We rarely get the opportunity to get an inside look at what makes a maritime heritage event succeed or fail; however, last week the State of North Carolina published a Special Review of last summer’s Pepsi America’s Sail. (download pdf copy) It makes very interesting reading. I previously wrote about this here and here.
The majority of the report involves a land transfer that generated some confusion and controversy. The report also includes the responses from a number of interested parties including the Friends of the Museum who since their founding in 1979 appear to be a significant contributor to the growth and success of the North Carolina Maritime Museum.
Large scale maritime heritage festivals carry with them a significant level of risk for organizations to manage. They also consistently have a high public profile causing them to be subject to close scrutiny. There are a number of valuable lessons in the audit report for all would-be event organizers.
Execute Vendor Contracts – According to the report, Pepsi Americas Sail 2006 LLC, an entity established to organize the event and
“to insulate the Friend’s principal asset, the Gallants Channel property, from catastrophic liability beyond the limits of ample insurance in place, …did not have signed contracts with vendors for major services for the tall ships event.”
As a result of this, there was a lack of controls in place causing significant cost overruns to be incurred. It’s difficult to imagine that an event of this scale and public profile would not have project management systems in place including a budget and operating plan requiring vendor contracts outlining deliverables and fees.
Manage Expenses Carefully – The report states:
Pepsi Americas’ Sail incurred $26,596.44 in food costs for meetings. Pepsi Americas’ Sail routinely paid for meals for event planners including Pepsi Americas’ Sail representatives, contractors, and committee chairs. The Friends of the Museum Executive Director said meals for entire committees of up to 40 persons were sometimes paid by Pepsi Americas’ Sail but that practice was later discontinued.
The financial success of these events is often dependent on revenues earned directly from the festival such as ticket sales and merchandising. One rainy day can make a world of difference; therefore, pre-event expense management/control is crucial. Pizza and soda at a few volunteer meetings might be a worthwhile investment; however, it’s best to avoid meals for event planners, contractors and committee chairs.
Establish Sound Accounting Controls – The report states:
The event coordinator signed 14 checks totaling $21,700.39 made payable to himself. In all but one instance, the checks were co-signed by a Pepsi Americas’ Sail board member. However, the final salary check to the event coordinator for $1,523.80 was only signed by him. The Friends of the Museum Executive Director, who is also a Pepsi Americas’ Sail board member, did not know why that payment included only one authorizing signature.
The public private nature of these events makes strong accounting control essential. Organizers should avoid any chances of perceived or real conflict of interest or self-dealing.
Plan for Escalating Security Costs – The report states:
Security costs for the event exceeded $373,000. Representatives from the Pepsi Americas’ Sail and the Friends of the Museum noted excess security was obtained due to inaccurate attendance estimates, the decision to hold the event at three sites, and the insistence by the Beaufort Police Chief that security levels be maintained in order for the town to provide necessary permits.
After the September 11th terrorist attacks, security for public events has increased dramatically. In the United States, marine events are subject to even more scrutiny since port security is viewed as a potential weak link in the protection chain. In reality, maritime festivals provide no more exposure than other similar land based festivals; however, because they involve vessels they are subject to maritime security regulations that have been evolving over the past few years. One thing event organizers can count on is that security will continue to make up a significant expense in their event budget for the foreseeable future and must be planned for accordingly.
Establish Media Partnerships Early – The report states:
Media and public relations costs approached $750,000. As noted in a prior finding, three contractors involved with advertising and public relations operated without signed contracts. Those three contractors invoiced Pepsi Americas’ Sail $429,853 for their services.
It’s hard to image that Pepsi Americas Sail 2006 LLC’s media and public relations cost “approached $750,000” unless it included paid media for promoting the event. However, most high profile events like these can fairly easily attract print and broadcast media partners that are helpful in promoting the event as well as for leverage in securing sponsorship. The benefits of establishing media partnerships early are significant.
Set Realistic Ticket Prices and Attendance Estimates – The report states:
According to the report, ticket prices ranged “from $15 for children to $40 for adults for a one-day pass.” A little research would have indicated that there was no history of any US maritime event ever charging prices near this range. High ticket prices create high expectations and with only one Class A vessel, its no wonder visitors were disappointed and that the organizers had to refund nearly $100,0000.
Enthusiasm and optimism have a tendency to creep into the planning of these event. The original estimate for ticket sales was $2.6 million but actual sales were only about $700,000 for 27,658 tickets sold. The high ticket prices had the dual negative effect of inflating revenue estimates while tapping down demand.
Actively Manage the Media
From the outside looking in, the media management and public relations for this event were horrible. Long lines, few ships and dissatisfied customers were repeated in nearly every article I read on line. There was also a quasi-scandal involving a state ferry taken out of its normal service to provide a viewing platform for some government officials. This story had tremendous legs but felt like something, if not manufactured by the media, at least manipulated by it. Negative media is contagious if not dealt with immediately; there are at least 2 sides to every story. Unfortunately, this event really suffered from not getting the positive stories out.
At the end of the day, these large scale maritime festivals are very complex and risky; however, that does not mean that they should be avoided. Events like the American Sail Training Association’s TALL SHIPS CHALLENGE can leave tremendously positive economic and cultural impacts on a community. They can help a city establish an unique brand through cultural/heritage tourism. I think of Newport, Rhode Island, Halifax, Nova Scotia, Canada and even Bay City, Michigan as outstanding examples.
Every group interested in hosting a maritime festival like a tall ships event should read and study the Pepsi Americas Sail 2006 audit report in order to be reminded about what can possibly go wrong even with the best of intentions.