Since passing in May, Chicago’s legislative reform to its convention industry has entered its first phase of implementation. That has largely centered around tangible operational changes as well as specific cost savings for show organizers and exhibitors. Going forward, McCormick Place will move into its next phase, which will involve a significant debt restructuring to help absorb the cost saving implementations as well as fund new investments. Finally, the MPEA will submit an RFP to take the management of McCormick Place Private.

In a phone interview with EXPO, David Causton [pictured], general manager of McCormick Place, described the convention center’s plans in more detail.

Talk about how you're positioning and marketing the venue. What's your approach now and how are the show organizers responding?

The reaction from our customers has been very positive. We're now going into our second show here that's using the Phase I roll-out and we've already gotten some feedback that things have gone extremely well as related to the costs and the ability of the exhibitors to do a lot of the work themselves that they hadn't done in the past.

From a marketing standpoint, what we're trying to demonstrate to the whole convention and trade show market nationally is we have generated this flexibility of work that you can do that creates no bills, and that is putting us in alignment with much of our competition. Secondly, and more importantly, is we're driving down costs. What exhibitors have told us through their show organizers is McCormick Place is a great destination and it has all the positive aspects of having a successful face-to-face meeting, but we had to figure out ways to lower costs at the facility. And that's certainly what we've done as it relates to the cost of utilities and installation and the cost of food.

What specifically are the savings in these areas?

On the electrical front, when you look at the labor savings and you just take the fact that we've reduced the cost of a straight-time hour from $103 to $79 that's over 23 percent savings for the customer. And since most of the billing we do is in straight time, you're going to see that 23 percent flow through to the bottom line of the exhibitor.

On the service side, we took our competitive set that includes many of the national players and we also looked at regional convention centers in the Midwest and we took every price that we offered and if we were below those costs of the competitive set we kept them; if we were not we lowered our price to the competitive set. So from the exhibitor's point of view, what they're paying for the service should not be different than what they're paying for the competition—and the electrical labor is now 23 percent cheaper.

On the food front, when you go to our food courts that we operate with our in-house caterer, those costs have dropped 20 percent. When you order a catering function, those menus have dropped by 10 percent.

How are you absorbing those cost reductions?

This is part of the Phase 2 rollout. We'll be restructuring our debt. We have received, under the legislation, permission from the general assembly to restructure our debt on what we need to pay off on the existing buildings that we built. That will generate additional capital. That capital will be used in two ways. For a short-term period of four years, it will subsidize the costs for our business operations as it relates to the savings that we're passing on to customers right now.

Additionally, it will allow us to invest in other projects that are going to generate revenue for us so that after four years, this will be an ongoing way to make sure that we're going to keep covering these cost reductions. The first way that we're going to use that money is to expand the Hyatt Regency McCormick Place, which is owned by the MPEA. We can add 400 rooms and generate additional profit from that.

Was the debt restructuring a reduction in interest?

It's partly a reduction in interest and partly an extension of the life.

You talked about the phased implementation. What's ahead and how many phases will this have?

Phase 2 will include the creation of an advisory council. The council is important because moving forward, some of the other changes that we may explore will require us to at least talk to the advisory council as we go through that process. It will be made up of customers, contractors—both the EAC community and the official service contractors—labor, and representatives from the facility. That announcement will occur in September.

We also made a commitment when we passed the legislation in that even though we are providing electrical at cost we also agreed that the building will no longer be the exclusive provider of that service. We are working on a process by which we can pre-qualify a series of electrical contractors that will be on a certified list that show organizers can use and take bids from. We hope to announce in October the list that our customers can use going forward.

Also part of Phase 2 is over the next years we will privatize the management of McCormick Place completely. That will require us to put out a request for proposal. We are working now on creating the RFP for that. We have committed to September 15 for putting the RFP on the street to start the process of finding a private manager for the operation. That process will probably take up to a year.

We would become the largest privately managed facility in the country once we complete this process.