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Despite pressure from hotels, Palo Alto extends its stay in visitors bureau

Urged to leave the organization, City Council opts for 'wait-and-see' approach

The Palo Alto City Council found itself in an unusual position on Monday night — playing the role of a referee in a bitter feud between hospitality experts.

The issue at hand was whether or not the city should withdraw San Mateo County/Silicon Valley Convention and Visitors Bureau (CVB). The Burlingame-based organization collects revenues from the San Mateo County Tourism Business Improvement District, which markets hotels and other destinations throughout the region. Palo Alto hotels have been contributing funds into the special assessment district since 2010.

Now, many hotel operators think it's time to leave. After paying a combined total of about $309,000 annually to the district for nine years — or about $2.7 million total — numerous hotel general managers told the council that they are not getting enough in return. Barbara Gross, former general manager at the Garden Court Hotel who currently works as a hospitality consultant, and Jim Rebosio, general manager of the Westin and Sheraton hotels, co-signed a letter to the council last month arguing for withdrawing from the district, which they said is "not a good fit."

Stephanie Wansek, general manager of Cardinal Hotel, agreed and said the returns the hotels have been getting from the bureau is "proportionately negligible" to their contributions.

"Nine years of history have demonstrably proved the relationship is not a good fit for Palo Alto. The CVB attracted travel groups and generated business leads that did not convert to actual bookings," said Wansek, whose hotel is one of 19 that were listed as co-sponsors of the letter from Gross and Rebosio.

Hugo Santos, owner of Cowper Inn, is among those who favored the departure. He told the council that his hotel has never benefitted from the bureau's marketing efforts.

"I don't want to pay for a service that I'm not getting," Santos said.

Matt Dolan, general manager of Homewood Suites by Hilton, strongly disagreed and took issue with the process steered by Gross. He disputed the assertions by the "leave" camp that a "clear majority" exists and suggested that the move is being spearheaded as part of a "hidden agenda" by the Palo Alto Hotel Council, an informal group of hotel executives that formed last year to oppose the council's campaign to raise the hotel tax rate later approved by voters.

Dolan called the bureau a "reputable organization" and criticized the Hotel Council for not proposing any clear alternative.

"There is no clear majority. There is no clear motive. There is no clear guideline," Dolan said.

The conversation occasionally turned testy, particularly when Dolan accused Gross of misrepresenting the level of support for leaving at a September meeting of hotel leaders (Gross left the meeting while he was talking). He also told the council that Rebosio has told him he was neutral on the issue but only wanted to lend his name to Gross (Rebosio told the council that he favors leaving and called the bureau "not a good fit").

At numerous times throughout the discussion, hotel executives walked up to the microphone to offer dueling anecdotes, answer questions or make further arguments in favor of their positions.

Dolan wasn't the only hotel executive at the meeting who supported staying. Julie Handley, owner of Dinah's Garden Hotel, said she wants to see the city's relationship with the bureau continue. And the Chamber of Commerce, which receives about $30,000 annually from the bureau to fund its visitors center, also recommended maintaining the agreement.

The council, however, concurred that if the hotels want to leave the district, the city should let them do so. It also decided that it give the visitors bureau a little more time to address the hotels' concerns before making the final decision. After a lengthy period of deliberations that was punctuated by occasional interruptions from hoteliers, the council voted 5-2, with Mayor Eric Filseth and Councilman Greg Tanaka dissenting, to direct staff to return in fall 2020 with a status report and a recommendation on whether the city should stay or go.

Filseth and Tanaka supported a separate motion that would have given the decision-making power in this case to the "monetary majority" of hotel executives — those whose contributions make up the majority of the overall assessment.

The rest of their colleagues supported the wait-and-see approach that was proposed by council members Lydia Kou and Liz Kniss and that left most of those seeking to leave unsatisfied.

"We don't know if this is broken yet or not," Kniss said. "We don't even know if it needs fixing.

But until we can assess that as a city — and with the help of hotels — I think it would be unfair for us to either abruptly terminate it or continue it.

"Let's find out if it needs fixing. If it does, we'll do our best. If we see at the end that it's not fixable, we'll go from there," Kniss said.

The vote paves the way for possible termination of the agreement in late 2020, a decade after the City Council agreed to enter into the agreement as part of its effort to promote local businesses. Most members agreed on Monday that they will have no problem ending the agreement. Councilman Tom DuBois was among those who said he'd be comfortable doing so sooner, given the strong support from the majority of the hotels.

"If the hotels want out of this, we should let them," DuBois said.

John Hutar, who became CEO of the visitors bureau in June, urged the council to give his agency more time to address the recent concerns from Palo Alto hotels. Hutar, former general manager of Dinah's Garden Hotel, told the council that since he learned of these concerns, he has "worked tirelessly to make changes based on feedback received."

"For me, this has been six months of trying to deal with this issue and effect change," Hutar told the council. "I'd just like the opportunity to really effect change. It's up to you — you like it or don't like it — but I'd like to have the opportunity to give it my best shot and I'm convinced deep down that you will like it and I'm committed to working for all of you."

The council agreed to give the bureau a little more time. And while it will be up to council members to decide in 2020 whether to stay or go, several members indicated that they will take their cues from those best familiar with the bureau's services — the hotel owners.

"I think the criteria ought to be, 'Do the hotels see value in this?' If they do see it, great," Filseth said. "We should continue it. If they don't see the value, I don't think the city should get in the way."

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