by Michael J. Shapiro | June 28, 2013
Felix Niespodziewanksi, left, convention and meetings director for the Chicago-based American College of Surgeons, started in this business 40 years ago. "My first trade show was in August of '73 at McCormick Place, in the old building," he recounts. Over the years, Niespodziewanski planned many events there, a process that was often frustrating. "The difference between today's McCormick Place and what it was then is, without exaggeration, like day and night," he says. "I never thought I'd live to see such changes in McCormick Place."

McCormick's reinvention is a well-publicized success story. The sprawling four-building, 2.6 million-square-foot facility, historically plagued by customer complaints about service, labor and expense, underwent a dramatic transformation in 2011. Chicago's Metropolitan Pier and Exposition Authority named private venue-management firm SMG to run the center's operations, and reached a settlement with local labor organizations to implement work-rule reforms legislated the previous year.

Niespodziewanski has been organizing the American College of Surgeons' annual Clinical Congress since 1990, returning to McCormick Place every three years. The meeting typically draws about 13,500 attendees from around the globe, including some 8,400 surgeons. Working with the facility for the 2012 congress was a relative breeze, says Niespodziewanski.

"The staff is smaller," he notes, "but the people who are there are in tune with the industry, have been there a while and have worked on the delivery side of client services, resulting in a more customer-friendly atmosphere for planners, exhibitors and attendees."

David Causton, general manager of McCormick Place since 2004, has seen the changes from the inside. Causton worked directly for the city authority for seven years before SMG hired him upon taking over the facility's management. "Now we are more flexible and can react more quickly to customer needs and expectations," he notes.

Implementation of the new work rules has pleased exhibitors, too. "Before, costs were prohibitive," says Christopher Price, vice president of the Reston, Va.-based Graphic Arts Show Co. Price was so pleased with the changes that he produced a video detailing them to show to his prospective exhibitors. "Today," he says, "people are happier. They start off with less stress, less hassle and a better experience." (See "McCormick Place: What Went Right," left.)

Now Trending: Privatization

Excellent convention facilities across the country and abroad are public-run and highly successful, including the mammoth Orange County Convention Center in Orlando (see "The Orlando Center's Adoring Public," below). Some have even made the switch from private back to public, citing cost savings and other positive results (see "Memphis: From Private to Public"). However, the move to private management is on the rise.

McCormick Place is the largest publicly owned convention center to privatize management and operations, but it's far from the first. Its management firm, West Conshohocken, Pa.-based SMG, now runs 71 U.S. facilities, including many in top-tier cities such as San Francisco, Denver and, as of last month, Philadelphia. In the past five years, the number of convention centers SMG manages has increased by more than 14 percent.

Small- to midsize markets have long been using private management firms to operate their convention centers, explains SMG's Gregg Caren, senior vice president of strategic business development. But he has seen a definite uptick in interest from major market venues. SMG now manages more than 85 percent of the publicly owned, privately managed convention centers in the U.S.

Philadelphia-based (and Comcast-owned) Global Spectrum, SMG's closest competitor, runs a total of 31 convention centers nationally, primarily in smaller markets. And, Los Angeles-based AEG, which was selected to manage the Los Angeles Convention Center last month and recently bid to manage the facility in Hawaii, now runs operations at six centers globally -- in Qatar, Kuala Lumpur and four locations in Australia.

"It certainly is a trend," notes David Dubois, CAE, CMP, CTA, president and CEO of the International Association of Exhibitions and Events in Dallas. Dubois, who formerly served as president of the Fort Worth Convention and Visitors Bureau in Texas, where a city staff manages the convention center, has had positive experiences working with both scenarios. "The challenge is that the operational deficits at most centers continue to be problematic, because the pressures of city budgets are not going away," he says. "Obviously, cities that own convention centers are looking at ways to continue to put out a good product and provide good service to conventions and trade shows at their facilities, while lessening expenses." For many cities, a solution is to outsource, taking facility managers off the city's payroll.

The private management companies are enjoying the results of such decisions. In the first half of this year, Global Spectrum has responded to more RFPs than in any previous full calendar year in the company's history. They come from all types of venues, including arenas and stadiums, notes the company's senior vice president, Frank Russo. But there has been a particularly strong spike in interest from publicly run convention centers.

"Prior to 2008, the vast majority of our opportunities were for new buildings that were under construction," says Russo. "Because of the impact of recession on municipal governments, many more opportunities to manage existing venues have emerged. Local governments have an inability to spend money but are aware that you can't have an across-the-board cut to a convention center, arena or stadium, because it's an entrepreneurial function of government; the more you cut expenses, the more you might jeopardize service, revenue and repeat business."

And when it comes to a public facility like a convention center, local governments are competing with statewide facilities, hotels with meeting space, other regional convention centers and other cities internationally. "You can't do that on a cost-cutting budget," asserts Russo. "You have to be able to do that as an entrepreneur, as an organization that can spend money to make money."

When a private company takes over a facility's management, its goal is to turn the convention center -- which often is losing money -- into a profit­able venture. Running such venues efficiently and profitably are core competencies of private management firms, says Russo. Also, private firms are not bound by the political influences or regulations that could potentially affect procurement, personnel, salary structure and other processes at the government level. And, he points out, management companies generally are prepared to invest more money to lead to longer-term profitability.

"You need a full-strength staff that is customer-service oriented, gets the job done and generates repeat business. Many government organizations just aren't geared to do that," notes Russo, who previously worked in the public sector. "It's not that the people who manage these convention centers are not good, solid professionals, but they're involved in a governmental system that does not reward for bottom-line results, achievement and sales."

Even sources on the government side of the equation agree that public facility management has a host of inherent challenges. "This is an area where the private sector excels," says Miguel Santana, city administrative officer for Los Angeles, which just made the decision to go from public to private convention center management. In terms of motivating employees based on merit, Santana thinks the city has done a decent job. "But it's hard to apply some of those principals in government," he admits.

After completing an RFP process in mid-June, L.A. selected Los Angeles-based AEG to manage its convention center. (SMG, which had bid on the business, challenged the decision, claiming that AEG lacks the experience to run the facility. Officials were expected to vote on the issue by the end of June.)  

Part of the motivation to go private, says Santana, was to remain competitive with other large cities, many of which have gone that route. "We want to make sure our service is consistent with the experience convention-goers have elsewhere. Bringing in a firm that specializes in this industry and can put us on par with other major destinations is part of our objective. Part of it, too, is to generate savings so that it's run more cost-effectively and the savings get reinvested in the center or in other areas in the city."