National University School of Business & Management Speaker Series July 16, 2015

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1 National University School of Business & Management Speaker Series July 16, 2015

2 MODERATOR JOE TERZI President & CEO San Diego Tourism Authority Joe Terzi began his hospitality career with ITT Sheraton Corporation in During his tenure with the company, he distinguished himself as General Manager for a diverse set of hotels in locations including Washington, DC; Billings, MT; Tulsa, OK; Dallas, TX; Seattle, WA; Bal Harbor, FL, and, finally, San Diego, CA. In 2002, Terzi was promoted to Senior Vice President for Starwood Hotels & Resorts and continued in that capacity until his retirement on January 1, Terzi was recruited to fill the role of President and CEO for the San Diego Tourism Authority in March 2009.

3 KELLY CUNNINGHAM Senior Fellow and Economist for National University System Institute for Policy Research (NUSIPR), a non-partisan organization with the goal of improving the efficiency and effectiveness of public and private sectors in San Diego County and southern California region. He has closely monitored San Diego s economy for over 30 years. His analysis and views on the local economy are regularly sought by local, state, national, and international businesses, government, and media.

4 8.0% Percent of Visitor Industry Impact on Overall San Diego Economy 7.0% 6.0% Percent of GDP 5.0% 4.0% 3.0% 2.0% Total Regional Impact Visitor Spending 1.0% 0.0% f Sources: U.S. Department of Commerce, Bureau of Economic Analysis; CIC Research; San Diego Tourism Authority; National University System Institute for Policy Research.

5 Annual Change in Overall San Diego Economy vs Visitor Industry Annual Percent Change 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0% Overall economy Visitor Industry -12.0% Sources: U.S. Department of Commerce, Bureau of Economic Analysis; CIC Research; San Diego Tourism Authority; National University System Institute for Policy Research.

6 San Diego Visitor Related Industries ($millions) SAN DIEGO GDP (Total) Arts, entertainment, and recreation Accommodations Food services and drinking places Air transportation Visitor Spending (Direct) Total Visitor Impact (+Indirect Induced) Year 2006 $167,881 $1,700 $1,818 $3,425 $190 $7,719 $12, ,602 1,794 1,973 3, ,899 13, ,616 1,866 2,059 3, ,908 13, ,564 1,710 1,744 3, ,958 11, ,201 1,755 1,786 3, ,080 11, ,676 1,849 1,813 3, ,485 12, ,940 1,914 (D) (D) (D) 7,979 13, ,886 1,999 (NA) (NA) (NA) 8,394 13, ,776 (NA) (NA) (NA) (NA) 9,209 15,195 Annual Change: GDP% 07/06 4.0% 5.5% 8.5% 1.5% -4.2% 2.3% 7.6% 08/07 1.2% 4.0% 4.4% 0.5% -5.5% 0.1% 7.5% 09/08-1.7% -8.4% -15.3% -1.6% -2.9% -12.0% 7.4% 10/09 0.9% 2.6% 2.4% 2.1% 13.8% 1.7% 6.6% 11/10 4.3% 5.4% 1.5% 2.9% 6.8% 5.7% 6.7% 12/11 4.5% 3.5% (D) (D) (D) 6.6% 6.8% 13/12 3.6% 4.4% (NA) (NA) (NA) 5.2% 6.9% 14/13 5.0% (NA) (NA) (NA) (NA) 9.7% 7.0% (D) Not shown to avoid disclosure of confidential information. (NA) Not Available. Sources: U.S. Bureau of Economic Analysis; CIC Research; San Diego Tourism Authority; National University System Institute for Policy Research.

7 SKIP HULL Skip Hull is an economist and vice president of CIC Research, an economics and market research firm that was founded in San Diego in CIC s largest ongoing visitor industry research study is the Survey of International Air Travelers. Each year, CIC has conducted this survey of nearly 80,000 international air travelers for the U.S. Department of Commerce, Office of Travel & Tourism Industries. CIC is also currently responsible for processing more than five million monthly international arrival and departure records for the U.S. Department of Homeland Security.

8 San Diego Visitors Characteristics, Volume, & Spending

9 San Diego Visitors million visitors $9.2 billion spent by visitors $171 million City TOT / $230 million County 173,000+ hospitality jobs / 135,000 tourism San Diego s 2 nd Largest Traded Sector CIC Research, Inc.

10 San Diego Visitor Highlights Visitors are here for leisure! 88% of all San Diego visitors 82% of overnight visitors Stay: 4 nights all visitors / 3.3 nights hotel Spend: $273 per visitor in San Diego $658 per hotel visitor / $56 per day visitor CIC Research, Inc.

11 Visitors by Accommodation Type 9.3 million hotel guests are 28% of S.D. visitors and Hotel/Motel 28% Private Home Guests 20% Day Visitors 50% Camp/RV/Other 3% 33.8 Million Total S.D. Visitors CIC Research, Inc.

12 Visitor Spending by Type of Lodging $6.2 billion in spending by hotel guests 2/3rds of all S.D. visitor spending. Hotel/Motel 67% Camp/RV/ Other 9% Day Visitors 10% Private Home Guests 14% $9.2 Billion Direct Visitor Spending CIC Research, Inc.

13 Total Visitor Spending by Category Lodging (Hotels, etc.) $2.6 Bil. Restaurants/Bars/Clubs 22% ($2.3 B) $2.0 Bil. 29% Shopping (gifts, etc.) 19% ($1.9 B) $1.8 Bil. ($1.1 B) Attraction/Mus./Entertain. 10% $0.9 Bil. ($775 M) Air Travel (local impact) 8% $0.8 Bil. ($659 M) Exhibitor/Assoc. Events 7% $0.6 Bil. ($482 M) $9.2 Billion Direct Visitor Spending in San Diego (2014) Trans(Car Rental/Taxis/etc.) 5% ($371 $0.5 M) Bil. $0.0 Bil. $0.5 Bil. $1.0 Bil. $1.5 Bil. $2.0 Bil. $2.5 Bil. $3.0 Bil. Source: CIC Research, Inc.

14 San Diego Benefits from Visitors Benefits for S.D. residents quality of life. Keeps local dollars & taxes at home in S.D. Tourism is growing nationwide. $2.1 trillion total output in the U.S. 15 million jobs in the U.S. $117 Billion in California/1.03 million jobs CIC Research, Inc.

15 BOB RAUCH Robert Rauch, CHA, is CEO of RAR Hospitality, a leading hospitality management firm. Rauch has over 35 years of hospitality-related management experience in all facets of the industry. Widely recognized as the "hotel guru," Mr. Rauch maintains a blog where he expounds upon insights and trends in the hospitality industry at Along with the blog, he also publishes Hospitality Innsights, a monthly electronic newsletter.

16 Today s Top Hospitality Trends Millennials More international visitors Booking more profitable business Innovative technology Sharing economy/disruption

17 Reputation Management and Today s Millennials Travelers ability to access social networks anytime, anywhere empowers them to create and consume more content than ever before 70% of travelers make decisions based on review and responses on review sites.

18 Capitalize on guest created content Social Media Create a virtual concierge through the property s website or other digital app Implement concise and impactful videos to enhance dramatic imagery Utilize content marketing and real-time marketing 90% of travelers trust recommendations from their friends and family more than any advertising

19 Chinese Travelers 2015 and Beyond Visa Waiver Program Longer stays Spend more money Mandarin Chinese is the most spoken language in the world

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21 47% of travelers research options using their mobile device 31.6% will actually book their travel on a mobile device

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23 Copyright 2015 R.A.Rauch & Associates PORTER S FIVE FORCES Threat of New Entrants Bargaining Power of Suppliers Rivalry Among Existing Firms Bargaining Power of Buyers Threat of Substitute Products

24 San Diego County Hotel Occupancy Rate 100.0% 80.0% Prior Peak Occ Mil. Nts. New Peak Occ Mil. Nts. 60.0% 40.0% 20.0% 0.0% Occ. Rate 70.9% 72.3% 73.3% 72.9% 69.5% 63.3% 66.7% 68.9% 70.7% 71.6% 74.6% Source: STR, Monthly Hotel Review - San Diego = 53,700 rooms 2014 = 59,500 rooms CIC Research, Inc.

25 San Diego County Hotel ADR $200 $150 Prior Peak $2.1 Bil. New Peak $2.3 Bil. $100 $50 $ ADR $114 $122 $131 $139 $142 $124 $122 $126 $132 $136 $142 Source: STR, Monthly Hotel Review - San Diego. CIC Research, Inc.

26 LORIN STEWART As executive director of San Diego Tourism Marketing District Corporation (SDTMD), Stewart is responsible for the administration and development of the nonprofit mutual benefit corporation dedicated to improving tourism and hotel room night consumption in the City of San Diego. The mission of the SDTMD is to create a positive economic impact on the lodging businesses within in the City of San Diego. His nine-member volunteer board accomplishes this through the judicious allocation of TMD revenues, historically in excess of $25 million annually, to measure successful tourism promotion, marketing and sales programs through a competitive application process.

27 Case Study: The State of Colorado In 1993, Colorado eliminated its tourism promotion budget, leaving it as the only state without in the U.S. without tourism funding Within one year, Colorado slipped from 1st place to 17th place in the summer resort category By 1997, Colorado s overall share of the U.S. leisure travel market plummeted by 30% Visitor spending fell dramatically, creating an immediate loss of total revenues of $1.4 billion, which increased to $2.4 billion annually by the late 1990s State and local tax receipts dropped by $134 million between

28 Initial San Diego TMD Public Private Partnership 5-Year Trial Period % of Gross Room Revenue SDTMD, Corp. Governed by 9 Elected Payors Brown Act Transparency Funds Collected by City w fully loaded cost recovery Relieved General Fund of approx. $10.4 million p.a.

29 Hot Buttons Incremental Room Nights and Leads for TMD Assessed Lodging Businesses Need to Benefit TMD Paying Lodging Businesses Off-Peak Events and Promotions Geographical - Programs in Sub-Regions Possibility of Creating Long-Term / Legacy Events Quantifiable Results through Third Party Audits Economy of Scale & Collaboration

30 6 -Year Recap Initial TMD Results (cont.) Results Through *: $136 Million TMD Funds Deployed 20.1 Million Room Nights Directly Supported $2.87 Billion in Hotel Room Night Revenue ROI in excess of 19:1 Relief to SD General Fund in excess of $63 Million *Approximate

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32 Restricted Funding & TOT Collections

33 Restricted Funding 2013

34 FY2015 ALLOCATIONS & PROJECTED RESULTS Room Room Entity Allocation Nights Rev ROI SD Tourism Authority A1 & B $20,794,736 3,444,000 $552,881, A2 Sub-Region $3,000,000 TBD TBD TBD SD Bowl Game Assoc. $450,000 30,500 $3,507, Craft Brewers Guild Beer Week $74,900 6,943 $997, SD Sports Commission $328,900 22,873 $3,286, CA State Games $150,000 15,600 2,059, SD Bayfair $85,000 14,194 $1,817, San Diego Crew Classic $120,500 9,000 $1,292, La Jolla Playhouse Hunchback $18,114 1,470 $211, Comp. Group: RR Marathon $300,000 42,000 $7,473, Farmers Open Century Club $200,000 30,825 $4,218, TOTAL $25,522,150 3,717,425 $593,975,

35 THANK YOU!