by Joe Sullivan
Over the past several months, there' s been a lot of finger pointing, if not a turf war, between the firm that manages the Knoxville Convention Center and the separate entity responsible for convention sales.
The management firm, SMG, and even moreso Mayor Victor Ashe, have been critical of the sales entity, the Knoxville Tourism and Sports Corp., for failing to bring in more convention bookings. There have been intimations that the convention sales role might get shifted to SMG, and Ashe has at least temporarily cut off city funding of the TSC for which $900,000 had been budgeted this fiscal year.
For its part, the TSC has contended that SMG's charges for convention center use are too high and that prospective business has been lost because of overpricing. Another complaint on the part of the TSC's president, Gloria Ray, has been slow SMG responses to inquiries about the availability of convention center space.
Within the past few weeks, however, there's been a remarkable meeting of the minds between Ray and SMG's convention center manager, Bill Overfelt. Their accord covers everything from agreement on a new convention center pricing structure to a resolve to put past differences behind them and to work together closely in the future.
The new pricing structure would mean steep discounts from SMG's list prices for convenings that bring large numbers of delegates to Knoxville for overnight stays. Under a "heads in beds" economic benefit formula devised by Ray, the sales and hotel/motel tax yield to the city from an event would be calculated using what Ray terms conservative assumptions about delegates' daily spending while they are here. Half of that assumed tax yield would then be applied as what Ray terms a "value credit" against an organization's convention center rental charges.
For events that bring more than 3,000 overnight visitors to the city, Overfelt reckons that the value credit might totally offset charges whose list price could run to $15,000 a day or more. Smaller events would get lesser credits, which would only be applied against space rental charges, not things like equipment rentals and food and beverage services. Only events that put "heads in beds" would qualify.
Because convention center pricing is subject to city approval, the value credit plan has been submitted to the city in the form of a proposal—and it's getting a good reception. "Everybody is agreed that value pricing is necessary, and I think both organizations [SMG and the TSC] are making progress in terms of how we value the business that we're trying to recruit in here so that we're all singing from the same sheet of music," says the city's finance director, Randy Vineyard.
When it comes to a resumption of city funding of the TSC, Vineyard says, "We do not have a contract in place with the TSC, but I would think that there will be one in the offing. We want to make sure that we've got all the pieces in place and that we're all comfortable with everyone's role. If we've got general agreement on that, then I would assume there will be a commensurate contract."
Overfelt, for his part, stresses that improved comfort levels involve more than just concurrence on pricing. "More than anything else, what has been improved is that Gloria and I have committed to a greater and more constant level of communication," he says.
The convention center manager insists the proposed new pricing structure won't hurt its revenue and should contribute to narrowing over time of the $2.7 million operating deficit projected for the current fiscal year. "If our proposal to the city works, revenues will inherently grow," he claims. "The more business we can get for the convention center, the more revenue it will produce."
Both Overfelt and Ray stress that the convention center's list prices are already negotiable. The problem, from Ray's standpoint, has been that the TSC's five-person sales force had to refer the meeting planners with whom they deal to SMG for negotiations on a case-by-case basis which Ray terms a "very cumbersome process."
"We might have gotten to the same price [as under the value credit formula] eventually in negotiation, but you're liable to lose your meeting planner if you can't give him your best price quickly," she says. The new approach "enables us to immediately put a price on a piece of business. We know how to put all of the other pieces together that it takes to make a sale. Pricing was the missing link."
Neither Overfelt nor Ray is willing to make any specific projections as to how much more business may result. Ray insists her organization has been making good progress anyhow with convention center bookings now docketed for future years that will have an economic impact of $113 million (as she measures it). That compares to only $2 million in future business (again in terms of economic impact) on the books a year ago when TSC was formed. The new pricing structure "can only help," Ray says.
By all accounts, the Knoxville Convention Center is a state-of-the-art, new facility that hasn't begun to realize its potential. An adjacent headquarters hotel, better air service and more downtown revitalization are all needed to enhance its prospects. So is the passage of time, in Overfelt's estimation. "It takes five to seven years for a city to grow into this very competitive business," he says.
The collaborative relationship that now seems to exist between SMG and TSC should facilitate and expedite growth.
August 7, 2003 * Vol. 13, No. 32
© 2003 Metro Pulse
| 
