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Home My WebLink About19 - Transient Occupancy Tax Enhancement ReportEW PQ CITY OF NEWPORT BEACH COMMUNITY AND ECONOMIC DEVELOPMENT F PLANNING DEPARTMENT V T 33oo NEWPORT BOULEVARD a. FOFN�P NEWPORT BEACH, CA 82658 (714) 644-32oo; FAX (714) 644-3250 Hearing Date: July 28, 1997 Agenda Item No.: 19 Staff Person: Patrick J. Alford (714) 644-3235 CITY OF NEWPORT BEACH REPORT TO THE MAYOR AND CITY COUNCI JUL 2 81997 SUBJECT: Transient Occupancy Tax Enhancement Report. APPPOWED SUMMARY: A study on potential methods of increasing transient occupancy tax revenues. SUGGESTED ACTION: Accept the study and direct the Economic Development Committee and staff to consider the findings and recommendations as part of the strategic plan for economic development. Background On May 28, 1996, the City Council authorized a three-way agreement with the City, the Newport Beach Conference and Visitors Bureau and PKF Consulting to conduct a study on the feasibility of developing a conference center as a method of increasing hotel occupancy rates and transient occupancy tax revenues. Analysis Preliminary analysis by the consultant indicated that neither a conference nor a convention center is the most cost-effective method of increasing hotel occupancy rates, and thus, transient occupancy tax (TOT) revenues. It was demonstrated that while there may be sufficient market demand for such a facility, it still would have to receive significant subsidy from the City. Since it was a goal to have a self-supporting facility, the scope of the study was modified to include alternative methods of increasing TOT revenue. The study concludes that Newport Beach has ample natural and developed amenities to attract tourists to its hotels. Furthermore, while hotel occupancy levels are relatively high, there is limited potential for growth without new hotel development. The study also concludes that the City has the means to optimize this potential by increasing the City's appeal as a tourist destination. This will increase hotel occupancy levels, which will in turn increase room rates and spur further hotel development. The study recommends that the City adopt a development strategy aimed at enhancing its image within the travel community. Short term goals include building on the success of the Newport Beach Conference and Visitors Bureau in promoting the City's tourism product to the travel community. Long term goals include integrating tourism into planning policies, engaging in regional joint marketing, developing an infrastructure (signage, streetscape, landscaping, and Transient Occupancy Tax Enhancement Report July 28, 1997 Page 1 transportation) to support tourism, and developing major activity centers within the City's existing commercial areas and in new areas such as Pelican Hill. A copy of the study, which includes an executive summary, is attached. The Economic Development Committee has begun a process for strategic planning for economic development. The findings and recommendations contained in the study should be considered as part of that process. Submitted by: SHARON Z. WOOD Assistant City Manager Prepared by: PATRICK J. ALFORD Senior Planner Attachments: PKF Consulting Report: "Analysis of Potential Means of Enhancement of Transient Occupancy Tax Revenue for the City of Newport Beach" F:\USERS\PLN\SHARED\l CITYCNL\1997\0728rrOT.DOC Transient Occupancy Tax Enhancement Report July 28, 1997 Page 2 Analysis of Potential Means of Enhancement of Transient Occupancy Tax Revenue for the City of Newport Beach Prepared for: City of Newport Beach and Newport Beach Conference and Visitors Bureau Prepared by: PKF Consulting Los Angeles, California February, 1997 r - February 25, 1997 Ms. Rosalind Williams Newport Beach Conference & Visitors Bureau 3300 West Coast Highway Newport Beach, California 92660 and Mr. Kevin Murphy City Manager City of Newport Beach 3300 Newport Boulevard Newport Beach, California 92663 Dear Ms. Williams and Mr. Murphy: r CONSULTING 811 Wilshire Boulevard E Suits 800 Los Angeles CA 90017 Telephone (213) 680-0900 Teletex (213) 623.8240 In accordance with your request, we have completed the revenue enhancement study for the City of Newport Beach. The conclusions reached are based on our knowledge of the market as of the completion of our fieldwork in August 1996. This study was undertaken to determine the current transient occupancy tax revenue generated within the city of Newport Beach and to identify areas of potential growth. This report has been prepared primarily for your use and guidance in determining actions for the City of Newport Beach and the Newport Beach Conference and Visitors Bureau to increase the total taxable revenue generated. We appreciate the opportunity to conduct this study and look forward to working with you in the future. Sincerely, PKF Consulting d AI-=� Bruce Baltin Senior Vice President Member, Pannell Kerr Forster International Table of Contents Section I - EXECUTIVE SUMMARY...................................................................................... 1 MARKETDEMAND.............................................................................................................................1 ALTERNATIVE MEANS OF INCREASING TOT EXIST..................................................................1 OCCUPANCYOUTLOOK....................................................................................................................2 PLANNING............................................................................................................................................ 2 PRODUCTENHANCEMENT.............................................................................................................. 3 ALTERNATIVE CONVENTION/CONFERENCE FACILITIES........................................................3 ADDITIONALOPPORTUNITIES........................................................................................................3 Section II - SCOPE AND METHODOLOGY........................................................................ 6 Section III - MARKET ANALYSIS......................................................................................... 7 SUPPLYAND DEMAND.....................................................................................................................7 CommercialDemand.............................................................................................................7 GroupDemand...................................................................................................................... 8 LeisureDemand.................................................................................................................... 8 ContractDemand...................................................................................................................8 REVPARANALYSIS..........................................................................................................................10 Section V - CONFERENCE AND CONVENTION CENTER FEASIBILITY ........................... 13 CONFERENCE FACILITY.................................................................................................................13 CONVENTIONCENTER....................................................................................................................13 COMPARABLE FACILITIES.............................................................................................................13 UTILIZATION OF CONFERENCE CENTER FACILITIES.............................................................19 Seasonality...................................................................................................................................20 FUNDINGMECHANISMS.................................................................................................................20 RelativeCost................................................................................................................................21 Hotel Occupancy for Newport Beach......................................................................................22 Lackof a Critical Mass................................................................................................................ 22 Section V - RECOMMENDATIONS FOR REVENUE ENHANCEMENT .............................. 23 ALTERNATIVES TO A CONFERENCE AND CONVENTION CENTER......................................23 AvailableMarket Segments.........................................................................................................23 TheMeetings Market...................................................................................................................24 Expanding Current Facilities...............................................................................................24 CorporateMeetings............................................................................................................. 24 IncentiveTrips.....................................................................................................................24 Association Conventions.....................................................................................................25 Overall Development Strategy.....................................................................................................25 SHORTTERM GOALS.......................................................................................................................25 Creatinga Tourism Plan.............................................................................................................. 25 MarketingActivities....................................................................................................................26 Defining the Current Visitor Product...........................................................................................27 PressCoverage.............................................................................................................................28 LONGTERM GOALS.........................................................................................................................28 LocalPlanning.............................................................................................................................28 RegionalPlanning........................................................................................................................29 RegionalJoint Marketing.............................................................................................................30 r--. Table of Contents C iii Imageand Perception...................................................................................................................30 Spatialityof Existing Development............................................................................................. Infrastructure................................................................................................................................ 31 31 Signage.........................................................................................................................................32 Aesthetics.....................................................................................................................................32 Transportation.............................................................................................................................. 32 Section VI - POTENTIAL SITES TO DEVELOP AND PROMOTE ....................................... 33 NEWAREAS TO DEVELOP..............................................................................................................33 PelicanHill ...................................................................................................................................33 MarinaPark..................................................................................................................................33 AREASTO BE ENHANCED..............................................................................................................33 MarinersMile/PCH - The prototype............................................................................................34 . CoronaDel Mar...........................................................................................................................34 FashionIsland..............................................................................................................................34 BalboaIsland...............................................................................................................................34 BalboaPier...................................................................................................................................35 i Section I - EXECUTIVE SUMMARY PKF Consulting was initially retained by the City of Newport Beach and the Newport Beach Conference and Visitors Bureau to conduct a preliminary study of potential market demand for a potential conference or convention center in the City. Based upon the criteria presented to us at the outset of our engagement, we found that while market demand exists to support a potential convention center, other criteria presented to us precludes such a recommendation and the study then evolved into a revenue enhancement study for Transient Occupancy Tax (TOT) for the City. The following points summarize our primary findings and conclusions. MARKET DEMAND • There is a sufficient market demand for the development of a convention center in Newport Beach, but such a development would not be self-supporting from its own operations and may not be the most cost effective manner of achieving the desired objective of increasing revenues received from transient occupancy taxes, as compared with other avenues available to the City. Substantial market support does lend itself for the development of a convention center, as opposed to a conference center which would have only limited ability to substantially increase room night demand in Newport Beach. However, establishment of a convention center does not meet all the criteria established by the city of Newport Beach, particularly that of no city investment. Most convention centers are developed and supported by communities based upon the economic impact they generate. Additionally, most convention centers are subsidized at the operating level and all are subsidized at the capital expense level. ALTERNATIVE MEANS OF INCREASING TOT EXIST • The City of Newport Beach is well positioned to upgrade its image within the travel community and create a more desirable product for the visitor. • The city needs to adopt a long-range plan aimed at enhancing Newport Beach as a tourism destination. Newport Beach does, however, have other means to substantially increase revenue in TOT over the foreseeable future. A conference and/or convention center is usually developed by a community to attract visitors to it. Newport Beach, with its location relative to the ocean, climate, retail and entertainment amenities and scenic appeal has other avenues open to it to attract regional business travelers, tourists and conference attendees who would, in turn, contribute to generating hotel occupancy, increasing room rates and supporting further hotel development. However, to optimize the potential we recommend that the community adopt a goal of maximizing tourism revenues through means consistent with other local objectives. r r~ 2 To maximize tourism revenues, tourism needs to be "top of mind" to the city; thus enabling tourism to penetrate the awareness of the community and manifest itself in a variety of public-private partnerships for specific projects to further develop Newport Beach as a tourism product. Such partnerships would stress cooperative efforts which would work to develop various facilities and special events and promote cultural affairs and other activities within the community. OCCUPANCY OUTLOOK The City is already operating at occupancy levels that are approaching the effective capacity of the existing hotels. Thur, even though overall demand may continue to grow, the current occupancy outlook presents modest opportunity for growth in accommodated demand, without the development of new hotels. City-wide hotel occupancy finished in 1995 at 71.1% and is projected to end at 72.7% in 1996. We estimate, based on the City of Newport Beach's market position and our knowledge of concparable destinations, that the city's occupancy level will effectively reach capacity at an annual average of approximately 78.0 percent, a relatively high level of occupancy for any hotel market. The average daily room rate achieved was $98.71 in 1995 and is expected to finish the current year at $105.68. • Promoting and enhancing the City of Newport Beach as a major tourism product will contribute to increased occupancy and higher rates, as well as promote the hotel market within Newport Beach. For many demand segments, the appeal of an overall destination (the city) has a direct bearing on the amount that a guest will pay at a hotel within the destination and the degree to which a guest is willing to travel to a particular hotel. Furthermore the amenities provided within a city, along with its "quality of life" attributes, infrastructure and marketing have a direct bearing on its appeal to visitors. Higher occupancy caused from an increase in demand for the City should directly provide Newport Beach with the opportunity to strengthen its market position and lead to an increase in the average daily rate. At the same time increasing demand lends support to the potential development of new hotels and/or additions to existing hotels. PLANNING • Tourism needs to be incorporated as an element of city planning. The appeal of Nev port Beach as a major destination is determined, to a large extent, by such factors as climate, retail and dining options, cultural and recreational amenities, aesthetics, transportation and image. The extent to which the foregoing is recognized and 3 blended into a city's planning and management culture is also an important factor in determining a city's success in optimizing tourism revenues. Some elements, such as climate, are not in control of the city. However, many other factors are in the control of policy makers. For example, retail and dining options, transportation, and other amenities are within the scope of the city. Therefore, Newport Beach may want to assume a proactive development role and vigorously promote its many amenities, thus increasing its appeal to the various demand segments. PRODUCT ENHANCEMENT Newport Beach can enhance tourism and related revenue through reinvestment, which in turn, promotes the city as a tourism product. The city of Newport Beach can also achieve its goal of increasing revenues through transient occupancy tax by reinvesting in the further enhancement of its tourism product. A cyclical relationship exists between reinvestment and enhancing Newport Beach's appeal as a major tourism destination. By investing in the city's major elements such as transportation, signage, and aesthetics, the city would be linking tourism sites and develop an enhanced tourism product which would increase transient occupancy tax derived directly from increased demand. ALTERNATIVE CONVENTION/CONFERENCE FACILITIES An example of Public -Private Partnerships could be the development of a large ballroom or conference center at one of the existing hotels which would allow the city of Newport Beach to increase its level of rooms demand by appealing to group demand segments not currently able to be accommodated within the community. In contrast to going to the substantial expense of developing and operating a free standing conference or convention center, communities are now finding that it is more cost effective for the City to facilitate development of additional ballroom or meeting facilities at existing hotels that already have much of the needed support facilities in place. Such newly developed facilities can then open the community to new market segments such as larger conventions or working conferences. ADDITIONAL OPPORTUNITIES Pelican Hill presents the opportunity for Newport Beach to develop a self-contained resort destination. Destination hotels, unlike other hotels, generate their own demand and increase the appeal of the city as a whole. Currently, Pelican Hill Golf Course is located in an unincorporated area outside the city of Newport Beach. This area is within the City's sphere of influence, thus there is the possibility of incorporating this area into the City of Newport Beach. Having an amenity 4 such as Pelican Hill Golf Course as part of the city will enhance the tourist appeal and also offer a venue to hold special events, showcasing the city as a true destination. Pelican Hill is zoned for the development of 1500 - 1900 resort hotel rooms. The development of such resorts would allow Newport Beach to have both an urban and resort destination assuming the new development utilizes prime location and the ocean views. Pelican Hill presents the opportunity to develop a self-contained resort destination based on prime amenities such as an ocean view golf course with a Mediterranean -style clubhouse and an elegant Pro -Shop, along the lines of Pebble Beach or the Four Seasons Aviara Resort now under construction in Carlsbad. • Mariners Mile/PCH and Marina Park are two potential tourism sites, which if enhanced, could be used to increase the appeal of Newport Beach as a major tourism product. Mariners Mile could be utilized as the City's primary tourist center, due to its central Newport Beach location and easy accessibility. Mariners Mile is located along Highway 1, the main North-South route through Newport Beach that connects Los Angeles and San Diego Counties. It is the midpoint between the Newport Pier and Fashion Island and is proximate to the Newport Dunes Resort. This highly visible site is literally a window that provides commuters visible access from the highway to the Newport Beach area. Currently a haven for yacht brokers and boat dealers, Mariners Mile is an exclusive high- end boating area and is not currently considered a tourist node. We recommend this area be re -positioned to maximize its highly accessible prime location to lure potential visitors from Highway 1. A variety of upscale restaurants and retail stores can be instrumental in enticing tourists to stop in Newport Beach. Once tourists are in the area, the city and private sectors will further enhance their opportunities for additional revenue. Marina Park represents a different opportunity. With its proximity to Newport Pier, the ocean and bay, it represents an opportunity to add essential critical mass of a village type environment to the Newport Pier area, thereby enhancing the drawing appeal of this area. Development of an international airport would facilitate tourism -related transportation to and from the city of Newport Beach. There has been discussion as to the possibility of establishing an international airport at MCAS El Toro, which is scheduled to close in 1999. This would facilitate air transportation into both the region and Newport Beach. Moreover, development of an international airport at El Toro would present Orange County with the opportunity to utilize a portion of the existing John Wayne Airport as a regional convention center. Both developments would contribute to tourism within the City of Newport Beach. • Active public sector and private sector cooperation in enhancing tourism is required and benefits both sides. In addition to an enhanced public sector role, major private sector entities, such as the Irvine Company, including Fashion Island, can enhance tourism related revenues for themselves and others by participating in cooperative marketing programs and special events. Section 11 - SCOPE AND METHODOLOGY This study was executed in two phases. In Phase One of our analysis, we began by conducting preliminary research to identify the feasibility of a conference or convention center based on the current image of Newport Beach's tourism product and the level of awareness among meeting planners. The following steps were taken to identify the potential opportunity of the city: • We accumulated data and performed analysis on average daily rate and occupancy of the lodging facilities located within the City of Newport Beach. • We. conducted Revenue Per Available Room (REVPAR) analysis and identified revenue patterns generated by the various hotels located within Newport Beach. • We evaluated advantages and disadvantages of the possible development of a conference and/or convention center. • We performed potential user surveys that included meeting planners located throughout the United States to identify the current perception of Newport Beach as a primary travel destination. • We interviewed management at Newport Beach hotels regarding areas of potential growth within the hotel market. In the process of identifying the need for a conference or convention facility, we recognized other demand generators and factors that would better enable the City of Newport Beach to increase the total revenue generated. Phase Two of our study examined these ways of revenue enhancement and are fully described in the following text. The steps included in our research of potential areas for revenue enhancement were: • We interviewed management at Newport Beach hotels relating to techniques that will enable the city to enhance revenue generated. • We reviewed development and promotional patterns in comparable destinations with the Newport Beach tourism product. • We researched "high visibility" areas in Newport Beach for infrastructure improvements. • We interviewed Newport Beach Conference and Visitors Bureau management to review current marketing activities. V. 7 Section III - MARKET ANALYSIS Located along the Pacific Ocean in Orange County, Newport Beach is nestled between Los Angles and San Diego counties. Its prime oceanfront location is adjacent to the John Wayne Airport and the commercial areas of Irvine/Costa Mesa/Santa Ana and is in proximity to regional tourist destinations, including Disneyland in Anaheim. Newport Beach has many amenities and attractions that serve to attract tourists to its community, mainly from within the region. However, despite the diversity of activities within Newport Beach, the City has yet to reach its potential as a major destination in Southern California among coastal cities. SUPPLY AND DEMAND While this market has experienced no growth in supply since 1992, the number of rooms occupied has grown at a compounded annual rate of 5.8 percent. To examine the market of Newport Beach, we included data from the following participating hotels, representing approximately 89 percent of the City's total rooms supply: ♦ Bay Shores Inn 58 rooms ♦ Four Seasons 285 ♦ Hyatt Newporter 410 ♦ Le Meridien/Sutton Place 411 ♦ Marriott Newport Beach 570 ♦ Marriott Suites 250 ♦ Sheraton Newport 339 Total 2,323 The following table and text set forth the demand, by market segment, within the community. Newport Beach Primary Market Source: Individual Hotels and PKF Consulting Commercial Demand Commercial demand is typically characterized by single occupancy stays of one to two nights in duration and is usually generated from travelers requiring transient accommoda- tions while conducting business in the area. These are generally salespeople, executives, professionals, and others involved with area business or industry. Commercial visitors tend to seek major chain hotels because of a combination of the business services they Mix of Demand Segment Percentage Room Nights Commercial 39.3% 234,472 Group 38.8 231,675 Leisure 19.1 113,985 Contract 2.8 16,910 TOTAL 100% 597,042 Source: Individual Hotels and PKF Consulting Commercial Demand Commercial demand is typically characterized by single occupancy stays of one to two nights in duration and is usually generated from travelers requiring transient accommoda- tions while conducting business in the area. These are generally salespeople, executives, professionals, and others involved with area business or industry. Commercial visitors tend to seek major chain hotels because of a combination of the business services they �f'8 offer and the extensive, often worldwide reservation systems. The Newport Beach commercial market segment is estimated to account for approximately 234,472 room nights of demand in 1995 or 39.3 percent of total demand captured Group Demand The group demand is usually associated with: 0 traditional group business, such as corporate meetings and state, regional, and national association meetings; and, O entertainment -related groups, such as press junkets, production companies and music groups, many of which do not require meeting space. 0 catering -based social group business, such as wedding parties, which primarily utilize the hotels during the weekends. The group segment is estimated to be 231,675 room nights in 1995 or 38.8 percent of captured demand. Leisure Demand The tourist market segment is estimated to account for 19.1 percent of total demand in 1995 or approximately 113,985 room nights of captured demand. International tourists make up an increasing portion of demand, and in recent years, currency fluctuations of the U.S. dollar versus foreign currencies have had a significant positive impact on this demand. Many visitors bureaus have, as a result, focused efforts abroad in addition to targeting domestic weekend travel. Contract Demand The contract demand generally includes airline crews and other large companies which generate a large amount of local business. To minimize their costs, they will usually negotiate a contract with one or two properties guaranteeing a certain number of room nights in exchange for a reduced room rate. The contract demand consists of approximately 16,910 room nights or 2.8 percent of total captured demand. The following table reflects the historical performance of the Newport Beach market. 0 Newport Beach Hotel Market Rate and Occupancy 1992 to 1995 and 1996 Projections 1992 2,323 $93.14 - 60.0% - 1993 2,323 92.48 -0.7% 66.5% 10.8% 1994 2,323 93.17 0.7% 69.5% 4.5% 1995 2,323 98.71 5.9% 71.1% 2.2% 1996 Projected 2,323 105.68 7.1% 72.7% 2.3% CAG' from 1992 to 1995 2.0% 5.8% ' CAG - Compounded Annual Growth Source: PKF Consulting We have identified the average daily rate as a major area of potential growth within the market, along with increasing the number of rooms in the community. The occupancy within the market has shown stable growth; however, the rate reflects growth lower than the rate of inflation (3.5 percent). 1996 is projected to achieve an occupancy of 72.7 percent, up from 71.1 percent. The consistent growth in occupied rooms enables the market to focus on driving the average daily rate. Also, creating a more appealing destination and increasing the awareness of Newport Beach as a destination enables the market to achieve a higher rate due to increased demand. In our interviews with the various properties within the market, the minimal growth historically in rate has been attributed to the lack of recognition of Newport Beach as a group or tourist destination. Newport Beach has a very high residential profile yet is lacking in tourism, therefore generating a lower rate than comparable markets and accommodations, creating an undervalued market. r_,, 10 REVPAR ANALYSIS REVPAR stands for Revenue (generated) Per Available Room. The REVPAR analysis was done with information provided by the city for the following hotels: ♦ Balboa Bay Club 120 units ♦ Balboa Inn 34 units ♦ Doryman's Inn 10 units ♦ Four Seasons Hotel 285 units ♦ Hyatt Newporter 410 units ♦ Little Inn on the Bay 29 units ♦ Marriott Hotel 570 units ♦ Marriott Suites 250 units ♦ Newport Beach Hotel 46 units ♦ Newport Channel Inn 30 units ♦ Newport Classic Inn 30 units ♦ Portofino Hotel 24 units ♦ Sheraton Hotel 339 units ♦ Sutton Place Hotel 411 units Total Rooms 2,609 units Used as an indicator of success, REVPAR combines the paid occupancy percentage and the average daily rate achieved within the Newport Beach hotel market. To calculate REVPAR, we utilized data on the total revenue paid to the City by the 14' hotels in the Newport Beach hotel market. This number was multiplied by 10 (based on the 9% transient occupancy tax the City collects and 1% visitor's bureau fee) to indicate the amount of total rooms revenue generated per hotel for each representative year. This was divided by the number of room nights available for each representative year. REVPAR Formula $ paid to city x 10 # of days x-# of units From 1992 to 1995, there has been consistent real growth in the market as indicated by the following table. The 12.2 percent compounded annual growth in REVPAR shows the large amount of growth within the market. This growth can be contrasted to Los Angeles County's 1.5 percent annual growth over the last three years. The following graph illustrates the historical trends of the total revenue generated within the Newport Beach hotel market for 1992 to 1995 by month. The graph reflects the seasons of the Newport Beach hotel market. In 1994 and 1995, the market has peaked during July and August due to the higher rates generated in summer months by the hotel market. December figures are slightly skewed due to the thirteen period reporting methods of both Marriott properties. Therefore, December figures for those two properties are combined periods twelve and thirteen resulting in higher than normal revenue generated in that month. The monthly analysis enabled us to identify "holes" within the hotel market that could be potentially filled by the development of a conference or convention center facility. However, the months that are traditionally healthy group or conference months are February, October and beginning of November. These months historically reflect healthy months in the Newport Beach market. Therefore, the development of a conference or convention center facility would not be able to fill the slower months, which are January and April. Newport Beach REVPAR 1992 - 1995 City Tax Supply Revenue REVPAR % Change 1992 2,580 $4,453,408 $46.77 . 1993 2,609 $5,109,109 $53.65 14.7% 1994 2,609 $5,801,904 $60.93 13.6% 1995 2,609 $6,289,531 $66.05 8.4% Compounded Annual Growth 12.2% Source: PKF Consulting and City of Newport Beach The 12.2 percent compounded annual growth in REVPAR shows the large amount of growth within the market. This growth can be contrasted to Los Angeles County's 1.5 percent annual growth over the last three years. The following graph illustrates the historical trends of the total revenue generated within the Newport Beach hotel market for 1992 to 1995 by month. The graph reflects the seasons of the Newport Beach hotel market. In 1994 and 1995, the market has peaked during July and August due to the higher rates generated in summer months by the hotel market. December figures are slightly skewed due to the thirteen period reporting methods of both Marriott properties. Therefore, December figures for those two properties are combined periods twelve and thirteen resulting in higher than normal revenue generated in that month. The monthly analysis enabled us to identify "holes" within the hotel market that could be potentially filled by the development of a conference or convention center facility. However, the months that are traditionally healthy group or conference months are February, October and beginning of November. These months historically reflect healthy months in the Newport Beach market. Therefore, the development of a conference or convention center facility would not be able to fill the slower months, which are January and April. 575.00 $70.00 $65.00 $60.00 $55.00 $50.00 $45.00 $40.00 $35.00 is REVPAR ANALYSIS Newport Beah Hotel Market 1992-1995 E E g Z O — 4 1992 —11-1993 — —1994 12 There is, however, the opportunity for the City to increase revenues from the group meeting demand segment by encouraging and/or assisting, either financially or through entitlement bonuses, one or more local hotels in adding a large ballroom (15,000 to 20,000 square feet). Such an addition would expand the size of groups currently able to utilize Newport Beach hotels. Other efforts to increase the overall appeal of Newport Beach as a destination, as discussed throughout this report, would also assist area hotels in increasing the yield from this demand segment. Actions taken by the City to increase the appeal of Newport Beach as a destination would have an impact upon virtually all of the demand segments noted above and would stimulate the demand for the development of additional hotel rooms as well as increase the yield from existing hotels. 13 Section IV - CONFERENCE AND CONVENTION CENTER FEASIBILITY CONFERENCE FACILITY The intent of a conference facility is to generate higher levels of revenue within the local market. The bulk of increased city TOT revenue has traditionally been a result of increased hotel occupancies. As a stand-alone operation, conference facilities typically do not generate a profit; therefore, these types of facilities are usually subsidized by the city in which they are located. A conference center caters to groups ranging in size from 10 to 300 people, offers state-of-the-art technology, and is designed to promote a learning environment. The success of a conference facility is dependent upon its location as it relates to lodging accommodations. To reach a level of prosperity, a conference center must be conveniently accessible by conference attendees and positioned as a unique and educational site for group meetings. CONVENTION CENTER Similar to a conference facility, a convention center's main goal is to increase city revenue by generating an increase in hotel occupancies and daily spending by attendees within the market. A convention center is comparable to a conference center in regards to its funding. Because a convention center does not normally generate a profit, city governments tend to subsidize this type of facility. These types of facilities must be conveniently located relative to major hotels able to accommodate convention attendees. A convention center must incorporate a large amount of meeting space that can hold much larger groups than 'a conference facility. Encompassing more meeting rooms, one or several ballrooms and an exhibit hall are the major differentiating factors of facilities offered by a convention center from a conference facility. Traditionally, a convention center targets groups of 500 or more people for the intent of exhibitions and trade show type groups and would be located as close as possible to hotels and visitor amenities. Our inquiries regarding a proposed convention center facility to be located in the city of Newport Beach resulted in responses regarding potential difficulties due to the location of the hotels within the market in relation to the proposed facility. COMPARABLE FACILITIES To determine the feasibility of a conference or convention center in the City of Newport Beach, we examined four destinations with centers similar to Newport Beach's proposed facilities. The four comparable facilities are: • Modesto Center Plaza Convention Center • Monterey Convention Center • Palm Springs Convention Center • Pasadena Center ' 14 All of the convention/conference centers we selected are city owned and either connected to or adjacent to a conference center hotel. In terms of size, the selected conference centers range from 24,000 square feet to 100,000 square feet. The Palm Springs Convention Center and the Pasadena Center are independently managed and located in Southern California, while the other two facilities are managed by their respective cities and are located in Central and Northern California, respectively. 15 MODESTO CENTER PLAZA CONVENTION CENTER Total Size of Center. 50,000 square feet Exhibit Space: Maximum Square Feet in Single Hall Number of Levels Number of 10' by 10' Booths 20,000 square feet 16,000 square feet One 99 Meeting/Ballroom Space: Dedicated Ballroom Largest Meeting Room Number Meeting Rooms 4,000 square feet No 2,400 square feet Four Year Built: 1988 Original Cost to Build (excluding land): $14 million How It Was Funded: Redevelopment agency bonds How Loss Is Funded: TOT (Transient Occupancy Tax) Supporting Hotels: 1,000 rooms within a two block area Parking: 900 dedicated parking spaces • Meetings/Conventions: 40% • Social/Civic: 60% Manager: City owned and managed Sources: IAAM Industry Profile Survey, Candace Fennell and Associates, and PKF Consulting 16 MONTEREY CONVENTION CENTER Total Size of Center 58,000 square feet Exhibit Space: Maximum Square Feet in Single Hall Number of Levels Number of 10' by 10' Booths 19,600 square feet 19,600 square feet One 100 Meeting/Ballroom Space: Dedicated Ballroom Largest Ballroom Largest Meeting Room Number Meeting Rooms 21,900 square feet Yes 11,000 square feet 5,000 13 Year Built 1977 Original Cost to Build (excluding land): $8 million How It Was Funded: Revenue bonds How Loss Is Funded: N/A Supporting Hotels: Adjoins Doubletree, 371 rooms, and Marriott, 341 rooms Parking: 900 parking spaces on-site % Meetings/Conventions: Majority of bookings % Social/Civic: Small percentage Manager City owned; public employees Sources: IAAM Industry Profile Survey, Candace Fennell and Associates, and PKF Consulting 17 PALM SPRINGS CONVENTION CENTER Total Size of Center. 80,000 square feet' 'additional 10,800 square feet of function space at connected Wyndham Hotel Exhibit Space: 66,000 square feet Maximum Square Feet in Single Hall 66,000 Number of Levels One Number of 10' by 10' Booths 392 Meeting/Ballroom Space: 15,000 square feet Dedicated Ballroom No Largest Meeting Room 1,800 Number Meeting Rooms 10 Year Built 1987 Original Cost to Build (excluding land): $35 million $13 million for 1992 expansion How It Was Funded: Municipal bonds, TOT How Loss Is Funded: TOT Supporting Hotels: 410 room Wyndham adjacent 1,800 other rooms within walking distance Parking: 800 spaces on property % Meetings/Conventions: 80% % Social/Civic: 20% Manager: City owned; managed by Leisure Management International Sources: IAAM Industry Profile Survey, Candace Fennell and Associates, and PKF Consulting !� 18 PASADENA CENTER Total Size of Center. 100,000 square feet Exhibit Space: Maximum Square Feet in Single Hall Number of Levels Number of 10' by 10' Booths 48,000 square feet 32,000 2 250 Meeting/Ballroom Space: Dedicated Ballroom Largest Meeting Room Number Meeting Rooms 32,000 square feet No 32,000 square feet 22 Year Built 1973 Original Cost to Build (excluding land): $20,000,000 How Center Was Funded: Bonds How Loss Is Funded: Transient Occupancy Tax (TOT) Supporting Hotels: 320 -room Holiday Inn adjacent 1,000 rooms within walking distance Parking: 800 spaces on property • Meetings/Conventions: 50% • Social/Civic: 50% Manager: City owned; managed by the Pasadena Center Operating Company Sources: The Pasadena Center Operating Company 19 UTILIZATION OF CONFERENCE CENTER FACILITIES Conference centers, in general, provide two main functions: to host meetings, seminars and trade shows for corporations and associations; and, to serve as a community venue for social events and those related to entertainment, recreation, culture, art and religion. Utilization for two of the four conference centers we examined is as follows: CONFERENCE CENTER UTIUZATION Us2ge Modesto Convention Center Palm S 'n s Convention Center Number of Total Events 712 139 Total Attendance 337,209 133,855 # of Conventions without Exhibits NIA 19 # of Conventions with Exhibits N/A 31 # of Consumer Shows 21 8 # of Banquets & Receptions 193 0 # of Corporate Meetings 389 9 # of Entertainment Events 15 27 # of Community Events 36 1 # of Other Events 29 44 Source: IAAM Industry Profile Survey Note: Monterey b Pasadena statistics were not available The corporate meetings as well as the banquets and receptions captured by the Modesto Convention Center most likely represent local business, while the Palm Springs Convention Center captures a significant amount of demand from outside the local market. The Monterey Convention Center is considered to be a model facility based on its location, amenities, and demand. Based on interviews with representatives of the Monterey Convention Center, we ascertained the following: • the Monterey Convention Center hosts approximately 400 events per year, which equates to roughly 600 event days and 200,000 people annually • the "typical" group utilizes anywhere from 200 to 300 rooms and consists of 400 to 600 persons • the Monterey Convention Center mainly captures corporate meetings and association business from the state, regional and national levels • SMERF-related business (Social, Military, Educational, Religious and Fraternal) represents a relatively small segment of demand for the center as does local business functions (i.e., Rotary) 0 most of the groups at the center utilize exhibit space 20 • the Monterey Convention Center mainly competes with San Francisco, San Diego, Arizona and Napa Valley Seasonality In terms of frequency, according to the 1994 Meetings Market Study conducted by Market Probe International, Inc. for Meetings and Conventions, most major conventions are held annually (68 percent), with 20 percent being held during the month of October. Presented below is the percentage of meetings which occur by month: SEASONALITY OF U.S. GROUP MEETINGS MARKET Month Frequency January 5% February 6 March 6 April 6 May 10 June 9 July 6 August 6 September 10 October 20 November 10 December 4 Source: 1994 Meetings Market Study published by Vv2g 6 Conventions The trends for seasonality in the Southern California meetings market are similar to the United States convention market, with the exception that February tends to be a stronger month. Although many meeting planners expressed interest in holding conventions in Newport Beach, the months that are typically strong convention/group meeting months in Southern California are February, October, and the beginning of November. As previously mentioned, these are strong months in the Newport Beach hotel market; therefore, a convention center would add its primary demand during periods when it is not needed, and may not be able to be accommodated within the market. FUNDING MECHANISMS In most cities, conference centers are developed with the primary goal of increasing revenues for the city, and secondarily to provide a venue for community activities and events. Specifically, conference and convention centers attract new demand and dollars to a community, increase the occupancy and/or utilization of area hotels, restaurants, attractions and retail, and often stop the leakage of local business from the city due to a lack of facilities. Thus, while such facilities operate at a loss, they can generate revenues for a city. 21 According to data presented in the IA.AM Profile Survey, it has long been recognized in the industry that public facilities require some sort of annual operating subsidy in addition to debt service, which in most cases comes from city assistance. Communities often look upon public assembly facilities in much the same way they view libraries, parks, museums, recreation centers and other places which contribute to the quality of life for their citizens. Many sources of financing exist for conference and convention centers, including general obligation bonds and notes, revenue bonds, redevelopment agency bonds and certificates of participation. For the purpose of our analysis, we reviewed the most recent operating results available for the four conference/convention centers we examined, which are as follows: OPERATING PERFORMANCE Source: IAAM Industry Profile Survey and Pasadena Center Note: Above data reflects 1995 calendar year operating expenses and income before any city subsidies for Pasadena Center and 1992/93 fiscal year for all others; total direct operating expenses do not include Convention Bureau related costs, financing costs or capital expenses._ It is important to realize that the above figures representing the net operating profit do not include debt service that is associated with the establishment of these centers. The Modesto Center cost approximately $14,000,000 to develop in 1988 and has annual debt service approximating $1.6 Million, while the Monterey Center cost approximately $8.0 Million in 1977 and requires annual debt service of approximately $400,000. The Palm Springs Center reportedly cost $35.0 Million in 1987, and the 1992 expansion cost $13.0 Million. The Pasadena Center reportedly cost approximately $20.0 Million in 1973. All four of the destination conference/convention centers operate at a loss. While a conference or convention center could lead to 500 - 1000 more rooms in Newport Beach, the increase in TOT from them may not be sufficient to cover operating costs and development costs for the center. Focusing on other means of increasing the overall occupancy level to 78 percent and concurrently driving the rates at an increase at or above inflation will likely yield greater profits for the City. Relative Cost There is substantial cost involved with constructing, maintaining, and operating (usually at a loss) such a facility. Conference/convention centers are only funded based upon the economic impact they have on a city, along with the need to generate occupancy for existing hotels or develop substantial numbers of additional hotel rooms when there are limited other avenues for inducing hotel demand. Additionally, the City's position on not Modesto Monterey Palm Springs Pasadena Total Direct Operating Expenses $1,130,405 $1,490,000 $2,459,544 $4,354,610 . Total Direct Operating Income 600,440 518,000 816,890 3,257,056 Net Operating Profit or (Loss)/Subsidy 529,965 972,000 1,642,654 1,097,554 Source: IAAM Industry Profile Survey and Pasadena Center Note: Above data reflects 1995 calendar year operating expenses and income before any city subsidies for Pasadena Center and 1992/93 fiscal year for all others; total direct operating expenses do not include Convention Bureau related costs, financing costs or capital expenses._ It is important to realize that the above figures representing the net operating profit do not include debt service that is associated with the establishment of these centers. The Modesto Center cost approximately $14,000,000 to develop in 1988 and has annual debt service approximating $1.6 Million, while the Monterey Center cost approximately $8.0 Million in 1977 and requires annual debt service of approximately $400,000. The Palm Springs Center reportedly cost $35.0 Million in 1987, and the 1992 expansion cost $13.0 Million. The Pasadena Center reportedly cost approximately $20.0 Million in 1973. All four of the destination conference/convention centers operate at a loss. While a conference or convention center could lead to 500 - 1000 more rooms in Newport Beach, the increase in TOT from them may not be sufficient to cover operating costs and development costs for the center. Focusing on other means of increasing the overall occupancy level to 78 percent and concurrently driving the rates at an increase at or above inflation will likely yield greater profits for the City. Relative Cost There is substantial cost involved with constructing, maintaining, and operating (usually at a loss) such a facility. Conference/convention centers are only funded based upon the economic impact they have on a city, along with the need to generate occupancy for existing hotels or develop substantial numbers of additional hotel rooms when there are limited other avenues for inducing hotel demand. Additionally, the City's position on not 22 subsidizing a conference/convention center would support discovering other means of revenue enhancement. Hotel Occupancy for Newport Beach Our analysis of the Newport Beach hotel market occupancy indicates that the market is forecasted to conclude 1996 close to 73 percent (refer to table: Newport Beach Hotel Market Rate and Occupancy -1992 to 1995 and 1996 Projections). Newport Beach can improve its overall occupancy, but not by a substantial amount. Given the prevailing patterns of seasonality, the Newport Beach hotel market should effectively cap at 78 percent, indicating limited potential to absorb additional demand with. existing supply. Additionally, the city has other avenues available to it to stimulate demand for additional hotel rooms. Pursuit of these venues would allow the city of Newport Beach to fill the existing "holes" within the hotel market. Lack of a Critical Mass We conducted demand interviews with meeting planners located throughout the United States regarding interest and facilities required for a Newport Beach Conference Facility. The respondents expressed concern regarding the success of a conference facility in this market due to the lack of synergy in hotel locations, creating difficulty in transportation and organization of groups. The lack of the concentration of hotel rooms found in other destinations makes the planning process much more intricate for meeting planners. The size of the groups that the proposed conference/convention facility would accommodate can be self-contained in other destinations around the country. Many of the meeting planners interviewed expressed the essential need of ease when planning a major meeting and that this type of facility located in Newport Beach does not have the ease that many other large individual group meeting hotels or other conference facilities offer. There are, however, opportunities to attract larger convention groups into the Newport Beach market, as discussed in the next section. Currently, the largest contiguous meeting space in Newport Beach is the 8,000 -square -foot ballroom located in the Newport Beach Marriott Hotel & Tennis Club. To accommodate banquets in excess of 700 persons, or groups requiring more than 300 rooms in a block, additional facilities will be needed. 23 Section V - RECOMMENDATIONS FOR REVENUE ENHANCEMENT ALTERNATIVES TO A CONFERENCE AND CONVENTION CENTER Neither a conference facility nor a convention center appears to be the most cost/beneficial option for the City of Newport Beach in order to enhance TOT revenue. In conducting our research, we have identified some alternatives to conference/convention center development as options for the City of Newport Beach to enhance revenue for taxable purposes, including other means to attract group meetings to the community. These options are in addition to continuing to develop an improved image and perception of Newport Beach and focusing on upgrading the infrastructure and product of Newport Beach. Available Market Segments The amount of occupancy taxes paid to the City of Newport Beach is determined by the number of hotel rooms in the City, occupancy, and average daily room rate of its hotels. Therefore, TOT can be increased by a combination of more hotel rooms developed and higher occupancy and average daily room rate for existing and new hotels. Occupancy and average room rate of the City's hotels are, in turn, determined by the amount of demand generated by each available market segment, the blending of that demand to maximize potential occupancy, and the ability and proclivity of each segment to pay the highest possible room rates. Available demand segments are: A. Group conference and convention Corporate meetings Associations- National, Regional, State Incentive Groups Social and other discretionary groups B. Individual commercial demand C. Leisure Group tour and travel Domestic International Destination vacation Regional National International Weekend getaway The foregoing demand segments are susceptible to marketing by individual hotels and by convention and visitor bureaus, but their desire to stay in a particular hotel or group of hotels, and their willingness to pay for that stay, are also influenced to a significant degree by the appeal of the community in which the properties are located. The greater the appeal of the destination, the higher will be the occupancy and room rates of the hotels within the community, and the greater will be the likelihood of new hotels being developed - - The appeal of the destination is, in turn, determined to a large degree by such factors as climate, retail and dining options, cultural and recreational amenities, aesthetics, - - - Iransportation and image. The extent to which the foregoing is recognized and blended -_ into a city's planning and management culture is also an important factor in determining a city's success in optimizing tourism revenues. The Meetings Market In targeting the corporate, incentive, and association segments of the meetings market, we examined the trends in the number of meetings planned, number of attendees, and total spending. As previously noted, the Bureau is currently targeting the meetings market. With enhanced recognition of Newport Beach as a destination, rates from this segment can also be upgraded. Expanding Current Facilities _ The City may wish to participate in assisting one or more area hotels in building a large ballroom on its property. Financing assistance is a possible form of participation. If one or more area hotels expands its meeting space to accommodate groups larger than are currently available to the market, they will, in turn, displace other demand from their hotels to others within the market. This occupancy pressure will create upward pressure on average room rates within the overall market. In this manner, the City can achieve certain objectives of the development of a conferencelconvention center in a cost/beneficial manner. Corporate Meetings Corporate meetings saw the most dramatic decrease of the three segments in the early 1990's. Mergers and downsizing in the 1990's caused a decrease in the number of meetings planned and a decline in the number of attendees. As a result, spending was down nearly 19 percent with $8.6 billion spent in 1995 compared with $10.6 billion spent in 1993. We expect this trend to change as 85% of meeting planners foresee the same budget or an increased budget in 1996 compared with 1995. An average of 62 people per convention make this segment an attractive one to target for Newport Beach facilities. Several hotels in the area can provide facilities to satisfy this market. Incentive Trips -Incentive trips primarily are used as rewards for employees and are the fastest growing segment in meeting planning. With an average of 95 participants per trip, this group tends to be the most location sensitive. Currently, Newport Beach does not capture a lot of incentive trips as the lack of name recognition tends to be a discouraging factor. However, we believe that this segment represents the greatest potential within the group - _- market for Newport Beach, given the potential appeal of the destination. The Bureau is - putting concentration into this area. 25 Association Conventions Association meetings tend to be the most rate -sensitive of all the groups, thus lowering its priority for Newport Beach. 1995 proved to have more attendees and an increase in visitor spending, but had a fewer number of conventions overall. Overall Development Strategy Beyond the foregoing that applies specifically to the meetings market, the City of Newport Beach could upgrade its image within the travel community and create a more desirable product for the visitor from all market segments. This will enable the market to achieve the rates that are being achieved within other comparable markets. These two goals have been categorized as short term and long term goals for the City of Newport Beach. SHORT TERM GOALS Creating a Tourism Plan The first short-term step to generating higher levels of revenue through increased tourism is to create a sustainable plan for tourism within the City of Newport Beach. Hence, the City needs to adopt a mission statement which is recognized by all the major stakeholders including: public officials, private sector representatives, and local residents. The Newport Beach Conference and Visitors Bureau has previously established an overall tourism goal as noted in the following mission statement: to gain and retain clients, thereby contributing to the . economic fabric of the community, through solicitation of conferences and other related group business; and to engage in visitor promotions which generate overnight stays. This statement covers several elements affecting the local tourism industry. However, it does not recognize that increasing the number of tourism dollars spent within the community first begins with increasing awareness. Therefore, it is our recommendation that the City of Newport Beach incorporate into its mission statement the broader goal of increasing the awareness and perception of the City of Newport Beach as a leisure travel destination among meeting planners, tour operators, travel agents, and consumers, leading to increased visitations and overnight stays. La Jolla and Santa Monica are two markets that offer similar accommodations and are located along the coast of Southern California. As compared to Newport Beach, each of these markets has more name recognition and understanding of the planning culture needed to successfully promote the tourism product within the travel community. As the second largest city amongst the three, Newport Beach could be viewed as a destination offering activities available in a metropolitan city and within a resort destination. An area claiming appeal to a variety of travelers defines itself as a true 26 destination. The La Jolla market achieved a rate of $141.45 in 1995, a 7.1 percent increase from the $132.07 achieved in 1994. During 1995, the Santa Monica market realized an average daily rate of $118.84, and 5113.04 in 1994. La Jolla achieved a 43.3 percent higher average daily rate and Santa Monica achieved a 20.4 percent higher daily rate than Newport Beach in 1995. These destinations offer a more `user friendly" environment for a visitor. The ease for the visitor is achieved by increased signage of attractions, synergy of major hotels and a heightened awareness of activities available within the market. The following table shows a brief overview of the demographics found in the three markets discussed in the previous text. Demographic Overview Newport Beach as compared to La Jolla and Santa Monica Median Household Total Retail Total Income Sales Population Newport Beach $65,604 $993,298 70,100 Santa Monica $41,355 $1,408,215 86,600 La Jolla $60,000 NIA 35,000 Source: Sales and Ma4Yeft Management and La Jolla Chamber of Commerce Marketing Activities Second, it is essential for consistent and continual marketing of Newport Beach as a destination to occur for it to remain competitive. The Conference and Visitors Bureau can assist in marketing Newport Beach as a tourism destination. A well conceived marketing plan includes the following: • identify target markets; • identify the primary media the potential tourists utilize; • advertise in a cost-effective manner, • establish a strong public relations campaign. 27 The City of Newport Beach already has several key elements which are fundamental to the establishment of a comprehensive marketing plan. The sales and marketing efforts of the Conference and Visitors Bureau are evident in the 12.2 percent increase the City achieved in its Revenue Per Available Room (REVPAR) from 1992 - 1995 (discussed in section III of this text). The Conference and Visitors Bureau is responsible for marketing the current visitor product to potential visitors. This includes staffing the Visitors Information Center to provide visitors with tourism related resources and responding to more than 35,000 potential visitor inquiries annually. In addition, the Bureau communicates to the consumer by conducting multiple direct sales calls on an on-going basis. These calls tend to target meeting planners and tour operators who are in positions to make decisions over and/or influence potential visitors. The Conference and Bureau has a dedicated sales and marketing team that is responsible for promoting the City and its image. Several segments of group business have been targeted as illustrated by the 25 familiarization trips the City has hosted for meeting planners, tour operators, and various media sources. This effort can be further enhanced through aggressive advertising campaigns which target various constituencies, an on- going public relations effort to increase the awareness and perception of Newport Beach to trade officials, meeting planners, and consumers, and by the attending of 25 national and international trade shows. Defining the Current Visitor Product The third step is to define the current visitor product. Newport Beach is positioned as an upscale, residential coastal community located in southern Orange County. With. the historic area, marina harbor, variety of `villages" and shopping malls, extensive beaches, diversity of hotel accommodations, selection of dining facilities, range of meeting spaces available, and easy access via Highway 1, Newport Beach should first define the current visitor product description. Added public relations opportunities can be effective in increasing the image of Newport Beach. Special events will allow the City to exhibit the various amenities available to potential visitors. Currently, the Toshiba Classic Golf Tournament continues to be successful in promoting an upscale image of Newport Beach and generating business within the City. More of these types of attractions are needed despite the obstacles the City faces to holding special events (the lack of a venue that is desirable and that will not cause disruption within the residential areas of the City). Other special events that the City of Newport Beach could highlight include boating expositions, tennis tournaments, food and wine events and city street fairs. These types of special events help potential tourists to realize that Newport Beach is an attractive destination for sophisticated travelers and will produce a higher level of demand, which in turn will enable the hotel market to charge higher average daily rates. As mentioned previously, we have identified that the average daily rate generated within the hotel market has potential for growth and will largely impact the total revenue generated. Press Coverage Finally, press coverage can also assist with disseminating information on various events and activities which can be promoted within the City of Newport Beach. The media is a very powerful marketing tool which could be used further by Newport Beach to help get their "Come to Newport Beach" message. Infrastructure improvements in relation to improving the tourism industry will very often be covered by local and other California r newspapers. Having a key contact at various local newspapers can prove to be beneficial in the long term. Also, local news stations will periodically profile an up-and-coming ` tourist destination. In relation to increasing tourism, Newport Beach should take a proactive stance on providing information, timing, and their overall goals to local media. LONG TERM GOALS Once the short term marketing goal has been reached, to retain the increased average daily rate, to generate repeat business, and to remain competitive with other coastal destinations, the City of Newport should upgrade its infrastructure which will, in tum, increase the quality of the total product. Although it should be started immediately, we identified this task as the long term goal for the City of Newport Beach because of the perceived time to implement needed changes. This will entail a continuation of the joint action between the private and public sectors within the City. Local Planning The first long term -goal is to promote a culture within the City of Newport Beach which will contribute, in a positive manner, to the pursuit of increased tourism. A city-wide tourism culture can be realized by integrating a tourism plan reflective of the public- private partnerships within the City. This combined effort would include the Conference and Visitors Bureau, city management, inter-agency/departmental cooperation, and increased communication with the private sector. Additionally, the city needs to work with residents and the private sectors to project an atmosphere that invites and welcomes tourists into their community. A series of city-wide meetings can bridge the communication between local government ideas and views by the local residents on tourism. The media, if utilized properly, can also be an instrumental tool in achieving the desired tourism culture for Newport Beach. To increase tourism related revenues within the community, a proactive attitude towards tourism should be incorporated into the planning culture and instilled into the city government and residents of Newport Beach. Culture is the perception and related attitudes the city and its constituents have regarding their tourism product. The benefits of tourism to the community have not yet been fully realized and we recommend that the city start by educating the public organizations, private business, and local residents how tourism can benefit them individually and the community as a whole. Planning for tourism in the City of Newport Beach entails more than attracting hoteliers, ensuring transportation access to various sites, and promoting facilities. Successful 29 tourism development entails systematic planning, via interagency cooperation, for Newport Beach. Investments are necessary in areas which will assist the city to generate revenues through this industry. General areas of investment which may contribute to the promotion of Newport Beach as a major destination are as follows: • Cultural institutions and events • Available facilities • Attractions and entertainment • Hotel rooms • Amenities • Marinas and natural parks • Transportation, signage, and aesthetics These are general areas of investment. The proceeding study provides a more specific examination of the potential areas of investments for Newport Beach. Product -led approaches to tourism focuses on developing facilities, services, and attractions that can best be integrated into the local development patterns of Newport Beach. A holistic approach to developing tourism will produce optimal results for Newport Beach. Revenue enhancement, via transient occupancy tax, can be achieved through investing and promoting the City's primary product, which will be determined by its policy makers. Without the construction of new hotels, hotel occupancy is projected to yield modest growth opportunities for Newport Beach. Simply stated, modest growth in hotel occupancy equates to limited additional revenues stemming from transient occupancy tax. Additionally, our market analysis demonstrates that the construction of a convention center may not generate additional revenue for the slower months of January and April. Regional Planning The second long-term goal is to adopt a regional approach to tourism planning. Regional tourism planning has become increasingly important to top tourism destinations. The Newport Beach Convention and Visitors Bureau has already taken a proactive approach by working in cooperation with the California Department of Tourism, the Orange County Tourism Council, the Orange County Convention and Visitors Bureau, the City of Anaheim, and other neighboring cities. Once defined, Newport Beach can utilize its tourism product and distinct location as its competitive advantage within the region. Newport Beach, as a product, appeals to those tourist seeking premium amenities, excellent year round climate, spectacular ocean -side golf courses, and exceptional conference facilities. Moreover, Newport Beach is regionally situated as a coastal city which offers convenient access to Anaheim's Disneyland and to the denser urban hub of Santa Ana which serves as the primary industrial, manufacturing, and civic center of Orange County. Newport Beach is also adjacent to Costa Mesa, Huntington Beach, Irvine and Laguna Beach, all of which offer important services for Orange County and Southern California alike. Newport Beach possesses the opportunity to promote its distinct locality which is regionally situated in an area conducive to both business and leisure. Given the nature of the opportunities in the transient market, travel agent familiarization trips and local consumer markets could also be emphasized further. Newport Beach has the potential to 30 strengthen and build upon this foundation and realize the value added which tourism yields if appropriately planned Interdepartmental cooperation and exchanging of ideas from as many of the City's elements as possible is essential to the long term success of establishing Newport Beach as a major tourist destination. Regional planning could serve as an instrument to reinforce the long term vision of tourism within Newport Beach. Regional Joint Marketing Unlike local marketing efforts, regional joint marketing would combine the region's resources to effectively appeal to the potential visitor who has yet to be reached by local marketing efforts. Tourism will increase in Newport Beach concurrently with an increase in tourist traffic to the entire region. Regional partnerships have become the latest trend in destination marketing, realizing that the "think local, act regional" mentality benefits all stakeholders, public and private, situated within the region. Newport Beach is in discussions with neighbors such as Laguna Beach, Huntington Beach, Irvine, and Costa Mesa and is an active member of the Anaheim/Orange County Bureau. Additionally, the proximity that Newport Beach has to Laguna Beach creates other possible marketing options for the city. Laguna Beach has created its own niche in the Southern California tourism market as an artist beach community. By combining marketing efforts with Laguna Beach, both cities would be able to position this coastal region as the "gold coast" of Southern California. Together these communities offer a tremendous number of activities and amenities for a visitor. Once the city of Newport determines its primary product, it must ensure its sustainability. This is to say, that reinvestment within the City is requisite to ensuring the long-term appeal of Newport Beach as a destination. Such reinvestment can be directed in areas which are not contrary to the vision or development patterns of the City. Tourism marketing, similar to city planning, is a direction not a destination. Therefore, reinvesting in infrastructure, transportation, and signage will assist Newport Beach with the overall image and perception of the City's tourism product. Image and Perception The fourth long-term goal is to develop a lucrative tourism market for Newport Beach. This will yield a high degree of name recognition combined with a positive perception of the destination's image. The attractive, upscale coastal location of Newport Beach has a positive local image to most residents of southern California; this however does not directly correlate to the success of a hotel or market. The name recognition of Newport Beach could be improved outside the Southern California area. Image and perception is a reflection of the Newport Beach `reality.' What does Newport Beach have to offer? Why should individuals visit Newport Beach? Why should groups hold their conferences in Newport Beach? These are critical questions which need to be addressed when promoting a top tourist destination. Cities such as Anaheim, for example, have the advantage of promoting an extremely popular tourism product internationally known as Disneyland. However, even the city of Anaheim may loose potential revenues if it does not facilitate the interaction between the built environment (attractions) and human activity (tourist). 31 Available to Newport Beach is the natural environment as well as the built environment. This is to say that beaches, parks, marinas, fisheries, and other similar space may be utilized as sites which are naturally defined by ecology. Promoting the natural environment, as well as the built environment, may prove beneficial to Newport Beach given the growing appeal of natural facilities such as: beaches, parks, bays, reefs, coves, and similar attractions. The Newport Beach product includes a diverse natural environment in addition to the many built amenities the city offers. Promotion and marketing of the final product should contribute to the creation of positive imagery for the city. In turn, positive imagery and perception of Newport Beach would increase the appeal of the city as a tourist destination. By nurturing positive imagery and perception, Newport Beach could stimulate demand for the development of additional hotel rooms as well as increase the yield from existing hotels. Spatiality of Existing Development The City of Newport Beach needs to create a sense of critical mass by facilitating movement between existing and new development. Most cities with a positive image have a well-defined critical mass. The critical mass is defined by several amenities or distinguishing characteristics, shops, or restaurants in a relatively proximate location that help accentuate the city's identity. Lack of such an area can leave a destination to struggle to design a concept that appeals to the potential tourists. Furthermore, having a number of hotel rooms within the critical mass can be one factor in determining the feasibility of generating room nights from the addition of a conference and convention center. Newport Beach can be characterized as having several elements of critical mass but which are spread throughout the city. If not addressed, such a development pattern could prove to be an impediment in the overall definition of the City's tourism product. Developing the City's infrastructure, signage, aesthetics, and transportation will contribute to facilitating movement of tourists and enhancing the overall appeal of Newport Beach as a tourism destination. Infrastructure Tourism development in Newport Beach is a product to be packaged and promoted as such. Similarly, a tourist's visit to ariy locality is a complete experience which encompasses the built and natural environments, social interaction of the City and its residents, level of service received, and ability to depart with a positive perception of the area visited. Hence, the tourist `experience' could positively or negatively affect a destinations rate of return visitation. The city of Newport Beach could contribute to the positive experience which tourists have if they choose to visit this coastal city. By improving the infrastructure, such as transportation, signage, streetscape and landscaping, and creating a destination that is more "user friendly" for the visitor, the City of Newport Beach will be able to offer a product that is more appealing to the visitor, hence generating a higher level of demand. This can be accomplished by 32 integrating several short and long term planning and marketing goals through combined efforts of both the public and private sectors. Once this higher level of demand is attained, a higher average daily rate can be achieved. Over the last three years, the Newport Beach hotel market has consistently achieved an average daily rate lower than comparable markets as indicated in the Market Analysis section of this text. Signage Newport Beach has "Fourist Info' signs along its access corridors. However, signs directing tourists to specific attractions and neighborhoods, such as Corona del Mar, could be enhanced to increase awareness of tourist activities and to create a friendly and inviting atmosphere. Signs located on local Highways 55, Highway 1, and Interstate 405 that lead the way into Newport Beach and also highlight various local attractions would be very beneficial targeting thousands of travelers along these major access routes. Aesthetics Many of the most exclusive neighborhoods in Southern California are appealing to both residents and visitors alike with beautifully landscaped parks, sidewalks, and street islands. City sponsorship of the regular planting of bright, bold colors of foliage represent a sense of goodwill on behalf of the city planners. Such initiative along Mariners Mile and Balboa Peninsula will most likely give residents a sense that the public grounds are extensions of their beautifully kept private property. Transportation Many cities have invested in local public transportation. Based on the distance between major activity hubs (identified below) scattered throughout Newport Beach, we propose a local nominally priced "themed" transportation system, such as a trolley, be implemented. The trolley systems in San Francisco, Grand Canyon National Park, and Estes Park, Colorado have linked main activity nodes in areas lacking proximate attractions. The novelty and convenience of such an operation generally has successfully added a means to experience an otherwise undefined critical mass. Additionally, transportation into the City of Newport Beach may be facilitated by the possible establishment of a regional airport at El Toro MCAS when the base closes in 1999. This would facilitate air transportation into Orange County and Newport Beach. Development of a regional airport at El Toro would present Orange County with the opportunity to utilize a portion of the existing John Wayne Airport as a regional convention center. Easier access into Newport Beach may increase tourism within the City. 33 Section VI - POTENTIAL SITES TO DEVELOP AND PROMOTE Due to the diffusion and lack of a critical mass that exists within the City of Newport Beach, we have identified seven major activity nodes for the City to enhance and link, which are signified on the following map. These eight hubs of activity fall into one of these two categories. New Areas to Develop Marina Park Pelican Hill Areas to be Enhanced Mariners Mile/ PCH Corona del Mar Fashion Island Balboa Island Balboa Peninsula/Pier Each of these areas currently offers appeal for visitors to Newport Beach; however enhancements in each area will raise the quality of the city as a tourist destination. Newport Beach can further develop its tourism product by linking these nodes. Transportation to and from each nod is essential in developing a more `user friendly' tourism product. Various medians are recommended which will link and facilitate transportation between these nodes. NEW AREAS TO DEVELOP Pelican Hill Currently, Pelican Hill Golf Course is located in an unincorporated area outside the city of Newport Beach. There have been discussions of the possibility of incorporating this area into the City of Newport Beach. Having an amenity such as Pelican Hill Golf Course as part of the City will enhance the tourist appeal and also offer a venue to hold special events, showcasing the City as a true destination. Pelican Hill is zoned for the development of 1500 - 1900 resort hotel rooms. The development of such resorts would allow Newport Beach to have both an urban and resort destination assuming the new development utilizes prime locations and the ocean views. Marina Park Marina Park is an 11 -acre waterfront park close to Newport Pier. This land presents an opportunity for oceanfront hotel/ resort or retail development. The proximity of Newport Pier, Balboa Island, and Balboa Pier to Marina Park could, with the implementation of a trolley or similar system, create a critical mass. In addition to these areas, Newport Beach can further develop its tourism product by enhancing the following nodes. 34 AREAS TO BE ENHANCED Mariners Mile/PCH - The prototype Because of its central Newport Beach location and easy accessibility, Mariners Mile should be utilized as the City's primary tourist center. Mariners Mile is located along Highway 1, the main North-South route through Newport Beach that connects Los Angeles and San Diego Counties. It is the midpoint between the Newport Pier and Fashion Island and is proximate to the Newport Dunes Resort. This highly visible site is literally a window that provides commuters visible access from the highway to the Newport Beach area. Currently a haven for yacht brokers and boat dealers, Mariners Mile is an exclusive high-end boating area and is not currently considered a tourist node. We recommend this area be re -positioned to maximize its highly accessible prime location to lure potential visitors from Highway 1. A variety of upscale restaurants and retail stores can be instrumental in enticing tourists to stop in Newport Beach. Once tourists are in the area, the City and private sectors can further enhance their opportunities for additional revenue. The real estate community must target tenants who will correspond to the upgraded image the city is trying to achieve. Accessibility proves to be an issue for northbound PCH travelers; hence there is a need for more user-friendly entrances into the restaurant area. Corona Del Mar Hidden to many visitors due to lack of signage and awareness, Corona del Mar is a beach community that appeals to the upscale traveler. This area of Newport Beach should be integrated and highlighted as a "beach neighborhood" within Newport Beach. Often times, this community is considered a separate city even by Southern California residents. Additional signage and an infusion of marketing efforts would help link the beach, sunset views, restaurants and retail available in the neighborhood of Corona Del Mar. Corona Del Mar must be known as part of the City of Newport Beach. This community will provide a greater amenity base for the visitor and play a major role in upgrading the total product of Newport Beach as a destination. Fashion Island Shopping is a fundamental attribute for a destination to offer. Newport Beach provides a variety of retail options, many located at the Fashion Island Mall. As a major retail and restaurant core within Newport Beach, Fashion Island still lacks the regional appeal that major malls such as South Coast Plaza possess. Because Fashion Island is smaller in scale than many major malls, it focuses on offering unique retail opportunities to the consumer rather than competing head-to-head with larger shopping alternatives. The shops and restaurants offer high quality products on a consistent basis. The opening of Bloomingdales in Fashion Island is anticipated to create more activity and continue the upgrade of the mall. Balboa Island The enchantment of Balboa Island must continue to be preserved while simultaneously focusing on upgrading the total product to accommodate both the tourist and the local consumer. This upgrade could entail more critical mass in this area, hence creation of 35 more neighborhood restaurants and variety of retail. The goal is to enhance the sidewalk appeal to the visitor. This will prompt more activity within this area. Balboa Pier A redevelopment plan for the Balboa Pier and parts of the Peninsula would enable the city of Newport Beach to truly offer an attraction to its visitors. Since "beach" is part of the name of the City, then the beautiful beaches of Newport Beach must be emphasized. However, the feeling a visitor may experience at the beach must correlate with the rest of the city. This consistency plays an essential role in enabling Newport Beach to achieve its long term marketing goal of upgrading the City. Again, the increased quality of the sidewalk appearance and outlets available to the visitor in this area will provoke an increase of dollars spent within the City. The City of Newport Beach business activity is spread amongst these seven activity nodes. To truly create an environment that allows the visitor to experience all of the amenities available within the City, transportation linkages must be established. Shuttle buses funded by the City that run on a convenient schedule will make it easy for the visitor to spend part of their visit in each of the various areas. Travel between the major nodes must be facilitated in order to assist tourists with their desire to fully absorb the tourism product developed by the City of Newport Beach.