Find out how these factors affect your rates and what’s negotiable now.
Looking for free space? Prove your show’s worth, and you’re likely to get it (or at least some other value-added services). During a recent negotiation with a convention center manager, Tony Calanca, Senior Vice President of Shelton, CT-based Infinity

Expo Group, was hoping to get additional meeting rooms for his exhibitors, at no additional cost.

“They said ‘You have to show us you’re going to fill more sleeping rooms to get more meeting rooms,’” Calanca says. Infinity’s attendee list included a complete list of hotels where they were lodging, proving that many of his attendees had booked rooms outside the CVB housing authority’s hotel block. Instead of the 4,000 hotel rooms the authority counted, Calanca was able to show that his event was filling 12,000. The center doubled his number of meeting rooms – with no additional cost.

“We demonstrated to them the economic impact we were making, and that gave us leverage,” he says.

Knowing what’s important to convention centers and what they’re willing to negotiate helped Calanca work out a favorable agreement. A recent study by PricewaterhouseCoopers LLP (PWC) may help other show managers find more ways to effectively negotiate by providing insight into how venues operate, structure their rates and discuss deals.

PWC, a business research and analysis firm, produced the 2003 Convention Center Report in conjunction with the International Association of Assembly Managers (IAAM). Through surveying approximately 100 managers of different-sized venues around the United States, the study provides averages on occupancy rates, attendance, number of events, rental rates, operating expenses, management structures, food-and-beverage revenues and the number of hotel room nights associated with convention center events.

The report is intended to give convention center managers benchmarks by which to measure their own business decisions and results. But it also provides show managers with valuable information on convention center trends and how they might affect negotiations in the future.

Room at the center
Occupancy rates at convention centers were down across the country, says Robert Canton, PWC Director of Convention and Tourism Services. Compared with data from PWC’s 2001 report, the occupancy of convention centers in “gateway” destinations (cities with more than 30,000 hotel rooms) dropped by 10 percentage points to 51 percent. The occupancy rates for “national” centers (cities with between 15,000 and 30,000 hotel rooms) dropped by about 15 points to 32 percent. “Regional” centers (cities with less than 15,000 hotel rooms or secondary/tertiary convention centers in markets with more than 15,000 hotel rooms) remained the least occupied at 26 percent, a one-point decline from 2001.

Some attribute the slump to a number of factors, including a sluggish economy, tight budgets and perhaps an industry downturn. However, Canton says the deciding factor is the increase in exhibition space.

“There were so many venues that opened or expanded in this past two years, and that’s the primary reason there’s such a significant drop in occupancy, particularly in the gateway convention centers,” he says

Though the drops are significant, Canton points out that the gateway destinations are operating within an efficient range of 50 to 60 percent occupied. (It’s generally accepted that 70 percent is a practical maximum occupancy, considering the days exhibition halls cannot be booked because of maintenance and logistics.) But the national and regional centers are having a tougher time, he says.

“Clearly, convention center managers and the CVBs that are responsible for filling these buildings are certainly going to experience intensified pressure to maximize the return on these major investments,” Canton says.

Just how they raise more revenue varies from center to center. As Canton points out, some of the more challenged venues have been giving space away. Others are stepping up their customer service and adding more exclusive services. While some convention center managers may be more willing to negotiate to fill their buildings, others take the opposite tactic by being less flexible.

It’s difficult to generalize because while some cities have an overabundance of exhibition space, others — such as New York and San Francisco — could definitely use more. Also, many different factors affect just how flexible a facility will be, says Lauren Diamond-Barkan, Director of Exposition Development for Advanstar Communications Inc. who negotiates contracts with convention centers around the world for the company’s more than 70 trade shows.

“It depends on different things, like the nature of the show coming to a convention center. If a show has a major impact in a city, then I’ll be able to get a better deal. But if I’m bringing less of an impact to a mid-sized convention center, they might not give me as good of a deal. And, it depends on the time of year as well. If it’s not a busy time, I may get better rates or free space,” Diamond-Barkan says. She adds that Advanstar has been able to reduce rental costs at convention centers in the central and western parts of the country by committing to three-year deals.

Comparing rental rates
According to the PWC/IAAM report, building rental rates among all sizes of convention centers and destinations are fairly uniform. This may reflect the tendency for publicly owned facilities to fix their rates, thereby leading managers to negotiate other items like move-in/move-out days and meeting rooms. The report shows gateway venues have an average convention/trade show rental rate of 5 cents per gross square foot per day; national venues are at an average of 4 cents and regional venues are at 7 cents.

These rates sound miniscule compared with how most convention centers quote prices. Show managers more commonly hear prices such as a daily rate of 30 cents per net square foot, or a show rate of $1.60 per net square foot for five days. Since different convention centers quote rates in different ways, and for the purpose of comparison, the PWC/IAAM report calculated daily rental rates by taking a venue’s gross space rental revenue and dividing that by occupied square foot days.

“This makes everyone apples to apples,” Canton says. “Occupied square foot days counts all the space used — including move-in, move-out and event — whether or not it was billed to the show. Published rental rates are rarely comparable, as they don’t always clearly represent the same number of free or discounted move-in/move-out days, discounts off or published rates, etc.”

David Meeks, General Manager of the Anaheim Convention Center in California, says, for the most part, show managers can expect venues east of the Mississippi River to quote rates based on the total number of show days and those west of the river to quote daily rates. That means his facility’s 30 cents per net square foot daily rate is compared with Atlanta’s Georgia World Congress Center’s (GWCC) $1.60 per net square foot rate for five show days. When calculating the two venue’s rates for, say, 20,000 square feet of exhibit space for five days, the cost at Anaheim is $30,000 and at GWCC it’s $32,000.

However, as show managers know, one must consider services, move-in/move-out days and other factors when comparing rates. For example, Anaheim gives one free move-in/move-out day for each show day. And, to compete with popular destinations like Anaheim and others around the country, GWCC’s rental price includes several items, such as a free move-in/move-out day for each show day; cleaning; complimentary electrical service for show management offices and registration operations; room changes and setups; and complimentary special handling of vehicles and machinery.

“We figure it’s easier for our customers because they don’t have to wonder what each fee on their bill is for,” says Pattsie Rand, GWCC’s Director of Sales and Marketing. “At the end of an event, when the customer gets the bill, there won’t be much on it, unless they order a lot of extra services.”

Rand says GWCC raised its rate by 10 cents this year, and then added a number of new services as part of the price. By comparison, last year, Anaheim raised its rate 2 cents and expects to maintain it through 2004. The GWCC typically raises its rates every three years. Though it won’t negotiate that rate because it includes many services, Rand says she is able to barter for other rental needs. “It depends on the time of year, and the short-term of the event. It’s tough to negotiate for a show several years out because we just don’t know what will be happening.”

Negotiation considerations
IAAM’s President Dexter King says he expects convention centers will continue to be loss leaders. As a result, convention center managers will also continue to consider a show’s potential economic benefit to a city first when negotiating deals with show producers.

“You really need to take responsibility for knowing what your individual events are worth to each city,” says Beth Torrey, Vice President of Conferences and Exhibitions for M/C Communications. Torrey says she uses her food-and-beverage revenues and hotel pick-ups as negotiating tools.

Most convention center managers we interviewed said they do factor in potential food-and-beverage sales in their bargaining decisions. “We’ve been known to waive rental rates if the customer will have significant food-and-beverage needs,” Rand says.

The PWC/IAAM report shows that gateway destination centers make about $22 gross per attendee for conventions and trade shows and about $2.50 gross per attendee for consumer shows. Respectively, it is about $6 and $2.35 for national centers. Regional centers bring in about $8.45 and $1.40 per attendee respectively. If your show is higher than the average, you may have more negotiating power.
Priorities vary from city to city, but Phillip Robinson, Senior Vice President for George Little Management LLC, says he finds convention centers are more concerned with the number of hotel rooms his shows will fill than the amount of food-and-beverage sales they generate.

The 2003 Convention Center Report lists the average number of hotel room nights generated by convention centers by destination type and facility size. Gateway centers generated about 368,000 hotel room nights, nationals had about 150,000 and regionals 33,300. Centers with more than 500,000 square feet of leasable space generated about 521,000 hotel room nights. Centers with between 100,000 and 500,000 square feet had about 152,000 and those with less than 100,000 square feet had 40,500.
The report qualifies these statistics by noting that hotel room night estimates often come from CVBs and often don’t account for hotel bookings “outside the block.” Consequently, the report’s hotel room data may underestimate the impact convention centers make on the hotel industry.

Although filling hotel rooms, generating food-and-beverage sales and the overall economic impact on a destination are important, Robinson points out that it all comes down to a simple supply and demand question. Bottom line: Most convention centers around the country are concerned about filling their halls throughout the year, he says.
To do that, both King and Canton say many cities are looking into the benefits that come from developing hotels and other businesses in proximity to their convention centers. King says he expects to see this trend expand.