Last November, the National Governors Association concluded that cities and states are facing their worst budget crisis since World War II. The result is a kind of triple whammy for the hospitality industry.
The lower hotel occupancies of the last two years have reduced revenues, cutting, sometimes deeply, into occupancy taxes — the lifeblood for most convention and visitors bureaus. Meanwhile, many expanded or new convention facilities are coming online in a post — 9/11 climate. The competition to fill these facilities has severely hampered convention centers' ability to recoup lost revenues by raising rates and fees.
Some possible scenarios that could impact meeting planners:
- Hike Taxes, Shift Costs
A rise in bed taxes could be coming, along with sales tax hikes, which can inflate the overall tab for a convention. But don't expect convention centers to raise rates to recoup some of the subsidies they have lost from state and local governments.
“We're seeing the opposite — cities giving away space to get more business or capture delegates,” says Eugene Dilbeck, president and CEO of the Denver Metro CVB.
- Casting a Wider Net
Denver's CVB collects revenue only from hotels in the city, which includes about 16,000 rooms. Yet some 36,000 rooms in the metro area benefit from large conventions. So the bureau has been discussing ways those other hotels can contribute more, especially through marketing.
Some cities are hoping that the local business community will help them ride out tough times. Others, like the Greater Pittsburgh CVB, which has been adjusting to a $200,000 to $300,000 decline in state funding, are freezing salaries, leaving some positions unfilled, and cutting back on advertising.
“One of the things we made a commitment to is that we would not deplete our service capabilities [for meeting planners],” says Robert Imperata, executive vice president. “We're doing everything — if not more than — we did in the past because we recognize meeting planners are the individuals who can bring us back.”