City complex turns bottom line from red to black
In 1990, Denver opened its new convention complex to rave architectural reviews. There were great expectations for the $135 million facility, which was going to boost the city’s economy with convention business and tourist trade.
The problems began quickly. Instead of fulfilling the city’s dreams, the facility operated over budget and under event capacity during its first three years.
Booking revenues fell far below forecasts. The new center was supposed to spawn a major hotel opening, but, this too, did not happen. Turning the tide required a new tactic. Realizing the need for cohesiveness among the Convention and Visitors Bureau, the Hotel and Motel Association and the Downtown Denver Partnership, Mayor Wellington Webb decided to hire an outside firm to manage the Denver convention facilities.
The city reasoned a private management firm can increase revenue quickly by attracting new events because it has more contacts in the industry, and it can exert more control over operating costs and evaluate performance levels.
The Denver Complex hired SMG, Philadelphia, a firm that manages convention centers in cities all over the country, to help boost revenues at the convention buildings from $4.1 million to $5.1 million, largely through the attraction of new events, including the Western Hemisphere Trade and Commerce Forum and the World of Wheels.
Additionally, annual operating expenses decreased by over $600,000, while pre-existing employee levels have been maintained.
The management company was able to reduce expenses by adapting an aggressive energy conservation program, purchasing supplies at lower prices and reducing overtime labor costs. Thus, the buildings, net loss has dropped by $1.5 million since the private takeover.
Furthermore, an additional 50,000 patrons have visited the facility since 1994, and the complex has become the economic catalyst the city originally intended it to be.
A number of factors contributed to the success of the effort. First, private management firms have dedicated professionals whose knowledge and contacts in the industry have a profound and immediate impact on a facility.
In Denver, for example, the convention center division enabled the network of facilities to “block book” events. This way, smaller-market buildings are still able to attract large-market trade shows, conventions, concerts and family shows, which increase patronage. Private companies also have leverage with vendors and suppliers, which can help them negotiate the best and least expensive contracts.
Second, improving the bottom line is a strong incentive. Cities rarely have enough resources to support and make the necessary marketing initiatives to increase attendance, but with private companies, management can tie compensation directly to the improvement of the facilities, bottom line.
In two years, the Denver Convention Complex not only experienced a significant increase in the number of bookings for the next two years, but a number of shows, specifically the Minority Enterprise Show and the SOS Taste of the Nation Benefit (a local fund raiser for the food bank of the Rockies) have already re-booked, a major accomplishment within an industry where repeat business is critical to success.
The result is a vibrant convention center that promotes the city’s downtown economic activity.