San Jose tourism slow to recover

A recent audit of the nonprofit that manages San Jose’s arts and cultural centers shows the organization is rebounding from a devastating pandemic year—but is still a long way from regaining pre-pandemic revenues.

The city’s annual audit of Team San Jose found the organization exceeded its goals of booking hotel rooms, hosting events and bringing revenue to the city. The group manages the San Jose McEnery Convention Center and seven arts and entertainment venues including the California Theatre, the Center for the Performing Arts and San Jose Civic.

The findings, presented earlier this week to the city’s Community and Economic Development Committee, show a major improvement over previous years, when COVID-19 stifled the hospitality and entertainment industries.

“We are continuing to see increasing momentum throughout our facilities,” Team San Jose spokesperson Frances Wong told San José Spotlight. “Especially so in our theaters, where we hosted 22 performances last week alone.”

While the hospitality sector has begun to rebound from COVID-19 hardships, it’s still far below pre-pandemic levels. This is largely due to lingering pandemic safety precautions, Wong said.

“Santa Clara County health orders banned large meetings and events from March 2021 until June 2021, so our buildings were closed and the start of the fiscal year saw us reopening from scratch,” Wong said.

Team San Jose receives $1 million annually from the city to manage its tourism efforts and convention centers. Because the organization met all of its targets for revenue and economic impact, it qualifies for an additional $250,000 from the city. This is the first time it has qualified for the incentive since before the pandemic.

Increased revenues, hotel bookings

According to the audit, Team San Jose brought an estimated $34.2 million to the city last year, based on spending by attendees at conventions, meetings, sporting events and performances. This is a drastic improvement over 2020-21, when the nonprofit reported zero revenue after pandemic safety mandates closed event spaces citywide.

A handful of major events generated nearly half of that revenue, including Beyond Van Gogh, a three-dimensional projection of the famous painter’s works, and CLEO 2022, a laser science conference.

Team San Jose earned nearly $2.7 million in total revenue during the 2021-22 fiscal year. The previous year was the first in which the organization failed to meet its economic and financial goals in a decade.

At $2.7 million, Team San Jose beat its revenue target of $25,353 more than 100 times over, though that goal was set far lower than the previous year’s target of $612,830. Wong said that’s because the state still hadn’t published guidelines for reopening event spaces when the organization set its revenue goals in the spring of 2021, and the organization anticipated restrictions to further hamper business.

Even though overall revenue is up, Team San Jose’s event spaces operated at a loss of $9 million. Though this is a major improvement over the $13 million deficit in 2020-21, it’s more than double the $4 million loss reported in 2018-19.

The organization often operates at a loss, Wong said, which is usually recuperated via subsidies from hotel taxes and revenue from the nonprofit’s parking garage on W. San Carlos Street. These generated nearly $10.5 million over the last year, according to the report.

Hotel bookings increased to more than 101,000 over the last year, nearly 20,000 more bookings than the previous year, but still far short of the 170,000 bookings in 2018-19.

Team San Jose laid off roughly 1,400 employees during the pandemic, but has begun to hire hospitality workers again, Wong said.

Improvements at Team San Jose are representative of a slow rebound across the city’s hospitality industry, which struggled even more than in other cities during the pandemic.

“The hospitality industry is recovering, but certainly not back to pre-pandemic levels,” said San Jose Chamber of Commerce CEO Derrick Seaver. “I spoke to one of our (hospitality industry) members just a few weeks ago who told us they’ve been fairly consistently at 90% capacity.”

But in order to return to its previous luster, the city needs to lean into destination marketing, or travel advertising that caters to businesses, Seaver said. By highlighting activities, restaurants and other local attractions available to business travelers, he added, the city can pull in more traffic from business travelers who want to do more than just come to the city for work.

“The more that we highlight the other regional economic activities that we have, the better,” Seaver said.

Contact Brian Howey at [email protected] or @SteelandBallast on Twitter.