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Taxes Are Up But Occupancy Is Flat

Tourism taxes are up in Morro Bay but occupancy rates are flat, according to figures put together for the Tourism Business Improvement District Advisory Board and released to the public in August.

The chart, part of a larger report on marketing efforts, gives totals for Fiscal Year 2014-15 and 2015-16 and shows marked increases across the board, including monies collected from the TBID’s 3-percent per night, room fee, which funds the City’s marketing efforts.

In previous years, the TBID, in conjunction with the City ran the marketing efforts under a non-profit Tourism Bureau. The new system is basically reversed, with the marketing employees now either City employees or working under contract with the City.

The Tourism Bureau is in the process of being dismantled and the City is now in charge of the budgeting and the marketing, which is being done through a contract marketing firm, Mental Marketing. The whole program is overseen by a new City tourism manager.

Total reported receipts in 2014-15 from the town’s roughly 915 motel rooms was more than $24.34 million (the number of available rooms varies from 910-915 for each month reported).

That translates to $2.43M in transient occupancy taxes (TOT) collected and sent to the City treasury (based on the 10% per night tax rate). That money goes into the City’s general fund, which pays for most services like police, fire, street maintenance, planning, administration, recreation, parks, etc. Some services like water, sewer, harbor, and public transit have their own revenue sources.

In 2015-16, the totals rise to $25.93M total and $2.59M in TOT, according to the chart.

As for occupancy rates, the average for 2015-16 was 62.8% compared to 2014-15’s 63%, showing little change. And while tourism could be described as seasonal, occupancy rates did not dip below 43% in any single month in 2015-16 (January 2016 had a 43% rate, contrasted with July 2015’s 85%.). By contrast, January 2015 had a 47% rate.

Trailer parks show total receipts for 2014-15 of a little over $2M and in 2015-16 it totals $2.22M, an increase of some $214,400. TOT from RV parks (also 10% per night) totaled $200,500 in 2014-15 and $222,023 in 2015-16.

Vacation rentals, at least those that are registered with the City, show total receipts in 2014-15 of $2.67M and $3.24M in 2015-16, perhaps showing a growing trend in choice for vacationers.

In July, Community Development Director, Scot Graham said the City’s best estimate is that there were 180 legal, registered vacation rentals in town, with another 50-60 suspected of being vacation rentals but not registered with the City and thus not collecting the TOT.

The City Council has approved a limit of 250 vacation rentals that would be allowed, a number that could change when the council eventually passes a more comprehensive vacation rental ordinance. It also prohibited so-called secondary or granny units from being rented out in this fashion.

TOT taxes collected from vacation rentals totaled $281,000 in 2014-15 and $324,300 in 2015-16. These numbers should be expected to increase as the unregistered rentals are signed up with the City. Such rentals are also required to get business licenses.

As for the total TOT collected from all the sources, in 2014-15 it was $2.91M and $3.13M in 2015-16. But while the taxes are going up, the occupancy rates are flat, which is seen as a disappointment.

“It’s VERY disappointing that occupancy continues to be flat or decline,” said Michele Aanerud, a regional manager for the Bartfield Hotel Group, which has the Masterpiece, San Marcos and La Serena Inn, and was a TBID board member until recently. “The reason for the increase in TOT is due to the ADR [average daily rate] increase, guests paying more for their rooms. Many hoteliers have remodeled their facilities so they can charge more.”

There are also other charges that get tacked on to a night’s accommodations — a 1-percent charge that goes to the SLO County Tourism Marketing District (CTMD) and 3% that goes to the Morro Bay TBID. Motel owners are the only ones who collect or pay these fees. Aanerud, who was one of the people who worked on the formation of the TBID from the beginning, feels the motel owners are carrying the load.

“The vacation rentals and RV parks are reaping huge benefits at the hoteliers expense,” she said. “They should be paying into this assessment.”

The City is also considering what to do with so-called home sharing programs, like Airbnb, an online service, gaining in popularity for booking places to stay inside someone’s private residence.

The County tourism district receipts for 2015-16 — the first year the tax was collected — was $303,600, just from Morro Bay alone. Motel owners countywide contribute to this program, which was approved for a 5-year term and is used to market SLO County as a whole.

The TBID total budgets in 2014-15 was $729,600 and in 2015-16 it was $778,000. To see the TOT chart, go to: www.morro-bay.ca.us/ArchiveCenter/ViewFile/Item/2897. It is embedded inside the TBID Board’s Aug. 11 agenda.

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