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CLEARWATER CONVENTION CENTER AND HOTEL FEASIBILITY STUDY I I I I I I I I I I I I I I I I I I I hunden strategic partners destination develop111ent consulting Clearwater Convention Center and Hotel Feasibility Study August 2009 hunden strategic partners destination development consulting I I I I I I I I. I I II I I I I I II I I August 19, 2009 Martin Smith Clearwater Convention Center Task Force C/O Belleview Biltmore Resort 25 Belleview Boulevard Clearwater, FL 33756 Ms. Gerri Raymond Vice President of Tourism Clearwater Chamber of Commerce 1130 Cleveland St. Clearwater, FL 33755 Sent electronically to: qravmond@)clearwaterflorida.orq and msmith@)belleviewbiltmore.com Dear Mr. Smith and Ms. Raymond: The Clearwater Convention Center Task Force has engaged Hunden Strategic Partners, (HSP), to conduct a feasibility study for a new Convention Center and related hotel in downtown Clearwater, Florida. The attached is our report for your review. We have enjoyed serving you on this engagement and look forward to providing you with continuing service. Sincerely yours, ~I Hunden Strategic Partners Attachment I I I I I I I I I I I I I I I I I I I hunden strategic partners destination development consulting AssuMPTIONS AND UMmNG CoNDmONS This report has been prepared under the following general assumptions and limiting conditions: . The findings presented herein reflect analysis of primary and secondary sources of information. HSP utilized sources deemed to be reliable but cannot guarantee their accuracy. . No responsibility is taken for changes in market conditions and no obligation is assumed to revise this report to reflect events or conditions, which occur after the date of this report. . Responsible ownership, competent property management, and professional marketing are assumed. . Terrorist activity or other major calamity affecting travel, the economy and tourism is assumed not to occur. . This report has been made only for the purposes stated and shall not be used for any other purpose. Clearwater Convention Center Feasibility Study Executive Summary Page 1 I I I I I I I I I I I I I I I I I I I hunden strategic partners destination development consult1l19 EXECUnvE SUMMARY Hunden Strategic Partners was retained to study the feasibility of a new convention center for downtown Clearwater. Though the Harborview Center has experienced a great deal of success given its poor condition, it is not a long-term convention solution for Clearwater. Based on our study of the market, it is recommended that a new convention center be developed in downtown with 244,000 gross square feet of space proximate to the other amenities of downtown and adjacent to a new convention headquarters hotel of at least 350 rooms. The convention facility should consist of a 60,000-square foot exhibit hall, a large grand ballroom of 20,000 square feet, and a junior ballroom of 12,000 square feet. HSP recommends approximately 23 meeting rooms of various sizes, totaling 18,000 square feet. As mentioned, in order for the facility to be feasible and reach the demand projections set forth herein, a full-service branded hotel of 350 rooms is recommended. The hotel should have its own function space, including two ballrooms, meeting rooms and a boardroom. Hunden Strategic Partners has come to the following conclusions while studying the feaSibility of the new convention center. . West Central Florida is a major center of economic activity and tourism in the southeast U.S. region. The area has grown at the double the growth rate of the U.S. over the past 20 years, which creates a base for local event business as well as the airport capacity for regional and national business. . Most of the respondents to an online survey of state meeting planners share the opinion that they are willing to consider booking in Clearwater if it had a properly sized facility with accompanying hotel package. Clearwater has many of the amenities that planners want in a destination, but not the facilities. With such facilities, it should be able to carve out a niche for smaller conventions and conferences as well as many local and consumer events. Currently many meetings and events seeking a home in the area cannot be accommodated. . The hotel market in Clearwater has performed well in the last few years, although has suffered lately with the rest of the nation. In addition, the Residence Inn that recently opened downtown has proven that there is a market for quality branded hotel accommodations downtown. . The convention center industry is competitive and requires investment for ongoing success. Convention centers as a general rule do not generate a significant profit and often do not even generate positive cash flow to pay debt service. The benefits from such centers include improving the local economy through additional visitation, new jobs, new businesses, spending at restaurants, stores and hotels and the actualization of a live-work-play reality in an urban area. The amenities and assets that are developed to primarily service convention attendees also serve the local population and create an inviting, attractive place to live and recreate. By only developing a convention center without the proper support amenities, the City is not likely to be successful in attracting business and it is not likely to generate the benefits such a facility can provide. The following report details the full study process and results. I I I I I I I I I I I I I I I I I I I h u n den 5 tra te gi cpa rtn e rs destination development consulting INTRODUcnON, REPORT LAYOUT, AND FINDINGS Subject of the Study The Clearwater Convention Center Task Force retained Hunden Strategic Partners (HSP) to conduct a feasibility study for a proposed convention center and hotel project with an emphasis on Downtown Clearwater, Florida. The specific site is not a part of the scope of this phase of the analysis. Pinellas County is the largest county in Florida without a true convention center, as the current Harborview center is a converted department store and the City is considering demolishing it in the next few years to make way for a higher and best use for the waterfront site. As such the Task Force engaged HSP to consider the factors related to feasibility for a convention center in or near downtown. Hunden Strategic Partners analyzed the following scope components in this report: · Local economic, demographic and related information. · Local tourism, conferencing, convention and hotel infrastructure. · Market supply and demand for hotels and meeting facilities in a variety of competitive locations. · Recommendations of meeting center and hotel facilities, including amenities. · Comparable and competitive facilities. · Demand and financial pro forma for both recommended facilities. · Development cost and likely funding gap for both facilities. The following lays out the primary scope items in summary form as well as the recommended improvements. T.ble 1-1 Summary of Analysis Scope&. Data Property Type: Proposed Convention Center and Hotel Location: Clearwater, Florida (emphasis downtown) Date of Property Inspection: April 1, 2009 Property/Land Description: Site is To Be Determined Proposed Improvements: To Be Recommended Clearwater Convention Center Feasibility Study Chapter 1 Page 1 Clearwater Convention Center Feasibility Study Chapter 1 Page 2 I I I I I I I I I I I I I I I I I I I hunden strategic partners destmatlon development consulting Company Description Hunden Strategic Partners is a full-service real estate development advisory practice specializing in destination assets such as convention centers. With professionals in Chicago, Minneapolis & Indiana, HSP provides a variety of services for all stages of destination development, in the following primary areas: · Market and Financial Studies, including Feasibility & Valuation · Hotels · Convention and Conference Centers · Sports & Recreational Facilities · Entertainment/Retail Districts, Mixed-use Developments · Resorts · Arts, Cultural & Entertainment Facilities Master Strategy and Planning Development Owner's Representation and RFP Process Management Public Incentive Analysis Economic and Fiscal Impact Analysis Economic and Tourism Development Legislation Consulting Organizational Audits and Best Practices . . . . . . Hunden Strategic Partners (HSP) professionals have provided all of the above services for more than 200 client projects worldwide for the public and private sectors. Beyond consulting, HSP professionals have experience in municipal and state government, economic development, and non-profit management. Report Layout The report is organized as follows: Chapter 1 - Outlines the study concept, prOVides the report layout and an overview of conclusions. Chapter 2 - Reviews the economic, demographic and tourism forces in Clearwater and the region. Chapter 3 - Analyzes the current national meeting trends, demand issues, financing trends and other variables that impact the industry as a whole. Chapter 4 - Profiles the current Harborview Center and other centers in the Florida market. A survey of meeting planners provides insight on preferences and practices of local and national planners. Chapter 5 - Analyzes the current national convention hotel trends. I I I I I I I I I I I I I I I I I I I h u n den 5 tra te gi cpa rtn e rs destination development consulting Chapter 6 - Establishes a local set of hotels that a new convention hotel would compete with. This section will provide an understanding of what effect other hotels in the market will have on the proposed hotel. Chapter 7 - Profiles convention centers that will either be competitive or comparable to the proposed center in Clearwater. Chapter 8 - Provides recommendations for the hotel and convention center facility based on an analysis of strengths, weaknesses, opportunities and threats. Chapter 9 - Makes projections for the demand and financials for the recommended convention facility. Chapter 10 - Makes projections for the demand and financials for the recommended hotel facility. Chapter 11 - Provides an economic and fiscal impact analysis for the project, as recommended. Summary of Recommendations Based on the analysis conducted, HSP recommends the following be developed, assuming a suitable site is acquired adjacent to or near downtown. Clearwater Convention Center Feasibility Study Chapter 1 Page 3 January 1, 2014 Convention Center Size (SF) 60,000 20,000 12,000 18,000 110,000 134,000 244,000 800 I I I I I I I hunden strategic partners destination development consuitlng Table 1-2 Summary of Recommendations Proposed Improvements Assumed Opening Date Meeting Facility (Phase I) Function Space Exhibit Hall* Grand Ballrooom* Junior Ballroom Meeting rooms (incl. Boardroom) Total Back-of-House & Pre-function Gross Building Size Onsite Parking Hotel Guest Rooms Function Space Grand Ballrooom Junior Ballroom Meeting rooms Total Parking Source: HSP Divisions 3 4 3 23 33 Full-Service, Branded, HQ Meeting Hotel 350 Size (SF) 11,000 4,200 8,250 23,450 333 I I I I I I I I I I I I Divisions 4 3 10 17 It is recommended that a convention center be developed with 244,000 square feet of gross space. This would consist of a 60,000-square foot exhibit hall, a large grand ballroom of 20,000 square feet, and a junior ballroom of 12,000 square feet. The junior ballroom can also be used as meeting space. HSP recommends approximately 23 meeting rooms of various sizes, including a boardroom, (and averaging 800 square feet), to accommodate the breakout sessions after a general session. Parking of 800 spaces is recommended for the convention center. The site chosen (in the next phase) should allow for expansion of the facility by at least a factor of two times. For the hotel component, a full-service branded hotel of 350 rooms is recommended. The hotel should have its own function space, including two ballrooms, meeting rooms and a boardroom. This allows the hotel to generate group business when the convention center may not be able to. Parking at the hotel recommended to be at least 333 spaces. The recommendations for the hotel are based on the assumption that a hotel with roughly 180 rooms will be developed on the site of the current Harborview Convention Center. If these plans do not materialize, it is our recommendation that the convention hotel be enlarged to 400 rooms. The following table shows more specifics for the hotel recommendation. Clearwater Convention Center Feasibility Study Chapter 1 Page 4 I I I I I I I I I I I I I I I I I I I h u n den 5 tra te gi c pa rt n e rs destination development consulting Table 1-3 Recommended Hotel Components Item Count Unit Guest Rooms (Total) 350 Rooms Grand Ballroom 11,000 Square Feet Junior Ballroom 4,200 Meeting Rooms 7,750 Board Room (1) 500 Parking 333 Spaces Three-meal Restaurant 105 Seats Fine Dining Restaurant 56 Lobby Lounge/Bar 18 Spa Yes Indoor Pool Yes Fitness Center Yes Concierge Desk Yes Business Center Yes Source: HSP The hotel is recommended to have its own function space, two in-house restaurants as well as a bar/lounge and coffee bar. One of the restaurants should be a three-meal per day setting while the other can be open for lunch and dinner only. A full-service spa, pool, business center and room service should also be developed. Room service late at night should be included since it is a continual request of meeting planners and other visitors. Summary of Conclusions & Projections The following is a summary of conclusions and projections regarding the hotel study from each chapter and component factor in the analysis. Local Economy, Demographics and Tourism. West Central Florida is a major center of economic activity and tourism in the southeast U.S. region. Within the metropolitan area, there are three major cities including Tampa, St. Petersburg and Clearwater. The area is home to a number of major tourist attractions including some of the nations most visited theme parks. Its waterfront location on the Gulf Coast also makes it a destination for many travelers, especially due to its renowned beach. In addition to theme parks and beaches, the area is also home to many cultural establishments including museums and theaters. The area has grown at the double the growth rate of the U.S. over the past 20 years, which creates a base for local event business as well as the airport capacity for regional and national business. Meeting Trends. The meetings industry nationwide has continuously grown as more municipalities have developed their own meeting facilities. Although demand for meetings Clearwater Convention Center Feasibility Study Chapter 1 Page 5 hunden strategic partners destination development consulting fluctuates with the condition of the economy, strong destinations are able to find success with well-conceived facilities over the long term. Clearwater would be a popular choice for meeting planners as a destination based off of its local attractions, beaches and proximity to the Tampa International Airport. Buildings that host meetings have continued to increase in number and size, leading to a fierce competition for meetings and conventions. This allows meeting planners to pit destinations against each other more effectively than in the past. Therefore they can demand better hotel packages, rebates or reductions in rent and other incentives to host their meetings in a city. Many destinations now have a large budget for providing incentives to groups. This lowers the impact of the industry. However, this does not mean that certain attractive locations like Clearwater should not invest in new and improved facilities. However, it does mean that communities should go into the industry fully prepared to invest fully in order to succeed, in facilities, hotels, destination appeal and marketing efforts. Meeting planners expect a destination with several large hotels so they can put their attendees in as few hotels as possible. Planners are not willing to make numerous agreements with smaller hotels in order to achieve their required room block. This will be an initial challenge for Clearwater if a convention center is built downtown, although the proposed new convention hotel would be greatly beneficial. The Residence Inn and proposed new convention hotel would have a combined total of approximately 460 rooms close to a downtown convention center, which is a major advantage from constantly having to rely on beach hotel rooms for hosting groups, which is the case in Clearwater presently. There Other high-quality hotels will likely need to be developed over time to allow for additional growth of the group market. Current Area Supply and Opinions of Meeting Planners. The Harborview Center opened in 1996 when a former department store's facilities were converted into the present-day convention center. The building was originally opened as aMaas Brothers/Jordan Marsh store in 1961. Located in downtown Clearwater, Florida the center overlooks Clearwater Harbor. The center consists of three floors with 55,700 square feet of total function space and can accommodate up to 1,400 guests. The facility has been under the management of Global Spectrum since 1998. Because the building is a rehabbed department store, it cannot function as a high quality convention center. The spaces have many columns and the facility is dark, not efficient, and costs more money than a convention center of similar size would due to its obsolescence. As a result, the City is preparing to demolish the building in the next several years. Though the Harborview Center has experienced a great deal of success given its poor condition, it is not a long-term convention solution for Clearwater. In fact, it holds very few true conventions and instead hosts small consumer shows, receptions and low-rated business. Having no hotel rooms within walking distance to the center makes it difficult to book large events. Finally, the size of the facility is too small to attract large events. However, if the events being hosted now are willing to use the current facility, they are most likely potential business targets for a new facility (although a new facility will likely improve upon the quality and type of business, not necessarily the number of events). Clearwater Convention Center Feasibility Study Chapter 1 Page 6 I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I h u n den s tra te gi c pa rtn e rs destinatIOn development consulting In order to create a competitive facility it is important to examine the other facilities in Florida to see where a new facility would fit into the market. HSP reviewed the state and local market for convention facilities and found that a high quality facility in a solid location such as downtown Clearwater would fit the needs of the market. There are already a number of smaller facilities around the state of varying quality levels, but beyond the Palm Beach County Convention Center, there are no mid-sized high-quality facilities. It was determined that Clearwater could do well with a small-mid-sized facility (as recommended), as long as it had a strong hotel package. Survey. HSP deployed an electronic survey to more than 350 national and state meeting planners and very few respondents to this survey were opposed to considering Clearwater as a meeting option. Most of the respondents share the opinion that they are willing to consider booking in Clearwater if it had a properly sized facility with accompanying hotel package. Clearwater has many of the amenities that planners want in a destination, but not the facilities. With such facilities, it should be able to carve out a niche for smaller conventions and conferences as well as many local and consumer events. Convention Hotel Trends. In today's competitive convention market, the market has demanded and received top-quality hotel and convention center packages, usually connected to each other, in most major U.S. cities and now even in second and third-tier cities. Smaller cities have stood behind the development of smaller hotel and conference center developments. For a community to be competitive in the industry, a convention center alone will not suffice. Clearly, the destination package must include a solid-quality convention hotel, plus additional hotel choices beyond this within a few blocks. Current Hotel Market. National hotel trends are important to the development prospects of any hotel as are local market characteristics. A number of hotel measurements have declined in the first quarter of 2009 due to the recession both nationally and locally. Yet a convention center cannot be recommended without a hotel. SpeCifically, the hotel market in Clearwater has performed well in the last few years, although has suffered lately with the rest of the nation. In addition, the Residence Inn that recently opened downtown has proven that there is a market for quality branded hotel accommodations downtown. Overall, the only barometer of demand for a downtown hotel is the Residence Inn and it has performed exceptionally well, but at a rate level that makes it difficult to know the breadth and depth of downtown demand. Based on our research, HSP believes there is demand for a high quality hotel downtown above the quality offered at the Residence Inn. A convention center will generate room night demand, which will partially support a new full-service convention hotel. Over the next ten years as downtown continues to improve, a mix of hotels makes sense: a larger convention hotel, a smaller transient quality hotel (such as the lBO-room hotel proposed at the site of the current Harborview Center), and one or two select service hotels. A room count between BOO and 1,000 rooms spread amongst this group would provide a variety of price/quality options and allow a convention center to put together a solid room block package beyond the beach. Competitive Hotel Set. HSP has chosen a set of primary competitive hotels to analyze and relate to a proposed full-service convention hotel. Some of the factors considered were Clearwater Convention Center Feasibility Study Chapter 1 Page 7 hunden strategic partners destination development consuitlng market orientation, quality, size, location, age, brand, and market demand mix. Based on a HSP's initial review of the market's characteristics, the site for the oonvention center and hotel should likely be downtown Clearwater, as discussed in the report. The following table shows a summary of the hotels in the competitive set. Table 1-4 Clearwater Competitive Set Hotels Open Date Jun 1998 Jun 1975 Aug 2007 Jan 1897 Feb 2004 Dee 2007 Sep 2008 Dee 2009 Hotel Hilton Clearwater Beach Resort Sheraton Hotel Sand Key Resort Sand pearl Resort Belleview Biltmore Resort Marriott Suites Clearwater Beach Holiday Inn & Suites Clearwater Beach Residence Inn Clearwater Downtown Hyatt Regency Clearwater Beach Resort and Spa* Total Average Rooms 416 390 249 226 220 189 115 250 2,055 257 1988 *Expected to compete when open in late 2009 Source: Smith Travel Research The competitive set consists of seven hotels, ranging in size from the llS-room Residence Inn Downtown to the 416-room Hilton Clearwater Beach. Although not every hotel in the set has similar characteristics, each has a number of attributes that are competitive with the proposed hotel. In all cases, the physical attributes are classified as midscale, upscale or higher. Most of the set is located on the beach except for the Residence Inn downtown, and the Belleview Biltmore, just south of downtown Clearwater. There are other smaller limited service hotels located along Highway 60 closer to the bay. These properties however, would not compete in the set, dues to the fact that they are limited service and their location is not immediately downtown. The following figure shows the competitive hotel properties on a map of the Clearwater area. Clearwater Convention Center Feasibility Study Chapter 1 Page 8 I I I I I I I I I I I I I I I I I I I I I hunden strategic partners destinatIOn development consultmg i ~- . .:,.t..~ s.-..on Sand ~ :~:= - ~ MarrioU Suites "I Clearw"er Beach nd Key ~ on Sand Key ~ 220 Suites I I I I I I I I I I I ~.:, ~~ I I I Figure 1-1 I ,,<~ II;: ~~......~ _,~~cm~~~.sT I " Took6 Lake " I r~ :BELTREC$ 5T""='=II ffi] II ':.II I ,\ I:=" ~~ UNION.ST i~l .1 ~'I il ~ _ 8)l ~~~~OJ=-=-==== OJd- n Clrnrll'atcril Bay;; ~. II c: ~ ;.. ~ ~ Island Estate If':::::; q......OIt':--TST ~ i:I _~i~ oJl -... ~,' '* ~'. ~ lj: f/'~:1Il or; .. ~ @ Clea nm ter Harbor r, /I ..... _. I Discussion of Need, Strengths, Weaknesses, Opportunities and Threats. When considering the idea to develop a new convention center and hotel, one must consider the strengths, weaknesses, opportunities and threats of and for such a development. I Clearwater Convention Center Feasibility Study Chapter 1 Page 9 I r--- Clearwater Convention Center Feasibility Study Chapter 1 Page 10 I I I I I I I I I I I I I I I I I I I hunden strategic partners destmatlon development consultm9 Strengths . Established base of business. While the current facility is relatively poor compared to what a new facility would offer, it still hosts a good book of business, generating over $2 million in annual revenue. This is a great base from which to start with a new and improved facility. . Established Destination. Clearwater is an established destination primarily for leisure visitors, but the attributes that make it appealing for leisure travelers are attractive to meeting planners. The area is surrounded by many attractions that visitors can easily get to during their stay in Clearwater, including a world class beach. The climate is very appealing, especially to those from the northern two- thirds of the U.S. . Reputation. The metro area's reputation (along with most of the west coast of Florida) includes sentiments of value and values (price and cultural) compared to the east coast cities of Miami, Miami Beach and Fort Lauderdale. This conservative and cost-conscious reputation provides a lure for many religious groups and others who are not attracted to the glitz. · Proximity. Any potential sites in the Clearwater area are proximate to the world- class beaches, downtown Tampa and the variety of attractions that the overall metro area has to offer. Within a 30-minute drive, visitors can be at any number of attractions. · Access. Most of Clearwater has good to very good access that would make it attractive to users. Downtown is easily accessible. . Airlift and direct connections. Like most cities in Florida, Clearwater and Tampa Bay offer excellent air connectivity and competitive pricing, which is critical to attracting conventions. The number of direct flights to and from the area is stronger than many cities and metros its size. · Increasing Population. The population of the local and regional areas has grown significantly over the last ten years and continues to increase. This increasing population provides a growing base of business in every major segment for a hotel (business, group and leisure). The growing population also increases the attendee base for a convention center. · Balanced Economy. The economy of the area, both regionally and locally, is fairly balanced and should not suffer at a greater rate than the overall economy. · Downtown Redevelopment. Downtown Clearwater has seen improvement based on private investment and publiC leadership. More restaurants and shops are open downtown and along Cleveland St. than in the past decade. · Established CVB. St Petersburg and Clearwater have a well established Convention and Visitors Bureau. This will speed up the time that the bureau can begin to market the center to users. Weaknesses . Lack of Additional Hotel Stock Downtown. While the Residence Inn recently opened downtown and has been successful, there are virtually no other hotels that could be used as part of necessary room blocks for the convention center I I I I I I I I I I I I I I I I I I I hunden strategic partners destination development consulting downtown. This is mitigated by the fact that groups generally do not mind being blocked into beach hotels. If the recommended hotel (below) is built and the proposed hotel/cultural development on the current Harborview site (180 rooms) opens, the total quality room count downtown would be 645 rooms. Over time, the city should target a quality mix of hotels totaling 800 - 1,000 rooms. · Tourism Focused CVB. The current regional CVB has a strong focus on tourism over meetings business, due to the fact that the area does not have a traditional high-quality convention center. Clearwater is a top-ranked leisure destination, but would need an adequate facility to attract more group business. Opportunities · The Group Market in the Area is Stable. The market for meetings and events continues to grow with the business community and the regional population, as well as with the national economy. Even when economic times are difficult, group business is less affected and so can offer a stabilizing effect on the hotel and convention facility, when compared with corporate business. · Religious Market. Clearwater and Florida are already popular with religious conventions and this would be enhanced with a larger, better facility. The lack of hotels does not impact these groups as much as others. · Overflow from Tampa. Tampa's convention center is very busy and may provide spin-off or overflow business to a facility in Clearwater. · Unaccommodated demand downtown. Except for the newly-opened Residence Inn, there are no other hotels downtown and the demand downtown at the Residence Inn has been impressive, suggesting additional demand for other hotels that could be developed. · Lack of Function Space to Support Hotels. The existing hotels in the Clearwater have limited function space. By developing a convention center and full-service hotel with function space, it will induce new demand to the market, which should put positive demand pressure on existing properties and provide balance to the hotel market. Threats · U.S. Economy and Declining Demand. The U.S. economy has been experiencing a recession, which has hurt demand for convention centers and hotels. However, by the time such a facility opens, the economy will likely have rebounded. Evidence exists that the recession may have ended in the third quarter of 2009. Caution and Opportunity What are the costs and benefits of a convention center? The convention center industry is competitive and requires investment. Convention centers as a general rule do not generate a significant profit and often do not even generate positive cash flow to pay debt service. The benefits from such centers include improving the local economy through additional visitation, new jobs, new businesses, spending at restaurants, stores and hotels Clearwater Convention Center Feasibility Study Chapter 1 Page 11 hunden strategic partners destination development consultmQ and the actualization of a live-work-play reality in an urban area. The amenities and assets that are developed to primarily service convention attendees also serve the local population and create an inviting, attractive place to live and recreate. By only developing a convention center without the proper support amenities, the City is not likely to be successful in attracting business and it is not likely to generate the benefits such a facility can provide. Convention Center Demand. Financial Projection. The following shows the operations at the recommended Clearwater Convention Center (CCC) assuming the recommended hotel is constructed and an easily visible and accessible site is chosen. It also assumes that a CVB provide more resources in terms of convention sales and then markets the facility at levels comparable to other convention centers of this size. Pre-marketing for meetings and conventions should take place immediately upon financing of the project. The following table shows the events by type projected for the CCC. It is assumed the facility opens in January 2014, simultaneous with the hotel. Table 1-4 Clearwater Convention Center Event Demand Summary Event Type Vear1 Vear 2 Vear3 Vear4 VearS Vear 6 Vear 7 Vear8 Vear 9 Vear10 Exhibit Events Conventions and Trade Shows 6 8 12 16 19 19 19 19 19 19 Consumer Shows 12 15 15 17 19 19 19 19 19 19 Sports/Entertalnment Events 9 13 16 18 22 22 22 22 22 22 Sub-total Exhlbn Hall 27 36 43 51 60 60 60 60 60 60 Non-exhibit Corporate Events and Conferences 11 13 16 19 23 23 23 23 23 23 Banquets 99 109 120 132 145 145 145 145 145 145 Meetings Room Events 165 180 196 214 233 233 233 233 233 233 Sub-total Non-Exhlbn 275 302 332 364 401 401 401 401 401 401 Total 302 338 374 418 460 460 480 460 460 460 Exhibit Hall Occupancy 23% 31% 34% 41% 49% 49% 49% 49% 49% 49% Meeting & Ballroom Occupancy 33% 39% 44% 50% 67% 57% 67% 57% 57% 67% Source: HSP It is projected that the number of events will increase from 302 in 2014 to 460 by stabilization in the fifth year. The number of stabilized events will be dominated by ballroom and meeting room events, however, a number of large, high-impact events are projected, including 19, conventions and tradeshows, 19 consumer shows, and 22 sporting or entertainment events using the exhibit hall annually. Occupancy at stabilization for the exhibit hall is projected to be 49 percent and meeting and ballroom occupancy is projected to be 57 percent. These numbers are favorable, as the maximum practical occupancy for exhibit halls typically does not exceed 70 percent due to move-in/move-out days and holidays. The next table shows the number of attendees projected in the first ten years. Clearwater Convention Center Feasibility Study Chapter 1 Page 12 I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I h u n den 5 tra te gi cpa rtn e rs destmation development wnw/tmg Table 1-5 Projected Attendance Event Type 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Conventions and Trade Shows 8,600 13,200 17,200 22,900 28,600 28,600 28,600 28,600 28,600 28,600 Consumer Shows 56,700 70,100 70,100 80,100 88,400 88,400 88,400 88,400 88,400 88,400 SportslEntertainment Events 19,200 24,000 26,400 28,800 36,000 36,000 36,000 36,000 36,000 36,000 Corporate Events and Conferences 8,000 9,100 13,200 14,300 16,000 16,000 16,000 16,000 16,000 16,000 Banquets 41,600 45,800 50,300 54,800 60,100 60,100 60,100 60,100 60,100 60,100 Meetings Room Events 53 800 58100 63 300 68 600 75 000 75 000 75 000 75 000 75 000 75 000 Total All Events 187 900 220 300 240 500 269 500 304 100 304 100 304 100 304 100 304 100 304 100 Source: HSP A total of 187,900 attendees are projected in the first year, increasing to approximately 304,100 by 2018. It is those attending exhibit hall events that generally create economic impact via overnight hotel stays and spending in restaurants, however the ballroom events create the most revenue internally (except for consumer shows). A healthy balance of utilization across room types and events keeps the building the most viable. The next table shows the projected number of room nights generated by the facility. The year 2018 is projected to be the stabilized year for demand. Table 1-5 Attendee & Exhibitor Room Nights Generated 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Exhibit Hall Events Conventions and Trade Shows Attendees 6,210 10,460 12,410 14,890 22,750 22,750 22,750 22,750 22,750 22,750 Exhibitors 3230 5500 6650 8290 11550 11550 11550 11550 11550 11550 Conventions and Trade Shows 9,440 15,960 19,060 23,180 34,300 34,300 34,300 34,300 34,300 34,300 Consumer Shows Attendees 30 40 40 40 40 40 40 40 40 40 Exhibitors 5440 6720 6720 7680 8480 8480 8480 8480 8480 8480 Consumer Shows 5,470 6,760 6,760 7,720 8,520 8,520 8,520 8,520 8,520 8,520 Corporate Events and Conferences Attendees 1,800 2,060 2,600 3,220 3,600 3,600 3,600 3,600 3,600 3,600 Exhibitors 460 510 830 830 880 880 880 880 880 880 Corporate Events and Conferences 2,260 2,570 3,430 4,050 4,480 4,480 4,480 4,480 4,480 4,480 Sports/Entertainment Events Attendees 6,600 4,700 3,900 2,800 5,300 5,300 5,300 5,300 5,300 5,300 Subtotal 6600 4700 3,900 2800 5300 5300 5300 5300 5300 5300 Sub-total Exhibit Hall 23,770 29,990 33,150 37.750 52,600 52,600 52,600 52,600 52,600 52,600 Non-Exhibit Banquets 840 930 1,020 1,110 1,220 1,220 1,220 1,220 1,220 1,220 Meetings Room Events 860 930 1010 1 100 1200 1200 1200 1200 1200 1200 Sub-total Non-Exhibit 1700 1860 2030 2210 2420 2420 2420 2420 2420 2420 Total 25 470 31 850 35 180 39 960 55020 55 020 55 020 55.020 55.020 55 020 Source: HSP Clearwater Convention Center Feasibility Study Chapter 1 Page 13 I hunden strategic partners destination development consulting I Hotel room nights are generated primarily by out-of-town visitors in Clearwater for larger events, such as conventions, large corporate gatherings, and the exhibitors serving all events. The number of hotel room nights generated by the CCC is projected to be nearly 25,500 in the first year and should increase to more than 55,000 by 2018. These are the primary drivers of economic impact to the community. This does not include room nights generated by the adjacent hotel by events it host on its own. I I The following table presents the projected operating statement for the facility's first ten years of operation. The projection uses inflated dollars and accrual-based accounting, wherein revenues are recognized when they are earned and expenses are recognized when they are incurred. Revenues include all revenues of the facility that can be used for operations. All revenues and expenses are inflated at a three percent annual rate. I I T.ble 1-6 I Pro Forma Operating Statement of Revenue and Expenses ($OOO's. Inflated) 2014 2016 2018 2017 2018 2018 2020 2021 2022 2023 Revenue Event Revenue Space Rental $518 $651 $765 $916 $1,088 $1,116 $1,143 $1,172 $1,201 $1,231 Equipment Rental 56 70 82 99 117 120 123 126 129 133 Gross Food & Beverage 3,103 3,609 4,186 4,788 5,487 5,624 5,764 5,909 6,056 6,208 Less costs ell 65% 2,017 2,346 2,721 3,112 3,566 3,655 3,747 3,841 3,937 4,035 Net Food and Beverage 1,086 1,263 1,465 1,676 1,920 1,968 2,018 2,088 2,120 2,173 Event Services Income 290 363 416 500 588 803 618 834 649 686 Sub-total $1,949 $2,347 $2,729 $3,190 $3,714 $3,807 $3,902 $4,000 $4,100 $4,202 Other Revenue Advertising and Sponsorships 200 206 212 219 225 232 239 246 253 261 Sub-total $200 $208 $212 $219 $225 $232 $239 $246 $253 $281 Total Operating Revenue $3,887 $4,883 $6,460 $8,302 $7,281 $7,483 $7,848 $7,840 $8,038 $8,237 Expenses Food and Beverage $2,017 $2,346 $2,721 $3,112 $3,568 $3,655 $3,747 $3,841 $3,937 $4,035 Salaries and Wages $801 $825 $850 $875 $902 $929 $958 $985 $1,015 $1,045 Employee Benefits 246 258 263 271 279 288 296 305 315 324 Passthrough Labor 83 108 125 154 184 189 193 196 203 208 Maintanance & Repairs 16 26 45 54 65 66 68 71 73 75 Cleaning 45 56 64 76 90 93 96 99 102 105 Utilities 295 313 327 347 371 375 380 385 390 395 Sales and Marketing 125 129 117 120 124 128 131 135 139 144 General and Administrative 246 255 283 270 279 287 296 304 314 323 Insurance 135 139 143 148 152 157 161 168 171 176 Other Operating Expenses 62 68 68 72 76 78 80 82 84 B6 Management Fee 250 258 265 273 281 290 299 307 317 328 Reserve For Replacement 101 120 139 162 188 192 197 202 207 212 Total Expenses $4,426 $4,886 $6,382 $8,83& $8,&68 $8,728 $8,801 $7,080 $7 ,286 $7,464 Net Operating Income ($4681 ($2021 $68 $388 $726 $738 $748 $780 $772 $783 Source: HSP I I I I I I It is projected that in the first year of operation, the convention center will generate revenues of nearly $4 million and incur approximately $4.4 million in operating expenses, leaving a deficit of $458,000. Once the building stabilizes after marketing and long-term bookings occur, it is expected that 2018 revenue will be $7.3 million and $6.6 million in expense, leading to a small profit. I I Forecast of Hotel Performance. I The following table summarizes the projected performance of the hotel. I Clearwater Convention Center Feasibility Study Chapter 1 Page 14 I I I I I I I I I I I I I I I I I I I I I h un den 5 tra te gi cpa rt n e rs destmation development consultmg Table 1-5 Performance Projections Year Average Daily Occupancy Revenue per Annual Rate Available Room Increase 2014 $181 55% $100 2015 $185 59% $109 8.9% 2016 $190 68% $130 19.0% 2017 $196 72% $140 8.0% 2018 $202 72% $144 3.0% 2019 $208 72% $149 3.0% 2020 $214 72% $153 3.0% 2021 $220 72% $158 3.0% 2022 $227 72% $162 3.0% 2023 $234 72% $167 3.0% Source: HSP The hotel is projected to achieve a $181 average rate in its first year with occupancy of 55 percent. At stabilization the average rate and occupancy are expected to be $196 and 72 percent, respectively. Revenue per available room is projected to be $100 in 2014 and increase to $140 by 2017. Understanding how the hotel will perform internally is as important to the feasibility as the external occupancy and rate projections. The financial projections are presented in the following table. PAR stands for 'per available room' and POR stands for 'per occupied room night. ' Clearwater Convention Center Feasibility Study Chapter 1 Page 15 I h u nden strategic pa rtners destination development consulting I Projection of Income & Expense: 350-Room Downtown Clearwater Convention Hotel - (in $000, inflated) Year 1 I Year 2 . Year 3 Year 4 I Year 5 I Year 10 Room Count 350 l 350 350' 350 350 350 Available Room Nights 127,750 127,750 127,750 127,750 127,750 127,750 Occupancy Rates 55% 59% 68'1 68% 68% 68% Occupied Room Nights 70,757 75,329 87,149 87,149 87,149 87,149 Average Daily Rate $181 $181 $185 $190 $196 $227 RevPAR $100 $107 $126 $130 $133 $155 Percent of Change from Prior Year - 6.5% 18.4%1 2.9% 2.8% 3.0% Valet Rate/Day, gross $9.00 $9.00 $9.001 $9.50 $9.50 $12.00 Room Nights Using Valet 28% 28% 28o/d 28% 28% 28% Overnight Parkers 19,812 I 21,092 24,4021 24,402 24,402 24,402 $ % PAR POR $ $ I $ $ % REVENUE 57,9%1 Rooms $12,787 58.5% $ 36,535 $ 180.72 $13,613 "'''' I $16,580 $17,050 $19,766 Hotel Food and Beverage 6,536 29.9% $ 18,673 $ 92.37 7,028 8,405 8,734 8,982 30.5%' 10,412 Telephone 219 1.0% $ 625 $ 3.09 234 277 266 294 1.0O/} 341 . Other Operated Departments 1,005 4.6'/" $ 2,873 $ 14.2~1 1,074 1'2761 1,317 1,355 4.6'/" 1,570 Parking & Transportation 219 1.0% 627 234 277 286 294 1.0%' 341 Rentals and Other Income 1,093 5.0"/" $ 3,123 $ 15.45 1,168 1,387 1,432 1,472 5.00/0~ 1,763 Total Revenue $21,859 loo.O"/" $ 62,454 $ 308.93 $23,350 $27.7411 $28,636 $29,448 1000"/"1 $34,194 DEPARTMENTAL EXPENSES Rooms $3,568 27.9% $ 10,193 $ 50.42 $3,526 $4,029 $4,145 $4,263 250"/"1 $4,942 Hotel Food and Beverage 5,098 78.0% $ 14,565 $ 72.05 5,412 6,472 6,638 6,826 76.0"/"1 7,913 Telephone 236 108.0% $ 674 $ 3.34 252 300 309 318 108.0%, 369 Other Operated Departments 45 4.5% $ 129 $ 0.64 38 45 46 47 3.5% 55 Parking & Transportation 59 22.0% $ 169 $ 0.84 51 55 57 59 I 68 20'O%l Rent and Other Income 86 6.0"/" $ 187 $ 0.93 58 69 72 74 5.0% 88 Total Departmental Expenses $9,072 41.5% $ 25,919 $ 128.21 $9,337 $10,971 $11,267 $11,587 39.3%\ $13,435 Gross Operating Income $12,788 58.5% $ 36,536 $ 180.72 $14,013 $16,770 $17,369 $17,861 60.7%' $20,760 UNDISTRIBUTED OPERATING EXPENSES ! Administrative and General $1,902 8.7% $ 5,434 $ 26.88 $1,915 $2,136 $2,176 $2,238 7.6%, $2,599 Marketing $1,683 7.7% $ 4,809 $ 23.79 $1,681 $1,914 $1,947 $2,002 6.80/0 $2,325 Utility Costs $1,159 5.3% $ 3,310 $ 16.37 $1,121 $1,248 $1,289 $1,325 4.5%' $1,539 Property Operations and Maintenance $1,137 5.2% $ 3,248 $ 16.06 $1,097 $1,221 $1,260 $1,296 4.4%' $1,505 Total Undistributed Expenses $5,880 26.9% $ 16,800 $ 83.10 $5,814 $6,519 $6,672 $6,861 23.3%' $7,967 Gross Operating Pront $6,907 31.6% $ 19,736 $ 97.62 $8,199 $10,251 $10,697 $11,000 37.4%' $12,792 FIXED EXPENSES I Property Taxes $984 4.5% $ 2,810 $ 13.90 $1,051 $1,248 $1,289 $1,325 4.5%1 $1,539 Insurance 350 1.6% $ 999 $ 4.94 350 388 401 412 1.4%, 479 Management Fee 874 4.0"/" $ 2,498 $ 12.36 934 1,110 1,145 1,178 4.0% 1,368 Reserve for Replacement $437 2.0"/" $ 1,249 $ 6.18 $701 $1,387 $1,432 $1,472 5.0%1 $1,710 Total Fixed Expenses $2,645 12.1% $ 7,557 $ 37.381 $3,0361 $4'1331 $4,267 ~ $4,388 14.9%~ $5,095 Cash Flow from Operations $4,263 19.5% $ 12,179 $ 60.24 $5,163 $6,118 $6,430 $6,612 ! $7,697 22.5% Source: HSP Table 1-6 I I I I I I I I I I I I The property is projected to generate a total of $21.9 million in gross revenue in its first year, consisting of $12.8 million in rooms revenue and $7 million in food and beverage revenue. After direct and indirect expenses are accounted for, net operating income available to repay debt and equity requirements is projected to be $4.3 million, or 20 percent of revenue. As the hotel gains occupancy, the net operating income is projected to increase to $6.6 million by the fourth year. I I Conclusion. After analyzing the various factors of supply, demand, location and destination appeal, HSP believes that a new, high-quality convention facility and hotel I Clearwater Convention Center Feasibility Study Chapter 1 Page 16 I I I I I I I I I I I I I I I I I I I I I hunden strategic partners package can perform well in downtown. We do not believe that a beach location is the highest and best use of such land and could be prohibitively expensive relative to other locations. Downtown has developed as a high-quality submarket and a convention center and hotel will help build upon that trend. A new hotel has recently opened and another is proposed for the current Harborview site. These will support a hotel package if a larger convention hotel is also built. While the current facility is a poor quality center, it generates $2 million in annual revenue and hosts hundreds of events each year. A better facility with a better package will build on this base of business and offer a value alternative to the perennially busy Tampa Convention Center. Based on our interviews, the facility should be able to attract a wide variety of event types, from religious conventions to consumer and trade shows, as well as many locally-based events. Higher rated medical, pharmaceutical and high-tech events are not expected as often, although they too could be accommodated. Overall, HSP recommends the City pursue the next steps of analysis, which include additional programming and cost analysis, site analysis and financing plans. Clearwater Convention Center Feasibility Study Chapter 1 Page 17 hu nden strategic partners destinatIon development consulting I I I I I I I GENERAL MARKET AREA ANALYSIS Local market area characteristics influence the demand potential for convention centers, hotels and related developments. This section profiles the city and metropolitan area and characteristics of the area that would affect the proposed convention center and hotel, including an overview of the economic characteristics of the market. Overview The City of Clearwater, Florida is part of the Tampa-St. Petersburg-Clearwater Metropolitan Statistical Area (MSA) located in central western Florida. The local MSA includes the Florida counties of Hernando, Hillsborough, Manatee, Pasco, Sarasota and Pinellas, where Clearwater is located. The City of Clearwater is located in Pinellas County. The Tampa-St. Pete-Clearwater MSA ranked 19th in size in the U.S. with a 2007 population of 2,723,949. The following figure shows Clearwater on a state map of Florida. . Daytona Beach I I I I Figure 2-1 CLEARWATER AND FLORIDA REGION Mobile . o Pensacola . Panama City Tallaru:ssee ~ . Jacksonville " . Gainsville ~ Orlando. ,'- eJ .' I I I' I I I I I ''Cf~-~t"-.~ V ....-.~a.~.s- ~~~~, Tampa \).~ ~ st Petersburg Fort · Myers . . Naples West Palm ., Beach . Miami r;/;1';/!i!E:Jii~.~~ Brief History Before the arrival of European settlers, the Clearwater area was home to the Tocobaga people, a Native American tribe primarily located in the middle Gulf Coast of Florida. In the Clearwater Convention Center Feasibility Study Chapter 2 Page 1 I I I I I I I I I I I I I I I I I I I hunden strategic partners mid to late 1830's, the U.S. Army built Fort Harrison as an outpost during the Seminole Wars. Fort Harrison was located on a bluff overlooking Clearwater Harbor in an area now known as Harbor Oaks. After the Federal Armed Occupation Act of 1842 (which offered 160 acres to anyone who would bear arms and cultivate the land), the Clearwater area began to grow in population. Clearwater was incorporated as a town in 1891. The city began to grow as a tourist destination when the Belleview Biltmore was constructed in 1897. During World War II, Clearwater became a major training base for u.s. troops, who also were housed at the Biltmore, this contributed to the strong population growth of Clearwater. Regional Access Clearwater, Florida is located adjacent to the major metropolitan cities of Tampa and St. Petersburg on west coast of Florida. Interstate 75, a major north-south corridor connecting Michigan to Florida, runs through Tampa, and the 1-275 spur travels from Tampa to St. Petersburg, approximately ten miles south of Clearwater. Highway 60 is of major importance for those traveling to downtown Clearwater from across Tampa Bay. The junction of Highway 60 and 1-275 is adjacent to the Tampa International Airport. Interstate 4, the major highway that connects the east and west coasts of Florida, terminates in Tampa approximately 25 miles east of Clearwater. The major highway that serves the city is State Highway 19, which runs north from St. Petersburg along the west side of Tampa Bay. Clearwater is approximately twenty miles west of Tampa and twenty miles north of St. Petersburg. The W. Courtney Campbell Causeway is a 9.9-mile bridge across Tampa Bay that links the Clearwater area with Tampa. First completed in 1934, the causeway has provided access between the two areas for more than seventy-five years. The road continues on as a major east-west artery through Clearwater and linking it to Clearwater Beach over the Clearwater Memorial Causeway. The following figure shows a map of much of the MSA. Clearwater Convention Center Feasibility Study Chapter 2 Page 2 h u n den 5 t rat e gi cpa rt n e rs destination development consulting Airport Access The region's major airport is the Tampa International Airport (TPA), twenty miles east of Clearwater at the eastern end of the W. Courtney Campbell Causeway. In 2008 TPA processed 18,262,934 passengers, making it the 26th busiest North American airport. The present terminal was opened in 1971, and was the first airport terminal to have the innovation of building a central "Landside Terminal" for ticketing and baggage claim, with Clearwater Convention Center Feasibility Study Chapter 2 Page 3 I I I I I I I I I I I I I I I I I I I I I I I I I I hunden strategic partners smaller "Airside Terminals" housing the individual gates. The Airside Terminals radiate out from Landside along arms that use people-mover monorails. Presently the airport serves 68 non-stop destinations by every major domestic carrier and several international carriers. A second airport, the St. Petersburg-Clearwater International Airport (PIE) also serves Clearwater and the region. The airport is on the west side of Tampa Bay, ten miles south of Clearwater and ten miles north of St. Petersburg. A smaller airport that has one major carrier and several charter flights, PIE had 742,380 passengers in 2008, slightly fewer than the 747,369 in 2007 but up substantially from previous years. The major airline that uses PIE is Allegiant Air, a regional carrier that has service to eighteen smaller cities in the Midwest and South. The airport is also popular with executive jets and private planes. Public Transportation I I I I The Pinellas Suncoast Transit Authority offers bus service in Clearwater and Pinellas County. A beach trolley runs along the barrier islands, including Clearwater Beach. Presently Clearwater has no other public transit system. Population A strong population base is important to the success of a full-service hotel and other cultural uses because a share of its users will be local businesses and residents, especially regarding amenities such as restaurants and function space. The following table shows the population characteristics of the state, MSA, County and City. Table 2-1 Clearwater, Florida MSA, and State Population and Growth Rates I I I I I I I I Population Percent Change 1990 2000 2007 2000-2007 United States 248,709,873 281,421,906 299,389,484 6.0% State of Florida 12,937,926 15,982,813 18,361,189 13.0% Tampa-St. Pete-Clearwater MSA 2,067,959 2,395,997 2,715,273 11.8% Pinellas County 851,659 921,482 914,444 -0.8% City of Clearwater 96,886 108,787 106,642 -2.0% City Pop. As % of MSA 4.7% 4.5% 3.9% Source: U.S. Census Bureau, HSP The State of Florida experienced strong population growth from 1990 to 2007, increasing by 42 percent (more than five million residents), more than double the rate of the nation as a whole. It increased 13 percent in the past seven years. The metropolitan area population increased at a slightly slower rate, but still very healthy at 11.8 percent in the past seven years. Pinellas County decreased in population by 0.8 percent in the past seven years, though, since 1990 it added approximately 63,000 citizens. The city of Clearwater increased Clearwater Convention Center Feasibility Study Chapter 2 Page 4 I I I I I I I h u n den s t ra t e gi cpa rt n e rs destination development consulting significantly from 1990 to 2000, but then has since decreased in population slightly, which has been seen in many Florida cities as well. Diversified Economy A healthy and diversified economy provides not only employment and disposable income for a market's residents, but it also helps to insulate an area from economic downturns. Markets that have historically relied on one sector have often had difficulty recovering from market shifts to other sectors, which lead to an overall loss of local income and employment. This situation will often lead to declining population trends, as has been the case in many industrial cities, as residents move to other areas with better opportunities. However, this is not the case for the Tampa-St. Pete-Clearwater MSA. The following figure shows the diversification of the Tampa-St. Pete-Clearwater MSA employment totals, as provided by the Bureau of Economic Analysis (BEA). Figure 2-3 Government I I I I Local Employment by Category in 2007 100% 90% 70% 60% 50% 30% 20% 10% Tampa-St. Pete-Clearwater MSA Source: BEA Clearwater Convention Center Feasibility Study Other Services . leisure and Hospitality Educational and Health Services . Professional and Business Services . Financial Activities I I I I I I I I . Information Retail Trade Wholesale Trade . Manufacturing . Natural Resources, Mining & Construction Chapter 2 Page 5 I I I I I I I I I I I I I I I I I I I hunden strategic partners ~ r As shown, employment in the Tampa-St. Pete-Clearwater Metropolitan Statistical Area has several large components: Government, Professional and Business Services, Retail, Educational and Health Services, Financial Activities, and Leisure and Hospitality. The area is not dominated by one particular industry or sector, insulating from severe shocks relative to other areas. Educational Attainment In terms of educational attainment, 23.9 percent have a bachelor's degree or higher compared to the State of Florida, which has a rate of 22.3 percent. This level of education provides the local workforce with a wealth of opportunity and as such, the local population is more educated than most other communities in the U.S. The national average of people with a bachelor's degree or higher is 24.4 percent. Clearwater's figures are just slightly below the national average but that leaves the city comparable to other larger metropolitan areas. Income and Employment The depth and strength of a market's employment base and income levels is a strong indicator of its potential ability to support a full-service hotel. In general, higher income levels indicate a high quality base of employers, which create demand generators for meeting space and hotel room nights via corporate transient and group visitors. Markets with more wealth also tend to be attractive regionally and nationally for events as such populations are more likely to support various events that would use a hotel. In addition, an educated and wealthier community is more likely able to have the public resources to provide meeting facility amenities. Less wealthy markets will have less disposable income available to spend on special events, for example, and would generally be expected to provide a lower level of attendee demand. Indicators of a market's overall wealth and growth can include trends in its income and employment. The following table summarizes the historical growth in income and employment in the Tampa-St. Pete-Clearwater MSA from 2000 through 2007, based on the latest data provided by the Bureau of Economic Analysis. Clearwater Convention Center Feasibility Study Chapter 2 Page 6 I hunden strategic partners destination developmentconsulttn9 I Table 2-2 Tampa-St. Pete-Clearwater MSA Income and Employment I Year Non-Farm Income Non-Farm Employment Incomel $ (OOOs) % Change Employed % Change Employed % Change 2000 $68,696,964 -- 1,454,420 - $47,233 - 2001 $71,489,600 4.1% 1,478,580 1.6% $48,350 2.4% 2002 $73,921,869 3.4% 1,489,889 0.8% $49,616 2.6% 2003 $76,277,474 3.2% 1,471,724 -1.2% $51,829 4.5% 2004 $82,310,316 7.9% 1,527,621 3.7% $53,881 4.0% 2005 $88,427,372 7.4% 1,568,763 2.6% $56,368 4.6% 2006 $95,127,658 7.6% 1,606,453 2.3% $59,216 5.1% 2007 $99,044,274 4.1% 1,627,188 1.3% $60,868 2.8% I I I Source: Bureau of Economic Analysis, HSP I While the rate of growth has varied, each year since 2000 has shown an increase in income. Non-farm employment increased in every year except 2003. Income per employed person has increased at rates higher than inflation, suggesting an improving economic situation for the populace through 2007. I Unemployment I The following figure shows the unemployment rate in the local MSA in comparison to the national rate for 1990 through 2009. I Figure 2-4 I Tampa-St. PeteoClearwater MSA Unemployment Y5. u.s. 12.0 8.0 I 10.0 6.0 I 4.0 I 2.0 0.0 ~ 0/ 0/ 0/ ~ ~ * ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~########~~~~ I - US Unemployment Rate - MSA Unemployment Rate Source: Bureau of Labor Statistics, HSP I I Clearwater Convention Center Feasibility Study Chapter 2 Page 7 I I I I I I I I I I I I I I I I I I I I I hunden strategic partners The unemployment rate for the Clearwater area was below the average for the entire country from 1995 through 2008. The seasonal range of unemployment has generally oscillated between one and two percent throughout each year, largely due to the college student population as well as its place as a spring break destination. Recently, the area's unemployment rate exceeded the national average by approximately two percentage points. Florida has been hard hit by the recent recession due to a strong contraction in housing prices and credit/foreclosure issues. This has led to its strongest spike in unemployment in recent history. Income Residents' effective buying income helps to demonstrate the amount of disposable income that is available locally. Effective Buying Income is income less personal tax and non-tax payments, a number often referred to as "disposable" or "after-tax" income. Considered a bulk measurement of market potential, EBI indicates the ability to buy, and is essential for selecting, comparing, and grouping markets. Markets with higher EBI are important for hotels because the local population often attends and/or hosts events in function spaces, eats in hotel restaurants, and have outside functions catered by hotels or served by convention facilities. They also may participate in putting up friends and families in hotel rooms when visiting. Effective Buying Income data is shown in the following table. Effective Buying Income (EBI) 2008 Tampa, St. Pete, State of Florida United States Clearwater MSA Total EBI (ODDs) $59,659,975 $85,068,373 $6,300,794,040 Median Household EBI $39,043 - $41,792 % of Households by EBI Group $20,000 - $34,999 23.3% 23.9% 24.5% $35,000 - $49,999 19.3% 18.2% 20.0% $50,000 & Over 36.8% 26.1% 30.5% Source: Nielson Company, HSP Table 2-3 As the table shows, the Tampa-St. Pete-Clearwater MSA had a total effective buying income of $59.6 billion and a median household EBI of $39,000 in 2008. This median EBI is slightly lower than the United States median. The number of households with an EBI over $50,000 is 36.8 percent, compared with 26.1 percent in Florida 30.5 percent nationally. The following table ranks U.S. metropolitan areas in terms of their Effective Buying Income. Clearwater Convention Center Feasibility Study Chapter 2 Page 8 hunden strategic partners I I I I I I I Table 2-4 Total Effective Buying Income for 2008 (Ranked by MSA) Median Household Core Based Statistical Area Total EBI Rank EBI Rank New York et ai, NY-NJ-PA $462,073,803 1 $47,753 46 Los Angeles-Long Beach-Santa Ana, CA $280,261,545 2 $46,933 57 Chicago-Naperville-Joliet, IL-IN-WI $216,267,575 3 $47,561 48 Washington-Arlington-Alexandria, DC-V A-MD-\NV $163,650,743 4 $62,107 3 Philadelphia-Camden-Wilmington, P A-NJ-DE-MD $136,677 ,208 5 $46,900 58 Dallas-Fort Worth-Arlington, TX $135,942,453 6 $46,024 73 San Francisco-Oakland-Fremont, CA $127,289,753 7 $58,598 7 Miami-Fort Lauderdale-Pompano Beach, FL $121,422,215 8 $41,254 165 Boston-Cambridge-Quincy, MA-N H $119,927,293 9 $52,447 22 Houston-Sugar Land-Baytown, TX $118,183,845 10 $44,226 94 Atlanta-Sandy Springs-Marietta, GA $117,732,368 11 $46,844 60 Detroit-Warren-Livonia, MI $97,310,258 12 $44,336 92 Phoenix-Mesa-Scottsdale, AZ $89,627,233 13 $44,940 80 Seattle- Tacoma-Bellevue, WA $85,314,538 14 $50,315 30 Minneapolis-S1. Paul-Bloomington, MN-Wl $79,524,268 15 $50,977 26 Riverside-San Bernardino-Ontario, CA $72,086,885 16 $44,809 82 San Diego-Carlsbad-San Marcos, CA $71,339,303 17 $50,024 32 Baltimore-Towson, MD $67,172,325 18 $50,260 31 S1. Louis, MO-IL $59,887,510 19 $42,574 137 Tampa-S1. Petersburg-Clearwater, FL $59,659,975 20 $39,043 271 Source: Nielson Company, HSP I I I I I I I I I I I I As the table shows, the Tampa-St. Pete-Clearwater MSA had a total household EBI of nearly $60 billion, ranking it 20th overall among metropolitan areas. However, the area's median household EBI is 7.14 percent lower than the national average, ranking the MSA 271st amongst other U.S. cities. Corporate Presence In general, a market's corporations will provide event demand for hotels and cultural facilities via individual corporate transient travel, group training, new product launches, off- site meetings, banquets, and other events. Table 2-5 shows the largest employers in Pinellas County, by number of full-time employees. Clearwater Convention Center Feasibility Study Chapter 2 Page 9 I I I I I I I hunden strategic partners Table 2-5 I I I I Top Employers in Pinellas County (1,000+) Number of Employer Employees Industry Location Pinellas County School District 13,900 Government Largo Freedom Village 5,000 Health Care Pinellas Park Home Shopping Network 4,000 Retail Business St. Petersburg Fidelity 4,000 Insurance St. Petersburg Pinellas County Government 4,000 Government Clearwater City of St. Petersburg 3,500 Government St. Petersburg Mortan Plant Health System 3,300 Health Care Clearwater Raymond James 3,000 Financials St. Petersburg Barnett Recovery Systems 3,000 Financials Clearwater Pine lias County Sheriffs Office 2,800 Government Largo Nielsen Media Research, Inc. 2,669 Research Oldsmar Tech Data 2,500 Technology Clearwater Bayfront Medical Center 2,500 Health Care St. Petersburg Bay Pines VA Medical Center 2,330 Health Care Bay Pines All Children's Hospital 2,300 Health Care St. Petersburg Times Publishing Corporation 2,200 Publishing St. Petersburg Raytheon 2,200 Technology St. Petersburg Marine Max 2,000 Retail Business Clearwater Progress Energy 1,870 Energy St. Petersburg Special Data Processing 1,800 Technology Clearwater Honeywell, Inc. 1,800 Retail Business Clearwater Jabi Circuit Company 1,630 Technology St. Petersburg Western Reserve Life Assurance 1,500 Insurance St. Petersburg Valpak 1,500 Marketing St. Petersburg St. Anthony's Hospital 1,500 Health Care St. Petersburg Essilor of America 1,397 Manufacturing St. Petersburg Crum Resources 1,150 Insurance Clearwater Walgreen Company 1,150 Retail Business Various Locations Franklin Resources, Inc. 1,129 Financials St. Petersburg Danka Business Systems 1,000 Retail Business St. Petersburg Source: Pinellas County, Clearwater Regional Chamber of Commerce. HSP I I I Pinellas County School District with 13,900 employees located in Largo. The majority of largest employers are established in St. Petersburg which neighbors Clearwater. The largest employer in the City of Clearwater is Pinellas County Government with 4,000 employees followed by Morton Plant Hospital with nearly 2,500 employees. I I I I I Higher Education The presence of colleges, universities, and educational institutions can serve not only as a demand base for hotels, but also a source of event demand for hotel function space. The following table shows COlleges and universities in the Clearwater area. Clearwater Convention Center Feasibility Study Chapter 2 Page 10 hunden strategic partners Table 2-6 Clearwater Area Colleges & Universities Instituation University of South Florida St. Petersburg College Saint Leo University Pasco-Hernando Community College Hillsborough Community College Troy University University of Tampa Southwest Florida College Eckerd College Florida Metropolitan University Argosy University, Tampa Clearwater Christian College Stetson University College of Law Schiller International University Concord Career Institute Florida College International Academy of Design Source: Tampa Education Directory Location Tampa & St. Petersburg St. Petersburg Tampa Brookfield Tampa Tampa Tampa Tampa St. Petersburg Tampa & Clearwater Tampa Clearwater St. Petersburg Largo Tampa Temple Terrace Tampa Total Enrollment 34,000 20,000 12,000 8,000 4,300 2,000 2,000 1,700 1,500 900 660 600 600 471 433 400 100 I I I I I I I I I I I I I I The largest of the local universities and colleges is the University of South Florida (USF) with about 34,000 students.. There are campuses both in St. Petersburg and Tampa. Saint Leo University is the largest private university in the area with 12,000 students. Its main campus is located just north of Tampa. The university offers 24 bachelors degrees and two graduate degree programs. Pasco-Hernando Community College in Brookfield and Hillsborough Community College in Tampa enroll 8,000 and 4,300 students respectively for two-year degree programs. Clearwater Area Tourism Most tourist destinations have experienced declines in total visitors due to the recession. Since Clearwater is primarily a leisure market, it too has seen decline in number of visitors. The following table shows year to date (April) visitor counts for the St. Petersburg and Clearwater market. Clearwater Convention Center Feasibility Study I I I Chapter 2 Page 11 I I I I I I I I I I I I I I I I I I I I I hunden strategic partners 1 it Table 2-7 St. Petersburg/Clearwater Visitor Counts YTO (April) YTO (April) Visitor Origin Annual 2008 2008 2009 % Change Florida 549,604 105,630 114,076 8.0% Southeast 300,486 87,477 80,344 -8.2% Northeast 1,215,764 624,795 596,009 -4.6% Midwest 1,586,715 761,564 675,910 -11.2% Canada 349,934 202,882 178,028 -12.3% Europe 1,007,182 244,966 243,849 -0.5% Other US Markets 156,095 44,706 45,784 2.4% Latin America 28,200 5,300 6,270 18.3% Total 5,193,980 2,077 ,320 1,940,270 -6.6% Source: Research Data Services Inc. Travel from within the State of Florida is up eight percent in 2009 from the same period in 2008. The largest decrease in visitors occurred from the Midwest and Canada, while Latin American visitation increased. Overall, total visitation decreased 6.6 percent. The following table profiles some of the visitor characteristics of those visiting the area. Table 2-8 St. Petersburg/Clearwater Visitor Profile 2009 YTO 2008 (April) Length of Stay (Oays) Away From Home 9.0 9.1 In Florida 8.6 8.7 In St. Pete/Clearwater Area 6.0 5.9 Party Size Number of People 3.0 3.0 Party Composition Family 51.8% 53.1% Couple (traveling without Children) 43.7% 43.9% Single 3.7% 4.0% Source: Research Data Services Inc So far in 2009, visitors to the market spent six of their nine days away from home in the St. Petersburg/Clearwater market. The average size of traveling parties was three people. This is primarily due to families who find the area ideal for a family vacation. Families made up 53.2 percent of visitors in 2009, which is up more slightly from 2008. Couples without children accounted for 43.9 percent of visitors and four percent were singles. Clearwater Convention Center Feasibility Study Chapter 2 Page 12 Table 2-9 I I I I I I I hunden strategic partners The City of Clearwater and the area MSA have tourist destinations that are an important packaging opportunity for a convention center and hotel. The following table shows the area's top tourist attractions. Tampa-St. Pete-Clearwater MSA Top Tourist Attractions Sightseeina Locations Adventure Island Tampa Busch Gardens Tampa Bay Tampa Clearwater Marine Aquarium Clearwater The Florida Aquarium Tampa Florida Botanical Gardens Largo Heritage Village Largo J.B. Starkey's Flatwoods Adventures Odessa Lowry Park Zoo Tampa Moccasin Lake Nature Park Clearwater Sunsets at Pier 60 Clearwater Tarpon Springs Downtown Main Street Tarpon Springs Ybor City Nation Historic Landmark District Tampa Cultural American Stage Company S1. Petersburg Billlrie Early Bird Dinner Theater Clearwater Dunedin Fine Art Center Dunedin Florida Holocaust Memorial Museum S1. Petersburg Florida International Museum S1. Petersburg Francis Wilson Playhouse Clearwater Great Explorations Children's Museum S1. Petersburg Leppa-Rattner Museum of Art Tarpon Springs Mahaffey Theater S1. Petersburg Medieval Brass Rubbing Center & Museum Tarpon Springs Museum of Fine Arts S1. Petersburg Museum of Science and Industry Tampa Ruth Eckerd Hall Clearwater Safety Harbor Museum of Region History Safety Harbor Salvador Dali Museum S1. Petersburg Science Center of Pinellas County S1. Petersburg S1. Petersburg Museum of History S1. Petersburg Tampa Bay Performation Arts Center Tampa Tarpon Springs Cultural Museum Tarpon Springs Tarpon Springs Heritage Museum Tarpon Springs Ybor City State Museum Tampa Source: Clearwater Chamber of Congress I I I I I I I Clearwater Convention Center Feasibility Study Chapter 2 Page 13 I I I I I I I I I I I I hunden strategic partners Primary Area Visitor Demand Generators Demand generators are those community assets (whether ongoing or event-based) that generate hotel room nights for the community. The following is a discussion of some of the primary demand generators in Clearwater. Clearwater Beach - Clearwater is best known to the country and beyond for its beautiful beaches and water-based activities. It is characterized by its white beach sand, which stretches for 2.5 miles along the gulf. Clearwater beach and its many component pieces include as many as 69 properties that rent accommodations, as well as dozens of restaurants, shops and other supporting amenities. Clearwater Beach is located two miles from downtown Clearwater. I I I I I I I I I I I I Clearwater Marine Aquarium - brings visitors the opportunity to view and learn the biology and behavior of bottlenose dolphins, loggerhead sea turtles, Kemp's Ridley sea turtles, river otters, stingrays, local fish and coral reefs through daily shows and hands-on interaction. The aquarium is located two miles outside of downtown Clearwater. Adventure Island - is a 30-acre water park filled with water slides, a 17,000 square foot wave pool, a lazy river, volleyball courts and other attractions welcomes over 600,000 visitors annually. Adventure Island is the seventh most visited water park in North America. Located in Tampa, FL, the park is about 30 miles from downtown Clearwater. Busch Gardens Tampa Bay - is an adventure park offering an array of attractions based on exotic encounters with the African continent. The park includes rides, a premier zoo featuring more than 2,000 animals, live entertainment, restaurants, shops and games. Busch Gardens is the 11th most visited theme park in North American with over 4.3 million annual visitors. Busch Gardens Tampa Bay is approximately 30 miles from downtown Clearwater. Florida Botanical Gardens - located within the expansive Pinewood Cultural Park, the gardens are comprised of specialty and demonstration gardens, preserved wetlands, wildlife sanctuaries and other exhibits. The gardens are located in Largo, FL roughly six miles from downtown Clearwater. Salvador Dali Museum - the world's most comprehensive collection of the famed surrealist's work outside of Spain. The collection includes oil paintings, 200 watercolor paintings, drawings and graphics, as well as sculptures. The museum is located in downtown St. Petersburg, about 22 miles from Clearwater. Local Area Tourist Attractions Francis Wilson Playhouse - makes traditional theater available to the community and builds and enhances the community's cultural image by offering a season of eight main stage productions. About 14,000 people a year see shows in the 182-seat theater. Clearwater Convention Center Feasibility Study Chapter 2 Page 14 hunden strategic partners Moccasin Lake Nature Park - is a 51-acre environmental and energy education center with a lake, upland forest and wetlands, the park showcases most of the plant and aquatic animal species native to the area. Ruth Eckerd Hall - is one of North America's most successful performing arts facilities. It has been named one of the top five concert halls in the United States by a nation-wide industry poll. Ruth Eckerd presents more than 200 events annually. Sunsets at Pier 60 - is an ongoing "street" festival located on the promenade portion of Clearwater Beach's famous fishing pier, celebrating the setting of the sun and featuring artists, craftsmen and performers with weekend musical entertainment. Royalty Theater - Before closing in 2008 the city's only opera house was known for having some of the best acoustics in the southeastern part of the United States. The city, in cooperation with private stakeholders, is working to restore and renovate the theater. Local Area Professional Sports The Clearwater area is home to the National Football League's Tampa Bay Buccaneers, the National Hockey League's Tampa Bay Lightning, and the MLB Tampa Bay Rays, who play at Tropicana Field. Spring training sites for Major League Baseball teams include AI Lang Field in St. Petersburg, where the Tampa Bay Rays train; Bright House Networks Field in Clearwater, where the Philadelphia Phillies train; and Legends Field in Tampa, the training field of the New York Yankees. Minor league baseball teams in the area include the Clearwater Threshers, affiliated with the Philadelphia Phillies, and the Tampa Yankees, affiliated with the New York Yankees. Minor league teams are a good draw for regional tourism. The Clearwater Threshers play at Bright House Field located just outside of downtown Clearwater. The Church of Scientology The City of Clearwater is the spiritual headquarters of the Scientology religion. Scientologists from all 50 states in the U.S. and almost every country have visited Clearwater to gain spiritual training and education. According to a recent economic study of the area, Scientologists spend an estimated $96.7 million annually in direct purchases in Clearwater, which resulted in an additional $156.8 million in indirect spending. While the Church is fairly self-sufficient in terms of accommodations, its location downtown Clearwater is important to note, ironically, because while it generates significant visitor volume, it accommodates most of its own room nights in-house and so does not create material demand for hotels downtown. Meeting & Function Space An important factor in determining the benefit of a hotel with meeting space is to analyze the current conditions of function space in the area. Clearwater Convention Center Feasibility Study Chapter 2 Page 15 I I I I I I I I I I I I I I I I I I I I I hunden strategic partners I The following table shows several Clearwater area facilities that offer meeting and other function space. I Table 2-10 Clearwater Area Meeting & Function Space I Total Room Funcation Meeting Name Count Space Ballroom Space Exhibit Other Tampa Convention Center N/A 600,000 36,000 78,000 200,000 -- Harborview Convention Center N/A 55,650 17,250 8,400 30,000 -- Saddlebrook Tampa 540 51,157 19,882 7,769 -- 23,506 Tampa Marriott Waterside Hotel & Marina 719 50,000 17,169 32,831 - -- Innisbrook Resort & Golf Club 620 48,256 30,560 17,696 -- -- Renaissance Vinoy Resort & Golf Club 361 42,000 14,102 36,049 -- 8,151 Grand Hyatt Tampa Bay 445 41,691 13,240 28,541 -- - Belleview Biltmore Resort & Spa 226 40,000 20,700 18,820 -- 480 Hyatt Regency Clearwater Beach Resort & Spa 250 32,500 4,000 28,500 -- - Manatee Convention & Civic Center in Palmetto N/A 32,400 -- -- Hyatt Regency Tampa 521 30,000 14,540 10,528 -- 4,932 Sand pearl Resort 253 25,000 8,657 9,689 -- 6,654 SI. Petersburg Marriott Pinellas Park 197 22,146 10,566 9,780 -- 1,800 Hilton Clearwater Beach Resort 416 20,000 13,985 6,015 -- -- A La Carte Event Pavilion N/A 18,000 14,000 -- 3,258 The Don Cesar - A Loews Hotel 277 17,753 9,402 10,886 -- 2,908 InterContinental Tampa 323 17,000 5,046 8,454 -- 3,500 Embassy Suites Tampa - Downtown Convention Center 360 15,655 3,688 11,977 - -- Mainsail Suites Tampa Hotel & Conference Center 360 15,000 6,300 8,700 -- -- Renaissance Tampa Hotellntemational Plaza 293 12,500 7,883 4,617 -- -- Crowne Plaza Tampa Westshore 222 9,175 6,014 3,161 -- -- Clearwater Beach Marriott Suites on Sand Key 220 7,500 3,330 2,170 -- 2,000 The Grand Hotel Clearwater 148 6,000 2,520 3,360 -- 120 I I I I I I Source: Mpoint, HSP I I The Harborview Convention Center, a converted department store, is expected to be demolished, which would leave the city without a convention center if a new one is not built. The largest of the local facilities is the Tampa Convention Center with 600,000 square feet of space including 78,000 square feet of meeting space and 200,000 square feet of exhibit space. The list also includes many area hotels and resorts; the largest of them is the Saddlebrook with 540 guest rooms and 51,000 square feet of total function space. The Tampa Marriott Waterside Hotel and Marina is located across from the Tampa Convention Center and consists of 719 guest rooms and 50,000 square feet of function space. The Innisbrook Resort and Golf Club has approximately 48,000 square feet of function space and the Renaissance Vinoy Resort and Golf Club and the Grand Hyatt Tampa Bay each have approximately 42,000 square feet of function space. I I Discussion has surfaced about a potential new convention or conference center in the Westshore area within the city of Tampa near the Tampa International Airport. If the plan moves forward it could have an impact on the development of the new Convention Center proposed in this report. At the time that this report was released, no significant progress is known of the potential center in the Westshore district. I I I Clearwater Convention Center Feasibility Study Chapter 2 Page 16 I Clearwater Convention Center Feasibility Study Chapter 2 Page 17 I I I I I I I I I I I I I I I I I I I hunden strategic partners Market Area Conclusion Clearwater is located within a major center of economic activity and tourism in the southeast U.S. region. Within the metro area, there are three primary cities, including Tampa, St. Petersburg and Clearwater. The area is home to a number of major tourist attractions including some of the nations most visited theme parks. Its waterfront location on the Gulf Coast also makes it a destination for many travelers. In addition to theme parks and beaches, the area is also home to many cultural establishments including parks, museums and theaters. Population growth has been double the rate of the nation for many years and as such the region has become a large force in business, leisure and group activities. The existing Harborview Center is set to be demolished and other non-convention center proposals are suggested for that site, including a hotel-based project. As such, the County will be the most populous in the state without a convention center once that building is demolished. The area is large and growing and this combination of destination appeal, population base and climate support the concept of Clearwater as a convention center location. I I I I I I I I I I I I I I I I I I I hunden strategic partners CONVENTION AND MEETINGS INDUSTRY TRENDS This section provides a current overview of trends and developments that are impacting meeting and convention facilities as this will have an effect on any new facility. Conventions, exhibitions, and trade shows are conducted for the purposes of exchanging information, conducting business transactions, and for educational, cultural, and social enrichment. As developments occur in the larger economy, simultaneous developments occur in the meetings market, such as the growth of the tech sector generating growth in tech related meetings and events. Often, a single event will use many different types of spaces, including exhibit halls, banquet facilities, and breakout meeting rooms. Well-designed multi-purpose facilities offer the proportions of different types of spaces that are appropriate for their market. In addition, they offer the flexibility to host multiple events at one time. Different types of conventions and meetings have differing needs. The following table summarizes the key attributes of various types of meetings, including facility requirements. Table 3-1 Facility Types & Requirements for Various Event Types .<: ; j 0 II .. .. .<: .. .. III .. c c c ~ .. .. .. 0 0 .. .! > u .. II ~ll ;:l :0 w c VI c .<: E l!! '" '" .. ..- .. .. ::J E t! c C ::J >:e > .. .. .. .! ;:l i: IT C.<: c "0 C .. 0 c .. ii c Event TVDe ,~ .l1 ,~ ~ 0 .:! /J; 8 .. ~ .. 0 ~ m Attendance 150 - 50,000 150 -15,000 250 - 50,000 8,000 - 5,000 - 500 - 100,000 50 - 2,000 10 - 300 10 - 300 50 - 2,000 Range 1,000,000 50,000 Primary Info Info Advertising Info Info Info Social, Purpose Exchange & Exchange Sales & Sales Exchange Sports Exchange Exchange Training Business & Sales Charity Exhibit Arena. Halls, Ballroom, Arena or Ballroom, Facility Ballroom, Meeting Exhibit Exhibit Stadium or Meeting Meeting Meeting Requirements Meeting Rooms, Halls, Hotel Exhibit Halls Halls, Hotel Exhibit Rooms, Hotel Rooms, Hotel Rooms, Hotel Ballroom Rooms, Hotel Block Block Block Halls, Hotel Block Block Block Hotel Block Block Convention Convention Expo Expo Arenas or Arena, Convention! Convention! Convention! Convention! Typical Facility Center & Center & Facilities & Facilities & Convention Stadiums, Conference Conference Conference Conference Used Large Hotels Large Hotels Convention Convention Centers Convention Centers and Centers and Centers and Centers and Centers Centers Centers Hotels Hotels Hotels Hotels Source: HSP Clearwater Convention Center Feasibility Study Chapter 3 Page 1 Clearwater Convention Center Feasibility Study Chapter 3 Page 2 I I I I I I I I I I I I I I I I I I I hunden strategic partners The various types of convention and conference center events are described below: Conventions and Trade Shows - Associations, professional groups, and other membership organizations hold conventions and trade shows, with attendance ranging from 150 to 50,000 attendees. The larger of these meetings take place in convention centers with large exhibit halls, but as a Center for Exhibition Industry Research (CEIR) survey indicates, the majority of events require less than 50,000 square feet. Conventions and trade shows may feature a single meeting, but they usually offer a number of concurrent meetings and exhibitions. Facility needs include assembly space for general sessions and displays, banquet facilities, and numerous breakout-meeting rooms. Two-thirds of conventions and trade shows use exhibit space as a means to communicate ideas and to display products. Conventions are high-impact events economically because a large percentage of attendees originate from outside the local area, typically stay several nights in the host city, and spend money on accommodations, food, transportation, retail goods, and entertainment. Spouses, family, or companions typically accompany a significant number of attendees. Like conventions, trade shows offer a forum for exchanging industry ideas. They vary slightly from conventions in that they are more product- and sales-oriented. Trade shows are exhibit-intensive, and exhibitors prefer column-free, open-space facilities in which they construct temporary custom booths for product display. Trade shows typically attract a large number of attendees, who originate from outside the host city but tend to have a shorter average stay than convention attendees. Consumer Shows - Consumer shows are public, ticketed events featuring exhibitions of merchandise for sale or display. Consumer shows provide a means of product distribution and advertising. Some, such as auto and boat shows, have a recreational and entertainment function as well. Consumer shows range in size from small local and specialized shows with a few hundred attendees to large shows with thousands of attendees. The larger consumer shows may occur in convention centers, shopping malls, fairgrounds, and other public- assembly facilities with large exhibition areas. The majority of attendees are local, but exhibitors often come from out of town. Site selection considerations for consumer shows include the size and income of the local population, availability of facilities, and the number of competitive shows in the market. Assemblies - Assembly events are social, military, educational, religious, and fraternal (SMERF) events. They attract larger numbers of people and require arena or stadium seating. Similar to conventions, attendees originate from outside the host city, but, unlike conventions, these events do not usually require large amounts of exhibit and meeting room space. Soorts - Sporting events are any youth, amateur, professional, or senior event of any variety of sports that can be played indoors. Typically, such events are held in arenas or stadiums, however, many events, from boxing to wrestling, to basketball, can be held in exhibit facilities with temporary seating/stands. A growing trend in this sector is cheerleading competitions. As such, convention centers can be marketed for a variety of event types. I I hu nden strategic pa rtners destinatIOn development consulting I Conferences - Conferences are meetings typically held by associations, professional groups, and other membership organizations. Educational institutions also host conferences. These events do not usually require exhibit space, but otherwise their facility demands are similar to those of conventions-such as meeting space for general sessions, food service facilities, and breakout rooms. Hotels and conference centers typically serve as venues for conferences. I I Coroorate. Trainina and Other Meetinas - Corporate meetings include training seminars, professional and technical conferences, incentive trips, and management meetings. Corporate meeting planners and attendees demand high-quality facilities. The existing facilities can accommodate most of these types of meetings; however, there are catering challenges for some users. With a higher-quality and expanded program of spaces, higher- rated and larger corporate meetings can be accommodated. I I ! I I Banauets - Banquets are typically locally-generated events, from social and wedding events to the annual Chamber of Commerce event, which can be the largest of its kind in a given city. A mainstay of hotels and convention centers, banquets provide significant catering income and provide the community with its largest dining room, in most cases. Figure 3-1 shows the comparison of supply and demand growth beginning in 1987. Figure 3-1 I National Exhibit Space Supply & Demand 200 I 180 ..-+ -/ /- - - II 190 140 I 170 160--.~ -~-----~ I I .. .g 150 .5 130 I I 100 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: MEHD 2007, HSP -+- Exhibit Space Supply Growth __ Net Square Feet of Paid Exhibit Space I The figure shows a very compelling and rational picture of supply growth in response to demand growth. From 1987 to 1989, demand outpaced supply. By the time supply caught I Clearwater Convention Center Feasibility Study Chapter 3 Page 3 I Clearwater Convention Center Feasibility Study Chapter 3 Page 4 I I I I I I I I I I I I I I I I I I I hunden strategic partners up, a recession was on and it took until 1996 for demand growth to catch up to supply. What is stunning is the rate of growth in demand from 1993 through 2000, with an average increase of 5.1 percent. Supply stagnated during much of this period. By the mid-1990s, cities released the economic impact potential that was not being adequately captured. New facilities and expansions began opening with force in 2000 - just as a recession was about to begin. With the time horizon for developing facilities being many years, the increase in supply continued unabated through 2007, as long-held plans were finally brought to fruition. Demand declined for three years, but has since shown the same growth trajectory as supply from 2004 through 2007. National Supply Demand for meeting and exhibition space allowed many communities in the U.S. to develop successful convention and trade show facilities during the 1970s and 1980s. Public sector involvement in these developments was motivated primarily by the desire to capture the economic benefits of the events they hosted in their communities. The following table shows the total number of exhibit space in the U.S. and Canada. Table 3-2 Total National Exhibit Space (000) Year Square Feet 2004 80,500 2005 82,300 2006 85,100 2007 85,900 2008 88,500 Source: MEHD 2008 In 2008, North America had 88.5 million square feet of exhibit space. The amount of exhibit space increased by 2.6 million square feet in 2008. The following table shows the expected increases in supply of exhibit space over the next several years. I I I I I I I hunden strategic partners Table 3-3 National Projected Added Exhibit Space (Square Feet) Increase from Base Fiscal Year Expansions 1,317,778 1 ,023,532 985,587 20,000 New Facilities 2008-2009 2009-2010 2010-2011 2011+ 1,001,000 441,728 201,000 816,000 Total 2,318,778 1,465,260 1,186,587 836,000 2.6% 1.7% 1.3% 0.9% Base 88,500,000 89,965,260 91,151,847 91,987,847 Source: MEHD 2008 Over the next two years, the amount of exhibit space is projected to increase by over three million square feet, mostly from expansions. The annual increases in each year are projected to represent between 0.9 and 2.6 percent of supply. I I I I I I I I I I I I The following table shows the distribution of facilities by size. Table 3-4 Distribution of National Facilities by Size Total Square Feet of Percent of Exhibit Space Facilities 25,000 - 49,999 15% 50,000 - 99,999 30% 100,000 - 499,999 47% 500,000+ 8% Source: MEHD 2008 The nearly half of facilities have between 100,000 and 499,999 square feet of space. An additional 30 percent of U.S. facilities have between 50,000 and 99,999 square feet of function space. The following table summarizes the ownership and management structure of U.S.-based exhibit halls. Clearwater Convention Center Feasibility Study Chapter 3 Page 5 hunden strategic partners I I I I I I I Table 3-5 Ownership and Management of U.S. Exhibit Halls Type of Entity Private City County State Combination Government Government Authority Other Ownership 37% 32% 11% 9% 5% 3% 3% Management 63% 16% 4% 6% 2% 5% 4% Source: MEHD 2008 As the table shows, over one-third of U.S. exhibition halls are privately owned, but more than 60 percent are operated by a private-management company. Public ownership of exhibit hall facilities often occurs because the facilities usually do not generate profits to an owner. The public sector will take ownership as a service in order to capture the related economic benefits within the jurisdiction. These benefits can range from revenue generated from hospitality taxes to increased sales activity in the local business community. Private management is common because, unlike governments, these companies have professional expertise in managing and operating facilities, and often have longstanding relationships with vendors, suppliers, and other industry organizations. In addition, a private- management company's experience and efficiency can help insulate a facility's operations from political issues and can help to reduce annual deficits as much as possible. Clearwater Convention Center Feasibility Study Chapter 3 Page 6 I I I I I I I I I I I I Meeting Demand Meeting planners have the strongest influence on conventions and meetings held nationwide. This section includes some of preferences of U.S. meeting planners based off of Meetings Media's Market Trends Survey in 2008 as well as data from other sources. The following table shows the size of exhibitions measured by the total gross square feet of space they used for their event. I I I I I I I I I I I I I I I I I I I hunden strategic partners Table 3-6 Size of Exhibitions (gross exhibit space) Percent of Total Cumulative Total 19% 19% 13% 32% 15% 47% 13% 60% 19% 79% 14% 93% 7% 100% 6,000 - 14,999 SF 15,000 - 24,999 SF 25,000 - 34,999 SF 35,000 - 49,999 SF 50,000 - 100,000 SF 100,000 - 200,000 SF 200,000+ SF Source: Center for Exhibition Industry Research, HSP There is a fairly equal distribution for the size of exhibitions. Nearly 20 percent of exhibits occur in less than 15,000 square feet of function space and an additional 20 percent take place in 50,000 to 100,000 square feet of space. Facilities that are under 100,000 square feet of gross exhibit space can host four out of five conventions. The following table shows the typical meeting duration organized by meeting planners. Table 3-7 Typical Meeting Duration 0.5dQ 7% 1dQ 9% 1.5 days 7% 2 days 14% 2.5 days 13% 3 days 22% 3.5 days 9% 4 days 8% 4.5 days 3% 5 days 5% More than 5 days 3% Source: Meetings Media, HSP About 22 percent of meetings lasted three days, while 14 percent were two-day meetings and 13 percent lasted two and a half days. The following table shows attendance changes over the past year based on the survey. Clearwater Convention Center Feasibility Study Chapter 3 Page 7 hunden strategic partners I I Decreased more than 10% Decreased up to 10% About the same Increased up to 10% Increased more than 10% Do not know 3.7% 6.9% 52.1% 22.2% 9.8% 5.3% I I Table 3-8 Attendance Changes in the Past Year Source: Meetings Media, HSP I I About 52 percent of meeting planners say attendance remained about the same in 2008. Over 22 percent of respondent say that meeting attendance increased by up to ten percent. I In 2009, attendance is expected to decline and the number of meetings is estimated to drop significantly. The loss of business from conventions is expected to be $2.5 billion nationwide. Of that figure, $781 million is attributed to room revenue loss. The estimated value of lost room revenue per planner is estimated to be $560,000. Meeting planners state that their cancellations are due to negative media coverage of large corporate events, current economic conditions and corporate downsizing. More than two-thirds of meeting planners expect their budget for off-site meetings to be cut in 2009 and over 50 percent say that attendance rates will decline. This is typical during recessions and is expected to rebound with rebounds in the economy. I I I The following table shows the types of facilities used for all conventions and meetings (respondents could give more than one answer). I Table 3-9 Types of Facilities Used for U.S. Meetings and Conventions Chain Hotels Conference Centers Independent Hotels Convention Centers Boutique Hotels Special Venues No Particular Type Source: Meetings Media, HSP 69% 48% 43% 31% 29% 13% 13% I I I I Nearly 70 percent of respondents said meetings were held at chain hotels. About 48 percent selected conference centers and 43 percent said independent hotels were venues where meetings were held. Convention centers were selected by 31 percent of respondents. I Clearwater Convention Center Feasibility Study Chapter 3 Page 8 I I Occupancy. Convention center occupancy is maximized when the proper balance of destination elements occurs in terms of facility size, hotel package, retail and restaurant I I I I I I I I hunden strategic partners availability, and other factors. Exhibit hall occupancy can be difficult to measure as it is impossible to have 100 percent occupancy due to days required for set-up and tear-down. In the industry, a maximum occupancy rate for an exhibit hall would be approximately 70 percent; however, 50 percent to 60 percent occupancy is considered to be practical maximum occupancy. Rates below 50 percent would indicate the potential for increased marketing of the facility, with occupancy of over 60 percent possibly indicating an increased amount of lost business due to insufficient available dates. The following table presents the occupancy rates by exhibit hall size for respondents to the PwC su rvey. Table 3-10 National Exhibit Hall and Ballroom Occupancy Rates I I I I I I I I I I I I Size Conventions I Consumer Total Ex. Hall Ballroom Trade Shows Shows Occupancy Less than 100,000 square feet 19.8% 16.7% 36.3% 39.2% 100,000 to 500,000 square feet 30.7% 14.5% 44.1% 46.2% More than 500,000 square feet 49.0% 8.1% 57.2% 63.6% Source: PricewaterhouseCoopers 2007 Based on the PwC benchmarks, large size convention center respondents are within the range determined to be close to maximum occupancy. Small to mid-sized convention centers fared better in terms of occupancy rates for consumer shows, showing approximately 14 to 17 percent versus eight percent for large convention centers. More economic impact occurs with non-consumer shows, but consumer shows pay more rent and gate fees to the facility. Interestingly, ballroom occupancy rates for small and mid-sized convention centers were noticeably higher, approximately two to seven percent than that of their exhibit halls. Ballroom occupancy for large convention centers has the greatest difference over exhibit hall occupancy, with 64 percent versus 57 percent. The following table presents total attendance for convention/trade shows and consumer shows. Table 3 National Exhibit Hall Attendance Size Conventions I Trade Shows Less than 100,000 square feet 100,000 to 500,000 square feet More than 500,000 square feet 57,200 203,500 603,200 Consumer Shows 72,200 192,300 347,600 Total 129,400 395,800 950,800 Source: PricewaterhouseCoopers 2007 Clearwater Convention Center Feasibility Study Chapter 3 Page 9 hunden strategic partners I I As shown by the table, small convention centers generate a higher portion of their total attendance from consumer shows versus convention and trade shows. Conversely, the majority of attendance for large convention centers is generated from conventions and trade shows. I I The following table displays the number of convention/trade show and consumer show events hosted by survey respondents. Size Conventions I Trade Shows 29 48 55 Consumer Shows 20 24 26 Total 49 72 81 I I I Table 3-12 Surveyed National Exhibit Halls - Number of Events Less than 100,000 square feet 100,000 to 500,000 square feet More than 500,000 square feet Source: PricewaterhouseCoopers 2007 I I Small convention centers average 29 conventions and trade shows and 20 consumer shows. The average attendance at these events is shown in the following table. Table 3-13 U.S. Exhibit Hall Events - Average Attendance Less than 100,000 square feet 100,000 to 500,000 square feet More than 500,000 square feet 2,100 3,600 10,000 Consumer Shows 4,100 8,700 16,400 I I Size Conventions I Trade Shows Source: PricewaterhouseCoopers 2007 I I I Small convention centers average 2,100 at conventions and trade shows and 4,100 attendees at consumer shows. These figures increase with the size of the facility. In addition to convention, trade show, and consumer show events within their exhibit halls, convention centers also host a variety of other events at ballrooms and meeting rooms located on site. The following table shows the average event count and attendance for survey respondents by facility size. I I Clearwater Convention Center Feasibility Study Chapter 3 Page 10 I I I I I hunden strategic partners I I Table 3-14 U.S. Convention Centers - All Event Characteristics Size Average Event Average Total Count Attendance I I I Less than 100,000 square feet 100,000 to 500,000 square feet More than 500,000 square feet 344 370 219 262,200 523,000 1,099,900 Source: PricewaterhouseCoopers 2007 Unsurprisingly, convention centers with large square footage capacities tend to host events with a higher number of attendees, even though fewer overall events are hosted. I I I I The following table shows the average number of room nights generated annually by respondents to the convention center survey. Table 3-15 U.s. Convention Centers - Hotel Room Nights Size Average Number of Room Nights 34,300 164,300 1,122,400 Less than 100,000 square feet 100,000 to 500,000 square feet More than 500,000 square feet Source: PricewaterhouseCoopers 2007 I I I Again, larger convention centers host shows that not only attract higher attended events but also events with a higher portion of attendees from outside areas requiring overnight accommodations. If a convention center can generate one room night per square footage of exhibit space, it is generally considered to be performing well. Figure 3-2 shows the seasonality of the convention calendar across the U.S. I I I I Clearwater Convention Center Feasibility Study Chapter 3 Page 11 I I h u nden strategic pa rtners destination development consulting I Figure 3-2 I Seasonality of Conventions I 20% 18% 4% I 16% Cl c "t: 14% :I u u o ut 12% c o .. 510% > c o U (; 8% ... c Cl ~ 6% Cl a. I II I 2% I 0% January February March April Source: 2006 Meetings Market Report May June July August September October November Oeoember I The heaviest month for conventions in the U.S. is October, with September, June and April also sharing a large percentage of convention demand. I The following table shows the important factors when choosing a meeting destination/city. Table 3-16 Important Factors when Selecting a U.S. Meeting Destination Convention Association Corporate Meeting Meeting I I Availability of hotels and/or other facilities suitable for meetings 83% 79% 74% Affordability of Destination 77% 81% 77% Safety and Security of Destination 46% na na Ease of Transporting Attendees to/from Location 43% na 62% Transportation Costs 43% na na Source: 2006 Meetings Market Report I I I I Clearwater Convention Center Feasibility Study Chapter 3 Page 12 I I I I I I I I I I I I I I I I I I I I I hunden strategic partners . . Between convention, association, and corporate meeting planners, little differentiation in the factors driving decisions exists. The top criterion for convention planners was the availability of hotels and/or other facilities suitable for meetings. It was the second-most important item for both association and corporate planners. Affordability was the most important factor for association and corporate planners and the second most important for convention planners, although based on HSP's experience, convenience is key for state association planners. Once a destination is selected, planners must then choose a hotel. The following table shows the important factors for selecting hotels within the destination. Table 3-17 Important Factors when Selecting a Hotel within a U.S. Meeting Location Item Convention Association Corporate Number, Size and Quality of Meeting Rooms 93% 69% 81% Negotiable Food, Beverage and Room Rates 87% 80% 79% Cost of Hotel or Meeting Facility 82% 80% 80% Number, Size and Quality of Sleeping Rooms 79% 54% 72% Quality of Food Service 70% 63% 70% Source: 2006 Meetings Market Report The most important factor for convention and corporate planners when selecting a hotel is the number, size and quality of meeting rooms. This speaks to the power of full-service properties versus limited-service or rooms-only hotels. This criterion is the third most important for association planners. Corporate planners list number, size and quality of meeting rooms and affordability of the facility as the two most important factors, highlighting the balance between quality and affordability. Cost of the meeting facility is an important criterion for association and convention planners as well. Note that while the number, size and quality of sleeping rooms is very important for convention planners, it is considerably less important for association planners and somewhat less important to corporate planners, showing that convention planners are more concerned with the availability of quality than the affordability of hotels. The ability to negotiate food and beverage and room rates is the third most important factor for corporate planners but does not rank as high percentage wise as meeting room amenities and affordability of facilities. Based on a more recent survey, the following table shows the important factors for meeting planners when choosing a hotel. Clearwater Convention Center Feasibility Study Chapter 3 Page 13 Source: Meetings Media, HSP I I I I I I I hunden strategic partners Table 3-18 Important Criteria for Selection a Hotel Location 92% Rates 87% Service 63% Amenities 42% Meeting Rooms 38% Attrition Policy 34% Guest Rooms 20% Recreational 19% Chain Hotel 9% Other 5% Clearwater Convention Center Feasibility Study Chapter 3 Page 14 I I I I I I I I I I I I The most important factor for meeting planners when selecting a hotel is its location. About 92 percent of respondents selected location as an important factor. Rates and services were two other important factors for meeting planners. Hotel amenities and meeting rooms were also two important factors with just less than half of respondent selecting each. These criteria are driving the success of some convention centers (that have good hotel packages nearby) and hurting those that do not. Implications When comparing Clearwater's current situation to the trends and needs of the meetings and convention market (as well as the special event market), several critical conclusions can be drawn: · The meetings industry's health has generally followed that of the economy and the effect of video conferencing has not taken away the desire for people and businesses to meet face to face. · Buildings that host meetings have continued to increase in number and size, leading to a fierce competition for meetings and conventions. This allows meeting planners to pit destinations against each other more effectively than in the past. Therefore they can demand better hotel packages, rebates or reductions in rent and other incentives to host their meetings in a city. Many destinations now have a large budget for providing incentives to groups. This lowers the impact of the industry. However, this does not mean that certain attractive locations like Clearwater should not invest in new and improved facilities. However, it does mean that communities should go into the industry fully prepared to invest fully in order to succeed, in facilities, hotels, destination appeal and marketing efforts. · Meeting planners expect a destination with several large hotels so they can put their attendees in as few hotels as possible. Planners are not willing to make numerous agreements with smaller hotels in order to achieve their required room block. This will be a challenge for Clearwater if a convention center is built I I I I I I I I I I I I I I I I I I I hunden strategic partners '-1 ;' \ downtown. Other hotels will need to be developed over time to serve it effectively. The next chapter considers the Clearwater area as a meetings destination and makes conclusions about the logic of a new facility there. Clearwater Convention Center Feasibility Study Chapter 3 Page 15 Clearwater Convention Center Feasibility Study Chapter 4 Page 1 I I I I I I I I I I I I I I I I .1 I I hunden strategic partners CURRENT AREA SUPPLY'" MEETING PLANNER SURVEY In order to understand how a new convention center might perform, it is instructive to consider the performance of the existing center in Clearwater as well as the performance of the Tampa Bay Convention Center. In addition, because the current facility does not meet the quality and size needs of many potential users, a meeting planner survey was conducted to understand how they would view it as a convention destination if its facilities met their needs. Harborview Center - Clearwater, FL The Harborview Center opened in 1996 when a former department store's facilities were converted into the present-day convention center. The building was originally opened as a Maas Brothers/Jordan Marsh store in 1961. Located in downtown Clearwater, Florida the center overlooks Clearwater Harbor. The center consists of three floors with 55,700 square feet of total function space and can accommodate up to 1,400 guests. The facility has been under the management of Global Spectrum since 1998. Because the building is a rehabbed department store, it cannot function as a high quality convention center. The spaces have many columns and the facility is dark, not efficient, and costs more money than a convention center of similar size would due to its obsolescence. As a result, the City is preparing to demolish the building in the next several years. The following table shows a breakdown of the available function space at the Harborview Center. I I hunden strategic partners I Table 4-1 I Harborview Convention Center Function Space Total (SF) By Division (SF) Divisions Exhibit Space 30,000 2 Exhibit Hall East 15,000 Exhibit Hall West 15,000 Ballroom Space 17,250 4 Ballroom A 3,750 Ballroom B 4,875 Ballroom C 4,875 Ballroom D 3,750 Meeting Space 4,550 4,550 6 Clearwater room 3,900 3,900 1 55,700 55,700 13 Hotel Rooms nfa Total Exhibit Space 30,000 Per Guest Room nfa Total Ballroom Space 17,250 nfa Total Meeting Space 4,550 nfa Other Space 3,900 nfa Total Function Space 55,700 nfa Total Exhibit Space Divisions 2 11 00 Guest Rms nfa Ballroom Divisions 4 nfa Meetina Room Divisions 6 nfa Total Divisions (jncludina Ballroorr 12 nfa Source: mpoint.com, HSP I I I I I I I I I I The facilities consist of two exhibit halls with 15,000 square feet of exhibit space each, four ballrooms consisting of over 17,000 square feet of function space and seven meeting rooms encompassing about 4,500 square feet of space. I I I I Clearwater Convention Center Feasibility Study Chapter 4 Page 2 I hunden strategic partners FY08 I I I I I I I Table 4-2 Harborview Convention Center Income & Expense Summary Item FY 05 FY 06 FY 07 Income Event Revenue $1,413,004 $1,493,794 $1,600,849 Non Event Revenue $232,740 $187,978 $198,109 Gross Operating Revenue $1,645,744 $1,681,772 $1,798,958 Expenses Event F&B $593,114 $528,039 $482,783 Labor $511,311 $516,251 $528,149 Administrative $301,146 $432,156 $450,679 Operational $387,399 $278,276 $379,469 Total Expense $1,792,970 $1,754,722 $1,841,080 Misc Revenue $48,440 $0 $0 Net Profit ($98,786) ($72,950) ($42,122) City Subsidy $0 $283,300 $267,000 Source: Harborview Convention Center $1,832,038 $195,184 $2,027,222 $582,522 $577 ,620 $483,246 $374,485 $2,017,873 $0 $9,349 I I I I I I I I I I I I $255,000 Harborview's total revenue for 2008 was just over $2,027,000 million with expenses near $2,017,000. The difference was just over $9,000 for the fiscal year. This is the first year that the facility has been profitable. Revenue was nearly $400,000 higher in 2008 than in was in 2005. Revenue grew 11.2 percent from the previous year. The following table shows a break down of the event demand for the Harborview Center. Table 4-3 Harborview Convention Center Event Demand Events Event Days Total Attendance 2005 250 320 99,363 % Change % Change (30.4%) (25.3%) 15.7% 2007 193 245 85,938 % Change 10.9% 2.5% (25.2%) 2006 174 239 114,964 Source: Global Spectrum 2008 215 264 96,579 % Change 11.4% 7.8% 12.4% Harborview had its highest rates of attendance, event days and number of events in 2005. Event demand for the facilities declined by 30.4 percent the following year. Since 2006, demand has increased but not significantly. Attendance declined 25.2 percent between 2007 and 2008. The event demand increased 11.4 percent in 2008 and attendance also increased by 12.4 percent. Clearwater Convention Center Feasibility Study Chapter 4 Page 3 I I I I I I I hunden strategic partners Though the Harborview Center has experienced a great deal of success given its poor condition, it is not a long-term convention solution for Clearwater. In fact, it holds very few true conventions and instead hosts small consumer shows, receptions and low-rated business. Having no hotel rooms within walking distance to the center makes it difficult to book large events. Finally, the size of the faCility is too small to attract large events. However, if the events being hosted now are willing to use the current facility, they are most likely potential business targets for a new faCility (although a new facility will likely improve upon the quality and type of business, not necessarily the number of events). In addition to the Harborview Center groups often book meetings and events at the local hotels discussed in earlier in the report. The Pinellas County Convention and Visitors Bureau generates room nights throughout Pinellas County for events that occur throughout the county. The following table shows room night bookings by the CVB by the date that they were booked. I I I I I I I I I I I I Table 4-4 Clearwater Area Room Night Bookings by the CVB (Booked through 2014) Month 2007 2008 2009 January 2,392 11,059 7,041 Februrary 7,359 4,241 4,727 March 6,175 8,366 4,686 April 5,407 8,864 7,591 May 5,946 5,794 4,026 June n/a 7,013 July 5,902 5,542 August 3,790 3,653 September 7,658 5,522 October 14,496 8,281 November 3,728 4,300 December 8,398 3,270 Total 71,251 75,905 28,071 Source: Pinellas County CVB Although the data collected from the CVB does not show the actual date that the room nights are to occur, interest in the area is still strong. The CVB books, on average, between 5,500 and 6,000 room nights throughout the county. Tampa Convention Center - Tampa, FL The Tampa Convention Center (TCe) opened in 1990 near downtown Tampa, just off the bay. The center boasts nearly 279,000 square feet of function space. The facility is very successful, which bodes well for a new, high-quality smaller facility in nearby Clearwater. The following table shows a breakdown of the function space available at the Tampa Convention Center. Clearwater Convention Center Feasibility Study Chapter 4 Page 4 hunden strategic partners I I Table 4-5 I I Tampa Convention Center Function Space Total (SF) By Division (SF) Divisions Exhibit Space 200,000 3 Exhibit Hall East 100,000 Exhibit Hall Central 25,000 Exhibit Hall West 75,000 Ballroom Space 36,000 4 Ballroom A 7,200 Ballroom B 10,800 Ballroom C 10,800 Ballroom D 7,200 Meeting Space 42,747 42,747 36 278,747 278,747 43 Hotel Rooms 1,077 Total Exhibit Space 200,000 Per Guest Room 186 Total Ballroom Space 36,000 33 Total Meeting Space 42,747 40 Other Soace nfa nfa Total Function Space 278,747 259 Total Exhibit Space Divisions 3 11 00 Guest Rms 0.03 Ballroom Divisions 4 0.04 Meetina Room Divisions Cine!. auditlamoh) 36 0.36 Total Divisions (including Ballroom) 43 0.43 Source: mpoint.com, HSP I I I I I The TCC includes exhibit halls totaling 200,000 square feet, four ballrooms totaling 36,000 square feet, and 36 meeting rooms encompassing over 42,000 square feet of space. There are 1,077 hotel rooms within close proximity to the complex, including the 719-room Tampa Waterside Marriott. I I I I I The following table shows large events by type hosted at the Tampa Convention Center. I I Clearwater Convention Center Feasibility Study Chapter 4 Page 5 I I I I I I I I I I I I I I I I I I I I I I hunden strategic partners Table 4-6 Events By Type in 2008 Banquets 26 Consumer Shows 8 Conventions 45 Meetings & Conferences 63 Trade Shows 3 Government 25 Total 170 Source: Tampa CC, HSP There were 170 major events that took place at the TCC in 2008. Meetings and conventions represent 37 percent of the large events hosted at the facility while 26 of events were conventions. The facility boasts nearly 500 event days per year with many large events taking place over the course of several days. The following table shows the demand data for all events at the Tampa Convention Center. Table 4-7 Tampa Convention Center Annual Attendance Event Type 2003 2004 2005 2006 2007 2008 Consumer Shows 141,555 132,351 166,916 101,075 105,853 125,274 Conventions 11 ,200 6,923 11,800 1,300 13,800 43,933 Conventions with Exhibits 88,274 107,036 142,954 99,900 67,875 95,525 Food Functions 13,986 20,778 23,014 31,190 26,045 24,325 General Meetings 77,939 157,044 149,467 82,607 113,452 79,182 Trade Shows 29,525 14,799 4,508 11 ,220 17,925 23,750 Total for Year 362,479 438,931 498,659 327,292 344,950 391,989 Source: Tampa Convention Center In the past three years the Tampa Convention Center has been able to host more than 400,000 attendees per year. The largest number of visitors came in 2007 when the facilities hosted over 480,000 guests. The facility hosts between about 350 and 550 groups annually. The TCC has played a large role in area hotel bookings with over 390,000 room nights in 2008 and more then 400,000 in 2007. A 20-story Embassy Suites hotel opened in 2006 adjacent with a sky-bridge connecting it to the convention center. The hotel has 360 rooms and over 11,000 square feet of additional function space. The Tampa Convention Center has been able to book many large events due to its location in downtown Tampa, the destination appeal and its size. The center's 200,000 square feet of exhibit space in addition to over 1,000 hotel rooms within easy walking distance to the convention center attract large events. The building has been so successful that there could be significant overflow or turnaway business for a smaller facility in Clearwater to capture. Clearwater Convention Center Feasibility Study Chapter 4 Page 6 hunden strategic partners I I Table 4-8 I I I I I Clearwater, Florida as Meetings Destination Clearwater is already a popular choice for meeting planners as a destination based on its beaches, climate, local attractions and proximity to the Tampa International Airport. Clearwater offers reasonable hotel room rates and facility rental rates compared to major Florida markets such as Miami, Fort Lauderdale and Orlando. The following table shows the function space breakdown for all of the venues in and near downtown Clearwater. Clearwater Area Facilities with Function Space Function Total Space Per Function Ballroom Meeting Other Meeting Facility Rooms Room (SF) Space (SF) Space (SF) Space (SF) (SF) Rooms Hilton Clearwater Beach Resort 416 93 38,796 12,529 26,267 0 27 Belleview Biltmore Resort & Spa 226 113 25,645 19,800 3,065 2,780 15 Sheraton Sand Key Resort 390 48 18,632 13,776 4,856 0 14 Hyatt Regency Clearwater Beach Resort & Spa 250 50 12,510 4,000 8,510 0 8 Sandpearl Resort 253 38 9,689 8,657 1,032 0 10 Clearwater Beach Marriott Suites on Sand Kev 220 33 7,359 3,330 4,029 0 11 Total 1,755 376 112,631 62,092 47,759 2,780 85 Average 293 63 18,772 10,349 7,960 463 14 Source: Mpoint.com, HSP I I The average function space for Clearwater facilities is almost 19,000 square feet. This includes facilities with between 7,000 and 40,000 square feet. The hotels with substantial function space in Clearwater have between 220 and 420 rooms. The Hilton Clearwater Beach Resort is the largest of the hotels in the area and has the most function space with nearly 39,000 square feet. Clearwater hotels with function space have an average of 10,000 square feet of ballroom space and almost 8,000 square feet of meeting space. Yet because of their beach location and size, they cannot play the role of convention center. A replacement for the Harborview Center downtown would leverage off of the beach and its hotels as well as supply them with overflow group room nights during the week. I I Florida Meeting Facility Matrix I I I In order to create a competitive facility it is important to examine the other facilities in Florida to see where a new faCility would fit into the market. The section below compares a hypothetical facility with other facilities within the state of Florida. The following table shows convention centers in Florida with more than 30,000 and less than 300,000 square feet of function space. I I Clearwater Convention Center Feasibility Study Chapter 4 Page 7 I I I I. I h u nden strategic partners destmatlOn development consultmg I I Florida Function Space Analysis. Convention Centers Year Room Count Completel Within Most Immediate Airline Total Recently Destination Vicinity Passenger Overall Ballroom Meeting Function Convention Center Renovated Appeal (1,20011) Count Quality Space Space Exhibit Space Space Orange County Convention Center - Orlando 2003 9 5.473 17,614,679 24.02 62,182 468,761 2,049,740 2,580,683 Miami Beach Convention Center - Miami 1989 10 785 16,194,162 8.87 0 116,449 502,848 619,297 Tampa Convention Center. Tampa 2001 9 1,077 9,306,036 8.92 36,000 42,747 200,000 278,747 Palm Beach County Convention Center - West Paim Beach 2004 7 0 3,475,345 6.09 22,726 22,304 101,570 146,600 South Florida Expo Center - Miami 1990 9 0 3,475,345 4.88 0 0 123,000 123,000 Reccmmended Facility - Clearwater 2014 8 650 9,306,036 6,59 32,000 18,000 60,000 110,000 Prime F. Osborn III Convention Center. Jacksonville 1986 7 0 3,138,015 2.06 10,184 78,540 22,360 111,084 Ocean Center. Daytona Beach 2009 6 744 340,328 7.30 11,715 31,769 42,000 85,484 Lakeland Convention Center - Orlando 1974 6 127 17,614,679 3.87 0 36,328 28,262 84,590 Harborview Convention Center. Clearwater 1996 8 0 9,306,036 3.63 17,250 8,400 30,000 55,650 Manatee Convention & Civic Center. Bradenton/Sarasota 1985 5 0 782,497 1.38 0 41,177 0 41,177 Tallahassee-Leon Countv Civic Center. Tallahassee 1981 4 135 462,233 1.41 0 8,400 30,000 38 400 Total 79.00 3,518.00 73,400,712.00 55,00 129,855.00 404,114.00 1,140,040,00 1,674,009.00 Source; Mpoinl.com, HSP Table 4-9 I I I I I I I A number of factors are included in the overall quality of the facility including the year of completion or last renovation, the destination appeal and the room count for hotels within close proximity. Room count includes hotel rooms within walking distance to the facility. This figure includes rooms within 1,200 feet or less. The total function space is also included in the chart above with a break out of each facilities exhibit, ballroom and meeting space. The recommended facility space includes 100,000 square feet of total function space with 50,000 square feet of exhibit space, 32,000 square feet of ballroom space and 18,000 square feet of meeting space. I I I Generally speaking, the facilities with scores well below average are older, smaller and in locations that are not as appealing or accessible. Newer, larger facilities that are located in areas with high destination appeal and easy accessibility to major airports rank above average. The Orange County Convention Center in Orlando was included in the table but excluded from the totals and averages as to not skew the data due to its massive size with over 2.5 million square feet of function space and a hotel room count of nearly 5,500 rooms. The Miami Beach Convention Center ranks highest among the other facilities because it has a high destination appeal, is new, and is located near a major airport. The Tampa Convention Center ranks fairly high due its destination appeal, proximity to over 1,000 hotel rooms and relatively young age of the facility. The Palm Beach Convention Center ranks above average because the facility is newer and is close to a major airport, however there are no hotel rooms within a close proximity and it is not as easily accessible by air as the other major cities. The South Florida Expo Center is not a true convention center, is fairly old and generally will not compete for most events. The Prime H. Osborn III Convention Center in Jacksonville ranks well below average because it is an older facility that has no hotel rooms within close proximity. Ocean Center in Daytona Beach ranks high I I I I I Clearwater Convention Center Feasibility Study Chapter 4 Page 8 I h u nden strategic pa rtners destination development consulting I I I I I I I because it is a strong destination and a newly renovated facility with a large number of hotel rooms nearby. The local airport is very small and limited, so most attendees must drive from airports in Orlando and Jacksonville. Lakeland Convention Center is about halfway between Orlando and Tampa and is the oldest of the facilities. Its destination appeal is very limited. The Manatee Convention and Civic Center in Bradenton ranks lowest among the set of facilities because of its location, access and overall appeal. The facility is also among one of the oldest and does not have hotel rooms within close proximity. The Tallhassee-Leon County Civic Center also ranks well below average due to its lack of destination appeal, the age of the facility and lack of passengers at the closest airport. The recommended facility for Clearwater ranks considerably above average because the facility will be new and hotel rooms are assumed to be built within close proximity. The other factors for the facility rank fairly high including the destination appeal and local airport strength. The following figure shows the distribution of the overall score for each facility compared to the size of the facility. Figure 4-1 I I Florida Convention Center Competitive Matrix 300,000 50,000 . . . Recommended Facility . . . . .- . Current Harborview Center , o 0.00 0.50 1.00 1.50 2.00 I I I I I I I I I I 250,000 CII ~ 200,000 c. VI c o :e 150,000 c ::J u. iii ~ 100,000 I- Building/Destination Quality (0 = Poor; 2 = Excellent) The table shows the distribution of Florida convention facilities when the quality or rank of the facility is compared to the total function space available. The Orange County Convention Clearwater Convention Center Feasibility Study Chapter 4 Page 9 I I I I I I I h u n den 5 t rat e gi cpa rt n e rs destination development consulting Center and Miami Beach Convention Center are not included in the graph due to their large size. The recommended facility will be much more competitive because it fits a size niche that is not served in the market by quality facilities in good locations. The current facility is not large, has no large hotel nearby and competes with many other lesser quality facilities. MEETING PLANNER SURVEY HSP sent a survey to more than 350 meeting planners throughout Florida as well as meeting planners of national associations that could potentially come to Clearwater. The survey was created to understand their needs as well as their perceptions of a new convention hotel in Clearwater. The following is a discussion of results. Below are the responses given when asked the range of attendees for the event(s) that each participant planned. The meeting sizes for the respondents' different groups vary between small educational/training sessions to large conventions and annual meetings. I I I I I I I I I I I I Figure 4-2 What is the Average Range of Attendees at Your Events? 50/0 100/0 33% 140/0 . Less than 50 .50-100 101-250 .251- 500 .501-1,000 .1,000-2,500 .2,500+ . Other Nearly half of the responses, 47 percent, indicated that the attendance of their events averaged more than 1,000 people. Twenty percent reported meetings with less than 250 attendees. These responses show that there are many opportunities to capture large groups of people in Clearwater. The next question asked "what is the natures of the largest event you plan for your groups?". Clearwater Convention Center Feasibility Study Chapter 4 Page 10 220/0 I:: Convention/ Annual Conference I I I I I I I hunden strategic partners destination development consulting Figure 4-3 What is the nature of the largest event(s) that you plan for your group(s)? . Tradeshow Consumer Show I I I I I I I . Reception/Social 59% . Sporting Event .... ~ ........ -..- ~ . Other The majority of the largest events that the respondents plan are conventions or annual conferences. These events typically take up the most space by using exhibit, ballroom and meeting space. The next most common event type is tradeshows, followed by social events. The next question asked meeting planners to indicate whether or not they would be interested in hosting an event in Clearwater, if all of their size requirements were satisfied. Clearwater Convention Center Feasibility Study Chapter 4 Page 11 I I I I I I I I I I I I I I I I I II I I I I I I h u n den 5 t ra t e gi cpa rt n e rs destinatIOn development consulting Figure 4-4 Clearwater Florida is considering developing a new downtown convention center. If it satisfied your size requirements, would you be interested in holding an event at this facility? Maybe 530/0 Only 29 percent of all respondents indicated that they were not interested in hosting an event in Clearwater. This is a relatively strong score given that most meeting planners do not know Clearwater well, beyond its beach reputation. The next set of questions asked were related to the actual amount of space needed for the events that the participants would host in Clearwater. The responses were as follows: · In terms of exhibit space, the necessary square footage for the events that the respondents plan ranged from 10,000 to 100,000 square feet of exhibit space, with a preponderance needing from 25,000 to 80,000 square feet. · The minimum amount of ballroom space needed ranged from 1,000 to 35,000 square feet with a preponderance needing from 15,000 to 30,000 square feet. · The number of breakout rooms necessary at a convention facility ranged from two to 30 rooms. A majority of the respondents stated that the ideal number for the individual meetings that their events required was between 10 and 20 rooms of va rious sizes. In addition to the meeting facility being adequate for the needs of the group, the lodging must also meet certain criteria. The next set of questions related to the preferences of overnight accommodations for event planners and their groups. Clearwater Convention Center Feasibility Study Chapter 4 Page 12 Figure 4-5 I I I I I I I h u nden strategic pa rtners destination development consIlltm9 What amenities at a hotel do you require or prefer for your group(s)? Please indicate all that apply. Meeting Rooms Ballrooms Business Center Fitness Center Three-meal restaurant Room Service Bar/Lounge Boardrooms Fine DIning Restaurant Pool Other Spa I .. " - - . - - .. - .,.. - - - T l - - I I I I I I I 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% The most important hotel amenity to the meeting planners surveyed is the availability of meeting rooms. The next most important amenities are ballrooms, a business center and three-meal restaurant. Although many groups will host their events in a convention or conference center, meeting rooms at the headquarter hotel offer greater flexibility as well as convenience of being in the location where most attendees would be staying overnight. Ballrooms were required by nearly 90 percent of respondents. These also offer an opportunity for leadership board meetings and related meetings that occur parallel to the conference agenda. Responses in the "other" category were access to high-speed wireless internet and high-end amenities such as golf that can be found in the area but not onsite. Room Block. Participants were asked about their room block requirements for the events that they plan. Peak room nights are the total amount of room nights that are necessary for the evening(s) of the event with the largest number of overnight visitors. The peak number of rooms that are needed by respondents for their large events ranged from less than 50 to 2,000 rooms, with a large number of groups needing from 100 to 1,000 rooms. Clearwater Convention Center Feasibility Study Chapter 4 Page 13 I I I I I Conclusion Very few respondents to this survey were opposed to considering Clearwater as a meeting option. Some of the larger groups had size expectations that are not feasible for Clearwater and therefore are unable to host events there. Most of the other respondents share the same opinion that they are willing to consider booking in Clearwater if it had a properly sized facility with accompanying hotel package. Clearwater has many of the amenities that planners want in a destination, but not the facilities. With such facilities, it should be able I I I I I I I I I I I I I I I I I I I hunden strategic partners to carve out a niche for smaller conventions and conferences as well as many local and consumer events. Clearwater Convention Center Feasibility Study Chapter 4 Page 14 h u nden strategic pa rtners destination development consulting I I I I I I I CONVENnON HOTEL DEVELOPMENT"" CASE STUDIES This section provides insight on the methods and tools used for convention hotel development in various markets. Such hotels are essential ingredients to the success of meeting and destination packages. Except in extraordinary cases, such hotels need some form of financial incentive to be developed. Convention Hotel Market The convention and meetings market has grown more sophisticated in its requirements and competitive offerings over the last ten years. While at one time meeting planners expected to contract with multiple far-flung hotels in order to service a convention, certain cities were able to offer room packages within just a few very large hotels adjacent to convention centers. This improvement in packaging of the convention product led to expectations by the market and competitive pressure for all convention facilities to offer a convenient package of hotels attached, adjacent or within immediate area walking distance of the convention facility. Those that do not offer such a package, such as Dallas, suffer considerably when competing for shows. Those that offer the best packages, such as Indianapolis and San Antonio, have shown peak convention center performance. Clearwater Convention Center Feasibility Study Chapter 5 Page 1 I I I I I I I I I I I I The demands are not just for hotel rooms, but high-quality, full-service hotel room blocks in major branded hotels. Due to the large room block requirements, meeting and function space requirements, food and beverage requirements and parking needs, these facilities are often outside the realm of private financial feasibility. This feasibility gap is generally temporary, most pronounced during ramp-up of the property, but renders such projects difficult to finance. As a result, the public sector has found creative ways to participate in the hotel developments in order to realize the net benefits generated by the synergies they create. Since 1992, one of the most notable trends in public finance has been the use of municipal bonds and other public financing tools to enable the development of convention headquarter hotels. The public sector has provided or sponsored public debt for over half of the total $7.5 billion spent or proposed to finance more than 45 convention hotel developments since 1992. The tables on the following pages show a summary of these public-private hotel developments. This participation has made the creation of 30,000 open or planned hotel rooms possible that now serve as the hospitality centerpiece of convention center developments throughout the u.s. Rationale for Public Involvement The business of establishing a successful urban core was once the secret to success of a few pioneering cities. In recent years, however, the expectation has spread to most cities, regardless of size or historical development patterns. Competition for I I I I I I I h u nden strategic pa rtners destination development consulting tourists, conventioneers and businesses has become fierce, as has creating a positive environment for visitors and residents. This has led to a building boom not only of convention centers, but sports venues, retail, housing, hotels and cultural attractions in most urban centers in the United States. Early analysis indicates that cities that are not proactive and fail to spur urban core development will be at a competitive disadvantage in the future if venues, traffic flow and pedestrian access are not convenient or well-planned for visitors, residents, and business users. I I I I I I I I I I I I Cities today are increasingly aware that planning hotels adjacent to convention centers, with additional access to other urban amenities, is necessary to help both properties succeed. Meeting planners demand easy access between venues, especially convention centers and hotels. Cities that fail to respond have been unable to attract meetings and conventions. Because of event growth, meeting planners demand larger room blocks and try to house their entire membership in a small cluster of hotels. Cities that wish to remain competitive in the tourism and convention market must be visionary, proactive and creative in the sizing, placement and connectivity of major hotels with their convention center(s) and other attractions. Cities are now financing hotels due to the fact that convention hotels are key to the success of their tourism package. At the same time, such hotels are large financial obligations that often do not provide enough of a return on investment for the private development community to undertake. Developing the appropriate project with the optimal level of meeting and support space, results in a relatively expensive project. The absolute size of these projects, including extensive meeting and parking infrastructure, places financial pressure on the hotel during its early ramp-up years. However, the issue is not necessarily the long-term operating characteristics of the hotel. Most large hotels, as they stabilize after three to five years, perform well. The issue pertains to early year deficits and efforts to minimize risks, such as late convention center openings, longer than expected ramp up periods, or cost overruns. Once these poor early year economics are folded into the long-term financial picture, overall returns fall below alternative investment vehicles. As a result, there is reluctance among banks and other lending institutions to lend to larger hotels, unless there is an equity ratio of up to 50 percent. The financial reality of a convention hotel being consistently filled with large groups to keep it profitable is not realistic. The large city-wide conventions that a hotel- convention center package attracts do nothing to fill the large supply of rooms during the rest of the year. So although a city may want to build a 1,000-room property to host the largest conventions, reality dictates a more realistic project. The same concepts apply for smaller markets. Another reason for a city to support downtown convention hotels is to bring people back downtown and not lose visitors to the suburban areas. Suburban growth has come at the expense of downtowns and their centralized resources. Often when hotels are subsidized, there is criticism from various groups. However, these direct Clearwater Convention Center Feasibility Study Chapter 5 Page 2 h u nden strategic pa rtners destination development consulting I I I I I I I subsidies pale in comparison to the indirect and unmeasured cost of spreading cities' infrastructure to outlying areas. The efforts of economic development officials have not been to just keep other cities from luring businesses and their spending to other states, but to keep urban businesses from moving to their own suburbs. Downtown supporters have been fighting for workers, visitors and residents since the suburban boom began. When given a choice, private hotel developers will often build limited service hotels in suburban locations, due to lower risk and lower overall costs for land. As hotel offerings and other services expand in the suburbs, businesses find it easier to move from the central business district to suburban locations. A lack of quality Central Business District hotels contributes to the push of local businesses out of downtowns, as full service hotels are a key amenity to corporate location. But limited service hotels clustered around suburban interstates do nothing to lure conventions, meetings or tourists and undermine the economics of center city full-service hotels. Cities have responded to the new reality of the convention hotel business in numerous ways, depending upon various state and local laws and financing mechanisms. Assistance ranges from favorable land leases at one end of the spectrum, to regulating development of limited service hotels in the middle range of intervention, to complete public ownership of hotels at the farthest end of the spectrum. Clearwater Convention Center Feasibility Study Chapter 5 Page 3 I I I I I I I I I I I I Public Participation Options Building large hotels is very difficult due to the cost and space required for development. However, large hotels are vital for successful convention center environments to work properly. Public entities have owned hotels for many decades, as evidenced by numerous land lease structures at airports and in downtown settings. However, more direct participation has been called for as the private sector has had difficulty obtaining hotel financing at reasonable equity and interest rate levels. Public participation can help hedge the financial risk in the early ramp-up years of a large convention hotel property. Credit enhancements, tax incentives and abatements, and capital investment that count towards equity are all tools that are used to get over the initial ramp-up period. The public sector has creatively dealt with participation in many ways, sometimes unique to state and local regulations. Public Sponsorship via Tax-Exempt Bonds The most direct form of public participation is public ownership of the asset, allowing the hotel to qualify for tax-exempt financing and avoid property taxes. In this instance, the city is investing in the hotel as an insurance policy for its convention center and urban renewal efforts. This type of ownership was used for Chicago's Hyatt McCormick Place, Houston's l,200-room Hilton, Denver's 1,100- room Hyatt, and in Overland Park, Kansas' Sheraton hotel as well as more than a I I I I I I I I I I I I I I I I I I I h u nden strategic pa rtners destination development consulting dozen others, as shown in the table further in the document. While tax-exempt bond funding originated with larger projects and markets, it is now common in all market sizes. Since 1997 with a change in tax law, communities have a new alternative, one using a publicly owned tax-exempt bond financial structure. Using either public incentives or tax exempt financing has advantages and disadvantages including both financial and political consequences. The newer, tax-exempt method is achieved via creation of a publicly owned, tax-exempt bond financed structure. It utilizes a single purpose tax-exempt entity created by the public to issue revenue bonds to finance the construction of the project. The bonds are primarily secured by net cash flow from the hotel and hotel occupancy taxes, and mayor may not be enhanced with bond insurance. These bonds typically require some financial back stop from a political jurisdiction or require fairly heavy insurance to support the project's financing based solely on the operations of the hotel. The advantages to this approach are: · An ability to get the deal done with the public's timeline, · Developing a hotel when the private sector is unwilling to invest in it, · A lower cost of capital compared to a privately financed alternative, · The long-term nature of the financing, and · The public ownership of the project at bond retirement. The disadvantages are: · The significantly increased amounts of financing required to capitalize credit enhancement and financing reserves, · Negative public perception and reaction to a publicly-owned hotel, which we have seen delay projects for several years in other markets nationally, such as in Fort Worth, · Restrictions on performance-based contracts, and · Long-term performance risk. Public-Private Partnerships (P-3) Traditional public investment, in the form of inducements to bridge the financing gap, has taken the form of land assemblage, public payments for parking and infrastructure, and funding public components of the hotel, such as meeting and ballroom space. This approach was used in Norfolk for its Marriott, Portsmouth for the Renaissance, Indianapolis for its initial Marriott, and in many other markets. Another strategy uses grants, tax abatements, or creation of districts where taxes earned in the district are used to fund the public contribution. Often a combination of these sources is used to make a project happen, as has been demonstrated in numerous instances. Clearwater Convention Center Feasibility Study Chapter 5 Page 4 h u nden strategic pa rtners destination development consulting I I I I I I I State programs often playa key role as states have more power to create and appropriate tax streams for projects. As an example, the states of Kentucky, West Virginia, and Arkansas have a program that allows qualifying projects to receive up to 25 percent of their project's costs in the form of sales tax rebates over a ten- year period. other states have established other funding mechanisms, such as MoDESA in Missouri (allowing the recapture of numerous tax streams for a project), and low-cost funding via STAR Bonds in Kansas. Texas has allowed various Hotel Tax recapture schemes in recent years, along with other incentives. Land leases are also a common incentive for hotel developers. In some cases, a public entity may acquire the necessary land and lease it back to the developer for below market rates. The advantage to land leases is that they lower the development costs and allow the cost of the land to be amortized and subsequently paid for out of operating revenues. The following is a list of incentives provided by public agencies to stimulate hotel development: · Tax abatement · Tax rebates · Tax Increment Financing (TIF) · Equity participation · Construction of meeting space, parking structure, and/or other infra structu re · Credit enhancement of financing · Land assemblage · Rebate of development fees for licensing, permitting and water and sewer hookup fees · Free or nominal ground rent · Section 108 loans · Community Development Finance Authority (CD FA) grants or Community Development Block Grants (CDBG) Clearwater Convention Center Feasibility Study Chapter 5 Page 5 I I I I I I I I I I I I Risk Whether the private or public sector builds and owns the hotel, there is always an element of risk. It breaks down into financial risk and operational risk. With private development, the public's subsidy/investment is a one-time or limited time risk which is quantifiable. The long-term risk is that the project owners may not reinvest in the property over the long-term and cause the entire complex to have a bad reputation, etc. Several cities have experienced this (Evansville, Indiana is a recent example, as is Owensboro, Kentucky). With public financing, the public sector takes the long-term risk and responsibility for the project and therefore has I I I I I I I I I I I I I I I I I I I h u nden strategic pa rtners destination development consulting control over long-term quality, design and operation. However, the annual debt load is usually very close the operating income available, which gives the project a smaller margin of error in performance before reserves are used. This will exist for the life of the bonds, usually 22 to 25 years. Myrtle Beach and St. Louis are unfortunate examples of projects where the hotel did not perform as expected and required the recapitalization of the project. In either case, some level of risk exists. Summary The options available to cities and developers continue to increase as both the public and private sector create new funding mechanisms unique to the legal, financial, and other political realities of the city, county or state. The following tables show traditional public-private hotel developments and publicly-sponsored hotel developments (via the issuance of tax-exempt bonds for the majority of the project). In addition to direct subsidies, the value of other rebates and inducements is not always included as each deal is fairly complex. Clearwater Convention Center Feasibility Study Chapter 5 Page 6 - - hunden strategic partners destination development consulting Table 5-1 Public-Private Hotel Developments Public Private Participation Investment as Public as a % of Total Private a % of Total City Brand Status Rooms Total Hotel Costs Cost/Room Partlclpatlon* * Cost Investment Cost 1 Atlantic City Sheraton Opened 1997 502 $85,000,000 $169,323 $38,200,000 44.9% $46,800,000 55.1% 2 80ston Westin Opened 2007 793 $200,000,000 $252,207 $15,000,000 7.5% $185,000,000 92.5% 3 Baltimore Marriott Opened 2001 750 $133,000,000 $177,333 $10,000,000 7.5% $123,000,000 92.5% 4 Charlotte Westin Opened 2003 700 $143,000,000 $204,286 $16,000,000 11.2% $127,000,000 88.8% 5 Chattanooga Chattanoogan Opened 2001 202 $43,000,000 $212,871 $20,000,000 46.5% $23,000,000 53.5% 6 Denver (expansion) Adam's Mark Opened 1998 1,230 $135,000,000 $109,756 $25,000,000 18.5% $110,000,000 81.5% 7 Fort Wayne Courtyard by Marrriott Under Construction 250 $47,000,000 $188,000 $12,000,000 25.5% $35,000,000 74.5% 8 Fort Worth Omni Opening 2008 600 $160,000,000 $266,667 $40,000,000 25.0% $120,000,000 75.0% 9 Franklin, TN Ma rriott Opened May 1999 300 $30,000,000 $100,000 $12,000,000 40.0% $18,000,000 60.0% 10 Indianapolis Ma rriott Opened 2001 615 $100,000,000 $162,602 $23,000,000 23.0% $77,000,000 77.0% JW Marriott (1,000), Courtyard (250), Fairfield Inn (168) & Scheduled to Open 11 Indianapolis Springhill Suites (150) March 2010 1,568 $354,000,000 $225,765 $48,500,000 13.7% $305,500,000 86.3% 12 Lancaster, PA Ma rriott Opening 2008 294 $45,000,000 $153,061 $20,000,000 44.4% $26,000,000 57.8% 13 Louisville Marriott Opened 2005 617 $111,000,000 $179,903 $57,500,000 51.8% $53,500,000 48.2% 14 Madison Hilton Opened 2000 222 $29,000,000 $130,631 $10,000,000 34.5% $19,000,000 65.5% 15 Miami Beach Loews Opened 1998 800 $110,000,000 $137,500 $29,000,000 26.4% $81,000,000 73.6% 16 Minneapolis Hilton Opened 1992 816 $144,800,000 $177,451 $89,200,000 61.6% $55,600,000 38.4% 17 Norfolk Marriott Opened 1992 405 $60,000,000 $148,148 $23,000,000 38.3% $37,000,000 61.7% 18 Palm Beach Westin Under Construction 400 $62,800,000 $157,000 $21,000,000 33.4% $41,800,000 66.6% 19 Philadephia Loews Opened 1998 350 $54,000,000 $154,286 $18,000,000 33.3% $36,000,000 66.7% 20 Philadephia Marriott Opened 1995 1,408 $236,500,000 $167,969 $36,500,000 15.4% $200,000,000 84.6% 21 Salem, OR Phoenix Grand Opened 2005 193 $19,000,000 $98,446 $19,000,000 100.0% $19,000,000 100.0% 22 San Antonio* Hyatt Opened March 2008 1,003 $280,000,000 $279,163 $208,000,000 74.3% $72,000,000 25.7% 23 Tampa Marriott Opened 1998 716 $104,500,000 $145,950 $27,000,000 25.8% $77 ,500,000 74.2% 24 Washington, DC Gaylord Opened March 2008 2,000 $950,000,000 $475,000 $210,000,000 22.1% $740,000,000 77.9% 25 Wichita Hyatt Opened 1998 303 $42,385,000 $139,884 $20,069,000 47.3% $22,316,000 52.7% Average 681 $147,159,400 $184,528 $41,918,760 35% $106,040,640 69% Total 17,037 $3,678,985,000 na $1,047,969,000 na $2,651,016,000 na * Amounts noted are bond financing vs. private financing, not actual contrlbuion ** Public participation may be upfront capital only, or could include value of abatements and other Incentives over time Source: HSP Clearwater Convention Center Feasibility Study Chapter 5 Page 7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - h u nden strategic pa rtners destination development consulting Table 5-2 Tax-Exempt Financing with Bonds Supported by Project Revenues Public Bond City/County Total Dedicated Issue Contributlon/Loan/Cr City Brand Status Rooms Sources Public Bond Issue Cost/Room % of Total edit Enhancement % of Total 1 Austin Hilton Opened January 2004 800 $280,115,000 $265,115,000 $331,394 94.6% $15,000,000 5.4% 2 Baltimore Hilton Opening 2009 757 $305,000,000 $305,000,000 $402,906 100.0% $0 0.0% 3 Bay City, MI Doubletree Opened April 2004 150 $32,900,000 $15,455,000 $103,033 47.0% $17,445,000 53.0% 4 Chesapeake Hyatt Opened March 2002 400 $193,000,000 $156,200,000 $390,500 80.9% $36,800,000 19.1% 5 Chicago Hyatt Opened 1998 800 $108,000,000 $108,000,000 $135,000 100.0% $0 0.0% 6 Chicago Hyatt Expa nsion Proposed 600 $180,000,000 $180,000,000 $300,000 100.0% $0 0.0% 7 Columbia, S.C. Hilton Opened 2006 300 $67,000,000 $67,000,000 $223,333 100.0% $0 0.0% 8 Coralville, IA Marriott Opened August 2006 286 $33,000,000 $33,000,000 $115,385 100.0% $0 0.0% 9 Denver Hyatt Opened December 2005 1,100 $394,825,000 $354,825,000 $322,568 89.9% $40,000,000 10.1% 10 Erie Sheraton Opened April 2008 200 $45,400,000 $45,400,000 $227,000 100.0% $0 0.0% 11 Fort Lauderdale/Broward Co. Hilton Projected 2011 1,000 $415,000,000 $415,000,000 $415,000 100.0% $0 0.0% 12 Houston Hilton Opened January 2004 1,200 $326,200,000 $326,200,000 $271,833 100.0% $0 0.0% 13 Myrtle Beach, S.C. Radisson Opened May 2001 404 $76,497,000 $64,345,000 $159,270 84.1% $12,152,000 15.9% 14 Omaha Hilton Opened April 2004 450 $111,970,000 $108,970,000 $242,156 97.3% $3,000,000 2.7% I 5 Overland Park, K5 Sheraton Opened 2002 412 $105,700,000 $92,200,000 $223,786 87.2% $13,500,000 12.8% 16 Providence (cost est.) Westin Opended 1995 364 $70,000,000 $70,000,000 $192,308 100.0% $0 0.0% 17 Providence (cost est.) Hilton Opened 2005 392 $78,400,000 $78,400,000 $200,000 100.0% $0 0.0% 18 Sacramento Sheraton Opened 2001 503 $104,900,000 $96,900,000 $192,644 92.4% $8,000,000 7.6% 19 St. Louis Renaissance Suites Opened 2003 1,081 $276,600,000 $248,100,000 $229,510 89.7% $28,500,000 10.3% 20 Trenton Marriott Opened 2002 197 $58,000,000 $42,300,000 $214,721 72.9% $15,700,000 27.1% 21 Vancouver, WA (cost est.) Hilton Opened June 2005 226 $47,500,000 $47,500,000 $210,177 100.0% $0 0.0% 22 Washington D.C. TBD Proposed 1,500 $500,000,000 $500,000,000 $333,333 100.0% $0 0.0% Average 596 $173,182,136 $164,541,364 $247,084 92.5% $8,640,773 7% Total 13,122 $3,810,007,000 $3,619,910,000 na na $190,097,000 na Source: HSP Clearwater Convention Center Feasibility Study Chapter 5 Page 8 - - Clearwater Convention Center Feasibility Study Chapter 5 Page 9 I I I I I I I I I I I I I I I I I I I h u nden strategic pa rtners destination development consulting Some of the most recent convention center hotel projects opened or under construction as of 2009: · Baltimore 757-room Hilton · Erie 200-room Sheraton · Fort Wayne 250-room Courtyard by Marriott · Fort Worth GOO-room Omni · Grand Rapids 340-room JW Marriott (privately-financed) · Indianapolis four-hotel development including l,OOO-room JW Marriott · Lancaster 294-room Marriott · San Antonio l,003-room Hyatt Other cities considering convention hotel developments include: · Albany · Amarillo · Chicago (GOO-room expansion of Hyatt) · Dallas l,OOO-room hotel (recently approved) · Minneapolis 1,200 room hotel · New York City l,500-room hotel While economic conditions impact the timeline of such projects, due to their long planning and development horizons (it can take from three to more than ten years from concept to opening, depending upon numerous political and economic factors), projects will continue to be proposed and built. I I I I I I I hunden strategic partners destination development consulting Hotel Market Development Cases I I I I I I I I I I I I The following examples illustrate how cities have recently participated in convention hotel development in smaller markets. Cities include: · Overland Park, Kansas · Portsmouth, Virginia · Chattanooga, Tennessee · St. Charles, Missouri · Coralville, Iowa · Trenton, New Jersey · Lancaster, Pennsylvania · Erie, Pennsylvania Overland Park, Kansas The city of Overland Park, Kansas, adopted a strategy in the early 1990's to capitalize on its status as a successful edge city with a large corporate presence. With only a small exhibit hall and a large wave of limited service hotels, the market challenge was apparent. The public sector funded development of the $60 million Overland Park Convention Center but still needed a hotel to complete the package. Project: The 412-room Sheraton is an upscale hotel with 30,000 square feet of function space. Total costs, including soft costs, financing, and shared infrastructure costs were $92 million. The hotel is directly connected to the Overland Park Convention Center, which was designed and constructed simultaneously, but as a separate project with separate financing. The hotel is owned by the city, and required a subsidy for debt service. Use of tax exempt financing, described next, reduced the hotel's subsidy. Deal Structure: The project was financed through the issuance of tax-exempt municipal bonds under IRS rule 63-20, which allows the formation of a not-for- profit corporation by the public sector in order to qualify for tax-exempt funding status. Overland Park established such a single purpose nonprofit corporation that issued approximately $88 million in non-recourse debt to be repaid from revenues of the hotel. Approximately $60 million in Series A bonds are rated as investment grade and consequently carry an interest rate below 7 percent. The city agreed to provide debt service support by dedicating approximately $5.0 million of its annual Transient Guest Tax Collections to pay debt service in the event that the hotel's revenues are insufficient to pay debt. Approximately $20 million in Series B bonds were subordinated to Series A bonds but will also be supported by the city debt service support agreement. Approximately $8 million in Series C bonds served as Clearwater Convention Center Feasibility Study Chapter 5 Page 10 hunden strategic partners destination development consulting I I I I I I I quasi-equity in the deal because they are to be paid only after all other operating subsidies, debt service reserve funds and management fees are paid. These bonds were acquired by Sheraton, the operator, the developer, and a small investor group. These bonds were important to the deal as they provide incentive to the operator and the developer to make the project succeed. In addition to its debt service support agreement, the city contributed approximately $3.9 million in land that will be leased to the public corporation on favorable terms. The city also contributed approximately $1 million in road and infrastructure improvements and $1 million in shared costs of the convention center and the hotel. The same model is applicable for smaller projects. Portsmouth, Virginia Project: The Renaissance Portsmouth Hotel and Waterfront Conference Center complex includes a 250-room full-service Renaissance Hotel, a conference center, and a parking facility. There is nearly 25,000 square feet of net meeting space. Clearwater Convention Center Feasibility Study Chapter 5 Page 11 I I I I I I I I I I I I Deal Structure: A condominium structure was established with the hotel, conference center, and parking facility. The City, however, owns each condominium and maintains separate contracts for the operation of each unit. During the development period, the City contracted with a developer (Stormont) to manage the design, construction, and development services for the hotel and conference center and parking garage. Financing for the center and garage was generated by the City. The City also made a grant to the developer for use in the construction of the hotel, although the developer funded the majority of the hotel. The operator leases the conference center from the City on a 50-year term, with five 10-year renewal options and pays $75,000 per year in lease payments (with no escalation). The operator leases the conference center space and the hotel above it for a similar term structure, but with base rent of $50,000 per year (with no escalation). There is also incentive rent related to net cash flow hurdles. The City will also participate in 50 percent of any net sale proceeds of the hotel in excess of the amount necessary to generate a 15 percent internal rate of return on the private capital. Participation in sale proceeds, combined with incentive rent cannot exceed $10 million over the life of the lease. The developer has the option to purchase the condominium lease (including the hotel and conference center) for $11 million less any incentive rent payments plus fair market value of the operator's projected remaining obligation to pay incentive rent. In regard to the garage, the hotel has access to 281 of the 458 spaces for 99 years, or so long as the hotel is operated as a hotel, whichever is less. The operator manages the garage under a tax-exempt bond qualified management contract, with a fair market value management fee paid to the manager. I I I I I I I h u nden strategic pa rtners destination development consulting Chattanooga, Tennessee Project: The Chattanoogan Hotel and Conference Center is located in Chattanooga, Tennessee. It is comprised of a 210,000 square-foot facility, has 202 guestrooms and suites and 25,000 square feet of conference and meeting facilities. The property, opened in April 2001, was co-developed by a private limited partnership for the City of Chattanooga at a cost of approximately $43 million. Hotel amenities include a 195-seat restaurant, a casual bistro and cafe, a sidewalk coffee shop, a day spa, and recreation and fitness facilities. The hotel courtyard is a 70,000 square-foot "urban forest" with 10,000 different plantings. Financing for the hotel was proVided through a combination of public and private sources, but primarily with public, tax-exempt bonds. The new 1,000-vehicle parking garage, to be located adjacent to the conference center, will also support parking needs for The Chattanoogan and the surrounding area. I I I I I I I I I I I I Deal Structure: The cost of the hotel was approximately $43 million, or $213,000 per keyed hotel room. The real estate is being subsidized by the city, paid for by bonds, and is expected to stabilize this year. Over the life of the project, it is expected to need $20 million in subsidy. The public non-profit corporation is the Southside Redevelopment Corporation and they have entered into a management agreement with The Benchmark Management Company. The management company received a base fee of approximately $443,000 in the first full year of operations (2002) and this will increase to $868,000 by 2010. There is a sliding incentive fee based upon the operator's projected revenues and gross CMP (complete meeting package) revenues. The incentive fee, being based on CMP, keeps the hotel focused on conference events. There is also an additional one time management fee based on total CMP sales, keeping management focused on the long-term performance of the property. st. Charles, Missouri Historic St. Charles, Missouri, located approximately 40 miles west of downtown St. Louis, is a growing, successful suburb with an historic past. Its well-preserved downtown and Lewis and Clark legacy made it a regional tourist destination for years. Riverboat gaming nearby and the development of an arena provided critical mass to the City's cache of attractions. St. Charles worked for years to leverage that success by building a convention facility to host those interested in holding meetings and conventions there. A hotel of good quality and size adjacent to the center was key to the development's success. After several failed attempts, the City completed a development deal with John Q. Hammons (JQH) to develop the hotel and approved the building of the convention center, both of which opened in 2005. Project: The St. Charles Convention and Sports Facilities center features approximately 36,700 square feet of exhibit space, two ballrooms totaling 18,300 square feet, and 9,300 square feet of meeting rooms. The project was funded and developed by the city. The $40 million convention center hotel, a 296-room Clearwater Convention Center Feasibility Study Chapter 5 Page 12 Clearwater Convention Center Feasibility Study Chapter 5 Page 13 I I I I I I I I I I I I I I I I I I I h u nden strategic pa rtners destination development consulting Embassy Suites, was funded by JQH. Discussions are now underway to expand the project and hotel product. Financing: The $32.5 million convention center was funded by the City while the $40 million hotel is a public-private partnership with JQH. The city is essentially providing free land to the hotel project and is also allowing the hotel to run the convention center's food and beverage operations. This provides the hotel with more revenue than it otherwise would have generated on its own and guarantees that the two integrated projects will work together. The city formed a property and sales tax TIF around the hotel and is using the revenues from the TIF to partially fund the convention center. The hotelier pays the convention center five percent of food and beverage sales to the convention center yielding an incentive to the hotel in the range of $4 million over the first 30 years of the project. JQH agreed to pay 0.75 percent of gross hotel sales in order to expand the convention center ballroom. Global Spectrum is managing the convention center for the City. Coralville, Iowa Coralville is located adjacent to Iowa City, Iowa and the University of Iowa, a regional center in Iowa. Coralville was simply a small town until the 1990s, when it aggressively pursued growth opportunities. It put itself on the map by developing a major new regional mall on 1-80. Since then it has worked to redevelop a separate 100-acre parcel on 1-80 with a convention center, hotel and other attractions. Project: The 250-room Marriott hotel and convention center opened in 2006. The project was developed by FaulknerUSA as an integrated property and was backed by the City. The convention center has 30,000 square feet of exhibit space, 15,000 square feet of ballroom space, and 15,000 square feet of meeting space. Financing: The city determined early on to develop the project and finance it with public, tax-exempt bonds. A sales tax TIF around the Coralville Mall, Iowa's largest, was expanded to the site area and its revenues, plus the hotel's cash flows are being used for land assemblage and as backstops for the bonds. The state also provided limited funding. The project costs are $60 million and the bonds were issued in 2004. Trenton, New Jersey Trenton was a state capital without a primary meeting facility. What separated Trenton from its sister capitals is that it had the distinction of being the only state capital with absolutely no hotels within the city limits, let alone downtown. The city began major redevelopment and growth initiatives downtown in the 1990s that resulted in the completion of major sports, cultural, and entertainment facilities, as well as those celebrating Trenton's significant history. Project: The project consists of a 197-room Marriott hotel, 15,000-square feet of net meeting space and a 657-space parking garage to service the hotel and the I I I I I I I I I I I I I I I I I I I h u nden strategic pa rtners destination development consulting nearby 1,800-seat Memorial Theater. A link between the complex and the theater was also built. The project opened in April of 2002. Financing: The city sponsored a non-profit corporation to issue tax-exempt revenue bonds of $46 million in addition to obtaining $12 million in other sources for the $58 million project. The other sources consisted of $8.2 million in State loans, $6.8 million in parking authority loans, and $450,000 through an Urban Enterprise Zone grant. The hotel and conference center portion cost $46.4 million and the parking garage cost $11.3 million. Lancaster, Pennsylvania Lancaster has been pursuing downtown redevelopment in the form of a convention center and hotel complex for several years. The public and private sectors united in a unique development format to fund the project. Despite multiple lawsuits brought by other local hoteliers who opposed using occupancy taxes to fund the project (all of which have been dismissed), the delayed project is now moving forward and will open shortly. Project: Lancaster is developing a combined convention center and hotel project on Penn Square that is expected to include a convention center with 46,000 square feet of exhibit space and a 294-room full-service Marriott hotel with 35,000 square feet of meeting space, both to be operated by Interstate Hotels. A portion of the hotel, 80 rooms, will be located in the historic Watt & Shand Building. The convention center will have a total of 55,000 square feet of function space with 46,000 square feet of exhibit space, and 9,000 square feet of ballroom and breakout room space. Financing: The total project costs are currently estimated at $170 million. The Marriott hotel planned for Penn Square is being developed by Penn Square General Corp., a High Associates affiliate. Limited partners are Fulton Bank and Lancaster Newspapers, Inc. The state is expected to provide up to $35 million of the $74 million necessary to build the convention center, with the remainder supported by hotel tax collections and other public support. The hotel financing, while not entirely detailed to the public to date, will be primarily borne by the private development group. However, while the civic-minded consortium of businesses developing the hotel is assisting the project, they are will take advantage of public subsidy opportunities. These incentives may include: · Low-interest loans, · Benefiting from shared public areas and function space paid for by the public, but leased on a long-term basis to the hotel for a nominal amount, · Allowing hotel to manage or profit from the catering operations at the convention center, and · Sharing personnel between facilities. Clearwater Convention Center Feasibility Study Chapter 5 Page 14 Clearwater Convention Center Feasibility Study Chapter 5 Page 15 I I I I I I I I I I I I I I I I I I I h u nden strategic pa rtners destination development consulting Erie, Pennsylvania Erie has an active Civic Center complex near downtown, however it did not include a convention facility. As part of Erie's efforts to revitalize its bayfront along Lake Erie, it secured funding from the Commonwealth of Pennsylvania for a new convention center in the first part of the decade. In order to make the project work, the Erie Civic Center Authority recognized the need to induce the development of a hotel with the project. As a result it conducted a search for a development and financing structure that would allow the project to be built. Project: The project includes the Erie Bayfront Convention Center, opened in 2007, with more than 30,000 square feet of exhibit space, as well as a 200-room Sheraton Hotel, to be opened in early 2008. Both facilities face the Bay and are linked via a pedestrian bridge over a boat slip inlet. The hotel was developed by Acquest Realty and White Lodging and will be managed by White Lodging. Financing: The convention center was financed with a state grant of approximately $40 million, while the hotel was financed using tax-exempt bonds totaling $45.4 million. A public entity was created to own the hotel project and issue the bonds, which the County agreed to fully guaranty in the event of a financial gap at the hotel. Implications In today's competitive convention market, the market has demanded and received top-quality hotel and convention center packages, usually connected to each other, in most major U.S. cities and now even in second and third-tier cities. Smaller cities have stood behind the development of smaller hotel and conference center developments. For a community to be competitive in the industry, a convention center alone will not suffice. Clearly, the destination package must include a solid- quality convention hotel. I I I I I I I I I I I I I I I I I I I h u nden strategic pa rtners destination development consulting LODGING MARKET'" COMPEnnvE SET National hotel trends are important to the development prospects of any hotel as are local market characteristics. A number of hotel measurements have declined in the first quarter of 2009 due to the recession both nationally and locally. Yet a convention center cannot be recommended without a hotel. As such, this chapter sets the stage for the entrance of an appropriately-sized convention hotel. u.s. Lodging Industry The following table shows selected characteristics of the U.S. lodging industry from 1992 through the first quarter of 2009. Clearwater Convention Center Feasibility Study Chapter 6 Pagel Table 6-1 National Lodging Industry Annual Summary I I I I h un den 5 tra t e gi cpa rt n e rs destination development consulting Revenue per Average Daily Available Year Occupancy Change Rate Change Room Change 1992 61.9% - $59.62 - $36.90 - 1993 63.1% 1.9% $61.30 2.8% $38.68 4.8% 1994 64.7% 2.5% $64.24 4.8% $41.56 7.4% 1995 65.1% 0.6% $67.17 4.6% $43.73 5.2% 1996 65.0% -0.2% $70.81 5.4% $46.03 5.3% 1997 64.5% -0.8% $75.31 6.4% $48.57 5.5% 1998 63.8% -1.1% $78.15 3.8% $49.86 2.7% 1999 63.1% -1.1% $81.29 4.0% $51.29 2.9% 2000 63.5% 0.6% $85.24 4.9% $54.13 5.5% 2001 59.8% -5.8% $84.45 -0.9% $50.50 -6.7% 2002 59.0% -1.3% $83.20 -1.5% $49.09 -2.8% 2003 59.2% 0.3% $83.28 0.1% $49.30 0.4% 2004 61.3% 3.5% $86.70 4.1% $53.15 7.8% 2005 63.1% 2.9% $91.29 5.3% $57.61 8.4% 2006 64.2% 1.7% $96.77 6.0% $62.13 7.8% 2007 64.1% -0.2% $102.38 5.8% $65.63 5.6% 2008 60.4% -5.8% $106.55 4.1% $65.61 0.0% 2009 Q1 56.5% -6.5% $102.89 -3.4% $54.00 -17.7% Annual Growth Rate -0.1% 3.7% 3.7% I I II Source: Smith Travel Research, HSP I I I I Clearwater Convention Center Feasibility Study Chapter 6 Page 1 I I I I I I I Occupancy peaked at an all-time of 65.1 percent in 1995 and recently was as high as 64.2 percent in 2006. After 9/11 and the recession in the early part of the decade, occupancy decreased to 59 percent, before increasing to the 64 percent range in 2006. The current economic conditions facing the United States have had an effect on hotel occupancy, which has decreased over six percent to 56.5 percent. Average daily rate (ADR) increased at an average annual rate of 3.7 percent during the period, outpacing inflation (when food and energy are not counted). The last five years have exhibited strong ADR growth from four to six percent, even in 2008. However, within the first quarter of 2009, ADR dropped 3.4 percent to $102.89. The first quarter of 2009 showed the worst decline in RevPAR since 1992, dropping 17.7 percent to $54, equivalent to the ADR in 2000. Based on the data in the table above, there appears to be a breakpoint at 60 percent national occupancy, above which ADR and RevPAR increase, and below which ADR and RevPAR decline. The following figure shows the above data in graph form, highlighting the annual change in performance. I I I h u n den 5 tr ate gi cpa rt n e rs destinatIOn development consulting I Figure 6-1 I National Hotel Industry Performance Annual Change 10.0% I 5.0% 0.0% I -5.0% -10.0% I -15.0% -20.0% I 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Ql . Occupancy . Average Daily Rate Revenue per Available Room I I. Source: Smith Travel Research, HSP I As the above graph indicates for the years 1996 through 1999, 2007, and 2008 even when occupancy declines, average daily rates can increase. This speaks to the concept of maximum practical occupancy. At a certain average occupancy, there are enough 'sold-out' dates and demand pressure to raise prices. This support for pricing has vanished in 2009. The following figure shows annual changes in supply and demand. I I I I I I I Clearwater Convention Center Feasibility Study Chapter 6 Page 2 I Figure 6-2 I I I I II I I h u n den 5 t ra t e gi cpa rt n e rs destination development consultmg U.s. Supply V5. Demand Change 2002-2009 5.0% 4.0% 3.0% . 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% . -6.0% 2002 2003 2004 2005 2006 2007 2008 2009P I I Source: Smith Travel Research I Iii Supply . Demand I Greater Clearwater Lodging Market I I I I I The figure shows that the increase in demand had outpaced the increase in supply in the years 2004 through 2006. However, the change in supply was much higher than the change in demand in 2007 and 2008. The first quarter of 2009 shows significant declines in both supply and demand. This should result in lower occupancy rates, which hurt the industry's performance, especially if rates begin to decline. The Clearwater lodging market includes a variety of hotels, ranging from limited service economy to full service upscale hotels. The area is dominated by beach-related hotels along Clearwater Beach. Hotels downtown and elsewhere in Clearwater are less prevalent. The following table shows the breakdown of hotels in the area by type of property. Clearwater Convention Center Feasibility Study Chapter 6 Page 3 I I I I I I I I I I I I hunden strategic partners Clearwater Area Hotel Market Percent Percent of Avg. Room Type Number of Total Rooms Total per Hotel Luxury 1 2% 249 4% 249 Upper Upscale 4 7% 1,272 22% 318 Upscale 1 2% 115 2% 115 Midscale wI F&B 6 10% 695 12% 116 Midscale wlo F&B 13 22% 1 ,432 25% 110 Economy 10 17% 743 13% 74 Independent 23 40% 1,248 22% 54 Total 58 100% 5,754 100% 131 Source: Smith Travel Research, HSP Table 6-2 I I I I I I I I I I I I Of the 58 properties considered to be a part of the area market, only 28 percent of the rooms, or 1,636, are considered to be Upscale or higher rated properties. Limited service rooms make up 50 percent of room supply in the market. The remaining 22 percent of rooms are independent, meaning that they do not have a national brand affiliation. Two notable properties that are considered independent are the Belleview Biltmore and the Sandpearl Resort, both of which are included in the competitive set discussed later in this section. The proposed hotel will likely be considered an Upscale property. Analysis of the Competitive Hotel Market As a result of the review of the Clearwater hotel supply discussed above, HSP has chosen a set of primary competitive hotels to analyze and relate to a proposed full-service convention hotel. Some of the factors considered were market orientation, quality, size, location, age, brand, and market demand mix. Based on a HSP's initial review of the market's characteristics, the site for the convention center and hotel should likely be downtown Clearwater, as discussed in Chapter 1 and Chapter 8. The following table shows a summary of the hotels in the competitive set. Clearwater Convention Center Feasibility Study Chapter 6 Page 4 hunden strategic partners i,:' Table 6-3 Clearwater Competitive Set Hotels Open Date Jun 1998 Jun 1975 Aug 2007 Jan 1897 Feb 2004 Dec 2007 Sep 2008 Dec 2009 Hotel Hilton Clearwater Beach Resort Sheraton Hotel Sand Key Resort Sand pearl Resort Belleview Biltmore Resort Marriott Suites Clearwater Beach Holiday Inn & Suites Clearwater Beach Residence Inn Clearwater Downtown Hyatt Regency Olearwater Beach Resort and Spa* Total Average *Expected to compete when open in late 2009 Source: Smith Travel Research 1988 Rooms 416 390 249 226 220 189 115 250 2,055 257 The competitive set consists of seven hotels, ranging in size from the US-room Residence Inn Downtown to the 416-room Hilton Clearwater Beach. Although not every hotel in the set has similar characteristics, each has a number of attributes that are competitive with the proposed hotel. In all cases, the physical attributes are classified as midscale, upscale or higher. Most of the set is located on the beach except for the Residence Inn downtown, and the Belleview Biltmore, just south of downtown Clearwater. For this analysis, a combination of quality, location and market orientation were the primary factors for selection in the competitive set. Certain hotels will compete due to location, such as the Residence Inn, which is the only other quality property downtown. Others will compete for a combination of reasons, even though they are located further from a downtown site where the proposed hotel and convention center are to be located. The following figure shows the competitive hotel properties on a map of the Clearwater area. Clearwater Convention Center Feasibility Study Chapter 6 Page 5 I I I I I I I I I I I I I I I I I I I I I hunden strategic partners destination developmentconsultmg I I I II I I I I I .; ff~.~ . "on s.nct ~ Key Resort 390 Rooms . I ~ Muriott Suites " Clearwater Beach nd KeylCgt'il' on Sand Key t ~ 220 Suites I ~: I I --= Figure 6-3 - - ----- I' ~,~ II ~ -i,+"'~ V~G~I~.T_ " ~~ T~:' II I' II ~I :: SELlREES :T~' ITill ~ UMON:!_---lJ I:" . > c ; g" ~ II I' S~SltT Po~ RD~~ -= ~< ;;;- Old Clean/ln/ail Bny II 'll , ., Island Estate ;" -' q.".O~T ST ~ ~.. 3'1 ~II =' ~I z :~1 ~ till tll :~ w 0(1 mil ii. t : ~ J~~~~IoffAi.MmQ.S~ :. i W l;~ III = . ~r i:r; e ~ ~DlINO&..E. Stoll (If~arwat('r ~ " @ COoKhnwn Clcnnm/a Hnrbor ~ O~UI~, R~ 1 =.:EZ~D$_ST~I 11 I ;1 _'I LAKEJItW_R01" _ __-.J I _ ,_- __.., ~ II ' ( C IZ "" o 5 . o 'I ~ .. Bcll91re P Ed C Wright ~ ' ~- .~ ~ Pant I ",~untry ~ z ~__ 'Jo: III BelIevlew BilbriOie Club 'i. g Resort & Spa II <, j 226 Suites '\ BRt.EAIR R~ -;'''' ~~E CE LEON B"::__ ~ ~.~ ">'1., 1k>1~lfW $}'.~..""lm.". ,,:0 '~~f Club l' ~ -- II - :;; ., ~ I The following section describes the primary competitive hotel facilities, their recent improvements or expansions, their market and other important characteristics. I Hilton Clearwater Beach Resort - The Hilton opened in 1998, and is the largest property in the competitive set, with 416 rooms. The hotel advertises 35,000 square feet of function space, which includes outdoor event space in addition to the traditional indoor space. I Clearwater Convention Center Feasibility Study Chapter 6 Page 6 I hunden strategic partners I I I I I I I In 2008 the ADR for the Hilton Clearwater Beach was estimated to be $201 with an average occupancy of 66 percent. Market segmentation for the Hilton is estimated to be 15 percent corporate transient, 36 percent group and 49 percent leisure. Sheraton Hotel Sand Key Resort - Located on Clearwater Beach, the Sheraton Sand Key Resort has 390 rooms and opened in 1975. After the historic Belleview Biltmore, the Sheraton is the oldest property in the competitive set. The hotel has more than 24,000 square feet of meeting space, which helps generate group business at the hotel. There are both casual and fine dining options for guests at the Sheraton, as well as pool, tennis facilities and other resort amenities. The estimated occupancy in 2008 for the Sheraton sand Key was 64 percent, and the ADR was estimated to be $203. Leisure visitors make up the largest segment of visitors at the Sheraton at 47 percent, while group visitors account for 35 percent of business and the remaining 18 percent are corporate transient. Preferred Sandpearl Resort - The Sandpearl opened in 2007, and has 416 rooms. The hotel has more than 20,000 square feet of indoor function space, with an additional 6,500 square feet of space outdoors. The hotel offers a spa, pool, and other resort amenities, as well as both fine dining and casual dining options. In 2008 the estimated occupancy was 63 percent. The ADR was estimated to be $206, which is the rate leader among the competitive set. The business mix at the Sandpearl is estimated to be 22 percent corporate transient, 36 percent group and 50 percent leisure. I I I I The property also has a separate tower of residential units that was completed in mid-2008. Plans for additional units in Phase II have not yet been released. Belleview Biltmore Resort - The Belleview Biltmore is the oldest property in the set as it opened originally in 1897 with 145 rooms. Since then millions of dollars have been invested into the historic hotel over various owners and decades and it now has 226 rooms. Among the additions were a spa, golf course, and pool. The property is set to close imminently to undergo a multi-million dollar total restoration and open again in 2012. The restoration will be a complete overhaul of the facility, including more than $100 million of improvements to its meeting space, guest rooms and planned underground parking facility. The Biltmore plans to attract higher end group business with what will be 40,000 square feet of quality indoor function space. I I I I I The estimated occupancy in 2008 for the Belleview Biltmore was 55 percent, which was the lowest in the set. The ADR was estimated to be $149. When the hotel reopens, it is expected to be a rate leader in the market and cater to high-end leisure and group business. Currently the segmentation is 33 percent corporate transient, 33 percent group and 34 percent leisure. Marriott Suites Clearwater Beach - The Marriott Suites, located on the beach, has 220 suite-style rooms and opened in 2004. The hotel has 7,500 square feet of meeting space, as well as fitness center and business center. Other onsite amenities at the hotel include salon, day spa, pool, several dining options and numerous retail shops. Clearwater Convention Center Feasibility Study Chapter 6 Page 7 I I I I I I I I I I hunden strategic partners In 2008 the estimated occupancy for the Marriott Suites was 71 percent, among the highest in the set. ADR was estimated to be $169. The business mix for the Marriott is primarily leisure, which accounts for 52 percent of business, and both group and corporate transient business are estimated to be 24 percent of the total demand. Holiday Inn and Suites Clearwater Beach - Located on Clearwater Beach, the Holiday Inna and Suites has 189 rooms and opened in 2007. The hotel has three meeting rooms, which total 1,900 square feet of space. There is one restaurant on the property and it serves breakfast, lunch and dinner. There are also two bar/lounges at the Holiday Inn. The estimated occupancy in 2008 was 73 percent and the ADR for the Holiday Inn and Suites was estimated to be $159. The estimated segmentation for the Holiday Inn is 26 percent corporate transient, 18 percent group, and 56 percent leisure. I I I I Residence Inn Downtown - The Residence Inn is the only property in the set that is located in downtown Clearwater. The hotel opened in late 2008 and has 115 rooms, with full kitchens and separate living/sleeping areas. Guests have access to complimentary breakfast each morning. The Residence Inn offers a heated outdoor pool, fitness center and business center. For the time the hotel was open in late 2008, it was estimated to achieve an occupancy rate of 90 percent, which is the highest for the set, and generate an ADR of $118. The Residence Inn gets most of its business from leisure and corporate transient visitors, each with 40 percent of the total demand. The remaining group business accounts for 20 percent. I I I I I I I I Market segmentation for the set averaged 23 percent corporate transient, 30 percent group, and 47 percent leisure. A majority of the beach properties in Clearwater target leisure guests and groups while the Residence Inn Downtown captures more corporate transient business, compared to the others in the set. The following table shows the estimated market segmentation for the competitive set. Table 6-4 Estimated Competitive Set Segmentation Corporate Transient 23% Group 30% leisure 47% Total 100% Source: HSP Changes to Competitive Set The only hotel that is under construction that will be directly competitive to the proposed hotel is the Hyatt Regency Clearwater Beach Resort and Spa, which is scheduled to open in January of 2010. The Hyatt will have 250 guestrooms and 12,500 square feet of function Clearwater Convention Center Feasibility Study Chapter 6 Page 8 hunden strategic partners space, including a 4,000 square foot ballroom. Although the hotel will be located on the beach, it will still be competitive due to market mix and quality. The Belleview Biltmore is scheduled to close for total renovation of its 226 rooms this year. It is assumed that the property will be off-line for roughly two years until the restoration is complete in 2012. This temporary change in supply has an effect on occupancy of the set by lowering the rooms available to accommodate the demand, thus pushing occupancy upward. A downtown hotel is in the planning process to be located on the site of the current Harborview Convention Center. The hotel is expected to be 180 rooms and will be part of a larger development that is to include a museum, children's activity center, food plaza, and access to the new marina being developed adjacent to Coachman Park. If built the hotel will likely open in 2013. Other hotels had been discussed as in pre-development prior to the recession, however investigation revealed that these are all on indefinite hold. Most were not considered to be large competitive properties to a downtown convention hotel. Competitive Set Performance HSP used Smith Travel Research data to analyze the competitive set of seven hotels described above. The following table displays historical room supply, demand, occupancy, rate, and RevPAR for the selected primary competitive supply of hotels up to March of 2009. Table 6-5 Historical Supply, Demand, Occupancy, ADR, and RevPar for Competitive Hotels Annual Available Room Year Avg. Room % Nights % Occ. % ADR % RevPar % Available Nights Change Sold Change Change Change Change Rooms 2003 1,558 568,670 -- 368,889 - 64.9% - $114.96 -- $74.58 - 2004 1,558 568,670 0.0% 368,804 0.0% 64.9% 0.0% $124.65 8.4% $80.84 8.4% 2005 1,476 538,780 -5.3% 360,566 -2.2% 66.9% 3.2% $141.99 13.9% $95.02 17.5% 2006 1,477 539,024 0.0% 359,456 -0.3% 66.7% -0.4% $155.05 9.2% $103.40 8.8% 2007 1,621 591,785 9.8% 384,977 7.1% 65.1% -2.4% $159.10 2.6% $103.50 0.1% 2008 1,727 630,349 6.5% 423,881 10.1% 67.2% 3.4% $178.70 12.3% $120.17 16.1% 2O(lfi,'n1l: ........ Ie. 1162450 7(2% 115663 .1~9% .11:3%< -'4,9% $295.24 . ,-2(5% ' $1146:38< t,~7;3% Proiected 2009 1,613 588,765 -6.6% 428,120 1.0% 72.7% 8.1% $171.55 -4.0% $124.75 3.8% CAGR* (2003-2008) 2.2% 3.0% 0.7% 11.1% 12.2% 2.2% 'Compound Annual Growth Rate Sources: STR, HSP Demand growth for room nights in the set ranged from a decline of 2.2 percent to a 10.1 percent increase. Average daily rate growth has been positive since 2003, with an average increase of more than 11 percent throughout the period, except for 2009, where it is expected to fall four percent due to the current economic conditions. Occupancy has Clearwater Convention Center Feasibility Study Chapter 6 Page 9 I I I I I I I I I I I I I I I I I I I r I I h u nden strategic pa rtners destination development consulting I increased to just above 71 percent year-to-date, despite a compound average growth rate of 2.2 percent in supply. I The following figure shows supply and demand for rooms within the set over the 2003 - 2009 period. I Figure 6-4 Monthly Supply &; Demand I 60,000 55,000 ~. - iTtti::,ty+.111 ~ t I , · I , ~tl' ;~~rlltnlr" rt~----,----,--a-': I ~t II ~~~,~ I " I II it ",I I :".' I ._ II 1 I 1111.ll~ II "t! tt-I~ .I~'L' ",' '!ff :PP"P~~J~J.~U" I ..1, I '.- :1 . , ) I" I 'I I . ~ 'lIT ,I '1~ k-',:"~ ffl+l~~ t~,~rll'J' "'1' . ' .' .'~ il' " . ,. ,I ~ , . 'I'l.!. " .... -.:rr.. .:r."~"IIi.~' r- -.- ,;,~ .. - . ..'~ q -' 1-' i1- . ' .... ,t .,' ~ -'... . iL ~J. ' -' '. ~ -- t '\+. 50,000 I 45,000 40,000 I 35,000 30,000 25,000 ~ I 20,000 15,000 -',-' . .IL. ~. I 10,000 5,000 I' ,~ I o ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~ _ Supply _ Demand - 12 per. Mov. Avg. (Supply) - 12 per. Mov. Avg. (Demand) I I Demand increased continually, although was fairly flat in 2008 until the Residence Inn opened. The following figure shows room revenue changes by month (year over year). I I I I I Clearwater Convention Center Feasibility Study Chapter 6 Page 10 I .1 hunden strategic partners destinatIOn development consulting I Figure 6-5 I Monthly Year-Over-Year Total Competitive Set Room Revenue Change I I I 50.0% 40.0% . 10.0% I 30.0% 20.0% I I -10.0% . -20.0% ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~&~~~&~~~&~~~&~~~&~ I I Since January 2003, nearly all months in the period have shown positive room revenue growth, except once the recession hit in earnest in the fall of 2008. This decline is expected to continue for much of the year. I The next figure shows Revenue Per Available Room (RevPAR), which is the product of occupancy and rate. I I I I I Clearwater Convention Center Feasibility Study Chapter 6 Page 11 I I I I I I II I I I h un den 5 tra te gi cpa rt n e rs destination development consulting Figure 6-6 Revenue Per Available Room I I I I I I I I I I I I $220.00 $200.00 $180.00 $160.00 $140.00 $120.00 $100.00 $80.00 $60.00 $40.00 M M M M ... 0 0 0 0 0 c: 5- ~ 1:: c: ~ <( 0 ~ g g g ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ g ~ ~ ~ g ~ ~ ~ g ~ : ~ g ~ ~ ~ g ~ The smooth line above shows the 12-month moving average. RevPAR has generally increased since the beginning of the period in 2003, except for a slight decrease in the last quarter of 2007. On average the revenue per available room has grown more than $40 since 2003. However, it peaked in the fall of 2008 and is now expected to decline in 2009. The following figure shows monthly year-over-year change in occupancy. Clearwater Convention Center Feasibility Study Chapter 6 Page 12 h u n den s tra te gi cpa rt n e rs destination development ccnsultlng I I Figure 6-7 I I I I I Occupancy & Year-Over-Year Change 100.0 0.0 I I I I I I I 80.0 60.0 icl! 40.0 20.0 -20.0 .., .., .., III III III \0 \0 \0 " " " co co co en 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 l: >- Co l: >- Co l: >- Co l: >- Co l: >- Co l: III III Gl III III Gl III III Gl III III Gl III III Gl III .., ::E III .., ::E III .., ::E III .., ::E III .., ::E III .., . Occupancy .Vear-over-Vear Change Occupancy has fluctuated year over year during the period. The tourism season accounts for the majority of the peaks and valleys throughout the year. Year-over-year changes have been negative since the end of 2008 and are expected to continue during 2009. The following table shows the monthly room demand and ADR trends extended back to 2003. Clearwater Convention Center Feasibility Study Chapter 6 Page 13 I I I I I I I h u n den 5 t ra t e gi cpa rt n e rs destination development consulting I II I Figure 6-8 Monthly Market Room Demand & Avg. Monthly Rate $375 50,000 I I $350 $325 45,000 $300 40,000 $275 'l:I 35,000 :; E Gl 30,000 ~ ~ aI Z 25,000 E o o II: 20,000 ~ ~ .. c 15,000 ~ I Cll 1ii $250 II: ~ $225 IQ Q ~ $200 IQ ~ $175 C $150 I $125 10,000 $100 I $75 5,000 $50 Jan 03 Jul 03 Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan Og o I I I _Average Daily Rate - 12 per. Mav. Avg. (Demand) -<>- Demand - 12 per. Mav. Avg. (Average Daily Rate) I On average, monthly demand reached nearly 35,000 room nights in September up from its low point in the end of 2003 at roughly 30,000. The months of September and December are typically the slowest for Clearwater. Average monthly rates have climbed steadily since 2004 when they were roughly $118. At the end of the reporting period in September 2008 average monthly rates had increased to more than $175. The opening of the Residence Inn caused the spike in demand at the end of 2008, despite the economic conditions. I The following figure displays the seasonality of occupancy during the last five years. I I I I I Clearwater Convention Center Feasibility Study Chapter 6 Page 14 I h u n den 5 tra te gi cpa rt n e rs destmatIOn development consult,ng I I Figure 6-9 I Seasonality of Occupancy 2003 - 2008 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dee I I I .1 100% 50% - .1'!>.."~' ~" 90% 80% 70% 60% - 40% - 30% - The competitive set's seasonality averages show that the strongest months for room demand are March and April (Spring Break), with March as the highest month, averaging nearly 83 percent. September and December are the weakest months, which is typical for many warm-weather tourist destinations. Overall, occupancy ranges from 45 percent to 82 percent throughout the year. I I Figure 6-10 I I The following figure shows the seasonality of rate. Seasonality of Rate 2003 - 2008 $220 - $200 - $180 $160 $140 - $120 - $100 $80 - $60 I I I Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dee I I Average rates range fairly significantly throughout the year, averaging between $180 and $118. In the past year, rate has been the maximum show, ranging from $140 to $215. Clearwater Convention Center Feasibility Study Chapter 6 Page 15 I I The following figure shows the seasonality of RevPAR. I I I h u n den 5 t ra te gi cpa rt n e rs destinatIOn development consultln9 I I Figure 6-11 Seasonality of RevPAR 2003 - 2008 $200 I I I $100 $60 $20 I I Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dee As would be expected from the prior graphs, RevPAR follows the same trends of occupancy and ADR, peaking in March and bottoms out in September and December. I I The following figure shows occupancy by day of week during the last 12 months of data. Figure 6-12 Occupancy by Day of Week April 2008 - March 2009 I I I 100% 90% - 80% - 70% - 60% 50% - 40% - 30% 20% - 10% - 0% I I SUN MON TUES WED THURS FRI SAT I I I Sunday is typically the slowest night in the hotel business and this holds true in Clearwater. Weeknight (Monday through Thursday) average occupancies are between 60 and 70 percent. Weekend occupancy reaches 80 percent on average on Saturdays due to the large leisure segment in Clearwater. This suggests that relying on corporate transient demand may be perilous in this market, despite the performance of the Residence Inn. Clearwater Convention Center Feasibility Study Chapter 6 Page 16 h u nden strategic partners destination development con5ult/lJ9 I I Figure 6-13 II I The following figure shows average daily rate by day of week. Average Daily Rate by Day of Week April 2008 - March 2009 $270 $250 $230 $210 $190 - $170 $150 $130 $110 - $90, __Max -a- Average t:. Min -=.'~~/. I I I Sun Mon Tues Wed Thurs Fri Sat I Clearwater experiences fairly constant rates throughout the week with the exception of small increases on the weekends. I Unaccommodated Demand I I Unaccommodated demand is defined as demand that would have been captured by the market, but for a lack of available rooms. This demand is therefore deferred to later dates, accepts lesser accommodations, moves just outside the competitive set, moves its business to another area, or cancels plans altogether. As new properties are added to the market, it is expected that this demand will be accommodated in the new supply. In most markets, average monthly demand in excess of 70 percent indicates unaccommodated demand. For every month that occupancy was greater than 70 percent, it is assumed that a portion over that amount was unaccommodated. I I I The following figure shows the estimated number of unaccommodated room nights in the competitive set historically. I I Clearwater Convention Center Feasibility Study Chapter 6 Page 17 I I I I I I I I II I h u nden strategic partners destinatIOn development consulting Figure 6-14 Estimated Unaccommodated Room Nights 'a GI .... III ra.... 'as:. o en Ez E E o 0 ~ 0 raa: c ;:) 14,000 12,000 10,000 8,000 6,000 4,000 2,000 2003 2004 2005 2006 2007 2008 Year I I I I I I I I I I I I For the competitive set, it is estimated that there were roughly 8,000 unaccommodated room nights in 2003. However, the excess demand increased to nearly 12,500 room nights by 2008. It is not expected that there will be much unaccommodated demand from occupancies over 70 percent in 2009, due to the recession. Conclusion The hotel market in Clearwater has performed well in the last few years, with healthy occupancy levels and strong rate growth. In addition, the Residence Inn has proven that there is a market for quality branded hotel accommodation downtown. The closing of the Belleview Biltmore this year will drive occupancy up in the short term until the property comes back on line or additional competitive supply is introduced. Demand declined the first three months of 2009 and HSP expects that to moderate during the balance of the year, but not rebound until 2010 at the earliest. Overall, the only barometer of demand for a downtown hotel is the Residence Inn and it has performed well, but at a rate level that makes it difficult to know the breadth and depth of downtown demand. Based on our research, HSP believes there is demand for a high quality hotel downtown above the quality offered at the Residence Inn. A convention center will generate room night demand, which will partially support a new full-service convention hotel. Over the next ten years as downtown continues to improve, a mix of hotels makes sense: a larger convention hotel, a smaller transient quality hotel (such as the 180-room hotel proposed at the site of the current Harborview Center), and one or two select service hotels. A room count between 800 and 1,000 rooms spread amongst this group would provide a variety of price/quality options and allow a convention center to put together a solid room block package beyond the beach. Clearwater Convention Center Feasibility Study Chapter 6 Page 18 I hu nden strategic partners destination development consultmQ I COMPARABLE AND COMPETITIVE FACILITIES I In order to understand both the competitive nature of facilities and how similar facilities perform, a significant amount of analysis was conducted on a variety of relevant convention centers. HSP conducted an analysis of a variety of smaller convention centers and one convention hotel that either will compete with a new facility in Clearwater or are comparable or both. I I The following table shows the summary data points for comparable facilities, Clearwater Convention Center Comparable and/or Competitive Meeting Facilities Per Total Mtg. Other Total Per Guest Exhibit Grand Junior Other Guest Meeting Room Function Function Guest Facility City Rooms Space Ballroom Ballroom Ballroom Room Space Divisions Space Space Room Ocean Center Daytona Beach, FL N/A 94,000 4,600 2,500 4,600 N/A 32,000 11 42,000 179,700 N/A Caribe Royale Orlando Hotel Orlando, FL 1,338 0 40,000 26,000 6,400 49 35,000 36 0 107,400 80 51. Charles Convention Center 51. Charles, MO N/A 27,600 16,200 6,000 0 N/A 56,000 6 0 105,800 N/A Jackson Convention Complex Jackson, M5 N/A 60,000 8,400 8,400 8,400 N/A 10,000 10 0 95,200 N/A Overland Park Convention Center Overland Park, K5 N/A 58,500 8,700 8,500 7,800 N/A 15,000 8 0 98.500 N/A Total 1,338 240,100 77,900 51,400 27,200 - 148,000 71 42,000 586,600 - Average 1,338 48,020 15,580 10,280 5,440 49 29,600 14 8,400 117,320 80 Source: Smith Travel Research, Mpoint, Respective Properties, HSP Table 7-1 I I I I I I The facilities have total function space between 95,000 and 180,000 square feet. The facility with the largest amount of function space is the Ocean Center located in Daytona Beach, Florida. The Caribe Royale Hotel in Orlando, Florida represents the only hotel-convention center combination in the set. The three other complexes are stand-alone convention centers, although the Overland Park Convention Center has a Sheraton hotel attached that operates as a separate but supporting enterprise. I I The facilities being profiled represent either a competitive development or a comparable development. Three of the four facilities are competitive based on their location in the southeast region including the Ocean Center, the Caribe Royale Hotel and the Jackson Convention Center, The Harborview Convention Center has lost business to all three complexes in the past. The Overland Park Convention Center located in Kansas and the St. Charles Convention Center located in Missouri are two comparable developments based on their size and location to the local Metropolitan Statistical Area's Central Business District (OPCC's location to Downtown Kansas City, St. Charles CC to Downtown St. Louis and Clearwater's location relative to Downtown Tampa), I I I Clearwater Convention Center Feasibility Study Chapter 7 Page 1 I I I I I I I I I I hunden strategic partners Ocean Center, Daytona Beach, Florida The Ocean Center is located in Daytona Beach, Florida. Originally opened in 1985, the facilities consisted of 60,000 square feet of function space. An expansion of the center opened in 2009, adding 120,000 square feet of function space. The following table shows the key data points for the Ocean Center. Location Opened Table 7-2 Ocean Center Key Data Facts Daytona Beach, FL Originally in 1985, Expansion in 2009 I I I I I I I I I I I I Cost of Construction Original Cost of Construction Expansion Cost Owner/Operator $42 Million $76 Million Volusia County, FL Source: Ocean Center, Volusia County, HSP The original cost of construction in 1985 was $42 million and was funded by $29 million in revenue bonds, $9 million in tourist tax revenue and $4 in interest earned on capital investment funds. The expansion of Ocean Center cost an additional $76 million, which was funded by a one percent increase in the area's resort tax. The following is a photo of the facility. Clearwater Convention Center Feasibility Study Chapter 7 Page 2 Clearwater Convention Center Feasibility Study Chapter 7 Page 3 I I I I I I I I I I I I I I I I I I I h u n den 5 t rat e gi cpa rt n e rs destination development consulting The following table shows a breakdown of the function space available at the Ocean Center. I I I I I I I hunden strategic partners Ocean Center, Daytona Beach, Florida The Ocean Center is located in Daytona Beach, Florida. Originally opened in 1985, the facilities consisted of 60,000 square feet of function space. An expansion of the center opened in 2009, adding 120,000 square feet of function space. The following table shows the key data points for the Ocean Center. Location Opened Table 7-2 Ocean Center Key Data Facts Daytona Beach, FL Originally in 1985, Expansion in 2009 I I I I I I I I I I I I Cost of Construction Original Cost of Construction Expansion Cost Owner/Operator $42 Million $76 Million Volusia County, FL Source: Ocean Center, Volusia County, HSP The original cost of construction in 1985 was $42 million and was funded by $29 million in revenue bonds, $9 million in tourist tax revenue and $4 in interest earned on capital investment funds. The expansion of Ocean Center cost an additional $76 million, which was funded by a one percent increase in the area's resort tax. The following is a photo of the facility. Clearwater Convention Center Feasibility Study Chapter 7 Page 2 I I hu nden strategic partners destination development consulting I I Ocean Center Convention Center Function Space By Division Total (SF) (SF) Divisions Exhibit Space 94,695 94,695 1 Ballroom Space 11,715 3 Ballroom A 4,615 Ballroom B 2,485 Ballroom C 4,615 Meeting Rooms 31,769 31,769 11 Arena 42,000 42,000 1 180,179 180,179 16 Hotel Rooms n1a Total Exhibit Space 94,695 Total Ballroom Space 11,715 nfa Total Meeting Space 31,769 nfa Other Soace 42,000 n1a Total Function Space 180,179 nfa Total Exhibit Space Divisions 1 f100 Guest Rms nfa Ballroom Divisions 3 nfa Meeting Room Divisions 11 nfa ArenafOther Divisions 1 nfa Total Divisions (includina Ballroom) 15 nfa Source: mpoint.com, HSP Table 7-3 I I I I I I I I The Ocean Center consists of one exhibit hall, three ballrooms, 11 meeting rooms and an arena. The complex includes over 180,000 square feet of function space including a 94,000 square foot exhibit hall, 42,000 square foot arena and nearly 32,000 square feet of meeting space. I The following table shows the number of events by event type for the Ocean Center. I I I I I Clearwater Convention Center Feasibility Study Chapter 7 Page 4 I 224 I I I I I I I hunden strategic partners Table 7-4 Ocean Center Events By Type 2008 Number of Events Attendance 24 57,086 o 0 13 78,070 1 2,247 7 115,118 9 3,421 12 19,743 66 275,685 Event T e ConventionsfTrade Shows Concerts Community Events Family Shows Consumer Banquets S ortin Events Total Event Days Source: Ocean Center, HSP Orlando, FL 1996 $30 Million 1,338 Caribe Royale I I I I I I I I I I I I In 2008, the Ocean Center hosted 66 events with over 275,000 attendees. A total of 224 event days for the year were derived from the 66 events. The largest contributor to attendance was consumer shows, while conventions and trade shows represented the most popular event type. Caribe Royale Hotel & Convention Center, Orlando, Florida The Caribe Royale Hotel is located in Orlando, Florida, one of the nation's most popular destinations for conventions and meetings. Opened in 1996, the hotel includes more than 1,300 rooms and over 137,000 square feet of function space with 36 meeting rooms and three ballrooms. Table 7 The following table shows the key data points for the Caribe Royale Hotel. Caribe Royale Orlando Key Data Points Location Year Complete Expansion Cost in 2003 Number of Rooms Owner/Management Source: Caribe Royal, HSP Caribe Royale Hotel is privately owned and operated. In 2003, additional meeting and ballroom facilities were added to the complex at a cost of roughly $30 million. While there are other larger hotels in the Orlando area, the combination of size and pricefvalue allow the Caribe to compete head to head with Clearwater. Clearwater Convention Center Feasibility Study Chapter 7 Page 5 I I I I I I I h u nden strategic partners destinatIOn development consulting The following is an image of the hotel and meeting facilities. Fi ure 7-2 I I I I I I I I I I I I The following table shows a breakdown of the function space offered at the Caribe Royale Hotel. Clearwater Convention Center Feasibility Study Chapter 7 Page 6 hunden strategic partners de5tmation developmentcco5ultmg I I Total (SF) By Division (SF) Divisions I I I I I Table 7-6 Caribe Royale Function Space Ballroom Facilities Grand Sierra Ballroom Caribbean Ballroom Martinique Ballroom Meeting Rooms 40,000 40,000 26,000 26,000 6,400 6,400 35,120 35,120 36 107,520 107,520 38 Hotel Rooms Total Ballroom Space Total Meeting Space Other S ace Total Function Space 1,338 72,400 Per Guest Room 35,120 29,720 137,240 54 26 22 103 I I 3 /100 Guest Rms 0.22 36 0.05 39 0.11 I I Source: Caribe Royal, MPoint.com, HSP The Caribe Royale Hotel includes three ballrooms encompassing over 72,000 square feet. The complex's 36 meeting rooms provide a total of 35,000 square feet of function space. The hotel does not categorize the types of events that take place at the facilities; it classifies most group events as conventions and banquets. However, about five percent of events are trade shows and less than one percent are local meetings. Ta Caribe Royale Annual Performance Data for 2008 Room Nights Generated by Group Events Group Events Avg Monthly Events for 2008 Typical Avg Monthly Events I I I The following table shows the performance data of the function space for 2008. 140,000 220-240 18-20 20-40 I I Source: Caribe Royale, HSP Clearwater Convention Center Feasibility Study Chapter 7 Page 7 I I I I I I I I I I I I I I I I I I I I I I hunden strategic partners The Caribe Royale Hotel measures the performance of its function space based on the number of room nights generated. In 2008, conventions generated over 140,000 room nights. The facility hosted between 220 and 240 group events, which averages out to 18 to 20 events per month. On average, the complex usually hosts between 20 and 40 events per month. The fiscal year 2008 was a very slow year for the facilities, especially after 2007, one of the busiest event years since their opening in 1996. Jackson Convention Complex, Jackson, Mississippi The Jackson Convention Complex is located in Jackson, Mississippi and recently opened its doors in January 2009. The complex features over 95,000 square feet of function space including two exhibit halls, five ballrooms and ten meeting rooms. The facility is owned by the City of Jackson and managed by SMG. The following table shows the key data points for the Jackson Convention Complex. Table 7-8 Jackson Convention Complex Key Data Facts Location Opened Cost of Construction Owner/Operator Management 2009 Expected Revenue 2009 Expected Expenses Jackson, MS 2009 $65 Million City of Jackson SMG $1.3 Million $2 Million Source: JCC, HSP The total cost of the complex was roughly $65 million dollars. The expected revenue for the complex for its first year of operation is $1.3 while expenses are projected to cost $2 million, leaving a $700,000 shortfall for the year. The following is a figure of the Jackson Convention Complex. Clearwater Convention Center Feasibility Study Chapter 7 Page 8 Clearwater Convention Center Feasibility Study Chapter 7 Page 9 I I I I I I I I I I I I I I I I I I I h un den 5 t ra t e gi cpa rtn e rs destinatIOn development consulting Fi ure 7-3 1..: I ' I I . -------j I I ..-1__..--t.-- '--1 - --1- j 1 ...J /.--,--- '1 __.....J .-- ,I ........J ..-. l_.../I..~..---I .-...-.. ..' ......}.-------T ,.../ .!!=(. . 'C~r.I/I/r/I,:-+ ~, " r' i; .t.~ r'::/I:;:.t.:S..-"r~~ . ,.' ',. '.. j.~ ~ I J , . .~,;.c,.t 1., ......: I '-'..--r-,.l-/ -,"" ' \ .. ..,~-~--.' r' ' I ' ,,' 'r,,,,riill!!i;;J:::7:-::' _--rt'-,-_.J'- 1 _ ..' _..~..jlf1JfftJ..,{."'ff'-"f.. ';'"--J;---r---+---L- ___.J-' .. .." .._--~..- w. ~.. .1_--,--...1. . ' I " I ' ' ',,- l!1 I. '- '--- --- ~~ ....... ...........-- The following table shows the function space available at the Jackson Convention Complex in further detail. I I hunden strategic partners I I Jackson Convention Complex Function Space Total (SF) By Division (SF) Divisions Exhibit Space Exhibit Hall 60,000 2 Exhibit Hall A 30,000 Exhibit Hall B 30,000 Ballroom Facilities Ballrooms 25,200 5 Ballroom A 4,200 Ballroom B 4,200 Ballroom C 8,400 Ballroom D 4,200 Ballroom E 4,200 Meeting Rooms 10,000 10 Meeting Room 1 1,000 Meeting Room 2 1,000 Meeting Room 3 1,000 Meeting Room 4 1,000 Meeting Room 5 1,000 Meeting Room 6 1,000 Meeting Room 7 1,000 Meeting Room 8 1,000 Meeting Room 9 1,000 Meeting Room 10 1,000 95,200 95,200 17 Hotel Rooms n1a Total Exhibit Space 60,000 Per Guest Room n/a Total Ballroom Space 25,200 n/a Total Meeting Space 10,000 n1a Other Soace 0 n/a Total Function Space 95,200 nla Exhibit Divisions 2 1100 Guest Rms n/a Ballroom Divisions 5 n1a Room Divisions lincl. auditlamDh) 10 n/a Total Divisions (includino Ballroom) 17 nla Source: JCC, mpoint.com, HSP Table 7-9 I I I I I I I I I I I The Jackson Convention Center features 60,000 square feet of exhibit space, including two 30,000 square foot exhibit halls. There are 25,200 square feet of ballroom space and ten meeting rooms totaling 10,000 square feet. The following table shows projected number of events and attendance for 2009 and 2018, based on a study conducted prior to its opening. I I I Clearwater Convention Center Feasibility Study Chapter 7 Page 10 I hunden strategic partners Table 7-10 Jackson Convention Complex Projected Attendance Number of Events Number of Attendees 2009 164 79,600 2018 279 175,300 Source: C.H. Johnson Consulting During the first full year of operation, the Jackson Convention Complex is projected to host 164 events and an estimated 79,600 attendees. By 2018, the complex is projected to host 279 events and an estimated 175,300 attendees. The complex can fit up to 7,000 attendees per event. The Overland Park Convention Center and the St. Charles Convention Center listed above are profiled in the following section, as they are each part of set of pairs with a large urban center and a smaller complimentary smaller center. This is a similar relationship that Clearwater will have with Tampa it develops a new center. Comparable Large City ISmail City Convention Center Pairs Does it make sense for a smaller city within a larger metro area to have a convention center if the largest city has one already? Clearly, in very large metro areas such smaller convention centers exist, often more than one. Examples include multiple convention centers in Atlanta, the Dallas-Fort Worth metroplex, and in the Chicago, Los Angeles and New York markets. However, examples of convention facilities exist and offer implications for Clearwater. The convention centers on the list were chosen based on their proximity to each other in terms of a large urban center and its surrounding smaller cities as well as the overall size characteristics of the metro area and the facilities. This section will focus on what the pairs of centers proVide in terms of space and quality and how the facilities perform. The primary facilities are shown as the primary bullet point, while the smaller facility is listed beneath: . Memphis Cook Convention Center - Memphis, Tennessee o DeSoto County (Mississippi) Civic Center . America's Center - St. Louis, Missouri o St. Charles (Missouri) Convention Center . Kansas City Convention Center - Kansas City, Missouri o Overland Park (Kansas) Convention Center . Duke Energy Center - Cincinnati, Ohio o Northern Kentucky Convention Center - Covington, Kentucky The following table displays how each pair of cities compare to each other in relationship to the large convention center and the facilities' performance. Clearwater Convention Center Feasibility Study Chapter 7 Page 11 I I I I I I I I I I I I I I I I I I I I I hunden strategic partners I I Table 7-11 Comparable CitylSecondary Convention/Meeting Facility Pairs Market st. Louis Cincinnati Average City/Secondary Market St. Louis St. Charles Cincinnati Covin ton KY Metro Area Population 2,793,720 2,121,128 2,037,083 Facil" America'. Center accc Duke Energy Ctr NKCC Primary CC Suburban CC Function Space Exhibij Space 340,000 27,600 195,320 46,080 270,160 37,291 Grand Ballroom 28,416 16,200 57,496 22,800 33,046 21,330 Junior Ballroom nla 6,025 17,248 n/a 17,902 6,025 Meeting Room SF 106,088 6,520 45,246 13,288 71,136 9,221 Other Items (Theater, etc.) SF 145 000 nla n/a n/a 87165 35 525 Total Function Space (SF) 619,504 56,345 315,310 82,168 426,877 72,897 Annual Attendance (CC Only) 720,168 189,635 696,822 150,000 562,332 179,248 Attendance to Exhibit Space Ratio 2.12 6.87 3.57 3.26 2.08 4.81 Est. Room Nights Generated 250,000 20,025 145,000 30,000 171,000 25,581 Room Nights to Exhibij Space Ratio 0.74 0.73 0.74 0.65 0.63 0.69 Gross CC Revenue nla $5,229,893 $11,818,175 nla nla 4,664,398 Convention Ctr. Event Demand (Year): (2006) (2008) (2007) (2006) ConventionsITrade Shows 32 30 17 32 27 24 Public/Consumer Shows 17 26 17 12 15 14 Conferences 8 0 0 0 3 7 Entertainment 1 0 0 0 9 0 Sporting Events 8 0 0 0 15 0 Arena Events 11 0 0 0 5 57 Banquets 37 97 71 63 59 79 Meetings 24 239 75 68 59 153 Miscellaneous 15 34 44 0 37 21 Total Events 153 426 368 175 354 364 Total Events at Conv. Ctr. Only 141 426 368 175 340 307 Attendance per Event at CC Only 5,108 445 1,894 857 1,655 584 I I I I I I . Kansas City does not track true convention center revenue, only appropriations and expenses Source: HSP, Respective Centers I For the comps, the average market size is two million people and the average size of the primary convention facility is 427,000 square feet of function space (including 270,000 square feet of exhibit space). The smaller facilities have approximately one-sixth the total function space (73,000 square feet) and one-seventh the exhibit space (37,000 square feet). However, attendance in the smaller centers is 40 percent of the large facilities (179,000 versus 451,000) and on a per-square-foot-of-exhibit-space metric, the smaller facilities are pulling three times the attendance of their larger city pairs. I I In terms of room nights generated, these small facilities generate from 7,000 to 45,000 room nights per year, or an average of 0.69 room nights per square foot of exhibit space. This compares well to the larger facilities, which average 0.63 room nights per square foot of exhibit space. Strong facilities, whether large or not, can generate more than one hotel room per square foot of exhibit space. I I Small facilities can also generate a large amount of gross revenue from catering and corporate events, as shown by the Overland Park and St. Charles examples. Event levels at the comparable small centers appear healthy, with an average of 316 events averaging 568 attendees each. While the majority of events are meetings and banquets, the small facilities have been able to capture conventions, tradeshows, and consumer shows. The larger, weaker facilities generate fewer events, but each event has approximately three times the attendance of the small facility events. I I I Clearwater Convention Center Feasibility Study Chapter 7 Page 12 I hunden strategic partners I I I I I I I DeSoto County Civic Center, DeSoto, Mississippi The DeSoto Civic Center is located in DeSoto County, along the Tennessee Mississippi border and is a part of the Memphis MSA. The DCC currently consists of a mid-sized arena, a small convention facility, and a theater. The following table shows the size of the rental spaces in the facility. Table 7-12 DeSoto Civic Center Function Space Total (SF) By Division (SF) Divisions Exhibit Space Conference Hall 16,991 8 Conference Hall 1 7,053 Conference Hall 2 2,380 Conference Hall 3 854 Conference Hall 4 864 Conference Hall 5 1,742 Conference Hall 6 864 Conference Hall 7 854 Conference Hall 8 2,380 Meeting Rooms Meeting Room 9 512 512 1 Meeting Room 10 505 505 1 Meeting Room 11 456 456 1 Meeting Room 12 587 587 1 Arena 35,525 35,525 1 Theater 400 Seats 400 Seats 1 54,576 54,576 14 Hotel Rooms 0 Total Exhibit Space 16,991 Per Guest Room nfa Total Ballroom Space 0 nfa Total Meeting Space 2,060 nfa Other Space 35 525 nfa Total Function Space 54,576 nfa Exhibit Divisions 8 f100 Guest Rms nfa Ballroom Divisions 0 nfa Room Divisions line!. auditlamph) 6 nfa Total Divisions lineludina Ballroom) 14 nfa Source: DCC, mpoint.com, HSP I I I I I I I The existing exhibit space is divisible into eight separate areas but in total can be opened to nearly 17,000 square feet. There is currently no ballroom. There are three small meeting rooms also available, plus one dedicated to the River Kings hockey team, totaling 2,060 square feet. The arena floor is 35,525 square feet, so larger events can use this floor space and several each year utilize both the convention hall and arena floor. I I Clearwater Convention Center Feasibility Study Chapter 7 Page 13 I I I I I I I I I I I I I I I I I I I I I I h u nden strategic pa rtners destination development consulting In terms of capacity, if the total exhibit hall is used for a convention, it would be able to accommodate 85 booths. If a full-service convention wants to use the facility, meaning one- third to one-half of the space would be reserved for ballroom functions, this would limit it to 40 booths and a sit-down dinner for 525. At present, if the entire convention hall is used for a sit-down dinner, it can accommodate just over 1,000 people. However, the room is not conducive to this type of usage. The following figure shows the layout of the facility. Fi ure 7-4 \ .... The following table shows the attendance at the facility from FY 2000 through FY 2005. Table 7 DeSoto Civic Center Attendance. Year Attendance 2000 258,047 2001 241 ,949 2002 288,133 2003 260,828 2004 252,344 2005 256,018 Average 259,553 *Fiscal Year Ends September 30 Source: HSP, DCC Clearwater Convention Center Feasibility Study Chapter 7 Page 14 hunden strategic partners I I I I I I I Attendance overall has been relatively stable throughout the period, ranging from 242,000 in 2001 to 288,000 in 2002. In the latest year of data, 2005, the number of attendees was 256,000, which is close to the average of 260,000. The following table shows the number of event days in 2005 by facility within the Civic Center. Table 7-14 DeSoto Civic Center Events by Facility. Year Arena Convention Theatre Parking Total Hall Lot 2000 68 127 25 0 220 2001 60 161 18 1 240 2002 101 217 83 7 408 2003 94 220 114 5 433 2004 207 280 138 14 639 2005 228 420 252 9 909 Average 126 238 105 6 475 *Fiscal Year Ends September Source: HSP, DCC Clearwater Convention Center Feasibility Study Chapter 7 Page 15 I I I I I I I I I I I I The number of event days has increased in total from 220 in 2000 to 909 in 2005. Each component of the facility has shown a significant increase in usage during the period. The arena began with 68 event days and has increased three-fold to 228 in the last full year. The convention hall has also seen event days more than triple, from 127 to 420. The most significant increase occurred between 2004 and 2005, with event days increasing from 280 to 420. The theater has shown a ten-fold increase in usage, from 25 event days to 252 event days. Parking lot event days have ranged from zero to 14 event days. HSP analyzed the convention hall activity to understand the character of demand for the facility. The results are shown in the following table. Table 7 DeSoto County Civic Center Convention Hall Activity FY2006 Event Days % of Total Attendees % Total Avg. Atten. Conference 5 1% 4,160 7% 832 Trade 23 5% 7,145 11% 311 Other 21 5% 6,284 10% 299 Association 7 2% 1,815 3% 259 SMERF 173 41% 23,797 38% 138 Corporate 96 23% 11,295 18% 118 Local 54 13% 5,063 8% 94 Government 41 10% 2,841 5% 69 Total 420 62,400 149 Source: HSP, DCC I I I I I I I I I I I I I I I I I I I hunden strategic partners For fiscal year 2006, there were a total of 420 event days at the facility, generating 62,400 attendees at the facility. The average attendance was nearly 150. The category with the most event days was SMERF (social, military, educational, religious, or fraternal) events, with 173 event days and average attendance of 138. This is typical for small convention facilities as they are not large enough to lure as many larger events. However, the facility did capture five large conferences with an average attendance of 832, 23 trade shows with attendance of 311, and 21 other large events with an average of 299 attendees. There were only seven association conferences, with an average attendance of 259. Corporate events were the second largest event type with nearly 100 event days and an average attendance of 118. Local and government events contributed another 95 event days. As shown by the average attendance, the events are pushing the limits of the physical building accom modations. HSP then analyzed the financial activity at the DCC to understand how much the convention faCility and arena contributes respectively to both revenue and expense. The following table shows the results. Clearwater Convention Center Feasibility Study Chapter 7 Page 16 I hunden strategic partners I Table 7-16 DeSoto Civic Center Fiscal 2006 Operating Income & Expense Revenue Total Arena Convention Events Ticket Sales (net of cost) $162,700 $162,700 $0 Sponsorship $123,800 $123,800 $0 Sign Sales $69,500 $69,500 $0 Luxury Suite Sales $77,100 $77,100 $0 Other $81,129 $52,734 $28,395 Total Operating Revenue $2,617,700 $1,831,638 $752,012 70% 29% Expenses Event Expenses Personnel $600,994 $390,646 $210,348 Food & Beverage $410,899 $164,360 $246,539 Equipment Rental $17,811 $3,562 $14,249 Entertainment $67,500 $64,125 $3,375 Luxury Suite Tickets $53,800 $53,800 $0 Supplies $58,586 $38,081 $20,505 Total Event Expense $1,209,590 $714,574 $495,016 59% 41% General Operating Expenses Personnel $995,094 $646,811 $348,283 Utilities & Phone $721,095 $504,767 $216,329 Repairs & Maintenance $168,097 $117,668 $50,429 Insurance $280,899 $196,629 $84,270 Taxes, Licenses & Other Insurance $44,282 $28,783 $15,499 Supplies $41,068 $28,748 $12,320 Retirement $73,206 $47,584 $25,622 Professional Fees $28,665 $18,632 $10,033 Janitorial $16,688 $11,682 $5,006 Travel $6,933 $4,853 $2,080 Waste Removal $11,044 $7,731 $3,313 Fuel $5,131 $4,105 $1,026 Signage $2,335 $2,335 $0 Other $15,281 $10,697 $4,584 Total General Operating Expense $2,409,818 $1,631,024 $778,794 68% 32% Total Expenses $3,619,408 $2,345,598 $1,273,810 65% 35% Net Operating Income ($1,001,708) ($513,960) ($521,798) 51% 52% Source: HSP, DCC I I I I I I I I I I I I I As shown, there was total revenue of $2.6 million at the Dee in FY 2006 and $3.6 million of operating expenses, leading to an operating loss of $1.0 million. This is not unusual for either an arena or convention facility, especially a small facility such as the Dec. Overall, the convention hall contributed 29 percent of total revenue, while the arena contributed 70 percent. I I Clearwater Convention Center Feasibility Study Chapter 7 Page 17 I I I I I I I I I h u n den 5 t ra t e gi cpa rt n e rs destinatIOn deveiopment consuitmg On the expense side, personnel are a primary cost for both the arena and convention hall, contributing over $600,000 to expense for the DCe. In total, the convention hall is projected to account for $1.3 million, or 35 percent, of total expense. However, due to the lower revenue generation, the convention hall contributes half of the overall net operating loss. Based on the strong performance of the facility, an expansion is currently planned that will expand the exhibit space and add a large ballroom. Historically, the DCC has not been a competitive threat to the MCCC,; however, with expansion this could change. While the expanded DCC will not be able to host the larger conventions and tradeshows, it will be able to compete effectively for smaller events and those with pricing concerns. I I I I I I I I I I I I St. Charles Convention Center, St. Charles, Missouri The St. Charles Convention Center is located in St. Charles, Missouri, which is a western suburb of St. Louis. The town has significant historic character, featuring a downtown from the 1800s and location of the site where Lewis and Clark launched part of their expedition. The city is a gaming location with riverboats and also features the Family Arena. The convention center was completed in 2005 and includes an attached 296-room Embassy Suites hotel. The hotel management manages the ballroom of the convention center. The following figure shows the St. Charles Convention Center and Embassy Suites hotel. The facility has been open since 2005. The following table shows the facility breakdown at the convention center. Clearwater Convention Center Feasibility Study Chapter 7 Page 18 I I I I I I I I I I I I I I I I I I I hunden strategic partners On the expense side, personnel are a primary cost for both the arena and convention hall, contributing over $600,000 to expense for the DCC. In total, the convention hall is projected to account for $1.3 million, or 35 percent, of total expense. However, due to the lower revenue generation, the convention hall contributes half of the overall net operating loss. Based on the strong performance of the facility, an expansion is currently planned that will expand the exhibit space and add a large ballroom. Historically, the DCC has not been a competitive threat to the MCCC,; however, with expansion this could change. While the expanded DCC will not be able to host the larger conventions and tradeshows, it will be able to compete effectively for smaller events and those with pricing concerns. St. Charles Convention Center, St. Charles, Missouri The St. Charles Convention Center is located in St. Charles, Missouri, which is a western suburb of St. Louis. The town has significant historic character, featuring a downtown from the 1800s and location of the site where Lewis and Clark launched part of their expedition. The city is a gaming location with riverboats and also features the Family Arena. The convention center was completed in 2005 and includes an attached 296-room Embassy Suites hotel. The hotel management manages the ballroom of the convention center. The following figure shows the St. Charles Convention Center and Embassy Suites hotel. The facility has been open since 2005. The following table shows the facility breakdown at the convention center. Clearwater Convention Center Feasibility Study Chapter 7 Page 18 hunden strategic partners I I Table 7-17 I I St. Charles Convention Center Function Space Total (SF) By Division (SF) Divisions Exhibit Space Exhibit Hall 27,600 2 Exhibit Hall North 14,500 Exhibit Hall South 13,100 Ballroom Facilities Grand Ballroom 16,200 6 Grand Ballroom A 4,010 Grand Ballroom B 4,010 Grand Ballroom C 4,010 Grand Ballroom D1 1,390 Grand Ballroom D2 1,410 Grand Ballroom D3 1,370 Jr. Ballroom 6,025 4 Jr. Ballroom A 1,450 Jr. Ballroom B 1,530 Jr. Ballroom C 1,530 Jr. Ballroom D 1,515 Meeting Rooms Boardroom 1,270 1,270 1 Meeting Room 101 1,100 1,100 1 Meeting Room 102 1,000 1,000 1 Meeting Room 103 1,000 1,000 1 Meeting Room 104 840 840 1 Meeting Room 105 1,310 1,310 1 56,345 56,345 18 Hotel Rooms 296 Total Exhibit Space 27,600 Per Guest Room 93 Total Ballroom Space 22,225 75 Total Meeting Space 6,520 22 Other Space 0 0 Total Function Space 56,345 190 Exhibit Divisions 2 /100 Guest Rms 1 Ballroom Divisions 10 3 Meeting Room Divisions Cinc!. auditlamphl 6 2 Total Divisions lincludina Ballroom) 18 6 Source: S1. Charles CC, mpoin1.com, HSP I I I I I I I I I I The convention center has approximately 55,000 square feet of total function space with 27,600 square feet of exhibit space. There are also two ballrooms that provide the facility with over 22,200 square feet of ballroom space. The exhibit hall is connected to the small ballroom, so it can be increased to over 33,000 square feet for consumer shows. The I I Clearwater Convention Center Feasibility Study Chapter 7 Page 19 I I I I I hunden strategic partners I convention center is adjacent to the John Q. Hammons Embassy Suites, which offers 296 guest rooms. The following table shows the event and room night activity at the St. Charles Convention Center from 2005 to 2008. St. Charles Convention Center Demand . Events Attendance Room Nights Avg. AttenJEvent Avg. Rm NlghtsJEvent 2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008 Conventions 5 6 10 9 3,130 5,820 16,949 12,162 1,322 9,360 6,186 3,885 626 970 1,695 1,351 264 1,560 619 432 Tradeshows 8 31 25 21 5,070 15,736 22,146 15,711 491 3,331 3,923 2,759 634 508 886 748 61 107 157 131 Consumer Shows 19 24 19 26 63,946 63,387 58,362 42,482 2,223 2,706 1,870 2,631 3,366 2,641 3,072 1,634 117 113 98 101 Meetings 168 289 287 239 21,573 40,157 44,315 43,482 2,485 6,068 6,424 6,584 128 139 154 182 15 21 22 28 Banquets 66 86 98 97 12,729 17,976 21,979 22,176 463 846 670 2,993 193 209 224 229 7 10 7 31 S~ial Events 9 19 23 34 3700 17361 25884 35499 445 1197 952 1052 411 914 1125 1 044 49 63 41 31 Total 275 455 462 396 110,148 160.437 189,635 143.639 7,429 23,508 20.025 13,260 401 353 410 363 27 52 43 33 Change - 65% 2% -14% - 46% 18% .2"" - 216% -15% -34% - -12% 16% -12% - 91% -16% -23% Sotn:e: St. Charles ConventIon Center I I Table 7-18 I I I In 2008 the St. Charles Convention center logged declines in the number of events, attendance, room nights and averages for attendances and room nights per event. This is due to the economic climate that has been challenging to a number of facilities. The following table shows the income and expenses for the faCility from 2005 to 2008. I Table 7-19 St. Charles Convention Center Income & Expense Summary 2005 2006 2007 I Item 2008 Income Rental $451,800 $963,700 $992,400 Service Income $231,200 $528,700 $555,600 Ancillary Income $1.206.492 $2.598.700 $3.197.200 Gross Operating Revenue $1,889,492 $4,091,100 $4,745,200 Expenses Event Expense $447,400 $1,179,800 $1,552,200 Personnel $1,232,500 $1,830,900 $1,995,000 Operating Expense $942.100 $1.505.200 $1.560.900 Total Expense $2,622,000 $4,515,900 $5,108,100 Net Profit ($732,508) ($424,800) ($362,900) Other Revenue $77,653 $137,800 $140,900 Net Income (Loss) ($654,855) ($287,000) ($222,000) Source: St. Charles Convention Center I I I I $1,127,607 $559,692 $3.542.594 $5,229,893 $1,537,372 $2,233,880 $1.614.828 $5,386,080 ($156,187) $166,328 $10,141 I Gross revenue was $5.2 million 2008 and expenses totaled $5.4 million, leading to the first break-even instance for the center, which is uncommon for many convention centers. I I I Clearwater Convention Center Feasibility Study Chapter 7 Page 20 I hunden strategic partners I I I I I I I I I I I I I I I I I I I Overland Park Convention Center, Overland Park, Kansas The Overland Park Convention Center (OPCC) is located in Overland Park, Kansas, which is a suburb of Kansas City. The city of Overland Park, Kansas, adopted a strategy in the early 1990s to capitalize on its status as a successful small city next to a large metropolitan area with a large corporate presence. In 2001, the OPCC opened at a cost of $60 million and is owned by the city and managed by Global Spectrum. The following table shows the key data points for the OPCC. Location Opened Cost Owner Operator Table 7-20 Overland Park Convention Center Key Data Facts Overland Park, KS 2001 $60 Million City of Overland Park Global Spectrum Source: OPCC, HSP A 412-room Sheraton with 30,000 square feet of function space is connected to the OPCC, which was designed and constructed simultaneously, but as a separate project with separate financing. The following is a photo of the OPCC and the Sheraton Hotel. Clearwater Convention Center Feasibility Study Chapter 7 Page 21 I I I I I I I I I I I I I I I I I I I h un den 5 t ra t e gi cpa rt n e rs destination development consulting The following table displays the breakout space at the opec. Clearwater Convention Center Feasibility Study Chapter 7 Page 22 hunden strategic partners I I Overland Park Convention Center Function Space Total (SF) By Division (SF) Divisions Exhibit Space Exhibit Hall 58,494 2 Exhibit Hall North 29,464 Exhibit Hall South 29,030 Ballroom Facilities Ballroom 24,991 4 Ballroom A 1 4,232 Ballroom A2 4,250 Ballroom B 7,830 Ballroom C 8,679 Meeting Rooms Executive Conference Room 900 900 1 Meeting Room 1 3,093 3,093 1 Meeting Room 2 1,858 1,858 1 Meeting Room 3 1,810 1,810 1 Meeting Room 4 1,810 1,810 1 Meeting Room 5 1,858 1,858 1 Meeting Room 6 1,858 1,858 1 Meeting Room 7 1,828 1,828 1 98,500 98,500 14 Hotel Rooms 412 Total Exhibit Space 58,494 Per Guest Room 142.0 Total Ballroom Space 24,991 60.7 Total Meeting Space 15,015 36.4 Other Space 0 0.0 Total Function Space 98,500 239.1 Exhibit Divisions 2 /100 Guest Rms 0.49 Ballroom Divisions 4 0.01 Room Divisions fincl. auditlamph) 8 0.03 Total Divisions (includina Ballroom) 14 0.09 Source: oPCC, mpoint.com, HSP Table 7-21 I I I I I I I I I I I I The OPCC has approximately 58,500 square feet of exhibit space, 25,000 square feet of ballroom space, and 15,000 square feet of meeting space totaling 98,500 square feet. I I The following table displays the event demand at the OPCC for 2008. I Clearwater Convention Center Feasibility Study Chapter 7 Page 23 I I I I I I I I hunden strategic partners Table 7-22 I Overland Park Convention Center Event Demand for 2008 Net Event Type of Event # of Events Income Room Nights Consumer Shows 17 10% 1,359 Conventions 13 14% 25,368 Special Events 23 3% 3,624 Meetings 173 35% 8,154 Banquets & Receptions 60 15% 453 Tradeshows 17 23% 6,342 Total 333 45,300 Source: opec I I The OPCC had a total of 333 events in 2008 with a total attendance of 45,300. Meetings comprised over one-half the events at the OPCC and were the largest income generator, but conventions brought in most attendees and room nights. The following table displays the financial performance of the OPCC. I I I I I I I I I I Table 7-23 Overland Park Convention Center Revenue and Expenditures 2008 Revenues Operating Revenue Direct Event Revenue Ancillary Revenue Total Revenues Expenditures Operating Expenses Direct Event Expenses Anchillary Expense Non-Operating Expenses Indirect Expenses Total Expenditures Other Income $2,214,272 5,526,632 $7,740,904 $312,498 2,673,558 Net Operating Income 4,514,227 $7,500,283 $216,156 $456,777 Source: opec In 2008, the OPCC had operating income of $7.7 million with an operating expense of $7.5 million, leaving the facility with a net operating income of approximately $457,000. Clearwater Convention Center Feasibility Study Chapter 7 Page 24 Clearwater Convention Center Feasibility Study Chapter 7 Page 25 I I I I I I I I I I I I I I I I I I I h u nden strategic pa rtners destinatIOn development con5ult/(19 The OPCC benefits from its location in an easily accessible suburb with many corporate headquarters and a nice, large hotel attached, as well as many other smaller hotels within one quarter of a mile. Northern Kentucky Convention Center, Covington, Kentucky The Northern Kentucky Convention Center (NKCC) is located in Covington, Kentucky near the Ohio River and across from Cincinnati. The Convention Center is attached via walkway to the 326-room Cincinnati Marriott Hotel. Across the street from the NKCC is a 227-room Embassy Suites Hotel. The complex has a mixture of 2,200 open air and garage parking spaces. The NKCC was built in 1998 and opened in 1999 at a cost of $31.5 million. Six months after the Convention Center was built, the Marriott hotel was completed. The City of Covington is situated on the south side of the Ohio River, across from Cincinnati and resides in the greater Cincinnati MSA. Covington has a population of 43,470 and a MSA population of approximately 2.1 million. There are 900 hotel rooms within walking distance of the NKCC. The following figure shows an aerial photo of the facility and hotels. The following table shows the breakout of function space for the convention center. I I hunden strategic partners I Table 7-24 Northern Kentucky Convention Center Function Space Total (SF) By Division (SF) Divisions I Exhibit Space Exhibit Hall I Exhibit Hall II 26,940 19,140 13,288 82,168 26,940 19,140 5 5,300 6,000 6,000 2,750 2,750 13,288 10 82,168 17 I I Ballroom Facilities Ballroom Ballroom Section A Ballroom Section B Ballroom Section C Ballroom Section D Ballroom Section E Meeting Rooms 22,800 I I I Hotel Rooms Total Exhibit Space Total Ballroom Space Total Meeting Space Other S ace Total Function Space 321 46,080 Per Guest Room 22,800 13,288 o 82,168 144 71 41 o 256 I I 2 /100 Guest Rms 5 10 17 1 2 3 5 I Source: NKCC, mpoint.com, HSP I I The NKCC includes approximately 82,000 square feet of function space, including 46,000 square feet of exhibit space and 22,800 square feet of ballroom space. In addition to the 82,000 square feet at the NKCC, the Marriott offers 9,000 square feet of function space and the Embassy Suites offers 6,000 square feet. According to management, a larger ballroom that is divisible into smaller sections and more meeting rooms would be preferred if the faCility could be expanded. The following table shows number events by type from 2005. I I I I Clearwater Convention Center Feasibility Study Chapter 7 Page 26 I hunden strategic partners Table 7-25 NKCC 2005 Activity Event Conventions Tradeshows Consumer Shows Social Corporate Local Total # of Percent of Events Demand 22 13% 10 6% 12 7% 7 4% 68 39% 56 32% 175 Source: HSP, NKCC In 2005, the NKCC hosted 175 events, including 22 conventions, ten tradeshows, and 12 consumer shows. Attendance is not tracked at the facility because revenue is based on gross square feet sold. Most of the demand comes from the Marriott, which rents 70 percent of the facility for its own events and reduces marketing costs for the convention center. The largest market segment of business comes from corporations. The following table shows the room nights generated by the NKCC over the past several years and those booked for future years as of 2006. Table 7-26 NKCC Room Nights Year Room Nights 1999 13,788 2000 30,405 2001 14,647 2002 22,287 2003 25,040 2004 34,093 2005 30,941 2006 29,998 2007 16,090 2008 10,020 2009 11,393 2010 1,150 Source: HSP, NKYCVB The following table shows the estimated performance of the two primary hotels serving the NKCC. Clearwater Convention Center Feasibility Study Chapter 7 Page 27 I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I hunden strategic partners Table 7-27 Performance of NKCC HQ Hotels Year 2005 2006 2007 Marriott Room Count 326 326 326 Occupancy 71.8% 71.4% 70.8% * Rate $142.84 $149.21 $152.10 * RevP AR $102.56 $106.54 $107.69 RevPAR Change 3.9% 1.1% Embassy Suites Room Count 227 227 227 Occupancy 67.0% 68.6% 71.1% Rate $133.77 $141.03 $144.29 RevP AR $89.63 $96.75 $102.59 7.9% 6.0% . Estimate Source: HSP, Pinkowski & Co. The hotels have performed at improving levels over the three-year period, with occupancy and rate levels that would be welcomed by most comparable properties. The NKCC benefits from it location to Cincinnati but is also supported by the many tourist attractions that are located on Covington's side of the Ohio River, such as Newport on the Levee, the Newport Aquarium, the Hofbrauhaus, and many other restaurants. As a result of all of the investment, the area has seen residential growth, including significant reinvestment in the historic neighborhoods in the area. The NKCC offers an extremely comparable situation for Jeffersonville and proves that with strong leadership, an area can be transformed from a neglected area to one with a compelling destination for visitors as well as a compelling home for residents. Clearwater Convention Center Feasibility Study Chapter 7 Page 28 · Established base of business. While the current facility is relatively poor compared to what a new facility would offer, it still hosts a good book of business, generating over $2 million in annual revenue. This is a great base from which to start with a new and improved facility. · Established Destination. Clearwater is an established destination primarily for leisure visitors, but the attributes that make it appealing for leisure travelers are attractive to meeting planners. The area is surrounded by many attractions that visitors can easily get to during their stay in Clearwater, including a world class beach. The climate is very appealing, especially to those from the northern two-thirds of the U.S. · Reputation. The metro area's reputation (along with most of the west coast of Florida) includes sentiments of value and values (price and cultural) compared to the east coast cities of Miami, Miami Beach and Fort Lauderdale. This conservative and cost-conscious reputation provides a lure for many religious groups and others who are not attracted to the glitz. . Proximity. Any potential sites in the Clearwater area are proximate to the world-class beaches, downtown Tampa and the variety of attractions that the overall metro area has to offer. Within a 30-minute drive, visitors can be at any number of attractions. · Access. Most of Clearwater has good to very good access that would make it attractive to users. Downtown is easily accessible. · Airlift and direct connections. Like most cities in Florida, Clearwater and Tampa Bay offer excellent air connectivity and competitive pricing, I I I I I I I I I I I hunden strategic partners IMPUCAnONS. RECOMMENDATIONS This chapter includes a discussion of implications for the proposed project as well as makes initial recommendations for the project that is optimized by the opportunity. As a result of the preceding study of supply, demand and opportunities, and synthesis of the various factors affecting the proposed project in Clearwater, HSP has determined that a convention center and convention hotel are very real opportunities. Discussion of Need, Strengths, Weaknesses, Opportunities and Threats When considering the idea to develop a new convention center and hotel, one must consider the strengths, weaknesses, opportunities and threats of and for such a development. Strengths I I I Clearwater Convention Center Feasibility Study Chapter 8 Page 1 I I I I I I I I I I I I hunden strategic partners I I I I I I I I I I I I which is critical to attracting conventions. The number of direct flights to and from the area is stronger than many cities and metros its size. · Increasing Population. The population of the local and regional areas has grown significantly over the last ten years and continues to increase. This increasing population provides a growing base of business in every major segment for a hotel (business, group and leisure). The growing population also increases the attendee base for a convention center. · Balanced Economy. The economy of the area, both regionally and locally, is fairly balanced and should not suffer at a greater rate than the overall economy. · Downtown Redevelopment. Downtown Clearwater has seen improvement based on private investment and public leadership. More restaurants and shops are open downtown and along Cleveland St. than in the past decade. · Established CVB. St Petersburg and Clearwater have a well established Convention and Visitors Bureau. This will speed up the time that the bureau can begin to market the center to users. Weaknesses · Lack of Additional Hotel Stock Downtown. While the Residence Inn recently opened downtown and has been successful, there are virtually no other hotels that could be used as part of necessary room blocks for the convention center downtown. This is mitigated by the fact that groups generally do not mind being blocked into beach hotels. If the recommended hotel (below) is built and the proposed hotel/cultural development on the current Harborview site (180 rooms) opens, the total quality room count downtown would be 645 rooms. Over time, the city should target a quality mix of hotels totaling 800 - 1,000 rooms. · Perception of Area's Scientology Presence. Although Scientology is a prominent issue locally, feedback from meeting planners indicated that this was not an issue for them if deciding to host an event in Clearwater. The downtown development that is occurring by the Scientologists mostly includes facilities that be for them specifically and not the general public. It was also indicated in interviews with local hoteliers that Scientologists do not generate significant room night demand at the local hotels. · Tourism Focused CVB. The current regional CVB has a strong focus on tourism over meetings business, due to the fact that the area does not have a traditional high-quality convention center. Clearwater is a top- ranked leisure destination, but would need an adequate facility to attract more group business. Clearwater Convention Center Feasibility Study Chapter 8 Page 2 · The Group Market in the Area is Stable. The market for meetings and events continues to grow with the business community and the regional population, as well as with the national economy. Even when economic times are difficult, group business is less affected and so can offer a stabilizing effect on the hotel and convention facility, when compared with corporate business. · Religious Market. Clearwater and Florida are already popular with religious conventions and this would be enhanced with a larger, better facility. The lack of hotels does not impact these groups as much as others. · Overflow from Tampa. Tampa's convention center is very busy and may provide spin-off or overflow business to a facility in Clearwater. · Unaccommodated demand downtown. Except for the newly-opened Residence Inn, there are no other hotels downtown and the demand downtown at the Residence Inn has been impressive, suggesting additional demand for other hotels that could be developed. · Lack of Function Space to Support Hotels. The existing hotels in the Clearwater have limited function space. By developing a convention center and full-service hotel with function space, it will induce new demand to the market which should put positive demand pressure on existing properties and provide balance to the hotel market. I I I I I I I hunden strategic partners Opportunities · U.S. Economy. The U.S. economy has been experiencing a recession, which has hurt demand for convention centers and hotels. However, by the time such a facility opens, the economy will likely have rebounded. I I I I I I I Threats Caution and Opportunity What are the costs and benefits of a convention center? The convention center industry is competitive and requires investment. Convention centers as a general rule do not generate a significant profit and often do not even generate positive cash flow to pay debt service. The benefits from such centers include improving the local economy through additional visitation, new jobs, new businesses, spending at restaurants, stores and hotels and the actualization of a live-work-play reality in an urban area. The amenities and assets that are developed to primarily service convention attendees also serve the local population and create an inviting, attractive place to live and recreate. By only developing a convention center without the proper support amenities, the City is not likely to be successful in attracting business and it is not likely to generate the benefits such a facility can provide. I I Clearwater Convention Center Feasibility Study Chapter 8 Page 3 I I I I I hunden strategic partners I I I Based on the various factors discussed above, the following table summarizes the recommendations for the project. Table 8-1 Summary of Recommendations Proposed Improvements Assumed Opening Date Meeting Facility (Phase I) Function Space Exhibit Hall* Grand Ballrooom* Junior Ballroom Meeting rooms (incl. Boardroom) Total Back-of-House & Pre-function Gross Building Size Onsite Parking I I I I Hotel Guest Rooms Function Space Grand Ballrooom Junior Ballroom Meeting rooms Total Parking I I I I I Source: HSP January 1,2014 Convention Center Size (SF) 60,000 20,000 12,000 18,000 110,000 134,000 244,000 800 Divisions 3 4 3 23 33 Full-Service, Branded, HQ Meeting Hotel 350 Size (SF) 11,000 4,200 8,250 23,450 Divisions 4 3 10 17 333 It is recommended that a convention center be developed with 200,000+ square feet of gross space. This would consist of a 60,000-square foot exhibit hall, a large grand ballroom of 20,000 square feet, and a junior ballroom of 12,000 square feet. The junior ballroom can also be used as meeting space. HSP recommends approximately 23 meeting rooms of various sizes, including a boardroom, (and averaging 800 square feet), to accommodate the breakout sessions after a general session. Parking of 800 spaces is recommended for the convention center. The site chosen (in the next phase) should allow for expansion of the faCility by at least a factor of two times. I I For the hotel component, a full-service branded hotel of 350 rooms is recommended. The hotel should have its own function space, including two ballrooms, meeting rooms and a boardroom. This allows the hotel to generate group business when the convention center may not be able to. Parking at the hotel recommended to be at least 333 spaces. I I Clearwater Convention Center Feasibility Study I Chapter 8 Page 4 I hunden strategic partners I The recommendations for the hotel are based on the assumption that a hotel with roughly 180 rooms will be developed on the site of the current Harborview Convention Center. If these plans do not materialize, it is our recommendation that the convention hotel be enlarged to 400 rooms. I I The following table shows more specifics for the hotel recommendation. Table 8-2 Recommended Hotel Components I Item Count Unit Guest Rooms (Total) 350 Rooms Grand Ballroom 11 ,000 Square Feet Junior Ballroom 4,200 Meeting Rooms 7,750 Board Room (1) 500 Parking 333 Spaces Three-meal Restaurant 105 Seats Fine Dining Restaurant 56 Lobby Lounge/Bar 18 Spa Yes Indoor Pool Yes Fitness Center Yes Concierge Desk Yes Business Center Yes Source: HSP I I I I I I The following chapters discuss how the recommended facilities are expected to perform. I I I The hotel is recommended to have its own function space, two in-house restaurants as well as a bar/lounge and coffee bar. One of the restaurants should be a three- meal per day setting while the other can be open for lunch and dinner only. A full- service spa, pool, business center and room service should also be developed. Room service late at night should be included since it is a continual request of meeting planners and other visitors. I I I Clearwater Convention Center Feasibility Study Chapter 8 Page 5 I I I I h u nden strategic pa rtners destination development consulting I I CONVENnON CENTER DEMAND" FINANCIAL PROJEcnONS I This chapter shows the operations at the recommended Clearwater Convention Center (CCC) assuming the recommended hotel is constructed and an easily visible and accessible site is chosen. It also assumes that a CVB provide more resources in terms of convention sales and then markets the facility at levels comparable to other convention centers of this size. Pre-marketing for meetings and conventions should take place immediately upon financing of the project. I I The following table shows the events by type projected for the CCC. It is assumed the facility opens in January 2014. Table 9-1 Clearwater ConvenUon Center Event Demand Summary Event Type Year 1 Year 2 Year 3 Year" Year 5 Year 6 Year 7 YearS Year 9 Year 10 Exhibit Events Conventions and Trade Shows 6 8 12 16 19 19 19 19 19 19 Consumer Shows 12 15 15 17 19 19 19 19 19 19 SportslEntertainment Events 9 13 16 18 22 22 22 22 22 22 Sub-total Exhib~ Hall 27 36 43 51 60 60 60 60 60 60 Non-Exhlbn Corporate Events and Conferences 11 13 16 19 23 23 23 23 23 23 Banquets 99 109 120 132 145 145 145 145 145 145 Meetings Room Events 165 180 196 214 233 233 233 233 233 233 Sub-total Non-Exhibit 275 302 332 364 401 401 401 401 401 401 Total 302 338 374 416 460 480 480 480 480 480 Exhibit Hall OCcupancy 23% 31% 34% 41% ..,% ..,% 49% ..,% ..,% 49% Meeting & Ballroom Occupancy 33% 39% "% 50% 57% 57% 57% 57% 57% 57% Source: HSP I I I I I It is projected that the number of events will increase from 216 in 2014 to 367 by stabilization in the fifth year. The number of stabilized events will be dominated by ballroom and meeting room events, however, a number of large, high-impact events are projected, including 23 conferences, conventions and tradeshows, 13 consumer shows, 19 large corporate events, and 15 sporting or entertainment events using the exhibit hall annually. Occupancy at stabilization for the exhibit hall is projected to be 48 percent and meeting and ballroom occupancy is projected to be 59 percent. These numbers are favorable as the maximum practical occupancy for exhibit halls typically does not exceed 70 percent due to move-in/move-out days and holidays. I I The following table displays the number of show days as well as move in/move out days (time needed for set-up and tear-down) for the CCC. I Show, Move In/Out and Total Use Days 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Show Days 444 500 554 614 687 687 687 687 687 687 Move In/Out Days 114 129 141 155 174 174 174 174 174 174 Use Days 557 629 695 769 861 861 861 861 861 861 Source: HSP I I I Clearwater Convention Center Feasibility Study Chapter 9 Page 1 I I h u nden strategic pa rtners destination development consulting I The number of show days is projected to increase from 444 in 2014 to 687 by stabilization. The total number of use days is projected to increase from 557 in 2014 to 961 by stabilization. I The next table shows the number of attendees projected in the first ten years. I Projected Attendance Event Type 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Conventions and Trade Shows 8,600 13,200 17,200 22,900 28,600 28,600 28,600 28,600 28,600 28,600 Consumer Shows 56,700 70,100 70,100 80,100 88,400 88,400 88,400 88,400 88,400 88,400 SportslEntertainment Events 19,200 24,000 26,400 28,800 36,000 36,000 36,000 36,000 36,000 36,000 Corporate Events and Conferences 8,000 9,100 13,200 14,300 16,000 16,000 16,000 16,000 16,000 16,000 Banquets 41,600 45,600 50,300 54,800 60,100 60,100 60,100 60,100 60,100 60,100 Meetings Room Events 53 800 58100 63 300 68 600 75000 75 000 75000 75 000 75 000 75,000 Total All Events 187900 220 300 240 500 269 500 304 100 304 100 304 100 304 100 304 100 304 100 Source: HSP Table 9-3 I I I A total of 187,900 attendees are projected in the first year, increasing to approximately 304,100 by 2018. It is those attending exhibit hall events that generally create economic impact via overnight hotel stays and spending in restaurants, however the ballroom events create the most revenue internally (except for consumer shows). A healthy balance of utilization across room types and events keeps the building the most viable. I I The following table shows the average number of attendees projected by event type. Changes over the period are due to rounding in the model. I Projected Average Attendance by Event Type 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Exhibit Events Conventions and Trade Shows 1,433 1,571 1,463 1,391 1,505 1,505 1,505 1,505 1,505 1,505 Consumer Shows 4,730 4,670 4,670 4,710 4,650 4,650 4,650 4,650 4,650 4,650 Sports/Entertainment Events 2,130 1,850 1,650 1,600 1,670 1,670 1,670 1,670 1,670 1,670 Sub-total Exhibit Hall 3,130 2,950 2,660 2,560 2,570 2,570 2,570 2,570 2,570 2,570 Non-Exhibit Corporate Events and Conferences 730 690 830 750 700 700 700 700 700 700 Banquets 420 420 420 420 410 410 410 410 410 410 Meetings Room Events I-~ 320 320 320 320 320 320 320 320 . 320 Sub-total Non-Exhibit 390 390 400 400 400 400 400 400 400 400 Average 620 650 640 650 660 660 660 660 660 660 Source: HSP Table 9-4 I I I I The largest events are projected to be consumer shows, which is normal for convention facilities. The average size of conventions, and trade shows is projected to be just over 1,400 attendees, although many will be smaller, while some will be much larger. Ballroom and meeting room events are projected at 390 on average. I The next table shows the projected number of room nights generated by the facility. The year 2018 is projected to be the stabilized year for demand. I I Clearwater Convention Center Feasibility Study Chapter 9 Page 2 I I I I h u nden strategic pa rtners destination development consulting I Attendee & Exhibitor Room Nights Generated 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Exhibit Hall Events Conventions and Trade Shows Attendees 6,210 10,460 12,410 14,890 22,750 22,750 22,750 22,750 22,750 22,750 Exhibitors 3230 5500 6650 8290 11550 11550 11550 11550 11550 11550 Conventions and Trade Shows 9,440 15,960 19,060 23,180 34,300 34,300 34,300 34,300 34,300 34,300 Consumer Shows Attendees 30 40 40 40 40 40 40 40 40 40 Exhibitors 5440 6720 6720 7680 8480 8480 8480 8480 8480 8480 Consumer Shows 5,470 6,760 6,760 7,720 8,520 8,520 8,520 8,520 8,520 8,520 Corporate Events and Conferences Attendees 1 ,BOO 2,060 2,600 3,220 3,600 3,600 3,600 3,BOO 3,600 3,600 Exhibitors 460 510 830 830 880 880 880 880 880 880 Corporate Events and Conferences 2,260 2,570 3,430 4,050 4,480 4,480 4,4BO 4,480 4,480 4,480 Sports/Entertainment Events Attendees 6,600 4,700 3,900 2,BOO 5,300 5,300 5,300 5,300 5,300 5,300 Subtotal 6600 4700 3900 2 BOO 5300 5300 5300 5300 5300 5300 Sub-total Exhibit Hall 23,770 29,990 33,150 37,750 52,600 52,600 52,600 52,600 52,600 52,600 Non-Exhibit Banquets 840 930 1,020 1,110 1,220 1,220 1,220 1,220 1,220 1,220 Meetings Room Events 880 930 1010 1100 1200 1200 1200 1200 1200 1200 Sub-total Non-Exhibit 1700 1860 2030 2210 2420 2420 2420 2420 2420 2420 Total 25 470 31 850 35180 39 960 55 020 55 020 55 020 55 020 55 020 55 020 Source: HSP Table 9-5 I I I I I I I Hotel room nights are generated primarily by out-of-town visitors in Clearwater for larger events, such as conventions, large corporate gatherings, and the exhibitors serving all events. The number of hotel room nights generated by the CCC is projected to be nearly 25,500 in the first year and should increase to more than 55,000 by 2018. These are the primary drivers of economic impact to the community. This does not include room nights generated by the adjacent hotel by events it host on its own. I I Financial Projection I The following table presents the projected operating statement for the facility's first ten years of operation. The projection uses inflated dollars and accrual-based accounting, wherein revenues are recognized when they are earned and expenses are recognized when they are incurred. Revenues include all revenues of the facility that can be used for operations. All revenues and expenses are inflated at a three percent annual rate. I I I I I Clearwater Convention Center Feasibility Study Chapter 9 Page 3 I I h u nden strategic pa rtners destination development consulting I Pro Fonna Operating Statement of Revenue and Expenses ($OOO's, Inflated) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Revenue Event Revenue Space Rental $518 $651 $765 $916 $1,088 $1,116 $1,143 $1,172 $1,201 $1,231 Equipment Rental 56 70 82 99 117 120 123 126 129 133 Gross Food & Beverage 3,103 3,609 4,186 4,788 5,487 5,624 5,764 5,909 6,056 6,208 Less costs @ 65% 2,017 2,346 2,721 3,112 3,566 3,655 3,747 3,841 3,937 4,035 Net Food and Beverage 1,086 1,263 1,465 1,676 1,920 1,968 2,018 2,068 2,120 2,173 Event Services Income 290 363 416 500 ___ 588_ ~__ 618 634 649 866 Sub-total $1,949 $2,347 $2,729 $3,190 $3,714 $3,807 $3,902 $4,000 $4,100 $4,202 Other Revenue Advertising and Sponsorships 200 206 212 219 225 232 239 246 253 261 Sub-total $200 $206 $212 $219 $225 $232 $239 $246 $253 $261 Total Operating Revenue $3,967 $4,693 $5,450 $6,302 $7,281 $7,463 $7,649 $7,840 $8,036 $8,237 Expenses Food and Beverage $2,017 $2,346 $2,721 $3,112 $3,566 $3,655 $3,747 $3,841 $3,937 $4,035 Salaries and Wages $801 $825 $850 $875 $902 $929 $956 $985 $1,015 $1,045 Employee Benefits 248 256 263 271 279 288 296 305 315 324 Passthrough Labor 83 108 125 154 184 189 193 198 203 208 Maintenance & Repairs 16 26 45 54 65 66 88 71 73 75 Cleaning 45 56 84 76 90 93 96 99 102 105 Utilities 295 313 327 347 371 375 380 385 390 395 Sales and Marketing 125 129 117 120 124 128 131 135 139 144 General and Administrative 248 255 263 270 279 287 296 304 314 323 Insurance 135 139 143 148 152 157 161 166 171 176 Other Operating Expenses 62 86 68 72 76 78 80 82 84 86 Management Fee 250 256 265 273 281 290 299 307 317 326 Reserve For Replacement 101 120 139 162 188 192 197 202 207 212 Total Expenses $4,425 $4,895 $5,392 $5,935 $6,556 $6,726 $6,901 $7,080 $7,265 $7,454 Net Operating Income ($458) ($202) $58 $368 $725 $736 $748 $760 $772 $783 Source: HSP Table 9-6 I I I I I I I I It is projected that in the first year of operation, the convention center will generate revenues of nearly $4 million and incur approximately $4.4 million in operating expenses, leaving a deficit of $458,000. Once the building stabilizes after marketing and long-term bookings occur, it is expected that 2018 revenue will be $7.3 million and $6.6 million in expense, leading to a small profit. This is highly dependent upon the assumptions below. I I The assumptions and methodology used to estimate the financial performance of the faCility is described in the following subsections. I Operating Revenues I The following text describes the individual line items listed in the table above. Space Rentals - include the temporary rental of event space and other facilities for events. Assumptions of rental revenue per square foot are based on comparable facilities, The following table summarizes the projected rental rates for event spaces and equipment, as well as the ratio of event services revenue to rental revenue. I I I Clearwater Convention Center Feasibility Study Chapter 9 Page 4 I I I I I I I I I I I I I I I I I I I I I h u n den 5 tra te gi c pa rtn e rs destination development consulting Item Table 9-7 Rental Revenue Assumptions Rent Unit Ballroom Rental $4,500 $2,250 $3,200 $1,600 $1,200 $600 per show day (full hall) per moving day (full hall) per show day per move day Exhibit Hall Rental Equipment Rental per show day (all rooms) per move day (all rooms) % of space rental Meeting Room Rental 7% Source: HSP The projections assume rental rates of $4,500 for exhibit hall rental (half as much for moving days). Ballroom rental, due to the higher quality of space, is more expensive per square foot and is assumed to be rented at $3,200, although this is often waived if food and beverage minimums are met. Meeting room rental is expected to be $1,200 if all rooms are rented. In the proforma, it is assumed that a number of events will meet food and beverage minimums or have rent lowered by the CVB. Equipment Rental - includes the rental of furniture, audio/visual, and other equipment. In this analysis, equipment rental is expected total seven percent of room rental revenue. Event Services - include revenue from services and reimbursements for labor provided to exhibitors and other facility users. Facilities charge users for a range of services, including electrical, cleaning, telephone, Internet, decorating, audio-visual, and security services. The facility will receive revenue from providing these services, either through direct charges for services provided by facility staff, or through shared revenues from services provided by third-party vendors. The costs of temporary labor for stagehands, police, ushers and paramedics, and others, are also recovered from facility tenants. The projection assumes that event services are charged per booth for events using the exhibit hall. Services include electrical, cleaning, audio/visual, and telecommunications and are assumed to total of approximately $37.00 per booth. Food and Beverage - are based on event attendance, and reflect sales that the facility will generate through its events in concessions, catered meals, and other services such as coffee break services for meetings. The projections are based on per capita food and beverage revenues, estimated to reflect an expectation of the quality in the facility. The following table shows the assumptions for per capita food and beverage revenue, in current price levels. Clearwater Convention Center Feasibility Study Chapter 9 Page 5 h u nden strategic pa rtners destination development consulting I I Revenue Table 9-8 Gross Food and Beverage Service Assumptions Base Unit I I I I I Conventions and Trade Shows Consumer Shows Sports/Entertainment Events Corporate Events and Conferences Banquets Meetings Room Events $24.00 $3.00 $7.00 $30.00 $27.00 $24.00 per attendee per attendee per attendee per attendee per attendee per attendee Source: HSP As the basis for the analysis, gross food and beverage sales are assumed to be $24.00 per convention/trade show attendee, $3.00 per consumer show attendee, $30.00 for corporate events, $24.00 for meeting and conferences, and $27.00 for banquets and seminars. Depending on the event type, 35 to 50 percent will flow to the bottom line. Other Revenues - other revenues includes any revenue from other sources that do not fit into previous categories. Examples include vending commissions, interest, or income from a coat check booth. I I Expenses I I The expense assumptions are described below. Salaries and benefits will be one of the largest expense items. The assumptions for staffing are shown in the following table. I I I I I Clearwater Convention Center Feasibility Study Chapter 9 Page 6 I I I I I hunden strategic partners destination development consulting I I I I I Table 9-9 Base Salary Expenses Salary per Staff Member 2014 I I Gen. Manager Administrative Assistant Business Manager Accounting Assistant Receptionist Director of Sales and Marketing Sales Coordinator Sales Manager Marketing Manager Director of Event Services Event Manager Event Manager Director of Operations Housekeeping/Set-up Supervisor Housekeeping/Set-up Crew Housekeeping/Set-up Crew Housekeeping/Set-up Crew Housekeeping/Set-up Crew Engineer Total $105,000 $30,000 $55,000 $40,000 $28,000 $60,000 $30,000 $40,000 $38,000 $55,000 $40,000 $40,000 $60,000 $35,000 $25,000 $25,000 $25,000 $25,000 $45 000 $801,000 I I Source: HSP I I I The following table shows a summary of the assumptions utilized for projections of most other operating expenses. I I I I I Clearwater Convention Center Feasibility Study Chapter 9 Page 7 I I h u nden strategic pa rtners destination development consulting Expenses Table 9-10 Expense Assumptions Base $2.25 Unit I I I I I General and Administrative Salaries and Wages Employee Benefits Maintenance & Repairs 31% $250 $125 $2.25 $125,000 $110,000 $500 $2.00 $300 3% $250,000 3.5% Insurance Advertising & Marketing Utilities Cleaning Other Operating Expenses Management Fee Reserve For Replacement Source: HSP per SF of facility see Salary Table % of salaries per show day per move in! out day per SF of facility per year in first 2 years per year afterwards per event day per building sq. footage per event day % of sub-total Flat Annual Fee % of revenues I I General and Administrative - expenses are related to expenditures for staff training, travel, registrations and memberships, printing, postage, and other expenses. Based on the existing amount implied for G&A, general and administrative expense is projected to be $2.25 per square foot of facility space. Building Maintenance and Repair - reflects maintenance associated with particular events occurring in the exhibit hall. Consequently, the projected amounts are calculated based on faCility usage for exhibit hall events at $250 per event day and $125 per move-in lout day. I I I I I Insurance - this projected expense is based on the premiums paid currently by the facility, based on faCility size at $2.25 per square foot of total space. Passthrough Labor/Contract Services - depend on the level of faCility utilization and are calculated based on the number of rental days in the exhibition hall. Contract services include cleaning, security, and electrical services. These are estimated to be 15 percent of Event Services Income in the first three years, 25 percent in Year 4, and then increase to 30 percent by Year 5. Advertising (Sales & Marketing) - Advertising and marketing expenditures are projected to be $125,000 in the first two years, then decrease to $110,000. Utilities - reflect the facility's utility cost and are based on the volume of activity in the convention center (usage of the facility will spike utility usage) as well as a base amount for continuous utility service for the total building space. The projections assume a rate of $500 per event day on top of a base of $2.00 per square foot of total space. I I Clearwater Convention Center Feasibility Study Chapter 9 Page 8 I I I I I I I I I I hunden strategic partners destination development consulting Cleaning - depends on event activity and is separate and in addition to passthrough labor charges for cleaning. This is calculated at $300 per event day. Other Operating Expenses - include miscellaneous expenses, uniforms, tools, small equipment, dues and subscriptions, and transportation. These expenses are estimated as three percent of total direct expenses. Management Fee - assumes that a private management company specializing in convention center management will assume day-to-day responsibility for the facility. This is typically a flat annual fee totaling $250,000 which includes most standard incentive packages for quality performance. Reserve for Replacement - The building owner is responsible for major capital items, so HSP has assumed an amount be dedicated to a reserve fund of 3.5 percent of revenue. I I I I I I I I I I I I Clearwater Convention Center Feasibility Study Chapter 9 Page 9 I hunden strategic partners destination development consulting I I PROJECTION OF OCCUPANCY AND AVERAGE DAILY RATE I In this chapter, a penetration model is used to understand how the new convention hotel will penetrate the competitive set and what occupancy and rate will result. The hotel is expected to be a full-service convention headquarter hotel of 350 rooms. All of the projections below are based on the assumption that the hotel will be under a private ownership structure, unlike the convention center, which will be publicly owned. I Competitive Set Supply and Demand Growth I I The following table shows the historical and expected competitive set growth by segment from 2004 through 2023. Growth in each segment can be natural growth, new induced growth or can be the set's ability to penetrate the market outside the set's historical pattern. Table 10-1 I I Estimated Competitive Set Demand Growth by Segment Year Corporate % Group % Leisure % Total % Total Supply % Total Occupancy Transient Change Change Change Demand Change Change Rooms 2004 84,825 - 110,641 - 173,338 - 368,804 - 568,670 - 1,558 64.9% 2005 82,930 -2.2% 108,170 -2.2% 169,466 -2.2% 360,566 -2.2% 538,780 -5.3% 1,476 66.9% 2006 82,675 -0.3% 107,837 -0.3% 168,944 -0.3% 359,456 -0.3% 539,024 0.0% 1,477 66.7% 2007 88,545 7.1% 115,493 7.1% 180,939 7.1% 384,977 7.1% 591,785 9.8% 1,621 65.1% 2008 97,493 10.1% 127,164 10.1% 199,224 10.1% 423,881 10.1% 630,349 6.5% 1,727 67.2% 2009 85,794 -12.0% 115,720 -9.0% 171,333 -14.0% 372,846 -12.0% 588,765 -6.6% 1,613 63.3% 2010 87,080 1.5% 116,877 1.0% 179,043 4.5% 383,000 2.7% 638,883 8.5% 1,750 59.9% 2011 90,564 4.0% 120,383 3.0% 187,995 5.0% 398,941 4.2% 638,883 0.0% 1,750 62.4% 2012 95,092 5.0% 133,625 11.0% 204,914 9.0% 433,631 8.7% 794,008 24.3% 2,175 54.6% 2013 104,601 10.0% 142,979 7.0% 215,160 5.0% 462,740 6.7% 859,708 8.3% 2,355 53.8% 2014 117,153 12.0% 177,294 24.0% 228,070 6.0% 522,517 12.9% 987,458 14.9% 2,705 52.9% 2015 125,354 7.0% 200,342 13.0% 237,192 4.0% 562,888 7.7% 987,458 0.0% 2,705 57.0% 2016 130,368 4.0% 212,363 6.0% 244,308 3.0% 587,039 4.3% 987,458 0.0% 2,705 59.4% 2017 130,368 0.0% 212,363 0.0% 244,308 0.0% 587,039 0.0% 987,458 0.0% 2,705 59.4% 2018 130,368 0.0% 212,363 0.0% 244,308 0.0% 587,039 0.0% 987,458 0.0% 2,705 59.4% 2019 130,368 0.0% 212,363 0.0% 244,308 0.0% 587,039 0.0% 987,458 0.0% 2,705 59.4% 2020 130,368 0.0% 212,363 0.0% 244,308 0.0% 587,039 0.0% 987,458 0.0% 2,705 59.4% 2021 130,368 0.0% 212,363 0.0% 244,308 0.0% 587,039 0.0% 987,458 0.0% 2,705 59.4% 2022 130,368 0.0% 212,363 0.0% 244,308 0.0% 587,039 0.0% 987,458 0.0% 2,705 59.4% 2023 130,368 0.0% 212,363 0.0% 244,308 0.0% 587,039 0.0% 987,458 0.0% 2,705 59.4% I I Source: HSP I I I The projection shows the hotel opening at the beginning of 2014 (Total Supply column). The new hotel will represent a 15 percent increase in the competitive set room supply. Note that supply increases in 2010 with the opening of the Hyatt, in 2012 with the reopening of the Belleview Biltmore and again in 2013 with the potential opening of the proposed hotel on the site of the current Harborview Center in downtown Clearwater. The opening of the proposed hotel should coincide with a rebounding economy, which should assist in its absorption. However, the opening of such large hotels will delay strong occupancies. I I Clearwater Convention Center Feasibility Study Chapter 10 Page 1 I I It is assumed the hotel will be fully absorbed over a four-year period. I I I h u nden strategic pa rtners destination development consulting I I Based on the new hotel, overall occupancy in the competitive set is projected to decrease to 52.9 percent for the competitive set in 2014 and increase to 59.4 percent by 2017 as it is expected the new rooms will be nearly absorbed within the period, I The following figure shows the projection of demand for the competitive set. Figure 10-1 I I Estimated Past &: Future Room Night Demand by Segment 50,000 - / - ... - - -- - ... I-- / - I-- / ~ - I- - I- / - I- - - / "" ,- ;- -...~, - :"1-- I-- - I- - l- I-- I 1/ - ~ I- - - - - - - -- - - - / - - - - - - - - - - - - - - V - / 1 . -'I -1 -; I -, ; r- --" -c. -< I-< -l --j -i f-l 1 ;I . ~ ~ . I - I -! f-I -! I -I ;I -; -; -1 f-J -i -! -; I-< -; -1 H --; / , , , , , , Leisure 600,000 550,000 500,000 I 450,000 400,000 I 350,000 300,000 . Group . Corporate Transient 250,000 I 200,000 150,000 I 100,000 I II II I o 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 As shown, demand in all segments is expected to increase after the opening of the hotel. Group business is projects to increase the most due to the opening of the new convention center and convention hotel. The next figure shows demand and supply changes in the set, I I I Clearwater Convention Center Feasibility Study Chapter 10 Page 2 I I h u nden strategic partners destination development consulting I 1,000,000 950,000 900,000 B50,000 BOO,OOO 750,000 700,000 650,000 600,000 550,000 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 Figure 10-2 I I Annual Room Night Supply and Demand - - - 1- - - - - - - 1- - - - - - - - - - - .. -f 1 H ~ . -{ j I -l - - - - - - --I ~ -l - - 1.- - - ~ ~ -I -; -I H" - - 7 l-f -l -I -I -I 1 " -f -I -t -. --f ~ -~ -i -; -l -t -l -I ~ -I , -t -' -1 -i -I -I -; -l' -l -; -I -1 f-J j -; -I --j ~ --J I H l--->, -i ~ -I =1 -I -1 --j -l ~ -l -J ~ -l W -l , -t -I -; 1-1 J H f-i -I -j ~ I --, -J --: H . -I j ~ --4 --I ~ -l ---I j --I --'0 -I --< ---I ~ l -l . H ---I -I ~ j j ---I -;l .. -I -I ---I -l -j tl J ~ -{ -1 ""1 H -I -l -l j ~ j -l -l j -I -1 I -.t -I -I -l -I -l -I -l -I. -t. -l -j, -l , I I I I I 2002 2004 2006 200B 2010 2012 2014 2016 201B 2020 I . Total Demand . Total Supply I I I As shown, supply will increase from 588,800 room nights in 2009 to 914,800 room nights in 2014. Despite the large increase, demand is projected to increase at a similar rate, albeit more slowly. This will lead to temporary declines in occupancy. I I I The next figure shows supply versus occupancy. I I Clearwater Convention Center Feasibility Study Chapter 10 Page 3 I I I 1.- I h u nden strategic pa rtners destination development consulting I I Figure 10-3 Competitive Set Occupancy vs. Room Supply I I 1,100,000 1,000,000 900,000 >- 800,000 "a. Cl. 700,000 :I 1Il .. .z: III 600,000 Z E 500,000 8 a: iii 400,000 :I C C 0( 300,000 200,000 100,000 84.0% 82.0% 80.0% I I I 78.0% 76.0% 74.0% 72.0% 70.0% 68.0% 66.0% 84.0% 62.0% 60.0% 58.0% 56.0% 54.0% 52.0% I I V In '" .... co en 0 ... M .., V In '" .... ~ en 0 ... 0 0 0 0 0 0 ... ... ... ... ... ... ... ... .... M M 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 M M M M M M M M M M M M M M M M M M I ---- Total Supply -+- Occupa~ I I I As shown, occupancy increased in 2005 and peaked in 2008 and is projected to decrease in 2009 and 2010, briefly increase in 2011, then decrease for three years as the projected hotels open. Total supply is expected to increase from 600,000 room nights to over 900,000 room nights, a massive increase. The stabilized occupancy for the set is 59 percent. Penetration Rate Analysis I I Occupancy penetration is the ratio of a particular property's actual room nights captured compared to its fair share. Fair share is defined as the ratio of the property's number of rooms to the total rooms in the defined competitive supply. For example, if a hotel has 100 rooms and the market has 1,000 rooms, its 'fair share' of business would be 10 percent of market room nights. The ratio is then applied to the total market demand by segment to measure the property's actual room nights captured compared to its fair share of room nights. The following table shows how the property would fare if it captured its fair share of the competitive set demand. I I Clearwater Convention Center Feasibility Study Chapter 10 Page 4 I h u nden strategic pa rtners destination development consulting Table 10-2 Fair Share for Proposed Hotel - Room Nights Corporate % Group % Leisure % Change % Total Supply % Total Occupancy Year Transient Change Change Total Demand Change Change Rooms 2014 15,543 - 21,246 - 31,972 - 68,762 - 127,750 - 350 53.8% 2015 15,156 -2.5% 22,937 8.0% 29,506 -7.7% 67,599 -1.7% 127,750 0.0% 350 52.9% 2016 16,217 7.0% 25,919 13.0% 30,686 4.0% 72,822 7.7% 127,750 0.0% 350 57.0% 2017 16,866 4.0% 27,474 6.0% 31,607 3.0% 75,947 4.3% 127,750 0.0% 350 59.4% 2018 16,866 0.0% 27,474 0.0% 31,607 0.0% 75,947 0.0% 127,750 0.0% 350 59.4% 2019 16,866 0.0% 27,474 0.0% 31,607 0.0% 75,947 0.0% 127,750 0.0% 350 59.4% 2020 16,866 0.0% 27,474 0.0% 31,607 0.0% 75,947 0.0% 127,750 0.0% 350 59.4% 2021 16,866 0.0% 27,474 0.0% 31,607 0.0% 75,947 0.0% 127,750 0.0% 350 59.4% 2022 16,866 0.0% 27,474 0.0% 31,607 0.0% 75,947 0.0% 127,750 0.0% 350 59.4% 2023 16,866 0.0% 27,474 0.0% 31,607 0.0% 75,947 0.0% 127,750 0.0% 350 59.4% Source: HSP In a "fair-share" scenario, the hotel would capture 16,900 corporate transient room nights by stabilization, nearly 27,500 room nights in the group segment, and 31,600 room nights from the leisure category. At stabilization, the hotel would perform at 59.4 percent occupancy. After preparing projections of overall market occupancy, the analysis provides an assessment of the expected qualities of the proposed hotel in relation to the competitive supply to formulate projections of occupancy. This projection represents the hotel's relative performance, or "penetration" within the competitive supply. Characteristics considered in this analysis include, but are not limited to, location, market orientation, pricing strategies, contracted rooms, chain affiliation, facilities, and amenities. The following table shows the projected penetration of the market segments by the hotels. Table 10-3 Estimated Market Penetration of Proposed Hotel Corporate Total Projected Set Subject Year Transient Group Leisure Penetration Occupancy Occupancy 2014 92% 195% 47% 103% 54% 55% 2015 97% 200% 50% 105% 53% 55% 2016 100% 205% 58% 103% 57% 59% 2017 100% 205% 58% 115% 59% 68% 2018 100% 205% 58% 121% 59% 72% 2019 100% 205% 58% 121% 59% 72% 2020 100% 205% 58% 121% 59% 72% 2021 100% 205% 58% 121% 59% 72% 2022 100% 205% 58% 121% 59% 72% 2023 100% 205% 58% 121% 59% 72% Soun;e: HSP The hotel is projected to penetrate the corporate transient market from 92 to 100 percent during the period, primarily due the location of the hotel relatively close to downtown Clearwater, and away from the beach. In the group market, it is projected to show 195 percent penetration in the first year of operation and 205 percent by Clearwater Convention Center Feasibility Study Chapter 10 Page 5 I I I I I I' I I I I I I I I I I I I I I I hunden strategic partners destination development consulting I I stabilization. Leisure penetration is projected at 47 percent the first year of operation and 58 percent by stabilization. The greatest penetration segment will be the group segment due to the fact that the hotel will be primarily meetings-based and adjacent to the convention center. I Total market penetration is projected to be 121 percent by stabilization, leading to an occupancy rate of 72 percent at stabilization. I I The following table displays the projected occupied room nights by sector and the occupancy rate for the hotel. Table 10-4 Projected Demand for Proposed Hotel I Year Corporate % Group % Leisure % Total Demand % Total Supply Total Occupancy Transient Change Change Change Change Rooms 2014 14,300 -- 41,430 - 15,027 -- 70,757 -- 127,750 350 55.4% 2015 14,702 2.8% 45,874 10.7% 14,753 -1.8% 75,329 6.5% 127,750 350 59.0% 2016 16,217 10.3% 53,133 15.8% 17,798 20.6% 87,149 15.7% 127,750 350 68.2% 2017 16,866 4.0% 56,321 6.0% 18,332 3.0% 91,519 5.0% 127,750 350 71.6% 2018 16,866 0.0% 56,321 0.0% 18,332 0.0% 91,519 0.0% 127,750 350 71.6% 2019 16,866 0.0% 56,321 0.0% 18,332 0.0% 91,519 0.0% 127,750 350 71.6% 2020 16,866 0.0% 56,321 0.0% 18,332 0.0% 91,519 0.0% 127,750 350 71.6% 2021 16,866 0.0% 56,321 0.0% 18,332 0.0% 91,519 0.0% 127,750 350 71.6% 2022 16,866 0.0% 56,321 0.0% 18,332 0.0% 91,519 0.0% 127,750 350 71.6% 2023 16,866 0.0% 56,321 0.0% 18,332 0.0% 91,519 0.0% 127,750 350 71.6% I I I Source: HSP I I I As shown, corporate room nights are projected to increase from 14,300 to 16,900 during the period. Group nights are expected to increase from 41,300 in the first year of operation to more than 56,300 by stabilization. Leisure nights are projected to increase very slightly from 15,000 in 2014 to 18,300 in 2017. Overall occupancy is projected to increase from 55.4 percent to 71.6 percent during the four-year absorption period. The follOWing table shows the resulting stabilized demand mix for the hotel compared with the competitive hotels. I I I I Clearwater Convention Center Feasibility Study Chapter 10 Page 6 I Projected Hotel Stabilized Demand Mix vs. Comp Set Segment Hotel at Camp Set Stabilization Corporate 20% 22% Group 61% 36% Leisure 20% 42% Total 100% 100% Source: HSP Table 10-5 I I I I I I I hunden strategic partners destination development consulting Based on its penetration of the market, HSP expects the hotel to draw 20 percent of its business from the corporate transient sector (compared with 22 percent for the set), 61 percent from the group segment (compared to 36 percent for the comp set), and 20 percent from the leisure segment (compared with 42 percent for the comp set). Competitive Position I I I I I I I AVERAGE RATE ANALYSIS The average rate is the weighted average of the rates charged to all guests in all segments throughout the year. Rates also differ depending upon how far in advance the room is sold and based on the user type. Groups usually are able to attain a discount because they are filling more rooms; however, their rates can exceed more discounted leisure business (except during high leisure periods). Corporate travelers usually pay the highest rate. The resulting average provides a benchmark for performance measurement as well as a tool for managing target revenue generated per occupied and available room night. The competitive position of a property determines, in large part, its ability to generate rate. A hotel with high comparative quality to the rest of the competitive set as well as a good location and brand reputation will be able to penetrate the competitive set rate at greater than 100 percent. The proposed hotel is assumed to be generally well-located downtown, one of the few downtown, and a part of the strongest set of hotels. It is expected that rates for each segment will be slightly below that found at other hotels due the fact that the downtown market is not as robust as that of the beach market. For these reasons, we expect that the hotel will penetrate the average rate at 91 percent. Clearwater Convention Center Feasibility Study Chapter 10 Page 7 I I I I I I I I I I I I I I I I I I I I I I I I h u nden strategic pa rtners destination development consulting Projected A verage Daily Rate The following table displays the projected average daily rate in the competitive set and the proposed hotel's penetration and resulting rate. Average Daily Room Rate Projections Year Compo Set Annual Hotel Rate Projected Annual ADR Increase Penetration Hotel Rate Increase 2004 $125 8.4% - - - 2005 $142 13.9% - - - 2006 $155 9.2% - - - 2007 $159 2.6% - - - 2008 $179 12.3% - - - 2009 $184 3.1% - - - 2010 $185 0.5% - - - 2011 $192 3.5% - - - 2012 $200 4.5% - - - 2013 $206 3.0% - - - 2014 $212 3.0% 85% $181 - 2015 $219 3.0% 85% $185 2.3% 2016 $225 3.0% 84% $190 2.9% 2017 $232 3.0% 84% $196 2.8% 2018 $239 3.0% 84% $202 3.0% 2019 $246 3.0% 84% $208 3.0% 2020 $254 3.0% 84% $214 3.0% 2021 $261 3.0% 84% $220 3.0% 2022 $269 3.0% 84% $227 3.0% 2023 $277 3.0% 84% $234 3.0% Source: HSP Table 10-6 The hotel is projected to penetrate the market at 85 percent in the first year with a rate of $181 and increase to $196 by 2017. The following table summarizes the projected performance of the hotel. Clearwater Convention Center Feasibility Study Chapter 10 Page 8 Table 10-7 Performance Projections Year Average Daily Occupancy Revenue per Annual Rate Available Room Increase 2014 $181 55% $100 2015 $185 59% $109 8.9% 2016 $190 68% $130 19.0% 2017 $196 72% $140 8.0% 2018 $202 72% $144 3.0% 2019 $208 72% $149 3.0% 2020 $214 72% $153 3.0% 2021 $220 72% $158 3.0% 2022 $227 72% $162 3.0% 2023 $234 72% $167 3.0% Source: HSP I I I I I I I h u nden strategic pa rtners destination development consulting I I I I I I I The hotel is projected to achieve a $181 average rate in its first year with occupancy of 55 percent. At stabilization the average rate and occupancy are expected to be $196 and 72 percent, respectively. Revenue per available room is projected to be $100 in 2014 and increase to $140 by 2017. Forecast of Income and Expense & Return on Investment Understanding how the hotel will perform internally is as important to the feasibility as the external occupancy and rate projections. The financial projections are presented in the table below. PAR stands for 'per available room' and POR stands for 'per occupied room night.' Clearwater Convention Center Feasibility Study Chapter 10 Page 9 I I I I I I I h u nden strategic pa rtners destination development consulting I Table 10-8 Projection of Income & Expense: 350-Room Downtown Clearwater Convention Hotel - (in $000, inflated) I Room Count Available Room Nights Occupancy Rates Occupied Room Ni9hts Average Daily Rate RevPAR Percent of Change from Prior Year I I Valet RatelOay, 9ross Room Nights Using Valet Overnight Parkers I REVENUE Rooms Hotel Food and Beverage Telephone Other Operated Departments Parkin9 & Transportation Rentals and Other Income Total Revenue I DEPARTMENTAL EXPENSES Rooms Hotel Food and Beverage Telephone Other Operated Departments Parking & Transportation Rent and Other Income Total Departmental Expenses I I Gross Operating Income UNDISlRlBUTED OPERATING EXPENSES Administrative and General Marketing Utility Costs Property Operations and Maintenance Total Undistributed Expenses I Gross Operating Profit I FIXED EXPENSES Property Taxes Insurance Management Fee Reserve for Replacement Total Fixed Expenses Cash Flow from Operations I Source: HSP I The property is projected to generate a total of $21.9 million in gross revenue in its first year, consisting of $12.7 million in rooms revenue and $6.5 million in food and beverage revenue. After direct and indirect expenses are accounted for, net operating income available to repay debt and equity requirements is projected to be $4.3 million, or 20 percent of revenue. As the hotel gains occupancy, the net operating income is projected to increase to $6.6 million by the fourth year. I I I I Clearwater Convention Center Feasibility Study Chapter 10 Page 10 I Year 10 350 127,750 68% 87,149 $227 $155 3.0% $12.00 28% 24,402 $19,766 10,412 341 1,570 341 1,763 $34,194 $4,942 7,913 369 55 68 88 $13,435 $20,760 $2,599 $2,325 $1,539 $1,505 $7,967 $12,792 $1,539 479 1,368 $1,710 $5,095 $7,697 h u n den 5 tra te gi c pa rtn e rs destination development consulting I I I I I I I Explanation of Income and Expense Items The estimates of income and expense statements are based on the results of operations of comparable hotels and solving for a new branded mid-scale to full- service hotel costs. In addition, we have estimated net parking income based on room night projections and an assumption of valet parking for a certain percentage of guests. The steps in the projection of income and expenses for the proposed Hotel include projecting the income and expenses for Year 1. The income for each of these years is estimated based on the expected impact that the change in occupancy and average daily room rates is expected to have on income and expenses. Expense estimates are assumed to have both fixed and variable components, and vary based on projected occupancy levels. Departmental Revenues and Expenses I I I I I I I Distributed Departmental Revenues and Expenses Rooms DeDartment: Room revenue is estimated by multiplying the occupancy rate by the average daily rate (ADR) projected in this analysis. Rooms department expenses include payroll and related costs associated with the front desk and housekeeping, operating supplies, laundry linens, cable television, and other items necessary to maintain guest rooms. The stabilized expense ratio is 25 percent. Food and Beveraae: Food and Beverage is comprised of room service, and revenues from bars, and any catering revenue. Food and beverage expenses are among the highest in the Hotel's departments (outside of telecommunications). Hotels with significant food and beverage business tend to have lower net profit ratios. For the Hotel's food and beverage it is estimated there will be total revenue of $99 per occupied room night and an expense ratio of 78 percent in the first year. The stabilized expense ratio is estimated to be 76 percent. TeleDhone DeDartment: Estimated telephone revenue is based on the experience of the similar hotel properties. Hotel telephone systems today are designed to generate profits, although the increasing use of cellular phones and expectation of free high-speed internet access has cut the gross and net revenue figures in this department across the industry in the last few years. Some hotel chains, such as Marriott, charge a flat $10 per night fee for high-speed internet access, while others provide it gratis. In many hotels, this department loses money. We have assumed the department performs at an eight percent deficit. Clearwater Convention Center Feasibility Study Chapter 10 Page 11 I I I I I I I I I I I I I I I I I I I I I I I I hunden strategic partners destination development consulting Other ODerated DeDartments: This income category is typically comprised of smaller departments that generate income from activities such as valet laundry, business services, and similar others. It is figured based on a percentage of total revenue and the experiences of other full-service properties. Combined expenses are projected to be 3.5 percent at stabilization. Rentals and Other Income: This income category is typically comprised of interest, commissions on vending machine sales, movies, and other miscellaneous income. This income category is typically highly dependent on occupancy and has a very low expense ratio. Stabilized expenses of five percent are estimated. Undistributed Operating Expenses Operating expenses that are not chargeable to a particular operating department are presented as undistributed operating expenses in accordance with the Uniform System of Accounts for hotels. These expenses are discussed in the following paragraphs. Administrative and General: This category covers expenses such as salaries and wages for management staff, bookkeeping, data processing charges, corporate office charges, office supplies, legal, accounting, allowance for bad debts, travel expenses, and similar items. General insurance (liability, business risk, etc.) is included in the Administrative and General (A&G) category. This is estimated at 8.7 percent of revenue, decreasing to 7.6 percent by stabilization. Marketina EXDenses: Marketing expenses include local advertising, marketing costs, the cost of printing brochures, and other related items. These are estimated at 7.7 percent of revenue in Year 1, decreasing to 6.8 percent. Utilities: It is estimated that the ratio at the subject Hotel will be 5.3 percent in Year 1, decreasing to 4.5 percent. ProDertv ODerations and Maintenance: Property operations and maintenance expenses include salaries and wages, employee benefits, other payroll costs, normal maintenance of the building and electrical and mechanical equipment. It is estimated at 4.4 percent by stabilization. Fixed Charges ProDertv Taxes: are estimated at 4.5 percent of gross revenues based on the current formula used for taxing hotels in Clearwater. Insurance: This insurance category covers only the cost of building and contents insurance and no liability insurance and is estimated at 1.4 percent of revenue at stabilization. The liability insurance is found in the A&G expense. Manaaement Fees: It is estimated that this fee will be set based on four percent of revenue throughout the period. Clearwater Convention Center Feasibility Study Chapter 10 Page 12 h u nden strategic pa rtners destination development consulting I I I I I I I Reserve for ReDlacement: As is standard for income-producing properties, a reserve for replacement for furniture, fixtures, and equipment, as well as other capital items has been included in this analysis. Recent studies have indicated that, over the long-term, a minimum of four percent is required to properly maintain hotel facilities and actual costs could be higher. HSP projects a reserve level beginning at three percent in the first year and remaining at 5.0 percent once the property reached stabilization. Return on Investment and Financing Analysis This section focuses on how the total development can be financed after solving for debt and equity requirements. The cost per room for each scenario was determined by many factors, primarily the cost estimates provided by the Client, less a credit for the smaller amount of function space recommended. Financing Assumptions Clearwater Convention Center Feasibility Study Chapter 10 Page 13 I I I I I I I I I I I I In order to assess the potential financing scenarios for the Hotel, an analysis was conducted of the income available to pay debt service and repay equity investments. Based on the financing and return requirement needs of banks and investors, the following assumptions were made: . Borrower has excellent credit and the ability to back a loan required by the hotel's costs. . Debt coverage ratio of 140 percent or 1.4 times debt service in all years via net operating income. No loan amount greater than 70 percent of loan-to-cost for a branded hotel, 65 percent for an independent hotel. If the debt coverage is not adequate based on cash flow, then the amount lent is decreased. . Loan: Construction/Mini-perm loan of 2 years plus 3 years, amortized over 25 years. Interest rate of 7.9 percent. This then converts to a conventional loan with interest rate of 7.4 percent in fourth year of operation, assuming interest rates are similar. The number of basis points is based on both the borrower's risk level, the strength of the hotel and brand (if no brand, added risk is put in), and the market situation. The best capitalized developers building branded hotels in excellent locations can receive LIBOR plus 150 basis points. . Project costs as discussed. The following table shows the financing assumptions related to the hotel. The purpose is to show the value that can be supported by the projected performance of the hotel. I I I I I I I I I I I I I I I I I I I hunden strategic partners destination development consulting Table 10-9 Financing Assumptions. Clearwater Convention Hotel Constr. Yr1 Constr. Yr2 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 6 Year 9 Year 10 Net Operating Income $0 $0 $4,263 $5,163 $6,118 $6,430 $6,612 $6,842 $7,047 $7,257 $7,474 $7,697 Interest and Debt Reserve WID $842 $1,926 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $842 $1,926 $4,263 $5,163 $6,118 $6,430 $6,612 $6,842 $7,047 $7,257 $7,474 $7,697 Debt Service Payment ($642) ($1,926) ($3,019) ($3,019) ($3,019) ($2,760) ($2,760) ($2,760) ($2,760) ($2,760) ($2,760) ($2,760) Net Income to Repay Equity $0 $0 $1,244 $2,145 $3,099 $3,670 $3,852 $4,082 $4,287 $4,497 $4,714 $4,937 Prine. Amount.... $8,125 $24,375 $32,500 $32,049 $31,562 $31,040 $30,577 $30,079 $29,545 $28,971 $28,354 $27,692 Interest $642 $1,926 $2,568 $2,532 $2,493 $2,297 $2,263 $2,226 $2,186 $2,144 $2,098 $2,049 Less Payment ($642) ($1,926) ($3,019) ($3,019) ($3,019) ($2,760) ($2,760) ($2,760) ($2,760) ($2,760) ($2,760) ($2,760) Loan Balance $8,125 $24,375 $32,049 $31,562 $31,037 $30,577 $30,079 $29,545 $28,971 $28,354 $27,692 $26,981 Assumptions Rell Loan Amount ($Ooo's) $32,500 $31,040 Amortization Period (Years) 25 25 Loan Interest Rate 7.9% 7.4% Annual Debt Service Payment ($Ooo's ($3,019) ($2,760) Equity: Develope~s Equity ($ooO's) $22,000 29% Private Debt 32 500 42% Total Private Financing $54,500 71% Public Gap Subsidy $22,500 29% Project Amount ($ooO's) $77,000 100% $220,000 per room Debt (Private) Coverage Ratio 1.41 1.71 203 2.33 2.40 2.48 2.55 2.63 2.71 2.79 Return on Private Equity' 5.7% 9.7% 14.1% 16.7% 17.5% 18.6% 19.5% 20.4% 21.4% 22.4% Return on Assets" 5.5% 6.7% 7.9% 8.4% 8.6% 8.9% 9.2% 9.4% 9.7% 100% "On developer's equity only. *"On project cost. -Assumes 50% craw in construction Year 1; 75% 8VfJfagB during Construction Year 2 Source: HSP It is projected that the hotel would support $32.5 million in private debt, or 42 percent of cost, at a lAx debt coverage ratio in the first year. The remaining amount of net income supports a $22 million equity investment, which will repay an average of 17 percent over the first ten years of the project. The gap totals $22.5 million that will likely need to be funded in some way by the public sector for the hotel to be feasible. This portion of subsidy is not unusual. Clearwater Convention Center Feasibility Study Chapter 10 Page 14 hunden strategic partners I I I I I I I ECONOMIC AND FISCAL IMPACT ANALYSIS This section analyzes the economic, fiscal and employments benefit that would accrue to Clearwater by the activities at the proposed Clearwater Convention Center and hotel, upon stabilization. It also reviews the potential economic and fiscal impacts induced through the construction of the project. Definitions For the purpose of this analysis, impact totals are discussed in terms of the City of Clearwater economy. The levels of impacts are described as follows: · Direct impacts - are an expression of the spending that occurs as a direct result of the events and activities that occur in the convention headquarters hotel. For example, a hotel guest's expenditures on hotel rooms and meals are a direct economic impact. · Indirect impacts - consist of re-spending of the initial or direct expenditures, or, the supply of goods and services resulting from the initial direct spending in the proposed convention center and hotel. For example, a hotel guest's direct expenditure on a restaurant meal causes the restaurant to purchase food and other items from suppliers. The portion of these restaurant purchases that are within the local, regional, or state economies is counted as an indirect economic impact. · Induced impacts - represent changes in local consumption due to the personal spending by employees whose incomes are affected by direct and indirect spending. For example, a waiter at the restaurant may have more personal income as a result of the hotel guest's visit. The amount of the increased income the waiter spends in the local economy is considered an induced impact. · Personal income measures increased employee and worker compensation related to the hotel operations being analyzed. This figure represents increased payroll expenditures, including benefits paid to workers locally. It also expressed how the employees of local businesses share in the increased outputs. · Employment impact - measures the number of jobs supported in the study area related to the spending generated as a result of the events occurring in the convention headquarters hotel. Employment impact is stated in job years. Clearwater Convention Center Feasibility Study Chapter 11 Page 1 I I I I I I I I I I I I The total impacts of the proposed project in Clearwater presented in this analysis are expressed through the net new spending to the City of Clearwater. I I I I I I I hunden strategic partners Summary of Findings The following table summarizes the estimated economic and fiscal impact of the proposed development, from annual operations based on the facilities' stabilized operations, and from the construction activity. I I I I I I I I I I I I Clearwater Economic & Fiscal Impact Hotel and Convention Center From Operations Economic Impact Direct Spending $42,206,975 Indirect Spending $13,541,619 Induced Spending $17,326,336 Total $73,074,930 Personal Income from Direct $13,204,521 Personal Income from Indirect $4,465,942 Personal Income from Induced $5,342,027 Total $23,012,490 Employment from Direct 620 Employment from Indirect 195 Employment from Induced 256 Total 1,071 Fiscal Impact Real Property Tax $820,939 Personal Property Tax $12,794 Total $833,733 From Construction Economic Impact Direct Spending $61,200,000 Indirect & Induced Spending $23,603,359 Total $84,803,359 Personal Income $34,480,080 Employment (Job Years) 560 Source: HSP Table 11-1 Annual direct spending from hotel and convention center operations is projected to be $42 million with an increase in personal income from direct spending of $13 million and net new employment in the economy of 620 jobs. Total annual spending from the project is projected to be $73 million, new personal income is $23 million, and total jobs are more than 1,070. Annual taxes generated for the City of Clearwater Convention Center Feasibility Study Chapter 11 Page 2 Clearwater Convention Center Feasibility Study Chapter 11 Page 3 I I I I I I I I I I I I I I I I I I I hunden strategic partners Clearwater are $834,000. From construction alone, there is expected to be $85 million in total spending, plus new income from construction of roughly $34.5 million. There are expected to be 560 construction and related job-years added to the economy over the construction period. Impact Analysis The economic and fiscal impact analysis focuses on the proposed development's stabilized year of operation. Assuming that the average number of hotel guests per room is 1.1, 1.4, and 1.9 for corporate transient, group and leisure segment, respectively, the 91,519 occupied room nights translate to 132,233 guest-days, total. The following table summarizes the calculation. Table 11-2 Total Hotel Guests by Segment - Stabilized Year Room Guestsl Existing New Total Nights Room Guests Guests Guests Corporate Transient 16,866 1.1 12,059 6,493 18,553 Group 56,321 1.4 2,366 76,485 78,850 leisure 18,332 1.9 20,898 13,932 34,831 Total 91,519 1.4 35,323 96,910 132,233 26.7% 73.3% 100.0% Source: HSP It is assumed that not all of the guests that stay at the proposed hotel will be new to the market. Some visitors to the new hotel will be those who would have otherwise made arrangements to stay at one of the other hotels in the market. The following analysis of per-guest spending is separated into three categories of visitors: new guests to the market staying at the proposed hotel, guests staying at the proposed hotel that would have stayed at another property in the market, and net new guests staying at other hotels in the market as a result of the new group business generated by the synergy between the Convention Center and the proposed hotel. Spending assumptions were combined with the guest totals to show the total spending from new guests in the market staying at the new hotel. I I I I I I I I I I I I I I I I I I I hunden strategic partners Total Guest Spending - New Hotel Guests Segment Purchase Corporate Total Transient Group Leisure In Hotel Lodging $1,438,159 $10,360,035 $1,820,169 $13,618,364 Hotel F&B $155,842 $2,003,896 $241 ,028 $2,400,766 Parking $4,870 $53,539 $9,753 $68,162 Out of Hotel F&B $199,552 $1,786,362 $308,274 $2,294,188 Shopping $71,839 $752,153 $239,768 $1,063,760 Transportation $108,847 $1,007,347 $135,208 $1,251,402 Recreation $47,892 $611,124 $145,574 $804,590 Other $31,928 $282,057 $51,379 $365,364 Total $2,058,929 $16,856,514 $2,951,153 $21,866,596 Source: HSP Table 11-3 The total spending from new guests to the market staying at the hotel is $22 million in the stabilized year. Although the corporate transient guests spend the most on a per person basis there are significantly more new group visitors projected to stay at the new hotel, which results in the group segment generating the largest amount of economic activity. The following is a table that shows the total incremental spending captured by the new hotel. Total Incremental Spending - Existing Guests Segment Purchase Corporate Total Transient Group Leisure In Hotel Lodging $127,184 $41,793 ($303,362) ($134,384) Hotel F&B $57,884 $9,296 $54,231 $121,412 Parking $9,044 $1,656 $14,629 $25,329 Out of Hotel F&B $296,477 $44,199 $369,928 $710,604 Shopping $106,732 $18,610 $287,722 $413,064 Transportation $60,643 $9,347 $60,844 $130,833 Recreation $71,155 $15,121 $174,688 $260,964 Other $47,436 $6,979 $61,655 $116,070 Total Net New $776,556 $147,000 $720,336 $1,643,892 Source: HSP Table 11-4 Clearwater Convention Center Feasibility Study Chapter 11 Page 4 Ta ble 11-5 I I I I I I I hunden strategic partners The total incremental spending captured in the economy is $1.6 million, most of which comes from the corporate transient segment. The majority of the incremental spending for all three segments is a result of the difference in ADR between the existing low quality hotels and the new, high quality proposed hotel. The next set of visitors includes those who are new to the market, but seek accommodations at other properties than the proposed hotel. The effect that the Convention Center and the new hotel as a pair will have on the group business at other properties is positive and is material. This is shown in the following table. Total Guest Spending - New Market Guests Purchase Group In Hotel Lodging $3,738,157 Hotel F&B $562,990 Parking $19,318 Out of Hotel F&B $580,107 Shopping $244,256 Transportation $327,128 Recreation $198,458 Other $91,596 Total $5,762,010 Source: HSP Clearwater Convention Center Feasibility Study Chapter 11 Page 5 I I I I I I I I I I I I Group visitors seeking accommodations at other properties are expected to spend roughly $5.8 million in the local economy. Convention Center. The spending associated with the convention center has largely been accounted for in the spending of those attendees spending the night, either at the hotel or in other Clearwater hotels. Yet to be counted is the spending of day- trippers (such as those coming to consumer shows) as well as the spending within the facility by exhibitors. The following table shows the estimated amount spent in the local economy by day trip attendees. I I I I I I I I I I I I I I I I I I I hunden strategic partners Spending of Day-Trip Convention Center Attendees Purchase Dav- Trip Attendee Total Spendina F&B $11.68 $461,146 Shopping $4.92 $194,167 Transportation $6.59 $260,045 Recreation $4.00 $157,760 Other $1.84 $72,813 Total Net New $29.02 $1,145,930 Source: HSP Table 11-6 As shown, roughly $1.5 million is projected to be spent by day trip attendees to the convention center. The following table shows the annual economic activity occurring within the convention center, primarily by show producers and meeting planners. Table 11-7 Spending within the Convention Center Category Space Rental Equipment Rental Gross Food & Beverage Event Services Income Other Total Stabilized Year $679,944 $118,990 $4,568,574 $507,042 $19,723 $5,894,273 Source: HSP Spending within the convention center is projected to reach nearly $6 million annually by stabilization. The following table shows the estimated economic impact of the proposed total project. HSP utilized the IMPLAN input-output model to estimate indirect and induced impacts, as well as the increase in personal income and employment. IMPLAN is a nationally recognized model commonly used to estimate economic impacts. An input- output model analyzes the commodities and income that normally flow through the various sectors of the economy. The indirect and induced spending, personal income, and employment effects represent the estimated changes in the flow of income and goods caused by the direct spending associated with the total project. Clearwater Convention Center Feasibility Study Chapter 11 Page 6 hunden strategic partners I I I I I I I Ta ble 11-8 Clearwater Economic Impact Hotel and Convention Center From Operations Direct Spending Indirect Spending Induced S end in Total Personal Income from Direct Personal Income From Indirect Personal Income from Induced Total Employment from Direct Employment from Indirect Em 10 ment from Induced Total $42,206,975 $13,541,619 $17,326,336 $73,074,930 $13,204,521 $4,465,942 $5,342,027 $23,012,490 620 195 256 1,071 Clearwater Convention Center Feasibility Study Chapter 11 Page 7 I I I I I I I I I I I I Source: HSP As shown in the table, HSP projects that in the stabilized year of operation, the proposed development is estimated to generate approximately $73 million of total new spending with $42 million from direct expenditures, $13.5 million from indirect expenditures, and $17.3 million from induced expenditures. Also, $23 million in earnings will result with support for the equivalent of 1,071 new full-time equivalent jobs, all of which are net new impact to the City of Clearwater. Fiscal Impact Analysis Fiscal impacts are tax revenues that result from the spending and income related to the activities at the proposed Clearwater Convention Center and Hotel. This analysis estimates fiscal impacts for the governmental units that levy taxes in the jurisdiction. Like the annual spending estimates on which they are based, fiscal impacts are based on event demand and attendance in their stabilized year of operation. The fiscal impacts are the public sector's return of investment. Fiscal impacts provide a partial offset to the capital and operating expenditures required to support the development of the facility. The analysis in this section shows the fiscal impacts minus the property and sales taxes that are expected to fund the hotel and convention center. All of the totals are net new benefits to the city of Clearwater. Based on the spending shown above, HSP estimated the fiscal impacts from major categories of tax revenues that are directly affected by the development's activity: mainly for the City of Clearwater - property tax and sales tax. I I I I I I I hunden strategic partners · Real Property Tax - is calculated based on the income approach where the net operating income is determined, then a cap rate is applied, to determine the value of the property. The tax rate for the value is 0.021322. · Personal Property Tax - is calculated with the same tax rate as real property but is applied to the value of certain items, mostly FF&E, associated with the hotel. · General Salesl Use Tax - is 7.0 percent, but all flows to the State of Florida and Pinellas County, · Hotell Motel Tax - is 5.00 percent on hotel rooms and is directed to Pinellas County for destination marketing. I I I I I I I I I I I I The following table summarizes the fiscal impact estimates from the applicable taxes. The analysis assumes the public owns the convention center and hotel and therefore no property taxes are generated. Table 11-9 Estimated Net New Annual Stabilized Fiscal Impact Tax Real Property Tax Personal Property Tax Total Property Tax Hotel $820,939 $12,794 $833,733 Total $833,733 Source: HSP, City of Clearwater, Pinel/as County As the table shows, for the City of Clearwater, the new tax revenues are estimated to be $834,000 annually. The City of Clearwater is likely to incur expenses related to providing services to the improved facilities that are not estimated in this analysis. These expenses include police, fire protection, emergency medical services, traffic control, street maintenance, sanitation, and other ongoing operating expenses required to maintain the environment around the facility. While many of these costs are charged back to faCility users, inevitably these costs would, to some extent, decrease the overall fiscal benefit to the public sector. Construction Impact In addition to the ongoing impacts from the operation of the facilities, the construction of the Clearwater Convention Center and Hotel would create a one-time influx of spending. The construction spending also results in employment in many sectors of the local economy. Clearwater Convention Center Feasibility Study Chapter 11 Page 8 Clearwater Convention Center Feasibility Study Chapter 11 Page 9 I I I I I I I I I I I I I I I I I I I hunden strategic partners The total project is expected to cost $153 million for both the convention center and hotel. Not all of the total project cost will create impacts. An industry standard ratio of 60 percent labor, 40 percent materials is used to determine the spending and employment and income impacts. Only the materials cost is used for calculating construction impacts. The following table shows the development budget for both the convention center and hotel. Hotel Convention Center Total Table 11-10 Proposed Project Development Budget Total Materials Labor $77,000,000 $30,800,000 $46,200,000 $76,000,000 $30,400,000 $45,600,000 $153,000,000 $61,200,000 $91,800,000 Source: HSP Materials associated with the hotel are expected to total $30.8 million and materials for the convention center is $30.4 million. The following table shows the total direct spending and the estimated indirect and induced impacts that the construction of the development would generate to the local economy. Table 11-11 Construction Impact Hotel and Convention Center Direct Construction Spending $61,200,000 Indirect Spending $16,266,960 Induced Spending $7,336,399 Total Spending $84,803,359 Personal Income $34,480,080 Employment (Job Years) 560 Sales Tax State of Florida $3,672,000 Source: HSP As shown in the table, the construction activity of the hotel and convention center is projected to account for total spending of $85 million, increased earnings of $34.5 million, and the equivalent support of 560 job-years. These jobs are counted in "job- years," each representing one-year of work for one person because construction is a one-time event rather than an ongoing operation. The estimated fiscal impact from I I I I I I I I I I I I I I I I I I I hunden strategic partners the state sales tax applied to the total spending is approximately $3.7 million from the construction of the development. Clearwater Convention Center Feasibility Study Chapter 11 Page 10