Annual Meeting

Board of Directors C. Terry Brown Chairman President, Atlas Hotels Richard Bartell Vice Chairman President, Bartell Hotels William L. Evans Treasurer VP / Managing Director, Evans Hotels Luis Barrios Secretary GM, Best Western Hacienda Hotel Patrick Duffy GM, The Hilton La Jolla Torrey Pines Mohsen Khaleghi GM, Hyatt Regency La Jolla Aventine Robert A. Rauch, CHA GM/Partner, Hilton Garden Inn Del Mar Keri A. Robinson Area Managing Director, Starwood Hotels & Resorts San Diego John Schafer VP / Managing Director Manchester Grand Hyatt San Diego

Meeting Overview SDTMD FY2012 Annual Report Five-Year Recap of Initial District Results Overview of District Renewal Information Sessions: Lodging Businesses: Changes to Reporting Requirements Applicants for Funding: FY 2014 Funding Guidelines and Application Introduction

FY2012 Results (pending performance audits) $29 million deployed Supported production of 3,747,771 room nights $528 million in room night revenue Approximately 18:1 ROI

What We’ve Done: Competitive Application

3 rd Party Performance Audits

5-Year Recap Initial TMD Results Created accountability through standards, measurement, audits and transparency ROI measured in TMD Hotel Room Nights Relieved pressure on City General Fund ($10.4 million in FY2009) Stabilized TOT against economic downturn Held our own or out-pacing other cities to attract tourist spending

THE GREAT RECESSION National Decline in Hotel Production August 2008 to August 2009 Room occupancy: down 7% Average daily room rate: down 10% Revenue per available room: down 13% Source: STR Global, Oct. 2009

FY2009 RESULTS $26.7 million deployed Supported production of 2,650,856 room nights $433.7 million in room night revenue Approximately 16:1 ROI

FY2009 SD Gaining Market Share Against Regional Competitors CityChange ’09 vs. ‘08 Los Angeles-0.56% Anaheim0.01% Phoenix0.07% Seattle0.07% San Diego0.17% San Francisco0.25% Source: Smith Travel Resources

FY2010 RESULTS $21.5 million deployed Supported production of 3,545,500 room nights $481.5 million in room night revenue In excess of 18:1 ROI SDTMD Hotel Occupancy 2.6% Higher than County SDTMD OTA Trend Continued in Nights/ Revenue

SDTMD Properties Ranked # National RevPAR New York$ Oahu$ Miami$97.82 San Francisco$97.75 Washington$92.90 Boston$90.77 San Diego TMD$88.56 Los Angeles$75.34 New Orleans$70.09 Anaheim$70.05 Seattle$69.39 Philadelphia$68.70 Chicago$65.02 Phoenix$55.45 Denver$55.44 Orlando$55.19 Minneapolis$52.87 Nashville$49.93 Tampa$49.83 Houston$48.41 Atlanta$45.09 St Louis$44.96 Dallas$44.39 Norfolk$43.12 Detroit$37.95

FY2011 Results $22 million deployed Supported production of 3,267,501 room nights $458 million in room night revenue Approximately 20:1 ROI US NEWS Travel Ranked San Diego as #3 Best Vacation Destination Collaboration and Economy of Scale

Is It Working? SD Hotel Industry Oversight and Direction in Partnership with the City of San Diego TMD & City Double Filter of Checks and Balances Funding = Aggressive Application, Vetting and Audits ROI (est.) : : Over $112 million TMD funds deployed Directly supported production of over 15 million SD room nights Generating approximately $2.18 Billion in SD room night revenue Overall estimated ROI of 19:1

Is It Working? There are now 74 TMDs in California.

John Lambeth President & CEO and SDTMD General Counsel

Statewide & National TMDs 74 TMDs currently in California Including “comp sets” San Francisco, LA and Anaheim California, Montana, Oregon, and Washington have established TMDs Texas, Florida, South Carolina, Oklahoma, and Colorado in process of starting TMDs

SDTMD RENEWAL SDTMD Initial Term Ended on Year Procedural Ordinance Passed by City CA Prop 26 Passed November 2010 Mandates enhanced restrictions on funding Revised Management Plan and Contract Approved by Industry and City

PROP 26 OVERVIEW Taxes require 2/3 voter approval Not a tax if “A charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged” And “which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege”

PROP 26 OVERVIEW continued Not a tax if “A charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged” And “which does not exceed the reasonable costs to the local government of providing the service or product”

NEW DISTRICT MANAGEMENT PLAN Reconstructed to Accommodate PROP 26 Refined District Created for Assessed Hotels SDTMD Contractor Funding Not Guaranteed Annual Distribution: 90% Sales & Marketing Programs 5% Contingency 5% Admin including fully loaded City Fees Two Major Benefit Categories Created – – Benefit Category A: TMD Meeting & Group Sales / Consumer Direct Sales & Marketing Payor Universe = Lodging businesses in City of SD with thirty (30) rooms or more 1.45%* – – Benefit Category B: Destination Marketing with Specific Call to Action for TMD Lodging Businesses Payor Universe = All Lodging Businesses in City of SD 0.55%* * All TMD lodging businesses of 30 or more rooms pay Categories A + B for total assessment of 2%

Benefit Category A A1- Meeting and Group Sales & Marketing Programs and TMD Consumer Direct Sales & Marketing Programs A2 – Sub-Regional Targeting A3 – Competitive Targeting Payor Universe = Lodging businesses in City of SD with thirty (30) rooms or more assessed at 1.45%

Benefit Category B Destination Marketing with Specific Call to Action Benefit Category B advertising campaigns and earned media to drive sales demand for San Diego TMD lodging businesses. Payor Universe = All Lodging Businesses in City of SD assessed at 0.55%. Includes revenue from businesses with 1-29 rooms*; and Includes revenue from businesses with 30 rooms* or more. * % estimates to be provided by City All campaigns must have proportional other-source funding reflective of benefits.

STEPS & ACTIONS B&F recommended adoption of revised Ordinance: July 20, 2011 City Council approval of revised Ordinance: October 6, 2011 B&F approval of in concept the management plan: July 25, 2012 City Council approval of ROI & management plan: September 25, 2012 Ballots sent out: October 10, 2012 Public Hearing: October 23, 2012 Ballot count & City Council approval of renewed district: November 26, 2012 Effective date of new district: January 1, 2013 Approve / publish FY 2014 applications: January 2013 SDTMD Annual Meeting & City Workshop: January 23, 2013 FY2014 Application Deadline: February 8, 2013 Public Application Presentations: February - March 2013

Q & A John Lambeth New District Formation

Tricia Mendenhall Transient Occupancy Tax Accounting Supervisor, Accounting Program, Treasury Operations Division Office of the City Treasurer

Changes to the Reporting Process TOT/TMD Return Online Payment Option Mandatory Online Payment Requirement

Office of the City Treasurer New TOT/TMD Return On January 31, 2013: Updates to Office of the City Treasurer’s Website TMD is now split into two categories

Office of the City Treasurer Online Payment Option - Changes First step – select reporting period Actively confirm TOT Certificate number Auto calculation of TMD amounts

Office of the City Treasurer Mandatory Online Payments Online will be mandatory July 1, 2013 Lobby Payment Option Exemption Benefits

Q & A Tricia Mendenhall Changes to Reporting Requirements

INTRODUCTION: FY 2014 APPLICATION & GUIDELINES

“Hot Buttons” Incremental Room Nights and Leads for TMD Assessed Lodging Businesses Cannot Benefit Non TMD Paying Lodging Businesses Example – Coronado / Carlsbad / Casinos, etc. Off-Peak Events and Promotions Geographical - Programs in Sub-Regions Possibility of Creating Long-Term / Legacy Events Quantifiable Results through Third Party Audits Economy of Scale Example - Collaboration with Other TMD Contractors

Benefit Category A3 : Competitive Targeting* See Application / Guidelines - Appendix 4 A1.1 - Hotel Meeting Sales A1.2 - Event Management and Group Sales Dev. A1.3 - Tourism Development including Travel & Trade A1.4 - Group Meeting Direct Marketing A1.5 - Consumer Direct Sales & Marketing Programs * Payor Universe = Lodging businesses in City of SD with thirty (30) rooms or more assessed at 1.45%

EXAMPLE: Category A1.5 (see Appendix 4 ) A1.5 Consumer Direct Sales & Marketing Programs Placement of consumer direct sales and marketing campaigns including, but not limited to, Pay-Per-Click Online Banner Advertising and dedicated Online Travel Agency (OTAs such as Expedia, Orbitz, Travelocity) campaigns that are specifically designed to place booking opportunities for assessed businesses in the grasp of consumers who have or may have expressed an interest in traveling to San Diego. Typical expenses include outside services such as advertising agency fees ; related events and promotions; production and advertising costs, District-related personnel salary, commissions, benefits, training, travel, printed material, promotional items, information technology, market intelligence, research, and performance audits. Typical indirect expenses include related contractor executive management, information technology support, and general & administrative overhead.

EXHIBIT A: PROPOSED SCOPE OF WORK NARRATIVE: By Category A1.1 through A1.5, specifically detail the scope of work of your proposed sales, marketing / promotional program and/or event using TMD funding. Your proposed scope of work narrative should explain your line-by-line Exhibit B – Budget.

EXHIBIT B - BUDGET:

HOW TO REQUEST “UNLOCKED” EXHIBIT - B BUDGET TEMPLATE:

EXHIBIT E – ROI WORKSHEET:

FY 2014 FUNDING CYCLE (TENTATIVE*) January 2013: FY 2014 Applications available by download / request February 2013: FY 2014 Application Deadline: February 8, 2013 Formal public board review of qualified applications March 2013: Funding recommendations of programs by board Notification of funding intention to City FY 2014 final budgets from approved organizations due on or about March 15, 2013 SDTMD submits FY 2014 Budgets with ROI projections and Scope of Work assumptions to City on or about March 21, 2013 May-June 2013: FY 2014 Budget presentation to City Budget Finance Committee / City Council FY 2014 Contracts Issued July 1, 2013: FY 2014 Begins *Dates and funding cycle are approximate and may change without notice.

Q & A Lorin Stewart FY 2014 Application & Guidelines

Thank You…