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At a meeting of the Arcata Lodging Alliance this past Friday, the group’s three-member board of directors approved a new promotional endeavor allowing the city’s hotel owners to give away more than $700,000 worth of $100 gift cards to visiting travelers.

The idea is to lure out-of-towners into multi-night stays at Arcata hotels through a targeted ad campaign that dangles an unfailing incentive: cash money. Well, not cash, technically, but the 6,250 pre-paid Visa gift cards approved for dissemination will have no restrictions or expiration dates. 

This expensive campaign is designed to super-charge demand at the seven hotels that comprise the Arcata Lodging Alliance, a subsidiary group of the 501(c)(6) nonprofit Humboldt Lodging Alliance (HLA). Arcata’s hospitality sector has suffered in recent years due to a variety of bureaucratic and economic factors, not least of which is the skyrocketing cost of gasoline. 

While several hospitality leaders are excited about this promotion, not everyone agrees that it’s a wise use of the organization’s limited revenue. The lone dissenter in the board’s 2-1 vote was Hotel Arcata General Manager Sherrie Potter, who expressed “grave concerns” about the apparent lack of accountability and potential for malfeasance.

“I don’t think this is a good look for the Humboldt Lodging Alliance,” Potter said prior to the vote. She argued that the gift cards should be held and distributed by a neutral third party, rather than the hotel owners or employees, saying, “Really, there needs to be a lot of accountability for where this money is going.”

A public commenter agreed, describing the proposal as “gross misuse of funds” and saying, “There’s nothing preventing the individual hotels from distributing these gift cards as they see fit.” 

But the other two directors on the board — Comfort Inn Arcata owner Meenal Patel and Hampton Inn and Suites owner Shailesh Patel — simply ignored these objections and voted to approve the gift card bonanza. 

Meredith Matthews, the HLA’s executive director, told the Outpost in an email that she’s enthusiastic about this plan’s potential, and she vowed that the organization will establish controls and reporting requirements to ensure transparency and accountability.

“What I like about this program is that it’s really straightforward,” Matthews said. “It gives people a reason to come stay in Arcata, and it’s something we can actually measure. We’ll be able to see how many room nights it generates, where visitors are coming from, and what the overall impact is.”

But Potter, for one, remains skeptical.

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Formed in 2012, the Humboldt Lodging Alliance functions as the official owners’ association for the county’s lodging industry. It generates revenue through a Tourism Business Assessment District (TBID), imposing a 2% surcharge on every guest’s bill. The group’s revenues exceeded $1.5 million in each of the last four years, though its income has been declining slightly as expenses rise. 

Matthews noted that Arcata’s lodging sector, in particular, has faced some real challenges in recent years. Through California’s Project Homekey, for example, two Arcata hotels were converted into permanent supportive housing for people experiencing homelessness. Rooms in other hotels were nabbed by Cal Poly Humboldt for student housing. These projects reduced Arcata’s total room inventory and, consequently, its transient occupancy tax (TOT) revenues.

“This [promotion] is a way to respond to that by making sure we’re actively bringing visitors in and supporting the hotels and businesses that are still serving our tourism economy,” Matthews explained.

The HLA’s mission is simply to drum up more business, “to put heads in beds” through outside marketing and various events and attractions, such as the Redwood Sky Walk at Sequoia Park Zoo.

The HLA is governed by a nine-member executive committee, and it’s also subdivided into eight community jurisdictions represented by their own, smaller boards, with members elected every two years. The number of directors in each sub-group is based on that region’s TBID revenues, so the Arcata Lodging Alliance has three board members while Eureka’s has six and others (Ferndale, far-northern Humboldt) have just one.

Friday’s meeting of the Arcata Lodging Alliance was held via Zoom, and its centerpiece was a presentation from Matt Kolbert, co-founder of a Sacramento-based ad agency called Misfit, which has a longstanding contract with the HLA.

Kolbert explained that the idea behind this campaign is to target people within a five-hour drive of Arcata with ads offering $100 gift cards to people who book multi-night stays.

“We want to deliver a message that is not just, ‘Come see beautiful Humboldt County,’ but we want to deliver an incentivized, value-based message,” Kolbert said. He noted the skyrocketing costs of travel. “Anyone filled up their gas tank lately?” he asked, raising his own hand. “Probably took out a second [mortgage] on your house just to be able to do that.”

His agency’s proposal was for 6,250 cards to be divvied up to Arcata’s seven hotels in two waves, based on the number of rooms. See below:

The cards will be loaded with $100 apiece, but each one will cost the lodging alliance $115 due to various fees. It costs more to secure cards that have no expiration date. The media and outreach budget for the campaign will be $150,000. Add in a $27,500 fee from the ad agency and the total cost of the promotion comes to $896,250, an amount that represents more than three and a half years of revenues for the Arcata Lodging Alliance.

After the presentation, Potter raised her concerns.

“I think it’s a good idea to a degree, but I don’t want to be responsible for tens of thousands of dollars of [gift] cards,” she said. She also expressed a reluctance to maintain oversight of staff with such valuable items behind the front desk, and she said she was under the impression that any expenditure larger than $75,000 needed to go before the entire HLA board for approval. (Matthews told her that’s incorrect.) But Potter’s main issue was the apparent lack of internal controls and oversight.

Those concerns were echoed by a caller named Tineke Iris, who said, “You’re basically distributing three-quarters of a million dollars with no internal controls over how these gift cards are distributed. There is nothing preventing the individual hotels from distributing them how they see fit.” 

But the board majority expressed no such concerns — nor much of anything else. Immediately after Potter voiced her objections, Shailesh Patel made a motion to adopt the proposal “as is.” Meenal Patel quickly seconded the motion. Neither man acknowledged or addressed the concerns raised by Potter and Iris. When Potter later asked Shailesh directly to respond, noting that this promotion was his idea, he ignored her.

(The Outpost could not determine whether the two Patels on the board are related. Attempts to reach them via phone and email for this story were unsuccessful.)

The two-minute video below collects a few clips from the meeting. (Note that Potter refers to the gift cards as “gas cards” a few times. An earlier version of the campaign proposal involved that idea.)

Reached by phone this week, Potter said that serving on the Arcata Lodging Alliance board has been frustrating because the other two directors tend to vote in lockstep.

“My opinion doesn’t matter,” she said, adding that Meenal Patel rarely attends board meetings. “I think I’ve seen him once before.”

Potter said she remains concerned about how the gift cards will be managed and accounted for. 

“Plus, I think it’s a foolish use of our money,” she said. “We will have nothing to show for it in a few months.”

While the HLA’s revenues are generated through a self-imposed tax and thus not considered public funds, the organization has a contract with Humboldt County to collect the TBID assessments and pass the funds on to the HLA, minus a 1% administrative charge. Because of this arrangement, the county has the right to monitor and review HLA’s records, programs and financial activities at any time. The HLA also has to abide by California’s open public meetings law, the Ralph M. Brown Act.

The HLA’s TBID will expire next year, and in recent HLA board meetings, directors have remarked on this looming deadline, noting that the county’s tourism-boosting efforts may look a lot different starting in 2027.

This may have played a role in the Arcata hoteliers’ decision to take such a big swing now. The $896,250 gift card promotion will eat up more than 81% of the Arcata Lodging Alliance’s current fund balance. 

But Matthews isn’t the only person excited by the plan. Rosa Dixon, executive director of the local business marketing nonprofit Humboldt Made, said her organization plans to collaborate with the HLA on this effort.

“I think that the campaign is an amazing concept because I think the idea of giving people money to spend in our town is exactly what we need for our local businesses,” Dixon said. “It’s going to encourage them to go down to a local business and buy that shirt they might not have bought before, or go to a restaurant and spend a bit more, maybe stay another night [in their hotel].”

Matthews said HLA will work with Humboldt Made and the Arcata Chamber of Commerce to design a flyer promoting local businesses and restaurants that can be distributed with the gift cards. 

“We already spend about half a million dollars a year marketing Humboldt County, and this is just a more targeted way to drive people specifically into Arcata,” Matthews said. “And when people stay overnight, they’re eating in our restaurants, shopping locally — it really supports the whole community.”