Free or deeply discounted convention center space has traditionally been offered to associations to attract their meetings, particularly in North America. However, that perk may be harder for planners to get these days.
“The equation is going to have to change a little bit based on the economic realities we find ourselves in as publicly financed venues,” said Dave Causton, general manager at Chicago’s McCormick Place, who was among the panel of experts speaking at a session called, “When ‘Free’ is No Longer An Option: Navigating New Pricing Realities at Convention Centers,” at the Professional Convention Management Association’s Convening Leaders conference in January.
That sentiment was shared by fellow panelists, James Rooney, executive director, Massachusetts Convention Center Authority; Gregory O’Dell, president and chief executive officer, Events DC; John Patronski, executive vice president, Global Experience Specialists; and moderator Claire Smith, vice president, sales and, Vancouver Convention Centre. Association executives Robin Preston, assistant executive director, conferences, exhibits and sponsorships, National School Boards Association, and Lisa Block, vice president of meetings and conferences, Society for Human Resource Management, also sat on the panel.
Feeling the Pinch
The vast majority of convention centers in the U.S. are publicly owned and funded, in part, by local government subsidies. As states slash budgets, convention centers are feeling the pinch. “The majority of our states are underwater with pensions, and that has the potential to take a lot of dollars away from supporting convention centers,” said Patronski.
More and more, municipalities need convention centers to generate revenue to help close budget shortfalls, panelists said, not just serve as loss leaders for the economic impact they generate. And, said Rooney, even the economic impact argument is harder to make these days as the duration of hotel stays for meetings is declining and other metrics generally aren’t growing like they used to. “They (legislators) are trying to solve this year’s budget, and we’re talking about the economic impact seven years from now,” he said.
On top of these pressures, convention centers need to invest in maintenance and improvements to compete in a very crowded field. “The pressure of the ask is greater,” said Rooney.
Groups require upgrades, like wireless connectivity, which is very expensive. It can cost anywhere from $500,000 to $1 million—or more—to install wireless in a building and that needs to be updated every few years to keep up with the demand, experts say.
Market Correction Coming?
In the coming years, convention centers will have to take steps to generate additional revenue to survive—in addition to charging for convention space. Some destinations will have to repurpose their centers, using them for something other than just meetings and events, the panelists said. Another possibility is for buildings to host and manage their own events—a strategy that’s common in Europe. The key is to find a niche that is not competitive or offensive to clients, panelists said.
There are other options as well, like getting into the hotel business, said Causton. In some destinations—such as Chicago where the Metropolitan Pier Exposition Authority owns the Hyatt Regency—publicly owned properties are generating profits to offset deficits at the convention center.
Even still, many of the panelists believe the industry won’t be able to sustain the number of convention centers out there. “I think there’s going to be a major market correction,” said O’Dell. “There will be less supply—buildings will be repurposed or vanish.” Conversely, other destinations will thrive.
Advice for Planners
Faced with this new reality, meeting planners should negotiate with convention centers on the whole package and not focus on specific issues, like free rent. “It’s very hard for us to negotiate piecemeal,” said O’Dell. “We need to look at the package in totality to see how we can be flexible and work together.”
Neither of the planners on the PCMA panel have ever asked for or received free convention center space, but they did bring up several areas where they’d like to see more flexibility—minimum spending requirements, exclusive contractors, and Internet fees. Regarding minimums, for example, Preston’s NSBA group does not require much F&B, so she’d like to work with venues on waiving those minimums but perhaps impose them in another spend category.
Block would like to see flexibility with exclusives, allowing her to bring in contractors that she’s worked with elsewhere and ensure a consistency across meetings. Her SHRM attendees have high expectations, she explained, so she can’t have different experiences from one city to the next.
Above all, said Block, planners need pricing transparency—knowing what they are paying for without any surprises. “What drives us crazy is being nickled and dimed, and not having the ability to forecast appropriately,” said Block. “There is not a building we have been in the last seven years where there has not been some sort of surprise.”
PCMA will continue the discussion with a similar panel at its Education Conference, June 24–27, in Denver.