Agenda Index City of Vancouver


ADMINISTRATIVE REPORT

Date: January 14, 2002
Author/Local: B. Pearce/6276
RTS No.02428
CC File No 6008
CS&B: January 24, 2002

TO: Standing Committee on City Services and Budgets

FROM: General Manager, Corporate Services

SUBJECT: Tourism Vancouver 2002 Business Plan/2% Hotel Tax Revenues

RECOMMENDATION

CITY MANAGER'S COMMENTS

The City Manager supports the vital role the tourism industry plays in Vancouver's economy. The events of 2001 will have a continued impact on this industry in 2002, and the activities of Tourism Vancouver are critical to ensure tourism remains a powerful driver of Vancouver's economy. The 2002 Business Plan continues the tourism activities supported in the past, and the provision of the 2% Hotel Tax revenues will provide Tourism Vancouver the capacity to carry these activities out. However, it is imperative that, as in the past, Tourism Vancouver continue to closely monitor the financial position throughout the year to ensure expenditures, while vital to the activities of Tourism Vancouver, do not exceed total actual revenues (including 2% Hotel Tax revenues) received during the year.

City staff and Tourism Vancouver are actively working together on other tourism related issues which will support this industry, and a Memorandum of Understanding will be forthcoming in the near future for Council's consideration.

COUNCIL POLICY
On an annual basis, Council must approve the business plan of Tourism Vancouver, which details the allocation of the 2% Hotel Tax revenues.

PURPOSE
The purpose of this report is to provide an overview and analysis of Tourism Vancouver's 2001 performance and the 2002 Business Plan and Budget, and in addition, reports back on issues presented to Council in 2001 relevant to the tourism industry.

BACKGROUND
In 1987, the Hotel Room Tax Act legislation of the Province of British Columbia enabled the collection of a tax of up to two percent on sales of accommodation in designated areas within the Province. The Hotel Tax is intended to assist municipalities and regional districts in financing and operating new tourist facilities and with tourism promotion.

Since 1988, the City of Vancouver has held the authority to receive from the Province the 2% tax on hotel revenues, and holds the responsibility to ensure the hotel tax revenues are used in accordance with the Provincial legislation and the City's by-law. These state the revenues are to be utilized for "tourism promotions, projects and programs". Since 1988, the City of Vancouver has allocated these revenues to Tourism Vancouver for these purposes.

DISCUSSION

Industry Performance
Tourism Vancouver reports to Council annually on highlights of the tourism industry in the Greater Vancouver region. Appendix 1 provides an overview of the tourism industry. Complete results will be reported in Tourism Vancouver's Annual Report and audited financial statements, which will be distributed to Council at a later date for information.

In brief, the tourism industry exhibited modest growth in 2001. Occupancy rates in theGVRD decreased from 69.2% in 2000 to 68.0% in 2001 (January - September), however the demand (room nights sold) increased 1.4% over 2000 results of the same period. The reason for the discrepancy between these indicators is an increase to the room inventory in Greater Vancouver (an increase of 3% from 2000 to 2001).

Overnight visitors to Greater Vancouver increased 0.3% for the first nine months over the same period in 2000. US visitors increased overall, while Canadian and overseas (primarily led by Asia) overnight visitors decreased.

Tourism Vancouver 2001 Performance
In 2001, Tourism Vancouver set a number of performance measures with which to measure the success of their business plan activities. Many of these measures were met and some were exceeded.

Key measures for Meetings & Events included city-wide conventions (those which result in room bookings of 1,000+) - Target was 18, attained 15 (to year end). Other measures included increasing leads by 5% (attained 1.4%), and a conversion ratio of leads to definites of 40% (attained 49% conversion ratio). Key measures for Leisure Travel included a 10% increase in Best Customer bookings (attained 9%), and an increase in leisure travel consumer program room nights of 86% over 2000. Visitor Servicing measures to the end of November include InfoCentre visits, which were targeted to increase by 5%, but decreased 5%, and visits to the Tourism Vancouver web-site, which were targeted to increase by 5%, and rose by 9%. Member retention rose in 2001 by 9%; 93.8% of Tourism Vancouver's members were retained from 2000 to 2001. This indicates the high level of satisfaction members have with the organization. Tourism Vancouver will review the full year's results in their Annual Report.

2001 Financial Performance
The revenues and expenditures reported herein are Tourism Vancouver's draft year end figures. The annual audited financial statements, generally complete by March each year, will report the final numbers for 2001.

Tourism Vancouver's primary source of revenues in 2001 was the 2% Hotel Tax, accounting for 79% of total revenues. 2% Hotel Tax revenues realized were 1% lower than in 2000. Figure 1 illustrates the growth of the hotel tax revenues since 1992. Hotel tax revenues decreased significantly in the latter part of the year. The September and October receipts were down 18% and 22% respectively from receipts in 2000. Overall, Tourism Vancouver realized revenues 2% higher than the previous year (2000: $10,405,489 to 2001: $10,581,893). This was due to increases in Membership and other program revenues.

Figure 1

Expenditures were 2% higher than in 2000 (2000: $10,536,637 to 2001: $10,783,186), primarily caused by increased sales and marketing expenditures (including one time expenses relating to the 2001 World Figure Skating Championships and the City of Vancouver/Tourism Vancouver contribution to the 2010 Olympic Bid Corporation). Expenditures on Finance & Administration and Member Services decreased from 2000 levels.

Tourism Vancouver expended $201,293 more than received in 2001. This was due to spending on programs committed to in previous years, and the source of revenue for these expenses was Tourism Vancouver's Net Assets. Net Assets are held to cover programs and commitments made in previous years.

Tourism Vancouver 2002 Business Plan

On an annual basis, City Council approves the business plan of Tourism Vancouver which details the allocation of the 2% Hotel Tax revenues. In brief, Tourism Vancouver proposes a budget of $10,410,400 (a decrease of 2% from the 2001 draft actual). The primary source of funds for this budget continues to be the 2% Hotel Tax revenues (estimated at 85% of the total revenue budget).
Tourism Vancouver's 2002 Business Plan has been attached as Appendix 2, and has been presented this year as a PowerPoint document. Tourism Vancouver has utilized this format as a cost savings measure (did not require printing; available electronically to members) and for the opportunity to amend activities should the industry require refocused tourism efforts. The 2002 Budget has been attached as Appendix 3.
Tourism Vancouver's 2002 Business Plan continues to focus on the three strategic priorities identified in previous business plans: Meetings and Events, Leisure Travel, and Visitor Services. All three priorities are marketing and promotions oriented activities. Seventy-eight percent of the expenditure budget is dedicated to these priorities.
1. Meetings and Events
Emphasis is on generating long-term city-wide impacts and short-term (1-3 years) meetings and events. Current opportunities include promoting environmentally responsible events. The success of the activities for this priority will be measured by indicators such as the number of Lead Room-nights (target - 620,000) and Definite Room-nights (target - 223,000).
2. Leisure Travel
Emphasis is on generating incremental business from "Best Customer" travel influencers and targeted independent travellers. The success of the activities for this priority will be measured by indicators such as Best Customer room nights (target - 265,000) and Consumer direct room nights (target - 20,600).
3. Visitor Servicing
Emphasis is on generating greater visitor spending, extending length of stay throughout Greater Vancouver, and stimulating repeat visitation. Current opportunities to build visitor servicing are being carried out through visitor servicing contracts with Tourism BC at YVR and the PeaceArch border crossing. The success of the activities for this priority will be measured by indicators such as the number of visits at the Burrard InfoCentre (target - 73,500).

The 2002 Business Plan and Budget includes allocations to other tourism activities and initiatives, such as the joint contribution of the City of Vancouver/Tourism Vancouver tothe 2010 Olympic Bid Corporation ($333,333). Tourism Vancouver will participate in a number of other activities including the Celebration of Light, GVRD By Design Not By Chance Forum, Keep Vancouver Spectacular, Convention Centre Expansion, and the Oceans Blue Foundation. These activities help to deliver exceptional visitor experiences and bring positive benefits to the Greater Vancouver community.
The activities identified in the 2002 Business Plan are consistent with the legislation and city by-laws governing the usage of the 2% Hotel Tax revenues. These state the revenues must be utilized for tourism promotions, programs and projects.

2002 Finances
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 Tourism Vancouver's publications and involvement in marketing strategies);
· continuation visitor servicing contract with Tourism BC.

The 2% Hotel Tax revenues are entirely dependent on the performance of the tourism industry. The revenues identified in Tourism Vancouver's Business plan are an estimate, based upon their analysis of the status of the industry in the fall of 2001. However, it should be noted that this is an estimate only, and actuals may vary. In light of uncertainties created as a result of September 11, 2001 and a softening economy, Tourism Vancouver has implemented a Board endorsed budget management plan that would ensure they manage within their financial means and not run an operating deficit. The plan involves a 90-day planning horizon which will identify any revenue shortfalls and respond with expenditure reductions that include scaled-back programs and personnel through attrition, hiring and salary freezes, partial work-week and layoffs as appropriate. The Tourism Vancouver Board and management will continue to closely monitor the situation and will keep City Management updated on a regular basis. Quarterly financial reports will be reviewed with city staff to ensure spending remains within the limits dictated by hotel tax revenue performance.
Other revenues are expected to decrease in 2002. The Vancouver Signature Program contributions have decreased as the program was a five year program which concluded in December 2001. Effective January 1, 2002, there is a new program in place, but only $200,000 in funding has been secured to date. The decrease is also due to one-off funding received in 2001 relevant to the 2001 World Figure Skating Championships ($200,000) which temporarily raised the Programs and Activities portion of the revenue budget.
2002 expenditures are estimated at 3% less than 2001. This is primarily due to decreases in marketing support expenses relating to the Vancouver Signature Program and decreases in investment in web related projects, collateral materials and research.
It is recommended that in 2002, 2% 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 12 month period of October 1, 2001 to September 30, 2002. These funds are received by the City and Tourism Vancouver over the January to December period. This collection/remittance treatment is consistent with business plans approved in previous years.

Other Tourism Vancouver Activities
In 2001, Tourism British Columbia awarded Tourism Vancouver fee-for-service contracts to operate the provincial Visitor Information Centres at the Peace Arch border crossing and at the Vancouver International Airport. Operation of the visitor centres is based on fee-for-service contracts (full cost recovery basis). Therefore, there is no net impact on Tourism Vancouver's existing operating budget. Operating overheads are recovered through a management fee component of the contracts. Tourism Vancouver assumed operation of the Peace Arch centre on February 1, 2001 and at Vancouver International Airport on May1, 2001.

Other Tourism Issues
At the June 28, 2001 Committee on City Services and Budgets meeting, Council requested action from Tourism Vancouver and city staff on a number of issues. This report provides an update on the status of these items.

2010 Olympic Bid
The 2010 Olympic Bid has been recognized as an appropriate tourism related activity to receive support from Tourism Vancouver. As such, in 2001, Council supported the allocation of $1 million from the 2% Hotel Tax revenues for the period 2001-2003 by Tourism Vancouver for contributions to the 2010 Olympic Bid, recognizing this participation is shown in Olympic Bid Corporation documentation as a joint contribution from Tourism Vancouver and the City of Vancouver. To date, Tourism Vancouver has forwarded one-third of the $1 million joint contribution to the 2010 Olympic Bid Corporation (allocated from the 2001 2% Hotel Tax revenues). The second installment of this contribution will be made in 2002, and will also be recognized as a joint contribution from the City of Vancouver and Tourism Vancouver. The final installment will be made to the 2010 Bid Corporation in 2003.

Regional Tourism Efforts
Other Greater Vancouver municipalities are beginning to implement the hotel tax system, and are using these funds to carry out their own promotions. Richmond implemented the hotel tax in 1999, and revenues are used for a convention centre and for tourism promotions. The City of North Vancouver and Surrey have also implemented the hotel tax. As other Greater Vancouver municipalities begin to generate revenues to carry out tourism promotions, it becomes increasingly important to ensure these efforts are carried out in a coordinated manner.

Tourism Vancouver is researching the integration of local tourism industry needs and interests with the GVRD. The "By Design, Not by Chance" forum, of which Tourism Vancouver will be co-host with Oceans Blue Foundation in May 2002, will be an opportunity to explore further ways in which the regional tourism organizations and municipalities can work effectively together.

Memorandum of Understanding
As directed by Council last June, Tourism Vancouver and city staff have been working on a Memorandum of Understanding ("MOU") which will clarify the relationship, responsibilities and accountability between the City of Vancouver and Tourism Vancouver.The MOU will also contain processes in which tourism projects will be identified and built into the Tourism Vancouver business plans. A draft MOU is now under development.

Ongoing and Emerging Tourism Projects
There are other tourism related projects which arise from time to time. For example, in 1996 the first Keep Vancouver Spectacular program was launched as a joint venture between Tourism Vancouver and the City. In 2001, the fireworks event, the "Celebration of Light" was the result of cooperation between a number of partners. The City of Vancouver supported the fireworks through contributions valued at $385,000 (police and fire services, sanitation, engineering), and Tourism Vancouver provided marketing, staff support, and a full-time project manager. The value of the Tourism Vancouver contribution has been estimated at $100,000. Similar arrangements may be used for future tourism projects. For example, Tourism Vancouver will be able to provide valuable support for the 2010 Olympic Bid beyond the joint $1 million direct financial contribution through promotions, networking and staff support. Other opportunities for support for tourism projects may become available in the future, and should be investigated by Tourism Vancouver and the City of Vancouver. For example, there may be opportunities for cost-sharing with the Federal Government for cultural tourism projects.

With a number of tourism projects emerging, it is appropriate for a formal process to be put in place to identify future projects as well as funding sources. As noted above, this will be contained within the Memorandum of Understanding between the City of Vancouver and Tourism Vancouver.

Conclusion
Tourism Vancouver has submitted their 2002 Business Plan and Budget. In addition, progress is being made on a number of the other tourism issues presented to Council in June 2001. The activities identified in the 2002 Business Plan are consistent with the legislation and city by-law relevant to the usage of the 2% Hotel Tax revenues. Therefore, this report recommends approval of the Tourism Vancouver 2002 Business Plan and Budget, and that the 2% Hotel Tax payments received by the City for the 2002 fiscal year be forwarded to Tourism Vancouver as and when they are received by the City.

 

Link to Appendices

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