A Must-Read Article (Not by Me)
Mulling It Over
I’ve been sitting on this one for a while.
I read it more than a few months ago now. And it’s churned through my brain dozens of times.
If you haven’t read it yet, I highly encourage you to read the Industry Confidential article appearing in Volume 5, Issue 3 of my friend Matt Dunn’s PUSH Magazine.
Though anonymously written, the author of the piece brings to light several key factors impacting the purported “financial imbalance” between event owners and destinations in the sports tourism sector.
And the wordsmith is not wrong.
There is much in the article to unpack. Some of which I adamantly agree with, some of which I don’t. But that’s the beauty of pieces like this: it’s not about being right or wrong, it’s about opening the conversation, reflecting, calling for – and making – change, and PUSHing (see what I did there?) our (relatively) archaic (IMHO) industry forward.
With that perspective in mind, and an uncertain hope the author shares agreement with not every opinion I or anyone else might have on the matter, but an openness to bring issues to light rather than sweep them under the rug, I decided to weigh in.
I particularly appreciate that the article’s purveyor suggesting several solutions to the thoughtful case framing the financial imbalance. And that he or she is a self-proclaimed “events rights holder” (see the last sentence in paragraph 2) to boot.
That’s where I’d like to focus my comments today.
My Genuine Respect for Offering Solutions
The proposed solutions outlined in the piece include 1) Shared risk and reward model, 2) Financial contributions from event owners, 3) Performance-based incentives, and 4) Transparent economic impact assessments.
I humbly believe that two out of these four proposed solutions have significant merit. And the other two will never see the light of day. Which two do you think? Well, you have a 50/50 chance.
Let’s start with the ones that my experience tells me have merit.
3) Performance-based incentives
Performance-based incentives, or “claw-backs” as they are sometimes called in the industry, are basically event owner proofs of performance. Upon hitting pre-determined and ideally contractually obligated metrics, additional support (usually in the form of additional bid fees) is released.
These should be an industry STANDARD! (And they are in many places). Although sport is an inherently inconsistent product, if I go buy a box of Lucky Charms, General Mills could tell me exactly how many marshmallows are in the box compared to the other junk no one likes. Understanding sporting event owners can’t be this precise, it is their duty to have a very accurate idea. If their confidence in their “product” (the event) is high, they should have no problem with this arrangement. Stand behind your product.
On the destination side, not only are performance-based incentives smart, but they are also prudent. Let us not forget, these bid fees – whether cash or in-kind – are more likely than not generated from TAX dollars – even if they are tax dollars generated from non-locals, they are still tax dollars and BTW, usually restricted from reallocation to other local governmental departments. Destination representatives have a serious obligation to use them responsibly.
Important sidebar: I do believe examination of (all) tax dollar usage at the local level is only going to increase. We are already seeing it. Tourism industry beware! More on that at another time.
And the second viable option for rectifying this known but never spoken imbalance?
4) Transparent economic impact assessments
Preach. EI assessments (not even the best way to measure event economic impact by nearly all scholarly accounts) have been grossly misapplied. We wrote an entire article on this little “secret” as it relates specifically to facility funding that is 100% worth the read.
Yes, bringing consistency and accuracy to these assessments would be hugely helpful to reshaping industry standards and thus, a viable solution through agreement among event owners and destinations on economic performance. That would be amazing.
The two main problems I see with the real implementation of this solution are:
1) Practitioners in the sport and tourism industry are not economists (yes, we have an industry standard tool in the EIC, but the data out is only as good as the data that goes in. That’s Research 101). I’m not buying that your intern pumping in the data has it covered because he or she took Econ 101 at the local university.
2) Both parties (destinations and event owners) are further motivated to exaggerate economic impact figures. Destinations for increased tax revenue and advocacy, and event owners for leveraging up future host bid fees. No mode of accountability exists in the industry that would allow for the positive outcomes of EI transparency to flourish…unless you are willing to hire economists to do the work, which is far less likely.
Yet, we see this discrepancy, and the resulting tug-of-war, all the time.
That was the positive note. Let’s flip over to the other two solutions the author offered up that I am (even) less inclined to believe have viability.
Less Plausible Solutions and Why
Shared risk and reward model and financial contributions from event owners.
I’m going to group these two together and you’ll see why.
As the commentary’s scribe points out, these approaches would logically bring a much-needed state of enhanced equilibrium to the business transaction of the industry. However, the likelihood of approaches working is scant at best and here’s why:
As difficult as it is to hear, many event owners rely on the cash provided by bid fees and/or net savings afforded by in-kind goods and services to make their operational budgets financially viable. In other words, without these subsidies, the event owners’ businesses and thus their events would be, well, sunk. They won’t agree with these suggestions because they can’t.
There are a lot of mom-and-pop event owners out there truly trying to make a go of helping kids and young people by providing youth and amateur events, but rising costs across the board, market competition, and inherently inconsistent products (as discussed above) make it a very difficult business proposition. Remember, to survive, any business must be 1) repeatable, and 2) sustainable. If this were the case for many, then solution #3 above would be instantly solved.
But what about the big players, you ask? Good question!
They, too, will not succumb to this model for one simple reason: they don’t have to.
Private equity has entered the fray like wrecking ball gobbling up (and in some cases, spitting back out) those mom-and-pops, providing boatloads of cash fueling the shark tank (as I outlined in this article), and completely flipping the script on our “golly-gee-whiz”, “it’s all about the kids” industry.
Why don’t they have to?
Simple. Destinations oblige.
You see, contrary to common belief, the burden of responsibility for this imbalance does not lie solely on the event owners. As the article noted, event owners only attend industry trade shows because they’re essentially free to them. Heck, now not only can they attend on the backs of destinations (funded by taxpayer dollars, I remind you), and have the time of their lives, if they are lucky and attend their 7-minute appointments and a party, they can also walk away with thousands of dollars in cash rewards. Truly disappointing. Remember the old book “He’s just not that into you”? I’ll leave it there.
And if a destination doesn’t oblige a shark? No sweat! On to the next one.
19th Hole with Stoll
I realize this is a lot to chew on. And I’m sure some will take umbrage with me saying the quiet part out loud. But someone must. With or without us it is coming to a head. Again, it’s not about being right or wrong. It’s about the sustainability of the industry we love, and let’s not forget, positively impacting people and communities. Frankly, it’s such a serious matter, I don’t care if you believe me.
Now, I don’t think these are the only plausible solutions. The article notes this arrangement has been ongoing for decades. I picture it swirling round and round like a grass-stained baseball uniform in a washing machine. Thow in a little bleach and it just emerges looking the same.
Truthfully, I’m not sure if it would or could change in its own accord now. Therefore, I’m not sure how much any proposed solutions matter.
Why doesn’t implementation of such solutions matter? I firmly believe that whether the “industry” does a darn thing about this imbalance or not, the sector is naïvely headed for a major self-correction. In other words, sports tourism is sitting in a pressure cooker, and if the release valve isn’t opened…well, you know what will happen.
In my view, that is a good – and greatly overdue – thing.
I realize it may hurt in the short term but it’s like a naturally occurring wildfire in the Rocky Mountains, while difficult in the moment, any biologist will tell you fire is not only good for but essential for the health and regrowth of the forest. The old must go, so the new can sprout forth.
A former pastor of mine once said, “If you sweep a problem under the rug, it’s still a problem, it’s just under the rug.”
We’ve swept the problems under the rug to the point that it looks like something out of a Shel Silverstein poem illustration. Yet we carry on patting ourselves on the back like the belles of the ball talking about how “recession proof” sports tourism is. I’ve even recently heard the expression “apocalypse proof”. I can’t help but shake my head.
In summation, I’ve been out on the limb largely by myself spouting about the need for change and incoming reconciliation of the sports tourism industry for some time now. After reading this article, it’s good to know I’m not the only one reading the tea leaves this way. The level of personal agreement – whether in full or partial – is irrelevant. On the one hand, the industry has done the same old thing for 35 years. On the other hand, it’s going to change whether by choice – or not.
The author of this article is clearly picking up the same indicators. My biggest beef with the article itself is whoever wrote it did it anonymously! Step up. Speak out. It’s going to take more than one or two of us!
Evoke a thought.
