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Ad campaign gets the boot; Victoria officials reconsider growing hotel tax fund

By Melissa Crowe
July 14, 2012 at 2:14 a.m.
Updated July 15, 2012 at 2:15 a.m.


Convention and Visitors Bureau budget 2007 and 2012

•  Total hotel tax allocation: $202,000 to $750,000

• Advertising: $37,413 to $340,000

• Bootfest: $0 to $100,000

• Personnel expenses (salaries and benefits): $83,024 to $155,618

• Convention and Visitor promotion: $11,774 to $25,000

• Travel and meetings: $2,990

• Continuing education: $1,265 to $6,800

How much?

Hotel rooms in Victoria average a night

$120

plus tax of about

$15.

7% goes to state

6% to city.

Deciding the funding

Museums, festivals and cultural groups depend on hotel tax funds.

By law, cities may allocate 15 percent of its hotel tax revenue to these arts groups.

Last year, Victoria organizations requested $480,000 in funds, but the committee was limited to allocating only $172,000. In the end, about $217,000 was spent, which includes the funding for Victoria Texas Independent Film Festival.

City Council voted July 3 to set aside $450,000 of the hotel tax fund to promote arts and historic preservation. When the budget process begins in August, it will approve how much and where the nearly $2.5 million remainder will go.

A committee of five Victoria leaders, including Charles Grant and Zona Sweeney, who represent the hotel industry; Vic Caldwell, representing sporting organizations; George Matthews, representing the arts; and Sheron Barnes, representing historic preservation, will make recommendations to council for the $450,000 to arts and historic organizations.

  • Melissa Crowe

WHAT THE LAW SAYS

Every expenditure must directly enhance and promote tourism, as well as the convention and hotel industry

Every expenditure must fit into one of nine categories:1. Establishing, improving, or maintaining a convention center or visitor information center;2. Paying the administrative costs for facilitating convention registration;3. Paying for advertising, solicitation and promotions that attract tourists and convention delegates;4. Arts promotion;5. Historical restoration or preservation programs;6. Sporting events that substantially increase hotel activity;7. Enhancing or upgrading existing sports facilities or sports fields;8. Transportation systems for tourists;9. Signage directing tourists to sights and attractions

Source: Texas Tax Code Chapter 351

Victoria will consider soon how to spend nearly $3 million generated by its skyrocketing hotel taxes.

However, critics fear the money will be as ill-spent as a recent $1 million advertising campaign that ended in March with no measurable success. City officials quietly pulled the plug on the campaign, "Bring Your Boots," earlier this year.

"I don't know if Boots was a failure," said O.C. Garza, the city's communications director. "I think we found a more effective method. ... "

As the city council prepares to vote in August about how to spend its windfall, what lessons may be learned from the past and from other cities?



Heartburn hotel tax

During the past 10 years, Victoria Convention and Visitors Bureau received more than $3.5 million from the hotel tax fund, with the largest allocations made since 2009.

In about two years, the bureau spent almost $1 million on the "Bring Your Boots" campaign.

In 2010, the visitors bureau spent almost $600,000 on advertising. The next year, the bureau spent about $388,000.

An additional $100,000 went toward the well-attended Bootfest in October.

"It's a big jump," said Gilbert Reyna, the city's finance director. "I can see why people had heartburn about it. I had heartburn about it."

According to state law, hotel tax revenue can be spent only on promoting tourism and the hotel and convention industry, and there is no time limit to spend hotel tax dollars, according to a report by the Texas Hotel and Lodging Association.

However, state law requires cities with a 7 percent local hotel tax rate to spend at least one-seventh of the tax revenue on advertising and promoting the city.

Victoria officials say they expect hotel tax recipients to prove they attract an overnight crowd.

However, the money the bureau spent on advertising since 2009 has gone largely unchecked.

Victoria Chamber of Commerce President and CEO Randy Vivian oversaw the campaign while the visitors bureau operated under his office. The bureau became part of the city last year.

He described "Bring Your Boots" as a high-quality campaign that "emphasized the attributes of the community."

"No campaign is perfect," he said. "You make adjustments as you go."

Bring Your Boots lasted two years, and campaigns need at least five years to measure results, Vivian said.

He said he would not speculate on what results the campaign might have made if it had a longer life.

"The goal of any campaign is heads in beds," he said.

"Bring Your Boots" was open-ended, Vivian said, and the chamber did not have to prove a specific number of overnight visitors came because of the advertisements.

Councilman David Hagan said he was "never a fan" of the campaign or the amount of money spent and voted against it.

"There's nothing that associated Victoria with boots," Hagan said. "We could be hard-pressed to say we had a good return on investment considering the amount of money we spent."

Not only was the campaign untested, officials had no way to measure its effectiveness, he said.

He called it "a reckless" use of money.

"Just because it's money that has to be allocated and spent a certain way doesn't mean we can be haphazard with it," Hagan said. "We need to be good stewards of all the money we're entrusted with."

The bureau's new director, LaRue Roth, started in October, replacing Bridgette Bise, who was hired by the city of Goliad to promote that community after starting the "Bring Your Boots" campaign.

Since coming on board, Roth said, she tried to analyze the effectiveness of the campaign, tracking website visits, visitor information and meeting with business leaders.

"It didn't garner any awareness about Victoria," she said.

With no effective way to measure the campaign's success, the bureau changed its course in March, after existing contracts expired, to the "Explore Victoria" campaign, which emphasizes the area's attractions, festivals and special events.

"People felt like we had invested quite a bit of money," Roth said. "So we brought some elements of it forward."



Best practices?

While Victoria officials say they are restricted by legal requirements, some other Texas cities take a more creative approach to hotel tax laws.

For example, the city of Tyler has spent more than $2 million since 2009 to rebuild Liberty Hall, a historic downtown theater. The city's total hotel tax revenues for 2012 were $2.8 million, according to financial documents.

Odessa City Council spent more than $360,000 in hotel tax revenue this year to support its sporting industry, including its golf course, the West Texas Crossroads Marathon, disc golf, and its local hockey team and track club. It projected $6.5 million in total tax revenue, but will spend only a third of that, according to financial records obtained through the Freedom of Information Act.

Corpus Christi projects $11.7 million in hotel tax dollars this year. Its two largest expenses are $3.8 million for convention promotion and $2.5 million for its debt service for repairs to the sea wall, according to financial documents received through an open records request.

Mayor Will Armstrong said Victoria is tightening its legal interpretation.

"There are a lot of things that would be nice, but does it promote an increase in hotel, motel occupancy?" Armstrong said.

At a recent workshop to help local organizations apply for funding, representatives left disappointed with the strict requirements.

Randy Lance, of Riverside Golf Course, said he wanted to apply for funding to replace the green on nine holes of the course, which would make tournaments more attractive to out-of-town golfers.

The city council approved matching the golf course $37,500 from the general fund for renovations to nine holes. The total 18-hole project is estimated to cost $150,000.

Because Lance could not prove the sport's impact on hotel stays, he was told it would likely be denied hotel tax funding.

"We're trying to grow events, but the events we're talking about right now don't bring in 50 percent to hotels," Lance said.

Former Main Street Program Director Mike Sigg said the city should focus on long-term goals, such as building up its tourism infrastructure versus a weekend spike in overnighters.

"Don't worry about filling hotel rooms right now. They're already filled," Sigg said. "Build the events and make them quality."

Heritage tourism draws people who spend more money and stay longer than people who visit a water park for a day, Sigg said.

Growing events and cultural destinations give tourists more options to stay longer.

"Very few people travel to Lubbock just to visit the Buddy Holly Museum, but they might stay an extra day just to visit it," he said. "I may not come to see the Nave Museum, Texas Zoo or just to see the Museum of the Coastal Bend, but together, that sounds like something I might want stay the weekend for."

Branding is part of that long-term framework, he said.

"I think the city has lots of pieces and some really quality items," Sigg said. "If it were my call, I'd call the museums and ask, 'What do you need to make you better?' ... What do we need to take them to the next level?"

Armstrong said he did not want to lobby for any specific project.

Armstrong, who has previously supported the city's efforts and studies in bringing a convention center to town, said he was not in favor of setting aside money from the hotel tax fund for that project.

"I don't think that would be prudent to set the money aside and hold it for years and years and years until we can build a convention center," Armstrong said. "It's too grandiose a project."



Heads in beds

Victoria's hotels have maintained steady 90 percent occupancies, thanks in part to jobs in the Eagle Ford Shale. Because of that, Victoria stands to take in significant revenue this year and next, the city finance director said.

"Compared to the last couple of years, there's no comparison," Reyna said.

If projections hold true, by September, the city will have nearly $3 million in tax receipts and related revenue. Five years ago, hotel tax receipts were a little less than $1 million.

However, Reyna predicts that in two or three years, the increase will level off.

"We need to be cautious about spending this money," he said. "Hotel tax receipts are very volatile."

Councilman Emett Alvarez said Victoria's strict interpretation of the tax law keeps the community from "overextending" itself.

"If we're spending that kind of money on advertising and promotion and it's not effective, maybe we need to change our direction and use it in more infrastructure or permanent improvements," Alvarez said.

Long-standing facilities or community improvements could benefit a broader audience for a longer period, he said.

"The critical thing is what we do with those funds is not whimsical," Alvarez said. "It's based on state law. It's got to be tourist-related and try to bring tourism in."

Councilman Joe Truman said he wants to see money spent more creatively.

"The only thing that limits us is our imagination," Truman said.

The city is still in its infancy of high hotel tax revenue.

"Now is the time to be talking about, dreaming about and planning for fun things to do," Truman said.

Multi-day festivals and heritage events top his hotel tax wish-list.

"If we want to become a touristic town, we've got to have things for tourists to do," Truman said. "We need to start planning and preserving our history, and be looking at things in creative ways."


For a previous look at "Boots" campaign, click here.

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