They tried it their way and now the City of Morro Bay wants to return to a previous model for tourism promotions, as the coronavirus pandemic response opens a window to changing how marketing is done and by whom.

The City Council agreed with recommendations made by a special committee and the Tourism Business Improvement District (TBID) board, most importantly, to put the marketing efforts back under a private non-profit corporation and take it out of City Hall’s bailiwick.

That’s how the TBID promoted the City from the inception of the tourism marketing assessment district in 2009 until it was taken over by City Hall in 2016.

Back then, the City said it wanted tighter control over the messaging, the City’s branding, and the types of promotions that were done. One of the first things it did was return to a City-copyrighted slogan — “Discover Your Better Nature.”

In what was a controversial move, the City took control over the TBID assessment monies (3% tax on a room night), and created a Tourism Department under the City administration, hiring a full-time tourism director, Jennifer Little, plus a full-time and a part-time staffer.

It also contracted with Mental Marketing to coordinate the actual promotions — online, social media and traditional (print) media advertising.

The TBID board was relegated to an advisory function with the City Council making final decisions on budget and promotional planning.

System Worked Before Takeover

Things had been going well, with transient occupancy taxes (10% of the cost of a room night) growing quickly, rising from some $1.5 million a year, to nearly $4 million in 2019.

The promotions helped moved TOT into second place on the City’s tax revenues list ahead of sales taxes. Property taxes are still No. 1 on that list.

TOT has been the lone tax source that has shown good, steady growth over the past several years.

Goal was ‘Heads in Beds’

TBID formed with the goal of increasing occupancy rates — putting “heads in beds” — and it has considerably, but occupancy has leveled off over the past couple of years.

Even so, TOT has increased annually, attributed more to motels charging more per night for rooms, than an increase in occupancy.
Last year, the Council voted to include so-called short-term rentals (vacation rentals), in the assessment district but held off on adding RV parks for now.

There have also been discussions about either adding restaurants and retail shops to the TBID through some fee arrangement, or creating a separate assessment district for these types of businesses?

One big question with this idea is should such an assessment district include all restaurants (and shops) be included, including those on North Main Street and Quintana Road, or just the ones in the tourism-heavy areas like the Embarcadero and Downtown?

City Swaps Laws

The City Council also voted to re-constitute the TBID model under a different State law.
The TBID was created under the “Parking and Business Improvement Area Law of 1989” and will now be under the “Parking and Business Improvement District Law of 1994.”

The main difference in the two is that the 1989 law requires assessment districts to undergo a protest vote of district members every year. The 1994 law requires a vote every 5 years.

“It is a time intensive process and, in many respects, creates a smaller window to execute on long-term objectives,” reads a staff report from City Manager Scott Collins. He estimated the costs for making this switch at $50,000 to $75,000
and recommended hiring a consultant to do the paperwork.

Collins told Estero Bay News, “The consultant would be paid through TBID assessments, not City funds. It was strongly recommended by folks who have participated in transitions in the past to use outside professional assistance.”

Tourism Was Already Troubled

City tourism in 2019 was sailing into rough waters already, as several regular events — Santa Crawl, tall ship visit, Amgen Tour of California — got canceled for one reason or another.

And then the pandemic hit on March 20 and every public event — the Kite Festival, Car Show, Art in the Park, 4th of July, Harbor Festival and Avocado Margarita Festival among numerous others — got canceled due to the shelter-at-home orders from the Governor and setting up the businesses for a “lost summer.”

Pandemic Changed Everything

With the advent of the pandemic shutdowns, the City decided to quit all promotions as they were in conflict with the idea of sheltering at home. It also canceled Mental Marketing’s contract, and lay off the tourism director and one of two staffers.

“Due to COVID-19 financial impacts,” Collins said, “we laid off Jen Little and Liz Gilson [part time]. Megan [Leininger] is still on staff.” Collins added that Leininger, “Helps administer the TBID meetings, coordinate with State and Visit SLOCAL and communicates with hoteliers and vacation rental owners and other maintenance duties. The City Tourism Department has not been dissolved, more like in holding pattern.”

Next Steps?

What’s going to happen next? Collins said, “There are many steps from here on out, but direction is to have separate non-profit manage the tourism marketing function moving forward beginning in July 2021.”

The City took the promotions away from TBID and its non-profit organization, to have control over the spending of what it considered “public monies.” Who’s going to be in charge now?

“Under this proposed new model,” Collins said, “the City would have oversight by ultimately approving the district plan and would review the budget annually [just as Visit SLOCAL is reviewed by the Board of Supervisors and Board approved the district plan].
“The district plan would include among other things, the board make up, which may have a city councilmember, staff or appointed community member on the board.”

Decision Made by Committee

This arriving back at the beginning wasn’t done in a vacuum, it was arrived at via a committee.

The City formed the “Morro Bay Tourism Stakeholder Group,” consisting of hoteliers, vacation rental owners, Visit SLOCAL representatives, restaurateurs, and a few community members, according to Collins, meeting five times in June-July to hash out the future promotions model.

The City also hired Kathleen Marcove of Marcove Executive Training to facilitate the meetings and draft a report for the Council.

“The group reviewed material, heard from experts on best practices and, through consideration of these materials and robust discussion, formulated three key recommendations for the TBID Board and City Council’s consideration,” Collins said.
Those three basic recommendations were:
• Support efforts to switch from the 1989 law to the 1994 law;
• Convene a transition team to design a new tourism management model with the City playing a supporting role rather than the leading role; and,
• Diversify the visitor profile by creating a new identity for Morro Bay, moving away from a primarily budget (inexpensive) destination to one that also attracts a wider spectrum of visitors, in terms of income levels.
That last one has long been a desire of the tourism industry, seeking to target wealthier people from Southern California and the Bay Area, and still cater to Morro Bay’s traditional tourists, from the Fresno and Bakersfield areas.
The TBID board supported the stakeholder’s recommendations, adding that the City should use TBID monies to set up the non-profit.

TBID Money Still Being Collected

With zero promotions being done right now stemming from the Governor’s pandemic response, the City hasn’t stopped collecting the TBID assessments.

So what have they done with the over $223,000 collected from March to the beginning of August?

“We are keeping the lights on at this point,” Collins said, “part-time staff, website and a few other things. Monies received and not spent are being held in the TBID assessment accumulation fund; those funds are being held for when paid marketing makes sense again. And can assist with the transition to the new model.”

According to City records, from July 2019 to June 2020 the TBID assessments collected over $651,200. But that includes the months of March, April, May and June 2020 when society was under strict, lockdown orders from the State, and tourism was being actively discouraged by the City.

Indeed, last April had the worst TOT totals for the City since TOT was first enacted in the mind-1960s with the town’s incorporation, with just $26,900 being collected with an occupancy rate of 16% and $8,400 in TBID charges.

For comparison, last March’s occupancy rate was 31% ($65,600 in TOT) before the lockdown hit on March 20.
But once the health emergency due to coronavirus is lifted, the tourism should pick up again, evidenced by the jumps in July, which totaled some $2.95 million total receipts ($292,500 in TOT) and added $110,400 to the TBID coffers, after just a slight easing of restrictions by the Governor. SLO County remains in the highest level of lockdown.

Visitor’s Center Still Closed

The City also shuttered its Visitor’s Center, which had been run under contract by the Chamber of Commerce but was given up in April after the City closed it along with its other facilities in the pandemic response.

Collins said that’s another of the things they still must decide.

There was some effort to possibly move the visitor’s center down to the Embarcadero where the visitors mostly are. But a proposal put forth by the Chamber was rejected by the City Council.

Asked about this, Collins said, “Nothing new on the Visitor Center future at this point.”

There has been some discussion that the traditional visitor center model with a physical location people can actually visit, could be outmoded, with today’s visitors mostly using their cell phones to get tourist information.