HomeMy WebLinkAbout07/06/1999, 3 - 1999-01 TOURISM PROMOTIONAL PROGRAM council M"N" �
j agenda .Repout 3
C I T Y OF SAN LUIS 0 B I S P O
FROM: Ken Hampian,Assistant City Administrative Ofcer �
Prepared By: - Wendy George,Assistant to the City Administrative Officer W
SUBJECT: 1999-01 TOURISM PROMOTIONAL PROGRAM
PROMOTIONAL COORDINATING COMMITTEE(PCC)RECOMMENDATION
(1) Approve funding for a two-year contract with the Visitors and Conference Bureau for
promotional services in the amount of$85,000 for 1999-00 and$97,500 for 2000-01 (increases
over the approved 1999-01 Financial Plan of$22,800 for 1999-00 and $33,400 for 2000-01),
with reconsideration for additional fimdmg for the second year upon the completion of the first
year; and direct staff to develop a contract for Council approval at a later date.
(2) Approve funding for a two-year contract with the Chamber of Commerce for (a) visitor
services in the amount of$74,436 for 1999-2000 and$76,669 for 2000-01 (increases over the
approved 1999-01 Financial Plan of $5,436 for 1999-01 and $5,569 for 2000-01) and (b)
promotional services in the amount of $40,200 in 1999-00 and $37,500 for 2000-01 (an
increase of$3,800 over the approved 1999-01 Financial Plan for 1999-00); and direct staff to
develop a contract for Council approval at a later date.
(3) Approve finding for a two-year contract with the firm of Barnett, Cox & Associates for
advertising services in the amount of$151,100 for 1999-00 and $154,600 for 2000-01 (which
are the amounts approved in the 1999-01 Financial Plan); and direct staff to develop a contract
for Council approval at a later date.
CAO RECOMMENDATION
Staff agrees with the PCC recommendations,with the following exceptions:
(1) Approved compensation for the Visitors and Conference Bureau should be reduced to $62,200
for 1999-00 and $64,100 for 2000-01, which are the amounts approved in the 1999-01
Financial Plan.
(2) Approved compensation for the Chamber of Commerce should be reduced to (a) $69,000 in
1999-00 and $71,100 in 2000-01 for visitors services and (b) $36,400 in 1999-00 for
promotional services,which are the amounts approved in the 1999-01 Financial Plan.
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Council Agenda Report-1999-01 Promotional Program
Page 2
REPORT-IN-BRIEF
The Promotional Coordinating Committee (PCC)has completed its review_of each component of the
1999-01 Promotional Program and has developed recommendations for the City Council's
consideration. -The PCC recommends that the City:
• Continue to contract with the Chamber of Commerce for visitor services and promotional services,
with additional finding above the currently budgeted amounts for website response, a photo CD
and virtual reality on the website.
• Continue to contract with the Visitors and Conference Bureau for promotional services, but at a
level which reflects a significant increase over the currently budgeted amounts.
• Continue to contract with Barnett, Cox & Associates for traditional advertising services at the
currently budgeted amounts.
Staff agrees with the PCC's recommendations to support the various programs and contractors.
However, the staff recommendation recommends funding in a manner consistent with the 1999-01
Financial Plan,which includes cost-of-living adjustments only until an advertising effectiveness study
is completed that will guide the use of an added$15,000 in 2000-01 .
DISCUSSION
Background
Each year the City spends more than $350,000 on a variety of services to promote the City as an
overnight tourist destination. The City's promotional program is overseen by the PCC and
traditionally carried out through four advertising and promotional services contracts.
One contract is with the VCB and represents the City's contribution toward the marketing of the entire
central coast as a tourist destination. Two of these contracts are held by the Chamber of Commerce,
one for visitor center services and one for promotional services. The final contract is for advertising
services. This contract is awarded as the result of a formal selection process performed every two
years. The recommended contractor is Barnett,Cox&Associates,Inc.
Consistent with Council direction,the PCC has used the last several months to review each component
of the promotional program and develop recommendations for new contract funding levels for 1999-
01. This report will provide the City Council with an overview of the PCC's recommendations for the
1999-01 promotional program. In the cases where the CAO's recommendations differ, an explanation
of those differences is also provided. The proposals presented by each contractor are available in the
Council reading file.
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Council Agenda Report-1999-01 Promotional Program
Page 3
Review Process and Recommendations
L Visitors and Conference Bureau(VCB)
Consistent with past practices,the VCB was requested to submit a two-year proposal to the PCC. The
PCC has determined that the VCB proposal continues to offer valuable services to the City and
recommends that the City continue the contract
Summary of ScoQe of Services
The VCB's contract represents the City's annual contribution to the countywide governmental
agencies' effort to market the central coast as a tourist destination. The VCB plans and executes a
complete marketing plan that focuses on encouraging tourism during the off-season. The VCB
accomplishes this through a variety of activities including advertising and promotion, participation in
travel trade shows, brochure development and distribution, publicity, market research, group
conference planning services and film production attraction.
VCB Proposal -VCB Executive Director,Joni Biaggini,pointed out that the VCB performs services
for the City that are not handled by other members of the City's promotional team. These services
include group bookings of motel/hotel rooms, attending travel trade shows and supporting the
County's film commission. She also stated that the City of San Luis Obispo takes in 26% of all the
TOT received countywide. Based on this percentage, Ms. Biaggim believes that the City should pay
26%of the cost of the VCB's proposed marketing plan for the next two years. Using this assumption,
the VCB requested $105,102 for the 1999-00 renewal of its contract and $108,255 for 2000-01. Ms.
Biaggini indicated that this level of funding would allow the VCB to continue its existing level of City
promotion.
PCC 'Recommendation - The PCC considered the funding request from the VCB and initially
proposed funding it at the level requested Upon reconsideration of the request at a later meeting, the
PCC determined that the original fimding request was too high. Ms. Biaggini offered an alternative
proposal which was to return to the VCB's 1996-97 funding level and apply appropriate cost-0f--living
increases since that time. The 1996-91 level was the level which existing prior to a reduction made by
the Council in the 1997-99 Financial Plan. The amount proposed by Ms. Biaggini for 99-00 is
$85,000,based on this alternative proposal. After much discussion,the PCC recommended a funding
level of$85,000 in the first year of the new contract and $97,500 in the second. The PCC also
recommended that the VCB's contract be reconsidered at the end of the first year to see if more
funding could be allocated to the contract from other sources.
CAO Recommendation - Staffs believes that funding for these contracts should not be established
based on "formula" (e.g. % of population, or % of the TOT). Therefore, staff does not support the
VCB's proposed alternative, since it builds off of what was essentially a formula based fimding level
in 1996-97. At the time, the method of calculating the VCB allocation was based on a percentage of
the Citys TOT—a method used only for the VCB contract. Because this led to the cost of the VCB's
contract escalating at a much faster rate than the other promotional contracts,the Council discontinued
this practice in 1997-98,feeling that it was causing an inequity.
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Conncil Agenda Report-1999-01 Promotional Program
Page 4
Experience has shown that a funding strategy based on cost-of-services, plus any new services to be
provided,is inherently more thoughtful and flexible than one based on formula The funding proposed
by staff for the VCB's is derived from the cost of last year's contract,plus a cost-of-living increase, and
is consistent with the 1999-01 Financial Plan. If the Council were to approve the PCC's
recommendation, additional finding would be needed from the General Fund reserve at this time.
— _ 12000-01 Total
PCC Recommendation $85,000 $97,500 $182 500
Staff Recommendation $62,200 $64,100 $126,300
H. Chamber of Commerce Contrails
The Chamber of Commerce was asked to submit two-year proposals to the PCC for the provision of
visitor center and promotional services, and the PCC unanimously recommended that the Council
continue to contract with the Chamber for these cost-effective and beneficial services.
Summary of Scope of Services
Under the proposed contracts, the Chamber of Commerce provides two type of services: (1) a fiill-
service visitors center, open to the public seven days per week, including several evenings; and (2)
promotional services.
• The Visitors Center responds to visitor inquiries, dispenses information about San Luis Obispo,
handles telephone calls from the public,responds to written requests for information about the City
and, in the past, has fulfilled responses to requests for visitor information generated through the
City's advertising contract.
• The Chamber's promotional services include working to obtain free coverage of San Luis Obispo
in newspapers, magazines, radio, television and books. This free coverage helps to promote
overnight tourism to the City and is obtained through a carefully orchestrated program of news
releases,letters and personal contacts with travel writers and editors throughout the state.
Chamber of Commerce Proposals - The Visitor Center contract proposal continues almost the same
services as in the past. However, at the request of the Chamber, during the recent budget process the
funding allowance for fiilfillment of advertising requests was removed from the contract and placed in
the advertising contract instead The advertising contractor will now be free to subcontract advertising
fiilfillment either back to the Chamber, or to another "fulfillment house", depending on price and
efficiency. Advertising fulfillment involves putting together a package of materials, including the
Chamber's Visitors Guide, to send to potential visitors in response to phone calls generated by our
advertising program. This change reduced the budgeted finding for the Chamber's Visitor Center
contract by about$5,500.
However,the Chamber has proposed retaining this funding for its contract,justifying it by the increase
in responses to the public required by the growing use of the Chamber's website, rather than by
advertising firlfillment. Any subcontract for advertising fidfilhnent would be paid on top of the extra
$5,500. Under the Chamber's proposal, the cost of the visitors service contract would be $74,436 f r
1999-00 and$76,669 for 2000-01. 3—T
Council Agenda Report-1999-01 Promotional Program
Page 5
The Chamber's proposes continuing its existing promotional services and also offers two
enhancements to the program at an additional cost. The first enhancement is to produce a photo CD to
replace the sets of slides currently provided to the media. As technology changes, more and more
publications prefer to receive pictures this way. One CD can hold up to 100 images, giving photo
editors more pictures from which to choose. The second enhancement-is to upgrade the Chamber's
website to include virtual reality. Visuals are important for potential visitors "scouting" the area, and
with virtual reality they can receive a more tangible sense of our community.
PCC Recommendation - The PCC is recommending that the Chamber of Commerce contract for
visitors services be funded at the requested level of$74,436 for 1999-00 and$76,669 for$2000-01 per
year. The PCC also recommends funding the promotional services contract at the requested levels of
$36,400 for 1999-01 and$37,500 for 2000-01. In addition,it recommends adding one-time payments
to the first year's contract of$2,000 for the photo CD and $1,800 for virtual reality on the website.
The PCC believes that the activities performed by the Chamber are an integral and valuable part of the
City's promotional program and that the Chamber is the most qualified to provide them. In particular,
the PCC feels that the request to retain in the contract the approximately $5,500 formerly used for
advertising fulfillment is very justified due to increased workload generated by the website. The
Chamber estimates it takes about 600 hours annually to respond to web site requests; 461 hours to
enter events into the community calendar and additional funding for web software and network
maintenance.
CAO Recommendation - The CAO recommendation differs the PCC's in that staff does not see the
need to retain the approximately $5,500 of former "fulfillment" funds in the contract Staff feels that
as website use increases, other forms of contact, such as the telephone, are likely to decrease
eventually, balancing the workload. In addition, while staff concurs that the photo CD and website
virtual reality are excellent promotional tools, we feel that they should be funded through the
Enhanced Promotional Fund, which was established to allow for enhancements to the promotional
program.
1 2000-01
Vwtors Center Contract
• PCC Recommendation $74436 $76,669 $151,105
• CAO Recommendation $6%000 $71J00 $140,100
Chamber Promotional Contract
• PCC Recommendation $40,200 $37,500 $77,700
• CAO Recommendation $36,400 $37,500 $73,900
Ill. Advertising Contras
.The purpose of our advertising contract is to develop an advertising campaign which encourages
overnight travel to the City. Overnight travel has traditionally been the focal point of the campaign
because of its relationship to the local tax base. It helps to generate revenues through increases in TOT
and sales tax receipts. The City's program has typically relied on a combination of cable and print
media,and has been geared to the southern California travel market,with additional advertising talo=
place in the Bay Area and Central Valley through cooperative arrangements with the VCB. 3
Council Agenda Report-1999-01 Promotional Program
Page 6
PCC Review Process
In April of tlii&year the City Council approved the Advertising Services Request for Proposals (RFP).
As explained in the RFP, suggested allocations of$151,100 and $169,600 were made for advertising
services for 1999-00 and 2000-01 respectively. These amounts were based on the current contract plus
annual 3% C6LA`s, with an additional approximately $5,500 added Each year to allow for the
subcontracting out of advertising fulfillment response. As noted earlier, the advertising fulfillment
fimdmg was transferred out of the Chamber's visitors services contract The RFP was subsequently
distributed to numerous local advertising, marketing and public relations firms. Two proposals were
received in response to the City's RFP. They were from Precision Communications and Barnett Cox
&Associates,Inc.
The PCC requested that both firms be invited to give oral presentations at its June 9, 1999, meeting.
Following the oral presentations, the PCC discussed the perceived strengths of the written proposals
and oral presentations. Key issues in the discussion included depth of experience in marketing
services, especially to public agencies; consistency and professionalism of representation; the type of
organizations (a consortium vs. a single company) and creativity and positiveness in approach. In
conclusion, the PCC felt that the firm of Barnett, Cox &Associates had provided excellent service to
the City under the prior contract and that the firm's proposal, consistent with past service, was
responsive and creative.
Barnett Cox&Associates Proposal
As requested,the proposal is for two years, funded at$150,100 for 1999-00 and 154,600 for 2000-01.
As in the past,the contract is general in nature so that the advertising contractor and the PCC have the
flexibility to modify the campaign throughout the term,as needed The focus and objectives are based
on a combination of historically successful advertising approaches.
In its proposal, Barnett, Cox & Associates stated its objective was to foster overnight and extended
visits by tourists to San Luis Obispo, especially in the traditionally"soft"months. This objective is to
be achieved through a combination of paid advertising, coordination with public relations and
marketing efforts underway with the Chamber of Commerce and VCB and special promotional
programs with area attractions such as Hearst Castle, the Edna Valley/Arroyo Grande Vinters
Association and the Hearst Theater.
The proposed advertising services will be guided by key principles:
• Use of research to determine target markets
• Understanding of product assets
• Development of enticing promotional messages for attracting visitors
• Coordination with the VCB,Chamber of Commerce,hotels and motels
• Reliance on high quality fulfillment materials and ad response mechanisms
• Development of new materials
• Development of new cross promotional programs
• Other new ideas that may be developed
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Council Agenda Report-1999-01 Promotional Program
Page 7
PCC's Recommendation
The PCC recommended that the advertising contract be awarded to Barnett Cox&Associates,Inc. and
that it include_f rading for the subcontracting of advertising fulfillment. Consistent with the adopted
Financial Plan,total funding recommended is$151,100 for 1999-00 and$154,600 for 2000-01.
CAO's Recommendation
The CAO concurs with the PCC's recommendation to award the advertising contract to Barnett, Cox
&Associates at the recommended levels of funding.
1999-00 2000-01 Total
PCC Recommendation $151,100 $154,600 $305,700
CAO Recommendation $151 100 $154,600 $305,700
FISCAL DIPACT
The amount currently budgeted in the 1999-00 Financial Plan for promotional contracts comes to a
two year total of $661,000, based on the 1998-99 funding level + 3% annual COLA + an added
$15,000 in 2000-01 for enhanced advertising purposes. The staff proposed allocation is equal to this
two year total, less the added$15,000 in the second year($646,000). This is because the use of these
added fiords is to be determined after the completion of the advertising effectiveness study in 1999-00.
The PCC recommendation totals$717,005. If the Council were to approve the PCC recommendation,
and still hold the added$15,000 aside until the study is completed, an additional $71,005 will need to
be appropriated from the General Fund balance.
ALTERNATIVES
1. The Council could choose to fund the full amount requested by the VCB. To do so would
require a total of$101,862 of additional appropriation from fiord balance.
2. The Council could choose to fiord anly the photo CD or anly virtual reality on the Chamber's
website,in addition to the regular Chamber promotional contract.
Available in the Council Reading File:
Proposals from the VCB,Chamber of Commerce and Barnett,Cox&Associates,Inc.
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Dear San Luis Obispo City Council Members:
On Tuesday,July 6 you will be considering the two recommendations for funding the city's
tourism promotion program which directly affects the funding level of the VCB. After reading
the staff report, I would like to offer the following justifications for the PCC's recommendation:
► Tourism in San Luis Obispo has increased by 9% this fiscal year adding over$270,200
more to the general fund than last year. With staff's recommended funding levels for all
tourism promotion at an average of$330,000 per year($661,000 for two years), only
10% of the TOT is being reinvested into tourism promotion. This level continues to
decrease as the City's TOT increases. At the PCC recommended level, 11% of the TOT
would be reinvested. (TOT estimated at$3.27 million in FY98/99)
► A 3%cost-of-living increase to advertising and promotional costs does not even allow for
the same program from the previous year to be executed. Advertising costs alone climb
8-10%annually. City staff does believe a cost-of-services plus new services provided to
be a "thoughtful" strategy. This is exactly what the VCB is proposing as well.
► The VCB's funding levels must be considered on a fair-share basis between all the public
entities in the county if the concept of pooling resources is to survive. If the VCB based
it's funding levels on the amount of benefit of the programs to each city, San Luis
Obispo's portion would equal 46% of the VCB's budget.
► We need to increase advertising programs to attract more people to the City as well as
attract the preferred mix of people who will visit during the desired time of year and
generate the optimum level of expenditures.
During the next week, the VCB staff and I will be heavily immersed in the staging of the
WASBE Conference. I will be checking my phone messages if you have any questions by
calling 546-4139. I look forward to seeing you on Tuesday.
ERECEIVEDJonni Biaggini
Executive Director RK
RECEIVED
J U L 0 1 1999
SLO CITY COUNCIL
From: <jonriib@slonet.orp
To: CIT YSLO.SLO1PO(DROMERO;JEWAN,JMARX.kscfiwaiti),CITY.-:..
Date: 7/1/991-.1:37pm
Subject PCC:Rcommendatiom
Hello Councilmembers:.
I apologize for having.to use this form of communication instead of impbrsoh, but-hopefully'itwill answer some
questions in.a timely manner..
Jonni.Biaggini