HomeMy WebLinkAbout18 - TBID Annual Report and Fiscal Year 2021-22 BudgetQ �EwPpRT
CITY OF
O �
z NEWPORT BEACH
<,FORN'P City Council Staff Report
August 24, 2021
Agenda Item No. 18
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Grace K. Leung, City Manager - 949-644-3001,
gleung@newportbeachca.gov
PREPARED BY: Melanie Franceschini, Management Analyst
mfranceschini@newportbeachca.gov
PHONE: 949-644-3028
TITLE: Tourism Business Improvement District (TBID) Annual Report and
Fiscal Year 2021-22 Budget
Visit Newport Beach, Inc. (VNB), a business unit of Newport Beach & Company, serves
as the administrator for the Newport Beach Tourism Business Improvement District (NB
TBID). VNB has submitted the NB TBID's FY 2021-22 Annual Report and Budget for the
City Council's review and approval.
RECOMMENDATION:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA)
pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because
this action will not result in a physical change to the environment, directly or indirectly;
b) Authorize a waiver of the timeline provided in Section 3.5 of the Tourism Business
Improvement District Management Agreement;
c) Review and approve the NB TBID'S FY 2021-22 Annual Report; and
d) Review and approve the NB TBID's FY 2021-22 Budget.
DISCUSSION:
Newport Beach Tourism Business Improvement District (NB TBID)
The NB TBID is a business improvement district formed pursuant to the Property and
Business Improvement District Law of 1994, codified in Streets and Highway Code
Section 36600 et seq., which helps fund marketing and sales promotion efforts for
Newport Beach Tourism businesses. It was established by Council Resolution 2009-21
on April 28, 2009 and is administered by VNB.
18-1
Tourism Business Improvement District (TBID) Annual Report and Fiscal Year 2021-22
Budget
August 24, 2021
Page 2
The Management District Plan for the renewed NB TBID (the document that details the
district's boundaries, funding and programs) was approved by the City Council on January
28, 2014 and was amended by the City Council on July 10, 2018. The NB TBID's current,
10 -year term will expire on January 31, 2024.
The NB TBID includes nine hotels/resorts, each consisting of 100 hotel rooms or more,
located within Newport Beach:
Balboa Bay Resort
Fashion Island Hotel
Hyatt Regency John Wayne Airport Newport Beach
Hyatt Regency Newport Beach
Lido House Hotel
Newport Beach Marriott Bayview
Newport Beach Marriott Hotel & Spa
Newport Dunes Waterfront Resort & Marina
Renaissance Newport Beach Hotel
VNB, on behalf of the NB TBID association, has prepared the NB TBID'S FY 2021-22
Annual Report and Budget for the City Council's review and approval (Attachments A &
B). The annual report includes a summary of the NB TBID's proposed activities for the
year. The report does not contain recommendations to alter the BID boundaries or the
method and basis for levying assessments for the following fiscal year. The NB TBID
Board of Directors met on June 24, 2021 to review and approve the TBID's FY 2021-22
Annual Report and Budget.
This year's report includes a brief discussion about the profound impact the COVID-19
pandemic has had on tourism, the signs of growth and recovery in the group market, and
the recovery of industry conferences and client events for hotels. Although there are
reasons to be hopeful about the recovery, most meetings and large group bookings are
postponed until 2022. Existing bookings for 2021 are much smaller in comparison to years
prior. At this time, most hotels have reopened, with the exception of the Fashion Island
Hotel. Additionally, the Marriott Hotel & Spa is undergoing major renovations, with half of
its rooms closed at any given time in 2021.
Year over year changes to the NB TBID's budget illustrate the substantial impact the
pandemic has had on Newport Beach hotels. The NB TBID's FY 2019-20 revenue was
$4.504 million. The NB TBID's revenue estimate for FY 2021-22 is $2.776 million. The
proposed FY 2021-22 expenditure budget, $2.964 million, utilizes carryover cash to
supplement the shortfall. The increase in expenditures is partially due to the VNB sales
team calling back three of its furloughed full-time employees, given the need to re -fortify
staffing due to the momentum in the industry. Furthermore, many hotels are working at
reduced staffing levels and need VNB to provide additional services, in order to be
competitive in the recovery market.
18-2
Tourism Business Improvement District (TBID) Annual Report and Fiscal Year 2021-22
Budget
August 24, 2021
Page 3
The report also explains how the TBID's FY 2021-22 marketing plan will concentrate on
the revitalization of group meetings. VNB will employ strategies such as proactive sales
campaigns, reinforcement of Newport Beach as a unique destination, effective target
marketing, and pursuit of highly -qualified client groups in order to meet the goal of booking
25,000 room nights. Despite the current challenges and continued uncertainties regarding
market recovery, VNB has made prudent adjustments to the workplan and budget, and
has the full sales team in place, to continue to support the NB TBID's member hotels as
the industry moves through the recovery process.
Waiver Request
Staff is recommending a waiver of the timeline specified in Section 3.5 of the 2009
Tourism Business Improvement District Management Agreement between the City and
Visit Newport Beach. The agreement set a May 31 due date for the NB TBID annual
report; however, the NB TBID Board of Directors was not able to meet until June 24 to
review and approve the annual report and budget.
FISCAL IMPACT:
Under the terms of the City -NB TBID agreement, the NB TBID assesses its member
hotels 3% of gross short-term (less than 30 -day stays) room rental revenue. The FY 2021-
22 assessment revenue is projected to be approximately $2,776,107. The assessments
levied for the NB TBID are applied toward the activities described in the NB TBID'S
Management District Plan (approved by the City Council on January 28, 2014) and
summarized in its annual report. The City collects the member assessments on behalf of
the NB TBID and retains 0.25% of the total assessments collected in order to reimburse
the City for collection and administrative costs associated with the NB TBID.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California
Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not
result in a direct or reasonably foreseeable indirect physical change in the environment)
and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA
Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no
potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
ATTACHMENTS:
Attachment A — NB TBID FY 2021-22 Annual Report
Attachment B — NB TBID FY 2021-22 Budget
18-3
ATTACHMENT A
NEWPORT BEACH TOURISM BUSINESS IMPROVEMENT DISTRICT
ANNUAL REPORT FOR FISCAL YEAR 2021-2022
JULY 1` 2021 THROUGH JUNE 30" 2022
ORIGINATION:
Implemented beginning May 1, 2009 through an ordinance approved by the City Council, the Newport
Beach Tourism Business Improvement District (TBID) was amended effective January 29, 2014. The
amendment included a revised assessment from 2% to 3% and a renewal period of ten (10) years. The
TBID is a benefit assessment district proposed to help fund marketing and sales promotion efforts for
Newport Beach lodging businesses.
Under an agreement with the City of Newport Beach, Visit Newport Beach, Inc. serves as the TBID's
Owner's Association and oversees its administration and coordinates its sales and marketing activities.
This is the annual report of the Newport Beach TBID for the 2021-2022 fiscal year and it is filed with the
City Clerk, according to the California Streets and Highways Code Sections 36650.
PURPOSE:
The Newport Beach TBID is responsible for representing and managing conference, meeting, and group
sales efforts in partnership with the nine TBID lodging businesses. These services are designed to benefit
the nine properties that will be assessed within the City of Newport Beach as well as generating
additional revenue to grow the Newport Beach hotel and tourism industry. The current participating
lodging businesses are as follows:
• Newport Beach Marriott Resort and Spa
• Renaissance Newport Beach Hotel
• Hyatt Regency John Wayne Airport Newport Beach
• Newport Beach Marriott Bayview
• Hyatt Regency Newport Beach
• The Balboa Bay Club and Resort
• Newport Beach Dunes Waterfront Resort and Marina
• Fashion Island Hotel
• Lido House Hotel
18-4
FY 2021-22 SITUATIONAL ANALYSIS
After a pandemic that was crippling to the meetings industry, there are signs of growth and recovery in
the group market. While meeting RFPs (Request for Proposals) are down 79% year -over -year (YOY) for
FY 2020-21, RFP submissions year-to-date (YTD) in 2021 are down 61%, and for the past 60 days, are
down just 56% YOY. This shows the growth the industry is now experiencing as the meetings market
reawakens. The trends for these RFPs are as follows:
1. Smaller peak rooms and overall room nights;
2. Longer lead times (3/4 are for Q4 2021 or sometime in 2022);
3. Half of the RFPs reference some type of virtual component, indicating the number of attendees
may be shrinking to accommodate those who have determined they do not want to attend in
person; and
4. Higher -end programs labeled as incentive or hybrid incentive: a good thing for the VNB portfolio
as they pay higher rates than standard corporate or association business.
Another important indicator of meetings recovery is that previously booked conferences started to
actualize in April and May, without cancellations! Additionally, industry conference and client events are
coming to fruition. Three individuals from the Visit Newport Beach sales team are travelling to customer
industry conferences in the month of June, the first travel of this kind since last March.
While there are reasons to be hopeful about the group market coming back, most meetings are waiting
until 2022. Unfortunately, this does not provide much opportunity for bookings in the remainder of
2021. Bookings that are finalized are much smaller than what was booked in the past. It remains to be
seen how bookings might resume their previous profile.
COST BASIS
Annual assessment rates are 3% of gross short-term room rental (less than 30 days) revenue on the
participating lodging businesses within the city limits of Newport Beach. Lodging business stays of longer
than 30 consecutive days are not be assessed. Based on the benefits received, stays by airline personnel
and government employees on government business are not assessed. Stays at time shares are also not
assessed. The renewal year for the current TBID agreement is 2024.
BUDGETED REVENUE:
After 10 years of consistent growth in TBID revenue, the COVID-19 pandemic created a serious
economic crisis in the hotel industry that is still affecting TBID revenue. The Newport Beach TBID
revenue for FY 2019-20 (the last "normal year") was $4,493,806. In stark contrast, the budgeted revenue
for FY 2021-2022 is $2,776,107.
This budget is based on the following assumptions:
• Marriott Hotel & Spa is undergoing a major renovation for the duration of 2021, with half of its
rooms closed at any given time.
18-5
• Fashion Island Hotel is still closed with absolutely no indication of plans to reopen. There would
be a considerable lead time to reopen, given that there are issues with the physical building, as
well as the need to re -staff from the ground up.
• Meetings and business travel are recovering, but the extent is uncertain and unknown. There is
still a lot of uncertainty with these two critical markets, which make up the bulk of midweek
occupancy.
FY 2021-22 TBID ROLL UP BUDGET
FY 2021-22 Proposed Budeet
Total Operating Revenue
$ 2,776,107
Total Operating Expenses
$ 1,679,063
Total Promotional Expenses
$
142,000
Total Community Relations
$
40,500
Total Digital Marketing
$
77,058
Total Trade Show Expense
$
184,672
Total Sponsorships
$
325,000
Total Sales Initiatives
$
213,500
Total Customized Destination Support
$
303,000
TBID Sales Staffing in FY 2021-22
The COVID-19 pandemic directly affected the TBID. When the TBID budget decreased by almost 80% in
2020, the Visit Newport Beach sales team laid off three full-time employees and furloughed three
others. VNB is pleased to report that as of June 7, the three furloughed employees have returned to
work. The sales team now consists of five individuals.
As previously mentioned, VNB is seeing momentum in the industry and felt that the team needed to be
re -fortified. Additionally, many of our hotel partners are still on reduced staffing levels and have a need
for VNB services more than ever, in order to compete for highly competitive business.
FY 2021-22 Direct Sales Initiatives/Goals
Objective: Re-engage & revitalize meetings in Newport Beach
Generate $20 million or more in group/meetings-related economic impact to Newport Beach TBID hotel
partners and the local Newport beach economy.
18-6
Strategy 1 - Proactive sales blitzes
Sales campaigns to clients in Southern California with qualified business who are resuming meetings
within drive markets for attendees.
Strategy 2 - Reinforce Visit Newport Beach's unique selling proposition
Visit Newport Beach delivers more resources, talent and focus to the small meetings market than any
other destination. This unique selling proposition is reinforced through all sales and marketing channels,
industry tradeshows and client interactions.
Strategy 3 - Effective target marketing
Deliver highly -targeted, refined messaging via automated email marketing, providing value and
inspiration to key contacts.
Strategy 4 - Familiarization trip series for targeted market segments
Educate and inspire small yet highly -qualified client groups for their business.
FY 2021-22 GOALS/PRODUCTION
After 10 years of exponential growth in definite room nights, the Visit Newport Beach sales team is
proposing a total goal of 25,000 definite room nights. There are many variables that make goal planning
difficult for FY 2021-22, such as hotel closures and the unpredictable nature of the market recovery for
meetings. Additionally, the VNB sales team was reduced by a third and many of our hotel partners have
significantly reduced their staffing levels and/or have new staff who are still learning the market.
Finally, the sales budget is about 55% of what it was in the last normal year, when the goal was 100,000
room nights, resulting in less ability to execute on travel and initiatives.
The VNB team has consistently exceeded goals in the past ten years and will strive to continue
exceeding goals and expectations in the coming year. VNB will revisit and realign goals with the TBID
Board of Directors in January of 2022.
ASSESSMENT AND BOUNDARIES:
The TBID Agreement was renewed in January 2014 for ten (10) additional years.
ESTIMATE OF NON -ALLOCATED FUNDS CARRIED OVER FROM FY 2020-21:
$188,686 —These funds will be used to meet the expected revenue shortfall in FY 2021-22.
AMOUNT OF ANY CONTRIBUTIONS OTHER THAN ASSESSMENTS LEVIED IN FY 2020-21:
$0.00
18-7
ATTACHMENT B
0
VISIT
NEWPORT
1{PORT
BEACH
CALIFORNIA
Visit Newport Beach, Inc. Group Sales (TBID)
FY2022 Budget
Operating Revenue
Revenue
41000 - TOT/TBID Income
Total Revenue
46001 - Other Income - Interest Income
Total Operating Revenue
Expenses
Salary and Wages
61010 - Salaries and Wages
61015 - Bonuses and Commissions
61020 - Auto Allowance
61030 - Payroll Tax Expenses
61040 - Accrued PTO Expense
Total Salary and Wages
Benefits
61110 - Medical Insurance
61115 - Benefit Administrative Fees
61120 - Dental Insurance
61125 - Vision Insurance
61130 - Life and Disability
61140 - Retirement Plan (401k)
61150 - Flexible Spending Plan
61160 - Employee Engagement Benefit
Total Benefits
General and Administrative Expenses
Operating Expenses
64100 - Office Supplies
64101 - Kitchen Supplies
64110 - Office Equipment Leases
64115 - Office Equipment (non-deprec)
64120 - Equipment Repairs & Maintenance
64125 - Computer Software (non-deprec)
64130 - Voice and Data - Office
64135 - Telephone - Mobile
64136 - Cable - Office
64140 - Postage
4,493,806
4,493,806
11,088
4,504,894
952,475
228,947
16,770
91,020
4,460
1,293,672
93,927
126
6,864
1,212
12,672
72,150
156
8,968
196,075
11,726
3,440
5,307
17,059
7,122
5,811
10,543
2,773,107
2,773,107
3,000
2,776,107
871,111
67,000
15,840
69,980
12,000
1,035,931
86,629
360
5,642
987
16,018
72,624
1,750
9,000
193,011
10,000
2,400
2,764
5,000
20,125
8,750
9,000
7,200
1,000
1,200
18-8
a
VISIT
NEWPORT
BEACH
CALIFORNIA
Visit Newport Beach, Inc. Group Sales (TBID)
FY2022 Budget
64145 - Shipping Charges
2,995
2,500
64150 - Bank Fees
105
400
64160 - Membership Dues
38,662
35,750
64165 - Subscriptions
476
1,080
64170 - Team Meetings
12,778
14,000
64175 - Governance Meeting Expenses
6,557
3,000
64180 - Education
19,327
15,620
64190 - Business Licensing Fees
-
550
64300 - Depreciation Expense
23,326
5,000
64600 - Business Meals/Entertainment
9,829
5,400
Total Operating Expenses
175,065
150,739
Office Lease and Expenses
62100 - Office Lease
116,417
139,162
62110 - Office Repairs and Maintenance
3,690
8,600
Total Office Lease and Expenses
120,106
147,762
Insurance
63100 - General Liability Insurance
1,163
1,220
63200 - Workers Compensation Insurance
8,672
3,250
63300 - Board of Directors Insurance
10,242
2,200
Total Insurance
20,077
6,670
Professional Fees
64203 - Recruiting Fees
4,900
64205 - Payroll Processing Service
3,895
3,500
64206 - Independent Contractors
3,600
5,000
67004 - Marketing NBCo Fees
93,000
108,000
64201 -Audit Fees
14,450
14,000
64202 - Tax Preparation Fees
3,900
2,000
64204 - Legal Fees
5,200
Total Professional Fees
128,945
132,500
Travel Expenses
65100 - Airfare
4,033
3,000
65200 - Accommodations
10,436
7,000
65300 - Meals
1,673
1,000
65400 - Transportation Costs
2,364
1,000
65405 - Mileage
-
200
65500 - Other Travel Costs
288
250
Total Travel Expenses
18,794
12,450
18-9
a
VISIT
NEWPORT
BEACH
CALIFORNIA
Visit Newport Beach, Inc. Group Sales (TBID)
FY2022 Budget
Total General and Administrative
462,986
450,121
Advertising Expenses
66101 - Advertising - Purchased
53,604
68,000
66121 - Promotional Gift Cards
31,367
40,000
66123 - Promotional Client Gifts
40,001
12,000
66203 - Creative Design/Development
226,743
22,000
Total Advertising Expenses
351,715
142,000
Marketing Expenses
Community Relations
67104 - Annual Marketing Outlook Event
-
30,000
67101 - Research
1,690
500
67108 - Company -Sponsored Events
1,250
Total Community Relations
2,940
30,500
Marketing Collateral
67311 - Collateral Production Expenses
1,394
750
Total Marketing Collateral
1,394
750
Digital Marketing
67502 - Website Maintenance
-
32,308
67503 - Online Search Advertising
-
12,000
67508 - Website Redesign Expenses
6,806
2,000
66211 - CRM Maintenance
13,500
30,000
Total Digital Marketing
20,306
76,308
Communications/Public Relations
67605 - Media Special Programs
82,208
10,000
Total Communications/Public Relations
82,208
10,000
Total Marketing Expenses
106,848
117,558
International Marketing Initiatives
67401 - International Brand Awareness Fees
17,500
67404 - International Trade Shows
50,000
67411 - International Promotional Items
1,320
67413 - International Sales Missions
49,962
-
Total International Marketing Initiatives
118,782
-
Direct Sales Initiatives
Trade Show Expense
66221 - Trade Show Travel Expenses
66,146
40,000
18-10
a
VISIT
NEWPORT
BEACH
CALIFORNIA
Visit Newport Beach, Inc. Group Sales (TBID)
FY2022 Budget
66222 - Trade Show Registration
66223 - Trade Show Booth Expenses
Total Trade Show Expense
Sponsorships
66231 - Sales Group Enhancement Credit
66232 - Hosted Industry Events
66233 - Industry Partnerships
66234 - Industry Sponsorships
Total Sponsorships
Sales Initiatives
66207 - Site Inspections
66208 - Client Events
66210 - Conference Services
66209 - Database/ Prospecting
Total Sales Initiatives
Total Direct Sales Initiatives
Customized Destination Support
66243 - Hotel Partner Booking Incentives
66247 - Partner Engagement Expenses
66248 - Group Marketing Initiatives
Total Customized Destination Support
Total Expenses
Utilization of Carryover Cash (not reserve funds)
Net Income
174,398
100,433
340,977
379,240
31,538
103,097
109,212
623,086
51,952
76,354
158
101,809
230,273
1,194,336
348,574
19,224
188,518
556,316
4,280,731
224,164
103,272
41,400
184,672
230,000
15,000
60,000
20,000
325,000
32,000
100,000
500
81,000
213,500
723,172
175,000
8,000
120,000
303,000
2,964,793
188,686
0
18-11