Facilities like the John B. Hynes Veterans Memorial Convention Center (pictured) in Boston are beginning to host their own events.
As chief financial officer for the Massachusetts Convention Center Authority in Boston, Johanna Storella typically focused on the numbers: fiscal management, sales reporting, etc. for the Boston Convention and Exhibition Center and the John B. Hynes Veterans Memorial Convention Center. But in 2008, plagued by a raging recession, Storella and her colleagues at the MCCA, along with many other convention executives, were challenged to find new methods of filling their facilities and generating revenue.
Some looked outside the United States for inspiration. "Convention centers in Europe, Asia and Mexico are not only focused on the economic impact for the host city, but also on starting their own events to break even or even get some kind of financial return," Storella notes. "We wanted to adopt a global mindset and work toward another product line that might help generate revenue."
This effort would bear fruit in June 2014, when, on behalf of the MCCA and its partners, Storella helped launch a new event, the Culinary Intelligence Summit, at the Hynes Center. It also proved part of a trend slowly catching on in several destinations across North America.
Seeking a new economic model
Convention centers traditionally have been known as loss leaders, says Vicki Hawarden, president and CEO of the Coppell, Texas-based International Association of Venue Managers. "The facilities primarily are there to serve whoever needs the space, and their job is to maximize revenue for the convention organizer," she says. The venue's city benefits from event participants via booked hotel rooms, taxes and other expenditures, though the venue itself seldom turns a profit.
"For a long time, if convention centers themselves were losing money, that was just the cost of doing business," Hawarden notes. "But in 2008, when the floor fell out, there was a lot of pressure to change that."
Several other factors were at play. As the economy sputtered and event budgets were cut, client expectations began to change. Fewer events meant venues were competing for business, and that meant more negotiating power for show organizers. "Clients wanted more and more for free at the same time that convention centers were trying to lose less money," says Hawarden.
If the goal was to balance the budget, charging clients more, especially in such a competitive market, was not the answer. It was clear that convention centers would have to begin looking at different models if they wanted to generate revenue, as happened in Boston.
Let's put on a show!
Along with several key colleagues, Johanna Storella began the process of determining whether starting an event from scratch was viable. "We hired consultants to help us, and we talked extensively with international convention centers to see what kind of infrastructure was necessary." It took meeting with dozens of sources and a few years of discussion and research before the team was ready to present a plan to the MCCA board, which gave its consent.
Massachusetts Convention Center Authority
"There was a lot of excitement, but also a feeling of pressure to pick the right events, even with the expectation that the first few years would be a learning process," says Storella.
An early move made by the MCCA was to set up a new strategy and development department. Storella stepped in as chief strategy officer, shedding her old role as CFO, and Mark Michaud, the MCCA's former director of technology business development, was brought on as the director of business strategy and innovation.
The team decided to start small by partnering with organizations or people that could help co-produce shows, rather than take on the task of producing an entire show on their own. But finding the right partner with the right idea took months of evaluation. How much would a show cost? What kind of content would be provided? How many attendees could they draw, and how much would they be willing to pay?
The Culinary Intelligence Summit
kicks off at the Hynes Center.
Potential show concepts were carefully researched and discussed before being brought to the MCCA's 10-person event-review committee. Eventually, two concepts passed muster and were green-lit: the Advanced Audio Applications Exchange, a technology show for musicians and audio professionals, and the Culinary Intelligence Summit, a full-day conference about gluten-free food production in college settings. For the latter, the MCCA partnered with Santa Barbara, Calif.-based John Wilczak, who had started his own gluten-free dough company. With his knowledge of and connections within the industry, he was tasked with creating the content, finding speakers and working with exhibitors. Meanwhile, Storella and her team would handle the bulk of other operational responsibilities.
"We were in charge of all of the logistics -- finding and marketing to attendees, getting registration set up and executing the event itself," says Storella. "I learned so much about the other side of the meeting-planning process and about how many moving pieces there are when you're getting ready to execute an event."
The organizers had about six or seven months to execute. "We wish we had more time to bring it together, but we wanted to do the event in June because it's the best time for college and university workers to attend," says Storella. "Luckily, our knowledge of the facility operations helped us streamline that process." The MCCA, which manages both the Boston Convention and Hynes centers, ultimately chose to hold the show at the Hynes after considering the available space and dates, the flow of the event and how they wanted their attendees to experience the event. "We approached choosing the building just as any other event planner would," says Storella.
Fine-tuning the plans
Once the concept was finalized, Storella established the show as a separate limited-liability company (LLC). "Every event has a certain set of intangible assets associated with it," like exhibitor and attendee databases, notes Storella. "The LLC helps us formalize the assignment of those assets to a particular event." It also helps separate the financial interest of the event from the MCCA.
Other decisions had to be made. For example, would the show be offered lower rates on operations or facility costs to help ensure its success? The simple answer: no. "We did not ask them to give us any kind of discount," says Storella. "If the whole idea behind creating our own events is to move the MCCA closer to financial self-sufficiency, we have to generate positive profit from the event, while generating revenue for the convention center. When you start discounting products, services and labor, that undermines this goal."
Storella says another important reason for paying full price was to make sure the event was successful regardless of where the show was held. She and her team had pondered: If there was demand in another market for a conference like this, would it be profitable? Charging themselves full price in their own building was the only way to know for sure.
When it came to working with A/V, rigging and general-services contractors, the team reached out to partners they already had relationships with and "negotiated with each supplier the same way that our clients negotiate with them for rates," says Storella.
Logistics planning came easy ("We are a convention center, so logistics are what we do best," notes Storella), but other issues proved daunting. "Marketing and sales are the most important aspects of the event," Storella says. "You need to make sure you have qualified and dedicated resources both human and financial -- to support these activities." Because Storella's team was so small, she had to borrow from the MCCA staff as needed. For example, Katie Hauser was tasked with handling the show's PR, marketing and social media on top of her normal day-to-day responsibilities as director of communications for the MCCA.
Storella compared the whole process to launching a small business. Working with minimal resources in the early stages can be a challenge, she acknowledges, but that's all part of the learning process and will eventually lead to growth and success.
The Culinary Intelligence Summit brought in 110 attendees, 12 exhibitors and $22,000 in revenue. As with most first-time events, the show was expected to lose money -- and did.
Undaunted, within the next three to four years, the MCCA hopes to have six events in its portfolio. In five years, the organization anticipates it will break even on self-produced events, and in 10 years, Storella expects the MCCA's events to be generating $5 million in profit. "While we are still learning from this entire process," she says, "we now have much stricter metrics in place for partnerships moving forward."