DATE: November 8, 2016
SUBJECT:
Title
A) INFORMATIONAL PRESENTATION FROM THE SAN DIEGO TOURISM AUTHORITY ON TOURISM, HOTELS, AND ATTRACTIONS IN THE SAN DIEGO REGION
B) PRESENTATION ON THE BENEFITS OF ATTRACTIONS LOCATED ON TIDELANDS AND RELATED BOARD DISCUSSION
Body
EXECUTIVE SUMMARY:
The Attractions and Advertising Department was created with the goal of expanding the District’s existing attractions portfolio, improving the urban landscape on tidelands, and growing citizen engagement, while improving revenues to the District and the region, and providing increased economic sustainability for the “Greater Good.”
Staff has begun exploring opportunities for various attractions that would create new key destination points, or “Jewels on the Green Necklace”, to enhance the visitor experience and overall enjoyment and activation of the waterfront. During the presentation, staff will cover the following topics, which are also outlined in the Discussion section below:
• Definition of Attractions and Attractions Concepts
• Importance of Attractions to the District
• Key Trends for San Diego Tourism
• Benchmarks within the Attractions Industry
• Attractions Possibilities for the District
Tourism is the second largest traded economy in San Diego County with $16 billion in regional impact for the region, also supporting industry jobs in hotels, restaurants, arts and culture, professional services, and many retail businesses. In the City of San Diego, Transient Occupancy Tax (TOT) is the City’s third largest revenue source accounting for $203 million in fiscal year 2016. The San Diego Tourism Marketing District (SDTMD) was formed to fund tourism through a fee on hotel stays that is separate from TOT. The City now receives 100% of TOT and tourism promotion is funded by this TMD assessment.
Tourism is also the highest source of revenue to the District. In fiscal year 2015, revenue from the District’s hotel, retail and restaurant tenants totaled $47.7 million. Additional tourism revenue comes from other categories such as museums, sport fishing, marina slips, boat charters, bay cruises, and others.
Staff recommends that the Board hear two related presentations on tourism, hotels, and attractions. The first, given by the San Diego Tourism Authority (SDTA), is an informational presentation on general data and analysis regarding tourism, hotels, and attractions in the San Diego region. A copy of the presentation is attached (Attachment A).
The second presentation will be on the benefits of attractions located on tidelands and request for general feedback to staff. A copy of the presentation is attached (Attachment B).
RECOMMENDATION:
Recommendation
Receive presentation on the benefits of attractions located on tidelands and provide related board discussion.
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FISCAL IMPACT:
This presentation has no fiscal impact.
Compass Strategic Goals:
This agenda item supports the following Strategic Goals.
• A Port that the public understands and trusts.
• A thriving and modern maritime seaport.
• A vibrant waterfront destination where residents and visitors converge.
• A Port with a comprehensive vision for Port land and water uses integrated to regional plans.
• A financially sustainable Port that drives job creation and regional economic vitality.
DISCUSSION:
San Diego has long been known to be a premier tourist destination due to its natural beauty, exceptional climate, and character. However, San Diego’s tourism growth will depend on its ability to compete for travelers against destinations with growing inventories of tourist attractions, access, and marketing dollars. To address competitive challenges and realize economic opportunities, SDTMD commissioned the 20-Year Destination Master Plan Draft Report to provide San Diego with a transformative approach to tourism growth and innovation. District staff and the SDTA have begun discussing a more collaborative approach for the development of future attractions concepts that would draw higher numbers of visitors to the region and to tidelands.
The SDTMD is a city-wide Tourism Business Improvement District encompassing all areas within the city limits of the City of San Diego. The SDTMD provides lodging businesses within the City of San Diego with the necessary forum to organize their efforts to increase tourism, which in turn increases hotel room night stays. It also enables the businesses to work together to achieve results that would not be possible individually. The SDTA is funded in part by the San Diego Tourism Marketing District Corporation with City of San Diego Tourism Marketing District assessment funds. Tourism industry metrics will be further discussed in paragraph 3 below.
1. Definition of Attractions and Attractions Concepts
Attractions are venues that draw visitors to a region or area, typically of natural scenic beauty, cultural value, or with leisure and entertainment benefits. Attractions on District tidelands can generate revenues to achieve the District’s overall purpose. Significant opportunities exist to integrate and leverage existing assets with compatible attractions that could create value for the District, for District tenants, and for the region. Examples of attractions include:
• Museums
• Aquariums
• Theme parks
• Wildlife or nature centers
• Themed dining and entertainment
• Symphonies and concert venues
• Sites of historic significance and heritage tourism
• Parks
It’s important to note that given that we are in a digital age in society, to be successful and endure, it is becoming critical that attractions have a digital interactive element to them.
Attractions range in size from smaller venues that may generate under one million annual visitors, up to larger venues attracting more than three million annual visitors, with medium attractions falling somewhere in between. The two museum attractions on tidelands are the Maritime Museum of San Diego with 150,000 annual visitors, and the USS Midway Museum with 1.3 million annual visitors, falling into the smaller and medium sized attractions venues, respectively.
2. Importance of Attractions to the District
Attractions are important to the District because they help achieve the overall goals of improving the urban landscape, growing citizen engagement, and improving revenues to the District and the region, which together provide increased economic sustainability. Additionally, attractions are important for the following reasons:
• Attractions are key elements in the Integrated Planning Framework Report: Attractions are important for the District, and are considered as key elements in the Integrated Planning Framework Report, which centers on the idea of a “Green Necklace” providing a connected, continuous public greenway surrounding the bay.
The Framework Report, which represents the culmination of the Integrated Planning Vision, establishes the North Bay as the urbanized portion of the bay that should accommodate greater intensification of uses. One of the Comprehensive Ideas contained in the report puts an emphasis on public access and recreation through the creation of an accessible Bayfront that enhances the experience and facilitates the enjoyment of the water with a variety of activities on the waterfront.
The Embarcadero area has been identified as a potential entertainment district well suited for “downtown attractions” and redevelopment opportunities that could include “waterfront arts and entertainment district, regional attractions, significant architectural elements or features.”
• Attractions Extend Traveler Stays in San Diego: Attractions and theme parks are the number one driver for extended stays in San Diego according to a 2014 study by CIC Research. According to the study, 33% of people travelling to San Diego for business or other purposes decided to extend their stay to visit one of the region’s major attractions such as the Zoo, Sea World, or Legoland. Whereas only nineteen percent of travelers indicated that the beaches or bays were the reason for an extended stay.
• Attractions Drive Hotel Revenue: As an example, the addition of the Legoland theme park in Carlsbad resulted in a 19% increase in the transient occupancy tax for the City of Carlsbad in the first year of operations, indicating an increase in hotel revenue. As the District continues to develop the tidelands around the bay with new hotel projects along the Chula Vista Bayfront, Central Embarcadero, North Embarcadero, and Harbor Island areas, attractions will be an important driver to the success of both new and existing hotel businesses, as well as restaurants and retail. Staff is continuing to research causation and correlation between attractions and hotel revenue.
3. Key Trends for San Diego Tourism
Tourism Industry Benchmarks
While San Diego is ranked fifth in the nation as a tourism destination according to the San Diego Tourism Marketing District’s 20-Year Destination Master Plan draft report dated December 2015, the San Diego area was lagging in key tourism metrics when compared to other California cities. Key metrics defined in that process for the tourism industry include visitor spending, revenue per available room (RevPAR), length of stay, nights in hotels, and average spend per trip. Visitor market demographics, geographic location, market constraints, and economic cycles influence these indicators differently in each market. The following San Diego region metrics are from the San Diego Tourism Marketing District’s 20-Year Destination Master Plan December 2015 draft report:
• Visitor spending - Average annual visitor spending in the San Diego region grew approximately 4.7% between 2009 and 2012, which lagged behind other major tourist destinations which averaged 7.8% growth.
• RevPAR - RevPAR for San Diego hotels grew 6.2% for the five-year period of 2009 to 2014, which was the lowest of 4 California tourist destinations cities including Anaheim at 8.4%, Los Angeles at 9.6%, and San Francisco at 13%.
• Length of stay - San Diego visitors averaged 3 nights per trip, lower than the 3.6 night average for other major tourist destinations in California and other competitive destinations.
• Night in Hotels - San Diego visitors averaged 1.1 nights in hotels per trip, lower than the 1.8 nights per trip average for other major tourist destinations in California and other competitive destinations.
• Average Spend per Trip - San Diego visitors spent an average of $917 per trip, lower than the $1,213 average per trip for other major tourist destinations in California and other competitive destinations.
District Opportunity
The District has an opportunity to increase public access and enhance enjoyment of the Bayfront through the creation of a variety of attractions on the waterfront, while also playing a role in economic sustainability. The development of attractions will assist in closing the gap in the above metrics through the growth of tourism. The 34 million visitors who pass through the region annually spend approximately $9.9 billion per year, which translates to a $16.4 billion regional impact, and the potential for growth. Of the 34 million visitors, 88% come to San Diego for leisure purposes.
The San Diego Tourism Marketing District has identified four key areas that can help improve tourism in San Diego and drive incremental economic benefit to the region:
• Transportation - Encouraging travel to, from and within the San Diego area, leveraging all transportation options such as air, water, rail, public transportation, and highway.
• Meetings, Incentives, Exhibitions, Conventions (MICE) - Expanding the appeal for businesses, meetings, and conferences in San Diego.
• Marketing - Increasing domestic and international awareness to reinforce San Diego’s position in the world tourism marketplace.
• Leisure Asset Development - Improved or new attractions for the area.
Many cities and public agencies have invested in product development and marketing within the attractions industry, resulting in the creation of increased competition as visitor destinations. Similar to those cities and public agencies, the District could seek to develop new attractions that would provide entertainment options to visitors to Southern California markets and capture a greater share of tourism spending.
4. Benchmarks within the Attractions Industry
As the District decides which attractions may be appropriate for the tidelands, it is important to consider industry data. From a national perspective, attractions are well attended. According to the research paper “Voice of The Visitor” authored by PGAV Destinations, 82% of American households visited at least one attraction in 2015. Additionally, nearly 6 in 10 visitors (59%) to those attractions were under the age of 51.
The “Voice of The Visitor” research efforts included tracking repeat visitor rates by attraction type. Below is the percentage of respondents who said their most recent attraction visit was not their first visit to that specific attraction:
• Theme Parks: 84%
• Zoos/Animal Attractions: 81%
• Large Format Theaters: 76%
• Family Entertainment Centers (i.e. Dave and Busters): 68%
• Water Parks: 67%
• Science Attractions: 67%
• Aquariums: 60%
• Theaters: 59%
• Art Galleries: 52%
• Botanical Gardens: 47%
• Museums: 43%
• Historical Landmarks: 41%
• Historic Homes & Mansions 36%
• Sightseeing Tours 34%
It’s also important to understand which attraction types are frequented by generational groups. The “Voice of The Visitor” research found that the three most recent attractions attended by the following generations were as follows.
• Millennials:
o Zoos/Animal Attractions
o Theme Parks
o Family Entertainment Centers
• Generation X:
o Theme Parks
o Zoos/Animal Attractions
o Museum & Historic Landmarks
• Baby Boomers:
o Historic Landmarks
o Museums
o Theme Parks
• Mature Generations:
o Theaters
o Zoos/Animal Attractions
o Theme Park & Museums
While zoos and live animal attractions are in the top 3 preferences, there is qualitative feedback from this research indicating that younger generations are looking for zoos and aquariums that replicate natural habitats.
Staff also researched five specific categories of attractions in terms of visitor attendance and how those specific categories grew in attendance in 2015 compared to 2014. Below are the five categories of attractions, the average attendance, growth rate between 2014 and 2015, and the status of the attraction in San Diego:
• Water Parks
o Top 20 Average Visitor Attendance: 796,000
o 2015 Growth Rates: 4.3%
o San Diego has no water parks that are in the top 20 nationally.
• Aquariums
o Top 14 Average Visitor Attendance: 1,503,645
o 2015 Growth Rate: 1.9%
o San Diego does not have an aquarium in the top 20 nationally.
• Zoos
o Top 20 Average Visitor Attendance: 1,954,907
o 2015 Growth Rate: 1.7%
o San Diego has the No.1 attended zoo in the U.S. with 3.2 million annual visitors. The Safari Park also made the top 20 list with 1.2 million annual visitors.
• Museums
o Top 20 Average Visitor Attendance: 2,877,050
o 2015 Growth Rate: 2.7%
o The District’s own USS Midway is included in the top 20 with 1.4 million annual visitors.
• Theme Parks
o Top 20 Average Attendance: 7,313,500.
o 2015 Growth Rate:5.9%
o San Diego’s Sea World is in the top 20 US attractions with 3.5 million annual visitors in 2015, but suffered a 19% decline since the “Blackfish” documentary.
Based on these findings, staff recommends that the District evaluate product and programming opportunities that would expand the appeal of San Diego to new visitors. The categories with the healthiest growth rates (Water Parks & Theme Parks) are potential attractions categories to consider within the context of Integrated Planning, provided there is demand for these attractions.
5. Attractions Possibilities for the District
Staff has been analyzing the potential share of current attractions attendance within San Diego. The San Diego Tourism Authority tracks attendance at 14 attractions and museums in the San Diego market, two of which are on District tidelands: the USS Midway and the Maritime Museum of San Diego. These two District attractions represent 14.3% of the total attractions measured in the San Diego market, but only 8.7% of the total visitors as outlined in the chart below. When the percentage of these two District attractions is applied to the total attendance of 16.7 million, the data suggests that the District should be getting 2.4 million visitors - roughly 930,000 more than current total visitor attendance for these two attractions. In addition to the two attractions on tidelands which are measured by the SDTA, there are various other existing attractions on District tidelands, such as the sport fishing landings, bay cruises, and others.
One path for the District to achieve increased visitor attendance and spending is the addition of new attractions that would compel visitors to choose San Diego and in turn boost spending at tidelands businesses. Alignment of the District’s efforts with other local tourism planning efforts would drive the most economic benefit for the region.
New Attractions
The Framework Report, which represents the culmination of the Integrated Planning Vision, establishes the North Bay as the urbanized portion of the bay that should accommodate greater intensification of uses. One of the Comprehensive Ideas contained in the report puts an emphasis on public access and recreation through the creation of an accessible Bayfront that enhances the experience and facilitates the enjoyment of the water through a variety of activities on the waterfront.
Specifically, the Framework Report identifies the embarcadero area between G Street and Ash Street as a potential entertainment district well suited for “downtown attractions” and buildings of different heights to form a new iconic skyline for Downtown San Diego, as well as opportunities for regional attractions with significant architectural elements or features, that could make it “a magnificent place along the Green Necklace” and “a strong regional attraction.” Staff is also researching other areas on tidelands that may be suited for various attractions.
Revitalizing Existing Attractions
While the biggest attractions in terms of visitor attendance consist of permanent structures (also known as “bricks and mortar”), staff is also investigating how additional engagement and revenue can be driven through the improved activation of our parks and piers. Two examples of how existing attractions can be revitalized are Pier 25 at Hudson River Park in New York City and Lawn on D in Boston.
• Pier 25 at Hudson River Park
An old pier in New York City was converted to a creative mixed-use destination which includes a combination of areas that are free and open to the public with some areas requiring paid admission. Pier 25 amenities include a children’s playground, and an 18-hole miniature golf course rated as the #1 miniature golf course in New York City, and an area for beach volleyball. Pier 25 is a great example of converting an old blighted area into a new fresh and engaging environment the public can enjoy.
• Lawn on D in Boston
Lawn on D is an innovative and dynamic outdoor event space on D Street in Boston’s waterfront district, providing multiple event venues, free activities such as bocce ball courts and ping pong tables, free Wi-Fi, food service venues, and abundant public space. A number of public, private, and community events are held at the Lawn on D. To achieve this change, Lawn on D partnered with HR&A, a company that specializes in programming open spaces. Staff will be working with HR&A to gain insight from their efforts at Lawn on D to see how the District might be able to increase engagement at our parks and open spaces.
Technology in Attractions
In addition to physical attractions and activation of our parks and piers, it is also important to understand how the use of technology will be critical at all attractions to enhance the visitor experience. Staff will be researching technologies such as virtual reality and augmented reality to ensure that future attractions consider these elements. During the presentation, staff will present an example of an augmented reality attraction from the Western Australian Museum.
Next Steps
Staff recommends that the District explore a variety of attractions concepts that would complement existing and future development on tidelands, with the potential to develop small, medium, and large attractions that would drive incremental visitor demand. Staff recommends an aspirational goal of reaching ten million annual attractions visitors within the next 10 years. The District currently has 1.5 million attractions visitors that come to the USS Midway and the Maritime Museum of San Diego each year. One path to growing that attendance to 10 million annual visitors could include:
• 1 New Large Attraction drawing 3 million visitors
• 2 New Medium Attractions at 1.5 million each for a total of 3 million visitors
• 5 New Small Attractions at .5 million each for a total of 2.5 million visitors
This growth in attractions’ visitors could bring the District’s total attractions attendance to approximately 10 million annual visitors, which would help ensure success for any new hotel projects proposed to be built around the tidelands in the next five to ten years, as well as the continued success of existing hotels and restaurants.
In summary:
1) Attractions are important elements on the Green Necklace within the Integrated Planning Framework Report.
2) Attractions are the number one reason people visit and extend their stay in San Diego.
3) Attractions drive hotel occupancy and revenue.
In order to further develop a future plan for an Attractions portfolio on tidelands, staff requests that the Board receive both presentations from the SDTA and from staff, and provide general feedback to staff.
General Counsel’s Comments:
The General Counsel’s Office has reviewed this agenda sheet as presented to it and approves it as to form and legality.
Environmental Review:
This item would receive presentations of the benefits of tourism, hotels, and attractions on tidelands and in the San Diego region, and provide direction to staff. These presentations to the Board do not constitute an “approval” or a “project” under the definitions set forth in California Environmental Quality Act (CEQA) Guidelines Sections 15352 and 15378 because no direct or indirect changes to the physical environment would occur. CEQA requires that the District adequately assess the environmental impacts of its projects. Further, while the Board may request certain project components be included, alternatives studied or other direction, such direction to staff will not bind the District to a definite course of action prior to CEQA review. Full CEQA analysis will be completed prior to the approval of any entitlements, concept approval, or agreements necessary for the projects. Moreover, the Board reserves its discretion to adopt any and all feasible mitigation measures, alternatives to the projects, including a no project alternative, a statement of overriding consideration, if applicable, and approve or disapprove the projects and any permits or entitlements necessary for the same. Those decisions may be exercised in the sole and absolute discretion of the Board. Based on the totality of the circumstances and the entire record, the Board’s direction does not commit the District to a definite course of action prior to CEQA review being conducted. Therefore, no further CEQA review is required.
In addition, these presentations allow for the District to implement its obligations under the Port Act and/or other laws. The Port Act was enacted by the California Legislature and is consistent with the Public Trust Doctrine. Consequently, these presentations are consistent with the Public Trust Doctrine.
These presentations to the Board do not allow for “development,” as defined in Section 30106 of the California Coastal Act, or “new development,” pursuant to Section 1.a. of the District’s Coastal Development Permit (CDP) Regulations because they will not result in, without limitation, a physical change, change in use or increase the intensity of uses. Therefore, issuance of a CDP or exclusion is not required. However, the District’s projects require processing under the District’s CDP Regulations. If a project is formulated as a result of these presentations of the benefits of tourism, hotels, and attractions on tidelands and in the San Diego region , the Board will consider approval of the project after the appropriate documentation under District’s CDP Regulations has been completed and authorized by the Board, if necessary. The Board’s direction in no way limits the exercise of the District’s discretion under the District’s CDP Regulations.
Equal Opportunity Program:
Not applicable.
PREPARED BY:
Ken Wallis
Director, Port as a Service
Annette Dahl
Department Manager, Attractions and Advertising
Attachments:
Attachment A: Presentation from the San Diego Tourism Authority on tourism, hotels, and attractions in the San Diego region.
Attachment B Presentation on the Benefits of Attractions Located on Tidelands