Reference no: EM133183020

Instructions

the Mid-City CVB is faced with low employee morale, relatively fixed current funding, a lethargic, patronage-style board of directors, an uninformed public, and the requirement to deal with a state legislature and disgruntled voters to increase its revenue. The manager of the CVB [you] believes additional revenue is necessary to increase marketing efforts in order to bring in more conventions and tourists. To increase revenue, the manager of the CVB would like to raise the current room tax, which is the CVB's primary source of revenue, or implement a new restaurant tax. Both the room tax increase and restaurant tax plan are opposed by associations that represent hotel/motel and restaurant owners and operators. In addition, passing and implementing the taxes will require significant political maneuvering to implement.

The manager of the Mid-City CVB is faced with a catch-22 situation: CVB revenue cannot increase without conventions and tourists, yet current funding levels will apparently not allow additional marketing to the conventions and tourists they are attempting to reach.

Case study 

Ristig, K. (2008). The Mid-City Convention and Visitor's Bureau (CVB). Journal of the International Academy for Case Studies, 14(7), 25-29

The problem:

The Honorable Fred Gann, Messrs. John Barnes, Ricky Bartholemew, Martin Hall, Robert Fulco, and Mrs. Debbie Jones have a common problem- how to improve the operations of the MidCity Convention and Visitor's Bureau (CVB) and encourage tourism in Mid-City. The mayor of Mid-City, the Honorable Fred Gann, appoints all members of the eleven member board. He realizes that he must appoint members that are willing to work in the best interest of Mid-City but, as is the custom, he typically appoints those that will support his re-election efforts. Although there is no requirement in the Mid-City CVB charter to do so, mayors have traditionally appointed a representative from the Mid-City Hotel and Motel Association (HMA) as well as the Mid-City Restaurant Association (RA) to a two-year appointment. Although Mid-City has an active Chamber of Commerce, that organization is not represented on the board. Once seated, the board elects a president for a two-year term which is currently held by John Barnes. He is joined by Ricky Bartholemew, the president of the Mid-City Hotel and Motel Association (HMA), Debbie Jones, the president of the Mid-City Restaurant Association (RA), and Martin Hall, an outgoing small business owner. Hall is considered the "main player" on the Mid-City CVB board. Hall has served on the board for 8 years, the longest tenure of any member, and has managed to form alliances with most of the members of the board and the CVB staff. The president and members of the CVB board work with Robert Fulco, the manager of the CVB for the past five years and a permanent board member, to further the aims of the CVB. Hall, Barnes, and Fulco enjoy a congenial relationship and have known each other for a number of years.

Mid-City is a medium sized city within a four-hour drive of a major metropolitan area. It has an active regional airport, freight rail service, and is located on the interstate highway system in the Midwestern United States. The economy of Mid-City is based on agriculture and manufacturing, although one significant portion of the manufacturing sector is experiencing a decline due to deteriorating economic conditions and competition from overseas manufacturers. The Mid-City Chamber of Commerce has been aggressively pursuing new industries but their efforts to date have met with somewhat mixed results. There are several small colleges located within a two-hour drive of Mid-City, but there are few major tourist attractions in the immediate area, and sporting events are not usually supported by the local community. The climate and geography of the Mid-City area, however, allow for outdoor activities (hunting, fishing, camping, and boating) for a good portion of the year. Mid-City voters recently rejected bond proposals supported by the Mid-City Chamber of Commerce and the Mid-City CVB for the construction of a zoo and additional parks.

Mid-City Employees and Board

The Mid-City CVB is a non-profit organization with thirteen full-time employees, including the manager. The number of CVB employees is typical for a city of this size, with oversight provided by a board of directors. Employees of the CVB seem to focus on tourism and conventions, although the by-laws of the bureau charge the CVB with the responsibility of promoting the MidCity area as a desirable area to live and bringing as many meetings and visitors to the area as possible. Employee surveys appear to support this conclusion with only a few of the employees mentioning the need for community interaction. CVB employees usually work alone and the CVB does not have a formal employee development program. 

The members of the Mid-City CVB board receive no compensation for their work. Although board members come from relatively diverse backgrounds, including business and government, only one of the current board members has direct experience in the tourism industry. That board member, Ricky Bartholemew, is also the president of the Mid-City's hotel/Motel Association (HMA). The Mid-City HMA is made up of representatives of the local hotels and motels with the purpose of furthering the interests of their members - primarily increasing hotel and motel occupancy rates. Members of the association have previously spoken out against further hotel development due to the low occupancy rates they have experienced in the past and have asked the CVB to pursue ways of increasing tourism in the Mid-City area. The Mid-City Restaurant Association, comprised of restaurant owners and operators and currently led by Debbie Jones, has similarly requested help from the CVB to bolster tourism.

Historically, the CVB monthly board meetings have had high levels of absenteeism and board members seem uninterested or unable to provide guidance to the manager and staff of the CVB. No job descriptions exist for members of the board and previous attempts to involve the board in goal planning sessions as well as other CVB activities have failed for lack of board participation. Although Martin Hall has encouraged members to take an active role in the CVB, other than John Barnes and Robert Fulco, the members seem to occupy their positions only to "help out" the mayor or to gain free entrance to local events, consisting mainly of craft shows, gun shows, rodeos, and the state fair. The employees of the CVB feel they are overworked and underpaid. Morale is low, but a poll of the CVB employees shows that they believe the bureau is doing a "good" job of promoting conventions and tourism for the Mid-City area. Outside consultants, however, have determined that definitive analysis of the effectiveness of the bureau is not possible due to the bureau's use of vague and inconclusive measures. 

CVB Operations

To measure its effectiveness, the CVB uses tourist inquiries and convention bookings as performance criterion. It has been noted that convention bookings may not provide an accurate nor effective measure since one large convention could produce a greater economic impact than several smaller conventions. In addition, the extended time lag between a booking and the convention could skew the results from one year to another. Measuring tourist inquiries does not provide reliable data since an inquiry does not necessarily translate into an actual visit and, if a visit does occur, there is no indication as to the length of stay.

The primary source of income for the Mid-City CVB is a three percent room tax from hotels and motels within the city and immediate surrounding area. Supplemental sources of income include state funds, interest income, and rental fees of the city's convention center. Although funding is limited, the bureau has shown the ability to control its expenses and operate within existing revenues. Expenses of the Mid-City CVB are classified as tourism, convention, or administrative depending on the application of the expense, with administrative related expenses absorbing all personnel costs and overhead of the CVB. Payroll expenses are forty percent of the approximately $1.2 million operating budget. Expenses seem to be reasonable in all categories for a CVB of this size and no significant reductions can be expected.

Obstacles

The Mid-City CVB has targeted three markets: conventions, recreational tourists, and corporate business travelers. Their efforts have met with some success but it has been noted that the CVB suffers from lack of recognition within the local community. Although their finances are sound they believe that they cannot capture additional market share in their target markets without an increase in funding for marketing. The likelihood of an increase in state funding is almost nonexistent and an increase in rental rates for the convention center would not have a significant impact on revenues. Additionally, an increase in convention center rental rates could result in loss of convention business to other, less expensive facilities in other cities. The manager of the CVB has proposed an increase in existing taxes or implementation of a new tax as ways of increasing their revenues. He has argued that the proposed taxes are necessary for expansion of the CVB ' s marketing efforts in order to effectively compete against other mid-size cities for convention and tourist business. He has also noted that each dollar spent in marketing the Mid-City area returns $75 in tourist expenditures.

Plans for increasing revenue include raising the room tax from three percent to four percent, which would raise the total tax rate for hotels and motels to seventeen percent. This increase would compare favorably with others throughout surrounding states, while generating approximately $340,000 in additional income. Another alternative is to establish a one percent restaurant tax, similar to that used in some metropolitan areas. This proposed tax could provide an estimated $400,000 in increased revenue for the CVB. All of the tax proposals would have to be authorized by the state legislature after approval by a vote of Mid-City residents. The bureau does not have a formal plan regarding how the increased income will be spent, although the manager of the CVB has indicated the need for additional "marketing."

Fearing that an increase in room rates will cause a loss of business to other nearby cities, the increase in the room tax is adamantly opposed by Ricky Bartholemew and the Mid-City HMA. Bartholemew has stated that a tax on the restaurants is needed since it would yield more money and spread the cost among visitors and residents. Similarly, Debbie Jones and the local restaurant association oppose the implementation of a restaurant tax dedicated to the CVB. She and the restaurant association believe a restaurant tax is unfair and she has indicated that she would support a tax increase on the local hotels and motels if it came to a board vote. Hall, Barnes, and Fulco want to do what's best for Mid-City but aren't certain which option to support. They know that it's not likely that they'll be able to satisfy everyone and the other members of the board are ambivalent. The mayor of Mid-City, Fred Gann, is concerned with his re-election so will not provide strong support for fear of raising the ire of either of the associations represented on the board.

Ricky Bartholemew, Debbie Jones, Martin Hall, Robert Fulco, and John Barnes have scheduled a meeting to discuss, and hopefully decide on, actions that must be taken.

Question

1. identify, describe, and evaluate a "best" course of action for the manager of the CVB to follow.
2. Assume the role of the CVB manager to research and assess different options and how they may have been used by other CVBs or modified and used by other CVB or destination management organizations.
3. Your comprehensive plan should address [but not limited to] the following aspects:

• Room Tax v. Restaurant Tax
  • Should the room tax be increased and justify to hotel association & members
  • Should a restaurant tax be implemented and justify to restaurant association & members
  • advantages v. disadvantages
• Mid-City Voters
  • How will voters be informed and their support gained
• Support from state legislature/city governance
• Methods of promoting Mid-City CVB
  • How will stakeholder cooperation be encouraged and sustained
• Engaging the CVB board
• Engaging the staff
• CVB's measure of effectiveness