IT'S NO PICNIC in the park being a convention and visitors bureau executive these days. In the last 18 months, spending scandals at a handful of bureaus have cast a shadow over the entire CVB profession. Many destinations, facing big budget deficits, have slashed funding for bureaus. Some have stripped bureaus of their traditional responsibility forthe area's convention center for citywide meetings in an effort to curb costs and/or generate more convention business for the center. There is debate in at least a few cities about abolishing the local CVB altogether.
We gathered together a group of CVB executives this summer at the annual meeting of the American Society of Association Executives in Minneapolis to talk about this unsettling state of affairs. Our conversation ranged from how bureaus are coping with intense public scrutiny of their travel and entertainment expenditures, to ways in which the role of CVB executives is expanding beyond sales and marketing, to how bureaus are working with associations to boost attendance.The bottom line for associations? Return on investment is a key theme for CVBs when it comes to meetings business, sponsorships, and marketing expenditures. Another big theme: Partnering with associations to boost convention attendance is a top priority.
T&E Spending: Built-in Conflict
These days no issue is as contentious as the travel and entertainment expenditures of convention bureaus. (Most bureaus are private, nonprofit organizations funded primarily through public funds.) Some examples: Last year the president of the Denver Metro Convention and Visitors Bureau departed after media reports that staffers attended a hospitality event at a local strip club restaurant; and top officials of the Dallas bureau left amid an uproar over lavish spending on travel, dinners, and strip clubs. More recently, a Suffolk County, N.Y., audit this summer has alleged spending abuses by the Long Island CVB that included trips to a strip club by the former bureau President Michael Hollander. Hollander's attorney has denied the allegations of abuse.
Clear-cut examples of CVBs crossing the line are not always the case. Take, for example, the San Diego CVB, which over the years has built a reputation as an industry leader. But when the city of San Diego found itself in a deep budget shortfall earlier this year, elected officials took a look at spending practices at the bureau, finding fault with, among other things, $16,000 the bureau spent last year to co-sponsor a golf outing organized by the American Society of Association Executives.
“This is how we meet and socialize with customers. It's all about relationships,” said a chagrined Reint Reinders, president and CEO of the San Diego CVB. Reinders said the city then “dropped a bomb” in July, saying that as a cost-savings move, sales and marketing for the San Diego Convention Center, which is owned by the city, would now be done by the center instead of the CVB. The bureau's budget was cut by $1.2 million, and the 10 former CVB sales and marketing staff now are public employees working for the center. The center's budget was not increased. The CVB is still involved in servicing citywides — from registration to special events and transportation, Reinders clarified.
(A six-month-long city audit of the bureau was completed in September, weeks after our roundtable. It found issues with excessive staff expenditures on things like Super Bowl tickets, parking, perks, and bonuses, as well as a legal $50,000 loan the bureau had made to Reinders and he had paid back.)
One upshot of this kind of scrutiny of how public funding is spent is that more and more bureaus are no longer co-mingling private and public funds. “We've not co-mingled funds for three years,” noted Steve Moore, president and CEO of the Greater Phoenix CVB. “And ourspecifies what are the allowable expenditures with city monies.… I think that [not co-mingling] monies is certainly going to be the choice in accounting for years to come. And as for the impact on , I don't think there is any.”
Reinders disagreed: “You have to have high ethical standards, of course, no matter what pot the money comes from. But there might not be sponsorship dollars, as there have been in the past, for association groups, such as ASAE, with big meal sponsorships. You get to show a 10-minute video, but you can't measure the return. Those kind of sponsorships are going to go away.”
Stephen Richer, executive director, Mississippi Gulf Coast CVB, added to that point: “There is a rule of reasonableness that has to be looked at here.…Some people at CVBs have taken their credit cards and done some things they shouldn't have. And sometimes there are meeting planners who simply demand too much [in negotiations], regardless of the value of their meeting.” The bottom line for bureaus, he said, is return on investment. “If you spend $100,000 on something, you'd better see some business come off of that, otherwise you are legitimately subject to some criticism.”
Part of the challenge for CVBs is that most are private, nonprofit organizations, but they must spend public money to generate profits for the cities they serve.
“We [CVBs] have done a very poor job of articulating to our community what it is we do,” said Deborah Sexton, president, Chicago Convention and Tourism Bureau. “And these budget cuts have a lot to with that failure,” she said. Illinois state legislators this year slashed tourism funding for the state's bureaus. “We said, wait a minute, the last thing you want to do when you have a deficit is cut funding for revenue producers,” Sexton continued. “We are revenue producers. The sad thing is that many, many people don't realize that. This has to change. I agree with others who have said that the role of CVBs is much broader than sales and marketing of a destination.”
Dianne Binger, president/CEO, Salt Lake City CVB, said that every year she brings members of her board to the ASAE annual meeting. It's part of an education process, she said. “They need to see first-hand what this industry is about, how competitive it is.”
New Models for Marketing Centers
Traditionally, the sales and marketing of the convention center has been split: CVBs handle events that are booked 18 or more months out, and the convention center sales team handles events that book less than 18 months out. That tradition, however, is rapidly changing. Most bureau leaders at the roundtable say their booking cycle now reaches to six or eight months out. “We've seen a lot of lucrative, short-termbusiness with very short lead times, and this is a big reason for this shift,” noted Leslie Doggett, president/CEO Baltimore Area Convention and Visitors Association.
In some destinations the change has been more radical. The Hawai‘i Convention Center is managed by SMG, one of the largest facility management firms in the country. A year and a half ago, legislators, looking to boost bookings at the center, took the marketing of citywide meetings out of the hands of the Hawai‘i CVB and made SMG responsible for booking this business.
“Our bureau partners manage and market our national interest in terms of the leisure market and single property meetings,” explained Randy Tanaka, director, sales and marketing, Hawai‘i Convention Center. “Clearly there is some crossover but we work with our partners every day to make it seamless.” In fact, Tanaka has two business cards: one as a representative of the center, another of the bureau.
Coordinating two sales teams — one working for the center and the other working for the bureau — has long been a challenge for many destinations. When San Diego decided in 1996 to merge those sales teams into one entity working under the aegis of the convention bureau, the move was considered by many to be innovative and efficient. As mentioned above, this move was reversed in July when the bureau's convention sales staff became public employees working under the management of the convention center.
San Jose has taken yet another approach. Earlier this year, the mayor agreed to put the management of the San Jose McEnery Convention Center, which was run by a city agency, out to bid for private management. The San Jose CVB spun off a private subsidiary called Team Jose to bid on the management contract, a bid that it won this summer. The idea behind Team Jose is that “local stakeholders are the best people to operate a convention center,” said Dan Fenton, who now has a dual role of CEO of the convention bureau and chairman of the board of Team Jose. Team Jose's board includes representatives not only from the bureau and area hotels and other local businesses, but labor unions that work at the center.
“We're very excited about the opportunity and about this new model,” Fenton said, “because now the convention center and the bureau controls the calendar and oversees all markets — from weddings to citywides. The bureau signs allso, essentially, when we book a client we can contract immediately with them, and there is no bureaucratic process.” It's a model, he said, that lets the center be more nimble in the marketplace with regard to service and pricing models.
As our feature on page 14 in this issue, “Let's Make a Deal,” points out, it's a buyer's market these days when it comes to convention center space. While that's good news for planners, it presents some major challenges for CVBs and convention centers. Several roundtable participants, for example, lamented the lack of due diligence done by many destinations before building a convention center.
“We've got a kind of ‘Edifice Complex’ these days,” joked Richer, Mississippi Gulf Coast CVB. Everybody wants a convention center, he said, but whether the destination has the accessibility and attractions, and whether they can build a center that has the service, support, and technology demanded by today's convention organizers is another question.
Moreover, the competitive environment in which there is so much discounting of not only center rental rates and service fees, but also of hotel rates (and consequent diminishment of room tax revenue) is going to hurt the long-term ability of many cities to meet debt service on the convention centers, noted Steve Moore, Greater Phoenix CVB. “We've got some major, big-picture issues facing many destinations in the next five to 10 years.”
Another big-picture challenge: In many places, tourism and convention-related activities are getting an ever-shrinking percentage of room and travel tax revenues that were once earmarked primarily to fund these activities. Instead, the revenue is going to a general fund to help with other budget needs, which are considerable in many destinations these days. This issue could really benefit from an industry-wide initiative, said several roundtable participants.
“I think if our elected officials heard from end-users and industry groups, like ASAE, PCMA, and IAEM, that they hate to see this money not going to things that ultimately benefit our meetings and what we do, that would be powerful,” San Jose's Fenton said. “Our elected officials hear from us all the time. For them to hear different voices on the subject would really help.”
One point of general agreement at the roundtable: Public funding for bureaus is going to continue to be a challenge. “I don't think there is a bureau out there that isn't aggressively looking for new revenue streams to offset loss of public dollars and to increase the private funding,” remarked Chicago's Sexton. “As state dollars shrink, you need to be out there working on sponsorships, fundraisers, strategic partnerships, that will give you greater marketing reach and/or additional funding, which is terribly important.”
A downside to slashing bureau budgets is that bureaus might not be able to create as many attendee-building tools for planners as they have in the past, she added, noting that cutting in this area is the last thing her bureau is going to do. “Most of our money is going to trade shows and conventions to help them build attendance.”
Helping planners build attendance is emerging as a huge priority for CVBs, roundtable participants noted. “All associations want maximum attendance for their conventions — this is their biggest money-maker in most cases,” Moore said. In this electronic age, there's a lot more that can be done to get a greater percentage of memberships to attend conventions, he said. “We're going to see bureaus, hotels, and associations working more closely on this issue, creating travel packages for attendees that bundle travel/hotel/registration. It's all in the early stages.”
Dianne Binger, Salt Lake City CVB, pointed out that CVBs have measured their success with citywide conventions in terms of room nights booked. “I am trying to build awareness that a better measure of economic impact is attendance. We have the tools, such as the new delegate expenditure data, from IACVB [International Association of Convention and Visitor Bureaus] to measure that impact. This is a much more important measure of our success.”
It was clear at the roundtable that the role of CVB leader has become more complicated, multifaceted — and much more subject to political pressure. “We have to be politically viable, no question,” said Fenton. “Elected officials have to see us moving the city or county forward when it comes to core issues.”
Hawaii's Randy Tanaka noted that while competition among bureaus for convention business is intense, it's far from unfriendly.
“It's really amazing, when you think about it, how well bureaus get along with one another,” he said. “It's not like other industries, like the soft drink industry, where Coke and Pepsi are at each other's throats for position in the market. We are all friends of each other. You just don't see a lot of other industries that depend upon each other to become better at their jobs.”
The Future of Room Blocks?
OUR CONVERSATION INEVITABLY touched on some issues related to how discount hotel rates on the Internet have affected convention room blocks. Randy Tanaka, sales and marketing director, Hawai‘i Convention Center, pointed out: “We're seeing more contracts withoutclauses, much more conservative blocks, and in some cases, no blocks at all.”
The block is “an animal that is going to morph into whatever it's going to. We'll watch it,” said Deborah Sexton, president/CEO, Chicago Convention and Tourism Bureau. “But if the block doesn't materialize, and there are no rooms available in five years when the meeting comes to town, then it's going to be the destination's fault, not the association's. As business increases, this is precisely what's going to happen. It's an ugly picture.”
Others noted that more and more hotels are trying to drive customers to their own Web sites for the lowest room rates. “This is welcome change, and will help a bit in keeping attendees in the block,” said Reint Reinders, CEO/president, San Diego Convention & Visitors Bureau. Steve Richer, executive director, Mississippi Gulf Coast CVB, said that more and more bureaus are “compelled” to put hotel bookings on their CVB Web site, both as a service and convenience to meetings groups — and as a way for CVBs to generate revenue (by keeping a percent commission on the booking).