Orange County gets lots of attention for its tourist destinations like the coast, Disneyland, Knott’s Berry Farm and myriad other tourist attractions.
Peril of Promotion
State auditors accuse Anaheim’s tourism bureau and the local chamber of commerce of improperly spending some tourism dollars on lobbying instead of promoting the Disneyland resort area in the latest chapter of OC’s largest corruption scandal in recent history.
But there’s very little focus on the tourism bureaus promoting such places on behalf of cities.
That’s starting to change now that there are ongoing investigations into at least two of Orange County’s biggest taxpayer funded tourism advertising agencies, including in Anaheim where state auditors say the bureau sent money to the Chamber of Commerce, which then spent it on lobbying public officials, something auditors say was improper.
“Visit Anaheim improperly subcontracted with the Chamber to provide work related to its tourism district assessment contract with the city,” auditors wrote. “Without written permission from the city as required.”
[Read: CA Auditors Lambast Anaheim’s Tourism Bureau, Find Improper Tax Dollar Spending]
Auditors also noted that the city failed to properly oversee the funding they were sending to Visit Anaheim, the city’s tourism bureau.
“Because the city did not have a meaningful process for contract monitoring, Visit Anaheim was able to pay the Chamber for unallowable services that involved political advocacy and influence,” auditors wrote. “We also found that the city did not conduct substantive monitoring or oversight of these and other contracts.”
In Irvine, leaders of the Greater Irvine Chamber of Commerce are facing questions from the OC District Attorney’s office over how they handled the city’s tourism program after hoteliers pointed out most of the $3 million in tax dollars were being siphoned to fund the Chamber’s operations.
[Read: Irvine Chamber of Commerce CEO Resigns; Is OC District Attorney Probing?]
What is a Tourism Bureau?
Sometimes known as “destination marketing organizations,” at least half a dozen OC cities have a tourism bureau that’s set up to advertise why people should visit local hotels and venues in their city.
According to Kelly Miller, CEO of Visit Huntington Beach, these agencies have just one job – get people coming to town.
“We want to generate what we call destination demand,” Miller said at a press conference last May, joining city leaders announcing the return of the Pacific Airshow. “I’m telling you up and down the coast it’s competitive, there’s a lot of reasons people can go other places.”
Those agencies are largely funded by special taxes on hotel rooms, also known as transient occupancy taxes or TOT.
While the amount each tourism bureau receives varies, they generally receive a portion of the tax dollars while another chunk is spent on tourism promotion, with the goal of filling up the hotel rooms with visitors that inject extra tax dollars into the city’s economy.
While the bureaus receive tax dollars, they generally are not operated by city staff, except in Irvine, where city leaders took over the program after local hoteliers said their chamber of commerce was failing to spend the funds appropriately.
Instead, most bureaus are overseen by local boards of directors made up of business owners and hoteliers, with city staff occasionally participating in an advisory capacity.
Despite their role in advertising their hometowns, many of these tourism bureaus don’t like to talk about what they do beyond advertising.
Representatives from Visit Anaheim, Destination Irvine and Visit Huntington Beach did not return requests for comment on this article.
How Much Do Tourism Bureaus Boost Tourism?
While many of the county’s tourism bureaus regularly release reports highlighting their city’s successes, it’s difficult to track how much money was actually generated and how much the bureau’s staff had to do with that.
Last year, Visit Huntington Beach released a report claiming the Pacific Airshow brought in over $120 million of spending in three days to Surf City, but a Voice of OC investigation found they weren’t able to justify how they reached that number.
[Read: How Much Money Does the Pacific Airshow Bring to Huntington Beach?]
Chris Lynch, who used to run Destination Irvine and spent over two decades working as an economist for the U.S. State Department before he became an adjunct economics professor at Golden Gate University, said those kinds of reports aren’t very accurate.
“It’s not an exact science,” Lynch said in an interview. “It’s not the sort of thing you can go to the bank with.”
A 2015 study from the University of Massachusetts Amherst also found that economic impact reports like the ones released by tourism bureaus are not reliable.
“Economic impact analysis is an inexact process and the output numbers should be regarded as a “best guess,” rather than as being inviolably accurate,” researchers wrote.
The report also highlighted that it’s easy to taint the results by making inappropriate approximations that “will support the sponsor’s position.”
“Economic impact studies should be regarded as suggestive of the impacts of an attraction, rather than as being definitively accurate,” researchers wrote. “Even when every effort is made by knowledgeable researchers to do them with integrity, it is inevitable they will have relatively large error margins.”
Lynch also questioned just how effective the advertising programs were at bringing more people to town, pointing out that when he helped run Irvine’s program from 2009-2012 they had “problems spending (the money) wisely” on effective advertising.
“Advertising takes a lot of money and it takes constantly keeping that message in front of people and with the way media landscapes are changing these days, it’s just a lot harder,” Lynch said. “In general the kinds of activities that Irvine has, the impact of additional advertising has a pretty low return on investment.”
How Much Gets Spent on Lobbying Elected Officials?
In addition to tourism promotion, many of these bureaus also spend on something else – politics.
In Anaheim, auditors found Visit Anaheim sent $1.5 million to the city’s Chamber of Commerce, which then spent that money on lobbying public leaders.
While auditors called that spending improper, Laura Cunningham, the CEO of the Chamber, defended the spending in a letter to auditors.
“We respectfully disagree with this assessment, as these services and activities have demonstrably benefited the tourism and convention industries in Anaheim,” Cunningham wrote. “Moreover, such activities align with standard operating procedures for tourism improvement districts across the state.”
Beyond Anaheim, there’s more legal lobbying at the state level by most of Orange County’s tourism bureaus, including Visit Anaheim.
Much of that spending goes through the California Travel Association, a coalition of tourism bureaus and tourist destinations across the state that focuses on “advocacy for the travel and tourism industry in California,” according to their website.
In the past three election cycles, stretching from 2019 to the present, Orange County’s tourism bureaus and their staff have contributed over a combined total of $64,000 to the Travel Association’s fundraising committee, which then spent the funds on state legislators’ campaigns.
Orange County tourist destinations, like Disneyland and South Coast Plaza, also contributed nearly $27,000 more to the same fund.
The board that controls that fund is co-chaired by Gary Sherwin, CEO of Visit Newport Beach, and includes Kelly Miller, CEO of Visit Huntington Beach, as a regular board member.
Christine Miller, a government relations manager for the Disneyland Resort, also sits on the board.
Who Should Run These Agencies?
The investigations in Anaheim and Irvine are already starting to trigger discussions on who’s responsible for overseeing how tourism tax dollars are spent.
Gary Sherwin, CEO of Visit Newport Beach, stated Anaheim and Irvine were both lessons on why business leaders should be left alone to manage those tax dollars themselves in an editorial published by StuNews Newport after state auditors released their report on Anaheim.
“The biggest lesson of all is that hospitality leaders from the hotel community should be the ones in charge of how tourism dollars are spent and allocated,” Sherwin wrote. “Transient Occupancy Tax dollars are generated by the hotels. Those hoteliers who live and breathe this everyday know how to best spend those dollars.”
But in Irvine, hoteliers were able to double the amount of advertising spending when they took the program back from the local chamber of commerce.
City officials now host public meetings discussing the funds that are recorded, while the funds are overseen by both hoteliers and city leaders.
Tony Zand, general counsel for the Pacific Hospitality Group and one of the board members overseeing the Irvine spending, said while it was unclear how the chamber was managing it to him, they suddenly had a lot more money once the city stepped in.
“It seemed like there was a lot more money for us as a group to spend promoting Irvine,” Zand said in an interview. “We had a bigger budget, we were able to hire another person and do other stuff.”
Lynch said the amount of spending and control that each city on its advertising should be a serious discussion among city leaders.
“The question there is how much is the responsibility of the company vs the responsibility of the city,” Lynch said. “That’s a policy discussion that each city needs to have.”
Noah Biesiada is a Voice of OC reporter and corps member with Report for America, a GroundTruth initiative. Contact him at nbiesiada@voiceofoc.org or on Twitter @NBiesiada.
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