2013 CEO FORUM

Future Funding Models

Tourism Matters!

Tourism is a top-ten employer in 48 states

$124 billion tax revenue

1 of 9 jobs depends on tourism

But, government funds for tourism marketing…

Are being cut!

Tourism Funding

• Untethered allocations• Tethered allocations• Dedicated tax

– Tax increment financing

• Assessment

• Membership• Event revenue• Sponsorships• Contract services

PrivatePublic

Traditional private funds simply aren’t enough.

TIDs are an answer…

Funding

OversightStability

Hotels pay an assessment…

Collected by the local government…

And managed by the DMO.

Partnerships are best…

Drivers

Beneficiaries

Managers

Private

Guidelines

Compulsory

Sunset

Public

Payors

Government

DMO

TIDs are growing…

Competi-tors

No Fund-ing

Budget Reduction

Other

Why did your destination form a TID?

How many months did it take to form your TID?

<6 6-12 12-18 18+0

10

20

30

40

50

60

70

80

6

68

24

6

Laws

Plan

Classification

ApprovalSunset

Non-Profit

California has two TID laws…

• No petition• 1 year term• Annual renewal• Business only• Appointed advisory

board• City can disestablish

• 50% + 1 petition• 5 or 10 year term• Business or property• Non-profit

management• Annual report• Payors can

disestablish

1994 Law1989 Law

Montana has 1 TID law…

Property-based

60% footprint petition

Collected with property taxes

3-10 year term

Payors can disestablish

DMO must manage

Montana has seen results…

+ 4.3% demand(Billings)

Awareness up5-10X

3.50:1 ROI

+9.2% ADR(Billings)

10 district

s

Budgets have increased…

Average

Billings

W. Yellowstone

Helena

0

200,

000

400,

000

600,

000

800,

000

1,00

0,00

0

98,333

200,000

93,000

80,000

433,666

850,000

418,000

283,000

Post-TIDPre-TID

Washington has a TID law…

Convention and tourism promotion

40+ rooms

400,000 < Population > 1,000,000

$2.00 per room

Payors can disestablish

Texas has a narrow TID law…

100+ rooms

Special benefit

Population >

1,000,000

Council-manager governme

nt

Portland formed a TID by charter…

50 + rooms

2% assessment

5-year termination hearing

Travel Portland

1• Legislation

2• Structure

3• Business Plan

4• Owner Approval

5• Government Approval

Five steps to TID formation:

Management is a balancing act...

DMO

CVB

membersHotels

There are many different ways to structure TID

management.

An existing nonprofit can manage…

Board Hotel, Restaurant, Retail

Government RepresentativesElect directors & officers

Executive CommitteeSet Policy

Duties delegated by Board

Nominating Committee

Audit Committee

Compensation Committee

Sales Committe

Marketing Committee

Or work with a new corporation…

Existing CorporationProgram Implementation

Executive Committee

Sales & Marketing Committee

(formerly the TMD Executive

Committee)

Nominating Committee Audit Committee Finance Committee

New Hotel CorporationOversight

Contract

Or, a hotel corporation can manage.

Board of Directors Hotels

(Funding Only – No Marketing)

DMOLodging & Other Representatives

Develop annual budget

Other VendorsSpecial Initiatives

Events

Existing TIDs have seen great returns.

Los Angeles created a TID in 2011.

It raises over $13 million annually

The total paid by guests, with TOT, is 15.5%

3 cities & county

$0.50 - $2.00 per night

88 hotels

=47,888 room nights generated

Since 2010

Lodging Performance

2010 2011 $-

$50.00

$100.00

$150.00

$200.00

$166.4

5

$176.0

0 $109.9

4

$116.3

5

ADR

Santa Barbara

California

2010 201155%

60%

65%

70%

75%

67%70%

63%67%

Occupancy

Napa Valley created a TID in 2010.

It raises over $4 million annually

The total paid by guests, with TOT, is 14%

Napa Valley Sonoma County

Monterey County

Livermore0

1

2

3

4

5

6

Funding Levels

Pre-TIDPost-TID

5 cities & county

2% of room revenue

$4 million annually

25% goes to local committees

Since 2010

Occupancy ADR RevPAR Revenue0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

0.6%

5.0%

5.7%

9.0%

2012 – 2013 Growth

High Season Low Season Total Seasons Running 12 Months

5.0%

12.2%

7.4%

6.1%

2012 – 2013 High / Low Season Growth

3 employees

6 partners

19 employees

170 partners

Some state tourism offices also have districts…

There are four types of state funding…

General fund appropriations

Room / bed tax

Tax increment financing

Variegated sources

TN, NC, ND, WY, MN, PA, RI, NY, MI, MS, MA, MD, VT, VA, GA, CT SC,

KY

MO, UT

IL, HI, MT, DE, ID, TX, OR, AL, NE, NV, NJ, KY

KS, CO, WA, WV,

AZ, CA, LA, OK

General Fund

OH

FL, NM, WI, AK,

IA

NH, ME

IN, SD, AR

Variegated Sales TIF

Room Tax

Funding Sources By State

There are resources!

It isn’t always easy…

California has Proposition 26…Voters approved in November 2010-Article XIIIC of CA Constitution

All levies are a tax and require a 2/3 vote of the electorate, unless:

Seven exceptions:

• A charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged

• A charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged

Partnerships aren’t always perfect…

Strong mayor

District approved, but contract not signed

Council strongly supports district

Mayor successful at delay

If hotels can do it, why not others?

Restaurants Retail Attraction

s Wineries Auto

Mammoth Lakes TID

Included Business Types

• Attractions• Restaurants• Retail• Transportation• Other tourism related

Challenge is linkage between programs and assessees as defined businesses

Restaurant/Retail Districts have been created

Newport Organizational Chart

Visit Newport Beach

501 (c)(6)6-member board

TBID management/Brown Act

Newport Beach Foundation

501(c)(3)Fundraising Arm(Potential Future

Organization)

Newport Beach & Co.

501(c)(6)TOT Funds

24-member boardNo Brown Act

Dine Newport Beach

RBID Management

Marketing

Film Newport Beach

Attract film companies

Revenue from permits

Celebrate Newport Beach

Execute eventsDevelop new

events

Enterprise Newport Beach

B-2-B & BID marketing

Questions and Comments

Thank you!

John Lambeth, PresdientCivitas

www.civitasadvisors.com(800)999-7781