ANAHEIM, CA - (June 16, 2015) - The Anaheim City Council tonight approved a resolution establishing a Hotel Incentive Program to encourage the development of four-diamond-quality hotels and the renovation of existing properties to four-diamond quality. The Hotel Incentive Program, which requires no new City spending, is designed to enhance Anaheim's already strong financial standing by incentivizing economic development that in turn supports quality services for residents, businesses and visitors.
The program provides a level playing field for hotel developers and owners and clear building and renovation guidelines based on the AAA Diamond Rating Process for four-diamond hotels.
Developers of four-diamond-quality hotels in Anaheim can apply to receive an incentive equal to 70 percent of the transient occupancy tax generated by a new hotel for up to 20 years. The City would receive 30% the occupancy tax for up to 20 years and then 100 percent after that.
Existing hotel owners renovating to four-diamond quality can apply to receive an incentive equal to 50 percent of the added transient occupancy tax created by improvements, with the City receiving the remainder for up to 20 years and 100 percent after that.
The Hotel Incentive Program has no impact on the City of Anaheim's General Fund and covers only a portion of future transient occupancy tax generated by new four-diamond-quality hotels.
"Encouraging four-diamond-quality hotels is in the City's long-term economic interest," said Paul Emery, Anaheim interim city manager. "With the fundamental role tourism plays in providing quality services to our residents, businesses and visitors, this is as a pragmatic investment in future revenue generation by incentivizing private sector development."
The City Council approved the Hotel Incentive Program on a 3-2 vote. Mayor Pro Tem Lucille Kring and Council Members Kris Murray and Jordan Brandman voted in support with Mayor Tom Tait and Council Member James Vanderbilt in opposition.
The Hotel Incentive Program expands on previous initiatives by the City of Anaheim to partner with businesses on the creation of four-diamond-quality hotels.
In 2013, the City Council approved two economic assistance agreements for four-diamond-quality hotels at GardenWalk, an outdoor dining, shopping and entertainment lifestyle center in the Anaheim Resort.
Anaheim is currently home to two four-diamond hotels, Disney's Grand Californian Hotel & Spa and Disneyland Hotel. The Hotel Incentive Program seeks to expand the hotel market and enhance choices for the more than 23 million people who visit Anaheim each year.
"There is strong demand for four-diamond-quality hotels in Anaheim as shown by the tremendous success of the existing four-diamond properties here," said John Woodhead, Anaheim community development director. "With this program, we will be able to attract and host meetings and visitors now going elsewhere for four-diamond accommodations."
The Hotel Incentive Program will enhance the important role that tourism plays in Anaheim. The Anaheim Resort provides $67 million in net revenue — nearly a quarter of the General Fund — above and beyond the cost of providing services to the area.
As Anaheim adds police officers, improves neighborhood parks and upgrades streets, revenue from hotel stays plays a vital role in funding those services.
Along with the City's prudent fiscal management and a robust, diversified economy, Anaheim's tourism sector is a key contributor to the City's strong financial standing. The City's general obligation bonds carry AA ratings by major Wall Street rating agencies Moody's, Standard & Poor's and Fitch Ratings.
The City's fiscal year 2015-16 budget provides $10 million in supplemental funding and supports 10 new police officers, new or improved parks and community centers and street improvements and maintains Anaheim's reserve balance.
"Anaheim is on a very strong financial footing, which will only be enhanced as the City encourages new investment in hotels," said Debbie Moreno, Anaheim finance director.
In addition to creating new revenue, four-diamond-quality hotels have the added impact of boosting Anaheim's overall hotel market.
As four-diamond-quality hotels open in the City, they stand to have a positive impact on rates at existing hotels by increasing the average daily rate for rooms here, which currently stands at $149 according to PKF Hospitality Research.
For each $1 in added average daily rate, the City sees an additional $1 million in new annual hotel stay revenue.
Since the expansion of the Anaheim Resort in the late 1990s, the City's gross revenue from hotel stays has more than doubled to $133 million as of the fiscal year 2015-16 budget.
"Providing incentives for four-diamond-quality hotels will provide a strong return on investment and maintain the City's financial strength going forward," Emery said.