For years people have been buying shares in condos so they can reserve dates for future vacations. Now the trade show industry has adapted the idea, and for the first time, show management companies are lined up to become equity partners in a convention facility.
If all goes according to plan, the 2.4-million-square-foot World Expo Center in Osceola County, Florida, will be the nation's biggest exhibition hall. Slated for a January 2001 opening, the WEC will form the centerpiece of a mixed-use project that will also include a 120,000-square-foot, county-owned convention center, 5,000 hotel rooms, parking areas for 20,000 cars, and a shopping mall and entertainment complex.
Operated by Stanley Shenkman, owner of Toronto's International Centre, the WEC also has three equity partners, who are contributing a total of 20 percent of the funding. While WEC would not reveal their names at press time, they are "show management companies and associations that represent hundreds of shows--every type of show you can think of, including electrical, heavy construction, high technology," says Jerry Zwick, executive vice president, WEC.
The partners' investment entitles them to guaranteed dates and space for the next 40 years. The partners also get a five percent discount off the hall rental fees and a share of the center's total revenue, "just like normal investors," Zwick says. The WEC guarantees investors that competing shows won't be booked in the facility.
"It's a very innovative approach," says Steven Hacker, CAE, president of International Association for Exposition Management, based in Dallas. "Frankly, I'm surprised no one thought of it before. It goes to the heart of chronic problems with date protection, and it enrolls the show organizers in the project, gives them ownership. That always makes for an exciting dynamic."
WEC execs say the development team tapped the investors for more than money--it solicited their input. For example, two million of the facility's 2.4 million square feet will be exhibition space, says Zwick, because, "when we did a feasibility study, people said they wanted floor space." That emphasis on exhibition space, he adds, distinguishes the WEC from its neighbor, the Orange County Convention Center, which currently offers 1.1 million square feet of exhibit space (see sidebar on next page). The WEC's exhibition space will be spread through 11 contiguous, identical halls, Zwick continues, enabling show organizers to "keep the same schematics from hall to hall."
The WEC execs also bring their own trade show expertise to the project's conception. Zwick was previously president of GES Exposition Services Inc., and WEC president and CEO Ken McAvoy formerly served asGES's executive vice president-east.
Kissimmee, again? Does it make sense for the equity partners to commit their shows to the same venue for decades? "Meeting in one city over and over gets to be a burden sometimes," cautions Carey Rountree, executive vice president, sales and marketing, Atlanta CVB. Attendance may stagnate, and the host city may not appreciate the business the way it should, knowing the show has nowhere else to go.
"It will be a novelty for a while, but in the long run, exhibitors and buyers may say, 'Oh, we're going to Kissimmee again? We deserve the opportunity to move around, and enjoy a city, rather than look at [a show] as drudgery,'" agrees Ty Stroh, president, Greater Columbus (Ohio) CVB.
But the equity partners' shows are "so large there is no other place they can go," argues Zwick. "Some of the shows will grow 10 to 15 percent immediately [upon coming to WEC]," he says.
And some shows do stay in one location, adds Jim Lewis, WEC vice president of sales. He points to the Sands Expo Center in Las Vegas, another privately owned facility, as an example. Lewis served at The Sands for six years, most recently as associate director of sales. "Ninety-five percent of the shows there," Lewis says, "are annual shows."
Shows can change, counters Rountree. "We've all seen that happen. A big show may not exist in two years." While not privy to the details of the negotiations between the partners and WEC, Rountree says, "It's a huge risk."
The partners are not without an escape hatch. For a transfer fee, they can assign their time to another show, explains Zwick, as long as the show doesn't negatively affect the other WEC partners.
Why Just Orlando? If the WEC concept does work, it could create a trend. "Will this be the first of several others around the country, around the world?" questions Hacker. "Why just Orlando? If it works, why not Las Vegas, Chicago, Los Angeles?"
Why not, indeed? In fact, Zwick says, when the team conducted feasibility studies, the results indicated that the idea was viable in other parts of the country. "But Florida was the number-one choice," says Zwick, because of the climate, the work rules, and the proximity to Disneyland. Zwick adds that the development team has been offered the opportunity to go elsewhere, but has said no for now. "We want to concentrate on our facility here."
That's not to say that the project won't be cloned in the future. If it is, Zwick says, the same equity partners will be involved. "I call them our team. We'll work together and replicate what we're doing here."
The idea of numerous behemoth centers raises the question: Is there enough business to support them? While overbuilding is always a possibility, IAEM's Hacker sees no evidence of that yet. The trade show industry is healthy. Nevertheless, he reflects, "This certainly does raise the stakes. It doesn't take many three-million-square-foot facilities to create glut."*
Sharing the Sandbox When the World Expo Center opens in central Florida, it won't be the only big kid in town. Just five miles away, the Orange County Convention Center is currently angling for expansion as well. At press time, the OCCC was preparing to submit its recommendations to the county commission. "We hope to add as much as one million square feet by 2002," says Tom Ackert, executive director. The center would then offer2.1 millionsquare feet of exhibit space, just about the same amount of exhibit space as WEC will provide.
The tricky issue is whether the two centers will cooperate--or compete--for business. While the WEC initially "went into the marketplace looking at big shows that had outgrown their facilities," says Jerry Zwick, executive vice president, now the facility is marketing to smaller accounts. The WEC will be able to accommodate four, five, or six shows at a time. "We care just as much about the little shows," Zwick asserts. At press time, the WEC was showing a 30 percent occupancy for 2001.
WEC's president and CEO Ken McAvoy, has recommended the creation of a Central Florida Convention authority, which would coordinate bookings and hotel room blocks. It would not, he underscores, combine the bureaus. Cooperation is essential, because even though the WEC is in Osceola County, 50 to 60 percent of the hotel rooms, at least through mid 2005, will be in Orange Country.
But William C. Peeper, president, Orlando/Orange County CVB, is not nearly as optimistic. "We very much believe in the theory of cooperation and strategic alliances where it is practical and appropriate," he says. "The question I have is whether or not this alliance is appropriate. Don't construe that as a no," he stresses. "We have begun discussions to see if it is a viable approach. You can't have two 50,000 people shows here at the same time, competing for infrastructure and hotels. If you are in a real partnership, you have to take turns. But a for-profit entity has to answer to a board of directors. I don't know the last for-profit entity that was willing to forego revenue."
WEC's vice president of sales Jim Lewis responds that it wouldn't make sense for the WEC to book an event if there weren't enough hotel rooms, because the convention manager would not be satisfied. And that's not good for business. "As a private building," Lewis says, "we want to see return business."