by Michael C. Lowe | May 01, 2013

San Diego Mayor Bob Filner, the San Diego Tourism Marketing District and the city council have reached a deal to release millions in frozen tourism marketing funds after months of wrangling.

A number of events led to the standoff between the parties, starting when the San Diego Tourism Marketing District (TMD) was formed in 2007 by the city’s lodging businesses to fund tourism marketing and sales efforts. At that time, two five-year agreements were instituted; one outlined how the TMD would be run, and the other established a 2 percent transient-occupancy fee on the city’s hotels, to be used to support various tourism-related efforts and agencies, including the San Diego Tourism Authority, formerly the city’s convention and visitors bureau.

At issue: When the 2007 occupancy-fee agreement was renewed at the end of 2012, it was challenged by three lawsuits citing Proposition 26, which had passed in 2010 and established new guidelines for fees and taxes in the state. At the same time,  the TMD’s five-year operating agreement came up for renewal.

At this point, San Diego’s new mayor, Filner, refused to renew the agreement, claiming its wording did not include enough legal protection for the city against the current and potential lawsuits. This inaction froze funding to the TMD, halting tourism-
related marketing efforts.

Because the deal was on hold, the tourism authority, which receives 80 percent of its budget from the TMD, was forced to issue layoff notices this past March to 85 of its employees, and the Tourism Authority had to cancel approximately $8 million in advertising because the funds were in limbo.

The amended agreement, signed last month, added the protections the mayor sought. Days later, one of the three lawsuits against the TMD was dismissed, raising the likelihood that the remaining two also might be thrown out.

The city’s tourism marketing efforts now are back on track, but the delayed agreement didn’t come without costs. “Our lack of advertising is critical. We’ve already seen some loss in market share in the leisure markets,” said Joe Terzi, president and CEO of the San Diego Tourism Authority.

Ultimately, “The only thing that was affected was San Diego’s ability to market itself,” said Lorin Stewart, executive director of the San Diego Tourism Marketing District.

In fact, the lack of leisure traffic might offer opportunities for planners looking to book short-term meetings. Dips in occupancy have led to more aggressive pricing from hoteliers, which could mean deals for planners. Said Terzi, “There are periods over the next six to 12 months where planners will probably get a better deal in San Diego than if we hadn’t gone through this.”