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TDC Subcommittee Backup 01/12/2012TDC SUBCOMMITTEE BACKUP DOCUMENTS January 12, 2012 12/14/2011 03:15 18774686770 PROCESSOR PAGE 02 Tourism A business case for Economic Impact, Jobs, and Quality of Life in Collier County Dick Medwedeff General Manager and Tourist Development Council Member Tourism has always been recognized as one of the major economic drivers for Collier County. In 2010, Tourism had a $1.2'13illion dollar economic impact on our community. It is estimated that over 29,000 jobs in the county are related to tourism. The volume and variety of our quality dining and entertainment options are directly connected to tourism as many of these facilities could not sustain themselves in the absence of these travelers (higher capture versus residents) and as such, impacts the quality of life for both full and part time residents. Additionally, there is a halo effect that is created from the luxury products we promote in our county that inevitably raise the value of our homes and encourage real estate growth. There are some however who have blamed tourism for the congestion and excessive traffic resulting in a reduction in quality of life for its residents. The facts however show that of the population growth of Collier County "in- season" (January through April) approximately 100,000, tourism contributes about 23% to that growth. (9,638 rentable rooms x 80% occupancy x 3 people per room = 23,13 1). If we recognize these facts, why does our county continue to spend tourist development tax dollars in such a way that puts us at a competitive disadvantage? As a reminder, this tax is paid only by our tourist who stay in one of the 9,638 rentable units and not by the residents. The disadvantage I am referring to is the percentage of the tax collected that is actually spent on marketing and promoting our destination compared to our competitor markets. The following chart shows that comparison. We have the lowest percentage (25 %) of our tourist tax dollars promoting our destination compared to our competitor markets. The funding allocated to this effort affords our 12/14/2011 03:15 18774686770 PROCESSOR PAGE 03 community a "partial year" (5 months) advertising and promotion (TV and Print Media) exposure, a-ad within those months of advertising, a limited reach and penetration. So if we have the lowest allocation of tourist tax dollars going to advertising and promoting our destination, how is the rest of the tax being allocated? Collier County has the highest percentage of tourist tax dollars allocated for beaches and beach park facilities as shown below. Collier County is also the only county of our "competitor county sample" that spends tom ist development tax dollars on "operating" costs of county owned museums estimated to be approximately $1.4 million dollars in 2012. Museums have never been considered a driver for tourism in our market but even if we considered museum tourist attendance as a method of allocation which is 80,000 annually approximately 1.8% of our tourist visitation, it would be significantly less than the 11% of total tax collected currently. 12/14/2011 03:15 18774686770 PROCESSOR PAGE 04 So, how could our County Commissioners change this and enable more dollars to be allocated on a permanent basis to attracting more tourists that would drive more economic impact and more jabs? Well, some have suggested increasing the tourist development tax to 5% (like most other counties) in Florida. Many politicians at the National. and State level also believe that additional taxes is the solution to funding problems versus ensuring that the taxes currently collected are spent in the most efficient way. As a community we must reject this approach not only on principle but based on the following analysis. Increasing the tourist development tax would negatively impact our convention / group business. Over the last 4 years, the convention / group segment represents on average 39% of our hotel lodging room revenues in Collier County. Unlike a leisure traveler who probably does not inquire about the tourist development tax rate prior to making a buying decision, meeting planners do as they have a defined budget for their meeting. Our county is at a competitive disadvantage when competing for this segment of business due to 4 major factors: Cost of Airfare, availability and number of direct flights to RSW / Naples, and cost of ground transportation to hotels from the airport. The following shows a selected set of dates of travel "in- season7' and the related airfare and ground transportation costs in our market versus our primary competitor markets: Source: Expedia.com February 19 - 23, 2012 New York DC Chicago Philadelphia New Jersey (NYC) (WAS) (CHI) (PHL) (EWR) Avg Ft. Myers (RSW) $344 $247 $255 $301 $279 $285 Miami (MIA) $333 $145 $339 $359 $209 $277 Ft. Lauderdale (FLL) $343 $165 $327 $279 $199 $263 Orlando (MCO) $316 $184 $210 $221 $205 $227 Avg Competitor Market Cost $331 $155 $292 $286 $204 Ft. Myers Premium $13 $82 -$37 $15 $75 From our primary feeder markets during this time of the year, the average cost of airfare into RSW versus our primary competitive markets is the highest. From these primary feeder markets all with exception of Chicago, cost anywhere from $13 to $82 on average more to fly into RSW than competitor markets. Over these set of dates there were no direct flights from the feeder markets into Naples and there were significantly less going into RSW versus the competitor markets. 12/14/2011 03:15 18774686770 PROCESSOR PAGE 05 Ground Transportation (55 Passenger Bus) from Airport to Hotel (Roundtrip) Marco Island Beach Resorts $1,572 Miami Reach Resorts $1,000 Ft. Lauderdale Beach Resorts $1,000 $732 Orlando (Disney Area Resorts) $732 Ground transportation costs are also the highest for our county due to the distance from RSW to our county hotels and resorts. Tourist Tax Comparison Tourist Tax Total Tourist Tax Naples I Marco Island 4% $1,650 Miami Reach Resorts 5% $2,063 Ft. Lauderdale Beach Resorts 5% $2,063 Orlando (Disney Area Resorts) 5% $2,063 The tourist tax example is based on a 3 night stay, 55 Attendees, at a room rate of $250 per night. In this example our market (with 1% less in tourist tax) will charge $413 less in taxes for this meeting. Total Transportation & Tax Comparison Ground Tourist Costs for 55 Attendees Airfare Transportation Tax Total Naples / Marco Island $15,686 $1,572 $1,650 $18,908 Miami Beach Resorts $15,235 $1,000 $2,063 $18,298 Ft. Lauderdale Beach Resorts $14,443 $1,000 $2,063 $17,506 Orlando (Disney Area Resorts) $12,496 $732 $2,063 $15,291 Due to the fact we have limited to no impact on the availability of direct flights, cost of airfare into our market, and hotels distance from the airport, these costs will always put our county at a disadvantage versus the competitor markets. The only offset to this is our 1 percentage point less in tourist development tax versus these competitor markets. Although in most cases this tax differential does not offset the overall cost difference, it narrows the gap and enables our county to compete for this critical segment of business. We can ill afford to loose this negotiating tool. So, if raising the tourist tax rate is not the smart approach, how should we re- allocate the existing tourist development tax structure and at what level should we target funding our advertising and promotion budget. I am a firm believer that you should always benchmark off of the best performer to establish a goal of improvement. Over the past 4 years, two markets stand out over all others — Florida Keys and Miami both performing 10 points of occupancy better than Naples / Marco Island. The Florida Keys is primarily a leisure market whereas Miami has both a leisure and convention group mix similar to our market. Therefore, if we benchmarked against Miami, we would adjust our tourist tax allocation for Sales & Marketing of 25% to 45% of total funds. 12/14/2011 03:15 10774686770 PROCESSOR PAGE 06 The following permanent restructuring is suggested, however a transitional plan over the next 5 years would be recommended. Existing Recommended Tourist Development Tax Allocation Allocation Allocation Fund 195 Cat. A: Beach Re- nourishment / inlet management 33.33% 34.00% Fund 183 Cat, A: Beach Park Facilities 16.67% 6.00% Fund 184 Cat, B: Marketing & Promotions 25.00% 45.00% Fund 193 Cat C: Nan County Museums 2.40% 2.40% Fund 198 Cat C: County Museums 11.00% 0.00% Fund 194 Cat B: Admin & Overhead 11.60% 12.60% The significant changes in allocation is the elimination of funding operational costs of county owned museums (fund 198) and the reduction of funding of beach park facilities (fund 183). The operating costs of museums was funded from the County's general fund up until the year 1996 when it was changed to the tourist development tax funding. This cost belongs back in the general fund as it is not a driver of tourism in "our market". The beach park facilities' account has amassed a funding balance of over $12 million dollars and is clearly over funded. The transitional plan I referred to earlier would be as follows: Given the current overall economic conditions of our county, delay the transfer of funding of the operating costs of county museums for a period of 5 years. However, set a mandatory requirement for these museums to engage in self funding activities (similar to the Non- County Museums). Starting in 2012, change the funding of Cat A fund 183 to a 6% allocation and transfer 4 percentage points to the Cat B fuzed 184 (Marketing & Promotions) 1 percentage point to Cat B fund 194 (Admizx & Overhead) and .67 percentage points to Cat A: Beach Re- nourishment / inlet management fund. Bridge the final 11 percentage points necessary to achieve the 45% target for Marketing & Promotions by reallocating $1.4 million dollars a year for the next 5 years from the reserve funds of Cat. A fund 183 (currently over $12 million dollars) to Cat B fund 184 (Marketing & Promotions). That would still leave over $4 million, dollars in fund 183 after direct spending of $1 million a year over the next 5 years. This plan protects our prime asset (our beaches) with increased funding, has no immediate impact on any beach funding projects or general fund requirements, and puts our county on track to increase tourism in our community. Over the past 4 years our county has had an average of 60% occupancy of our lodging products. if we could increase that to a 70% occupancy (like Miami), that would represent over 350,000 additional room. - nights, over $240 million in additional direct spend, and over $350 million in additional economic impact.* This increase in occupancy would support an additional 2,300 jobs in the community and over $107 million in wages.* * See attached Research Data 12/14/2011 03:15 18774686770 PROCESSOR PAGE 07 Z W to U N w W Ice N � CJ HL1 luu U w w Q v � N CCi 1� C� N 0 79 .O p A 6 N �0 �o y� o b O W c"1 �a Q g� �'O � 11y�gyy Ln CD o ' c + w + S o �+ + ' + o M In C en + + + LM O 4yy.1 R ^ �•: + N uy � a �O `•, r, M. p A 6 N �0 �o y� o b O W c"1 �a Q g� �'O 12/14/2011 03:15 18774686770 PROCESSOR PAGE 08 Weighted Average Wages In Tourism Related Job Categories -- National Estimates Tourism Related Job Cate ories Average Annual Wages (2010 Chief Executives 173.3 0 Airline Pilots, Copilots, and Flight Engineers 115,300 Air Traffic Controllers 110 280 Marketing Managers 122,720 Sales Managers 114,110 General and Operations Managers 113,100 Economists 99$50 Public Relations Managers 104,390 Advertising and Promotions Managers 98,720 Market Research Analysts 66,850 Network and Computer Systems Administrators 72 200 Flight Attendants 41,630 Managerial /Skilled Occupations 108,708 Aircraft Mechanics and Service Technicians 53,280 Airfield Operations Specialists 46-1740- Food Service Managers 52,220 Aircraft Cargo Handling Supervisors 51,810 First-fine Supervisors/Managers of Landscaping, Lawn Service, and Groundskeeping Workers 44,730 Executive Secretaries and Administrative Assistants 45,860 First -line Supervisors/Managers of Retail Sales Workers $9890 Massage Therapists 39,770 Survey Researchers 43,450 Travel Guides 31 900 Reservation and Transportation Ticket Agents and Travel Clerks 32,640 Billing and Posting Clerks $3270 Tefemarketers 25,470 Retail Salespeople 25,000 Switchboard Operators (including answering service) 26 280 Landscaping and Groundskeeping Workers 25,430 Security Guards 26 870 Taxi Drivers and Chauffeurs 24,580 Recreation Workers 26,270, Transportation Attendants (except flight attendants and baggage porters) 23,320 Counter and Rental Clerks 25,620 Amusement and Recreation Attendants 19,750 Hotel, Motel, and Resort Desk Clerks 21,430 Baggage Porters and Bellhops 23,720 ConcieEges 29,480 Maids and Housekeeping Cleaners 21 150 Support Occupations 29,558 Weighted Average 46,647 ara iLacatfon: National, source: Bureau of Labor StaBaHca Research Data Services, Inc_ December 28, 2011 Copyright 2011.