Famously Hot New Year’s revenue falls short in VIP lounge, sponsorships, leads to event ending in red

ccope@thestate.comMarch 7, 2014 

Thousands of revelers rung in the New Year in front of the S.C. capitol during the Famously Hot New Year 2014 celebration, featuring live music from Kool and the Gang, ZZ Ward and Weaving the Fate.

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  • Coming Up Short

    A total of $100,000 in hospitality tax funds from the city went to its Famously Hot New Year’s Eve celebration, with $50,000 awarded in the event’s budget and an additional $50,000 approved by council after the fact.

    • $61,000 difference between budget for corporate sponsorships and realized revenues

    • $36,725 shortfall in Crescent Lounge ticket sales

    • $5,000 unexpected cost of VIP Penthouse

    $14,868 paid in Department of Revenue taxes, interest and penalties, the organization hopes to get back

    SOURCE: Profit & loss statement, Barbara Rackes

— Columbia’s Famously Hot New Year’s Eve celebration needed to sell about 290 more VIP Crescent Lounge tickets and not have overestimated sponsorships by $61,000 to meet its budget.

Part of the event’s overall deficit came from the $36,725 not realized in VIP Crescent Lounge ticket sales and not meeting the goal for sponsorship revenue.

Even with City Council paying $50,000 in hospitality tax money after the fact last month, the event still owes $7,000, which project manager Barbara Rackes said will be paid for with about $13,000 that has yet to be collected from private sponsors. Any leftover money will go toward next year’s event, she said.

All in all, she said, the festival is attracting attendees and attention for the city in a way that makes it worth the expenditure.

Still, event organizers say they are learning how to ensure the event is as financially successful as it is popular.

The VIP Crescent Lounge

This coming year could be the first real measure of the demand for Crescent Lounge tickets, with previous years’ success being inflated by the newness of the event and because the VIP area has looked different every year.

When the year Famously Hot New Year’s Eve kicked off for the 2012 New Year, the celebration was held at the corner of Main and Hampton streets. The VIP lounge was an outdoor heated tent, said Sam Johnson, co-chairman of the event for each of its three years. That year, the event ran out of alcohol because organizers expected a crowd of 7,500 people, and about 20,000 showed up, Johnson said.

The second year, for the 2013 New Year, the VIP lounge was held in the Capital Center, at 1201 Main St., for the first time because the event had moved closer to State House. The lounge also was infiltrated with people who had not paid for VIP tickets.

As the night went on, people who had not paid to be in the VIP lounge went into the area, and it “became tough to keep the paid guests in and the nonpaid guests out,” Johnson said.

In addition, alcohol ran short again because 5,000 more people attended than were expected. That year, there were tiered tickets with a $35 option that gave those outside a chance to be closer to the stage. A total of 761 VIP tickets were sold that year for $100 each, Rackes said.

But VIP lounge ticket sales dropped for 2014. There were only 533 sold, Rackes said. That figure includes discounted tickets that sponsors sold to their employees, she said.

However, organizational improvements were made. Paid guests were the only ones allowed in the VIP area, Johnson said. In addition, there was also plenty of alcohol with reserves available.

Sponsors were also given free VIP tickets depending on their sponsor level, Johnson said. For example, a $10,000-level sponsor received 12 VIP Crescent Lounge Tickets, he said.

But those tickets did not contribute to the overall deficit in VIP ticket sales, he said.

“The ability for the celebration to be free is made available by our community’s corporate citizens,” Johnson said. “Those tickets in no way impacted the Crescent Lounge.”

He and Rackes both said that no tickets were simply given away this year when they realized they had not sold as many as hoped.

Help from hospitality tax

To make up for the shortfall in revenue, City Council agreed to pay $50,000 in hospitality tax funds after the fact.

The hospitality tax is collected from a 2 percent tax on prepared meals and is given to groups that show they can attract tourists.

The hospitality tax request was justified, because the event was a victim of its own success, event organizers said.

“We would have had no right to request any hospitality tax if we had not felt that doing the New Year’s event was also going to put money in the hands of merchants and restaurateurs,” Rackes said.

Instead of paying $125 for VIP Crescent Lounge tickets, some who attended the event spent their money packing downtown restaurants and then going to see the free headliner, Rackes said.

“We have to rise to a higher competitive level if we’re going to continue to have a VIP area,” Rackes said.

The Lounge has to be as appealing as possible, said Johnson. But organizers also must recognize that so many other festivals and events are also taking place on New Year’s Eve, and factor that into the business model, thus “not relying as heavily on the Crescent Lounge tickets,” he said.

All of the expenses led to the deficit of more than $56,000 before the $50,000 hospitality money approval by City Council.

“Our preference is that they are able to stick to their budget,” said City Councilman Brian Newman, who brought up the request for hospitality tax funds at a City Council work session in February. “However, I understand the value of this event, the significant economic impact and the cultural return that it creates for our city.”

Councilwoman Leona Plaugh was the only no vote to give the $50,000 in hospitality tax funds.

“I wasn’t prepared to vote on a request that I didn’t understand,” Plaugh said, since she had not seen financial documents from the event when the vote was cast.

Plaugh pointed out that, typically, hospitality tax funds are awarded after a formal application made through the Hospitality Tax Advisory Committee, which allocates about a quarter of the total funds to about a hundred organizations.

Council allocates three-quarters of the money itself. But deciding who gets funding, and how much, has become inconsistent – and political.

Last-minute and sometimes ill-defined requests can get some organizations everything they ask for. Meanwhile, some organizations have their awards reduced each year, even though they document their ability to attract tourists and they submit their requests to council as requested, at the beginning of the budget process.

Unexpected expenses

Sponsors’ benefits include access to the VIP Palmetto Penthouse.

A $10,000 sponsor, for example, would receive six tickets to the VIP Palmetto Penthouse, Johnson said.

The Penthouse was another expense that went over budget. It cost $5,000, but no money was planned for it.

The organization thought it would get a location for the Penthouse at no charge, but it ended up being held at the Capital City Club, and organizers had to pay, Rackes said.

“We would have just scrapped it altogether if it hadn’t been part of the overall sponsor packet and everything we had marketed,” Rackes said.

The event also paid $14,868 to the Department of Revenue in taxes for two years’ events, plus penalties and interest, Rackes said. However, the organization is trying to get that money back, Rackes said.

Rackes said they are planning next year’s event in a different way.

She said there will be a different advisory committee that’s made up of a variety of governmental and business representation. This year there was an entertainment advisory committee made up mostly of vendors and sponsors, she said. Johnson said the goal is to have partners from the business industry, hospitality industry and regional partners.

“I think taking an event that was surprisingly successful to being one that is consistently successful takes a lot of learning,” Rackes said.

Coming Up Short

A total of $100,000 in hospitality tax funds from the city went to its Famously Hot New Year’s Eve celebration, with $50,000 awarded in the event’s budget and an additional $50,000 approved by council after the fact.

$61,000 difference between budget for corporate sponsorships and realized revenues

$36,725 shortfall in Crescent Lounge ticket sales

$5,000 unexpected cost of VIP Penthouse

$14,868 paid in Department of Revenue taxes, interest and penalties, the organization hopes to get back

SOURCE: Profit & loss statement, Barbara Rackes

Reach Cope at (803) 771-8657.

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