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HomeMy WebLinkAbout01/08/2002, B2 - USE OF PROMOTIONAL COORDINATING COMMITTEE (PCC) ENHANCED PROMOTIONAL FUNDS council j acEnaa Report CITY OF SAN LUI S O B I S P O FROM: Wendy George, Assistant City Administrative Officer Prepared By: Shelly Stanwyck,.Economic Development Manager �- SUBJECT: USE OF PROMOTIONAL COORDINATING COMMITTEE (PCC) ENHANCED PROMOTIONAL FUNDS CAO RECOMMENDATION (1) Approve the PCC's recommendations as follows: (a) Allocate $2,500 of Enhanced Promotional Funds to the San Luis Obispo Chamber of Commerce for the production of 2,500 customized press kits. (b) Allocate $2,500 of Enhanced Promotional Funds to the San Luis Obispo Chamber of Commerce for the creation of an email visitor database using the visitslo,com visitor site. (2) Authorize the Mayor to execute Amendment No. 1 to the Agreement with the San Luis Obispo Chamber of Commerce. (3) Approve the PCC's recommendation to allocate up to $45,000 of Enhanced Promotional Funds to purchase new advertising in light of recent declines in our tourism industry. (4) Authorize the CAO to execute an Amendment to the Agreement with Barnett, Cox and Associates (BCA) reflecting the actual amount of new advertising purchased, subject to the $45,000 limit. DISCUSSION Background Several years ago, in conjunction with an increase in the Transient Occupancy Tax (TOT) from nine percent to 10%, the City created an Enhanced Promotional Fund to be used to finance innovative promotional ideas and provide seed money for new special events. Annually, the PCC makes recommendations to the City Council on how this fund should be spent. The Enhanced Promotional Fund budget for 2001-2003 is $50,000. San Luis Obispo Chamber of Commerce New Public Relations Opportunities 1. Customized Press Kits At its September 13, 2001 meeting, the PCC heard a request for Enhanced Promotional Funds from the San Luis Obispo Chamber of Commerce to supplement its current tourism promotion Council Agenda Report—PCC Enhancement Promotional Fund Request Page 2 efforts. The Chamber requested $2,500 in funds to assist with the printing of 2,500 customized press kits. The PCC Marketing Sub-committee discussed and recommended this funding request to the PCC. The PCC recommended supporting this promotional tool by the Chamber's Public Relations Department as a method of increasing editorial coverage on San Luis Obispo. 2. Email Visitor Database For several months before the December 13, 2001 PCC Meeting, the PCC Marketing Sub- committee explored different methods through which the Chamber could develop an email database. The Chamber and Barnett, Cox.and Associates (BCA) researched the technology necessary to create this type of database and found that it would cost $2,500 for computer programming and database entry. The database would be comprised of potential visitors' email addresses. The potential visitors would_be individuals who requested information about the City from the visitslo.com website or those who completed a form online indicating they would like to receive promotional information about the City through email. The Chamber would maintain the database but would work closely with BCA on promotional opportunities. Members of the PCC discussed the role the Internet plays in travel decisions and felt this type of database would be integral to the continued development of the City's promotional program. Additionally, those potential visitors who have requested information are likely to visit soon after their request. Email promotions would target repeat visitors and those who just requested. information—the two segments most likely to "convert" into an overnight stay. Members of the PCC intend to focus the use of the database for coordinated promotional efforts and recommend supporting this request. New Advertising Campaign 1. Status of TOT Transient Occupancy Tax (TOT) is the City's third largest revenue source. The City's Financial Plan for 2001-2003 predicted TOT to increase by 8% in 2001-2002 and by 7% in 2002-2003. These predictions were based on consistent gains by the industry, in good times and bad, and were adjusted to reflect the slowing of the economy. Year-to-date (October 2001) TOT is down by 4.3%. That translates to a baseline decline of about 12%. Because TOT has declined dramatically, and because of the impacts of compounding, the City could see a shortfall .in predicted revenues of$500,000 in 2001-2002 and $1,000,000 in 2002-2003. TOT began declining over the summer (our strongest season). As usual,. the City was then competing with other small communities who try to define themselves as tourist destinations. Additionally, because of the slowing economy, business travel was off. Then, the tragic events of September 11 occurred. Today, the City is competing against major venues for in-state (driving) visitors. Our modest advertising budget is competing against well-known attractions that were previously predominately visited by out-of state tourists including: Disneyland, San Francisco and others. The PCC is recommending that the City allocate additional funds (up to $45,000) to the City's advertising contractor, BCA, to enhance our current marketing program. �a-z I 1 Council Agenda Report—PCC Enhancement Promotional Fund Request Page 3 2. Background on the City's Tourism Marketing Program The City's current tourism marketing program is directed at generating overnight visits to San Luis Obispo (TOT). The effort is overseen by the PCC and is accomplished through contracts with the San Luis Obispo Chamber of Commerce, the SLO County Visitors and Conference Bureau and local advertising agency, Barnett, Cox and Associates (BCA). The Chamber provides public relations outreach and visitor information services, the VCB conducts a countywide marketing program and BCA designs and implements a paid advertising campaign to attract overnight visitors. The contractors coordinate efforts in order to maximize funds spent. The VCB and BCA often work in tandem to develop ad placement schedules. The Chamber and BCA work in concert with paid advertising, since unpaid editorial coverage is often included . with advertising. Pursuant to the terms of its existing Agreement with the City, BCA charges a flat fee for administrative services. That fee is 18% of their contract amount and includes such services as account coordination, program design, meeting attendance and other administrative services. BCA does not receive commission on media placement for the City. Media and production costs are separate from the administrative fee and wherever possible these costs are passed on to other vendors. As contracted, BCA maximizes the City's funds for actual media placement through a combination of its flat fee arrangement and donation of services to further tourism promotion. The City has actively marketed to tourists for over twenty years; that history provides valuable information to us as to the.best methods and strategies. The PCC has recently had the additional benefit of an advertising effectiveness study conducted in the last budget cycle (and more recently revisited by the VCB) that has refined its marketing programs. Through the addition of tourism effectiveness research, the City has learned the best places to advertise to convert interested advertising respondents into actual visitors. The most recent conversion information supports findings made a year ago; the preponderance of San Luis Obispo visitors still come from Southern California. They are educated, affluent, and generally older couples traveling without children. They are familiar with San Luis Obispo and have usually visited here before. They value San Luis Obispo's downtown, access to arts, wineries, outdoor activities, Hearst Castle, and our scenic beauty. Currently, the LA Times far outperforms other media for visitor conversion. The challenge for the City advertising agency is not only to hone in on the best performing media, but to combine that information with sound creative content, strategic media buying (cost) and placement(timing& scheduling). 3. How the City's Advertising Contractor Makes Media Purchases Different media opportunities (newspaper, cable TV, radio, magazines, direct mail, etc.) are analyzed for response rate, cost per placement, reach and frequency. Determinations are made as to the most economical and effective placement. Advertising efforts for the City have focused on Southern California for several years, and recent conversion information points to the validity of further refining the "buy" to the LA Times as a sole placement for Southern California visitors. While media outlets less expensive than the LA Times are available to the City, a review of their performance supports using the LA Times as a 13a-3 Council Agenda Report—PCC Enhancement Promotional Fund Request Page 4 solid return on investment, and the most effective conversion media for generating San Luis Obispo visitors. There are a number of reasons for this: a. The LA Times has a Sunday (when we normally advertise) circulation of 1.6 million readers. b. The LA Times offers a Travel section for ad placement (versus simply being placed anywhere in the paper). This affords access to travel-interested readers and enables the City to compete with other destinations. C. The LA Times also offers specialized products: travel specials sections quarterly, magazine inserts twice a year, zoned editions for reaching particular areas of Southern California, and more. d. By concentrating the advertising "buy" in one publication, the City can enjoy the benefits of volume buying and reduced rates. Newspaper space is sold on a per column inch basis,with lower-rate contracts available for higher lineage contracts. With the LA Times proving to be a strong conversion tool, it benefits the City to generate as much lineage in the LA Times as possible to take advantage of lower rates. Contract rates, value-added benefits and other purchases are enhanced through the negotiation process. BCA's media department has an established relationship with the LA Times placing over $2 million in paid advertising annually. BCA's media buyer works with the LA Times account representative to maximize City benefit, placement, and frequency. Advertising placement however, is a process, and a larger budget would allow for greater maneuverability. Media placement typically carries a standard 15% commission for the purchasing agency (at no additional cost to the client). In the case of the City, BCA buys space at an agency rate,but does not receive commission for it. The City's goal is to maximize advertising placement over service and other fees. BCA is therefore on a flat fee with the City for advertising services that include activities beyond just placement: advertising response fulfillment, coordinated promotions with hotels and attractions, the recent trolley schedule information efforts, direct mail to former advertising respondents, and so forth. 4.Additional Allocation to Ad Contractor In response to the PCC's recommendation to allocate up to $45,000 of Enhanced Promotional Funds to the advertising contractor, BCA has offered to conduct all media buying, negotiation, coordination and outreach to hotel and motels on a pro bono basis as a donation to the City during difficult economic times. BCA will maintain its existing relationship with the City as a no-commission, flat fee schedule, with some consideration for the costs of graphic design, so that almost all of the additional funding would be used directly for the purchase of advertising. During their discussion of this issue, members of the PCC indicated that the allocation to BCA should be open-ended. This would allow BCA to develop a targeted campaign and negotiate for Y I Council Agenda Report—PCC Enhancement Promotional Fund Request Page 5 advertising placement. If the costs of the campaign were less, then the allocation would reflect the actual costs of the campaign. It was, therefore, the PCC's recommendation that up to $45,000 be allocated to BCA to attract additional visitors to the City, with.the final amount to be reflected in a BCA contract amendment approved by the CAO and subject to the $45,000 limit. FISCAL IMPACT A total of$50,000 of Enhanced Promotional funding was budgeted over the 2001-03 fiscal years. To date none has been spent. Upon approval of the PCC and the CAOs recommendations, all Enhanced Promotional Funds for FY 01-03 would be expended. ATTACHMENTS 1. Amendment No. 1, Agreement with the San Luis Obispo Chamber of Commerce 2. PCC minutes of September 13, 2001 3. Draft PCC minutes of December 13, 2001 ATTACHMENT 1 AMENDMENT NO. 1 AGREEMENT WITH SAN LUIS OBISPO CHAMBER OF COMMERCE, INC. The AGREEMENT dated July 19, 2001 between the CITY OF SAN LUIS OBISPO, a municipal corporation, hereinafter referred to as "City"and the SAN LUIS OBISPO CHAMBER OF COMMERCE, INC., a nonprofit corporation, hereinafter referred to as "Contractor," is hereby amended as follows: ATTACHMENT 1, "Promotional Program Contract Proposal", is modified by adding the new duties as follows: • Press Kit Production of a new press kit. The press kit will be used as a supplement to the tourism promotion efforts made by the Contractor and is intended to increase the amount of media coverage the City receives. • Email Database Creation of an email database. The email database is intended to supplement the tourism promotion efforts made by the Contractor. The Contractor will work with the City's ad contractor to direct market to potential visitors who have indicated an interest in receiving information and promotions about the City through email. SECTION 4, "City's Obligations", is modified as follows: 2001-02 • Production of Press Kit $2,500 • Email Database $2,500 All other terns and conditions of the AGREEMENT shall remain the same. Both City and Contactor covenant that each individual executing this Amendment No. 1 on behalf of each party is a person duly authorized and empowered to execute agreements for such party. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed on this day of 2002. ATTEST CITY OF SAN LUIS OBISPO A Municipal Corporation Lee Price, City Clerk By: Allen Settle,Mayor ATTACHMENT 1 APPROVED AS TO FORM CONTRACTOR orginsen, rty Oomey Dave Garth,President/CEO ATTACHMENT 2 PROMOTIONAL COORDINATING COMMITTEE REGULAR MEETING MINUTES September 13, 2001 Council Hearing Room, City Hall San Luis Obispo, CA 93401 1. CALL TO ORDER Chairperson\George Newland called the meeting to order at 5:30 p.m. with the following members present: Sandy Baer, Greg Dillman, and Wilda Rosene. Diane Hunt Roberts and Debby Nicklas arrived at 7:O4m. Bob Griffin was absent. Betsy DeJamette served as staff. Also present were Jonni Biaggini, Susan Carvalho, Maggie Cox, Alex LaChapelle, and Dave Garth. 2. PUBLIC COMMENT Pam Marshall-Heatherington from ECOSLO thanked the PCC for their GIA support of the Garden Street 30`" Birthday Party. She provided photos and a brief synopsis of the event and gave each member a seedling oak ir�gratitude. She also reported that ECOSLO has begun work on the second GIA grant to develop a trail guide for Reservoir Canyon.. Merrily Karr from Partners Mentoring Association provided an overview of the "Sister Cities" program and asked the PCC to consideK,supporting the program by becoming a Sister City to Toulouse, France or Valencia, Spain, both cities having a relationship to Saint Louis de Tolosa and the Mission. Staff will look into past practices, although Ms. Karr was referred to the Human Relations Commission or City Council, who ultimately would make the decision regarding participation. 3. APPROVAL OF MINUTES The minutes of the regular meeting of August , 2001 were approved. (Rosene/Nicklas/carried) 4. JACK HOUSE PRESENTATION Ron Batterson, Chair of the Jack House Commi a and Penny Rappa, Committee member, presented background information on Jack House ma eting efforts. Having been referred to the PCC by City Council during budget hearings, the Com ittee is requesting marketing/promotional support through the PCC contracts. The following ideas we discussed and referred to the Marketing Sub-Committee for further discussion and referral back to the II PCC for recommended action: • Adding the Jack House brochure to the City's fulfillme t packets • Taking advantage of the Chamber of Commerce's mar ting training program • Researching the possibility of applying for Enhanced Pro otional Funds for one of their special events Currently, Barnett, Cox &Associates includes information on the Jack H use in the welcome letter used in the fulfillment packets and the Chamber has a photo of and a refe al on the Jack House in their Visitor's Guide. 5. MARKETING SUB-COMMITTEE REPORT Nicklas deferred the Marketing Sub-committee report for inclusion in the Report on Marketing.