HomeMy WebLinkAboutFormalize the Hotel Co-op Program STAFF REPORT
CITY OF PALM DESERT
ECONOMIC DEVELOPMENT DEPARTMENT
MEETING DATE: December 14, 2017
REQUEST: AUTHORIZE THE HOTEL CO-OP PROGRAM.
Recommendation
By Minute Motion:
1 . Approve the Hotel Co-op Program, according to the criteria described in
this staff report; and
2. Authorize the City Manager, per the purchasing ordinance, to approve
individual requests for funding up to $25,000.
Funds are available in Advertising Special Co-op, Account No. 1 1 0441 7-4322201
Strategic Plan
• Priority 3: Attract new and developing travel/tourism markets.
• Priority 4: Support the City's tourism industry through enhancement of its
marketing efforts with an allocation of additional city resources.
Executive Summary
Approval will formally approve the Hotel Co-op Program and authorize the City Manager
to approve the expenditure of funds up to $25,000 in accordance with the program
guidelines. Requests in excess of $25,000 will be brought to Council for approval.
Background
At its January 7, 2015, meeting, the Hotel & Signature Events Committee discussed
ways to raise occupancy at Palm Desert hotels during the "shoulder" season. The City
Manager agreed to add funds to the marketing budget to be used cooperatively with
hotels to achieve that goal. In February 2015, the City Council approved a mid-year
budget adjustment, appropriating $200,000 to the marketing budget with the stated
purpose of increasing cooperative marketing and group incentive opportunities with
December 14, 2017— Staff Report
Hotel Co-op Program
Page 2 of 3
hotel properties in Palm Desert during need periods. A "need period" in this case is
defined as any time of the year when hotel occupancy is historically low, which in the
Coachella Valley includes:
• January 1-10
• June-September
• Sunday-Thursday before Thanksgiving
• First two weeks of December
Staff works closely with Palm Desert hotels to vet these requests and, when
appropriate, a formal memo requesting sponsorship is presented to the City Manager
for consideration. There are several requirements that must be met prior to approval:
• Funds can only be applied to need periods as outlined above.
• They can only be used for new business (not retroactively applied to business
already on the books).
• Once committed, the funds are only to be used for actualized business. Should
the group in question cancel, no funds will be given.
• The amount of funding committed by the City must result in a minimum of 25%
return on investment (ROI), in terms of transient occupancy tax generated by the
group business.
• The total amount available for this funding is capped at $200,000 total, per
annum.
• Any funds not committed in a given fiscal year are returned to the General Fund.
The co-op program has been used judiciously since its inception, and has produced
some strong results. A shining example is the effect this program had on Palm Desert
hotel occupancy in August 2016. The City contributed $5 per actualized room night in a
total amount not to exceed $10,000 to incentivize the Jewish Learning Institute to bring
its meeting to the JW Marriott Desert Springs Resort during the summer. The group was
strongly considering several other locations for its meeting, but ultimately chose Palm
Desert because of this incentive program. As a result, the City collected $35,369 in
transient occupancy tax (TOT), a 254% return on its $10,000 investment. TOT collected
in August 2016 increased by 44% compared to the year prior.
Because this program is designed to assist with the procurement of group business,
and because groups often book hotels years in advance, a question regarding the
encumbrance of these funds has arisen. For example, the JW Marriott has booked the
Kappa Kappa Gamma fraternity's annual national meeting for June 2022, which is
projected to generate 2,150 room nights. The City has pledged $20,000 to assist the
resort with this group, against a projected $42,333.50 return in TOT, a 112% ROI for the
City.
Staff is seeking Council's approval to set aside the pledged funds for this and other
approved groups from the current fiscal year's budget, to be used when and if the
business actualizes. This avoids committing funds from a future budget and ensures
that the funds will be available at the time the business occurs.
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December 14, 2017— Staff Report
Hotel Co-op Program
Page 3 of 3
Fiscal Analysis
No additional funds are being sought for this program. Funds are available in
Advertising Special Co-op, Account No. 1 1 0441 7-4322201.
Prepared by: Thoma oule,
Tourism & Marketing Manager
LEGAL REVIEW DEPT. REVIEW FINANCIAL REVIEW CITY MANAGER
Robert W. Martin Alvarez et Moore Lauri Aylaian
Hargreaves Director of Director of Finance City Manager
City Attorney Economic
Development
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