City Council Accepts Visit Newport Beach Report, Budget Amid COVID-19

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Newport Beach & Co. President and CEO Gary Sherwin addresses the city council

At the Newport Beach City Council meeting on July 12, Councilmember Diane Dixon pulled consent calendar item 12, the Annual Report and Budget for Visit Newport Beach, Inc. (VNB), a business unit of Newport Beach & Company, which serves as the administrator for the Newport Beach Tourism Business Improvement District (NB TBID), for further discussion.

According to the Staff Report on this item, under the terms of the NB TBID agreement with the City, the NB TBID assesses its member hotels three percent of gross short-term (less than 30-day stays) room rental revenue.

The NB TBID is a business improvement district which helps fund marketing and sales promotion efforts for Newport Beach Tourism businesses. The NB TBID includes nine hotels/resorts, each consisting of 100 hotel rooms or more, located within Newport Beach: Balboa Bay Resort, Fashion Island Hotel, Hyatt Regency John Wayne Airport, Newport Beach Hyatt Regency, Newport Beach Lido House Hotel, Newport Beach Marriott Bayview, Newport Beach Marriott Hotel & Spa, Newport Dunes Waterfront Resort & Marina, and Renaissance Newport Beach Hotel.

This year’s report includes a brief discussion about the impact the COVID-19 pandemic, including the related stay-at-home orders and restrictions on group sizes, has had on the meeting and conventions industry nationwide and consequently, on group sales for hotels. The subsequent and severe reductions in hotel demand led to record-low occupancy rates and even the temporary closure of hotel properties, including several NB TBID member hotels.

With the easing of a number of the COVID-19 related restrictions, occupancy rates are slowly increasing and most of the local hotels that had temporarily closed, are reopening. However, as explained in the NB TBID annual report, the meetings and conventions industry may remain depressed until a coronavirus vaccine is available to the public.

According to the Staff Report, year over year changes to the NB TBID’s budget illustrate the scope of the impact the pandemic has had on Newport Beach hotels.

The NB TBID’s FY 2019-20 revenue was $4.244 million. The NB TBID’s revenue estimate for FY 2020-21 is $1.245 million. The proposed FY 2020-21 expenditure budget, $1.935 million, reflects reductions in programming, travel, advertising and personnel.

Councilmember Dixon asked Newport Beach & Company President and CEO Gary Sherwin to give a brief update on the status of the hospitality industry, and particularly hotels, in Newport Beach.

“I don’t want to state the obvious, but what we are going through with our hospitality nationally, and particularly here in Newport beach, is nothing short of devastation,” stated Sherwin as he addressed the City Council. “In terms of our business climate, we have never seen anything quite like this before in our lives. It is tragic and it has cost the city tens of millions of dollars. It has inflicted a lot of damage among our hotels, restaurants, and our attractions.”

Sherwin noted that the TBID was created in the wake of the recession of 2009, and it was done specifically to go after the meetings and convention market.

“There is sometimes a misperception here in town that most of our visitors are here for leisure purposes, either staying in short term rentals or hotels, just to bring your family and enjoy a nice vacation,” said Sherwin. “We do get a lot of those, but the fact is our hotels really depend on the meetings and convention business to pay their bills. About 60 percent of their business is related to the meetings and convention market. These meetings bring in large numbers of people, they bring in food and beverage, they do off-site events that involve the harbor and other attractions. That has been literally turned off.”

Sherwin predicted that there will be no meetings and convention business for the rest of 2020 because people don’t want to risk their health and travel anywhere or go in a ballroom, assuming, as Sherwin explained, “you could even get into a ballroom because of the limitations on group sizes right now. We’re hopeful that a vaccine will be developed before the end of the year so we can bring that aspect of business back.”

Sherwin said Newport Beach hotel occupancy rates are averaging around 40 percent.

“We are in the middle of July, we should be at 80 percent or more,” Sherwin told the City Council. “If you factor in the hotels that are closed, city hotel occupancy rate now is about 30 percent. We have a long way to go to recover.”

Sherwin added that “as we come out of this crisis, the hotels which have had to reduce their staffing considerably are going to rely on this TBID to bring them more meetings and convention business, which is what will get us through this.”

Summing it up, Sherwin stated that “the hospitality industry here in town cannot fully recover until the meetings and convention business can recover. We’re hoping that 2021 bodes more favorably to us.”

Consent Calendar item 12 did pass 6-0 (Councilmember Duffy Duffield was absent).

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