OCEAN CITY — Last week’s debate about how much the resort government should be investing in advertising spilled over to this week with one citizen suggesting the marketing budget be cut or eliminated altogether and a few councilmembers fiercely defending the policy.
During a budget work session last week, a question was raised about how much money is needed to effectively market Ocean City and had that threshold been reached. In 2008, an ordinance was passed that added one-half of percent on the resort’s 4 percent room tax with the additional revenue dedicated to tourism advertising and marketing. In the years since, the advertising budget has steadily grown from around $1.5 million that first year to $6.7 million this year.
Last week, a question was raised on how much investment in marketing is enough and has the time come to consider redirecting some of that revenue elsewhere or perhaps return it to the taxpayers. Former Councilman Vince Gisriel broached the subject again this week during the public comment period.
“When I left the council in 2004, the advertising budget was about $1.5 million,” he said. “It now comes in at $6.7 million. I think it’s time to really take a strong look at that. I wish we were out of the advertising business altogether, frankly. I think the Chamber and the Hotel-Motel-Restaurant Association can do that quite adequately on their own.”
Gisriel suggested cutting the advertising budget or eliminating it could result in some of the revenue coming back to the year-round residents in the form of a tax cut.
“If that $6.7 million was cut from the budget, it would reduce everybody’s tax rate in Ocean City by over 16 percent,” he said. “For a convenience store, that would mean $4,100 more, a surf shop would get $3,300 more, a fast-food restaurant, $5,000 and an uptown hotel, $29,000. A Boardwalk hotel would see in excess of $34,000. Think of that money being used by individual businesses to earmark their own advertising as they saw fit.”
Gisriel suggested even a modest cut in the resort’s marketing budget could benefit the resident taxpayers.
“It’s time to take a good hard look at advertising in general,” he said. “If you cut $1.5 million in this year alone, you would save the taxpayers one to two cents on the tax rate. I think it’s time to give that back to the community.”
However, Council Secretary and Tourism Committee Chair Mary Knight said the $6.7 million marketing budget is borne on the backs of the tourists through the room tax formula and not on the backs of the property tax payers.
“I just want the public to know that $6.7 million does not come from our taxpayers,” she said. “The one-half percent tacked on to the room tax is dedicated to advertising. That is our law, so we would have to lower the room tax from 4.5 percent back to 4 percent and not spend any money on advertising and that would not be beneficial to our taxpayers. Let me assure you, we would not have the tourism that we have if we did not have that one-half percent.”
Gisriel later in the week suggested the town was not locked into the room tax dedicated to marketing formula. He said the formula was set in motion by a town ordinance and it could likely be reversed by repealing the ordinance if so desired.
Knight said tourism marketing is far more complicated than it was even just 10 years ago and the steadily growing advertising budget is put to its best use.
“It’s different than it was in 2004 when we advertised on television and radio,” she said. “Now, because of the technological world we live in, so much advertising is going to the Internet and social media. When you Google beach resorts, we pay money so we can be number one in Ocean City. I just don’t want the public to think we can give that $6.7 million back because we can’t.”
Knight said suddenly eliminating the town’s marketing efforts and putting them squarely on the backs of the private sector simply would not be as effective.
“We are actively taking a look at what is enough money and what is too much money,” she said. “It would be pretty complex for say a hotel to all of the sudden take money and start advertising. We find what we’re doing now is correct. I just don’t want the public to think we can just give back $6.7 million.”
Councilman John Gehrig said the formula was set up to fund the town’s advertising budget through the room tax so it would not be borne by the resident taxpayers.
“When I came to town, the advertising budget was $1.5 million and our competitors were spending much more,” he said. “The proposal was made at the time to not have the marketing budget paid for by the residents and taxpayers, but by the people who come and enjoy Ocean City.”
Gehrig said the formula has worked as designed. The more people come to Ocean City, the more the advertising budget grows, so the two feed off each other.
“The hotel industry said they would collect the money from their guests and if it’s unsuccessful, the budget will not grow,” he said. “If it is successful, the advertising budget will grow and that’s what happened. It’s grown from $1.5 million to $6.5 million and it has grown because it’s been successful. It’s like when you make an investment and you get a return on your investment.”
Gehrig said everybody in Ocean City benefits from the current formula for funding the town’s marketing budget.
“The way the ordinance is written, we’re all the beneficiaries,” he said. “The taxpayers are beneficiaries of the success of tourism. As it increases, 60 percent goes back into the general fund. That money is used to pay bills. Those bills would otherwise have to be paid by you and by us, because we’re residents and taxpayers too. So we would have to pay those bills instead of the people who enjoy Ocean City. They’re happy to pay those bills. They’re happy to come here.”
Gehrig said the town, like private sector businesses, has to constantly market and promote itself in order to remain competitive.
“We need to continue to advertise,” he said. “It’s a huge, huge risk to pull it. Will people come anyway? Some say yes but they’re not up here making the decisions. Any business owner needs to advertise and market their business and that’s what we’re doing. And it is paid by the people that visit Ocean City and enjoy Ocean City from all over the world.”
Gehrig said a robust advertising budget fueled by the expanding room tax was better than the alternative.
“I just want everybody to know we are the general partner in tourism,” he said. “We get 60 percent of the tourism revenue and 40 percent goes back into the market. It’s been wildly successful and this is what we call a good problem.”