HomeMy WebLinkAbout7/18/2001 - STAFF REPORTS (26) �y1
DATE: July 18, 2001
TO: City Council
FROM: Assistant City Manager- Special Projects
AIRPORT STRATEGIC MARKETING PLAN AND SH&E CONTRACT AMENDMENT
RECOMMENDATION:
It is recommended that the City Council accept the Airport Strategic Marketing Plan,
authorize Airport staffto immediately commence implementation,approve Amendment No.
1 to Agreement No. 4334 with SH&E for continued marketing services and authorize
$15,000 for the Greater Palm Springs Convention and Visitors Authority (CVA) to work
with American Airlines for continued year-round Dallas service.
SUMMARY:
The Airport has developed a Marketing Strategic Plan with the assistance of SH&E; this
action would accept that plan, approve an Amendment to the SH&E Agreement for
continued marketing consulting services for the coming year and set in motion discussions
with American Airlines.
BACKGROUND:
In the recent past, Airport staff has devoted most of its time to developing the Airport's
facilities and has taken a back seat to others in marketing the Airport. At the suggestion of
the City Manager,Airport staff,with the input of the tourism business sector, sought to hire
a national firni that had expertise in marketing an airport. The result of that search led the
Airport to SH&E from Boston. SH&E is one of the top two firnis in the country recognized
within the airport/airline business sectors for its expertise in airport marketing. SH&E
conducted a three-month study of our market (the great Coachella Valley) to develop a
strategic marketing plan for the Airport. The focus of the study effort was not just to develop
air service marketing, but provide a comprehensive "airport" marketing strategy; such a
strategy includes:
Facility Development&Maintenance Air Service Development
Rates & Charges Control ETA Marketing
Connnnmity Visibility Customs Marketing
Local Advertising Vacant Land Marketing
Distant Advertising
62VA
July 18, 2001
Page Two
The study effort included a travel agency ticket lift survey, as well as a hotel guest survey
and a review of the Department of Transportation database. From this, SH&E was able to
determine that the Airport suffers a"leakage factor" (passengers that utilize other airports
to get to and from the Coachella Valley) of 53% which then translates into a true market
potential of over 2 million passengers per year. The study found that the top markets with
the greatest potential for increased service were Chicago,Denver,Houston,Seattle,Portland
and San Jose. The study effort also revealed that the existing cash subsidy to American
Airlines is seen as a disincentive by other carriers that the Airport is hying to entice into
providing year-round service without a cash incentive. The consultant did not recommend
abruptly cutting off the subsidy, but rather recommends that the CVA receive Airport
funding to negotiate a gradual end to an Airline Task Force cash subsidy.
The major recommendation from the study was that the Airport must take the lead role in its
overall marketing effort. With the tapering off of the development projects at the Airport,
the existing staff is able to take on this effort with consulting assistance to provide the
required airline route analysis.
Attached is a copy of the SH&E Airport Marketing recommendations for Palm Springs
International Airport for City Council consideration and adoption as the Airport's Marketing
Plan. For this plan to reach its fullest potential,consulting services are needed on an on-call
basis with a firm capable of developing market forecast numbers that will be believed by the
air carriers. To that end, staff has negotiated an extension to the SH&E marketing contract
(Amendment#1 attached) as follows:
1. Contract Sum: Original contract was for up to $49,500, the Amendment
would add up to an additional sum of$89,000, bringing the
total maximum to $138,500. The contract amount allows for
$25,000 for three carrier presentations which provide an
opportunity for staff to learn from the professionals while not
missing the opportunities for pivotal meetings with United,
Alaska and Continental. There is also a fixed fee project to
develop an Airport publicity campaign for $7500. The
remainder of the contract is a 12-1-tionth retainer. The first
three months,the retainer is at$4500 and during this period,
the compensation will cover the cost of a week's onsite
training at SH&E's offices for Airport staff in air carrier route
strategic assessment skills. The second three months, the
retainer drops to $4000 followed by six months of$3500.
Included in the work covered by the retainer is a new
"leakage" study which would normally cost an airport
between $20,000 and $30,000.
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July 18, 2001
Page Three
2. Term: The Amendment would extend the term of the contract to
June 30, 2002.
3. Exhibit"A" Scope: The Scope of Services is amended by adding:
• Airport staff training in strategic assessment skills
• Develop three forecasts and presentations -United, Alaska, Continental
• Develop a specific Airport publicity campaign
• Maintain& develop economic forecasts for other target carriers
• Conduct an update of the ticket lift/visitor's survey
• Maintain statistics on target carriers - yield, load factor, fares, etc.
• Develop connnunication plan
• Develop press kits/marketing
Attached is a Resolution for City Council consideration which would accept and adopt the
SFI&E recommendations as the Airport's Marketing Plan,approve Amendment No. 1 to the
SH&E agreement for an additional year of consulting services, and approve funding of
$15,000 to the CVA to cover costs of negotiating with American Airlines. Funding for these
activities is available in Airport Marketing account 415-6002-45520.
J
ALLEN F. SMOOT, AAE
Assistant City Manager- Special Projects
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APPROVED
City Manager
ATTACHMENTS:
1. Resolution
2. Contract Amendment
3. SH&E Marketing Recommendations (dated July 2, 2001)
REVIEWED BY DEn OF FINANCE
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�'�r43
AMENDMENT NO. 1
AGREEMENT NO. 4134, AIRPORT MARKETING CONSULTING SERVICES
This First Amendmentto Agreement No.4334 for contract services,(herein"Agreement")made and
entered into this day of ,2001, by and between the CITY OF
PALM SPRINGS, (herein"City")and SIMAT,HELLIESEN&EICHNER,INC. (SH&E) (herein
"Contractor") is hereby effective July 19, 2001, as follows:
1. Section 2.1 Contract Sun,is hereby amended to reflect that the maximum contract amount
shall not exceed One Hundred Thirty Eight Thousand Five Hundred Dollars, ($138,500).
2. Section 5.1 Term, is hereby amended by extending the tern through June 30, 2002.
3. Exhibit"A" Scope of Services, is hereby deleted in its entirety and replaced as follows:
EXHIBIT
SCOPE OF SERVICES
AIRPORT MARKETING/ADVERTISING/PUBLICITY CONSULTING SERVICES
Contractor shall provide the following services in Air Service Marketing during the term of the
Contract:
Number Task
A-1 Couisel the Aviation Director and train Airport Marketing staff in strategic
assessments of specific air carrier routes, including one week of onsite training in
Contractor's offices.
A-2 Develop carrier forecasts and presentations for three carriers — United, Alaska,
Continental Airlines.
A-3 Develop economic forecasts and relevant data analysis for other targeted carriers.
A-4 Create and implement a time-line for primary research and market data updates.
Conduct the annual update of the ticket lift survey and inbound visitor survey.
A-5 Provide strategic counsel for regular communications with incumbent and target air
carriers.
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A-6 Maintain databases on existing air carrier service performance and benchmark them
against relevant system averages and comparable communities across the United
States. Such statistics will include load factors,revenue,yield,fare,connect markets
and market growth rates.
A-7 Provide counsel and recommendations on marketing packages for targeted carriers
and advertising campaign on PSP facilities and rates and charges.
Contractor shall provide the following services in the areas of advertising and publicity during the
term of the contract.
Number Task
B-1 Working with PSP staff, develop a proactive strategic communications plan.
B-2 Provide media training and presentation skills coaching to PSP spokesperson.
B-3 Draft materials for PSP press kit.
B-4 Develop strategy and accompany Aviation Director on editorial board meetings to
introduce a new shift in airport priorities from facilities upgrade to proactive
marketing.
B-5 Work with PSP staff to roll out plan, develop time-line for program elements and
provide ongoing support and counsel.
4. Exhibit `B" Schedule of Compensation, is hereby deleted in its entirety and replaced as
follows:
EXHIBIT `B"
SCHEDULE OF COMPENSATION
Contractor shall be compensated as follows:
The Scope of Work,Exhibit"A," lists twelve(12)separate tasks to be provided under the contract.
Some tasks have fixed fees, while others are ongoing and shall be compensated wider the retainer
fee.
Nwnber Task Cost
A-1 Train staff in strategic assessments of carriers Retainer
A-2 Forecasts &presentations (3 carriers) $25,000
A-3 Develop forecasts and relevant data on carriers Retainer
47yAS`
A-4 Update ticket lift&visitor survey Retainer
A-5 Develop communications model to contact Retainer
carriers
A-6 Develop carrier statistics (revenue, yield) Retainer
A-7 Develop marketing packages (incentives) Retainer
B-1 Develop communication plan $7500
B-2 Media training Retainer
B-3 Press kit Retainer
B-4 Editorial Board meetings Retainer
B-5 Ongoing publicity support Retainer
The retainer shall be as follows:
Months 1, 2 & 3 $4500./mo
Months 4, 5 & 6 $4000./mo
Months 7 - 12 $3500.mo
Contractor will be compensated monthly based on the above retainer schedule and based on the
percentage of work completed on Tasks A-2 and B-1. Reimbursables shall be compensated at cost
plus 10%, with all travel to be approved in advance, up to a maximum of$10,000.
Time-line: This is a year-long project. Work item A-2 shall be completed within the first four
months of the Notice to Proceed unless carriers are unable to schedule meetings. Work item A-4
shall be completed in the March-April time-frame. Work item B-1 shall be completed in the fast
four months of the Contract.
Deliverables: Work item A-2 shall include adequate numbers of hard copies of the presentation for
airline attendees and five (5) extra copies to the Airport. Work item B-1 shall include two bound
copies of the plan to the Airport. Monthly reports,including updated statistics shall be provided to
the Airport by the 101 of each month for the previous month. Work item A-4 shall include five
bound copies of the updated"leakage" analysis.
Except as specifically worded herein, all terms and conditions of the agreement shall remain in ful
1 force and effect and performance of services under the agreement shall be governed by the
provisions of this Agreement.
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IN WITNESS WHEREOF,the parties have executed and entered into this Agreement as of
the date first written above.
ATTEST: CITY OF PALM SPRINGS, CALIFORNIA
By
City Clerk City Manager
APPROVED AS TO FORM:
City Attorney
CONTRACTOR:
(Check One: individual, partnership,
corporation)
(NOTARIZED) By:
Signature
Print Name and Title
(NOTARIZED) By:
Signature
Print Name and Title
Mailing Address:
(Corporations require two signatures; one from each of the following: A. Chairman of Board,
President,any Vice President;ANDB. Secretary,Assistant Secretary,Treasurer,Assistant Treasurer,
or Chief Financial Officer.)
End of Signatures
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SH&E
Intenaational Air T@nsPort
1.011 SOILMNY
Airport Marketing Recommendations for Palm Springs International
Airport, the City of Palm Springs
July Z2001
In February, 2001 SH&E, Inc. was selected by the City of Palm Springs, on behalf of Palm Springs
International Airport,to provide a comprehensive marketing strategy addressing the following:
➢ Air Service Development Marketing
➢ Advertising and Marketing
➢ Foreign Trade Zone Marketing
➢ Customs Facility Marketing
➢ Vacant Land Marketing.
After three months of primary research, data gathering and analysis, and one-on-one interviews with civic,
business and community leaders from the Coachella Valley as well as with specific air carriers, SH&E
developed a set of recommendations for each of the marketing areas listed above. The recommendations
are meant to assist the City of Palm Springs in maximizing the utility of the airport and its facilities, to
increase air service options for residents and visitors, and to raise awareness of the attributes of Palm
Springs International Airport among target audiences.
Air Service Development Marketing Recommendations
Palm Springs International Airport handled 1.2 million passengers in 2000,the majority during the first and
fourth quarters of the calendar year. Indeed air travel in and out of the Coachella Valley through Pahn
Springs International Airport exhibits seasonal characteristics of peak(I"and 4d'quarter)and non-peak(2,d
and 3`d quarter)times of the year.Air carrier service options are greater during the peak season than during
the non-peak season when many carriers either discontinue or drastically reduce departures out of PSP.
SH&E undertook primary research in the form of a Travel Agency Ticket Lift Survey, in order to measure
outbound leakage, and a Hotel Visitor Survey, in order to measure inbound leakage. Such research
indicates that PSP captures 43.3%of its outbound market(its local market) and 67% of its inbound market
(its visitor market). SH&E then resized the PSP market area based on capture rates and estimates that the
true size of the PSP market is over 2 million annual origin-and-destination trips annually with the leaking
passengers using Los Angeles and Ontario markets as alternatives to PSP.
In order for PSP to recapture some of its leaking outbound and inbound passengers, it will be necessary for
PSP to attract more carriers to serve the market on a year-round basis. Based on market data, primary
research and discussions with airline planners, SH&E recommends that PSP pursue year-round service to
six key hubs and major O&D destinations: Chicago,Denver,Houston,Portland, San Jose and Seattle.
Air carriers tend to be receptive to marketing efforts on behalf of communities if the service requests are
realistic, backed up with solid and credible market research, and in line with the carriers' overall strategic
direction. Therefore, SH&E has developed the following recommendations for PSP's future Air Service
Development Marketing Program.
I
SH&E
1werwilion,al Air Ti ansport
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➢ Regularly update data regarding the socioeconomics and demographics of the market area through
primary research as well as data available through community,business and civic leaders in the
Coachella Valley
)> Annually update leakage studies to assess PSP capture and leakage rates,track convention
bookings,hotel occupancy rates,new business starts;
➢ Track aviation industry trends to proactively assess how they may affect PSP;
➢ Maintain databases on existing air carrier service performance and benchmark them against relevant
system averages and comparable cormmunities across the United States
➢ Load Factors—On Board versus 0&D,Revenue,Yield,Fare,Completion Rates,Connect
Markets and Market Growth Rates;
➢ Assess objectives for new service by monitoring carrier strategies for growth,orders and options of
new aircraft and characteristics of new and dropped markets;
➢ Attend key AAAE and ACI events in order to learn from other communities and to meet with air
carrier decision makers;
➢ Present economic and strategic case to air carriers for PSP service with analysis based on
methodologies acceptable and persuasive to target carriers in face-to-face meetings with senior airline
planners;
➢ Regularly communicate with incumbent and target carriers with timely and relevant data
➢ Set annual strategy for air service development and evaluate every six months to incorporate
learned information and industry developments.
➢ Fund CVA cost to negotiate with American Airlines to modify the Dallas summer service agreement to
a lesser amount and eventually(two years)eliminate cash subsidy.
➢ PSP should develop a marketing package to offer carriers specifically targeting shoulder and summer
seasons. Elements could include discounts to carriers, advertising,vacation promotional packages.
➢ Continue to fund an ad campaign targeted to carriers on the merits of PSP's first class facilities and
maintain low rates and charges structure.
Local Advertising, Marketing and Publicity
SH&E was asked to conduct a complete evaluation of PSP's historic marketing,advertising, and publicity
activities in the local Coachella market and then provide recommendations to City and Airport officials for
moving forward. As part of this evaluation, SH&E also reviewed marketing activities of other travel and
tourism organizations within the Valley to determine how their campaigns related to PSP local advertising
objectives. SH&E has developed the following recommendations for PSP's future marketing and publicity
activities:
Moving forward Palm Springs International Airport needs to develop a proactive and strategic marketing
plan. This plan should be developed with clear objectives and measurable goals. Target audiences should
be profiled and key messages should be developed and tested for effectiveness. It will be important that the
airport marketing executive become more proactive with the local Coachella Valley communities and that
there be a singular and consistent voice,face and message for PSP. Once the objectives, strategies,
measurements, target audience analysis and messages have been established,specific elements of
the plan should include:
2
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SH&E
Inlema6onsl AirTrtnsport
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➢ A Proactive Publicity Campaign:
➢ PSP spokesperson should be media trained and presentation skills coached;
➢ Develop a list of targeted media outlets including:television,radio,magazines, and
news periodicals;
➢ Develop a schedule for editorial board meetings;
➢ Create a PSP airport press kit including: key officials' biographies, airport"fact
sheet",airport milestones, and an airport history. (press releases added on a timely
basis)
➢ Issue regular press releases on both timely airport news and travel industry trends.
➢ Carriers and industry trade organization should be monitored on a regular
basis for new stories
➢ A series of`Evergreen"story angles should be identified for periods when there is
no news.
➢ By-lined articles and news items authored by Airport officials should be pitched to
news outlets.
➢ Increased Visibility in Local Community:
➢ Identify speaking opportunities and committee assignments with local business,
travel and civic organizations
➢ Develop"canned"airport speech with key airport messages that can be
updated and tailored to specific audiences.
➢ Most meetings at airport
➢ Identify community project to sponsor and/or participate in;
➢ Work Cooperatively With Organization Marketing to Inbound Travelers;
➢ Attend trade shows,travel missions and conferences with CVA and
individual city officials
➢ Provide organizations with regularly updated information on the airport
➢ Meet regularly with Valley-wide hotel managers and marketing officials,
provide them with updated information
➢ Host airport tours and make meeting space available for marketing
entertainment
➢ Merchandize News Initiatives with Targeted Organizations and Individuals
➢ Travel Agents,Hotel Managers,Business and Travel Organizations,CVA,
City Travel Officials, Chambers of Commerce, etc.
➢ Highly Targeted Advertising and Direct Marketing Campaign:
➢ Develop strategic messages and mediums that highly target your audiences
➢ Limit campaign to key messages,i.e.new service,new carriers, etc.
➢ Work cooperatively with carrier to develop messages
➢ Augment campaign with publicity and local community activities.
➢ Website Upgrades and Improvements:
➢ Establish new domain address that provides easier-more intuitive-access
➢ Upgrade links to and from related sites
➢ Create an new section dedicated to PSP"news"
➢ Insure key messages are present throughout site
➢ Encourage individual carriers to post information on site
➢ Add helpful travel section(s)
Foreign Trade Zone Marketing:
SI-I&E recommends that the PSP play a supporting role in FTZ marketing,not a leading role. The Palm
Springs FTZ should be viewed primarily as an economic development took,not an airport development
tool. The FTZ marketing will be most effective if coordinated with other economic development
activities.
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SH&E
lnwi national Air Transport
(.orl.uU Cancv
Vacant Land Marketing:
Vacant land marketing too, should be coordinated with the City of Palm Springs economic development
marketing initiatives. Collateral material should be updated and one brochure should be created to
represent all zoned land options, features and attributes. A targeted direct mail campaign should be
implemented to:
➢ Area commercial real estate brokers
➢ Regional Industrial and Conunercial Businesses
➢ Chambers of Commerce
Customs Facility Marketing:
SH&E recommends that PSP approach FBO's about partnering to create a marketing piece for aircraft
owners and operators.
4
�� VAN
RESOLUTION NO. 20138
OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS,
CALIFORNIA, ACCEPTING THE SIMAT, HELLIESEN &
EICHNER, INC. (SH&E) AIRPORT MARKETING
RECOMMENDATIONS AND ADOPTING THE SAME AS THE
AIRPORT'S MARKETING PLAN,APPROVING AMENDMENT
NO. 1 TO AGREEMENT NO. 4334 WITH SH&E FOR
CONTINUED MARKETING SERVICES AND AUTHORIZING
A PAYMENT OF $15,000 TO THE GREATER PALM
SPRINGS CONVENTION & VISITORS AUTHORITY FOR
USE IN NEGOTIATING WITH AMERICAN AIRLINES FOR
CONTINUED YEAR-ROUND DALLAS SERVICE.
WHEREAS for the last decade, the Palm Springs International Airport has spent more than
$50 million dollars to develop a first class Airport facility with a low Airline Rates & Charges
Fee Structure; and
WHEREAS with the necessary facility in place,the staff,Airport Commission and City Council
have expressed a desire to take on a more active role in aggressively marketing the Airport;
and
WHEREAS to bring the necessary marketing expertise to the Airport, the City, with the
assistance of the tourism industry, selected and hired the firm of SH&E; and
WHEREAS SH&E has completed a three-month study of the Palm Springs market and has
developed a Strategic Marketing Plan for the Airport;
NOW THEREFORE BE IT RESOLVED as follows:
1. That the SH&E Strategic Marketing Plan for the Palm Springs International Airport,
entitled"Airport Marketing Recommendations for Palm Springs International Airport,"
dated July 2,2001, is hereby accepted and adopted as the Airport's Official Marketing
Plan; and
2. That Amendment No. 1 to Agreement No 4334 with SH&E for continued on-call
marketing services, in an amount not to exceed $89,000 is hereby approved; and
3. That$15,000 of Airport Marketing funds are hereby authorized to be provided to the
Greater Palm Springs Convention and Visitors Authority for its use in modifying its
agreement with American Airlines for continued year-round Dallas service with the
goal of eliminating the cash subsidy overtime.
Res. No. 20138,
July 18, 2001
Page 2
ADOPTED this 18th day of July 2001.
AYES: Members Hodges, Jones, Oden, Reller—Spurgiu and Mayor Kleindienst
NOES: None
ABSENT: None
ATTEST: CITY OF PALM SPRINGS, CALIFORNIA
By
City Clerk City Manager
REVIEWED &APPROVED AS TO FORM