This Global Hotel Network® Report, sponsored by Newmarket International, takes a look at "The State of the Convention and Visitors Bureaus Industry" from the perspective of IACVB President & CEO, Michael D. Gehrisch. He reports:
The convention and visitor bureau industry looks at 2003 with guarded optimism, but with full awareness that a continually delayed economic recovery in many parts of the world and threats of war and/or future incidents of terrorism could continue to deepen an already depressed corporate travel market. Corporate business has been severely curtailed over the last 18 months and, at best, only a modest recovery is expected throughout 2003 and the first quarter of 2004. However, given stability in the political and economic realms, the association and leisure travel markets should continue to gain on the momentum established in the latter part of 2002.
In the coming year, convention and visitor bureaus (CVBs) will have to contend and manage issues within their communities, along with outside forces. From within, issues such as local government budget deficits and convention centers expansions (already committed or under construction prior to the economic downturn), along with demands from the local hospitality community, will result in closer scrutiny of bureau marketing and operating budgets. There is an increasing respect for bureau leadership in matters of destination development to ensure ongoing appeal for various visitor markets.
Meanwhile, in terms of external forces, increasing numbers of meeting planners are working with tighter budgets. As such, they are looking for bargains and also reducing the number of years out that conventions are booked in order to avoid steep attrition clause charges. The reduction of international and regional air service to many communities is another external concern. Finally, technology issues, specifically online bookings, have placed pressure on bureaus regarding accurate room blocks. A notable trend is toward reduced room block commitments, knowing that many delegates book around the traditional process. As a result, many room block commitments alone are no longer an accurate reflection of the conventions potential economic impact.
With municipal governments struggling to make ends meet, budget cuts are the order of the day. Many CVBs are largely funded by hotel occupancy taxes. With budget shortfalls, some elected officials are tempted to siphon off occupancy tax funds for non-travel and tourism related uses. That means less money for CVBs, resulting in reductions of staff and marketing services. In turn, fewer visitors come, reducing income from occupancy taxes. A poorly timed budget cut in one year will have negative business ramifications for many years to come.
In this “chicken and egg” situation, CVBs have to continue the fight to remind elected officials and community leaders of the massive return that bureau activities provide in the form of direct expenditures. For example, the average meeting attendee stays an average of three nights and spends one thousand dollars per visit.
Given that the primary funding mechanism of most bureaus is the occupancy tax, bureaus are, in essence, quasi-private/public partnerships. As economic pressures increase, more operational and performance audits will be implemented by elected officials. Bureaus will be under greater scrutiny in the way money is expended. CVBs have long been committed to transparency and accountability. It is imperative that proper performance measurements are utilized to accurately display the vast economic return bureaus provide.
As governments look to save money, many are considering options such as privatizing and outsourcing various CVB functions. Divvying up marketing responsibilities for convention centers is one notable trend. However, as with any type of privatization, whether it be health care, waste management, or tourism marketing, savings are often realized in the form of job cuts within a community. Therefore, municipalities should use extreme caution when considering privatization, as it may not necessarily provide the best long-term solution for local economic well-being.
Governments are not the only entities looking to save money. Both association and corporate meeting planners are having to rein in costs as never before. The weak economy is causing planners to seek out bargains wherever they may be. With room rates lower in major U.S. markets, businesses and associations that previously could only afford to hold meetings in second or third tier cities can now consider meeting in major markets. This provides downward pressure on all destinations in their marketing efforts and changes the competitive landscape between and among destinations.
As budgets become tighter, some meeting attendees are turning away from CVB centralized room block services and looking to save money through online bookings. As attendees go directly to the source, transparency of room rates leads to a decrease in REVPAR for hotels and reduces the number of bookings traditionally reserved through citywide CVB room blocks.
Certainly, as online bookings have a positive effect on the consumer bottom line, more and more rooms will be reserved this way. This trend toward direct online booking could have major repercussions to the bottom line of both hotels and CVBs. Furthermore, CVBs, hotels and meeting planners will have to consider new alternatives to accurately track meeting attendees.
Bureaus often have the primary responsibility of the long-term development and marketing of a destination. They are also in the unique position of selling products and services they do not create or deliver. In order to meet these challenges, convention bureaus must be able to articulate their messages, intensify strategic planning efforts, and organize and unify the hospitality and business communities to support and promote a destination. One way to rally community support is by “branding” the destination. This strategy will also allow a destination to distinguish itself from the competition. Larger bureaus are already becoming known by their branded names, such as LA Inc. or NYC & Co.
The economic and psychological needs for partnerships will become more vital than ever. Most significantly, CVBs will have to step up the effort to toot their own horns. Bureaus will need to intensify efforts to publicize the importance of what they do to both the internal audiences (members) and external audiences (government officials, meeting planners, tourists) they serve, in order to guarantee their own significance and to guarantee the continuing financial return that visitors and meeting attendees provide.
These matters are of international significance. While many of the issues discussed here pertain mainly to bureaus located within the United States and Canada, the fact is that bureaus and destination marketing organizations around the world are also under pressure to deliver return, while under the dual threats of economic recession and global political instability.
Certainly, over the next year, the cost of uncertainty will continue to outweigh the cost of doing business. However, we at IACVB believe that 2003 could be a comeback year in all aspects of the travel and tourism business. To a large degree, that comeback hinges on global economic and political conditions that are currently uncertain. The hope is that these conditions will stabilize in 2003, leading to a better climate and outlook for 2004.
Global Hotel Network® Sponsor: Newmarket International
Newmarket International's CVBreeze application is designed to help generate leads to area business partners, market your destination and analyze demographics through flexible reporting options. CVBreeze is an automated business solution that will streamline all aspects of managing your CVB from a single, easy-to-use database. Integration with our NetXchange connectivity tools enable your destination to conduct business with instant, web-enabled functionality, producing immediate results. For a product demo, please go to:
http://www.newmarketinc.com/cvbreeze/demo
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