[Lnc-business] Please review before 2020 site selection agenda item tomorrow

Alicia Mattson alicia.mattson at lp.org
Sat Dec 9 18:55:22 EST 2017

One of the reasons that I particularly dislike missing this meeting is that
the LNC is considering site selection for the 2020 convention.  I happen to
have a lot of institutional knowledge about it.  I have assembled an
extensive archive of available data on our conventions going back to 2008,
and I have been heavily involved with all of these selections starting with
the 2012 convention.

I recommend that on this agenda item the LNC adopt the following:

Move to postpone this agenda item until Mr. Kraus provides the LNC all
missing data points in the format of the existing historical site
comparison template and negotiates lower food & beverage requirements
comparable to past contracts.

I don’t think these bids are yet ready for a vote, for two reasons:

1)      The data is incomplete, and has not been assembled to the promised
standard to make it easy for the LNC to make an informed decision on a
complex issue.

2)      The food and beverage requirements (F&B) on these bids are too
high.  It is more than we typically spend, thus it creates too much
financial risk for the LNC.

A little background.  The first decision that the COC needed to make on
this subject was how the site search would be conducted.  I advocated that
we use the same outside consultant we had successfully used for the 2016
and 2018 processes.  Robert Kraus instead wanted to be our site search

I noted that previously when we have conducted in-house searches, we have
received only some of the data we needed in the bids, and I had to invest
lots of time tracking down the missing data and reformatting it into a
useful format that lets the LNC easily make apples-to-apples comparisons.
When we used the third-party agent, she did all that work for us, and I
barely had to lift a finger.  I indicated I did not have time to do that
this year, and that I would not be able to step in and fill in any gaps
this time.

To convince the COC to use Mr. Kraus instead, the COC was told in no
uncertain terms that Mr. Kraus understood that he would be responsible for
assembling all the usual data to match the template in the convention
archive, and he would do all of that work.  It was alleged to the other COC
members that if we used the outside agent, though the LNC never writes her
a check because she is instead compensated by the winning hotel, we would
“pay” for it by getting bids with higher F&B requirements.  I was in the
minority on that vote, and the COC opted to use Mr. Kraus rather than the
outside firm.

Now the LNC is being asked to make a decision.  The LNC does not have all
the promised comparison data that has been used in the recent past to
well-inform the LNC of the relative costs (both to the party and to
delegates) and the trade-offs between bids.  There are many missing data
points in what the LNC has been given.  The F&B requirements in these bids
are much higher than our historical data argues is a wise financial risk.

Had Mr. Kraus simply used the template that I created in the convention
archive, there are fixed positions for all the required data so it would
have been obvious what data points and calculations are missing.  Also the
historical data is there so it could be shown side-by-side with these 2020
bids so the LNC could gauge whether we’re being offered good deals relative
to what we’ve used in the past.

The one-page grid assembled for the LNC comparing the 2020 bids shows the
“F&B Min” data, which is the minimum amount that we would be contractually
obligated to spend on food and beverage.  These bids range from $65,000 to
$75,000…but that is not the full picture.  There are two substantial
up-charges for those base figures, and those are not shown.  There is a
service charge, typically ranging from 20% to 25%.  There is a sales tax,
which is applied to the base charge and also to the service charge.
Neither of those data points are provided on the grid, but they
significantly impact the final cost.  Some, but not all, of that data is in
the PDF version of the bids if you dig through it.  This grid should show
you those figures and calculate the total spending that would be required,
as compared actual amounts spent in past years.

The 2020 Glendale bid would require $65,000 of F&B expenditures, before the
up-charges.  The PDFs indicate there is a 24% service charge, and a 10.2%
sales tax.  That means if we buy $65,000 of product, the final F&B bill
will be $88,821.  Atlanta’s 2020 bid requires base spending of $65,000,
plus a 25% service charge, plus 8.9% sales tax, which yields a final bill
of $88,481.  I do not see those data points anywhere in the Austin bid, so
I don’t know what to add to the $75,000 base requirement.  If it were 24%
and 10%, it would be a bottom line of $102,300.

How do you know whether those are good bids?  What’s our typical F&B
usage?  That’s why I assembled the site comparison data in the archive,
which has our historical spending, but the grid you received doesn’t have
that data side-by-side with these bids.

Let me give you some historical data:

2010 convention (non-presidential)
Contracted Minimum:  (none)
Service Charge:  21%
Sales Tax: 7.72%
Actual Spending after Surcharges:  $56,633 (back-calculates to $43,450 base

2012 convention (presidential)
Contracted Minimum:  $40,000
Service Charge:  20%
Sales Tax: 8.81%
Actual Spending after Surcharges:  $68,160 (back-calculates to $52,201 base

2014 convention (non-presidential)
Contracted Minimum:  $40,000
Service Charge:  21%
Sales Tax: 6.75%
Actual Spending after Surcharges:  $68,854 (back-calculates to $53,306 base

2016 convention (presidential)
Contracted Minimum:  $60,000
Service Charge:  24%
Sales Tax: 6.50%
Actual Spending after Surcharges:  $105,398 (back-calculates to $79,811
base spending)

The bids in front of us for 2020 are well above historical spending levels,
with the exception of 2016, which was an outlier.  Please note that the
2016 convention nearly maxed out our delegate allocations, so the 2016
expenditures to some degree create a theoretical maximum that we’d ever
spend.  I think it is unwise and too financially risky for us to presume
that every future presidential convention will mirror 2016 and to
contractually obligate ourselves to match that performance.

When I brought this F&B issue up with the COC about two months ago, Mr.
Kraus replied that he thought the higher figures were fine because there
are some events involving F&B that are not “charged” to the convention’s
profit/loss figures.  The Chairman’s Circle event often happens offsite,
thus does not credit to our F&B.  It looks to me like the pledge club
reception tends to run about $3,000.  Some groups may have onsite parties
with a bar, which gets credited to our F&B requirements, but I am quite
skeptical and have been shown no data to demonstrate that these would add
up to an additional $20,000 of spending.

These are important data points that you need to have available before you
make a substantial financial decision.

In a quick look over these partial bids, I also do not see complete info

   - All taxes on guest rooms (can narrow the first-glance margin between
   base room rates)
   - Comparisons of prices of meals (impacts how much you get for your F&B
   - Square footage and ceiling heights of the ballrooms
   - Will our ballrooms use air walls to separate us from another
   potentially noisy event?
   - Are the hotels union shops? (impacts A/V and setup costs)
   - Airport transportation costs delegates will likely pay
   - The grid does not include the conditions placed on the a/v discounts
   - The grid doesn’t give side-by-side match-up of the concessions for
   easy comparison.
   - Etc.

The COC was told we would get all of this data (more than 50 comparison
points), and I think it is important to have in front of you as the LNC
tries to balance the many factors involved in a convention site selection.
Some, but not all, of that data has been given to the COC spread out across
numerous files, but it has not been compiled for the LNC.  The remainder
needs to be sought from outside sources still.

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