Arroyo Grande could become the sixth city in San Luis Obispo County to form a tourism promotion district and increase hotel room taxes to market the city and its hotels.
City officials estimate the Arroyo Grande Tourism Business Improvement District would raise about $140,000 a year by assessing a 2 percent levy on occupied hotel rooms.
That’s on top of a 10 percent so-called bed tax already charged by the city, but this new money would go into a separate fund and be used specifically to promote the city as a tourist destination and increase overnight stays in its lodging businesses.
“We have to be very strategic about how we spend those funds,” said Judith Bean, president and CEO of the Arroyo Grande & Grover Beach Chamber of Commerce, which would help manage the district.
The new assessment would impact the city’s 10 lodging businesses, which collectively have more than 400 hotel rooms. A board comprised of hoteliers would determine how the money is spent.
Some examples of what the money could pay for include rejoining the San Luis Obispo County Visitors & Conference Bureau, increasing Arroyo Grande’s online presence through social media and other websites, and possibly installing signs advertising the city along the Highway 101 corridor, Bean said.
Three of Arroyo Grande’s larger hoteliers — including the Hampton Inn, Best Western Casa Grande Inn, and Aloha Inn — have expressed support for a tourism district, according to City Manager Steve Adams.
On Tuesday, the City Council voted 4-0, with Mayor Tony Ferrara absent, to schedule a public hearing on the district for May 14. Formation of the district won’t move forward if written protests are received by business owners representing 50 percent or more of the assessments to be levied.
If approved, the new fee would take effect July 1.
Five other cities in San Luis Obispo County have already established tourism districts, with assessments ranging from 1 percent in Pismo Beach to 3 percent in Morro Bay. Atascadero became the fifth city to form a tourism district earlier this month, with a 2 percent levy.
The county’s tourism district was formed in July 2009 to collect a tax on hotel receipts in unincorporated areas.
If Arroyo Grande’s plan moves ahead, Grover Beach would be the only city in the county without such a district. Grover Beach Mayor Debbie Peterson said a push to form one could move forward in the next year, as two local groups, the Grover Beach Business Alliance and the Merchants Association, have expressed interest in establishing a district.
Peterson said she’ll also reach out to Pacifica Hotel Co., which will build the Grover Beach Lodge and Conference Center at West Grand Avenue and Highway 1, and the developer of another new hotel on El Camino Real, which breaks ground in June.
Grover Beach currently collects bed tax, also called transient occupancy tax, from four hotels and motels. City Manager Bob Perrault said he expects the city to receive about $275,000 in bed tax revenues this year.