Convention Center & Event Industry Outlook
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1 Convention Center & Event Industry Outlook Board of Directors Retreat Meeting March 2014 Michael Hughes Managing Director, Research & Consulting Objectives Industry Size & Growth Competitive Industry Event Producer & Client Requirements Convention Center Management Trends Trends to Watch Q&A 2
2 Industry Size & Growth mil 3.1% # of Convention Centers in the U.S. & Canada Total Exhibition Space Supply in the U.S. & Canada 2013 U.S. & Canadian Center Revenue Growth 3. 4, Convention & Exhibition Net Sq. Ft. Growth Major Convention & Exhibitions in the U.S. & Canada There are also tens of thousands of smaller conferences, meetings and special events. ; CEIR 3 Key Issue: A Very Competitive Industry Convention Center Exhibit Space Supply Sq. Ft. in the U.S. & Canada 100,000,000 90,000,000 80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000-90,000,000 93,500,000 63,400,000 47,300, % Growth in 24 Years; 2.9% compound annual growth rate. But the number of major conventions and exhibitions has been flat for over 10 years. ; TSW Millions of Square Feet of Exhibit Space 4
3 Recent Venue Development Projects, Beside SDCCC New 350,000 sq. ft. Nashville Music City Convention Center opened in 2013 music district. Cleveland Medical Mart & Convention Center -- new permanent medical mart showrooms next to new 300,000+ sq. ft. convention center to opened in Moscone Center planning to add 200,000 sq. ft. of exhibition and meeting space. Las Vegas Convention Center -- embarking on long delayed major renovation and upgrade project. Los Angeles Convention Center new 200,000 sq. ft. hall to replace similar sized hall area to make way for 68,000-seat Farmers Arena. Anaheim Convention Center building, renovating 100,000 Grand Plaza outdoor space. Boston Convention & Exhibition Center considering expansion and renovation and new hotels. Javits Center in New York added about 100,000 sq. ft. of exhibit space recently. New Orleans Ernest N. Morial Convention Center -- recent renovation. Metro Toronto Convention Centre considering major mixed use development with hotels. And other projects 5 Convention Impact Ecosystem Shopping 44% Restaurants 92% What Attendees Do When in Town Entertainment 52% Pre-Event Site-Seeing 19% Sports Events 12% Convention Center & Hotel Activities Stay Over Post-Event 25% Cultural & Education 17% Family Events 2% 17% bring a spouse or friend Other Activities 1 Outdoor Recreation 6% 6
4 Event Producer & Client Requirements Convention & Exhibition Producer Site-Selection: What is Needed in Proposals from Venues, CVBs and Hotels? Exhibition producers expect discounts and negotiate strongly. It is still a buyer s market for convention center space in North America % 75% 73% 49% Hotel rebates or discounts Exhibit hall discounts Having everything "under one roof" (i.e., meeting rooms, exhibit halls, hotels in one or connected) Other venue or hotel related service discounts or credits 8
5 Site-Selection: Top Host City Criteria 9 85% 84% Event Producers Selecting Very Important 82% 8 75% 74% 71% 65% Hotel room availability and capacity Convention center and exhibition hall size and quality Hotel room prices and quality Labor costs and service issues Facilities "under one roof" (i.e., meeting rooms, exhibit halls, hotels in one or connected) 9 Site-Selection: Top Venue Criteria 95% 9 91% Event Producers Selecting Very Important 85% 85% 81% 8 79% 77% 75% Costs (to event management group) Exhibit hall(s) size and quality Costs (to exhibitors and attendees) Meeting room capacity and quality Exhibit space layout (single floor, contiguous) 10
6 How Event Management Venue Needs are Changing 56% Primary 44% Secondary 4 38% 35% 35% 35% 33% 33% 3 27% How Event Producers are Changing the Way they Present Value to Attendees Conventions, exhibitions and conferences are the original social media. 49% 39% 39% 31% 19% 14% 11% 1 Source: R7M Research & Consulting 12
7 Major Convention Center Trends Risks to Convention Center Growth Worldwide 8 According to Convention Center Managers 68% 56% % 31% 31% 2 1 Growing competition Slow, weak event growth Hotel availability, pricing Air travel issues Gov./corp. meeting restrictions ; AIPC 14
8 Major Convention Center Capital Investment Projects Over Past Ten Years or Currently Underway Currently or Planning in % % 1 1 Yes No Yes No Mainly new builds, expansions, major renovations and technology upgrades. 15 Type of Major Capital Investment Projects Over Past Ten Years or Underway Currently 4 56% 44% 41% 63% 36% Expansions are the focus; there s no new municipal convention center being built or planned currently in the U.S. for possibly the first time in decades Renovation Expansion Technology infrastructure Past 10 Years & Currently 13% 13% 8% 8% 8% New building or center facility Hotel development Currently Only Transportation access, roads, parking, etc. 16
9 Has the Convention Center Industry Over-Built Exhibition Space Over the Past Ten to Fifteen Years? According to Convention Center Managers 58% % % 11% Yes No Unsure It depends on the city, market area and competitive set 2% It depends on other factors specific to the venue 17 North American Convention Centers with New Revenue Streams Added in 2013 Primary New Revenue Sources New events owned by venue Sponsorship and advertising Signage Enhanced F&B, new concessions Secondary Exhibitor and event services Parking Permanent space lease to corporations Office space lease rental 46% 54% Yes No 18
10 How Event Producer Clients and Events Changing % of Venue Managers 1.) Requiring more telecom/internet bandwidth, services 78% 2.) Shorter booking windows 73% 3.) Increased negotiations 69% 4.) Requiring higher-quality food and beverage 62% 5.) Event attendance is growing 49% 19 What Types of Events and Groups Provide the Best Near- Term Growth Prospects % of Venue Managers Local corporate meetings 59% Association conferences and meetings Association conventions with exhibits 48% Consumer and public shows 48% Sporting events 48% Local, regional for-profit exhibitions and trade shows 36% National or International corporate meetings 36% Entertainment events 34% National / International for-profit exhibitions, tradeshows 3 Governmental events and meetings 14% 20
11 Trends to Watch Most Important Center Management Issues & Trends Competitor expansions, new build projects and discounting. Client requirements and negotiations. Government meeting cutbacks. Search for new revenue and business models. Sales and marketing focus on new markets and event types. Flexibility and increased value added services and enhancement. On-going facility investment, expansions, renovations and new technology. 22
12 Innovation Waves Events, Then Centers, Now Attendees 1980s to Early 1990s New Event Formats, Rapid Growth Today Digital; Attendee Experience; Content Focus 1990s to 2000s Convention Centres & Hotels Facilities Boom Next Innovation Wave More Specialized, More Services Attendee-driven. Events more specialized and unique. Enhanced venue services. More bandwidth required. More event management and center collaboration.
13 Mix Messages Many Opportunities & Challenges Opportunities Decent recovery over past few years. Recovery, but very slow, grinding. Corporate meetings growing worldwide. Lack of recent new center space. New, other revenue streams growing. Hotel development increasing. Content and technology explosion. Event formats changing. Challenges Modest 2.9% growth expected in 14. Increasing competition. Conventions/tradeshows a little stagnant. Still buyers market; negotiations. Core revenue streams under pressure. Airline capacity constrained. More IT investment required by venues. Keeping up with rapid change. 25 Q&A
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