City Council Hears Pitch for Creating Tourism Improvement District

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The Menger Hotel at Alamo Plaza. The Menger Hotel at Alamo Plaza.

Scott Ball / Rivard Report

A fee on stays at downtown hotels such as the Menger Hotel at Alamo Plaza would fund a proposed tourism improvement district to raise revenue for Visit San Antonio.

Tourism representatives introduced a plan Tuesday that would make San Antonio an official tourism improvement district with the potential to inject millions into the city’s tourism advertising budget.

Visit San Antonio (VSA) President and CEO Casandra Matej and the San Antonio Hotel & Lodging Association’s President and CEO Liza Barratachea and Board Chairman Justin Holley outlined the proposed San Antonio Tourism Public Improvement District (SATPID) for members of the City Council’s Economic and Workforce Development Committee. The full Council is schedule to vote on the proposal later this month.

As part of a strategy for securing additional funding to support tourism sales, and marketing initiatives and increase hotel demand, the SATPID plan calls for the City to collect 1.25 percent of each overnight hotel stay as a fee that would be taxed at the existing Hotel Occupancy Tax rate.

Hotels with 100 or more rooms would be eligible to be included in the district. The plan excludes short-term rentals from the fee.

The City would direct those fees to VSA, which became a public-private partnership in 2016, for use in funding the sales, marketing, and promotion of San Antonio to convention, group, and business and leisure visitors.

Currently, of the 16.75-percent Hotel Occupancy Tax the City collects, 7 percent is allocated to fund VSA, convention facilities, history and preservation projects, and the arts.

Last year, VSA launched a membership program that has boosted its $25.5 million annual budget with an additional $1 million in revenue. Yet that still leaves San Antonio, and its third-largest industry, far behind other destination cities in the state and around the country, and VSA about $10 million short of the organization’s goal.

With an estimated $13.6 billion annual economic impact on San Antonio, the tourism industry hosts 30 million visitors annually, and provides for more than 130,000 local jobs. It’s an industry that gives back as well, Matej said, helping to fund quality-of-life projects and facilities that residents also enjoy.

But VSA’s current budget has remained flat and isn’t keeping pace with other cities’ destination marketing organizations, Matej said, and that puts San Antonio at a disadvantage when competing for visitors and growing the local tourism industry.

“It is true, we are a strong market for travel,” she said. “However, one of the things that we’ve been noticing is a trend over the last seven to 10 years that we are losing some market share.” One reason, she said, is because cities like Dallas and Houston have substantially increased what they spend on tourism advertising, with Dallas’ current budget at $37.2 million and Houston at $35 million.

“The reality is, when people are spending more in their marketing budget, he who has the loudest voice wins,” Matej said. “Dallas and Houston are certainly doing so.”

The full SATPID proposal will be made to City Council for consideration June 21. If approved at that meeting, the Hotel & Lodging Association and VSA will then begin the process of gathering the 60 percent of hotel owners’ signatures in the proposed district required on a petition, and developing a service plan, that would be presented to City Council for ratification.

Under the proposed eight-year agreement, which would go into effect in October, a SATPID Corporation Board would then provide direction to VSA on its sales and marketing programs.

Holley said the Hotel & Lodging Association has held several meetings with local hotel operators and general managers, and he is confident they will be able to collect the signatures that are needed. “The owners are ready to accelerate this and move forward,” he said.

There are 357 total hotels in San Antonio and the surrounding area, he said, and 151 have 100 or more rooms.

Hoteliers expect the money that is spent on tourism sales and marketing programs will create greater demand for hotels, Holley said, and that’s why part of the agreement calls for a minimum $7 return on every $1 invested.

Scott Joslove, the president and CEO of the Texas Hotel & Lodging Association who also attended Tuesday’s briefing, said travelers in general do not complain about the extra fee, seeing it as an understandable expense of promoting tourism.

“Everybody benefits, and it doesn’t cost the city of San Antonio a single dollar,” Councilman John Courage (D9) said. “It sounds good to me.”

Dallas, the first city in Texas to enact a tourism improvement district, has reported a return on investment of $26 in room nights for every dollar spent on incentives to attract conventions and other large events to the city. In 2016, the City of Dallas renewed its TPID agreement for another eight years.

Although TPIDs are most common in California cities and within a few other states, as the concept grows across the country, several Texas cities are currently exploring the idea. Last year, the State of Texas cut its tourism budget by half, to $34 million.

 

2 thoughts on “City Council Hears Pitch for Creating Tourism Improvement District

  1. I think this is a great idea. I worked for the Marriott downtown for 15 yrs at the front desk and I can tell you that I can count on one hand how many guests complained of the extra taxes on the bill. They seemed to be more upset with the parking costs!

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