A Turn of Events
When a reliable revenue-generating conference operation started showing signs of decline, Wheaton College developed a new business plan.
By CarolAnn Paul
Consistent with traditional business practice, we conducted an external and internal SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis. First, we took an in-depth look at business, political, and social trends beyond the college campus. Then we conducted a disciplined study of specific conference operations, including our marketing, staffing, and fee structures.
The World Beyond the Campus
We understood that some of our decline was beyond our control, such as the natural maturation of a business with increasing competition in an expanding industry. According to Unique Venues, a marketing company for nontraditional meeting venues, approximately 1,800 of the 4,100 higher education institutions in the United States have viable conference and events operations on their campuses.
Hosting conferences and meetings on campus is a logical business venture for colleges and universities. Surveys consistently reveal that business professionals choose conferences and meetings second only to trade publications as their leading resource for continuing education and professional development. It comes as no surprise, then, that college campuses are increasingly gaining market share as venues for meetings and conferences.
Other factors have also contributed to business office interest in conference operations. Shrinking budgets and declining enrollment have led a growing number of institutions to host conferences and events as a way to generate alternative revenue and supplement student recruitment. Wheaton was starting to feel the impact of this nationwide growth—20 years ago, Wheaton had less than half the competition it has today.
In addition to increased competition, we identified several other emerging trends that were contributing factors in our loss of market share and revenue:
- Post-September 11, fear of travel motivated some organizations to move away from large national conferences to smaller, regionally based meetings. Several of our large national summer conferences were “regionalized,” resulting in smaller conferences and lower revenues.
- Economic factors had driven other meeting planners to shorten conference lengths, lower the numbers of room nights, or reduce frills and catering costs. Our calendar had more white space between conferences than in the past, and more groups were eliminating expensive refreshment breaks and special meals. These practical cost-savings measures employed by conference planners cumulatively had taken a toll on our bottom line.
- Consumer-oriented housing, built largely like apartments, was stiff competition for Wheaton’s traditional-style residence halls.
- Many colleges built conference centers specifically designed for hosting conferences and meetings. While Wheaton has highly marketable facilities, academic priority comes first.
Evaluating Our Business Model
Recognizing these trends helped, but we also needed to evaluate our business practices, marketing strategies, and department structure. For decades, Wheaton had been able to depend on business that virtually walked through our door. We spent less than 1 percent of our annual budget on marketing. Suddenly we were receiving fewer unsolicited RFPs. Realizing that we needed to shift our focus from operations to business development, we restructured our department in the following ways:
- We reassigned responsibilities among job descriptions to enable the assistant director to concentrate more on new business development.
- We identified new business development as a priority for every event manager, not just senior staff. Mining current clients for additional business became a standard operating procedure.
- Recognizing that housing generates the largest portion of our revenue, we focused more on identifying organizations and programs outside our usual niche to intentionally market available summer conference dates. Wheaton’s early May graduation affords us an opportunity to host residential conference programs beginning mid-May. The majority of our summer programs are youth and family-oriented conferences beginning mid-June once the academic year ends for elementary and high schools.
- We allocated part of our budget to outsource the design of a Web site that would optimize our potential for capturing new business electronically. Benchmark Hospitality’s “Top Ten Meeting Industry Trends” reported that 27 percent of all group bookings are currently conducted online, a number that is expected to rise to 39 percent by 2007.
- We initiated a policy that when normal staff turnover occurred, we would deliberately recruit staff with sales and marketing experience in a corporate or traditional business setting.
We also acknowledged that we had to more proactively identify emerging trends and issues if we hoped to implement change more quickly. The Association of Collegiate Conference and Event Directors–International reports that its environmental scanning program is one of its most valued member services. Conference operations that keep pace with rapid change are those that value environmental scanning. While finding the time is always a challenge, all of our staff members are encouraged to include scanning as part of their regular weekly duties.
Recently, scanning benefited us in two specific areas. An ACCED-EYE article featured the Convention Industry Council’s APEX project, which advocates implementing standardized terms and definitions throughout the hospitality industry. The project came about in response to meeting planners’ frustration with having to learn new terms and definitions depending on the venue. We are currently evaluating our own terms, modifying them where possible. A second scan brought to our attention an article focused on evaluating Web sites. Since we were already working on an RFP to outsource our Web page redesign, these suggestions were helpful in our discussions with designers.
Solving the Contribution Margin Mystery
Re-engineering job descriptions, hiring sales-focused team members, and embracing the need to navigate change more rapidly left us feeling confident that we could turn around our revenue and market share decline. Solving the mystery of why our contribution margin was dropping proved a bit more elusive. We pored over past records and learned that we were actually managing fewer events than a decade ago. In the past 10 years, the department had increased staffing, adding a half-time event management position. Even so, event staff felt overworked and responsible for more events than they could manage effectively.
As we discussed possible reasons and potential solutions, team members acknowledged that they were spending more time managing the same or similar types of events than had been required in the past. We wanted to avoid unsubstantiated conclusions, however, by using hard data to identify the reasons staff felt genuinely overworked when we in fact had fewer conferences to manage.
We conducted a departmentwide comparative analysis to quantify these staff perceptions. For the next six months, event managers tracked the amount of time they spent on assigned events from the moment they received the first communication about an event through the final billing. We modified our billing spreadsheet to take into account the staff hours required to manage each event. Invoicing for an individual event was computed on its own contribution margin basis.
Identifying the Culprits
The results of this analysis revealed some startling facts. We learned that approximately 25 percent of our special-event clients were generating a below-average contribution margin. Worse, 15 percent of these events were “toxic” for the department; that is, the cost of staff hours spent managing the event exceeded the facility charges, resulting in a net loss. Further analysis of these net loss events yielded several conclusions.
Events require more technology support. Five years ago, a wedding reception only needed sound support. Families brought old photo albums of the bride and groom for guests to peruse. Today, couples request video projection systems and a managed PC so they can download childhood videos on a running loop. These demands require event managers to expand their working knowledge of technology and increase their interaction with the technology support provider and the client.
Clients expect customized events. Clients expect “new and different,” not cookie cutter. The template we once applied to similar events is now just a starting point, with the client’s customized needs built on top of it.
Client experience with event planning varies. Events are more often planned through volunteers. Even with a repeat client, the planner is often different every time the event is held on campus. As a result, the same type of event in the same facility can require as much as 10-12 additional staff hours, depending on client expertise.
Events are planned in shorter time frames. In our busy society where over-commitment often leads to procrastination, clients are hesitant to commit. They are unwilling to risk signing contracts too soon for fear that some major disaster may undermine their events. Shorter planning windows, however, mean that event managers have to partner more closely with the client to ensure that all details are covered. Managers also have less opportunity to identify early on that a piece of business will consume more time than the estimate prior to contract negotiation.
Staff costs were not explicitly covered in the facility fees. Whether our client is renting one classroom for a few hours or a major auditorium for two days, all outside group events require the same basic administrative services. These include developing a contract, working with the client to procure insurance, scheduling the event, filing work orders for setups, communicating with campus service providers, and billing.
We were hosting more fee-waived events. When one of Wheaton’s senior administrators waives the facility fees for an event, conference services pays the price because we provide support without any compensation. Many years ago, conference services led a campuswide initiative to develop policies to govern use of our facilities. The policies required outside organizations to pay facility fees unless the approved events were essential or directly related to the college mission. An exception clause allowed senior administrators to waive fees. Across the years, these fee-waived events had become a considerable drain on our department resources.
We were managing more cosponsored events. Cosponsored events are usually planned and hosted by an outside group in partnership with a campus department. These events, however, often require more management oversight due to the involvement of non-conference operations staff who have little or no event-planning experience. In addition, departments involved in a cosponsored event often pay only the direct costs, such as food service. Even though these relationships are highly beneficial to the college, reduced-fee or fee-waived events diminished our profitability.
The 30 Percent Solution
Having identified the reasons for our declining contribution margin, we moved toward developing a solution. Wheaton’s conference operation functions with the expectation that fees charged to clients will not only cover all direct expenses but will generate enough revenue to contribute 30 percent or more (over and above the direct cost of the event) to offset the college’s overhead. We regularly compare competitors’ rates with ours and make annual or biennial adjustments, so we know that our rates are on target. Simply raising rates wasn’t the answer. We had to stay competitive but also address the staff-hours variances.
We first reviewed the way we had been establishing our rates. Instead of asking, “What will the market bear?” or “What are our clients willing or able to pay?” we asked ourselves, “What do we want to make on a specific type of event?” In other words, we determined what we wanted our contribution margin to be on every event, regardless of facility.
Basic: Events that involve repeat clients, are self-managed, or are non-site-managed. Facility fees include up to six hours of conference services resource allocation.
Normal: Events in an auditorium, multisection facility, or multipurpose facility that require a setup or coordination with one or more campus service providers. Facility fees include up to 10 hours of conference services resource allocation.
Enhanced: Nonresidential, all-day, or multiday events or conferences, and events with unique and complex support needs. Facility fees include up to 14 hours of conference services resource allocation.
Thanks to our time-tracking exercise, we knew the number of staff hours required to support various events. Calculating these requirements and our desired contribution margin, we were able to back out our labor support costs and arrive at the basic fee we needed to recoup costs plus realize our 30 percent margin. The difference was startling. Using this process, we found we needed to charge a minimum of $150 for every event. Under our existing straight facility fee-based rate structure, we were charging as little as $30 per occasion for classroom or seminar room events.
Applying our new formula, we proposed a revised rate structure. The structure continues to use facility fees for its rate foundation but incorporates an additional tier that includes an adjustment for small events; categories that define the type of event by anticipated staff hours to support it; and an administrative fee for events where fees had previously been waived.
Small event rate adjustment. A group requesting facilities for which the charge is less than $150 is now charged a minimum rate of $150 to ensure that we cover our costs and generate our targeted contribution margin. This change replaces our practice of charging the straight facility fee.
Event categories. One of the outcomes of our departmentwide analysis was the discovery of patterns for events that required similar amounts of management support. Generally speaking, we found that events could be grouped together in three categories, with the amount of support time remaining fairly consistent for each type. In the past, events that fell outside our normal pattern and required higher-than-average support time resulted from the client’s conference planning ability (or lack thereof) or some other unique or time-consuming support need. In virtually all of these cases, the circumstances that ultimately made the events toxic for us were not evident until well after the contract was drawn up. To offset our inability to identify this potential before signing a contract, we developed special event categories.
We now classify events in one of three categories: basic, normal, or enhanced. Each category automatically includes in its fee structure the usual number of staff support hours for the types of events in that category (see sidebar, “Event Categories”). A new clause inserted into every contract defines the category along with the customary number of allocated conference operations support hours. The clause includes notification that fees will apply for additional support time over and above the customary level.
Administrative fee. The new categories protected us from events that had previously become toxic. However, the categories did not address our department’s revenue loss as a result of supporting fee-waived or cosponsored events. To compensate for these losses, we proposed applying a minimum administrative fee of $150. While we do not generate any revenue over expenses on fee-waived events, this minimum fee provides two benefits. First, receiving some compensation allows us to break even. Second, we can provide the increased support services that are sometimes necessary when working with inexperienced campus staff thrust into the role of event planner. We also track and regularly report the loss of revenue from fee-waived events to senior administration.
Testing the Proposed Structure
The initial response to our proposal from senior administrators was positive. A system that incorporates billable hours is consistent with other professionally contracted service providers. And charging clients an hourly rate beyond the customary amount of time patterned by other events in the same category is cost-effective in two ways: 1) it increases our contribution margin per event, and 2) it enables staff to reinvest the time savings into events that require additional oversight.
From an institutional view, the proposal was sound. However, while we wanted to effect change and be profitable, we did not want to lose clients or damage relationships. The greatest concern was on behalf of clients whose previously contracted fees for facilities fell substantially below our proposed $150 minimum.
We analyzed these specific events and found that the majority of these clients were single-event contracts with little or no potential for repeat business. We were able to accommodate two repeat clients by placing them in a different category, which significantly reduced the amount of event management required from conference services. Thus, we implemented the new rate structure as proposed, retaining all but one of our clients.
Maximum Profitability and Productivity
Almost two years later, we continue to benefit from the restructuring. Increased profitability—an original essential goal—has clearly resulted. Event managers indicate that they have increased job satisfaction and feel more productive. We have also experienced several other positive outcomes.
Clients with more event-planning experience who want to be certain that they do not incur additional fees are displaying better time-management skills. These clients take more responsibility for the success of their events and are more invested in the outcomes, which equalizes the partnership between client and manager. Spending less time with these clients allows our managers to focus on partnering with inexperienced clients who need our expertise and are willing to pay for it. This additional time investment makes these newer clients more knowledgeable and empowered for future contracted events. Charging for additional oversight also ensures that the events remain profitable.
Shortly following implementation of our rate structure, senior administration became aware of several “off-the-books” contracts between the athletics department and outside groups. These contracts were given to conference services to administer. Our rate structure enabled us to quickly identify the fees and categories most appropriate for these events.
The structure also allows us to more quickly identify business opportunities that have the highest revenue-generating potential. And, while it may never be possible to eliminate all toxic business, the structure provides a way to identify and control that potential. The best confirmation that our new structure is successful is our clients’ evaluations. Service ratings have either increased or showed no change. Satisfied customers and increased profitability—the bottom line doesn’t get much better than that.
CAROLANN PAUL is director of conference services, Wheaton College, Illinois, and immediate past president of the Association of Collegiate Conference and Events Directors-International.
- NACUBO Provides Advice on Collecting Student TINs
- Activity-Based Costing Guide Released for Community Colleges
- White House Public Awareness Campaign Aims to Prevent Campus Sexual Assault
- 2015 Intermediate Accounting and Reporting - Winter
January 22-23, 2015
- 2015 Endowment and Debt Management Forum
February 4-6, 2015
- 2015 Unrelated Business Income Tax
February 25-27, 2015
- WEBCAST: How to Build, Develop, and Support a Compliance Program at Your Institution
Wednesday, November 19, 2014 1:00PM ET
- ON-DEMAND: Strategic Tuition Assessment and Tuition Restructuring
- ON-DEMAND: Are Shared Services Right for Your Organization – The KU Journey
- ON-DEMAND: VIRTUAL: 2014 Annual Meeting
- ON-DEMAND: VIRTUAL: Student Financial Services Conference
- ON-DEMAND: VIRTUAL: Higher Education Accounting Forum
- A Guide to College and University Budgeting: Foundations for Institutional Effectiveness, 4th ed. - by Larry Goldstein
- NACUBO's Guide to Unitizing Investment Pools - by Mary S. Wheeler
- Managing and Collecting Student Accounts and Loans - by David R. Glezerman and Dennis DeSantis