Ellen Cardwell, meetings manager for the
Washington D.C.-based Ecological Society of America, faced
a tough choice when booking the ESA’s 2006 annual meeting.
Sure, San Antonio is a beautiful city, but the convention center
was asking for $121,000 in rental fees. Memphis, Tenn., on the
other hand, was charging only $26,500. But wouldn’t the group
prefer San Antonio? Cardwell’s boss thought so. Then Memphis came
back with a pledge of $15,000 to cover shuttle buses.
Able to offset the rental fee with the shuttle bus inducement,
Cardwell calculated the ESA could hold its 3,000-person convention
for $11,500 less than a tenth of what they would spend in San
Antonio. Memphis it was.
“Normally, it is the whole package for us,” says Cardwell, who
recently chose Portland, Ore., as the site of the 2004 annual
convention, based partly on attendees’ fondness for gourmet coffee
and microbrews. “But price can be a deal breaker,” she adds.
Or, from Memphis’ point of view, a deal maker. Cardwell’s case
is just one example of the lengths cities will go to in order to
lure convention business in an increasingly competitive market.
These include finding new ways to bring costs down, shaking up
sales responsibilities and contracting with private marketing
companies to bolster their efforts.
Such strategies are changing the way meeting planners do
business and how they make destination decisions.
Rental-fee discounts
In San Jose, Calif., where economic woes have been
worsened by the dot-com meltdown, the city is hoping to turn things
around by changing the way it markets the McEnery Convention
Center. In October, the city council unanimously approved a new
pricing structure that is drawing raves from planners booking
events in Silicon Valley.
Under the new policy, the city’s director of conventions, arts
and entertainment is permitted to reduce facility fees by more than
50 percent of established rates or even to waive the fees
altogether. Also, the director can cut the facility’s parking
garage rates, which can be as high as $20 a day for an in/out
pass.
The San Jose Convention and Visitors Bureau also was granted the
power to offer planners lower prices, based on factors such as
multiple event commitments, revenue history and event dates.
Prior to these changes, facility fee reductions were capped at
50 percent, and there was no wiggle room on garage rates,
handcuffing the city’s ability to compete.
Sue Davis, director of special events at the Bellingham,
Wash.-based International Society for Optical Engineering, applauds
the moves. “I’ve gone back to the bureau and asked them to come up
with a proposal based on this new mandate from the city
council.”
Davis, who has been holding events in the McEnery Center since
the late ’80s, expects the new policy will save her organization up
to $50,000 in annual rental fees. That degree of savings, she says,
could enable her to upgrade a reception, add an F&B event or,
best of all, avoid hiking registration fees.
This is the kind of response San Jose was aiming for. By
reducing the rental rate often a group’s largest expenditure, with
the possible exception of food and beverage the city is able to
appeal to planners saddled with budget problems and growing
concerns about returns on investment.
“Typically, with the public sector, the ability to be flexible
with pricing hasn’t been there,” says Dan Fenton, president and CEO
of the San Jose CVB. “Colleagues say this has to be the
future.”
In some cases, that future already has arrived. Davis recalls
being offered a rental-fee waiver from one major East Coast city as
well as heavily discounted fees at other major cities in
California.
Anaheim/Orange County Visitor and Convention Bureau president
Charles Ahlers confirms such reductions have grown common in recent
years, especially on the West Coast, where competition among
convention cities has grown fierce. Recently, he says, his
convention center adjusted its pricing structure by doubling the
amount of meeting space offered for the same rent.
“A lot of destinations literally are giving away space to
attract business,” Ahlers says. “But I don’t think that can last.
As soon as the economy picks up, a lot of those deals will go
away.” Still, Ahlers thinks price cuts are here to stay.
That’s a strategy under consideration in Portland, Ore., where
city officials recently commissioned a study to determine if they
should drastically reduce or even waive rental fees. But
Chicago-based CH Johnson Consulting concluded that steep rate cuts
are a last resort and a move to be avoided. Instead, the report
recommended offering planners tax breaks to help them offset costs
like transportation.
“There’s a lot a building can do besides a formal rent
reduction,” insists Charles H. Johnson, president of the consulting
firm. “They can waive the charge for a move-in day or be lenient in
how they charge for square footage. There’s plenty of wiggle room
that doesn’t pertain to the rental rate itself.”
Public vs. Private
Convention centers traditionally have lost money while still benefiting their cities by putting heads in beds, appetites in restaurants and wallets in retail stores. Lately, however, an increasing number of city governments have chosen to outsource management of their centers to private companies to drum up profits and create more accountability for performance. Unfortunately for the meeting planner, a center that needs to make money generally can’t offer the deep discounts some public facilities can.
Following is a rundown of what to expect from the different types of facility management.
Publicly managed
These centers are managed by the city. Usually, a publicly owned authority is set up to run the center. That authority is expected to break even, though many don’t, and taxpayers cover the difference.
Discounts: When bidding for major citywides, a few can offer the space for free. But many hold the line, charging at least half the rack rate, if not more. Says Bill Langley, deputy director of the Kansas City Convention Center, “We never have a situation when we don’t have rent, but there are a million ways to skin that cat.” Among them: The convention and visitors bureau might arrange for local hotels to offer rebates. Sometimes, the CVB also pitches in to cover bed taxes.
Privately managed
These facilities are publicly owned but managed by a private company. In other words, private firms run the centers, yet the funds come under public scrutiny. If there’s a shortfall, taxpayers cover it, but the management company suffers, too.
Discounts: Private management companies can give away space, as long as the center can make up the money elsewhere. However, they have a strong incentive not to lose money for the city: Their contracts can be terminated.
For most conventions at publicly managed centers, major discounts must come from hotel room rebates or CVB concessions.
Privately owned
This category refers to resort convention centers with no public affiliations. They are financed internally and make money for the corporation by bringing guests to their affiliated hotels and attendees to their convention space.
Discounts: Private centers cannot heavily discount their space unless they will see revenue elsewhere. As part of that equation, all meeting and trade show services typically are performed exclusively in house, whereas many public centers allow outside contracting. However, as at most centers, public or private, every group is evaluated individually, and pricing can vary widely. --
JONATHAN VATNER
Dealing for dollars: Kansas City Convention Center
One-stop shopping
The Orlando/Orange County Convention & Visitors Bureau
has not modified its rate structure, but CVB chief Bill Peeper is
working to make planners’ jobs easier in other ways.
Earlier this year, the bureau began developing a
single-point-of-sales strategy where convention planners deal
solely with one local representative. This replaced the old system
under which two account executives one from the CVB and one from
the convention center would work in tandem with a planner.
Peeper says the change aims to make both the bureau and the
convention facility more efficient. “The reality is, there is more
competition in a time of diminishing resources,” he says. “In light
of the changing marketplace, the level of competition, the lack of
growth in additional shows and all this meeting space, we can’t
afford to lose any business.”
San Jose took the single-point-of-sales strategy a step further.
In July, the CVB and the McEnery Center merged their sales and
marketing teams.
“To anyone in the trade show business, the strategy in place for
years between convention centers and CVBs has been confusing,” says
Rick Heim, president of Expo Excellence Strategically Inc., a Palo
Alto, Calif.-based convention consulting firm. Typically, he notes,
bureaus handle sales for conventions 18 months and further out,
while convention centers handle events 18 months out and
closer.
“The whole idea of not knowing who to call, or calling the wrong
person first, is a pain in the neck,” says Heim, who until recently
worked as senior vice president of expositions and technology for
San Jose-based Semiconductor Equipment and Materials International.
The job involved organizing 13 annual worldwide trade shows,
including an annual show at the McEnery Center. Now, in San Jose,
“It doesn’t matter if you are 12 months out or 12 years out, you
make one phone call,” says Heim.
Other cities are poised to follow suit. In Charlotte, N.C., talk
about consolidation has been bubbling since this summer, when
Melvin Tennant, president and CEO of Visit Charlotte, the city’s
CVB, left the bureau.
“There are a couple of things people looked at when we started
talking about consolidation,” says Mike Crum, managing director of
Charlotte’s coliseum authority. “First is the financial issue.
Dollars are tight everywhere. The other benefit is alignment
between the sales and marketing arm of the CVB and the operation
arm of the coliseum authority. And if we can cut down or eliminate
the amount of time clarifications have to be passed back and forth
between departments,” Crum adds, “then we have just made the
planner’s job easier.”
Boston also has unveiled a one-stop-shopping strategy. Last
June, the Massachusetts Convention Center Authority created the
Convention Marketing Center, a combination of the sales teams at
the CCA and the Greater Boston CVB. The change came after a raft of
criticism over low bookings at the city’s new convention
facility.
Although bureaus and convention centers say such moves will
appeal to planners, the changes often come out of financial
necessity. In San Jose, for example, consolidating the sales and
marketing teams was part of an effort to save the city up to $5.1
million a year. The recommendation was included in a report by the
Duluth, Ga.-based Strategic Advisory Group. That same report also
determined the San Jose Convention Center was suffering up to six
times the operational loses of similar-size centers.
Meanwhile, in Charlotte, the push for consolidation came largely
out of dissatisfaction with the coliseum authority as well as the
CVB. “While there have been a number of reasons for the lack of
business, none is more critical than the reluctance to change the
existing convention and travel development structure, which has
been unaccountable, underperforming and long overdue for an
overhaul,” according to Mohammad Jenatian, president of the Greater
Charlotte Hospitality and Tourism Alliance.
A push to privatize
Cities also are experimenting with using independent
agencies to lure conventions. In October 2002, the Honolulu-based
Hawaii Tourism Authority snatched the contract to market the Hawaii
Convention Center from the Hawaii Visitors and Convention Bureau
and gave it to SMG, a Philadelphia-based private firm that manages
98 percent of the publicly owned exhibit space in North
America.
“It’s been a bit of a learning curve, to be honest,” says Joe
Davis, general manager of the Hawaii Convention Center. Growing
pains notwithstanding, Davis sees some benefits to using a company
such as SMG, which shares links to so many other facilities. For
instance, at press time SMG was in talks with Microsoft to offer a
standard contract for the tech giant to use at any SMG property,
eliminating the need to renegotiate the usual sticking points, such
as indemnification clauses.
Marty Milan, director of sales and marketing at the Ala Moana
Hotel in Honolulu, sees other pluses for planners. “Meeting
planners can expect more expedient replies, greater negotiation
power and more efficiency on the part of salespeople,” she
says.
On the other hand, consultant Marshall Murdaugh, president of
Richmond, Va.-based Marshall Murdaugh Marketing, has doubts about
the wisdom in handing the reins to a private entity. “They’re
beginning to splinter and diffuse a number of responsibilities,
rather than create one integrated effort,” he says. “I can’t
believe that’s going to be a model for anything except
disaster.”
Although insiders hesitate to call privatization a trend, more
destinations are following Hawaii’s lead. In fact, officials in
Albuquerque, N.M., and Fresno, Calif., recently voted to privatize
their convention centers. At press time, both cities were
finalizing contracts with SMG.