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Local Hotels May Tax Themselves to Keep Up with Statewide Competitors

Local inns explore pooling resources for stepped-up marketing campaign to lure potential tourists to Santa Barbara, Goleta and Carpinteria.

Hotel guests currently pay a 12 percent
Hotel guests currently pay a 12 percent “tourist” tax in Santa Barbara and 10 percent in Goleta and Carpinteria. (iStock photo)

With financial turmoil brewing and the local tourism industry in a slump, all of the South Coast’s competing hotels may join hands and pool resources in an attempt to cast a wider net for guests.

Specifically, they may form a consortium called a Tourism Business Improvement District, which is another way of saying they may tax themselves, for the purpose of ratcheting up the marketing campaign to lure potential tourists to the sunny South Coast.

For hotel guests, this could mean an additional tax on top of the 12 percent they already pay in Santa Barbara, and the 10 percent tax they pay in Goleta and Carpinteria. The possible benefits to local residents are abstract, but in general some insiders say it could be key to preserving the health of the local tourism industry, which in turn is vital to the area’s economy.

After sales and property taxes, hotel bed taxes are the largest source of income for the city of Santa Barbara, generating about 12 percent of the city’s entire general fund, which bankrolls services such as police, fire, libraries and parks.

The troubled economy isn’t the only reason — or even the main reason — for considering the consortium. At least as worrisome to some local hoteliers is the fact that everybody else in California seems to be doing it.

Statewide, about 30 such districts are in existence, the majority of which have formed in the past three years, said Tom Patton, a local hotelier and chairman of the committee that is researching the issue. Another 15 are in the pipeline, he said.

“While we might not be affected currently, we do have a lot of competitors that have more (marketing) dollars than they had in the past,” said Patton, general manager of Ramada Limited, 4770 Calle Real. “At the very least, we want to preserve our market share.”

Although the specifics have yet to be ironed out, the goal would be to raise $2 million a year. Hotels would have the option of passing the fee on to to their customers, or taking it out of their own bottom lines.

Patton said there’s a lot of work to be done before deciding whether to go forward. Eventually, the matter will be put to a vote before all the local hotels, but that isn’t likely to happen for up to a year, he said. First, the Santa Barbara, Goleta and Carpinteria city councils — as well as the Santa Barbara County Board of Supervisors — must approve the idea, because their agencies would be responsible for administering the tax.

Unlike the traditional bed tax, however, none of the money would go to the government. Instead, it would go to the Santa Barbara Conference & Visitors Bureau, which would use the money strictly for the purpose of marketing the contributing areas. Interestingly, this means most of the county’s wineries would be omitted from the campaign, because the proposed consortium does not include the North County or the Santa Ynez Valley.

Throughout the fall, Patton has been organizing meetings with local hoteliers in an attempt to explain the issue. He is careful to say that neither he nor the Santa Barbara Conference & Visitors Bureau has taken a stand on a matter.

In general, Patton said hotel owners seem open to the idea, but some have some reservations.

Perhaps the most significant among them is the fear that the industry could lose its annual marketing stipend from the city and county of Santa Barbara, which give the bureau $1.5 million and $200,000, respectively, for the purpose of advertising the area as a destination. (Carpinteria and Goleta do not contribute.)

“I want to make sure we don’t get penalized for being proactive,” said Debbie Neer, general manager of the Franciscan Inn, 109 Bath St., who said she is on the fence about the whole idea.

Indeed, with the city of Santa Barbara facing a shortfall this current fiscal year of up to $5 million — or about 5 percent of its general-fund budget — City Administrator Jim Armstrong said he cannot give any source of funding a guarantee against cuts.

“There is nothing at this point that’s off the table,” he said, adding that, should the council ever vote to cut into the tourism funding, it would do so regardless of whether the local hotels had formed a consortium. As a result, he advises the hotels to proceed.

In San Diego, where a similar district took effect this fiscal year, the hotels actually told the cash-strapped city it could keep all the money it has traditionally earmarked for tourism marketing — in return for approving the special district.

So far, the end result has been encouraging: the annual marketing budget for the San Diego Convention & Visitors Bureau is projected to increase to $22 million this year from about $14 million last year, said Sal Giametta, the organization’s vice president of public affairs. (However, the projected budget might be overstated if the tourism industry takes a serious enough nosedive.)

In any case, this fall the new district allowed the bureau to launch campaigns such as a TV ad in the Los Angeles area called “The Road To Happiness” that encourages people to take a road trip to San Diego.

In Santa Barbara, other questions remain, such as whether such an assessment would come in the form of a percentage or a flat dollar amount.

Paul Bullock, general manager of the Eagle Inn, 232 Natoma Ave., said he is generally in favor of the idea.

“It couldn’t hurt,” he said. “In the ad campaign you could tell people about some of the things we have: the zoo, the natural history museum — a lot of things some out-of-towners don’t know we have here. Not just the usual walk up State Street, drink some wine and go to a dinner. Maybe they could do something else.

“There’s so many coastal towns now that are in one of these things that if we don’t do it we might get kind of left in the dust.”

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