by Tom Isler | September 01, 2006

Salvatore GiamettaSalvatore Giametta

The San Diego Lodging Industry Association and the San Diego County Hotel-Motel Association are developing a proposal to add a 2 percent surcharge to hotel bills and use the revenue to promote the city.

“This speaks to the need for a new funding model,” said Salvatore Giametta, vice president of community affairs for the San Diego Convention and Visitors Bureau. “Many of us feel the existing model is broken.”

Since 1993, the city of San Diego has cut the CVB’s funding by $5.1 million, or 37 percent, appropriating more hotel occupancy tax revenue for the city’s general fund. Mayor Jerry Sanders has hinted more cuts are on the way.

Mike McDowell, executive vice president and CEO of the Lodging Industry Association, who pitched the proposal to a city council subcommittee in July, said the concept of a Tourism Improvement District, funded by the surcharge, is also a reaction to the 12,000 hotel rooms now in development in San Diego, which could open by 2011.

“We’re faced with the rock that is the city’s economic reality and the hard place that is the growth in supply,” McDowell said. To keep occupancy at its current 73 percent, he calculates, the city needs to attract 2 million more room nights annually.

If the city council endorses the plan this fall, and the lodging community votes to levy the charge, the total amount of taxes and fees on hotel bills would rise to 12.5 percent as early as next spring, still below the national average for comparable markets, Giametta said. McDowell believes there will be “no problem” gathering enough support to pass the measure.

The surcharge could raise $20 million to $24 million annually. Half of the money would bankroll organizations now funded by the city, leaving an extra $10 million to $12 million to spend on marketing.