Greater Columbus Georgia Chamber of CommerceSeptember 26, 2013

2

Franklin County Convention Facilities Authority

• The FCCFA was created in 1988 to build the Greater Columbus Convention Center.

• The FCCFA is a special government unit created under Chapter 351 of the Ohio Revised Code.

• The FCCFA has an 11 member board appointed by the Franklin County Commissioners (6), City of Columbus (3) and Suburban Mayors (2).

• The FCCFA was created to develop, build and operate convention facilities in Franklin County. The FCCFA has full governmental powers to levy a 4% countywide and additional .9% citywide hotel tax, set its own budgets, appropriate property and other duties outlined in ORC 351.

• The FCCFA owns the Greater Columbus Convention Center, Nationwide Arena, the Columbus Hilton Downtown, land used to develop the Hyatt Regency and Drury Inn and Suites and various parking facilities.

Greater Columbus Convention Center

3

• The Greater Columbus Convention Center (GCCC) was developed by a community urban redevelopment corporation (CURC) and opened in 1980 as a mixed use facility called the Ohio Center. The CURC became the operating company that managed the facility.

• The Ohio Center consisted of 90,000 sf of arena/exhibit space, 50,000 sf of meeting space, an 18,000 sf ballroom and a retail mall. It was connected to the 631 room Hyatt Regency.

• Almost as soon as it opened, the Ohio Center was too small to be an effective convention center and planning began for a new convention center.

• The FCCFA opened the GCCC in March, 1993. It contained 216,000 sf of exhibit space, 50,000 sf of meeting space and a 25,000 sf ballroom.

• In 1996, the FCCFA assumed ownership of the Ohio Center and through an RFP process hired SMG to manage the combined convention center.

• The convention center was expanded in 2001 to add 125,000 sf of exhibit space, 15,000 sf of meeting space and a 15,000 sf ballroom.

Need for a Full Service Convention Hotel

4

• The target market for Columbus conventions are groups with room blocks ranging from 1,000 to 3,500 that have met in our geographic region.

• With the Hyatt Regency (631 rooms) as the HQ hotel, Columbus was able to meet the HQ hotel requirement for 65% of our target market. The addition of an additional 500 room HQ hotel enables us to meet the HQ hotel requirement of 92% of our target market.

• At 426,000 sf of exhibit space, the Greater Columbus Convention Center can accommodate approximately 98% of our target market.

• Based on market surveys, a new 500 room HQ hotel increased the propensity of customers to meet in Columbus by 170%

Columbus Hotel Pre-Development Timeline

5

2001

Experience Columbus

began lobbying for more hotel

rooms

2002

2003

2004

2005

2006

2007

2008

2009

2010

Feasibility/Demand Study (confirmation of previous

study) completed;

recommended potential

expansion of Hyatt as

alternative

Feasibility/ Demand

Study completed

Feasibility/Demand

Study completed

Feasibility/Demand

Study completed

Financial Feasibility

Study completed

Determined Hyatt

expansion too difficult

Subcommittees formed to

understand financing, marketing, economic

impact and connectivity

Mayor decided to

explore public financing due to expense of using private development

Market/Financial Feasibility Study

completed by SAG

Elected officials

briefed on potential

public financing

plans

County endorses

project

City, County, CFA agree to

financing terms

City, County, CFA

announce agreement to

finance project

Conditions Driving HQ Hotel Public Participation

6

Early 1990s Recession

S&L Commercial

Loan Failure

RTC Bulk Sale• 25-50% of

Replacement Cost

• Effectively a Federal Subsidy for Existing Hotels

Construction Costs Kept

Growing

Low Basis for New Owner• Lower ADR

Required

Traditional Hotels No

Longer Feasible

Limited Service Hotels Created• No meetings

space costs• Rates Just

Under Full Serv

Hotel Rates Never

Recovered to Support New Build

Costs

Conventions Still Need

Full-Service Hotels

Public Needed to

Fill Gap

The last convention hotel to be financed without public support

(other than in Las Vegas or Orlando) was the Chicago Sheraton

in 1992

Impact on Convention Center Generated Room Nights

Charlo

tte

Tampa

Houst

on

Baltim

ore

Denve

r

Ave

rage

Louis

ville

India

napo

lis

San A

nton

io

San J

ose

Myr

tle B

each

San D

iego

0%

10%

20%

30%

40%

50%

60%

70%

80%70%

50%43% 42% 40%

32%25%

20% 20% 18% 18%

6%

Change in Convention Center Generated Room Nights

Three years after Hotel Opened

7

Source: Local convention and visitor bureaus.

Impact on Competitive Hotels

8

0%

10%

20%

30%

40%

50%

60%

0.198471337579618

0.4250.451282051282051

0.50035739814153

0.398406374501992

0.2490470196223620.264943727014674

0.1723472047890320.216781214203895

0.173169889502762

26%

48%

55%

32%35%

23% 20%

3%6% 7%

0.2129510674010740.089876009293552

0.07177182892183270.0729668279172957

0.113703991807889

0.119172871714147

0.06753867907110370.02447548823489170.027711850907931

0.0710617427291525

0.03

Denver2005Hyatt1,100

Houston2004Hilton1,203

Louisville2005

Marriott616

Charlotte2003

Westin700

Austin2003Hilton800

Indianapolis2011

JW Marriott1,005

St. Louis2003

Renaissance917

San Diego2008Hilton1,190

Source: Smith Travel Research.

Supply

Demand Yr 1

Demand Yr 2

Demand Yr 3

Demand Yr 4

Demand Yr 5

Baltimore2008Hilton757

San Antonio2008

Grand Hyatt1,003

Opened in Recession

Sup

ply

/De

man

d I

ncre

ase

Typical Problem

9

Private Finance Approach – Prototypical 700 Rooms

Development Cost Warranted Investment$0m

$50m

$100m

$150m

$200m

$250m

Meeting Space$52m

Land Allowance $14500 Parking Spaces $12m Financing Gap

$50m

Private$160m

$140@75%$16m NOI10% Yield

Rooms$158m

Self Supporting ParkingDonate Land

$236m

Convention Hotel Financing Models

10

Pittsburgh 1991Norfolk 1992

Philadelphia 1995Denver 1998 Providence

Miami 1999Nashville 2000

TampaBaltimore 2001 Pittsburgh Airport

Jacksonville SacramentoNorth Charleston

SeattleCharlotte 2002 Overland Park

Richardson TrentonSt. LouisSan Jose 2003 Cambridge MD

Myrtle Beach2004 Austin

Houston2005 Omaha

Winston-Salem

2006 SchaumburgRaleigh Denver

Columbus OH

Washington DC

San Antonio

San Juan

La Vista2008 Phoenix

Manhattan KSBaltimore

Lancaster 2009

Shreveport

20112012

2014

PRIVATEFINANCING

With Public Incentives

PUBLICFINANCING

Houston 2016Miami Beach* 2018

Nashville 2013

Austin 2015

DallasFt Worth

Indianapolis

* No public incentives.

Chicago

Public Private Partnerships

11

• Nationwide Realty Investors developed the office buildings immediately south of the hotel site and brought 9,000 jobs downtown.

• The FCCFA expanded the garage next to the hotel by 900 spaces to provide daily parking for these new workers.

• The revenue received from these daily parkers covers approximately 85% of the debt service on the bonds.

• Hilton International provided $3 million in upfront cash to help develop the Hilton Columbus Downtown.

• The current convention center accounts for approximately 208,000 room nights annually for an economic impact of $140 million. With the new hotel this impact is expected to increase by at least 52,000 room nights worth $35 million in economic activity.

• The convention center accounts for 2,100 jobs, $44 million in wages and $9.2 million in tax collections annually. With the new hotel, we expect 550 new jobs, $11 million in wages and $2.3 million in new tax collections.

Public Approach Case Study: Columbus

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• Opened fall 2012

• 532 Rooms; 22,000 sf meeting space

• $142.8m project cost; $268,400/key

• Plus Land Contribution

• Hotel guests park in a CFA garage and pay market rates

• $178m w/ issuance & reserves

• $160m bond sale

• $15m Authority equity

• $3m Hilton “key money” contribution

• 10% hotel occupancy tax rebated forever

• No property tax – public ownership

• $17.8m in Reserves (working capital, operating, rental, debt service)

• Other Financing Pledges

• Authority hotel land lease revenues from two other hotels

• Equal amount of City Parking Meter Revenues

• County Full Faith and Credit

Fin

an

cial D

ash

board

RevenuesAugust2013

PY BudgetActual

$0m

$5m

$10m

$15m

$20m

$25m

Dept. Profits

PY BudgetActual

$0m

$2m

$4m

$6m

$8m

$10m

$12m

$14m

$16m

$18m

$20m

Occupancy

PY Actual

-5.0%-2.5%0.0%2.5%5.0%

Goal

ADR

PY

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

RevPAR

PY Actual

-$5.00

$0.00

$5.00

$10.00

Goal

Goal

G&A Expense

Sales & Mkting Expense

Other Expense

NOI

PY BudgetActual

$0m

$1m

$2m

$3m

$4m

$5m

$6m

$7m

$8m

PY Bud

$0m

$1m

$2m

$3m

PY Bud

$0m

$1m

$2m

$3m

$4m

PY Bud

$0m

$1m

$2m

$3m

Debt Service

Debt S...

Deposit

$0m

$2m

$4m

$6m

$8m

$10m

$12m

$14m

June

1 P

mt*

Dec

embe

r 1 P

mt* Y E

Cash

For

ecas

t

*Gross D/S prior to BABs subsidy

Dep

osite

dBA

Bs

STA

R R

ep

ort

& S

ALT

Dash

board

(S

TAR

data

thru

July

20

13

)

August2013 Occupancy Index (thru July 2013)

Current Month

YTD Running 3 Mo

Running 12 Mo

25%

50%

75%

100%

125%

150%

Average Daily Rate Index (thru July 2013)

Current Month

YTD Running 3 Mo

Running 12 Mo

25%

50%

75%

100%

125%

150%

Revenue / Available Room Index (thru July 2013)

Current Month

YTD Running 3 Mo

Running 12 Mo

25%

50%

75%

100%

125%

150%

Guest Satisfaction Scores (SALT) (thru August 2013)

Prop Loyalty

Overall Experience Service Accomm. Arrival Departure0%

10%20%30%40%50%60%70%80%90%

100%

% of respondents that rated hotel either 9 or 10 on a scale of 1 to 10

Hilton Compared to Competitive Set Hilton Compared to Competitive Set

Hilton Compared to Competitive Set --- Hilton Brand Benchmark

Hilt

on C

olu

mbu

s D

ash

board

0k

10k

20k

30k

40k

50k

60k

70k

80k

2013 2014 2015 2016 2017 2018<0k

10k

20k

30k

40k

50k

60k

70kOver GoalRemaining to be BookedTentative

City-Wide In-House Group

0k10k20k30k40k50k60k70k80k

% of Goal70%

80%

90%

100%

110%

Room Night Pace Room Night Bookings By Year

Average RateDefinite Booking Types

Goal/Budget to dateHilton bookings reflect contracts received and out for signature.

Tentative Booking Definite

August2013

2013 2014 2015 2016 2017 20180k

10k

20k

30k

40k

50k

60kProspects by Year

City-Wide In-House0k

15k30k45k60k75k90k

105k120k135k

Prospect by Type Conv. Center Revenue Generated by Hilton

F&B + Rental Revenue$0k

$50k$100k$150k$200k$250k$300k$350k$400k$450k$500k

Year to Date

Actual

Contracted through Yr End

CV

B D

ash

board

Goal Actual0k

25k

50k

75k

100k

125k

150k

175k

200k

225k

250k

275k

Room

Nig

hts

CVB GoalAugust2013

Current Year

1 Year Out

2 Years Out

3 Years Out

4 Years Out

5 Years Out

0k

50k

100k

150k

200k

250k

300k

350k20122013

Room

Nig

hts

CVB Pace and Position

Definite room nights as of 9/3/2013

Secrets to Success

• Agree upon a reasonable NOI projection• Back into development budget• Fight – Fight – Fight to keep it in budget

Build What You Can Afford

• Brands some times want to better their image at your expense• Make approval of DD part of Brand selection

Design the Hotel Through DD, THEN Retain the Brand

• Think quality, but small rooms – conventions are short term stays

• Study non-revenue support spaces diligently• Limit meeting space (a little) if hotel “laminated” to Center

meeting spaces

Square Feet is Your Enemy

• Approve incentive package then seek development partner• Good developers with capital relationships won’t take approval

risk• Avoid “other people’s money” developers

Get the PublicRole Approved

• Make it about economics, keep politics out• Select someone you want to do business with• Consider a community led selection/recommendation

Make the Right “Business” Decision

17

Questions

18