Tomorrow’s Congress & Convention Centres

Michael HughesManaging Director, Research & Consulting

July 5th 2010Liverpool, United Kingdom

Objectives

• About the Survey & RespondentsAbout the Survey & Respondents

• Growth Rates & OutlookGrowth Rates & Outlook

• Financials & RevenuesFinancials & Revenues

• New Buildings & ExpansionsNew Buildings & Expansions

• Design & TechnologyDesign & Technology

• Green & Environmental Green & Environmental • Client TrendsClient Trends

• Conclusion and Q&AConclusion and Q&A

About the Survey About the Survey & Respondents& Respondents

About the Survey

• In May and June 2010 AIPC conducted an executive-level In May and June 2010 AIPC conducted an executive-level survey covering congress and convention centre trends. survey covering congress and convention centre trends.

• The survey was sent to all AIPC members and about 150 non-The survey was sent to all AIPC members and about 150 non-members around the world. members around the world.

• 88% of the survey respondents are AIPC members. 88% of the survey respondents are AIPC members.

• The AIPC member response rate is significant: 71%.The AIPC member response rate is significant: 71%.

• Survey was conducted by Red 7 Media, LLC, which owns Survey was conducted by Red 7 Media, LLC, which owns EXPO and Event Marketer magazines. EXPO and Event Marketer magazines.

Key Themes

• 2010 expected industry growth trends – 4% global revenue 2010 expected industry growth trends – 4% global revenue growth from 1% to 2% event and attendance growth. growth from 1% to 2% event and attendance growth.

• Pricing – published rates are holding or increasing, but top Pricing – published rates are holding or increasing, but top clients are negotiating more or asking for incentives.clients are negotiating more or asking for incentives.

• Focus on new revenue and services.Focus on new revenue and services.

• Management role changing.Management role changing.

Key Themes

• Continued building boom – 59% of venues have a new build or Continued building boom – 59% of venues have a new build or expansion project underway or opened in the past three years.expansion project underway or opened in the past three years.

• Primary technology and service interest is in wireless internet Primary technology and service interest is in wireless internet access; higher quality, high-tech meeting rooms; and access; higher quality, high-tech meeting rooms; and environment conditions (HVAC, lighting, etc.).environment conditions (HVAC, lighting, etc.).

• Primary client trends and requirements are increased Primary client trends and requirements are increased negotiations; shorter booking window; and higher-quality F&B.negotiations; shorter booking window; and higher-quality F&B.

Ownership Structure

Survey Question 3. What is the ownership structure of your venue?

Management Structure

Survey Question 4. What is your management structure?

Tomorrow’s Congress Centres: More ownership combinations and continued trend to private management.

Facility Location and Size

Survey Question 5. Where is your facility located?

Average and Median Size of the Survey Respondents: • Total function space m²: 45,808 (median: 18,000)• Exhibition space m²: 31,800 (median: 10,700)• Largest non-exhibit space: 4,409 (median: 2,020)• Theatre-Auditorium seats: 3,128 (median: 2,150)• Total meeting rooms: 32 (median: 23)

Growth Rates & Growth Rates & OutlookOutlook

Expected Revenue, Event Bookings and Attendance Change 2010 vs. 2009 – All Respondents

Survey Question 7. By what percentage do you expect your facility's total gross revenues in 2010 to change compared to 2009 (or your current fiscal year compared to last fiscal)? AND, Q8 and Q9.

Revenue is expected to grow faster than bookings and attendance.

Expected Gross Revenue Change 2010 vs. 2009

Survey Question 7. By what percentage do you expect your facility's total gross revenues in 2010 to change compared to 2009 (or your current fiscal year compared to last fiscal)?

Expected Change in Number of Events 2010 vs. 2009

Survey Question 8. By what percentage do you expect your facility's total number of events in 2010 to change compared to 2009 (or your current fiscal year compared to last fiscal)?

Expected Change in Total Attendance in 2010 vs. 2009

Survey Question 9. By what percentage do you expect your facility's total number of event attendees and delegates in 2010 to change compared to 2009 (or your current fiscal year compared to last fiscal)?  

Financials & Financials & RevenuesRevenues

New Revenue Sources

Survey Question 15. Have you added any new revenue sources (facilities, services or events) in the past five years? (And) #16. If you have added new revenue sources, what are they?

Primary SourcesPrimary Sources• Expansions, more spaceExpansions, more space• Technology, wireless, internet Technology, wireless, internet and AVand AV• F&B including more catering, F&B including more catering, concessions, food courtsconcessions, food courts• Event servicesEvent services

SecondarySecondary• Booking more entertainment-Booking more entertainment-related eventsrelated events• Launching own events usually Launching own events usually entertainment-based entertainment-based • Signage and advertisingSignage and advertising• Package offersPackage offers• RegistrationRegistration• ParkingParking• Event management Event management

Tomorrow’s Congress Centres: Continued search for new revenue sources; the secondary sources will become more common.

Primary Responses to the Global Financial Crisis and Recession

Survey Question 10. What were your primary responses to the recent global recession and financial crisis? (Please check all that are applicable.)

““Other” responses include: Other” responses include: • Cost control, froze salaries, reassessed capital expenditures, energy expenses• More concerts/cultural events; less corporate events• Communicated more with all staff• Value added, rate flexibility and discounting

Facilities with a Gross Profit (excluding debt service or loan payments)

Survey Question 11. Does your facility business turn a gross profit, net of any debt service or loan payments related to past or current construction or development?

Governmental Payments or Subsidies

Survey Question 13. Does your venue receive any governmental payments or subsidies to fund operations or pay debt service or loans?

Overall Success Measurement

Survey Question 14. How do you and your senior management team measure overall success? (Please check all that apply.)

Primary Metrics

1.) Venue operational profit/loss 91% of respondents

2.) Total number of events 73%

3.) Total economic impact 63%

4.) Total number of visitors 57%

5.) Public Relations – press coverage 36%

Secondary• Performance of proprietary event business 20%• Total number of booked hotel rooms 19%• Hotel community occupancy levels 10%• Visitor-related tax revenues 9%• Hotel community gross sales or profit 3%• Other 14%

Convention and Exhibition Space Pricing Trends

Survey Question 12. In general, is your convention and exhibition space / hall pricing increasing or eroding?

Tomorrow’s Congress Centres: On-going analysis of where to increase and reduce rates for all services.

Venues Engaging in More Client Incentive Activities

Survey Question 18. Are you engaging in more incentive activities (i.e., rent reductions, added value services, cash incentives, hosted functions) than previously?

Tomorrow’s Congress Centres: More incentives for the largest 20% to 30% of events and group meetings.

New Buildings & New Buildings & ExpansionsExpansions

Most Recent New Building or Expansion Project

Survey Question 19. When was the last new building, expansion or major refurbishment project completed at your venue?

Tomorrow’s Congress Centres: Possibly a slowing of the building and expansion boom, but still continual facility growth.

New Building and Expansion Projects Underway

Survey Question 20. Are you planning a new build, expansion or renovation currently, or is one underway?

Primary Reasons for New Building Projects1.) Demand from events that need larger space: 39%2.) Add new technology features and services: 17%3.) Update aging facilities: 16%

Project Financing Sources

Survey Question 22. How will the new building project be financed?

““Other” responses includeOther” responses include: :

• Combination of sourcesCombination of sources

• Bank loansBank loans

• Internal fundsInternal funds

38% of new development projects 38% of new development projects have a P3 component.have a P3 component.

Factors Limiting Ability to Expand or Renovate

Survey Question 24. What factors are most limiting your ability to carry out required facility expansion / renovations?

Tomorrow’s Congress Centres: The limiting factors are manageable, but which one of these factors (or more than one) could increase significantly?

Design & Design & TechnologyTechnology

Most Important Facility Design and Functionality Themes and Amenities Over the Next 5 Years

1.) Wireless internet access1.) Wireless internet access 71%71%

2.) Higher quality, high-tech meeting rooms2.) Higher quality, high-tech meeting rooms 67%67%

3.) Environment conditions (A/C, lighting, etc.)3.) Environment conditions (A/C, lighting, etc.) 60%60%

4.) Multi-function space for various event types4.) Multi-function space for various event types 57%57%

5.) Unique overall ambience, aesthetics5.) Unique overall ambience, aesthetics 55%55%

6.) Better signage and way-finding6.) Better signage and way-finding 54%54%

7.) High quality exhibit space7.) High quality exhibit space 50%50%

SecondarySecondaryHigher-quality foodHigher-quality food 49%49%High-tech, divisible lecture hallsHigh-tech, divisible lecture halls 49%49%Efficient transportation options (to the venue)Efficient transportation options (to the venue) 49% 49%

Survey Question 25. Which of the following convention and congress venue center design and functionality trends, themes and amenities will be more important over the next five years to venue management, venue clients and attendees? (Check all that apply.)

Tomorrow’s Congress Centres: Many design, amenity and technology projects ahead. Most focused on improving attendee/delegate experience.

Ideal New Facilities and Programs to Increase Profitability

Primary Responses Primary Responses • Additional exhibition spaceAdditional exhibition space• Additional meeting space, multi-functional spaceAdditional meeting space, multi-functional space• AuditoriumsAuditoriums• Ballroom(s)Ballroom(s)• Technology, wirelessTechnology, wireless• New kitchen and F&B spaceNew kitchen and F&B space  Secondary ResponsesSecondary Responses• Hotel capacity and connections to hotelsHotel capacity and connections to hotels• Transportation elements and connections Transportation elements and connections • Retail, other ancillary servicesRetail, other ancillary services• Smaller, more “sociable” areasSmaller, more “sociable” areas• Green and environmental impact issuesGreen and environmental impact issues• Broadcasting services Broadcasting services • More parking facilitiesMore parking facilities• Creating own events Creating own events

Survey Question 27. What kinds of new facilities and programming (regardless of whether or not you can actually create them) do you think would be of greatest benefit in increasing your profitability over the next 3 years?

Tomorrow’s Congress Centres: Continued search for new programs and services – the secondary sources will become more important. More creativity and entrepreneurial approach required.

Current Facility Limitations

1.) Lack of exhibition space1.) Lack of exhibition space 52%52%

2.) Lack of meeting / breakout room space2.) Lack of meeting / breakout room space 41%41%

3.) Need more F&B areas, restaurants, concessions3.) Need more F&B areas, restaurants, concessions 17%17%

4.) Lack of theatre4.) Lack of theatre 16%16%

5.) Need for more kitchen space5.) Need for more kitchen space 10%10%

6.) Need more parking6.) Need more parking 14%14%

7.) Out-dated telecom and internet technology7.) Out-dated telecom and internet technology 9% 9%

Survey Question 28. What limitations in your current facilities are most restricting your ability to earn more revenue?

Tomorrow’s Congress Centres: These perceived limitations will drive more development and expansions. When the global economy recovers will the industry experience another development wave?

What Does Venue “Flexibility” Mean?

“Flexibility” has many different meanings… Primary Responses• Faster event turnaround• Meeting and ballroom turnarounds• Serving a diverse mix of business• Quick and inexpensive, less labor intensive• Creativity, having no limitations • Higher level of client service  Secondary Responses• Handle last minutes changes and bookings• Problem solving • Retractable seating• Ability to host multiple events • Multi-functionality• Lighting, rigging, A/V and communications capabilities • Removable walls and large pre-function spaces• Flexibility in services and financial / business matters

Survey Question 30. "Flexibility" is identified as one of the most important features a centre needs today.  What would this mean in the context of your own facilities?

Technology Services and Issues of Most Importance Over Next Five Years PrimaryPrimary

• Meeting room technologyMeeting room technology 65%65%

• AV technology and servicesAV technology and services 65%65%

• WirelessWireless 62%62%

• Web siteWeb site 51%51%

• InternetInternet 40%40%

SecondarySecondary• TelecommunicationsTelecommunications 36%36%• Technology staffingTechnology staffing 32%32%• Security technologySecurity technology 31%31%• Paying for IT investments/upgradesPaying for IT investments/upgrades 27%27%• Technology vendor relationshipsTechnology vendor relationships 14%14%

Survey Question 38. Which of the following technology-related services and issues will be the most important to your venue business over the next five years? (Please check the top three.)

Green & Green & EnvironmentalEnvironmental

Venues with Green/Sustainability Programs

Survey Question 31. Does your facility have Green / sustainability program policies and initiatives in place?

Venues with Recognized Sustainability Design Certification

Survey Question 32. Do you have a recognized sustainability design (i.e. LEED, BREAMM) or operating (i.e., Green Globe, GMIC) certification?

Certification ProgramsCertification Programs

• Green Globe 28%Green Globe 28%• LEED 11%LEED 11%• BREAMM 0%BREAMM 0%• GMIC 0% GMIC 0% • Other 42% Other 42% • Not Applicable 32%Not Applicable 32%

Factors in Decision to Pursue Green Programs

Survey Question 34. What factors were the most important in your decision to pursue green facilities / programming? AND, Survey Question 37. What Green, environmental and/or sustainability issues are of most importance to your clients and owners?

““Other” responses:Other” responses:• Combination of factors• Corporate responsibility• Cost effectiveness• Customer demands • Marketing strategy• Social responsibility• Staff interest

Important Green Issues to Clients and Owners Primary ResponsesPrimary Responses: Active and visible; Carbon off setting; Clients interested in reducing costs; : Active and visible; Carbon off setting; Clients interested in reducing costs; Waste separation and recycling; Reduction of energy consumption; Energy efficiency, saving; Waste separation and recycling; Reduction of energy consumption; Energy efficiency, saving; Facilities efficiency rate; Paper recycling Water recycling Facilities efficiency rate; Paper recycling Water recycling Secondary ResponsesSecondary Responses: Measuring : Measuring client green impact; Government policy; Locally-grown food; Food donations; Composting; client green impact; Government policy; Locally-grown food; Food donations; Composting; Reduction of use of plastic materials; Extraction of energy through our operations; Photovoltaic Reduction of use of plastic materials; Extraction of energy through our operations; Photovoltaic roof roof

Venues that have Gained Business from Green Initiatives

Survey Question 35. Have you gained business because of your green initiatives?

Only 3% say they have lost business because they lacked Green elements.

Client TrendsClient Trends

How Event and Group Clients are Changing

• Increased negotiationsIncreased negotiations 77%77%

• Shorter booking windowsShorter booking windows 74%74%

• Requiring higher-quality food and beverageRequiring higher-quality food and beverage 38%38%

• More PR assistance, outreach to city leadersMore PR assistance, outreach to city leaders 30%30%

• Focusing more on event design/ambianceFocusing more on event design/ambiance 26%26%

• Requiring attendance promotion assistanceRequiring attendance promotion assistance 22%22%

Survey Question 39. Which of the following trends are you seeing from your key event and group clients?

Client Requirements Today Compared to a Few Years Ago

Primary ResponsesPrimary Responses• More negotiating• Budget concerns, more price conscious• Internet, free or lower cost wireless requested/required• High-tech facilities in AV and telecom• Focus on meeting and breakout room space and quality• Higher food quality/creativity

Secondary ResponsesSecondary Responses• Public transport information and assistance• More help in organizing their meeting and exhibition• Environmentally sustainable practices• PCO issues, such as “hiding clients”• Attendance building assistance

Survey Question 41. What are the greatest differences in the kinds of facilities and services clients are asking for today as opposed to what they required three years ago?

Strongest Event and Group Client Segments

PrimaryPrimary• Association conferences and meetingsAssociation conferences and meetings 65%65%• Association conventions with exhibitsAssociation conventions with exhibits 61%61%• National or International corporate meetingsNational or International corporate meetings 49%49%• Local corporate meetingsLocal corporate meetings 45%45%• Governmental events and meetingsGovernmental events and meetings 45%45%

SecondarySecondary• Entertainment eventsEntertainment events 28%28%• For-profit trade shows, trade fairs, exhibitionsFor-profit trade shows, trade fairs, exhibitions 25%25%• Training eventsTraining events 24%24%• Consumer and public showsConsumer and public shows 22%22%• “ “SMERF” events (societal, military, etc.SMERF” events (societal, military, etc. 20%20%• PartiesParties 15%15%• Sporting eventsSporting events 6% 6%• Job fairsJob fairs 6% 6%

Survey Question 40. In which of the following event and group segments are you seeing the best current growth or near-term growth prospects?  (Please check all that apply.)

ConclusionConclusion

Centre Operation Trends Today and Tomorrow

Today Today Tomorrow Tomorrow

Periodic projects and enhancements

Multiple projects and enhancements continually

Recent and planned expansions To continue…

Technology investment Increased client demand

Focus on facility flexibility New programming, yielding more value from exhibiting space

Meeting client requirements Increasing creativity required

Focused on event organizers and exhibitors

Attendee experience

Centre Business Trends Today and Tomorrow

Today Today Tomorrow Tomorrow

A few core revenue sources Wider range of revenue sources

About 60% turn a profit May have to get to 65% to 70%

Pricing, incentives, discounts Same % of key clients; larger funds

Fast client-based change/trends Faster client-based change/trends

Periodic project management role Primarily a project management role

Venue management – either more quantitative or qualitative

More quantitative AND qualitative focused…

How the Congress/Convention Centre CEO/GM Role Will Change Over Next Five Years

Survey Question 17. What are the most significant management structural changes you anticipate, over the next 5 years, including in your own role as CEO / General Manager?

• More in-depth More in-depth management structure reviews management structure reviews

• Continued focus on revenue and profits, or minimizing lossContinued focus on revenue and profits, or minimizing loss

• More focused on sales and marketingMore focused on sales and marketing

• Managing expansions and hotel development projectsManaging expansions and hotel development projects

How the Congress/Convention Centre CEO/GM Role Will Change Over Next Five Years, continued

Survey Question 17. What are the most significant management structural changes you anticipate, over the next 5 years, including in your own role as CEO / General Manager?

• Watching industry trends more closely and changes Watching industry trends more closely and changes impacting group and event clientsimpacting group and event clients

• Working with new event types and categories – both client Working with new event types and categories – both client events and venue-produced eventsevents and venue-produced events

• More focus on adding services and improving quality; while More focus on adding services and improving quality; while working with leaner budgets and similar or smaller staff levels working with leaner budgets and similar or smaller staff levels

Convention Center Evolution

Fairgrounds, Coliseums, Hotels

Civic Centers and Box-Like Convention Centers

Contemporary Convention Centers

Resort Meeting Facilities

Civic Icons, Super Hotels

Marketplaces• Consider venues as marketplaces and add value for attendees/buyers and exhibitors/brand-builders.

• Centers that help build these marketplaces will be the most successful.

Commodities

Goods

Services

Experiences

Transformations

Most events, service providers and venues/hotels

Winners over next decade

Guest Transformations

Q&AQ&A

About Michael Hughes & Red 7 Media, LLC

Managing Director of Research & Consulting Michael Hughes manages Red 7 Media’s research and consulting group, which is focused

on providing information, analysis and recommendations to leaders in the event, venue and media industries. Red 7 Media publishes business magazines and produces executive conferences and trade shows in the event and media industries. Among the company’s market-leading brands are Event Marketer, Event Design and EXPO magazines, as well as the Event Marketing Summit. In addition, the company runs the Event Marketing Institute. Michael is a recognized events and venues industry expert that produces proprietary research and consulting projects for leading convention and event industry organizations around the world. He works closely with convention and exhibition industry leaders, corporate exhibitors, entrepreneurs, investors and real estate developers to provide strategic information, analysis and recommendations. His clients have included a majority of industry leaders in every segment of the industry as well as leaders in the investment and consulting community. Michael is frequently quoted by major newspapers and magazines such as The Los Angeles Times, Newsweek, The New York Times and The Wall Street Journal. Over his career, he has managed over 2,500 studies and assignments and been a presenter at over 100 industry conferences and meetings. He was previously VP of Research and Consulting at Tradeshow Week, where he founded and ran the magazine’s research and consulting group for 15 years.

www.red7media.com

Managing Director of Research & Consulting Michael Hughes manages Red 7 Media’s research and consulting group, which is focused

on providing information, analysis and recommendations to leaders in the event, venue and media industries. Red 7 Media publishes business magazines and produces executive conferences and trade shows in the event and media industries. Among the company’s market-leading brands are Event Marketer, Event Design and EXPO magazines, as well as the Event Marketing Summit. In addition, the company runs the Event Marketing Institute. Michael is a recognized events and venues industry expert that produces proprietary research and consulting projects for leading convention and event industry organizations around the world. He works closely with convention and exhibition industry leaders, corporate exhibitors, entrepreneurs, investors and real estate developers to provide strategic information, analysis and recommendations. His clients have included a majority of industry leaders in every segment of the industry as well as leaders in the investment and consulting community. Michael is frequently quoted by major newspapers and magazines such as The Los Angeles Times, Newsweek, The New York Times and The Wall Street Journal. Over his career, he has managed over 2,500 studies and assignments and been a presenter at over 100 industry conferences and meetings. He was previously VP of Research and Consulting at Tradeshow Week, where he founded and ran the magazine’s research and consulting group for 15 years.

www.red7media.com