its profile/awareness in their areas of work, boosting room incentives, increasing influencer collaborations, and enhancing tradeshow presence. Focus areas will include media buys, public relations, advertising, and design collaboration to support both digital and print campaigns with a 100% increase in influencer investment. Support for events also fall within this portion of the budget.
• Tourism Enhancement Programs (10%) - These funds will support projects aimed at improving the visitor experience, such as temporary beach restrooms, wayfinding improvements, accessibility upgrades, and preparations for the LA 2028 Olympics through enhancements to the Surf Museum.
• Administration (18%) - Funding will support operational costs including facilities, IT, human resources, insurance, legal, accounting, the company vehicle, and industry organization membership dues. Additionally, expenses will cover the transition to a new budget software, computer lease refresh, office improvements and professional development and team building
• Contingency/Reserve (8%) - These funds will ensure financial stability by providing a buffer for unforeseen challenges or economic downturns.
• City Collection Costs (1%) - This fee covers the City’s costs for collecting and administering the assessments.
The budget for FY 2024-25 was approved by VHB’s Board of Directors on June 25, 2024. The City Council may approve the Annual Report or may modify and approve it as modified.
Environmental Status:
Pursuant to CEQA Guidelines Section 15378(b)(4), government fiscal activities that do not result in a physical change in the environment and do not commit the lead agency to any specific project, do not constitute a project. Therefore, these activities are exempt in accordance with CEQA Guidelines Section 15060(c)(3).
Strategic Plan Goal:
Goal 1 - Economic Development, Strategy A - Develop an updated economic development strategy to ensure business retention, local investments and job growth.
For details on the City of Huntington Beach Strategic Plan, visit: https://www.huntingtonbeachca.gov/departments/city_manager/strategic_plan.php
Attachment(s):
1. Visit Huntington Beach FY 2024-25 Annual Report
2. PowerPoint Presentation - HBTBID FY 2024-25 Annual Report