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San Diego Tourism Outlook Is Overcast; Hotel Occupancy
 Down from 73.3% in 2006 to about 72.9% in 2007

By David Washburn, The San Diego Union-TribuneMcClatchy-Tribune Regional News

Dec. 28, 2007 - Spiraling energy prices, plummeting home prices and the nationwide credit crunch hurt San Diego's tourism industry in 2007 and have clouded the outlook for next year as well, according to a report from the San Diego Convention & Visitors Bureau.

A projected 31.4 million people visited the county in 2007, a 2.1 percent decrease from 2006. The county saw fewer of nearly all visitor types, with the number of overnight visitors dropping 3.6 percent and day visitors off seven-tenths of a percent, according to the report released yesterday.

Hotel occupancy was down from 73.3 percent to about 72.9 percent of all available rooms in the county. But hotel and motel revenue increased, thanks mainly to an average room rate hike of 6.2 percent, the report said.

In addition to broader economic factors, the fall wildfires also took their toll, especially on businesses depending on leisure travelers who represent eight of every 10 overnight visitors to the county.

"People were just hesitant to come here for a while," said David Peckinpaugh, chief executive of the visitors bureau. "Misperceptions about access, as well as concerns about air quality lingered for weeks."

Looking forward to 2008, Peckinpaugh and others say the industry should do well, but are less certain than they have been in years.

Convis estimates that San Diego will attract 32 million visitors who will spend $8.1 billion in the county, increases of 1.8 percent and 4 percent, respectively, over 2007.

These numbers are good, but not great, experts say.

"The impact of energy, mortgage, housing market -- all those things are sort of teetering, but no one knows where they will go," Peckinpaugh said.

If the national economy does slow down, as many are predicting, tourism businesses here and elsewhere will be among the first to feel it, said Jerry Morrison, a San Diego-based hotel consultant.

"In bad economic times," Morrison said, "the first thing both families and businesses cut back on is travel."

Morrison and other industry watchers say, however, that San Diego County remains one of the five most bankable destinations in the United States. And they say the local tourism economy has performed so well in recent years that it may be due for a leveling off.

"San Diego tourism has been blessed," said David Brudney, a Carlsbad-based hospitality industry consultant. "It's ridden a pretty fast car for several years, and like the stock market, maybe there'll be a correction."

Hotel and motel occupancy will continue to degrade, experts say, due mainly to this decade's hotel building boom. By the end of 2008, San Diego County will have 3,100 more rooms than it did in 2006.

But occupancy rates should stay above 70 percent, which indicates a vibrant tourism industry, said Bruce Baltin, a senior vice president at PKF Consulting, a hospitality industry research firm.

"(Occupancy rates) may go down for a year or two while more supply comes in, but you expect that to happen," Baltin said.

Potentially helping all corners of the local tourism business will be a new hotel room tax in the city of San Diego. Beginning Jan. 1, visitors to city hotels with 70 or more rooms will be taxed an additional 2 percent beyond the 10.5 percent transient occupancy tax.

The annual revenue from the tax is expected to be between $26 million and $30 million. The money will be funneled to the newly created Tourism Marketing District and be spent solely on promoting local visitor destinations.

Peckinpaugh said the money is sorely needed, and will help the area keep pace with other top destinations such as Las Vegas and Orlando, which have gargantuan promotion budgets.

"We are in many ways the envy of country as far as destinations go," Peckinpaugh said. "We just need to get the word out and make sure everyone knows about us."


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