Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

TO: City Services & Budgets Committee
FROM: General Manager of Corporate Services in consultation with the City Manager
SUBJECT: Tourism Vancouver 2000 Business Plan / 2% Hotel Tax Revenues
 

RECOMMENDATION

A. THAT Council approve the portion of the Greater Vancouver Convention and Visitors Bureau (Tourism Vancouver’s) 2000 Business Plan funded by the 2% Hotel Tax, and that the 2% Hotel Tax payments received by the City for the 2000 fiscal year be forwarded to Tourism Vancouver as and when they are received by the City, on the condition that their budget provides up to $400,000 for the Trade &Convention Centre project definition report and $100,000 for the 2010 Olympic Bid Corporation.

B. THAT Council request a comprehensive review and presentation from Tourism Vancouver, to be scheduled in June 2000. The review should include the following: Tourism Vancouver’s long-term strategic priorities, activities carried out by the organization, projected growth of Hotel Tax revenues and projected future of the tourism industry and hotel stock, Tourism Vancouver’s future plans for the revenues, and accountability and performance measures used by the organization.

CITY MANAGER’S COMMENTS

POLICY

Summary

In accordance with Council policy and legislative requirements, Tourism Vancouver has submitted their 2000 Business Plan to Vancouver City Council for consideration and approval (Attached as Appendix A). The Business Plan contemplates the continued receipt of all of the revenues of the 2% Hotel Tax.

The 2% Hotel Tax revenues have increased substantially since the tax’s inception in 1988 (Appendix B). The total proceeds of these revenues have been flowed to Tourism Vancouver in the past, although, as set out in the by-law, Council has the authority to allocate the fundsto tourism promotion, programmes and projects in general.

It should be noted that other tourism related projects would benefit from access to these funds, and could also support the tourism industry in Vancouver. Other tourism projects such as the proposal for the Vancouver Trade and Convention Centre are important to the City, and industry funding is necessary to help the project become a reality. Quoting from Tourism Vancouver’s 2000 Business Plan: “Tourism Vancouver and other industry groups clearly recognize that there is a strong business case to expand the convention centre in Vancouver. We simply will not be able to grow Greater Vancouver’s city-wide convention business beyond current levels without the expansion.”

This year it is recommended that the Tourism Vancouver receive total revenues from the 2% Hotel tax to fund their 2000 Business Plan. These funds will also allow Tourism Vancouver to contribute funding to two important industry initiatives: the Trade and Convention Centre expansion project definition report, and the 2010 Olympic Bid Corporation.

This report also recommends a comprehensive review of Tourism Vancouver’s long-term plan. This review will assist Council in future decisions regarding the allocation of the 2% Hotel Tax revenues. The 2% Hotel Tax revenues have risen substantially since 1988, and reconsideration of the allocation of these funds is appropriate at this time. However, it is recognized that a thorough discussion and review of the issue shall be put before Council prior to any further action.

Purpose

The purpose of this report is to review the Tourism Vancouver 2000 Business Plan and consider their request for the entire 2% Vancouver Hotel Tax revenues for 2000 for their tourism promotion program.

Background

In 1988, the hotel and tourism industry approached the City to indicate a willingness to establish a voluntary 2% tax on hotel rooms for the promotion and market development of tourism in Vancouver. The City and the industry approached the Province for the necessary legislation to establish the tax. The resulting legislation has set the tax rate at 2%, changeable only by the Province, and the revenues resulting from the tax are to be applied by the City to “tourism promotion, programmes, and projects”.

Prior to the enactment of the legislation and until 1997, the City also provided funds to Tourism Vancouver (approximately $700,000 per year) for the operation of a tourist InfoCentre and the development and printing of tourism related materials. These funds were provided to Tourism Vancouver through Tourism Services Agreements.

In 1997, a year of great financial challenge, the City faced costs associated with the APEC Conference. As Tourism Vancouver was among the agencies urging the City to host the event, it was agreed that they would fund 50% of the estimated costs (Total estimated cost -$700,000, Tourism Vancouver portion - $350,000). As the costs associated with APEC rose, and budgetary pressures within the City itself grew, the City elected to reduce the contract with Tourism Vancouver for the operation of the InfoCentre and the development of printing and materials ($600,000 in 1996, $400,000 in 1997, and $200,000 in 1998 and 1999). In addition, Council proposed funding 50% of APEC costs through 2% Hotel Tax revenues. Tourism Vancouver and the hotel industry were firmly opposed to the use of the 2% Hotel Tax revenues for this purpose. Discussions between the City and Tourism Vancouver resulted in a Statement of Intent (a copy is attached as Appendix C), and the current Tourism Services Agreement (a copy is attached as Appendix D).

In the 1997 Statement of Intent, it was outlined that the current City Council’s intent was to flow the 2% Hotel Tax revenues to Tourism Vancouver on a continuing basis, and required no further contribution towards APEC costs from Tourism Vancouver (Tourism Vancouver had contributed $150,000 prior to the negotiation of these documents). In a companion legal agreement, Tourism Vancouver agreed to continue the production of tourism materials and the operation of the InfoCentre without further contributions from the City.

Discussion

In 1988, the City of Vancouver and the tourism industry approached the Province for the necessary legislation to establish a hotel tax regime in Vancouver. The legislation provides the money to the City for purposes of tourism and convention promotion:

Additional Hotel Room Tax Levy Bylaw (City of Vancouver Bylaw 6378, section 4):
“The funds paid to the City of Vancouver under the provisions of the regulation shall be applied to tourism promotion, programmes, and projects.”

The Statement of Intent, a non-legally binding agreement signed in November 1997,confirmed that the City Council at the time was interested in allocating the 2% Hotel Tax revenues to Tourism Vancouver on a continuing basis. This agreement does not commit a subsequent City Council to continue this practice. The City did not, therefore, enter into a binding long-term agreement with Tourism Vancouver with respect to the allocation of the Hotel Tax revenues. This point is further affirmed by the fact that each year Council decides on whether to provide the 2% Hotel Tax revenues to Tourism Vancouver.

The Tourism Services Agreement signed by the City and Tourism Vancouver in 1997 commits Tourism Vancouver to the provision of tourism publications and the operation of an InfoCentre at their expense. The agreement was envisaged as continuing indefinitely, but is firm on a continuing basis for ten years (to 2008).

TOURISM VANCOUVER

1999 Financial Performance (Appendix E)
In 1999, 2% Hotel tax revenues realized were 10% higher than projected; overall, Tourism Vancouver realized revenues 11% higher than projected for that year. These additional funds were used to increase expenditures in a number of areas: Convention and corporate meeting sales and market development (up 20% from projected budget), Leisure travel sales and market development (up 17% from projected budget), and Marketing and industry communications (up 12% from projected budget). Projected spending decreased in two areas: Finance, administration & technology (down 6% from projected budget) and Membership services and community relations (down 6% from projected budget). Visitor information services funding increased slightly over the budget (2%).

Industry Performance
Tourism Vancouver reports to Council annually on highlights of the tourism industry in the Greater Vancouver region; the 1999 report from Tourism Vancouver is attached as Appendix F .

Tourism Vancouver 2000 Business Plan & Budget
For 2000, Tourism Vancouver anticipates revenues of $10,256,000; 1999 actual revenues totalled $10,097,246. 2000 2% Hotel Tax revenues are conservatively estimated at $8,400,000; 1999 actual hotel tax revenues totalled $8,293,822. Tourism Vancouver indicated that any additional revenues realized would be allocated to programs consistent with business priorities.

Tourism Vancouver business priorities, as set out in their 2000 Business Plan (Appendix A), and 2000 Budget (Appendix G) are submitted as follows:

1. Meetings & Events ($3.33 million)
Funds will be invested in sales and marketing programs which emphasize outstanding customer service and focus on building long-term relationships. Web-based technology will play a growing role in serving customers, providing richer, more timely information, and efficient, high quality service.

2. Leisure Travel ($2.604 million)
Activities will focus on selling Vancouver as a year round destination. Increasing emphasis will be placed upon the Internet as a customer service and e-commerce platform. The Leisure Travel focus will position Greater Vancouver as a destination that continually delivers “Best Ever” customer and visitor experiences.

3. Visitor Servicing ($1.232 million)
Activities will focus on extending visitors’ length of stay. Funding will be invested in the provision of Best Ever Service, from technological innovations to delivering and outstanding level of personal assistance via knowledgeable Visitor Information Counsellors and volunteers at the TouristInfo Centre.

Tourism Vancouver has committed to providing financial support to two major tourism industry initiatives this year: up to $400,000 for the Vancouver Convention Centre expansion project definition report and $100,000 for the 2010 Olympic Bid Corporation.

Tourism Vancouver 2000 Budget
In order to achieve their 2000 strategic priorities, Tourism Vancouver is anticipating funding through a number of sources:
… continuation of the flow-through of 2% Hotel Tax revenues;
… membership fees/partnership opportunities (Vancouver Signature Program - corporate partners, each of whom contributes a combination of cash, services and materials in return for having their logo promoted on TV’s publications and involvement in marketing strategies);
… continuation of Provincial government funding (from BC Tourism).

Actual 2% Hotel Tax revenues collected and forwarded may exceed or fall short of the projected revenues. Tourism Vancouver will monitor Hotel Tax revenues and will adjust their business plan to reflect actual receipts, as has been the practice in recent years.

It is recommended that in 2000, Hotel Tax revenues continue to flow through the City to Tourism Vancouver; payments to be forwarded to Tourism Vancouver as and when received from the Province over the period covered by the Council approved Business Plan. In order to recognize the delay between the actual collection of the 2% Hotel Tax by the Province and its receipt by the City and Tourism Vancouver, Tourism Vancouver has based its business plan on the 2% tax revenues to be collected during the 12month period of October 1, 1999 to September 30, 2000. These funds are received by the City and Tourism Vancouver over the January to December period. Council has previously granted authority to remit the first quarter receipts to Tourism Vancouver. This collection/remittance treatment is consistent with business plans approved in previous years.

CONCLUSIONS
This report recommends flowing 2000 Hotel Tax revenues to Tourism Vancouver. These funds will allow Tourism Vancouver to address their 2000 Business Plan strategic priorities, as well as to support two important tourism initiatives, the Convention Centre expansion project definition report and the 2010 Olympic Bid Corporation.

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