March 30 2016 11:59 AM

The national convention industry frowns on San Diego’s stadium funding notion

A new stadium rendering
Image by JMI Realty

While waiting for the overdue official draft of a ballot initiative that’ll attempt to pave the way for a new NFL stadium, it was time to turn to the tourism industry—that niche market some believe can and should be saddled with a hefty portion of the financial subsidy for Dean Spanos’ downtown dream arena.

One reality that’s been lost in San Diego’s East Village stadium shuffle is the effect a proposed 4 percent increase in hotel tax could have on incoming convention business. It could be disastrous.

Nope, not a problem, opined veteran San Diego Union-Tribune sports columnist Nick Canepa, known for his folksy boosterism and unending supply of sentence fragments. He’s not alone within local sports media in espousing that there’s no ill in any corporate welfare for Mr. Spanos-tastic.

But Canepa’s March 24 column, “Visitors Help Foot the Bill, We Get A ‘Convadium,’” was an absurd pièce de résistance. The premise: Bumping up the city’s tax on hotel stays by 4 percent is a pain-free panacea for filling a funding gap for a $1.8 billion, hybrid stadium-convention space project. Boosting the tax from 12.5 percent to 16.5 percent will have no local repercussions, unless you do a staycation. Only then would hotel tax funneling ding San Diegans. Otherwise, tourists will just keep a-coming. Because nobody looks at the hotel bill until it’s too late. To a sunbaked tourist, a hefty hotel tax is fair exchange for beach time, bottomless mugs of craft beer and an endless supply of fish tacos.

Er, but what about convention attendees? For number-crunching meeting planners who keep track of such things, a 4-percent increase is a big jump (32 percent!).

“Typically, such a tax increase is done more incrementally than that,” said Thomas Hazinski, managing director of HVS, the company that compiles the definitive list of U.S. cities’ Transient Occupancy Taxes.

A leap from 12.5 percent to 16.5 percent vaults San Diego from 104th to 17th on the list.

San Diego Tourism Authority president and CEO Joe Terzi said the proposed boost has no positive impact. “I question the wisdom of funding the tax to that level,” he says. “That would be a big play by the Chargers to support a stadium with tax money that would have no benefit for the tourism industry.”

Why? Meeting and convention planners shop around. A 4 percent increase means a large association has to pay that much more to house its people during an event. And it means a rise in the price for attendees to stay in a group’s room block. That adds up. And if costs to send somebody to an exhibition become prohibitive, fewer people go. That’s lost revenue and disincentive to book a city. Yes, we’re perpetually sunny-and-72 San Diego. But bottom line is bottom line.

Terzi supplied two letters from past San Diego Convention Center clients who express regret that they’ve outgrown the space but would come back if a contiguous expansion came online (a whole other point of expansion contention).

Both letters signaled concern about the proposed tax. “A significant increase of 4 percent could cause significant impact in our ability to ‘sell’ the destination to our potential attendees,” wrote Lenay Gore, senior director of meetings and tradeshows, for the American Public Transportation Association.

Another group recently confirmed conferences in San Diego in 2028 and 2034—on the belief that a contiguous expansion would be completed, and that if not, it will diminish exhibits and revenue potential. Regarding the tax: “While we appreciate the value and importance of San Diego’s commitment to keeping the Chargers in town, our concern is about the proposed increase in hotel tax,” wrote Eileen J. O’Neill, executive director of the Water Environment Federation. “The increased cost of participating and staying in San Diego will weigh heavily on companies and visitors…”

Finally, to local sports boosters who think hotel taxes are manna from heaven, there is the classic example of New York City. In 1990, The Big Apple was hit with a 5 percent hotel tax increase. Meeting planners around the country protested. A boycott caused the city to lose 32 conventions and $100 million in delegate spending the next year. The tax was repealed in 1994.

That Canepa column concluded: “Big time. Small time. Your choice. But remember, visitors pick up the check.”

Unless they decide not to visit.


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