Open to Scrutiny

There was a time when convention and visitor bureaus could be counted on to help their cities overcome the stigma of political scandal or other image-tarnishing events. While this still holds true for many CVBs, a growing number have found themselves the subject of lurid headlines, probes and executive firings in recent years. 
  

"Now is the time to make CVB heads the
most professional leaders they can be,"
says Atlanta's Spurgeon Richardson,
chairman of the International Association of Convention & Visitor Bureaus.

   For meeting professionals who rely on bureaus for assistance with site selection, housing and myriad other details, the issue has become especially thorny, leading to breaches in longstanding partnerships and leaving some to look elsewhere for help in planning their events.
   As recently as this past November, headlines about a CVB executive losing his job amid scandal had the ring of familiarity. In this particular case, the CVB head was Eugene Dilbeck, then-president of the Denver Metro CVB. The imbroglio: an event at a strip club attended by bureau personnel. (For details, see “Behind the Headlines.”)
   In 2003 alone, similar scenarios were played out in some major markets:
   " In Ohio, Dave Nolan, president and CEO of the Greater Cleveland Convention & Visitors Bureau, stepped down in October 2003 amid allegations of lavish entertainment expenses and authorizing a $4,000 weight-loss program for an executive on his staff. 
   " In Maryland, Baltimore Area Convention & Visitors Bureau president and CEO Carroll R. Armstrong was ousted last February following charges of inflated booking and membership numbers.
   " In Texas, Dallas Convention & Visitors Bureau president Dave Whitney resigned in January 2003 over alleged lavish spending on travel and entertainment.
   Such stories certainly do not help the public image of CVBs. Because of their hybrid nature as part government organization and part private business, and their somewhat ambiguous standing within their communities, the role of bureaus is confusing to the public even in the best of times.
The cumulative damage of all the bad news has had an impact on meetings and conventions business, too. In an exclusive poll of planners conducted by M&C/NTM Research, two-thirds said they would avoid working with a bureau if planning a meeting in a destination where the CVB was involved in an ethical controversy. In extreme cases, they’ve pulled business from troubled bureaus. (For full survey details, see The Taint of Scandal.)

Behind the Headlines

Eugene Dilbeck

On Nov. 5, 2003, this startling headline appeared in The Denver Post: “Visitors Bureau Fires President; Strip Club Party Among Issues Cited.” But the story behind the story runs deeper than a questionable venue choice.

Both Eugene Dilbeck, former president and CEO of the Denver Metro Convention & Visitors Bureau, and Walter Isenberg, former chair of the CVB’s board, tell M&C the Sept. 30 after-work reception for bureau members and staff hosted by the Diamond Cabaret, a Denver strip club (and a member of the DMCVB) was not the issue that led to Dilbeck’s firing on Nov. 4.

“The board lost confidence in his ability to lead the bureau into the future,” says Isenberg, “and the action was not based on this one incident. That’s all I am going to say.” Another board member says the board felt Dilbeck was getting “too comfortable” after being at the helm of the bureau for nine years and did not keep board members in the loop on a lot of CVB issues. The cabaret event ”was just the final straw,” says the source.
 
The headline-making party had little to do with his dismissal, agrees Dilbeck. After receiving what he called a “glowing” review from Isenberg at the end of 2002, Dilbeck says the chair encouraged him to request a contract extension that would take him through retirement. Dilbeck sought a six-year extension, unlike the annual deals he had made in the past.

“The board felt it was a presumptuous request,” says Dilbeck, “and they said I had to make improvements in three areas before they would consider it.” The actions requested: closer communication with city employees; aggressive efforts to ensure the expansion of the Colorado Convention Center would finish by the end of 2004; and the commitment to delegate more responsibility to staff and not “hog” the media spotlight.

Dilbeck says he agreed to address the concerns of the board and worked on doing so up through the time of his dismissal. But a few months later came the Diamond Cabaret event. At the same time, Denver’s city auditor began an audit which Dilbeck says he encouraged of how the bureau spent its public money. Among concerns were an apparent commingling of public and private funds, making it difficult to determine which monies were used for various purposes.

The details of the Diamond Cabaret party were reported by a local TV station on Oct. 30. The next day, the board put Dilbeck on administrative leave, and several members urged him to resign. He refused and was fired on Nov. 4. What now? The 61-year-old Dilbeck says he plans to seek new opportunities in the marketplace. Meanwhile, the Denver bureau has formed a search committee to seek his replacement, says Isenberg. -- L.G.

Under a harsh spotlight
Bureau heads getting into hot water is nothing new. M&C’s November 2002 cover story detailed CVB travails in Boston, Los Angeles and Pittsburgh. What has changed is the amount of attention the media and subsequently the public pays to bureau practices.
   When the Enron scandal broke in fall 2001, all businesses came under fresh scrutiny by the media, notes Spurgeon Richardson, president and CEO of the Atlanta Convention & Visitors Bureau and chairman of the board of the International Association of Convention & Visitor Bureaus, the Washington, D.C.-based trade organization for bureaus. “CVBs are not the only ones living in fishbowls,” he says.
   Even beyond a general distrust of corporate America, bureau scandals are getting more press due to the increasingly competitive nature of broadcast news, says Michael D. Gehrisch, IACVB’s president and CEO. “In today’s electronic media, there is a lot of copycat stuff, especially during ratings sweeps months,” he notes, adding that he found last year’s local coverage of CVB woes in Cleveland and Dallas, for example, to be remarkably similar in format and content.  
   Some experts say CVBs are particularly open to attacks due to a lack of understanding by both the media and the public about what they do and how they are funded. One way bureaus differ from government organizations is their CEOs are contracted employees, not elected or appointed officials. Another key difference is their business model. 
   “They are nonprofit organizations designed to deliver profit for the community, plus they receive some tax dollars,” explains Marshall Murdaugh, president of Marshall Murdaugh Marketing, a consulting firm in Memphis, Tenn., who served as an interim CEO of the Baltimore Convention and Visitors Bureau in the midst of its problems last year.
   Of IACVB’s 172 member bureaus, 69 percent are funded by a combination of private and public funds; 31 percent are completely funded by public dollars. What often sows the most confusion is when CVBs’ public funds are classified as “taxpayers’ dollars” and that leads to image problems for bureaus, says Linda McKinney, president of Edwards, Colo.-based McKinney & Co., a sales and professional training consultancy.
   “It’s the wrong term,” says McKinney. “The public money a CVB gets is from bed taxes paid by hotel guests and not from the pockets of local residents. People hear ‘taxpayers’ dollars’ and ask why that money can’t be used for police, firefighters, etc. And when the spending goes for things like entertaining, fam trips or buying tables at industry events, it really looks bad.”
   Yet, even industry sources admit not all of the media’s scrutiny has been without merit. “Some of these CVB heads got a raw deal in the media, but in other cases, some bad eggs were weeded out,” says one industry leader, who spoke off the record. 
   “Who will ask these questions if the media doesn’t?” asks Murdaugh. “There’s a need for transparency, and what the media is doing is its appropriate responsibility to the public.”

Cleaning up their act
How can bureaus fend off unpleasant headlines and burnish their tarnished reputations? First, they need to create and adhere to a code of ethics, according to Spurgeon Richardson. “Bureau executives need to understand this is a new millennium, and they need new tools to succeed in it,” he says. “Now is the time for IACVB to assist CVBs in raising the bar to make bureau heads the most professional leaders they can be.” To that end, one of Richardson’s initial acts as IACVB board chair was to unveil a set of recommended standards of conduct for CVB employees last summer (see “Playing by IACVB’s Rules,” page 58).
   Prior to the release of the guidelines, very few CVBs followed a policy on conduct, according to Marshall Murdaugh, who has worked with a number of bureaus in his practice. The best way for a bureau to develop its own standards of behavior, he says, is to enlist a third party, such as a local ethics professional, to craft and document a pervasive policy.
   But even the best-intentioned ethics policy can have loopholes. Joe Lathrop, president of OCG, a Maitland, Fla.-based consulting firm specializing in CVBs, says, “It is impossible to come up with a specific guideline or response to every situation bureau personnel might face.” 
   In Denver, for example, “There was nothing in the bureau’s code of conduct to discourage bureau employees from attending a party thrown by a bureau member,” says former CVB chief Eugene Dilbeck. Unfortunately, the bureau member in question happened to be a restaurant/strip club. 
   “In today’s world, any CVB head should be prepared to be questioned,” says Richardson, who supplies a very simple litmus test for conduct: “Before you act, think about how your actions would look on the front page of your hometown newspaper or how you would feel if your mother found out.”

Show them the money
Some insiders say another tactic for boosting credibility is for CVBs to show the public and/or stakeholders in the bureau how monies are spent. This is a controversial issue, however, causing much dissension in the industry. 
   IACVB’s Mike Gehrisch, for example, notes most of his members are private nonprofit organizations, and therefore state “sunshine” laws which forbid or restrict closed meetings and mandate public access to records of government bodies don’t apply to them. Further, while bureaus have to disclose what they do with public funds (if their states require it), only 31 percent of CVBs are completely funded by public money, which leaves a lot of gray areas.
   Many bureaus, including Atlanta and Greater Phoenix, disclose their public accounts, but not the privately funded ones. In Phoenix’s case, the decision to keep private funds private was made on the advice of the CVB’s board. In Denver’s case, Eugene Dilbeck’s troubles were only exacerbated when he was approached by a local television reporter last spring who wanted to look at the CVB’s books. Dilbeck checked with legal counsel, who advised against it (as did the board), as the bureau’s funding was not exclusively based on public money; 72 percent of the budget came from hotel taxes. Instead, Dilbeck suggested the city auditor conduct a bureau audit, which was started last September. One month later the strip-club story broke. 
   Some bureaus feel private dollars can be used for entertaining clients at top restaurants or purchasing alcohol practices that might be frowned upon or even forbidden when public dollars are used. “When planners come to town with business worth millions of dollars, and they want wine with dinner, the bureau executive should be able to order it,” says Gehrisch. “But you don’t want to use public funds for that.”
   Spurgeon Richardson agrees. “We market and sell; we need to go to good restaurants and get good wine,” he says. “That’s our job, and we should not apologize for it. Entertainment is part of our business.”
   When he took the helm nearly two years ago, Steve Moore, president and CEO of the Greater Phoenix Convention & Visitors Bureau, decided to separate public and private dollars into two different budgets. “Before, the budget was commingled,” says Moore, who prior to Phoenix ran the completely public-funded San Antonio Convention & Visitors Bureau. For his public-funds budget, Moore changed the travel and entertainment policy for bureau personnel to match that of the city’s, a move that makes perfect sense, he says. 
   Gehrisch strongly agrees with Moore in keeping monies separate. “When the money is not separated, there is no way to accurately account for the way it’s spent,” he says. He also believes bureaus should voluntarily comply with open-records laws and be transparent with their bookkeeping, short of divulging sensitive personnel issues or salaries. 

Plaudits for audits
Bureaus should take the initiative to conduct audits on their own, before their boards or the public have to call for them, suggests Mike Gehrisch. Indeed, IACVB recommends CVBs undergo financial audits, preferably by a third party, every year. For bureaus with separate budgets for the public and private funds, separate audits can be conducted.
   Gehrisch also would like bureaus to voluntarily undergo performance audits every two or three years. Also called operational audits, they can determine if different departments within a bureau are being run efficiently. “They make sure the CEO knows where efficiency and productivity improvements are needed,” he says. “They put the executive in the best seat not the hot seat.”
   To assist bureaus in making sure their departments are in good working order prior to audits, IACVB has been developing performance measurements. To be released later this year, the guidelines include a lexicon of CVB terms and standards for bureaus to determine actual business booked, productivity, and so on.
   Also in the works at IACVB are guidelines for calculating return on investment. “When you demonstrate ROI and performance and show you are spending money wisely, other things fall into place,” says Spurgeon Richardson.
   CVB consultant Joe Lathrop, for one, is pleased with IACVB’s efforts, but he says bureaus still will need to tailor the guidelines to their own markets, since not all cities have the same goals and no two destinations are alike.

Friends in high places
Bureaus also need the support of their boards and leaders in their communities, including mayors and the media, if they are to succeed in both deed and image, sources agree. And one of the best ways to gain this support, says Richardson, is to educate officials on the CVB’s impact on the city.
   “Bureaus should not be defensive or ashamed of what they do; they should be proud of the contributions they make to their communities,” he says. “And education is the key to getting the general public, boards and officials to understand what we do.”
   For his part, Richardson has regular meetings with Atlanta’s mayor and city council members, and he meets quarterly with local media to share success stories. “For instance, we calculated what residents’ taxes would be without the CVB’s contribution. They’d be raised about $1,000 without the money we bring in.”
   On a national scale, Richardson and Gehrisch attended the U.S. Conference of Mayors in Miami last year, where they participated in a panel discussion and extolled the economic impact of CVBs on communities. “There should be a natural partnership between CVB heads and mayors,” Richardson insists. “Mayors should be involved in our business.” 
   Another tool CVBs soon will have to help prove their value to their communities is the updated ExPact study by IACVB, which determines convention expenditure and impact on destinations by providing spending data from convention delegates, exhibitors and the sponsoring organizations. IACVB plans to reveal the report, which was last updated in 2002, later this year.
   Finally, CVB executives should make sure they have good communications with their boards. “Stay close to board members and communicate with them on a regular basis, not just when you’re playing golf,” advises consultant Linda McKinney.
   If kept in the loop, boards can become a big key to CVB executives’ success, stresses Richardson. “If they’re on your side, when something comes up in the media, they can stand up and say, ‘I know why the bureau is doing this,’ and they’ll back you on it,” he says.

The Taint of Scandal

How great an impact does a convention and visitor bureau’s troubles have on whether or not a meeting is held in that bureau’s city? M&C and NTM Research asked 321 association, corporate and independent meeting planners for their take on this thorny issue.
   Among the findings: In destinations where CVBs are being investigated for ethical misconduct, two-thirds of respondents (66 percent) would avoid working with the bureau if planning a meeting in that city; 5 percent say they’d overlook the destination completely.
   Twelve percent of respondents have encountered a CVB facing charges of ethical misconduct in a city where they were planning to hold a meeting. Of that group, 15 percent canceled their meeting and rebooked it in another city.
   Another 44 percent said they were concerned about the charges but did not change their plans. Fewer than half (41 percent) reported the scrutiny had no effect on their organization’s attitude toward that city or their meeting plans. 
   Only a small number of planners (16 percent) believe CVBs’ ethical ethical standards are worse today than they were five years ago; 61 percent say ethics are about the same and, on an optimistic note, 23 percent feel they have improved. -- L.G.