Destination D.C., the District’s marketing and tourism arm, is facing a $1 million budget shortfall this year, which could mean layoffs and cutbacks in marketing at a time when the city is trying to capitalize on a popular new president.
Officials blame the shortfall on lower-than-expected hotel occupancy and revenue this fiscal year, which ends Sept. 30, and they warn the outlook for fiscal 2010 is even more dire. Some 66 percent of the agency’s budget comes from hotel taxes.
“We knew the convention center and Destination D.C.’s funding would rise and fall with the success of the industry,” said Emily Durso, president of the Hotel Association of Washington, D.C. “This is the downside. We’ve never had a decrease anything like this before.”
News of the gap comes just a month after longtime Destination D.C. executive Elliott Ferguson was named CEO. Ferguson said he is weighing options for the 63-person organization.
Ferguson will not know how many people might have to be let go until the organization figures out what its marketing reductions will be. He hopes to have a better idea about potential layoffs by mid-August. If there are staff reductions, they will be the first in the more than seven years that Ferguson has been there.
The funding woes mean Destination D.C. will not be able to market itself internationally or domestically in a way that is competitive with cities such as Las Vegas or Orlando, Fla., which often get assistance from their state governments, he said.
“Unfortunately, it’s going to be a situation of new president, new reductions,” said Ferguson, who took the reins in early July after Bill Hanbury left to run the United Way of the National Capital Area. “Anytime you have to look at reducing the livelihood of individuals, it’s never pleasant, and having been involved with the organization as long as I have, it’s even less pleasant. But it’s the reality.”
Ferguson said he will try to find new funding sources, including more partnerships with corporate organizations. He also may ask businesses directly served by Destination D.C., such as restaurants, to provide in-kind services to the organization.
“Elliott has his job cut out for him as he looks for partners, more members and sponsorships,” Durso said. “He may even have to increase dues. It’s not an easy task, but businesspeople usually understand you need to spend money to make money.”
Destination D.C. projects that its fiscal 2009 budget will total $13.35 million, down about 7.8 percent from the initial projection of $14.4 million. Besides hotel taxes, other funding for Destination D.C. comes from private partnerships, member dues and city grants.
In the current fiscal year, it received a $750,000 grant from the Walter E. Washington Convention Center Authority and a $125,000 grant from the District to pursue specific marketing initiatives.
In what they call conservative projections, officials estimate a $11.3 million budget for the fiscal year staring Oct. 1. They do not expect the city will be able to provide the additional assistance it has offered in years past.
At the beginning of 2009, D.C. actually found itself in a better position than many other cities in terms of hotel occupancy, mostly due to a significant bump in January from the 2 million people who attended the inauguration of President Barack Obama, causing the city’s daily hotel rate to surge by 48 percent.
For the first half of the calendar year, occupancy and the average daily rate declined only slightly, but steeper declines are projected because of the city’s lean convention calendar.
For the entire calendar year, Smith Travel Research Inc., citing figures from PKF Hospitality Research, predicts revenue per available room for D.C. hotels will decline by 6 percent, with occupancy down 7.7 percent.
For 2010, revenue per available room could decline an additional 3.2 percent, with occupancy down 2.1 percent, Smith estimates.
Destination D.C. has tried to promote the return on investment that the city receives on its marketing efforts to government officials and potential partners.
Earlier this year, it initiated a study that showed a nearly 3-to-1 return on investment dollars dedicated to tourism marketing. Spending by tourists generated $5.6 billion in 2008.
The city has done its best to play up its assets during the recession, Ferguson said, such as promoting its ties to Obama and emphasizing the many free options for entertainment, such as visits to the Smithsonian Institution museums.
Meeting planners with qualifying events can take advantage of Destination D.C.’s new Power Savings program, a collection of 44-themed special offers, deals and discounts at hotels in honor of the 44th president.
