Improving Convention

Center Management
Using Business Analytics
and Key Performance
Indicators
Improving Convention
Center Management
Using Business Analytics
and Key Performance
Indicators
Focusing on Fundamentals

Myles T. McGrane
Improving Convention Center Management Using Business Analytics and
Key Performance Indicators: Focusing on Fundamentals

Copyright © Business Expert Press, LLC, 2020.

Cover image licensed by Ingram Image, StockPhotoSecrets.com

Cover Photo is of the Tampa Convention Center in Tampa, FL.

Cover and interior design by Exeter Premedia Services Private Ltd.,

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except for brief quotations, not to exceed 400 words, without the prior
permission of the publisher.

First published in 2020 by

Business Expert Press, LLC
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www.businessexpertpress.com

ISBN-13: 978-1-95253-804-9 (paperback)

ISBN-13: 978-1-95253-805-6 (e-book)

Business Expert Press Tourism and Hospitality Management Collection

Collection ISSN: 2375-9623 (print)

Collection ISSN: 2375-9631 (electronic)

First edition: 2020

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Printed in the United States of America.

 Abstract
I wrote this book because I believe convention centers can perform better.
Many in senior management positions feel likewise and have a good sense
of their center’s potential for growth. As busy as they are, there’s little time
and resources available for thoughtful development of a fulsome manage-
ment strategy to lift their center’s performance. In our work environment
it’s common for management’s attention to be diverted and overwhelmed
by the small problems of the day. Meeting agendas where the latest event
profit/loss statements are reviewed or event economic impact discussed
are often deferred. Why is this so? While business and operational data
are there, they are mostly financial with few if any operational metrics
such as labor productivity or net square footage growth or decline. The
data are also not collected and organized in a form that is easy to follow,
draw conclusions and acted on. Action is most likely not data – based
but rather based on intuition and gut feeling. How can you get past this,
where can you turn?
The answer is to adopt and embrace business analytics and key per-
formance indicators (KPIs). Improving Convention Center Management
Using Business Analytics and Key Performance Indicators (both volumes)
will guide you through that process. It introduces and rolls out sound
practical advice from an author who has experienced and succeeded in
what was one of the toughest work environments in our industry. Other
KPI advice and “how to” books do not touch on the business and per-
formance metrics unique to our industry. KPIs presently used are very
general and only presented in publications such as annual reports.
I believe this book is best suited for practitioners who work at con-
vention centers or with a company that services convention centers. These
are the individuals who make things work: managers at all levels, from
senior leadership to floor supervisors. This book is also a useful resource
for those in graduate schools of business or hospitality and hotel admin-
istration. It ties theory to actual practice. Others may find it interesting
and informative too; political staff, city managers, hotel operators, bond
underwriters and investors, engaged citizen groups, and all those busi-
nesses that either supply, service, or depend on convention center events.
vi Abstract

Keywords
Convention center (or centre); convention and visitor bureau (CVB);
convention and exhibition center; vertical market; key performance
indicator (KPI) tradeshow; occupancy rate; consumer show; net square
footage; economic impact; hotel or hotel occupancy tax; economic feasi-
bility study; exclusive contractor; earned revenue; social media presence;
soft target; WiFi; license agreement; deferred maintenance; labor union
grievances; event organizer; electric demand charges; net promoter score
(NPS); workman’s compensation fraud; experience modification rating
(EMR); hotel room nights; Javits Center; IMPLAN
 Contents
Introduction������������������������������������������������������������������������������������������ix

Chapter 1 Convention Center Business Fundamentals����������������������1

Chapter 2 Sales and Marketing�������������������������������������������������������37
Chapter 3 Earned (or Operating) Revenue Details��������������������������53
Chapter 4 Operating Expense Details���������������������������������������������85
Chapter 5 KPIs Applied: The Case of the Contradictory KPIs���������99
Chapter 6 Customer Service����������������������������������������������������������109
Chapter 7 Security and Safety�������������������������������������������������������117
Chapter 8 Facility Condition, Readiness, and Capital Spending����123
Chapter 9 Human Resources (HR)�����������������������������������������������133
Chapter 10 Sustainability����������������������������������������������������������������137

References�������������������������������������������������������������������������������������������155
About the Author��������������������������������������������������������������������������������159
Index�������������������������������������������������������������������������������������������������161
 Introduction
“If you can’t measure it, you can’t improve it.”1 Peter Drucker’s words
unwittingly created the widespread use of business analytics or key per-
formance indicators (KPIs) as a business philosophy. The idea was not
new in Drucker’s time but his elegant quote led others to build the idea
into a refined organized process of management. The explanations below
provide an introductory perspective.

What Are KPIs?

KPIs work by applying units of measure to business functions, then dis-
playing progress or decline, gains or losses, and ultimately success or fail-
ure. In simpler terms, KPIs measure how well companies, their business
units and departments, managers, and projects are performing. In the
KPI process actual performance is regularly tracked and judged in relation
to business objectives. The well-known author on KPIs, Bernard Marr,
best defines KPIs as “… vital navigational instruments, . . . giving a clear
picture of current levels of performance and whether the business is where
it needs to be. KPIs are also useful decision-making tools. Because they
help reduce the complex nature of organisational performance to a small,
manageable number of key indicators, KPIs can, in turn, assist decision
making—and, ultimately help improve performance.”2
In Marr’s words, “the complex nature of organisational performance
to a small, manageable number of key indicators” is a solution to a con-
vention center’s time-consuming, constantly changing, and often over-
whelming demands of event production, customers, stakeholders, and

1
  Lavinsky, Dave, L. undated, “The Two Most Important Quotes in Business.”
https://growthink.com/content/two-most-important-quotes-business (accessed
December 2019).
2
  Bernard Marr & Co. 2018, “What Is a KPI?” https://bernardmarr.com/default.
asp?contentID=762, (accessed April 2019).
x Introduction

union labor. In this type of business environment, it’s hard to keep your
eye on the ball. A systematic, reliable, and proven management process
is needed.
How can a convention center fully engage and benefit by starting a
KPI program? Where does one start? The advanced state of business soft-
ware makes data collection and organization so routine that the number
of possible KPIs seems without limit. Indeed many management con-
sultants advise that only about five KPIs provide enough breadth and
depth to touch all business operations and direct strategic management.
I disagree. The top five theory may hold for senior level managers and
board members, but managers at the departmental level need to be part
of the KPI program and measure success of their operations. Collectively
their contribution to overall business performance drives high-level KPIs.
Tactical KPIs covering productivity in revenue-earning departments,
sales and marketing metrics, and of course metrics for tracking customer
service levels are the data they need. These results will reflect on overall
business performance. As you read Volume 1, know that an effective KPI
program has many levels and parts, all which complement and advance
KPIs that may appear in an Annual Report.

The Basic Characteristics of Good KPIs: Things One

Should Know Before Getting Started
A good KPI program has common traits that direct development of your
program. They are listed below:

Good KPIs:

• Embody Simplicity: They are clear, fact-based and

­unambiguous.
• Are Easily Measurable: Most KPIs use data already available
and units of measure which are familiar.
 Introduction xi

• Are Achievable: KPIs do not promote “pie in the sky” objec-

tives. Employees lose enthusiasm when the objective is
unreachable.
• Are Relevant: The KPI must measure some real and critical
aspect of strategy and directly contribute to achieving it.
• Are Timely: Our business moves very fast. It’s best not to let
poor performance and bad habits fester.
• Can Be Tracked Over Time for Comparisons and Analysis:
Current trends and differences should be compared to a base-
line year (derived from three to five years of data), an industry
benchmark, a previous year’s data and performance, and to
business plan objectives.
• Help Explain Business’s Most Fundamental Concerns: Are we
at risk? How can we perform better? Can we meet stakeholder
expectations?

What Does a KPI Look Like and How Does the KPI
Review Process Work?
The KPI process includes collecting, organizing, analyzing, and interpret-
ing business data and information. Data are collected and organized on
work sheets, Excel spread sheets, fill in the blank forms, from question-
naires and interviews, or from existing records and financial statements.
This all culminates in a KPI presentation where everything is distilled
and reviewed into an easy-to-follow table, graphic, or simple narrative.
The example in Figure I.1 is what could be part of a convention center’s
KPI presentation as it may appear in a report to a board of directors and
stakeholders. The KPIs presented in the figure cover operating profit and
the number of events for the first two quarters of the year. The graphic
below was created using MS Excel.
The graphic’s purpose is to present facts and make comparisons to
previous years’ performance and the business plan. The purpose is also
to prompt discussion, which in turn may require a “deeper dive” by
xii Introduction

Figure I.1  Sample KPIs as they may appear in a presentation

reviewing related KPIs. If I were General Manager or a board member

reviewing the above, these would be my thoughts and questions:

1. Number of events and profit have performed well. Excellent recovery

from previous years. Why is that so?
2. Operating profit is tracking close to business plan. What happened
in March?
3. What was the mix of event types and economic sectors so far this
year and which brought in the most service revenue and out-of-town
visitors who stayed at hotels?
4. Did we have to offer rent concessions or service discounts to attract
any of this year’s events? If so, how much revenue was forfeited?

At the end of a comprehensive review, there should be enough informa-

tion to draw strong inferences and conclusions.

How Is This Book Organized?

Volume 1 consists of ten chapters. Most chapters (1–4 and 6–10) cover
major business functions such as Convention Center Business Funda-
mentals, Earned Revenue, and Customer Service. The format for these
 Introduction xiii

chapters was adapted from Bernard Marr’s 2012 book Key Performance
Indicators: The 75 Measures Every Manager Needs to Know. Within these
chapters, there are narratives for each KPI subject. Chapter narratives all
follow the format below:
Some chapters begin with a general discussion about the subject.
Some chapters will be broken down by related titles that are more precise.
Then, KPIs will be presented as noted below:

• KPI
• Owner
• Data Sources and Collection
• Reporting Frequency
• Why this KPI Is Useful
• Objective
• Managing Unfavorable Conclusions and Inferences
• How to Calculate and/or Organize Data (Sample work sheets
may also be presented. Nearly all of the work sheets were
done using MS Excel).
• Presentation Notes and Formats (Sample tables and graph-
ics for presentation will be included in several KPI narra-
tives. The graphics were created using MS Excel. Similar
graphics can also be created using MS Power Point. The
graphics and tables shown in ithe book are not prescriptive.
Rather, they show a variety of examples of presentations;
some are clear and understandable, others not so much.
Chapter 10 in Volume 2 “Presenting and Displaying KPIs”
offers the best advice and examples for tables and graphics.
• Also, a section titled “Things to Watch For: Nuances, Misin-
terpretations, and Cautions” may follow referencing the KPI
subject matter.

Chapter 5 is titled “KPIs Applied: The Case of the Contradictory KPIs.”

This chapter does not follow the format above. It is a case study providing
perspective and insight into the discipline and value of a thoughtful KPI
program.
xiv Introduction

Know This

“Without data you’re just another person with an opinion.”3 This is a

quote from W. Edwards Deming. He was an engineer, scholar, and
­professor at New York University’s and Columbia University’s School of
Business Administration.

3
 Deming, Edwards, D.W., undated, https://goodreads.com/quotes/7327935-
without-data-you-re-just-another-person-with-an-opinion (accessed December
2019).
 CHAPTER 1

Convention Center Business

Fundamentals

A Primer on the Convention Center Business

Model in the United States
Private companies with little debt and plenty of cash are said to have
strong fundamentals. But year after year fundamentals are recast as new
management techniques with clever buzz words. I see most of them as
new slants for ideas that have endured for years. Fundamentals that drive
success don’t change. For convention centers many private business fun-
damentals apply. On a macro level the national economy expressed as
market indices or GDP affect convention centers as profoundly as pri-
vate businesses. However, at an operational level, there are distinct differ-
ences. The obvious is that most centers are publicly owned. They are built
through the sale of tax-exempt bonds with debt service paid through tax
collections. Bondholders enjoy low risk, are indifferent about a center’s
operations, and cannot be compared to a private company’s investors and
shareholders. Importantly, convention centers are free from funding debt
payments and pay no corporate taxes. They also operate with low expec-
tations of being profitable.
Ongoing operations and capital funds are provided by hotel taxes
and government tourism funds.They are managed by a mix of govern-
ment-owned corporations, city and county government divisions, not-
for-profit organizations such as Chambers of Commerce or Convention
and Visitor Bureaus (CVB) or privately owned venue management
companies.
2 Improving Convention Center Management

A center’s business strategy can be segmented as follows:

• Leadership and governance—Having the right governance

and management structure and team in place; competent,
well-informed, decisive, and committed to constant
improvement.
• Economic impact—Achieving high occupancy and attracting
enough out-of-town visitors to materially improve profits for
hotels, restaurants, and entertainment and cultural attractions.
• Operational and business competency—Maintaining high stan-
dards of customer service with respect to building appearance,
functionality and efficiency, and event services.
• Overall financial health—Contributing enough earned revenue
to cover or exceed expenses, reduce dependence on subsidies,
maintain positive cash flow, and establish a capital reserve.

From the key performance indicators (KPIs) in this chapter, convention

centers can build and apply other KPIs that fit their business model. As
a minimum, these KPIs must regularly engage the attention of senior
management and board of directors.
The remainder of this chapter is divided into three parts:

1. Number and nature of events and space use

2. Financial reports
3. Economic impact

Number and Nature of Events and Space Use

KPI: Number of Events
Owner Sales Department
Data Sources and Collection Self-explanatory
Reporting Frequency Quarterly

Why This KPI Is Useful

The number of events is a basic KPI. It’s analogous to how many cars an
automobile plant produces or bushels of corn a farmer grows. However,
 Convention Center Business Fundamentals 3

simply tracking the number of events alone can be misleading. Many

small to mid-sized convention centers cite event numbers as favorable
performance. Indeed the number itself can be impressive, say 300 per
year. In one consulting engagement I learned a large event number
included school board meetings, regular meetings for the Kiwanis Club
chapter, and other similar events. The event numbers were high, but the
revenue value and economic impact negligible. The number of events has
to be coupled with space use statistics to lessen the impression that the
number of events alone is a measure of success.

Objective

Initially, the objective should be to meet or exceed the projections stated

in the feasibility study. After obtaining actual results, a stretch goal should
be to obtain enough events to achieve above 60 percent occupancy. If that
is not achievable, work backward to a reachable objective, on par with the
best performing competitor and build from there.

Managing Unfavorable KPI Conclusions and Inferences

Assume that second quarter results show a decline in the number of

events compared to the previous year-to-date (YTD) and business plan.
I recommend management take these steps as soon as practical:

1. Conduct a thorough review of qualified leads and come up with a

closing plan for events that may occur in the last two quarters.
2. Consult hoteliers and the CVB about possible leads.
3. Start a sales drive to have local corporations hold their business meet-
ings, award dinners, and shareholder meetings at your convention
center.
4. Pursue social events such as charity banquets, school graduations,
religious services, weddings, and so on.

Presentation Notes and Formats

Table, bar graph, or both, comparing current YTD to previous YTD and
business plan.
4 Improving Convention Center Management

KPI: Gross Square Footage Rented (GSF Rented)

Owner Sales Department
The Sales Dept. will provide GSF Rented.
If the “KPI: Operating Profit or Loss State-
ments for Each Event” is used and its work
Data Sources and
sheets completed, then through linking
Collection
spreadsheets using MS Excel, this KPI can
be automatically updated very soon after
each event.
Reporting Frequency Quarterly or more frequently if data is col-
lected by linking spreadsheets per the above

Why This KPI Is Useful

GSF Rented is a fundamental indicator of business activity. Rented or

licensed space measured in gross square feet is in some cases the basis for
rent. GSF Rented is also part of the calculation for certain productivity
metrics such as earned revenue per GSF Rented.

Objective

Obtain an accurate record of GSF Rented and progressively increase GSF

Rented until the most practical occupancy rate is achieved.

Managing Unfavorable KPI Conclusions and Inferences

The same recommendations as shown in the KPI for number of events

apply.

How to Calculate and/or Organize Data

Sum total GSF Rented for the quarter

Presentation Notes and Formats

Table, bar graph, or both, comparing current YTD to previous YTD and
business plan.
 Convention Center Business Fundamentals 5

KPI: Number, Percentage, and GSF Rented by Event

Type and Economic Sector
Owner Sales Department
Data Sources and The Sales Department will record the event
Collection types and economic sectors
Reporting Frequency Quarterly

Why This KPI Is Useful

Event types and economic sectors have unique characteristics with respect to
services, revenue, and out-of-town attendance. How they are categorized is
important. Event type categories typically are tradeshows, consumer shows,
conventions with meetings only, conventions with meetings and exhibits,
entertainment, sports, and corporate events (training, product rollouts, con-
ferences, and banquets). Economic sector categories are: health/life sciences,
technology (IT), manufacturing and industrial, food, consumer goods, arts,
sports and leisure, fashion, and SMERFS (social, military, education, reli-
gious, and fraternal). On review this KPI should prompt the question as to
whether this is the mix of events the center needs to be successful. This KPI
will also expose differences among event types and the economic sectors they
represent. As you read on you will see this type of KPI oft repeated where
those differences are enumerated and compared. Factors that differentiate
an event type and economic sector from another are critically important to
a convention center’s sales and marketing strategy.

Objective

Obtain a knowledge base of events based on event type and economic

sector. Use the knowledge base for assigning value to prospective events
and business forecasting.

Managing Unfavorable KPI Conclusions and Inferences

Not applicable for this KPI.

6 Improving Convention Center Management

How to Calculate and/or Organize Data

1. Create and record the number of events and their GSF Rented totals
for each event type and economic sector and their respective categories.
2. Sum the number of events for each category for the quarter.
3. Divide category sum by total events to determine the category per-
centage.
4. Sum the GSF Rented for each category.
5. Divide each category GSF Rented sum by GSF Rented for all cate-
gories to determine the category percentage.

Presentation Notes and Formats

Table and horizontal bar graph, comparing current YTD to previous

YTD and business plan.

KPI: Amount of Exhibit Hall’s Net Square Footage (NSF)

Owner Sales Department or the Event Services Department.
When NSF is the basis for exhibit hall rent there is
usually a formal procedure for verifying and agreeing
to actual NSF at the end of an event. If the basis for
rent is gross square feet of the exhibit hall, then a
staff member will have to be trained and assigned to
measure NSF after each event that has exhibits.
Data Sources
As the data calculation of NSF becomes more famil-
and Collection
iar, another recording method can be used. If the
“KPI: Operating Profit or Loss Statements for Each
Event” is used and its work sheets completed, then
through linking spreadsheets using MS Excel, this
KPI can be automatically updated very soon after
each event.
Reporting Quarterly or more frequently if data are collected by
Frequency linking spreadsheets per the above.
 Convention Center Business Fundamentals 7

Why This KPI Is Useful

NSF is the square footage for exhibit booths sold by an event organizer.
In some cases, NSF with a minimum percent of GSF Rented is the basis
for rent. Typically the minimum is between 40 to 60 percent. Maintain-
ing records of NSF is essential when calculating and comparing profit for
event types and economic sectors which have exhibits.
This data can also be used to track the performance of individual
events, particularly retained events. Additionally, NSF is used in calculat-
ing productivity metrics related to earned revenue such as utility services
and cleaning.

Objective

Obtain a data base of event NSF performance.

Managing Unfavorable KPI Conclusions and Inferences

1. If NSF is declining across all event types and economic sectors, then
it’s likely that other fundamental and earned revenue KPIs are show-
ing unfavorable results. Cross-check these first. There will be a steep
overall drop in service revenue, which will outpace an expected drop
in event expenses.
2. Know that there have been separate episodic declines in NSF that
occur and require attention. A decline in NSF may be indicative of
a downturn in a particular economic sector or the result of competi-
tive events playing in the same time period elsewhere.
3. At some point, there needs to be a serious conversation with retained
event organizers who are experiencing declining NSF.

How to Calculate and/or Organize Data

1. If the event is a retained event where NSF has been consistently

accurate, then the event organizer’s NSF and a cursory check of the
floor plan is all that’s necessary.
8 Improving Convention Center Management

2. If there is confidence in the final floor plan and exhibit booths are a
standard size (10’ × 10’’), then simply count the number of booths
and multiply by 100.
3. If there is no confidence in the final floor plan and the exhibit booth
sizes vary, then to accurately measure and calculate NSF, a staff mem-
ber will have to obtain and know how to use a planimeter shown
Figure 1.1. They are easy to use and there are reliable inexpensive
models.
4. Calculate the area by using the planimeter and measure the two-di-
mensional drawing of exhibit booth space from the event floor plan
(see Figure 1.2). Then calculate as if calculating the area of a rectan-
gle or square. The product is area and the measure is square feet. Sum
all the rectangle or square areas. Sum total NSF for all events and
separately for recurring events.

Figure 1.1  Planimeter, Source – grainger.com

Figure 1.2  Sample tradeshow floor plan

 Convention Center Business Fundamentals 9

Presentation Notes and Formats

Table, bar graph or both, comparing current YTD, previous YTD, and
business plan. See Figure 1.3.

Figure 1.3  Current year NSF by quarter compared to previous year and
plan

Things to Watch for—Misinterpretations, Nuances,

and Cautions

NSF Accuracy: Be cautious about relying on an NSF figure provided by

some event organizers. Event organizers may not want to disclose accurate
NSF for a variety of reasons and simply throw out a casual number which
may be inflated.

KPI: Occupancy Rate

Owner Sales Department or the Event Services Department
The Sales Department has GSF Rented and gross
square footage available for rent. Gross square foot-
Data Sources age available usually remains constant unless space is
and Collection taken out of service for maintenance or construction.
It is also advisable to take city and center promo-
tional events out of the occupancy rate equation
Reporting Quarterly
Frequency
10 Improving Convention Center Management

Why This KPI Is Useful

Occupancy rate is an elegant measure, shedding light on all aspects of

business performance. Occupancy rate reveals whether a center is busy
or not. High occupancy draws praise, increases revenue, supports invest-
ment, and opens selectivity when booking events. Low occupancy draws
scrutiny, often unfavorable.

Objective

For centers in major cities (Las Vegas, New York, Chicago), annual occu-
pancy rate should consistently be 60 percent or more; for second and
third tier cities, 40–45 percent or more.

Managing Unfavorable KPI Conclusions and Inferences

The same recommendations as shown in the “KPI: Number of Events”

apply.

How to Calculate and/or Organize Data

Occupancy rate is a simple process of tracking GSF Rented each quarter.

It is derived from hotel occupancy rate, which is standardized and part of
the “Uniform System of Accounts for the Lodging Industry.” For hotels,
occupancy is the percent of rooms sold vs. rooms available for a specific
time period. For convention centers, occupancy rate is similar:

1. Occupancy Rate (%) = GSF Rented for the quarter/Gross Square

Feet available in the quarter mutiplied by the number of days in the
quarter.
2. For example, say the convention center rented 2,762,100 gross
square feet in the second quarter. The center has 99,000 gross square
feet available to rent each day.
3. Occupancy Rate (second quarter) = 2,762,100 sq. ft. / (99,000 sq.
ft. mutiplied by 91 days)
4. Occupancy Rate = 2,762,100/9,009,000 = 30.7%
 Convention Center Business Fundamentals 11

Presentation Notes and Formats

Table, bar graph, or both, comparing current YTD, previous YTD, and
business plan.

Things to Watch for—Misinterpretations, Nuances,

and Cautions

An Incorrect Method to Calculate Occupancy Rate: Curiously, I have

run across more than one convention center using a different method,
which is incorrect. In those cases any occupancy, no matter how small,
is regarded as 100 percent. So a small meeting occupying a few meet-
ing rooms while the rest of the center is vacant qualifies as 100 percent
­occupancy for the day. Now that’s more than a fisherman’s lie.

Know How High Will Occupancy Rate Reasonably Go: About 20

years ago the consulting firm, PwC, announced 70 percent to be the
maximum practical occupancy for convention centers. Their logic was
that convention and trade shows have definite dates and days of the week
in mind and won’t compromise so gaps of several days or more between
events naturally appear. Add holidays when events are rare and days when
space is taken out of service for maintenance or construction and event
day possibilities lessen, making 70 percent ring true.

Financial Reports
KPI: Monthly Financial Report
Owner Finance Department
The Finance Department is responsible
Data Sources and
for compiling financial data and compo-
Collection
sition of the Monthly Financial Report
Reporting Frequency Monthly
12 Improving Convention Center Management

Why This KPI Is Useful

Convention center managers know the three basic types of financial

statements: income statement, balance sheet, and cash flow statement.
These basic financial statements are standard accounting practices. On
review, they prompt serious discussion about why revenues are shrinking
or expenses rising. They are fundamental for managing business and are
regularly presented for board meetings, audits, and annual reports. In my
view, none of these financial statements alone have the relevancy or detail
needed for line managers to readily see progress or unfavorable trends. In
my time at the Javits Center, we used a Monthly Financial Report similar
to this KPI. In sum, the Monthly Financial Report is a derivative of a
standard and traditional process of reviewing financial metrics.

Objective

Track and uncover unfavorable trends overall and in operating divisions

responsible for earned revenue and customer service in order to solve
problems early.

Managing Unfavorable KPI Conclusions and Inferences

As an example, a review of Work Sheet 1.1 below depicts a serious prob-

lem. Earned revenue is 20 percent behind plan but expenses are only 1.3
percent higher than plan. Clearly the problem is with earned revenue.
All revenue ­categories have underperformed. I recommend this course of
action:

1. Start with number of events. Was there a cancellation?

2. Go to rent, which is 18 percent behind plan (from Work Sheet 1.1
below). Were there rent concessions and if so, why?
3. Before you go on to services, was NSF as planned? If not, why were
the organizer’s space sales so low?
 Convention Center Business Fundamentals 13

4. Compare these productivity KPIs (as presented in Chapter 3) to the

retained events or to averages for event types and economic sectors.
Review utility services/NSF. Cleaning/NSF, Parking/GSF Rented,
Communications Service/GSF Rented, and Food and Beverage/GSF
Rented.
5. The cause of subpar earned revenue performance will be exposed
and evident after the above is analyzed. The cause is likely to be more
than one poorly performing KPI.

Actions taken for a business problem like this generally lie with an
underperforming event (those with low NSF), poor management and
supervision, a labor productivity problem or a lack of coordination with
General Service Contractors.

How to Calculate and/or Organize Data

Below is an example of a Monthly Financial Report work sheet:

Monthly Financial Report—March, 2019

EARNED (Operating) REVENUES
Revenue This Cumulative Cumulative $ %
Category Month Actual Plan Difference Difference
Actual from Plan from Plan
Rent 79,500 251,200 306,960 -55,760 -18.2%

Services 60,480 311,715 391,665 -79,950 -20.4%

F & B Commis-
47,498 165,388 207,154 -41,766 -20.2%
sions
Commissions
from Excl//Off'l 5,565 21,215 28,500 -7,285 -25.6%
Contractors
Other 1,590 5,340 15,000 -9,660 -64.4%

Sub - total 194,633 754,858 949,279 -194,421 -20.5%

Work Sheet 1.1 – Monthly Financial Report

14 Improving Convention Center Management

OPERATING EXPENSES
Expense Category This Cumu- Cumu- $ Dif- % Differ-
Month lative lative ference ence from
Actual Actual Plan from Plan Plan
Salaries – House 68,324 181,130 180,000 1,130 0.6%
Salaries – Events 83,260 259,772 280,500 -20,728 -7.4%
Employee Benefits – House 17,081 63,396 54,000 9,396 17.4%
Employee Benefits – Events 24,978 103,909 98,000 5,909 6.0%

Contract Services 10,000 30,400 37,500 -7,100 -18.9%

Materials and Supplies – House 2,150 6,450 4,500 1,950 43.3%
Supplies – Events 2,325 6,975 5,700 1,275 22.4%

Utilities 51,590 181,130 165,000 16,130 9.8%

Insurance 4,169 12,674 12,500 174 1.4%

Other 2,000 7,630 4,500 3,130 69.6%

Sub –Total 265,877 853,466 842,200 11,266 1.3%

PROFIT/LOSS -71,244 -98,608 107,079 -205,687 -192.1%

Work Sheet 1.1a – Monthly Financial Report (cont’d)

Below is a continuation of the report above: This section shows the

effect of non-operating revenue and expenses that express a more com-
plete picture of financial performance.
 Convention Center Business Fundamentals 15

MONTHLY FINANCIAL REPORT - MARCH, 2019 (Cont'd)

NON-OPERATING This Cumulative Cumulative $ Difference % Differ-
REVENUES Month Actual Plan from Plan ence from
Actual Plan
Hotel Tax - Operat-
71,244 98,608 0 98,608 100.0%
ing Deficit
Investment Interest 5,760 14,400 15,000 -600 4.2%
Sub-Total 77,004 113,008 15,000 98,008 -86.7%
Capital Contribu- 5,000 15,000 15,000 0 0.0%
tions - Hotel Tax
Total 82,005 241,016 30,000 98,008 -87.6%
NON-OPERATING
EXPENSES
CVB Contribution 2,000 6,000 6,000 0 0.0%
Sales Tax (5.5%) 9,732 37,743 47,464 -4,397 25.8%
Capital Spending 12,350 7,550 10,000 -2,350 32.5%
Sub – Total 24,082 51,293 63,464 1,547 23.7%
NON-OPERATING
REVENUES LESS 57,923 189,723 -33,464 117,860 -117.6%
EXPENSES
EXCESS/(DEFI-
CIENCY) OF
REVENUES AND 24,082 51,293 63,464 1,547 23.7%
CAPITAL CONTRIB.
vs EXPENSES

Work Sheet 1.1b – Monthly Financial Report (cont’d).

This KPI is similar to EBITDA (earnings before interest, taxes,

depreciation, and amortization). EBITDA evaluates a private company’s
performance without having to factor financing charges, accounting
decisions, or taxes. Convention centers pay sales tax on operating rev-
enue (services) but no corporate income tax. Most pay no interest on
debt. The line in the table above labeled “Operating Profit/(Loss)” shows
monthly business performance using only earned (operating) revenues.
Non-operating revenues, like hotel tax subsidies, and expenses, like
sales tax, are included but in a separate section. Depreciation and amor-
tization, which are non- cash expenses, are left out. This is useful for
convention centers, which have many fixed assets subject to heavy
16 Improving Convention Center Management

depreciation charges. In reading the table above one sees the monthly
problem is not just for the month but rather for the entire second quar-
ter. The problem is low earned revenue. This monthly KPI will show how
these trends develop month to month.

Presentation Notes and Formats

Prepare a graphic with the most important elements of Work Sheets 1.1
or 1.1a. Use tables, line graphs, or both, comparing current YTD, previ-
ous YTD, and business plan. For meetings have print copies available of
the entire Work Sheets 1.1, 1.1a and 1.1b for participants.

KPI: Monthly Operating Profit or Loss Per GSF Rented

Owner Finance Department

The Finance Department will provide operating
profit/loss for all events. The Sales Department will
provide GSF Rented for all events.
Data Sources If the “KPI: Operating Profit or Loss Statements for
and Collection Each Event” is used and its work sheets completed,
then through linking spreadsheets using MS Excel,
this KPI can be automatically updated very soon
after each event.
Reporting Fre- Monthly or more frequently if data is collected by
quency spreadsheet linking per the above.

Why This KPI Is Useful

This is a basic productivity metric for all types of events that connects
profit to business activity.

Objective

Obtain a database of profit/GSF Rented so that a benchmark can be

established at some point. As profit/GSF Rented increases, it demon-
strates stronger earned revenue and improved cost control.
 Convention Center Business Fundamentals 17

Managing Unfavorable KPI Conclusions and Inferences

A decline in profit/GSF Rented is a sign of an erosion of earned revenue

or a lack of control over expenses. It should prompt an investigation cen-
tering on the cause of decline. The most likely cause is an overall decline
in event NSF. Other likely causes are declining labor productivity, exces-
sive rent concessions, and other discounts. The sequence of the inves-
tigation is similar to the one outlined for the “KPI: Monthly Financial
Report” above.

How to Calculate and/or Organize Data

1. Operating Profit or Loss/GSF Rented is obtained from Operating

Profit or Loss from the Monthly Financial Report above.
2. For example, say the month’s events occupied 153,500 GSF and had
an operating loss of ($71,245).

Operating Loss = ($71,245)/153,500 GSF = ($.46) per GSF Rented

Presentation Notes and Formats

Table, and either line or bar graph, comparing current YTD to previous
YTD and business plan. Below are samples (Figure 1.4 and 1.4a) of the
annual data for this KPI displayed as a line graph and bar graph, both
with embedded tables.

Figure 1.4  Monthly profit or loss per GSF Rented (line graph)
18 Improving Convention Center Management

Figure 1.4a  Monthly profit or loss per GSF Rented (bar graph)

KPI: Operating Profit or Loss Statements for Each Event

Owner Finance Dept

The Finance Department will make this data
Data Sources and available from revenue receipts, payroll and
Collection procurement records, and exclusive and offi-
cial contractor commission reports.
Reporting Frequency Report on events within one week after the
event closes.

Why This KPI Is Useful

This KPI is a rapid “snapshot” of service performance after each event and
should be issued and distributed within a few days after an event closes.
The immediacy of the results is the primary value of this KPI. It makes it
possible to expose productivity weaknesses within just a few days after an
event closes. Corrective adjustments can be made before the next event.

Objective

Obtain immediate results that may reveal performance less than plan.
This enables management to react to problems rapidly. Problems are
­typically poor supervision, a lack of event work coordination with other
contractors, a supply delay, and so on.
 Convention Center Business Fundamentals 19

Managing Unfavorable KPI Conclusions and Inferences

In my time at Javits, we relied on individual event profit–loss statements

a great deal. Our routine would be to conduct a management review as
soon as practical. In this process, we would compare productivity met-
rics such as utility service/NSF or communications service/GSF Rented
­averages, vs. the previous year if it was a retained event. We would also
review productivity vs. economic sector averages. If we found subpar per-
formance, we would meet with floor supervisors to go over what and why
productivity declined and develop an action plan to remedy the problem.
We always found these reports invaluable.

How to Calculate and/or Organize Data

Data are available using routine event revenue and expense reporting from
the Finance Dept. When received, calculate profit per NSF for utility and
cleaning services and profit per GSF Rented for parking, food and bev-
erage, and communications services. Record on the work sheets below:

Event Profit/Loss Statement event Name ________Date ______

THIS YEAR ACTUAL PLAN
NSF

GSF

Type

Sector

PRINCIPAL REVENUE SOURCES

Rev. or # of Billable Labor Labor Material Total Profit or
Rev.
Comm. Items Hrs. Costs Cost Est. Costs Comm.
Rent
Electric
Plumbing
Parking
F and B
Telcomm.
Cleaning
Sub-Total

Work Sheet 1.2 – Individual event profit or loss statement

20 Improving Convention Center Management

SECONDARY REVENUE SOURCES

THIS YEAR ACTUAL PLAN
Rev. or # of Billable Labor Labor Material Total Profit or
Rev.
Comm. Items Hrs. Costs Cost Est. Costs Comm.
A/V
Set - Up
Adv.
Rigging
Security
Other
Other
Sub - Total

Total
Profit or
(Loss)
Profit or
(Loss)/GSF
Rented
Profit or
(Loss)/NSF
Event Labor
Cost/GSF
Rented
NSF/GSF
Ratio

Work Sheet 1.2a – Individual event profit or loss statement (cont’d)

PRODUCTIVITY METRICS FOR EACH EVENT EARNED REVENUE CATERGORY

Set
Elec. Plumb. Park. F&B Comm. Clean A/V Rigging Security
Up

Profit or
(Loss)/GSF
Rented
Profit or
(Loss)/ NSF
Labor Hrs./
Billable
Item

Work Sheet 1.2b – Productivity metrics for each event earned revenue
category
 Convention Center Business Fundamentals 21

Presentation Notes and Formats

Use tables to summarize the profit or ;oss and productivity metrics for
each event for the month. If details are requested have the individual
event work sheets available for explanations.

Things to Watch for—Misinterpretations, Nuances,

and Cautions

Expanding the Event Profit/Loss Report into a Comprehensive End

of Event Report Will Greatly Improve Data Collection: Most centers
maintain a record of various reports documenting service issues which
occur at events. They are mostly narratives, often anecdotal, and on sep-
arate departmental forms. There is little effort to enumerate and classify
the issues into a unified and comprehensive end of event report The event
profit/loss and productivity metrics presented above would naturally be
an important part of a comprehensive report. If a center elects to create a
comprehensive report using Excel, then through linking, a major fraction
of KPIs would automatically be compiled and updated for other KPI work
sheets. This subject is covered further in Volume 2, Chapter 11.

KPI: Profit Per GSF Rented for Each Event Type and
Economic Sector
Owner Finance Department
The Finance Department will compile all financial
statistics for events. GSF Rented, event types and eco-
nomic sectors will be provided by the Sales Department.
Data Sources
If the KPI: Operating Profit or Loss Statements for
and Collec-
Each Event is used and its work sheets completed,
tion
then through linking spreadsheets using MS Excel,
this KPI can be automatically updated very soon after
each event.
Reporting Semi-annually or more frequently if data is collected
Frequency by spreadsheet linking per the above
22 Improving Convention Center Management

Why This KPI Is Useful

This KPI borrows from the retail sector’s KPI of sales per square foot.
That sector’s characteristic dispersion of retail sales based on the product
and merchandise line also applies. For an example of dispersion, Apple
Stores produce well over $5,000 in sales per square foot. By contrast,
sales per square foot for Walmart are only around $400 per square foot.
Similar dispersions in profit per square foot exist in convention centers.
Different event types and economic sectors yield different results. For
example, the American College of Surgeons’ Clinical Congress, which
uses exhibit halls, meeting rooms, and ballrooms, yields a profit of $3.03/
GSF Rented. As a comparison, Profit/GSF Rented for a national educa-
tion conference with identical space and event duration yields a profit/
GSF Rented of $1.05/GSF Rented. The services ordered by exhibitors
and attendees at the education conference were much more modest in
comparison. No doubt, most center managers intuitively would know the
education conference would yield lesser profit/GSF. With this KPI, now
you’ll know by how much.

Objective

Create a knowledge base for profit yield per GSF Rented for different
event types and economic sectors.

Managing Unfavorable KPI Conclusions and Inferences

This KPI’s primary intent is to establish a knowledge base showing the

profit potential differences of event types and economic sectors. It will be
some time before profit or loss/GSF Rented will have statistical validity
unless you go through the time and effort to research event history. When
you are confident of the data, I’d consider an event type or economic sec-
tor profit yield to be unfavorable when the profit/GSF Rented falls below
the average for the type and economic sector. At that point it would be
useful to study the trends occurring elsewhere in a particular industry. For
 Convention Center Business Fundamentals 23

example, the commerce of women’s ­fashion has shifted away from brick
and mortar stores to the internet. This has profoundly affected the num-
ber of exhibitors and spending habits of buyers at fashion trade shows.
Fewer stores mean fewer buyers at fashion trade shows. Fewer stores mean
fewer buyers.

How to Calculate and/or Organize Data

1. Sum GSF Rented for each event by type and economic sector for the
six months representing half the year.
2. The Finance Dept. will sum all event related expenses for each event
type and economic sector for half the year.
3. Subtract expenses from earned revenue to obtain profit or loss for
each event type and economic sector.
4. The Finance Department will divide each event type and economic
sector profit or loss sum by GSF Rented sum for each event type
and economic sector to obtain their average profit or loss per GSF
Rented.

Presentation Notes and Formats

This format will have to be rich with data as it covers multiple event types
and economic sectors all organized to show results and comparisons over
time. Begin with tables organized where the best performers are on top
with others listed below in descending order.

KPI: Percentages of Earned Revenue Categories

Owner Finance Department

Data Sources and The Finance Department routinely collects and
Collection compiles earned revenue details
Reporting Annually
Frequency
24 Improving Convention Center Management

Why This KPI Is Useful

It’s good management practice to know the rank order of revenue source
contributions. This knowledge base should prompt a discussion of which
revenue categories are satisfactory and others that have room for growth. In
particular, there will always be an earned revenue source called “other.” Their
percentage is insignificant compared to utility services, food and beverage,
or parking. Within “other,” there may be a few that have substantial poten-
tial for growth, such as advertising and sponsorships and naming rights.

Objective

Make it routine to always have the up-to-date knowledge of these

percentages.

Managing Unfavorable KPI Conclusions and Inferences

Not applicable for this KPI.

How to Calculate and/or Organize Data

1. Assign revenues to the appropriate categories.

2. Divide each category’s revenue by total earned revenues to calculate
the percentage of each.

Presentation Notes and Formats

Table. A horizontal bar graph or a ring chart (aka donut chart) may work
if the number of categories is limited to the six top earned revenue cate-
gories. Which communicates the data more effectively? See below (Figure
1.5 and 1.5a):
 Convention Center Business Fundamentals 25

Figure 1.5  Earned revenue percent (horizontal bar graph)

Figure 1.5a  Earned revenue percent (ring chart)

26 Improving Convention Center Management

Economic Impact

Economic impact occurs anytime money changes hands, be it consum-

er-to-business or business-to-business. A common misconception is that
there is a single value representing economic impact. Economic impact is
typically measured using several metrics:

• Jobs created—Both full and part time

• New tax revenues—Sales tax, hotel occupancy tax, and so on
• Increases in household income
• Economic output—Economic output is the basis for eco-
nomic impact; without output there is no impact, no new dol-
lars added to the local economy, no new jobs and no increases
in household income. Economic output is the dollar amount
of all sales made or the value of goods and services created
due to new business activity such as convention center events.
Economic output represents the money spent to purchase all
of the inputs used to produce and stage an event and as well as
money received by local business as a result of the event. This
is also called direct spending.
• Direct spending has a cascading or ripple effect. These effects
are called indirect and induced spending. So economic output
is the sum of direct, indirect, and induced spending.
• Value added is the total dollar amount of only new sales
made. It is economic output minus the value of any product
or service already sold in the local market area.

When discussing the economic impact of events, the conversation

is really about economic output and value added. The two terms have
­combined into just “economic impact” when the subject is convention
centers and the events. Economic impact is a convention center’s raison
d’etre. Events attracting out-of-town attendees are the impetus for build-
ing a publicly financed convention center. As a KPI, economic impact is
the most meaningful and most contentious.
It’s meaningful because economic impact justifies the project’s
high investment and does so in a measureable, timely way. Nearly all
 Convention Center Business Fundamentals 27

convention centers use consultancies with experience in advising on eco-

nomic impact when first considering construction of a convention center
or when expanding. The process starts with a market study where national
and regional event demand is reviewed. This is followed by a survey of
occupancy at comparable venues. If these results are favorable, a series
of surveys and one-on-one interviews with prospects is conducted. From
this, consultants fill a simulated calendar and make judgments about
booking probabilities. Presuming there is enough demand to meet occu-
pancy goals, additional research and surveying is conducted in order to:

• determine event organizer and exhibitor event production

spending;
• determine organizer, exhibitor, and attendee in town-spend-
ing habits for commuters and out-of-town persons (the
primary metric is spending per day); and
• determine the average length of stay (in days and fractions of
days) for out-of-town event organizer staff, exhibitors, and
attendees.

It is at this point where consultants employ an economic impact

model. The one used most frequently is the IMPLAN model. This model
uses direct spending (transactions occurring locally by event organizers,
exhibitors, and attendees) as a basis to calculate indirect and induced
spending. To calculate these spending categories, the economic model
uses a “multiplier.” There is a calculation method and an explanation
for the multiplier. The economic impact eventually diminishes in value
once other uses of the income obtained from having events is not spent
or consumed locally. Rather, the extra income is absorbed by taxes,
savings, or a preference to consume imports (products and services not
made or sourced locally).
As mentioned, the determination of economic impact is also conten-
tious. It’s contentious because of perceived flaws and ambiguities in nearly
every step, from the market study through to the multiplier. To many, the
final economic impact may also appear grandiose. It’s advisable to expect
a multiplier to be between 1.0 and 1.5. If it goes beyond that, it’s time to
28 Improving Convention Center Management

question the process. Typically multiplier ranges follow this general pat-
tern; at a city and county level a multiplier is between 1 and 2, at a state
level a multiplier is normally higher. The end game for economic impact
is to persuade government to fund convention center construction and
expansion through sale of general obligation bonds.
Funding is also needed to cover operational costs of running a con-
vention center, which generally cannot be covered by earned revenue from
events. The source of this funding is normally the hotel tax. This too is con-
tentious because other projects related to tourism seek entitlement to hotel
tax revenues to fund new projects. As an example of which projects can be
funded by a hotel tax, below are the uses prescribed by the State of Texas.

• Funding the establishment, improvement, or maintenance of

a convention center or visitor information office
• Paying the administrative costs for facilitating convention
registration
• Paying for advertising, solicitations, and promotions that attract
tourists and convention delegates to the city or its vicinity
• Expenditures that promote the arts
• Funding historical restoration or preservation programs
• Funding certain expenses including promotional expenses,
directly related to a sporting event within counties of a popu-
lation fewer than 1 million
• Funding the enhancement or upgrading of existing sports
facilities or sports field for certain municipalities
• Funding transportation systems for tourists
• Signage directing tourists to sights and attractions that are
visited frequently by hotel guests.

KPI: Economic Impact of Convention Center Events

Owner CEO/General Manager and CVB

management
Data Sources and Collection See narrative below
Reporting Frequency Monthly or Quarterly (Short Version)
 Convention Center Business Fundamentals 29

Data Sources and Collection (Long Version)

1. Obtain the number of event organizer staff, exhibitors, and attendees

who stayed at hotels or Airbnbs from the event organizer.
2. Use the estimated stay in days from the event organizer or the initial
feasibility study or its update.
3. Obtain the number of exhibitors and attendees who commuted
from the event organizer.
4. If confidence is low in the organizer’s numbers, include report-
ing requirements in the license agreement and require a deposit,
held until the information is received. Then follow the procedures
below:
• Obtain the number by zip code and country code if interna-
tional, for organizer staff, exhibitors, and attendees.
• Estimate if U.S. attendees and exhibitors are staying over-
night in the city based on zip codes, distance, and ease of
commuting. Assume international exhibitors and attendees
stay in hotels or Airbnbs. Then, split the attendees and
exhibitors (United States) into out-of-town and commuting.
• Information about zip codes for consumer show attendees
can be obtained from online ticket sales.
• Set up a spread sheet template similar to the Economic
Impact table below except that this will be for each event.
Use the initial feasibility study multiplier effect. The Finance
Department can create a master spreadsheet
recording each event for the year.

Data Sources and Collection (Short Version)

1. Obtain hotel room nights that are normally reported to CVBs. Large
CVB staffs may have a statistician you can rely on for this data.
2. Use the event organizer’s report of number of out-of-town attendees
who stayed at hotels. Organizers may also have hotel room night
data.
30 Improving Convention Center Management

Why This KPI Is Useful

This KPI enumerates the value of all individuals who work at, exhibit or
attend events at the city’s convention center. The emphasis is on those
from out-of-town who remain overnight and stay at a local hotels and use
their free time spending by dining at restaurants, shopping, or engaging
in other tourist activities.
This KPI refers to a “long version” and a “short version”. The long
version is presented annually. There is a good deal of work obtaining the
data. You may rely on the event organizer or, if you find the statistics
unreliable, you can use the procedures detailed in the “How to Calculate
and/or Organize Data” section. Generally, statistics like these are pre-
sented in annual reports, marketing literature, and in formal requests
for facility expansion. The short version is a useful and expedient way to
report on economic impact using the number of event attendees staying
at hotels and how many nights they stayed at hotels. The short version
is also important because it creates a database for assigning economic
impact to each event type and each event e­ conomic sector.

Objective

Use economic impact calculations to periodically report on the center’s

contribution to the local economy. Also, use impact statistics to roughly
estimate economic value of future events. Cities such as Las Vegas have
found that periodic independent research to update spending patterns
improves the impact estimate’s accuracy and credibility. Updates are nor-
mally done every five years.

Managing Unfavorable KPI Conclusions and Inferences

It would be rare that a convention center would openly discuss an unfa-

vorable economic impact. However, when it does occur the problem is
sometimes so obvious that public discussions are unavoidable. As men-
tioned earlier the impact numbers are generally very high and it’s not
 Convention Center Business Fundamentals 31

unusual to see annual impact amounts in billions of dollars for cities like
Orlando, New Orleans, and Las Vegas.These are cities where the depen-
dence on tourism and convention center events are so impactful that bad
news would likely trigger a rigorous investigation.

How to Calculate and/or Organize Data

To calculate the annual Economic Impact, create a work sheet with all the
above listed elements. A sample of such a work sheet is shown below. The
sample only covers economic impact for the city and does not include the
county, region, or state. Consider this sample the “long version.”

ANNUAL ECONOMIC IMPACT

Category Number Ave. # of Spend- Total $
Days ing/Day
Event Organizer Rent and Services NA NA NA 5,500,000
Event Staff Staying at Hotels 324 3.5 45.96 52,119
Event Exhibitors Staying at Hotels 3,578 4.1 176.01 2,582,031
Event Exhibitors Commuting 397 NA 25.3 10,044
Exhibitor - Event Services NA NA NA 2,874
Out-of-Town Attendees (US) 41,964 2.5 234.68 24,620,279
Out-of-Town Attendees (Int'l) 1634 4.5 563.23 4,141,430
Attendees Day Trip or Commuting 58,357 1 41.78 2,438,155
Sub-Total 42,218,789

Geography Direct Spending Multiplier and Indirect and Total Spend-

Induced Spending ing (Eco-
nomic Impact)
1.38 x 42,218,789 = 58,261,928
CapitalL City 42,218,789 58,261,928 $100,480,717

Work Sheet 1.3 – Annual economic impact (long version)

32 Improving Convention Center Management

MONTHLY ECONOMIC IMPACT BY EVENT TYPE AND ECONOMIC

SECTOR
Event Type Economic Attendees at Est. - Hotel
Sector Hotels Room Nights
State Music Convention SMERF
1,695 2,567
Teachers w/exhibits
Gift Fair Tradeshow Consumer
957 1,823
Goods
Regional HS Cheer- Sports Sports Compe-
1,090 750
leading tition
Spring Dog Show Consumer Arts, Sports and
3,180 25
Show Leisure
XYZ Corp. Sales Corporate Business
35 60
Mtg. Event
Furniture Mfg. Tradeshow Manufacturing
1,936 2,385
Expo
IT for Finance Business Tech
390 500
Seminar Seminar
Totals 9,283 8,110

Work Sheet 1.3a – Monthly economic impact of events (short version)

Presentation Notes and Formats

Tables, bar graphs, or both, for each event type and economic sector,
comparing current and previous years.

Things to Watch for—Misinterpretations, Nuances,

and Cautions

Total Number of Exhibitors and Attendees from Out-of-Town Is Often

Inaccurate: It’s known by convention center managers that attendance is
sometimes roughly estimated. Moreover, even if an event organizer has
a reasonably accurate estimate before the event, there is rarely follow-up
with adjustments made after the event closes. The problems described
are especially true for privately owned tradeshows and consumer shows.
This situation normally does not occur for events owned and managed by
professional associations.
 Convention Center Business Fundamentals 33

Initial Convention Center Feasibility Studies Are Often Criticized as

Flawed: Perceived flaws may exist in the initial feasibility ranging from
the estimated number of events to direct spending estimates and methods
used to derive multiplier effects. The most oft-criticized aspects of the
feasibility process are as follows:

• Consultants conduct market feasibility and direct spending

studies, and then apply an economic impact model to find
the value of indirect and induced spending. In conducting
studies where a center does not already exist, there is often
a lack of reliable business data in the event industry. This
leads to many assumptions that cannot be validated. A fre-
quent critic of new convention centers (Heywood Sanders)
characterized initial feasibility studies as relying on the
opinions of prospective event managers and not on actual
data. Sanders called this a “Survey of Expectations” taken
from interviews. On reading through studies, it’s evident
that most prospects typically say yes, they would consider
the new convention center as an event location. These
responses and sentiments often end up as overly optimistic
forecasts.
• Initial feasibility studies are strongly influenced by the
enthusiasm and drive of local hospitality businesses, backed
by political leadership. In these circumstances it is difficult for
consultants to stay objective. However, that has been chang-
ing over the last few years.
• Consultants do not have clear insight regarding the power
of supply and demand and how it governs the way cities and
venues compete. Some convention centers go to extreme
lengths to maintain and grow market share. It is not uncom-
mon for them to offer zero rent and deeply discount services.
This can have a material effect on market share. Rarely do
studies mention price of rent as the basis for winning and los-
ing events. Cost is a driving factor for major event locations
and changes the competitive picture dramatically.
34 Improving Convention Center Management

• Economists believe that “opportunity costs” should be part

of convention center feasibility studies. Investopedia defines
“opportunity costs” as follows:

Opportunity costs represent the benefits an individual, investor

or business misses out on when choosing one alternative over
another. While financial reports do not show opportunity cost,
business owners can use it to make educated decisions when they
have multiple options before . . . Because by definition they are
unseen, opportunity costs can be easily overlooked if one is not
careful. Understanding the potential missed opportunities fore-
gone by choosing one investment over another allows for better
decision-making.1

Applied to convention center feasibility studies, public investment in

building a convention center is rarely, if ever, compared to an investment
in projects like airport construction, industrial parks, and other urban
improvements.

When Reporting Economic Impact, Emphasis Should Be on Direct

Spending Data: Until a follow-up study is done updating initial direct
spending data, center management should rely on the initial study results.
However, management should be careful about discussions regarding
indirect or induced spending impacts until validated by further research.
Most critics know positive indirect and induced impacts exist. It’s more
a question of the impact scale factored up by the multipliers. If a conver-
sation is unavoidable, you can avoid speculation by assigning a range of
possible multipliers from 1.1 to 1.5. Critics have a good argument when
impacts cannot be observed or accurately measured and appear grandiose.

1
  Investopedia. Undated. “Opportunity Costs.” https://investopedia.com/terms/
o/opportunitycost.asp (accessed October 2019).
 Convention Center Business Fundamentals 35

When Collecting Hotel Room Night Data, There May Be Overnight

Stays That Are Not Included in Room Block Data: Know that hotel
room nights are many times under-reported. For mature events that con-
sistently have returning attendees each year, there is anecdotal evidence
that many book their own hotel accommodations and are not reported
in the “room block” (where the hotel room night statistic is derived).
Also, new research from PCMA has shown that room block data accounts
for only about half of those staying overnight. Attendees are staying at
hotels where they are awarded loyalty points, use their company credit
cards to book where they please or where their companies recommend.
Many attendees are trying out Airbnb and other short-term rental options
instead of hotels.
 Index
Absenteeism, 133
Baseline year energy, 142
Baseline year hauled solid waste/
KGSF, 150
Capital reserve vs. deferred
maintenance (DM), 127–131
Carbon dioxide emissions, 152–153
Cleaning
pricing comparisons to convention
centers, 79–80
profit or commissions per total
carpeted, 81–83
Commission per GSF rented, 65–67
Communications, 73
market pricing comparisons, 73–75
profit/commission per GSF rented,
75–79
Consumer show, 5, 29, 32, 51, 68,
99, 102, 118
Contract and professional services,
93–94
Contractors
excessive pricing, 74
exclusive/official, 47, 53–54, 56,
73, 99, 104–107, 121
Convention and Visitor Bureaus
(CVB), 1, 3, 15, 28, 29,
37–40, 51
Convention center, ix, x, xi, 37, 39,
41, 45, 47, 50, 51, 61, 62, 64,
66, 72–76, 78, 85, 88, 91, 95,
123, 129, 134, 135
customer service, 109–115
economic impact, 26–35
event service business, 53–56
event types and economic sectors,
5–6
financial reports, 11–21
gross square footage rented, 4
Net Square Footage, 6–9
number of events, 2–3
occupancy rate, 9–11
parking, 67–73
percentages of earned revenue
categories, 23–25
pricing comparisons to, 79–80
profit per GSF rented for each
event type and economic
sector, 21–23
safety, 120–122
security, 117–120
Conversion rates, 43–44
Corrective maintenance (CM),
125–127
Current year hauled solid waste/
KGSF, 150
Customer service, 109
net promoter score, 112–115
number and nature of customer
complaints, 110–111
Decision-making, ix, 34
Deferred maintenance (DM), capital
reserve vs., 127–131
Diverted solid waste per thousand
GSF rented, 148–151
Drucker, Peter, ix
Earned revenue, xii, 2, 4, 7, 12, 13,
16, 17, 20, 23–25, 28, 48, 51,
57, 59, 97, 104
and profit/commissions, 54–56
Earnings before interest, taxes,
depreciation, and
amortization (EBITDA), 15
Economic feasibility study, 50
Economic impact, 2, 3, 26–28, 41,
50, 51
of convention center, 28–35
Economic output, 26
162 Index
Electric and natural gas costs per
thousand GSF rented
(KGSF), 89–90
Electric demand, 90–92
Electric/plumbing profit/commission,
60–62
Electric services, 57–60
Energy use per event and facility gross
square footage, 138–139
Energy use per KGSF rented,
corrected for weather,
139–144
Enforcement; parking lot, 72
Event and house materials and
supplies, 94–96
Event labor cost per GSF rented,
96–97
Event organizer, 7, 9, 27, 29–32, 38,
41, 47, 50, 51, 53, 62, 64,
80–82, 99, 103, 105–107,
109, 113, 115, 117, 118, 121,
129, 137, 149
Event service business, 53
Excessive pricing, 74
Exclusive/official contractors, 47,
53–54, 56, 73, 99, 104–107,
121
Experience modification rating
(EMR), 121, 134
Feasibility, 3, 29, 33–34, 50
Financial reports, 11–16, 34
Forbes, 115
“Free” and complimentary parking,
72
Funding, 28
Grievances, 134
Gross square footage (GSF) rented,
4–6
Harvard Business Review (Reichheld),
113
Hotel occupancy tax, 10, 26
Hotel room nights, 29, 32, 35,
47, 52
Human resources (HR),
133–136
IMPLAN model, 27
In-house labor hours and overall
cost, corrective maintenance,
125–127
Intervene, number of instances, 134
Javits Center, 12, 38, 91, 105, 111,
131
Key performance indicator (KPI),
ix–x
good, x–xi
process, xi–xii
Labor union grievances, 134, 135
Leadership and governance, 2
License agreement, 29, 103, 115, 121
Long version (economic impact),
29–31
Lost business, 44–46
Market pricing comparisons, 62–63
Market share, 40–42
Marr, Bernard, ix, xiii
Multiplier, 27
Net promoter score (NPS), 112–115
Net Square Footage (NSF), 6–9, 61
GSF rented ratio, 101
and profit, 102–105
Non-event day paid parking, 73
Non-green house gas (non-GHG)
electricity, 145–147
Number of events, 2–3
Occupancy rate, 4, 9–11, 101, 104,
151
Occupational Safety and Health
Administration (OSHA), 120
Open contractors, 53
Operating expense
amount and percentages, 86–89
contract and professional services,
93–94
electric and natural gas costs per
thousand GSF rented, 89–90
event and house materials and
supplies, 94–96

event labor cost per GSF rented,
96–97
peak electric demand, 91–93
per GSF rented, 85–86
Operational and business
competency, 2
Opportunity costs, 34
Outsourced exclusive/official, 53
Overall financial health, 2
Paid parking spaces, 69–71
Parking lot/garage fees comparison,
67–69
Parking profit or commissions/GSF
rented, 71–73
Peak electric demand, 91–93
Percentage of management and
supervisory staff, 134
Physical security and crime incident,
117–120
Planimeter, 8
Preventive maintenance (PM)
compliance, 123–125
Profit/commission per GSF rented,
63–65
Profit/loss per GSF rented, 16–18
Profit/loss statements, 18–21
Profit/NSF, 58–60
Profit per GSF rented, 21–23
Qualified lead list, 37–40
Reichheld, Frederick F., 113
Rent and license fees, 47–49
Retained events, 50–52
Safety, 120–122
Security, 117–120
Index 163
Self-operated/in-house, 53
Short version (economic impact), 29,
30, 32
Social media, 110
Solid waste efficiency, 150
Strengths, weaknesses, opportunities,
and threats (SWOT)
analysis, 41
Sustainability, 137
diverted solid waste per thousand
GSF rented, 148–151
energy use per event and facility
gross square footage, 138–139
energy use per KGSF rented,
corrected for weather,
139–144
KPIs to tons of carbon, 152–153
non-GHG electricity, 145–147
Tampa Convention Center, iv
Tradeshow, 5, 8, 32, 41, 74, 113, 115,
120, 149
Turnover rate of top performing
employees, 133–134
United States, 1–2, 29
Utility costs, amount and percentages,
88–89
Utility service market pricing,
56–58
Utility services (electric/plumbing),
58–60
Vertical market, 38
WiFi, 73–75, 77, 78
Workman’s compensation, 96, 121,
134