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Pasadena Center Operating Company Says It Will Take Years to Make Up for Lost Hotel Room Tax Revenue

Despite the impact of COVID-19 on hospitality sector, group is optimistic about FY 2022

Published on Tuesday, October 20, 2020 | 4:20 pm
 

According to a report included in the City Council’s Finance Committee agenda, the Pasadena Center Operating Co. will not begin to make up for lost Transient Occupancy Tax caused by the pandemic until fiscal year 2024.

The tax is paid by everyone who stays at a local hotel.

The PCOC manages the Pasadena Convention Center, the Pasadena Civic Auditorium, the Pasadena Convention & Visitors Bureau, and the Pasadena Ice Skating Center.

“The PCOC’s forecasted share of TOT revenue forecast is $5,725,000 which is a decrease in TOT revenue of $5.375 million compared to the FY20 original budget and $2.959 million lower than FY20 actual,” according to a staff report. “We anticipate we will not be back to FY19 TOT revenue until FY24.”

The committee is scheduled to receive an update on the PCOC at 2 p.m. Thursday, Oct. 22.

Currently, the PCOC has $16 million in reserves. Due to its nonprofit status, the PCOC has been unable to access Payment Protection Program loans, but has advocated for the expansion of these programs and has requested the support of Sens. Kamala Harris and Dianne Feinstein, and U.S. Rep. Judy Chu.

“It has been a trying year at the Pasadena Center Operating Co. since all facilities were required to be closed back in March. The hospitality industry has been decimated by this pandemic,” said Vice Mayor and PCOC Board Chair Tyron Hampton.

“In response to COVID-19, the PCOC responded quickly to reduce costs, prepared the facility for the new health protocols, all while supporting our community through local business promotion efforts and meal distribution programs,” Hampton said.

“Although the PCOC is forecasting a major budget shortfall due to COVID, as TOT and TBID [Tourism Business Improvement District] are at historic lows while our debt payments on the city’s Convention Center continue to rise, we feel confident we have the reserves to cover this deficit,” he said.

Locally, the Langham Hotel reopened on Aug. 1, but the Hotel Constance and Sheraton Pasadena remain closed at this time, and so far no reopening date has been disclosed.

According to consultations with local hotels and the city, as well as projections by Tourism Economics for LA County and Smith Travel Research (STR), occupancy rates are expected to average 44 percent for the first six months of the 2021 fiscal year. The average daily rate (ADR) of revenue of every room is expected to be $125.

“Due to restrictions on large gatherings and as an indoor facility, revenue-generating options are limited at this time,” according to a city staff report.

Impacts of shutdown
Prior to COVID-19, the PCOC anticipated hosting more than 350 events, $11 million in revenue, and a surplus of over $500,000 in FY21, according to a staff report contained in the committee’s agenda.

“In March, PCOC’s facilities were forced to close due to the statewide Stay at Home Order and restrictions on large gatherings,” the agenda report states. “The PCOC team quickly shifted our focus on living within our new COVID financial means. Across the company, we reviewed every line item and contract agreement, including CIP [capital improvement program] to cut or drastically reduce spending. [The] Ice Skating Center was closed and the ice was removed in early May.”

The PCOC board approved a revised FY21 budget at its June meeting. The budget included a scenario with a reduction in revenue by 50 percent; a second scenario with a 70 percent reduction in revenue; and expenses reduced accordingly with each scenario.

All told, 36 full-time employees and130 part-time employees were not assigned hours due to the cancellation of events. The decisions, including furloughs, reduced payroll by $200,000 per month, or $1.5 million since March.

Since then, several maintenance projects have been completed, including roof repairs at the Civic Center, new air conditioning in the offices, a cooling tower replacement at the ice rink, complete testing of all ice equipment, an LED lighting retrofit in the conference building, and carpet replacement in the ballroom and lobby areas.

Short term, long term
But there are some revenue opportunities for the center. The PCOC could make $1.6 million for the 250-room alternative care facility designed to operate as an overflow space if Huntington Hospital reached capacity during the pandemic. The makeshift facility was never used and shuttered in June.

A U.S. District Court jury empanelment event is currently on the books, and the city’s Human Resources Department will use the facility for multiple exam days.

Studio/film streaming partnerships and car research opportunities are also possibilities and the PCOC is in discussions with the Pasadena Symphony for a social distance season.
The Pasadena Convention Center will serve as a five-day voting center beginning Oct. 30.

Between January and June, there are 60 events on the books, including “America’s Got Talent” auditions, multiple award shows, and graduations.

“One thing I am most proud of is our employees. We value their dedication and expertise, and as such we are working to extend health benefits for one year to all who have been laid off,” Hamp[ton said.

“The PCOC Board is committed to lead the Convention Center, Civic Auditorium, Ice Rink, and CVB (Convention and Visitors Bureau) through these difficult times. We anticipate having an excellent FY 22,” he said.

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