The local House of Representatives is in the process of evaluating a bill that would increase the state’s funding to the island’s destination marketing organization (DMO), Discover Puerto Rico—a measure that has garnered widespread approval from the tourism and hospitality sector, but raised eyebrows and allegations from others.
Rep. Alonso Vega introduced House Bill 2303 to amend the ‘Act for the Promotion of Puerto Rico as a Destination’ to raise Discover Puerto Rico’s assignments from $25 million to $35 million—that is, equivalent to the revenue produced by the room tax above the revenue it produced in the fiscal year 2018-2019— as a bid to boost the organization’s marketing efforts and outreach capabilities.
Last week, the House held the second public hearing for the bill, in which Manuel Laboy Rivera, secretary of the Department of Economic Development and Commerce (DDEC by its Spanish acronym), affirmed that the legislation would create a “direct proportion” between the DMO’s efforts and their results, which he claimed should have a positive multiplier effect.
“That is, the more tourists come to Puerto Rico and stay in our rooms, the more room tax revenue will be generated and, as a result, the DMO will have the potential to receive more money. This, in turn, will result in more resources for the DMO, which will translate into more capacity to market Puerto Rico as a tourist destination and, as a corollary, more tourists [and a] greater injection for the island and economic development in the tourism sector,” Laboy Rivera asserted.
The tourism industry has expressed support to Discover Puerto Rico, the Destination Marketing Organization for the island
Moreover, the Puerto Rico Tourism Co. (PRTC) has repeatedly remarked that its combined efforts with the DMO have led to economic growth in this sector, such as more cruise visits, increased hotel occupancy rates and higher air passenger traffic.
Multiple organizations and entrepreneurs have endorsed the bill or even participated in its public hearings. Some of these include the Hotel & Tourism Association and the P.R. Builders Association (ACPR by its Spanish initials), both of which convey a message of consensus from their respective members and associates.
ACPR Spokesperson Emilio Colón Zavala stated during the hearing that “Puerto Rico is in a better position to continue attracting more groups, conventions and tourists from foreign markets, which would have a great impact on hotels’ occupancy rates, a positive effect on restaurant consumption and retail sales and a greater consumption index through tourism activity, with a significant impact on the treasury and economic development.”
Representative Denounces DMO’s Supposed Funding Mismanagement
Despite a resounding endorsement from diverse authorities, the bill has also been laced with criticism. Popular Democratic Party (PDP) Rep. Ángel Matos has vocally disapproved of Discover Puerto Rico’s operations and cited a supposed pattern of funding mismanagement.
In an interview with THE WEEKLY JOURNAL right after the second public hearing, Matos claimed that the DMO has reduced its expenditure finances for promotion and advertisements from $19 million to $16 million while expanding its payroll budget. He also claimed that the organization spends a dubious amount on catering services for its board of directors’ meetings.
Furthermore, he reminded that Discover Puerto Rico has a 10-year contract with the PRTC and claimed that the DMO has mismanaged a total $3 million, so if this supposed spending continues at the provided rate, the organization will have “mismanaged” roughly $30 million by the end of the initial contract.
“That is why before we give out more money, we need to have a clear understanding of what in the world they are doing with the $25 million,” he said.
“For example, we have recognized that they have a $33,000 budget for food and incidentals to cover mostly the board of directors’ meetings. The problem is that they have overspent up to $44,000, and the reality is that if you divide among 12, 14 people average per meeting we are talking about $350 per person in food for every meeting. Some of the meetings that I have read about last only 30 minutes and we need to understand that if we let spending go that way, and we multiply by 10 years, then we have a misuse of $440,000,” Matos stated, adding that the DMO spent around $10,000 on a desk and executive chair.
He also cited that the organization has a $140,000 assignment for travel expenses but it has spent nearly $200,000.
Regarding both the PRTC and Discover Puerto Rico’s continuous reports of growth in the tourism and hospitality sector, the representative denied that these are the result of successful marketing strategies, but rather a direct result of the island’s overall recovery from Hurricanes Irma and Maria, which devastated Puerto Rico on Sept. 2017.
“I strongly disagree for just one reason: if you see a report that says that the last trimester of 2018 was better than the last trimester of 2017, it’s outrageous because in the last trimester of 2017 we were hit by Hurricanes Irma and Maria, and that’s just stupid economics. You cannot say that groups and conventions in 2018 because, of course, we were down in 2017. And now you are saying that 2019 numbers are better than in 2018. Of course, because… the island was close to shutdown,” Matos affirmed.
CEO affirms the numbers surpass pre-Maria levels
THE WEEKLY JOURNAL asked if Matos or his party have considered canceling the DMO’s contract if victorious in the 2020 general election, provided that the organization was established under the Ricardo Rosselló administration, which is part of the New Progressive Party (NPP).
To this, the PDP legislator clarified that he does not oppose the concept of Discover Puerto Rico, but demands more transparency to comply with the standards expected of any public entity.
“My position today, and that which I have expressed since the beginning, is that if there is a change in government in 2021, we should have a Tourism Company back, not a Tourism Office… and yes, we will have a DMO, maybe a DMO closer to home, a DMO with maybe a less bureaucratic board of directors,” Matos said.
Convention District Stands by Bill
Meanwhile, Noelia García—chairwoman of Discover Puerto Rico’s board of directors and executive director of the Convention District in San Juan—responded to these allegations, citing that the DMO presents quarterly industry updates that include records of its spending.
García directly dismissed the claim that the organization spent thousands of dollars on an executive desk and chair, explaining that one of the aforementioned reports detailed that the expense was the mount of the DMO’s spending on furniture for its offices during the beginning of its functions. Moreover, she urged the island’s news media to report on these quarterly updates so that residents may have a better understanding of Discover Puerto Rico and its deeds.
“I think the important thing here is to define, far from criticizing and destroying the DMO, which is the vehicle that we have to promote Puerto Rico… what will we recommend for the DMO to have greater success? Well, all things considered, my recommendation is for the DMO to have a greater presence in the local media,” García said.
García shared a letter she addressed to Rep. Alonso, the author of H.B. 2023 and chairman of the House Committee on Tourism and Social Wellbeing, in which she observed that Puerto Rico’s budget for its DMO is considerably lower than other jurisdictions with similar or fewer inhabitants. For example, the city of Fort Myers in Florida has a population of roughly 80,000 but invests $112 million in tourism marketing. With this in mind, and the organization’s reported potential to boost the local economy, García told THE WEEKLY JOURNAL that the ideal budget for Discover Puerto Rico should tally at $50 million.
To justify her recommendation, García observed that in just over a year, the DMO managed to secure 36 percent of the Puerto Rico Convention Center’s bookings from 2019 to 2023 and the events with the highest number of participants.
Business owners and developers discuss recovery tactics and upcoming projects
PRISA Group CEO Federico “Friedel” Stubbe, who is overseeing the development of District Live in the Convention District and has invested more than $1.2 billion in the island’s tourism and hospitality sector since 2010, echoed García’s statements during the bill’s second public hearing.
Stubbe pleaded to increase Discover Puerto Rico’s allocations up to $50 million as a means to enact a more aggressive marketing effort to safeguard the island’s image, which has taken a toll since 2017 due to the Zika virus epidemic, the impact of Hurricanes Irma and Maria, corruption allegations and federal investigations.
“Our image is being systemically destroyed. We have to reverse this trend,” Stubbe said.
“The DMO is a great vehicle. They have been extremely effective with everything, including this mess of an image that we have. Even so, tourism has grown and they work with very low expenses, only 6.4 percent of their budget,” he added.
Editor's note: This story was published on the November 13 print edition of The Weekly Journal.