Federal funding gone, Los Cabos creates private promotional trust

Photo Credit: Gustavo Frazao/Shutterstock

Visit Los Cabos, which is funded by a 3% hotel tax on visitors, created a complementary trust fund that will allow the region's private sector to contribute money for promotional efforts.

Rodrigo Esponda, the tourism board's managing director, said the immediate impetus to create the fund was the need to replace $2.5 million in resources and contributions that had previously been provided by the federal Mexico Tourism Board, which was dissolved earlier this year.

Although Esponda said that international arrivals have grown 4% year over year through April, the board is underfunded compared with competitive destinations. To make his point, he compared Los Cabos' current budget of $12 million and its 3 million annual visitors with Bermuda's $38 million promotional budget, which attracted 650,000 visitors.

Rodrigo Esponda
Rodrigo Esponda

Esponda also noted the region's growth in capacity, with 2,000 additional rooms being added in 2019. Since 2017, hotel inventory has grown 31%, he said.

Los Cabos has traditionally been less dependent on federal funding than other tourist destinations in Mexico, enjoying greater hotel tax funding and very active involvement from the private sector. Because 100% of the hotel tax, collected by the state of Baja California Sur, is turned over to the board, Esponda said that hotels are incented to contribute to the private sector trust fund because when more visitors arrive, more hotel tax is collected. This creates, in effect, a tax "match" when a promotional campaign is effective.

Among the activities Visit Los Cabos' funding will support is the opening of an office in Los Angeles in August.  "Forty percent of our visitors are from California, and our biggest partners -- airlines, tour operators, wholesalers and travel advisors -- are also based in the state," Esponda said.

Membership fees to join the private trust are based on several variables. For hoteliers, considerations will include the number of rooms, location, star category, group facilities and target market. The local hotel and timeshare associations have signed on to be founding members of the trust.

Members of the trust will also have access to a fulfillment house which will, among other services, process travel agency commission checks.

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