by Michael J. Shapiro | June 28, 2013
Spreading the word
McCormick's move got the attention of other major cities, says David Causton. "Being the largest convention center in the U.S. and having decided to do this has gotten a lot of other facilities thinking, 'That's interesting, I never expected McCormick Place to do that. Should we give it another thought?' "

The board of directors of Philadelphia's Pennsylvania Convention Center Authority spoke with McCormick's top brass before deciding to privatize its management, having experienced similar, persistent complaints about customer service, labor and expense. A $787 million expansion of the facility debuted in spring 2011, but as of early this year, future prospects were looking grim. Citywide bookings were significantly down for upcoming years. The PCCA board issued a request for proposal in March, part of a four-point plan similar to the reforms made in Chicago. In early June, SMG was selected to manage the venue.

The other initiatives include a review and reform of the labor-supply model, a process now under way in conjunction with SMG. The convention center's situation is somewhat unusual, according to PCCA chairman Gregory J. Fox, in that a labor intermediary holds the collective bargaining agreement with the various unions. "We're reviewing that model and determining whether it would be good to make any changes or not," says Fox. "We want to be sure the labor supply model is structured in a way that's responsive to our customers' needs."

The PCCA will be analyzing existing work rules and looking for opportunities to make improvements in terms of service, billing transparency and other areas flagged for improvement. Philadelphia CVB president and CEO Jack Ferguson points to SMG's industry expertise and focus on customer service as key factors that he hopes will help turn things around for the facility. "It will allow us to tap into new business for Philadelphia and bring back others who had not planned to return," he says.

Pros, Cons and Caveats

"Ultimately, it's a customer-service issue," says Michael Lyons, AIBTM show director and a former member of the Pennsylvania Convention Center Authority's board of directors. "If you're running a really good facility and the costs are in line, clearly the customers will want to come back," he says. "That's why some cities are electing to work with these companies that have a great deal of customer-service expertise. But it certainly isn't a guarantee to success. Some cities that have taken on private management firms maybe didn't get the results they expected."

It's difficult to draw distinctions or make assumptions about facilities based on whether they are publicly or privately run, agrees Vicki Hawarden, CMP, president and CEO of the International Association of Venue Managers in Dallas. There are just too many variables in how each is operated; what might be the case at one publicly run venue could be drastically different at another.

"I've worked with both private and corporate venues as a meeting professional," says Hawarden, "and, really, I can't tell any difference between the two. It's not the type of organization that's running it, but the people you're dealing with at that venue."

One difference noted by planners: Public regulations can mean added costs. "City-run venues often have a set of terms that require you to use certain city services," notes Debbie Padilla, senior administrative specialist with Intel in Santa Clara, Calif. She recalls having to use a certain number of city police officers for a given amount of time as an example. Such nonnegotiable terms, and their accompanying fees, can add up. "It can definitely affect your budget," Padilla says. It might not be a deal-breaker, but she's grown accustomed to the relative ease of negotiating with privately run venues.

Hawarden believes most venues are becoming more flexible, including the publicly run facilities. "City governments sometimes had a tendency to say, 'Look, this is our standard contract and you can't change it.' Now that is much more flexible, no matter how the venue is run. There's an understanding that if you want to work with the customer you can't just have one contract where you can't change a word in it."

And she isn't convinced privatization is a long-term trend. "It's not like every venue, everywhere you look, is going down that path. It depends on the individual politics and culture of the city."

A variety of alternative models are emerging as well. Houston First Corp., for example, was formed two years ago as a "quasi-public" entity to run several venues, including the city's convention center. "I think everybody's just looking for the way to run a building in the most effective manner," says Hawarden.