To Be Right...or Safe

This expanded web-only version of the Opinion column by Zeitgeist President Bill Geist, taken from the Summer 2001 edition of the Zeitgeist Client Newsletter
 
 
Over the past few weeks, we've heard a collective "Huh?" coming from our friends in CVBs across the country.
 
That "Huh?" is in response to the monthly or quarterly Room Tax check that is significantly smaller than it has been in quite some time. After a slight decline in first quarter occupancy figures, Smith Travel Research is reporting a shocking 5% nationwide decline in April.

But we're hearing that room tax collections are off as high as 30% in some markets year to date. Even recession resilient cities like Austin (TX), which boast a State Capitol and a Major University, are off in double-digit territory, according to media reports. And, virtually everywhere you look, the downturn is occurring in a single sector of the tourism economy: corporate business travel.
 
This presents us with an interesting conundrum. Room Tax funding of CVBs is pretty pervasive in this country. Our hard work helps generate additional room taxes which, in turn, grows our budget. In other words, we do good...we get rewarded with a larger budget with which to do more good, and so on.

So, as Room Tax revenues drop like leaves on a brisk autumn day, have we done something wrong?
 
No. In most cases, Association Convention business is up. Leisure Business is up. And, for many, Sports business is exploding. If it wasn't for the CVB, the hemorrhaging we're seeing would be significantly worse.
 
We're seeing an erosion of room tax revenues for which we were never responsible but always expected would be there. We just took business travel for granted...and, with a wink and a nod, took the room tax revenue that came with it. Now, it's slipping away...and, with it, our resources.
 
So here's the riddle: What do we do now? The hotel community in many markets has made it very clear that they expect the CVB to steer clear of the corporate market ("mine, mine" they cry). But they clearly could use our help today as their bread and butter slips through their fingers.
 
However, it's a market in which most of us are not very experienced. We lack a strong database from which to attack. And corporate planners don't know or understand the benefits that CVBs bring, like their Association counterparts do. Will they take our call?
 
It runs deeper. Even if we could make a dent in this virgin territory, will we stem the tide? Are we sure that it's just the corporate meetings that are being downsized or postponed? Because it's also the loss of corporate sales travel that's impacting this massive part of the market. And there's nothing we can do when Boss Hog eliminates his sales manager's travel budget. Bristol-Meyers reports that they've cut a whopping $2.5 million a year in travel expenditures by utilizing picture-phones!
 
So, by entering a market that we may be powerless to impact, do we invite our own industry and our funders to accuse us of impotence when we fail to reverse the trend? Viewed this way, it's clearly in our best interest to focus on what we do best and make sure that those markets stay strong for our community.
 
But is playing it safe the right thing for our destination? Our hotels need us (whether they admit it or not). The right thing may well be to enter the corporate market on behalf of our destination, regardless of what they say.
 
It may be our last chance. In a morbid kind of way, this downturn may have come not a moment too soon. The technology to conduct business meetings electronically is here...but the broadband service necessary to pull it off is still a year or two off. Had this corporate downsizing of business travel occurred in 2003, business may have realized that they could meet via the internet. And business travel would never be the same.
 
As it is, only a handful of businesses with "fat pipe" are finding success with the virtual meeting this summer. While small, this group is "history." Their business travel budget will never be the same. The new technology has claimed its first victim in the travel world.
 
Of course, we don't believe that technology will ever replace the face-to-face meetings that our society craves. But it will cut into the frequency. Expect the average number of business trips per person in the corporate realm to drop...and then hold when companies reach hit that "do not cross" line between sales and bottom line.
 
For now, association business appears relatively secure because face time is why many of them meet. Many associations have already discovered that fine line, and have traveled it for years.
 
But, just as the ripple effect of tourism benefits our communities, the drop in business travel will send shock waves through all facets of the hospitality industry. Faced with lower weekday revenues, will hotels increase prices on the predominantly leisure-side weekends to recover lost revenue. If so, will the increase in room price cause further reductions in occupancy, as a recent AHLA study would suggest? And, if so, will the reduction in room nights cut into restaurant and attraction revenues?
 
And with dropping occupancies, one would expect that hotel development would slow, especially in the full-service arena that is so important to destination marketing efforts. And what about convention center expansion projects? Will communities mistakenly see declining business travel as a signal that the meetings and conventions industry is wavering and put the coaster breaks on critically needed facilities?
 
OK. OK. This is starting to sound like the millennial shrieks of the apocalypse. But we've either just dodged a bullet...or the beginning of a sea change in the way we do business as destination marketers has just begun.
 
Either way, the wise CVB will have a plan for this fall when the glow of the summer season brings us back to reality.
  

 

  

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