To understand exactly what the March 1 imposed sequestration means to the public assembly venue industry it is first best to understand exactly what the term means. Essentially, sequestration is a term used to describe the practice of using mandatory spending cuts in the federal budget if the cost of running the government exceeds either an arbitrary amount or exceeds the gross revenue it brings during the fiscal year. Essentially, it is the employment of automatic, across-the-board spending cuts in the face of annual budget deficits. Beyond that and relevant to our industry, sequester can (and does already) mean loss of events and venue-related jobs.
Jan Addison, CFE, deputy general manager of the Orange County Convention Center in Orlando, Florida, has become intimately familiar with the word and the definition and has her own opinion on the subject.
“Depending on which side of the fence a person is standing, sequester is a nine-letter word that can be a bit scary or at least disconcerting for a number of sectors across the U. S., including ours,” she said. “Or some believe it is only a fleeting blip, won’t produce any negative effects and will have a positive economic impact.”
Sequestration did not happen overnight. A couple of years ago, the White House and Congress struck a deficit reduction deal when they raised the government’s borrowing limit. At that time, both parties agreed to raise the debt ceiling but also added spending caps over the next nine years. Later, a “supercommittee” with members of both parties was created to further trim the deficit. A sequester would set in if the deficit reduction plan was not met, and supposedly the impact of the sequester would be so terrible that surely the two parties would reach a deal. A deal wasn’t reached, and March 1, 2013 was the date that approximately $85 billion in spending cuts were to start to take effect.
“In the current fiscal climate, agencies and businesses alike have been forced to make tough spending cuts.”
In Addison’s case, the sequestration impacted her venue before the March 1 deadline.
“Unfortunately, on February 25, 2013, just a few days before the cuts were to start, our venue received a cancellation notice from GSA,” Addison said. “The GSA Training and Expo 2013 were to have been held at our convention center mid-May 2013. We were anticipating approximately 7,000 attendees who were expected to bring an economic impact to our community of approximately $13.3 million. Those 7,000 attendees will not be traveling to our city. They won’t be purchasing airfare, staying in our local hotels, eating in our restaurants, shopping at our malls, etc. In other words, they won’t be helping our venue fulfill our mission of economic development. The explanation for the cancellation was due to the budget cuts; thus, sequester has already impacted our community. However, I think our venue and our community is one of the fortunate ones, despite the cancellation. We have a lot of events on our books and have added several in the year for this fiscal year, so we shouldn’t feel the sting as hard as some smaller communities might have.”
A notice on the GSA web site seems to back up what Addison was saying about their cancellation. It states: “The GSA Training and Expo has provided a valuable forum for our partners to receive acquisition training. Expo has also created opportunities for government and industry to interact for the benefit of the American people. However, in the current fiscal climate, agencies and businesses alike have been forced to make tough spending cuts. After carefully reviewing the projected spending and attendance for this year’s conference, GSA is suspending Expo for 2013 in an effort to use our resources responsibly and to deliver better value and savings for our government partners, our vendors, and the American people.”
“We assume GSA would have preferred to have held their event,” said Addison. “They had been wonderful to work with and their event would have been successful. However, GSA did what they needed to do given the budget circumstances they were facing. It appears they are readdressing their business model and plan to offer more virtual training opportunities and more training opportunities closer to their customers.”
Addison said that in the case of the Orange County Convention Center it is extremely rare for a contracted event, especially one that was to have taken place in just a few months, to cancel.
“Are there other events waiting to take similar actions? We don’t have the answers to that yet,” she said. “I assume that actual cancellations of contracted events will be rare, at least I hope so. But what about future events that may be reluctant to book because of the sequester, or need less space as a result of fewer exhibitors, or ones that may have reduced attendance because of the inability of many of their attendees to obtain budgetary approval to travel?”
One Wall Street Journal article stated that agencies such as departments of energy, state, defense, labor, transportation, justice and the National Institutes of Health are affected and travel is one of the first things agencies will eliminate or reduce, which is not surprising. The article also said that half of the sequester cuts relate to defense spending. Another portion would include housing, education and transportation programs.
“All of us have events that relate to those areas so we will need to closely monitor the situation,” said Addison. In addition to providing an economic impact to our communities, convention centers can also be considered to be educational institutions of sorts since we provide space for all types of training to be held by numerous associations,” she added. “That’s an important role and our industry must continually highlight the importance of face-to-face meetings, regardless of sequester, and promote the fact that convention centers are powerful economic engines for all our communities. Collectively, we must continually keep that message in the forefront.”
“In another Wall Street Journal article last month, it was relayed that the U.S. Government spent about $3.5 trillion last fiscal year, so, trimming $85 billion is only about 2.4% of the federal budget. Most venues probably would not have major issues trimming their own budgets by the same two percent or so.” Addison closed by saying, “We know that the media is playing a role in all of this and we don’t want business travel or tourist travel to be curtailed because of what if’s…. So one of the best things we can do as convention center managers is to try to assist our clients by providing exceptional services, operating efficiently and effectively, and suggesting ways that will help them contain or mitigate their costs so they can continue to bring their events to our communities.”