Destination Management Organizations in Flux

Like other sectors of the meetings industry, destination management organizations are faced with enormous challenges today. Topping the list: dwindling funds. Revenue from hotel bed or occupancy taxes, which typically accounts for more than half of DMO funds, dropped by a national average of 14.5 percent in 2009, then dipped another 2 percent in 2010, according to the Washington, D.C.-based Destination Marketing Association International. Among other woes: political pressure, increasing competition and heightened public scrutiny.

Of necessity, many DMOs are reinventing the way they do business. On the following pages, M&C profiles five bureaus now facing some type of crossroads. Their challenges include absorption into a state agency, drastic budget cuts and sluggish business.

Atlantic City Convention & Visitors Authority A combination of declining gaming revenues and a state governor restless for change has left the Atlantic City Convention & Visitors Authority, the organization that markets the city and its convention center, in a seemingly precarious position.

The harsh reality for Atlantic City is that gross revenues from its 11 casino resorts have declined by an estimated $1 billion since 2007, thanks to a faltering economy and encroaching competition from Internet gaming and casinos opening in neighboring states.

Last July, Gov. Chris Christie officially backed a plan put forward by the state's Gaming, Sports and Entertainment Advisory Commission, which called for the creation of a tourism district to be administered by a new agency that also would be charged with overseeing the city's meetings and conventions business. One stated goal was to grow convention revenue by at least 30 percent per year by 2015.

In November, the New Jersey Senate offered up bill S11, which calls for the establishment of an Atlantic City Tourism District to be administered by the existing Casino Reinvestment Development Authority, and for the transfer of the Atlantic City Convention & Visitors Authority and its functions to the CRDA.

Founded in 1984, the CRDA steers the 1.25 percent tax revenue that the state's 11 casinos pay to reinvest in public service projects such as senior centers, housing and schools. The CRDA currently has a staff of 28 and annual budget of about $4 million, compared to the ACCVA's staff of 58 and budget of $11 million (funded by a room tax of $1 to $2, based on type of property).

Executive director Thomas D. Carver, who has been at the helm of the CRDA since 2005, says handling the city's convention and meetings business "is not something we asked for; the ACCVA does a good job."

At press time, the measure had passed the state Senate and the Assembly, before heading to Gov. Christie for his signature. Though he is expected to eventually sign it, a state official who asked to remain anonymous told M&C that Christie most likely will request some revisions. The official said the governor has wanted to dissolve the ACCVA all along, but state legislators would like to retain the bureau as a separate division within the CRDA.

Obviously, this is not the most secure of times for the ACCVA. "What I hear changes daily," says Jeffrey Vasser, president of the bureau since 2002. Not surprisingly, he would prefer his agency to remain as a stand-alone division under the reorganization, "so the structure is still intact for customers and prospective customers."

Both Vasser and the ACCVA's vice president of convention sales, Gary Musich, see a bright side to the new arrangements. Since the scope of the tourism district will increase, they foresee more marketing funds to attract conventions and visitors. "If you want to grow, you have to invest in the product," notes Musich. "We are now competing with cities that have sales forces three times the size of ours." The bureau currently has eight reps, whose efforts account for 48 percent of group rooms sold in the city.

To help bolster the ACCVA's viability, Vasser and Musich have been compiling statistics and sharing their successes with government officials and the public. For example, at the end of October 2010, more than 440,000 attendees had signed up for conventions scheduled through 2015, an increase of 73 percent compared with the total for the same period as of October 2009. The delegates are projected to spend more than $169 million.

Vasser acknowledges that his job could be in jeopardy. In fact, neither he nor other ACCVA staffers have contracts. "Who knows what the future will hold for me, but for next few years my role is to help my team transition into the new group," he says. "These are interesting times. But uncertainty is nothing compared to opportunity."

Team San Jose Among DMOs currently under the gun is Team San Jose, the nonprofit organization that manages the San Jose Convention Center and the city's convention and visitors bureau, as well as several other area venues -- for now at least.

Team San Jose was created six years ago to streamline the selling and cus­tomer support for the Northern California city's hospitality product, including the convention center (previously managed by a city department) and area hotels and attractions. Local labor, arts organizations and businesses came aboard and were active in the management of the organization. Over the six years, Team San Jose maintains that it increased convention center revenues by 95 percent and grew its operating fund to more than $10 million in 2008.

However, the organization drew the ire of the city council last fall, following an audit that revealed Team San Jose had nearly halved its $10 million reserve fund to make up for budget shortfalls, while at the same time, hefty bonuses were handed out to staff, despite the fiscal concerns.

Another factor contributing to the city's doubts about Team San Jose's leadership might have been differing views with respect to the purpose of the convention center. Team San Jose and its CEO, Dan Fenton, saw the facility as a means to bring business to the rest of the community. As such, the DMO sometimes favored conventions that would draw more out-of-town attendees to fill hotel rooms, eat at restaurants and visit local neighborhoods, even if they rented less convention center space. The city, on the other hand, preferred to lease out as much square footage as possible, even if the exhibition drew a mainly local crowd, according to Fenton.

This past December, city leaders voted to seek bids for a new management team to run the center, which is expected to debut a $120 million expansion in June. "Cities have a right to issue an RFP, and contemplating their options is not uncommon in the public sector," says Fenton, who resigned from his post on Jan. 31.

While the bid process unfolds, Team San Jose is trying to convince the council that its model as a hybrid destination management/venue management organization has been and will continue to be the most effective option for the city. They are pressing their case under the presumption that the city could change course and not seek a new management team after all. Over the course of the next five months, Fenton says, the bureau's senior leadership and board of directors will work to educate elected officials and members of the community on how it has met and in some cases surpassed eight performance measures.

At press time, a search committee had been formed to begin a national search for a new CEO.

Mobile Bay Convention & Visitors Bureau In the past year, the Mobile Bay (Ala.) Convention & Visitors Bureau was hit on two fronts: the BP oil spill that fouled the shores of the region, and a severely curtailed budget.

Mobile was not alone in the damages the oil spill inflicted upon tourism, including meetings, to the Gulf states, but the catastrophe's effects still linger. Among the fallout: Leon Maisel, the CVB's president and CEO since 2002, announced his resignation as this issue of M&C went to press. David Randel, the bureau's vice president of convention sales and service, was named interim president. Maisel will leave the organization March 1 and will meanwhile assist in the transition process; Randel has already assumed his new responsibilities.

M&C spoke with Maisel just weeks before he left his post and outlined the organization's considerable challenges: A perception study the CVB conducted after the spill showed it would take three to four years for Mobile tourism alone to recover.

Right after the spill, according to Maisel, "80 percent of planners we queried said they wouldn't consider us; there still are lingering misperceptions of how we were affected and how it allegedly ruined our seafood." On that front, there appears to be some improvement: A survey conducted last October showed the number of planners who wouldn't consider the destination because of concerns over oil had dropped to 40 percent.

On the budget front, the bureau was blindsided last fall when the cash-strapped city council voted to slash its contribution to the CVB by a drastic $1.4 million. "It took us by surprise," admits Maisel. "We thought we would get some cuts due to the recession, but not that much."

Among the reasons the council members gave for trimming their contribution (which comprises the majority of the bureau's funds) was lack of accountability of spending by the CVB, specifically its participation in the Florida Caribbean Cruise Association's annual meetings, which are often held outside the U.S. Maisel says it was imperative for his staff to attend the event, as the bureau is making an effort to attract more cruise ships to sail out of Mobile.

After spending "98 percent of my time" answering the council's questions and addressing any inconsistencies they brought up, Maisel and the CVB board were able to convince the council to reinstate $1 million. The new budget finally was approved in December, after the council insisted that certain performance measures (among them, the number of new conventions the bureau secures and the number of hotel rooms it books) be added to the CVB's contract with the city.

"They restored us back to where we have a 16 percent cut [from the previous year's budget]," says Maisel. Among the areas the bureau will have to cut back on is staff attendance at meetings industry trade shows, he laments.

Going forward, Maisel says he'd like to see the bureau revert to getting its funds from a lodging tax, as it had been up until three years ago. But now, that will be a battle for his successor to fight.

Additional reporting for this article was provided by Michael C. Lowe.

Houston Gets Back to Basics 
At the Greater Houston Convention & Visitors Bureau, vice president of sales John Solis has turned back time to get his city noticed. In an age where customers are inundated with e-mail and other online messaging, he's urging his staff to pick up the telephone.

"We've taken a real grass-roots approach," Solis says. "Every Tuesday, we have a two-hour window when our salespeople are dialing for dollars. They are calling customers and logging their calls. The upshot is that it's been a really big success."

The destination management organization also reinstituted the sales blitz, a practice it had shelved for the past 10 years or so. Over two days in October, using a room at the George R. Brown Convention Center set with 25 phone banks, salespeople from the bureau and local hotels worked the phones during three-hour sessions, logging 3,000 calls. About 400 people were reached, 70 percent of whom were interested in bringing their business to Houston.

"That's tearing a page out of an old playbook," says Solis. "We're doing it twice a year now." The next sales blitz is scheduled for the spring.

Part of the reason the DMO has returned to successful practices of the past is the dismal return it was seeing on e-mail blasts and other electronic efforts. "Social media have been nice; they're new tools for us," Solis says. "But they do not take the place of face-to-face meetings, talking to customers and even handwritten notes. That's how we're going out and getting to customers." He adds that e-mail is not very effective for promotions; it's a communication tool. "If you rely solely on e-mail to get you to the customer, you're making a big mistake," he says.

Solis does love technology for prospecting. "We can do the research on the association or meeting in question, so when we make that initial call, we are better prepared," he notes. "We know where they held their last meeting, what property they used. We're smarter people in that sense. But to take that information and just shoot an e-mail weakens the attempt. We have the salespeople tell us why they are going after the business, what the history of the meeting is, before we even attempt to contact the customer. We know whether or not the meeting is a good fit for our destination, and the customer appreciates that we've done our homework."  -- Sarah J.F. Braley