Bonuses Paid for Canceled Events

The Los Angeles convention bureau paid $225,000 in bonuses to its sales staff and executives for booking events at the city-owned convention center although 20 of the events cited to justify the payments were later canceled, angering local hotel owners and raising questions about the bureau’s accounting and management practices.

Overall, 42 conventions once listed as “definite” have been canceled in the last three years--but only after bureau staff were allowed to count all but five of those conventions toward their annual goals and bonuses.

Organizers for at least 12 of those 42 conventions said in interviews that they thought they had never made a definite commitment to come to Los Angeles.

The cancellation rate, which bureau officials acknowledge is higher than ever before, has strained the city treasury, triggered a city review of bureau operations and led some downtown hotel owners to complain that the booking practices have forced them to fill empty rooms caused by false expectations.

“It seems clear to me there were a lot of bookings that simply were not true bookings,” said Uno Thimansson, operator of the Hotel Figueroa. “It’s devastating to the hotels, because if you block space for future years thinking it’s definite, you end up turning down business.”

Bureau President George Kirk- land, who shared in the bonuses, said that a lack of hotels near the convention center and the sluggish economy are the main culprits for what he admitted was a rash of cancellations higher than the bureau has ever experienced before. He said the bureau’s booking practices were not to blame but has nonetheless taken steps to tighten the process.

Kirkland said the bureau considers a booking “definite” once an organization sends a letter indicating that it plans to hold a convention in Los Angeles, although such letters of intent are not legally binding. Anaheim and San Francisco also follow this practice.

Other cities, including Long Beach and Phoenix, require signed contracts and deposits before a booking is designated as definite.

The Times reviewed four years of bookings and bonuses for the Los Angeles Convention and Visitors Bureau, which is responsible, under a city contract, for soliciting major conventions that are booked more than two years in advance. The contract, which last year resulted in the city paying $17.5 million to the bureau, also calls on the nonprofit organization to boost the number of tourists and visitors to Los Angeles.

The peak time for bonuses was a two-year period ending June 30, 2000, when the bureau paid $225,000 to its convention salespeople, a manager overseeing them and Kirkland, for achieving either individual or bureauwide convention sales goals.

The bonuses for convention sales averaged $34,600 per person for the two-year period.

Kirkland, who receives a $285,000 annual salary, got a total bonus of $155,000 in the fiscal year ending June 30, 1999, and a $199,000 bonus in the fiscal year ending June 2000. Kirkland said $55,720 of his total bonus in the year ending June 2000 came from convention sales, with the rest for his successes in tourism and management.

No bonuses were paid last year because the bureau fell far short of its goal of booking 51 conventions. Kirkland said it is unlikely that bonuses will be paid for the current fiscal year ending in June because the bureau has booked only six conventions toward a goal of 35.

In the fiscal year that ended in June 2000, when the biggest bonuses were paid, the bureau set a goal for its salespeople of 62 major convention bookings with 810,000 room nights. After subtracting cancellations in the same fiscal year, it reported net bookings of 63 events with 845,711 room nights. Because it met the goal, bureau staff and management executives were entitled to bonuses.

However, since the fiscal year ended and after the bonuses were paid, 11 of the “definite” events representing 144,900 room nights were canceled.

Some convention organizers said in interviews that despite being listed as definite, they never committed to Los Angeles.

“We do not announce a convention until it is definite, and we never announced going to Los Angeles,” said Nancy Elder, meetings director for the American Society for Microbiology, which the bureau listed as a definite booking in late 1999. The convention, to be held in 2004, is set for New Orleans.

She said her group never signed a contract. The group only sent a letter to the bureau saying that “it is the intention” to go to Los Angeles.

Still, the event and its 30,875 room nights were counted by the bureau toward its goals for that year.

In the fiscal year ending June 1999, the bureau said it met its sales goal of booking 55 events with 750,000 hotel room nights. The bureau reported that it booked 59 conventions with 755,684 room nights.

However, nine of the events have since been canceled, representing 86,325 hotel room nights.

In interviews with The Times, organizers of a dozen conventions listed as definite in the last few years said that, from their perspective, they had never committed to Los Angeles.

“The Los Angeles booking was never definite,” said Michelle Kirkwood of the American Society of Clinical Oncology, which was listed by the bureau as definite for 2001, 2004 and 2007, all of which were later canceled.

The group had sent a letter to the bureau saying that it “has decided on a firm rotation” that included Los Angeles, but Kirkwood said subsequent talks never reached fruition.

The group met last year in San Francisco.

Other groups have faced delays in being taken off the bureau booking lists.

In a July 2001 letter to the bureau, Kati Quigley of the Assn. for Financial Professionals said her group was frustrated by attempts to have the bureau acknowledge that the group would not meet in Los Angeles in 2006.

Quigley said that she told Dan Herbers, a former bureau senior vice president, after a problem-plagued 1999 conference that the group would not return to Los Angeles.

The executive, Quigley wrote, “at the time asked me to delay writing the [cancellation] letter as a favor. I did so....”

“The [cancellation] request was made a few more times, but again we were asked to delay the formal cancellation,” she wrote, adding that she finally had lunch with another top bureau official and made it clear “that we had no intentions of meeting in L.A. in the near future.”

Only after she sent the letter was the event taken off the bureau books, two years after bureau officials were first notified.

Herbers said he was only doing what any good salesman does, trying to keep the booking alive so he could change their minds and get them to come to Los Angeles.

“You don’t just shut the door on them,” he said, noting that there have been occasions when groups that canceled changed their minds.

Even when conventions are held in Los Angeles, hotel owners complain that the bureau frequently overestimates the number of hotel room nights that would be booked.

For instance, for purposes of getting a bonus and meeting the city goals, the bureau said it booked an event by PeopleSoft for the year 2000 that would result in 57,920 hotel room nights. But after the event was held, the bureau reported that only 30,726 room nights were actually booked.

For the year 2000, the bureau estimated that there would be 502,968 hotel room nights, but only 390,564 were booked, according to PKF, a bureau consultant. The 112,404 lost bookings cost the hotels $19.6 million.

In reaction to the complaints of hotel owners, an internal audit was done by the bureau’s regular accountant, Arthur Andersen LLP. It found no fraudulent inflation of bookings but identified some flaws in the booking practices that Kirk- land said he is addressing.

The audit said that of 35 conventions that canceled between June 1, 1999, and Feb. 28, 2001, only 11 were “confirmed definite” in writing, based on the content of letters.

Twenty others were listed by the bureau as definite although they only submitted “letters of intent,” three were contingent on actions including the construction of a new downtown hotel, and one event was listed accidentally, the audit found.

“It appears to me the bookings were inflated,” said Brian Fitzgerald, general manager of the Westin Bonaventure Hotel. “We certainly had a lot of bonuses paid out.”

Kirkland said there are safeguards against inflating bookings to boost bonuses. If a booking cancels in a future year, the booking and hotel room nights are counted against the goal for that subsequent year, so in theory salespeople have to book that many more events to earn a bonus, he said.

However, some salespeople responsible for canceled bookings have left the bureau in the last few years. Also, the bureau has actually reduced its convention sales goals, from 62 two years ago to 35 this year.

Kirkland has made some changes: Convention organizers are now asked to sign a letter to confirm their booking.

Peter Zen, owner of the Westin Bonaventure Hotel and president of the city Convention Center Commission, said Kirkland’s changes do not go far enough. He contends that the bureau’s “phantom” bookings have misled the city, which pays the nonprofit organization up to $17.5 million a year to book conventions and promote tourism.

The large number of cancellations since 1999 has depressed convention center profits and hotel bed tax money, which are used to pay the $42-million annual debt on the 1993 expansion of the convention center. As a result, the city next year will have to increase general fund payments toward the debt by $6 million.

Some downtown business owners want the bureau to adopt the tougher Long Beach policy requiring a contract to be signed before an event is considered definite.

“You need to differentiate between the conventions that are shopping around and those that are actually coming,” said Linda Griego, a downtown restaurant owner who until recently was a member of the bureau board of directors.

“To me, ‘definite’ means they are definitely coming, not they are definitely not sure,” she said.

Thimansson, owner of the Figueroa Hotel, would go further. Bonuses should not be awarded until the convention is held and the estimated hotel bookings are verified, he said.

Bureau Vice President Michael Collins said convention organizers might be scared off if they were asked to sign a contract too soon.

“If we say you have to sign a contract, they will say, ‘Bye,’” Collins said.

Responded Griego: “There was always a reluctance to push for a definite answer for fear someone would back out, but if it’s that fragile, it’s not definite.”