Resort’s Ad Budget Expected To Dip

OCEAN CITY – Due to a projected decline in room tax and gross room revenue for this year, the advertising budget for the town of Ocean City may have to be reduced once again for fiscal year 2010.

Ocean City Budget Manager Jennie Knapp briefed the Tourism Commission last week on the notion that she may have to reduce the advertising budget another $25,000 for 2010 based on the projected revenue brought in by the 4.5 percent room tax and the estimated gross room revenue for this year.

“Our advertising budget increased by about $2 million for 2009 to $3.7 million due to our new funding formula, which we are still very committed to keeping,” said Knapp, “but the projected revenue loss from the room tax and the gross room rates may force me to lower the budget by about $25,000 for FY 2010.”

Currently, the advertising budget is decided by using a formula, which takes the rates of 1.4 percent from July to December and 1.6 percent from January to June of the gross room revenue and sets the budget for the year.

The rates will increase .2 percent every year until they peak at 2 percent in 2011, according to Knapp. Despite the fact that room tax and gross room revenue is projected to be down for this year, the advertising budget for next year may actually go up, according to Knapp.

“At next year‘s rate of 1.6 percent and 1.8 percent, respectively, we anticipate the advertising budget for the town to be at $3.9 million, which is actually a 289,000 increase from 2009,” she said.

The budget sees two amendments each year, and the 2009 advertising budget was already lowered $112,000 after Knapp calculated the room tax and gross room revenue numbers through the first four months of the fiscal year in October.

“We collect about 60 percent of it in the first four months of the fiscal year, and through October, room tax was down 3 percent at $280,000 and as a result I reduced the room tax estimate that we would collect for the fiscal year to $11.25 million, and the advertising budget from approximately $3.7 to $3.6 million.”

Knapp then explained that after calculating the numbers through December for the fiscal year, the 3-percent drop is actually a 3.6-percent drop and the additional $25,000 cut may need to be made from next year’s estimated budget.

“I have to look at the trends and the numbers, and though Ocean City tourism will have lower numbers this year by way of room tax and gross room revenue, the .2-percent raise in the formula each year will help us keep our advertising budget headed in the right direction,” she said.