REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Al Zelinka, City Manager
VIA: Jennifer Villasenor, Acting Director of Community Development
PREPARED BY: Kriss Casanova, Economic Development Manager
Subject:
title
Approve Huntington Beach Tourism Business Improvement District (HBTBID) Annual Report for Fiscal Year (FY) 2023-24
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Statement of Issue:
In 2014, the Huntington Beach Tourism Business Improvement District (HBTBID) was formed pursuant to the California Property and Business Improvement District Law of 1994, which authorized special benefit assessment districts to raise funds within a specific geographic area.
The purpose of the HBTBID is to increase overnight lodging sales with targeted marketing and promotions. Funding for the marketing programs and activities of the HBTBID are derived from assessments collected from lodging businesses operating within the City of Huntington Beach (City) boundaries. The current assessment rate is four percent (4%) of gross short-term lodging revenue from room rentals under 30 days. Visit Huntington Beach (VHB), a non-profit 501(c)6 organization, serves as the HBTBID’s Owners’ Association. VHB is responsible for implementing the programs identified in the Management District Plan (MDP) and for submitting an annual report to the City Council for their approval in accordance with California Property and Business Improvement District Law of 1994.
Financial Impact:
There is no financial impact associated with the recommended action.
Recommended Action:
recommendation
Approve the Huntington Beach Tourism Business Improvement District (HBTBID) Annual Report for FY 2023-24.
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Alternative Action(s):
Do not approve, and request VHB to modify the Annual Report.
Analysis:
Background
Promoting Huntington Beach as a desirable tourism destination and increasing the City’s lodging brand awareness is essential to the City’s continued economic vitality. In 2014, the HBTBID was formed pursuant to the California Property and Business Improvement District Law of 1994, which authorized special benefit assessment districts to raise funds within a specific geographic area. This approach has been used successfully in other tourist destination communities throughout California to increase demand for room night sales at lodging businesses.
The purpose of the HBTBID is to increase overnight room night sales with funding dedicated to marketing and public relations, group sales, and visitor services enhancements. Funding is derived from assessments and revenues collected from all lodging businesses, existing and in the future, available for public occupancy located within the City boundaries, which include Sunset Beach. HBTBID is comprised of approximately 21 hotels/motels and 225 short-term rentals (STRs). Visit Huntington Beach (VHB), a non-profit 501(c)6 organization, serves as the HBTBID’s Owners’ Association and is charged with managing funds and implementing programs in accordance with the HBTBID Management District Plan (MDP). The City collects the assessments from the lodging businesses, monthly for hotels/motels and quarterly for STRs, and then distributes the funds to VHB.
The HBTBID term runs through June 30, 2028. The current assessment rate is four percent (4%) of gross room rental revenue for short-term stays. This assessment is separate from the City’s ten percent (10%) Transient Occupancy Tax (TOT). In 2019, the HBTBID was renewed and the assessment rate was increased by one percent (1%), from three percent (3%) to four percent (4%). At the same time, a Memorandum of Understanding (MOU) between the City and VHB was replaced with a TBID Management Agreement that sets forth the duties and responsibilities of the City and VHB. The MOU required the City to convey one percent (1%) of the City’s TOT revenue to VHB. This TOT revenue sharing was eliminated in the TBID Management Agreement, which provided that 100% of TOT revenues would be retained by the City and that funding to VHB would remain unchanged with the one percent (1%) assessment rate increase.
VHB consists of approximately 14 staff members and 22 board members dedicated to promoting tourism to Huntington Beach and increasing overnight stays in Huntington Beach hotels and short term rentals. VHB is responsible for implementing the activities and services identified in the MDP and for submitting an annual report to the City Council for approval.
Annual Report
VHB has submitted its Annual Report (Attachment 1), which summarizes the programs and activities for FY 2023-24. Core goals for the upcoming year include strengthening and enhancing Huntington Beach’s Surf City USA® brand, marketing and promoting Huntington Beach as a tourism destination, increasing occupancy at Huntington Beach lodging properties, establishing partnerships within the tourism community, better positioning Huntington Beach as a filming destination, and expanding a presence in emerging markets for tourists.
VHB will continue to leverage Visit California’s tourism efforts and extend its presence into key domestic markets to ensure Huntington Beach is well positioned to attract a balanced and wide range of visitors. Key markets include California, Phoenix, Dallas, Seattle, Chicago, New York, and other border states, while increasing and/or re-engaging in Tier 1 international markets (United Kingdom/Ireland, Canada, Mexico) and Tier 2 international markets (Australia/New Zealand, Japan, and Germany).
VHB’s initiatives and programs for the upcoming year will focus on four areas in line with goals of their Strategic Plan for FY 2023-26:
1. Driving Global Brand Awareness - Programs that increase the visibility of Huntington Beach and the Surf City USA® brand as the quintessential California beachside experience by strategically targeting key media, travel trade, meeting planners, and leisure and business travel markets around the globe to increase overnight visitation, visitor spending, and events/group meetings.
• Launch soft season campaigns highlighting HB lifestyle pillars of outdoors, wellness, family, active sports, dining, and shopping as micro-campaigns designed to encourage visitation and overnight stays.
• Leverage Visit CA’s “CA Road Trips” “Kidafornia” and “Ultimate Playground” themes.
• Promote 2023 ISA World Para Surfing Championships (NOV 2023).
• Issue a Request for Proposal for a creative agency of record.
• Attend two of the largest sales trade shows (IMEX 2023 & IPW 2024).
• Launch Show Your HB Love 2024 marketing campaign.
• Leverage the World Cup and LA28 to expand global destination brand awareness and secure offsite activations.
2. Enhancing Destination Stewardship - Programs that help ensure that the places to eat, shop, play, and stay in Huntington Beach are enjoyed by residents and visitors alike, and that those experiences are fun, unique, accessible, memorable, and inspire repeat visitation.
• Develop outreach and education to enhance customer service for all visitors including international and accessible communities.
• Engage in discovery research towards accessible certified destination.
• Survey key customer user groups to better understand ways to increase the frequency of booking meetings and special events in Huntington Beach.
• Help implement pertinent destination improvements recommended by Responsible Hospitality Institute’s sociable city assessment.
3. Championing the Value of Tourism - Programs that educate residents, visitors, local businesses, government officials, and community stakeholders on the vital role of the travel & tourism industry and provide a greater understanding of its impacts and benefits.
• Seek approval of the assessment rate modification for the Huntington Beach Tourism Business Improvement District.
• Develop annual Tourism 101 forum to help residents and businesses gain a greater understanding of the local tourism industry.
4. Prioritizing Organizational Effectiveness and Culture - Programs that ensure VHB’s spirit of service is operating at optimal efficiency and, as Huntington Beach’s destination management organization, is consistently delivering on its Mission, Vision, and Brand Promise to visitors and residents.
• Develop customer sentiment survey.
The following matrix summarizes the proposed revenues and expenditures to be funded with assessments for FY 2023-24.
|
HBTBID Reporting Year |
FY 2023-24 |
|
Revenues |
|
|
Estimated TBID Assessments |
$7,090,560 |
|
Retail, Web Ad, Walking Tour Sales |
$21,220 |
|
Total Revenues |
$7,111,780 |
|
Estimated Carry-over from Previous Fiscal Year |
$459,200 |
|
Total Funds Available |
$7,570,980 |
|
Expenditures |
|
|
Tourism Enhancement Programs (83%) |
$6,301,912 |
|
Administration (15%) |
$1,154,067 |
|
Contingency/Reserve (2%) |
$115,000 |
|
Total Expenses |
$7,570,979 |
VHB bases its revenue assessment projections on several factors, which vary and include anticipated group meetings business, return of more signature events, weather, anticipated demand, hotel partner projections and the addition of STR inventory. Assessment revenues for FY 2023-24 are estimated to be approximately four percent (4%) higher than last year and are budgeted at $7,090,560. This amount does not include a one percent (1%) administration fee retained by the City for collecting and disbursing assessment revenues. Total revenues also do not include a rollover of $459,200 from FY 2022-23 but are included in the total funds available for FY 2023-24. These funds have been allocated to Tourism Enhancement Program projects for the upcoming year.
Administration expenditures (15%) fund the administrative staffing costs, office costs, and other general costs such as insurance, legal, and accounting fees. The majority of expenditures fund Tourism Enhancement Programs (83%) which include a wide variety of services and programs and the associated staff time of two sub-programs: sales and marketing and visitor services enhancements. A summary of each sub-program is provided below and more detail can be found on page 28 of the Annual Report:
• Sales & Marketing - The sales and marketing program promotes assessed lodging businesses as tourist, meeting, and event destinations with a central theme of promoting the Huntington Beach destination brand as a desirable place for overnight visits. Goals of the program include increasing overnight visitation, room night sales at assessed lodging businesses, and visitor expenditures.
• Visitor Services Enhancements (VSE) - The VSE program includes initiatives based on criteria to be developed by VHB and reviewed and approved with the City with a focus on the entire destination footprint to ensure a consistent brand experience throughout Huntington Beach. Current programs include the Nighttime Ambassador Program partnership with the Downtown Business Improvement District, the Visitor Information and Digital Information Kiosks at Pier Plaza, Visitor Info Booth at key events, Team Surf City USA Volunteer Program, and VHB staff guided Downtown and Surf Themed Historical Walking Tours, Barrel Trail, Scavenger Hunt, and Photo Trail, designed to keep visitors longer in HB.
The budget was approved by VHB’s Board of Directors at its June 27, 2023 meeting. The City Council may approve the Annual Report or may modify any section contained in the Annual Report 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, visit www.huntingtonbeachca.gov/strategicplan <http://www.huntingtonbeachca.gov/strategicplan>.
Attachment(s):
1. Visit Huntington Beach FY 2023-24 Annual Report
2. Powerpoint presentation - HBTBID FY 2023-24 Annual Report