August 6, 2014
By Ken Stockdell, Jr., Director of Convention Center Practice, HKS, Inc.

In late July, the HKS Convention Center team had the opportunity to attend VenueConnect, the International Association of Venue Managers’ (IAVM) annual trade show and conference. It was a great weekend of interacting with facility managers from a variety of venues around the country. There were two sessions in particular that were informative and interesting as we look at convention center industry trends.

Several years ago, we learned that IAVM initiated a project called VenueDataSource, which gathers data on operational costs and revenue in IAVM member convention centers, stadia, arenas and performing arts facilities. This data provides a benchmarking tool that facilities can use to measure their operations against the industry as a whole. Although the project is fairly early in its life cycle, some helpful information is emerging. A conference session, presented by Steve Schwartz, senior research policy analyst at EventsDC, and Frank Ingoglia, research manager with IAVM, provided a report preview on facility operating costs and revenues. The picture it paints helps quantify industry trends.

It was no surprise to hear that operating costs are trending downward. Four cost categories were highlighted: cleaning, repair and maintenance, utilities and security. With increased pressure to reduce operating deficits, because of the economic and political climate of the last few years, facilities are working hard to move toward leaner operations.

In the utility category, some of the savings is created by initiatives such as lighting upgrades. Facilities are moving away from traditional HID lamping (mainly metal halide) to newer, more efficient technologies such as induction and LED. More and more venues also are taking advantage of their large roof areas by installing photovoltaic arrays. While these solar installations cannot meet all of the power demands, as technology efficiency increases, the amount of power generated is becoming meaningful.

The conversation about security cost reduction was interesting as well. Costs in this category have been devoted largely to staffing. In the aftermath of 9/11, the approach to enhanced security was to “flood the zone” with personnel. As time has passed, and in combination with the cost-cutting pressures, facilities are beginning to balance effective security with staff count. The net effect is reduced overhead in this area.

On the revenue side, it also was not surprising to hear that the market is flat. Occupancy, measured by total rentable occupied square feet, is hovering just under 50 percent, even though event attendance is rising. This means these venues are still operating at a loss, although they are making headway in closing the gap. And that means that funds for capital improvements are still hard to find. The available funding is being used for necessary repairs and replacements, and for enhancements related to food and beverage operations, since this typically is a convention center’s largest revenue generator.

Another session, presented by our friends at Conventional Wisdom and Rider Levett Bucknall, addressed planning for capital expenditures in this economic environment. They also noted the cost reduction trend, and discussed its impact on keeping facilities current as well as planning for needed improvements. “A short-term focus at the expense of long-term vision” was their summary of the situation. Facilities are so driven by annual budgets that they are unable, financially and politically, to properly plan for the future. One of the most interesting observations made in the presentation was that if a building is not maintained well during the first 60 percent of its life, you can never catch up with the deferred maintenance.

What are the big-picture implications? We are committed to helping our clients escape the short-term focus trap. We believe the process that helps most with this is developing a renovation master plan that sets the long-term vision and puts in place a plan to realize that vision. By making a list of the major maintenance, replacement and upgrade items that are needed and desired over the coming 10 years, facilities can act on them in the best sequence and plan for those expenses. This kind of long-term capital planning identifies the cost of each year’s projects and can facilitate the funding approval process with the public officials who make these decisions.

Posted in Convention Centers
Tagged convention Centers, International Association of Venue Managers, Ken Stockdell, VenueConnect, VenueDataSource