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					A world class
convention and
exhibition centre
for Sydney:
Pre-feasibility
Study
Final Report
September 2010
Disclaimer


This report has been prepared by PricewaterhouseCoopers (PwC) for Infrastructure Partnerships Australia (IPA).

The information, statements, statistics and commentary (together the ‘Information’) contained in this report have
been prepared by PwC from material provided by the IPA, and from other industry data from sources external
to IPA. PwC may at its absolute discretion, but without being under any obligation to do so, update, amend or
supplement this document.

PwC does not express an opinion as to the accuracy or completeness of the information provided, the
assumptions made by the parties that provided the information or any conclusions reached by those parties.
PwC disclaims any and all liability arising from actions taken in response to this report. PwC disclaims any and all
liability for any investment or strategic decisions made as a consequence of information contained in this report.
PwC, its employees and any persons associated with the preparation of the enclosed documents are in no way
responsible for any errors or omissions in the enclosed document resulting from any inaccuracy, misdescription
or incompleteness of the information provided or from assumptions made or opinions reached by the parties
that provided Information.

The Information contained in this report has not been subject to an Audit. The information must not be copied,
reproduced, distributed, or used, in whole or in part, for any purpose other than detailed in our Engagement
Letter without the written permission of IPA and PwC.




Comments and queries
can be directed to:

Scott Lennon
Partner – PricewaterhouseCoopers
T 02 8266 2765
E scott.lennon@au.pwc.com



Brendan Lyon
Executive Director – Infrastructure Partnerships Australia
T 02 9240 2050
E Brendan.lyon@infrastructure.org.au



Kylie Gillett
Manager, Industry Affairs – Infrastructure Partnerships Australia
T 02 9240 2059
E kylie.gillett@infrastructure.org.au
1
Contents


1   Executive summary                                        6

2   Introduction                                            31

    Background                                              31

    Scope of this study                                     32

3   Rationale for providing convention and exhibition       33
    facilities in NSW

    Role of convention and exhibition facilities            33

    Value of business events to the community               34

    Rationale for government investment in expanding        36
    Sydney’s convention and exhibition facilities

4   Current facilities in Sydney                            38

    Current facilities in Sydney                            38

    Conventions and exhibitions in Australia                45

    Conventions and exhibitions internationally             50

    Constraints of current facilities in Sydney             56

    Economic implications of these constraints              58

5   Options for new or expanded facilities in Sydney        64

    Introduction to options for expansion                   64

    1. Expand the Sydney Convention and Exhibition Centre   67

    2. Expansion of Sydney Showground                       79

    3. Develop airspace over Central Station                80

    4. Glebe Island and White Bay                           82

    5. Barangaroo precinct                                  83

    Assessment of site options                              85

    Economic benefits of creating an expanded,              86
    world class facility in Darling Harbour
6   Delivery and funding models for a new or expanded facility    88

    Existing facilities in Australia                              88

    Private and public sector delivery options                    95

    Benefits of private sector participation                      98

    Funding options                                               99

    Contributions from government and resulting benefits to the   102
    NSW economy

7   Risk allocation                                               103

    Risk allocation matrix                                        103

8   Proposed way forward                                          108

    Proposed way forward                                          108

    Appendices                                                    111

    Appendix A – Acronyms                                         111

    Appendix B – Artist impression of an expanded SCEC            112
Foreword

Dear Mr O’Farrell,


The NSW business community welcomes your policy and project commitments to underpin
economic growth and development in New South Wales.


We particularly welcome your commitment to deliver new, world class convention and
exhibition space in Sydney.


As you are aware, convention and exhibition space is a key driver of this State’s economic
activity. However, the age and design of the existing facilities means that New South Wales is
increasingly losing ground to competitors interstate and throughout the Asia Pacific region.


The wider economic benefits delivered through a well designed, well administered and world
class convention and exhibition facility would stretch far beyond Sydney.


International business events are a significant export earner for the State’s economy.
International convention delegates will typically invest five or six times the expenditure of
international leisure tourists.


Global and significant national events introduce new business for Sydney’s hotels, restaurants
and retail businesses. Moreover, delegates to business events travel far beyond Sydney –
driving economic development in regional New South Wales – and across the nation.


Because of the importance of new convention and exhibition space, we are pleased
to enclose this pre-feasibility study, completed by PricewaterhouseCoopers, for your
consideration.


We also acknowledge and thank Minter Ellison Partner Paul Paxton, who has provided
invaluable advice and counsel throughout this process.


Our pre-feasibility study recommends that a new facility be constructed adjacent to the
existing Sydney Convention & Exhibition Centre at Darling Harbour.


Darling Harbour’s position on the waterfront, its proximity to transport infrastructure and
existing hotels; and the opportunity for additional revenue streams to lower the cost to
taxpayers make it the stand out option.


Our study recommends the use of a Public Private Partnership, which would allow the State
to drive value for money outcomes and drive down the cost to taxpayers over the life of the
project. A PPP will allow the State to transfer project risks away from taxpayers and harness
the private sector to deliver innovations like a new deluxe hotel for Sydney.
A PPP will allow New South Wales to capture the sort of benefits delivered by the award
winning Melbourne Convention and Exhibition Centre PPP.


Your commitment to a new convention and exhibition facility in Sydney will also be an
important way to restore integrity to the State’s infrastructure programme.


During this study we have seen very significant interest from a range of respected industry
participants from across the tourism and infrastructure sectors.


We note that the next phase of this process involves a consultation with interested
parties, including potential financiers, constructors and operators to be overseen by an
independent panel.


We believe this interactive process will be important to further refine the options in terms of
site, scale and funding model. This consultation phase will allow the project to be advanced
quickly from concept to commission, if you are elected to govern next March.


In summary, we have been pleased to oversee the enclosed pre-feasibility study and
commend it to you.



Yours sincerely,




Matthew Hingerty                                 Brendan Lyon
Australian Tourism Export Council                Infrastructure Partnerships Australia




Glenn Byres                                      The Hon Patricia Forsythe
Property Council of Australia                    Sydney Business Chamber




Christopher Brown
Tourism & Transport Forum
                              1. Executive summary

                              Introduction

The Sydney Convention         The Sydney Convention and Exhibition Centre (SCEC) was opened in 1988. The facility cost
and Exhibition Centre         $287 million (or $630 million in today’s dollars), with a $57 million extension opened in 1999
is ageing, has limited        ($85 million in today’s dollars).
capacity and is
experiencing increased
competition related to        These facilities have served Sydney well; but it is clear that the existing centre is ageing and
the size and flexibility of   will not be fit for purpose in the years ahead. The SCEC now requires significant investment
its offering                  and already the facility is often trading at full capacity because of high demand from domestic
                              exhibitions. Additionally, the shortage of available space and the lack of flexibility in its design
This is losing economic
benefit for NSW               is increasingly impeding Sydney’s ability to meet demand.


                              Sydney is facing mounting domestic and regional competition for the right to host major
                              events; without action, these circumstances will increasingly see Sydney losing market share
                              for high value national and international business events.


                              The lack of investment in new convention and exhibition space means New South Wales
                              is missing out on economic opportunities. Without investment to renew and upgrade the
                              required infrastructure, this trend will accelerate as expanded facilities in Melbourne, Hong
                              Kong and Singapore erode Sydney’s competitiveness.


                              This report provides a high level pre-feasibility study of the options that are available to deliver
                              new or expanded convention centre capacity in Sydney.


                              This paper provides analysis and recommendations about the options that are available to
                              policy makers in New South Wales to deliver world-class convention facilities for Sydney.


                              This study was prepared by PricewaterhouseCoopers on behalf of Infrastructure Partnerships
                              Australia –with input from a steering committee comprised of:


                              •	   The Australian Tourism Export Council (ATEC);


                              •	   Infrastructure Partnerships Australia (IPA);


                              •	   The Property Council of Australia (PCA);


                              •	   The Sydney Business Chamber (SBC); and


                              •	   The Tourism & Transport Forum (TTF).




                                                                      6
Scope of the study

This paper provides a high level pre-feasibility study of the options for new or expanded
convention space in Sydney. This report considers options including the location, capacity,
economic benefit and procurement model for a new facility. The terms of reference for the
study are to:


•	   Identify the best location for a new or expanded Sydney conference and exhibition centre;


•	   Specify the size and key facilities required to make a convention and exhibition centre
     world class and internationally competitive;


•	   Identify vacant or underutilised state government owned land that could be used as a site
     to build or expand the existing convention and exhibition centre;


•	   Develop a funding model for the convention centre, including consideration of private
     investment, public private partnerships, in kind contributions from The State Government
     and minimising the impact on NSW taxpayers;


•	   Identify benefits to the NSW economy from the new facility including models to ensure
     that regional NSW benefits from the infrastructure; and


•	   Develop a target list of international conferences and events that could be attracted to the
     new convention centre.



The assessment draws on:


•	   Contributions from the steering group;


•	   Available literature and published data and studies;


•	   Other convention/exhibition developments in Australia;


•	   Interviews with key stakeholders including Business Events Sydney (BESydney), Tourism
     NSW, and the Sydney Harbour Foreshore Authority; and


•	   A range of private sector parties, including possible operators, financiers, construction
     companies and architects.




                                                            7
Rationale for providing convention and exhibition
facilities in NSW

Business events generally provide significant wider economic benefits beyond what can be
captured by either event organisers or the owners of the facilities required for such events.
This means that there is a substantial benefit derived from cities hosting business events.
However, the cost of providing quality convention and exhibition infrastructure is often too high
for the facility to be self-sufficient, meaning that government investment for their construction
(and sometimes operation) is generally required.


Business events allow local businesses to make overseas or interstate sales. They allow local
firms to build national and global networks that later have valuable payoffs for both those
companies and the State economy. Moreover, business events attract high yield visitors to
Sydney who stay in hotels, eat at restaurants and shop at local retailers. Often, these visitors
will extend their visits as tourists in regional New South Wales and interstate.


Every year, Australia hosts more than 300,000 business events involving more than 20 million
participants. These events drive expenditure of more than $17 billion each year.


Currently, New South Wales enjoys the lion’s share of these events. A study of Australia’s
business events found that while NSW hosted around 27 per cent of all meetings in Australia,
it accounts for around 40 per cent of delegates and resulted in $7 billion in expenditure.



These events drive value to the economy by:


•	   Contributing to the economy from a tourism perspective - The business events industry
     is one of the highest yielding tourism segments. For example, international convention
     delegates will spend five or six times the expenditure of an international leisure tourist. A
     six day international conference for approximately 2,000 delegates contributes an average
     of $9 million to the NSW economy. Interstate visitors also contribute expenditure to the
     NSW economy that may not otherwise occur, and often comprise 20% of major trade
     show visitors.


•	   Contributing to regional areas – The economic benefits from world class convention
     facilities extend well beyond Sydney. For example, 46% of all international convention
     delegates participate in pre or post-touring to other parts of Australia, and 58% of
     international convention delegates indicate that they will come back to Australia for a
     holiday within five years. This provides tourism opportunities for regional areas in NSW
     and across Australia. Furthermore, the ability to portray and market Sydney as a hub for
     business activity supports the scope for regional areas to host side or supporting events




                                       8
•	   Contributing to innovation, education, networking, trade, research and practice – The
     real benefits of international and national events extend significantly beyond tourism
     expenditure. Business events connect Australia’s businesses, professions and academics
     to global best practice. This ability to ensure skills and knowledge transfer in fields like
     medicine, law, sport and the environment in turn contributes to capacity building across
     the NSW economy. More broadly, business events showcase Sydney’s capacities,
     extending Australia’s reputation as a place of highly skilled, capable, world
     leading researchers.


However, these wider benefits are not easily or efficiently captured, and such a facility
is unlikely to be financially self sufficient. This means that there is a case for government
support. As considered further in John O’Neill’s 2007 Review into Sydney Convention and
Exhibition Space, it follows that government investment in convention and exhibition facilities
should maximise Sydney’s capacities to host the business events that will make the greatest
contribution to NSW: that is, international conventions and major national conventions.



Current situation

Presently, Sydney’s major convention and exhibition facilities are located at the Sydney            The primary convention
Convention & Exhibition Centre (SCEC) at Darling Harbour and the Sydney Show Ground                 and exhibition space
(SSG) which is located at Sydney Olympic Park Homebush. The proximity of the Sydney                 facilities in Sydney are
                                                                                                    at Darling Harbour and
Convention & Exhibition Centre to the Sydney Entertainment Centre allows SCEC to offer
                                                                                                    Sydney Olympic Park
expanded facilities.


There are a variety of other facilities which also serve different segments of the business
events market. The majority of venues available for larger scale business events are owned by
the NSW Government. These facilities are outlined in Figure ES1, below.


 Figure ES. 1 The five major venues in Sydney




      Australian Technology Park             Moore Park
      SCEC, Darling Harbour                  Sydney Showground, Homebush
      Sydney Entertainment Centre,
      Darling Harbour




                                                          9
                          In addition to these larger facilities, some alternative venues are also owned and operated by
                          the private sector, including Rosehill Gardens, Star City casino, and facilities such as hotels
                          with convention capacity which generally caters for events of up to 800 participants.


                          A range of recent studies have pointed to the economic benefit and importance of Sydney’s
                          ability to successfully compete for major business events. These studies particularly point
                          to the importance of high yield international events because of flow on benefits. Examples
                          include John O’Neill’s 2007 study, and Revitalising the Convention & Exhibition Industry in
                          Sydney, which was prepared for the Tourism & Transport Forum and Property Council of
                          Australia, also in 2007.



                          Sydney’s market share of events in Australia is declining

Due to increased          Historically, Sydney has dominated the market for major conventions and exhibitions
competition, Sydney       in Australia. But now, Sydney is facing mounting competition from interstate and regional
is losing events to the   competitors. A 2007 report found that Sydney is already losing 220 business events every year,
economic equivalent of    equating to lost rental revenues of around $300,000 per event – or $65 million each and every year.
hosting a Rugby World
Cup every year
                          While roughly comparable in size and capacity, the competition from other Australian cities has
                          been spearheaded by almost $1 billion in new infrastructure to support better quality business
                          events in those cities. An example would be the $413 million development at the Melbourne
                          Convention and Exhibition Centre (MCEC) – developed along with a $750 million ‘mixed-use’
                          surrounding commercial precinct – which introduced an additional 30,000 m2 of convention centre
                          space with seating for 5,000 co-located with the existing Melbourne Exhibition Centre facility.




                           Figure ES.2 Comparison of the SCEC and other major domestic venues

                          The SCEC is one of the largest facilities in Australia and historically hosts the largest share of major events in
                          Australia. It is difficult to compare facilities in this way as many modern facilities such as the MCEC and BCEC
                          are designed with high flexibility and multi use options.


                          40,000

                          35,000

                          30,000

                          25,000

                          20,000

                          15,000

                          10,000

                           5,000

                               0
                                      Sydney      Sydney         Sydney      Acer Arena      Melbourne       Brisbane        Darwin       Adelaide       Perth
                                    Convention Entertainment   Showground                    Convention     Convention      Convention   Convention   Convention
                                   and Exhibition Centre       (Homebush)                   and Exhibition and Exhibition     Centre       Centre       Centre
                                      Centre                                                   Centre         Centre

                                                                        Max. convention capacity (seats)      Exhibition space (m2)




                                                                              10
Sydney’s declining share of International Congress & Convention Association (ICCA) meetings
is a concern. Sydney’s share of ICCA meetings in 2008 is approximately comparable to 2003.
With the opening of the newly integrated MCEC in mid-2009, Melbourne’s market share can
be reasonably expected to continue to trend upwards.



 Figure ES.3 Share of ICCA meetings in Australian cities

Sydney holds the largest share of international events of all cities in Australia, however this has diminished
over the past decade

                               1.5%

                                                                                     Construction on
Share of events in each city




                                                                                       new MCEC
                                                                                         begins
                               1.0%




                               0.5%




                               0.0%
                                  1999   2000   2001       2002   2003      2004         2005          2006       2007   2008


                                                       Sydney            Melbourne                     Brisbane




Sydney’s market share of events internationally is declining

Across the board, Australia has been experiencing a decline in the proportion of ICCA events
hosted, decreasing from 3.2% in 1999 to 2.4% in 2008. This is cast against an increase in the
actual number of events convened across the globe since 1999.




                                                                              11
                            Figure ES.4 Percentage of ICCA meetings held in the Asia Pacific region, 1999-2008

                           The number of events being hosted in the Asia Pacific region has been steadily increasing, indicating the
                           potential for Sydney to take advantage of this trend

                                                               3,500                                                                                   7,000




                                                                                                                                                               number of meetings in the rest of the world
                                                                                 Asia Pacific    Rest of the World
                                                               3,000                                                                                   6,000
                           number of meetings in Asia Pacific




                                                                                                                                                82%

                                                               2,500                                                                                   5,000

                                                                        84%
                                                               2,000                                                                                   4,000

                                                               1,500                                                                                   3,000
                                                                                                                                                18%
                                                               1,000                                                                                   2,000
                                                                        16%

                                                                500                                                                                    1,000


                                                                       1999   2000   2001      2002     2003        2004   2005   2006   2007   2008

                                                                                                             Year


From 1995 to 2000,         The ICCA ranking for future scheduled meetings suggests Sydney’s ranking has declined
Sydney held more           over the past decade. Sydney’s ranking has shown a marked decline from 1st in 1999/2000;
meetings than Singapore.   to 4th in 2002 and 11th in 2005. Over this period, major competitors in the Asia Pacific region
But by 2004 and 2005,      have brought major new convention and exhibition facilities on-line. Examples include Suntec
Singapore was hosting
                           Singapore and the Hong Kong Convention and Exhibition Centre.
more than twice the
number of meetings
than Sydney                Figure ES.5 shows that SCEC is 30-40 per cent smaller in terms of total available space when
                           compared to Suntec and HKCEC; and it has 70% less total space than the Kuala Lumpur
                           Convention Centre. These new, state of the art regional facilities now provide versatile, multi
                           functional spaces that can be used to convene a versatile range of business events.




                                                                                                 12
 Figure ES.5 Comparison of the SCEC and world class facilities: total leasable space

The SCEC and SEC combined are approximately 30-40% smaller in terms of total space compared to Suntec
and HKCEC, and 70% smaller than space at the Kuala Lumpur Convention Centre

                                                                    120,000 m2

120,000                                                                                    100,000 m2
                                        91,500 m2
100,000
             Approx 70,000 m2
 80,000

 60,000

 40,000

 20,000

      0
                   SCEC                   HKEC                     Kuala Lumpur             Suntec
              (including SEC)                                    Convention Centre         Singapore

                                 Convention         Exhibition     Multi purpose & other




Broader economic implications if the trend of losing market share of                                    Do nothing scenario
domestic and international events continues                                                             - if current trends
                                                                                                        continue, the economic
                                                                                                        contribution of the SCEC
The Sydney Convention and Exhibition Centre makes a significant economic contribution to                could decrease from the
the State economy. That in turn means that a decline in market share for major events will              current $466 million pa
                                                                                                        to around $310 million
reduce economic activity and opportunities for New South Wales.
                                                                                                        over the next 30 years


SHFA indicates the economic contribution of the SCEC has declined from $478 million in
2006-07, to $474 million in 2007-08, then $466 million in 2008-09. This trend suggests an
average year-on-year decline of 1% per annum – representing a 4% real decrease per annum,
once inflation is taken into account.


Furthermore, the number of international events hosted at the SCEC has decreased 8% year-
on-year between 2006-07 and 2008-09.




                                                                 13
 Figure ES.6 ‘Do nothing scenario’ - economic impact of the SCEC if current trends continue

If current trends continue, the SCEC’s direct economic impact could decrease from the $466 million currently
to around $310 million in 2040


500
450
400
350
300
250
200
150
100

  50
   0
       08

            10

                 12

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    20

            20

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                                                                                                   20
                                 International             Domestic              Total



The figure above shows the decreasing economic impact of the SCEC under a do nothing
scenario. Simply put, a failure to invest in new and renewed capacity will see overall economic
benefits decline from around $466 million per annum currently, to around $310 million per
annum in 2040.


The decline in international return is the most significant, as NSW is able to fully capture
this expenditure as incremental economic benefit, whereas expenditure of local intrastate
domestic delegates is lower, being diluted by a substitution effect (e.g. if a Sydney resident
does not attend the Motor Show they may have instead attended the movies and generated
expenditure anyway).


The SCEC is also losing out on a range of valuable domestic events, because other domestic
facilities offer new, larger and more modern facilities, often integrated with accommodation.




                                           14
Factors contributing to Sydney’s declining market share of events

The decline in market share of major international and domestic events being hosted in
Sydney is attributed to factors including:


1    Ageing facilities;


2    Capacity constraints at SCEC, linked to factors such as:


     •	   Inadequate exhibition space for some major domestic consumer and trade exhibitions;


     •	   Occasions when facilities are unsuitable for an international convention, either
          because it has insufficient space for an accompanying exhibition or the size of
          convention space is inadequate;


     •	   Lack of flexibility in the size of rooms as event organisers increasingly demand flexible
          and functional exhibition space and a mix of plenary, breakout and exhibition space;


     •	   Inadequate IT quality, especially AV, relative to competing venues in Australia; and


     •	   Limited kitchen capacity.



Events that could be facilitated by a world class venue in Sydney

Some examples of major events that are either constrained at the SCEC, or that have been
recently relocated to other venues are:


•	   Swift International Banking Operations Society can no longer be hosted in Sydney due
     to space constraints - During 2006 the major international exhibition, Swift International
     Banking Operations Society (Sibos), was held in Sydney at the SCEC. This event was a
     major success for Sydney. However we are unable to hold this event again, despite its
     potential to generate $54 million in economic benefits, due to space constraints at SCEC.
     Sydney will not be considered for 2015 (or future years) unless an expansion of SCEC is
     undertaken. It is being hosted in Amsterdam this year.




                                                          15
•	   Some current events are forced to operate at smaller than desired levels to utilise the
     SCEC – events such as the Motor Show, Fine Food Show, and Boat Show would use
     more exhibition/flexible space at the SCEC if it was available, as they currently utilise the
     entire centre for these events at the SCEC.


Furthermore, a world class venue would have the potential to host an increased range of
international events currently hosted in other cities, including Hong Kong, Singapore and
Melbourne. Examples could include:


•	   International Conference on Materials for Advanced Technologies, more than
     3,000 delegates


•	   Clean Energy Expo, in 2009 over 3,500 professionals, more than 70 international
     exhibitors and 80 speakers from over 40 countries worldwide


•	   Options for the Control of Influenza, 1,200 delegates


•	   Corporate Social Responsibility (CSR) Asia Summit, over 300 international thought leaders


•	   MIPIM Asia, over 2,000 participants, 400 investors and 200 journalists from over
     40 countries


•	   Aussiecon4 World Science Fiction Convention


•	   SMART Investment & International Property Expo


•	   World Congress on Conducive Education


•	   APCO Australasia Conference & Exhibition


•	   Sustainable Risk Rationalisation Conference


•	   International Conference on Solid Waste.




                                       16
Size and key facilities to make a convention and exhibition centre
world class and internationally competitive

After considering the venues Sydney most competes with in the Asia Pacific, the                      World class facilities
following traits have been identified as making a convention and exhibition centre                   provide flexible space
internationally competitive:                                                                         that could be leased for
                                                                                                     conventions, exhibitions,
                                                                                                     entertainment acts, or a
•	   Size – compared to other world class venues, for example the Suntec in Singapore. the           range of other events
     HKCEC in Hong Kong, and the Kuala Lumpur Convention Centre, the SCEC and SEC
     combined are currently 30-70% smaller in terms of total space. These three venues
     claim total sizes between 90,000-120,000m2. Given the lower proportion of international
     exhibitions hosted in Australia, relative to these three cities, there may not be a need to
     expand space to this extent – although it does point to available space as a limiting factor
     on Sydney’s capacity.


•	   Location – an aspect that the SCEC already shares with the Suntec, HKCEC and other
     locations such as Brisbane, Darwin and Perth is a convention and exhibition facility that is
     not only close to the central business district (CBD) and major 5 star hotels, but it is also
     located on the waterfront.


•	   Mix of convention, exhibition and other flexible space – as indicated in Figure ES.5,
     there does not appear to be a particular mix of types of space that comprises a world
     class facility. Rather best practice appears to be provision of flexible, multi-function
     space that can be divided or combined to suit a range of events. For example, at Suntec
     approximately 12% of the total 100,000 m2 is marketed as convention space and a further
     12% as exhibition space, with the remainder a mix of flexible space and other facilities.
     This suggests that expansion of space in Sydney should maximise provision of flexible
     and multi-use areas.


•	   Other key facilities – key facilities at world class facilities include ballrooms, theatres,
     meeting rooms, restaurants and hotels.



Options for expansion in Sydney

There are various options available to expand Sydney’s convention and exhibition capabilities;
however not all site options are suitable. For example, while the Australian Technology
Park (ATP) at Eveleigh and Moore Park both cater for boutique events, the age, heritage
constraints, physical layout and the limited supporting tourism infrastructure mean that they
are generally unsuitable for major international conventions.




                                                           17
                           The table below lists a number of site options that are considered in the context of this
                           pre-feasibility study.


                            Table ES.1 Potential options for expanding convention and exhibition capacity in Sydney


                            Facility/location                Available capacity
                            1. Expansion of SCEC             Up to 10,000-20,000 m2 of additional space if the Sydney Entertainment
                                                             centre (SEC) site and car park are incorporated, with other alternatives for
                                                             refurbishment to increase flexibility

                            2. Expansion of Sydney           Potential for additional 14,700 m2 expansion bringing total exhibition
                              Showground (Homebush)          space to 36,300 m2

                            3. Development at Central        Up to 500,000 m2 of commercial space in airspace above railway lines,
                             Station                         of which 50,000-100,000 m2 could be used as convention/exhibition
                                                             space. This was proposed in Sustainable Sydney 2030

                            4. Development at Glebe Island   40 hectares

                                                             Potential for 40,000 m2 space (i.e. smaller than existing SCEC venue)

                            5. Development at Barangaroo     22 hectares
                              and Millers Point precinct
                                                             A previous report believed the site had potential for 40,000 m2 in
                                                             exhibition space and up to 5,000 seat capacity in a plenary hall; (TTF/
                                                             PCA 2007) but capacity is not certain, given that the commercial space is
                                                             fully allocated and retaining high levels of green space is important




                           The existing Darling Harbour site has been identified as the best
                           location for an expanded, world class conference and exhibition
                           centre in Sydney

The existing Darling       This report finds that the current SCEC location is the best option for a new, world class
Harbour site has been      convention centre for Sydney. This recommendation takes into account the advantages and
identified as the best     disadvantages of each site, together with the input from the tourism industry and potential
location for an expanded   project investors.
Sydney conference and
exhibition centre, given
its iconic location and    The key advantage is the ability to leverage existing facilities surrounding Darling Harbour,
scope to expand into the   including integration with the existing convention and exhibition facilities. The site’s location
SEC site
                           next to Sydney’s CBD, major hotels and transport networks has obvious advantages.




                                                                    18
Other sites such as White Bay, Central Station and Barangaroo do not allow for synergies from
operational integration with the existing facility. In addition, White Bay and Sydney Olympic
Park do not enjoy the CBD location provided by the existing site. These sites, in particular
White Bay, also have lower bases of foot traffic than Darling Harbour, resulting in lower
potential to generate ancillary revenues, which will lower the eventual cost to the taxpayer.


The existing SCEC and Sydney Entertainment Centre (SEC) site also offers significant
advantages because of its proximity to other major precincts and redevelopments. These
include the University of Technology Sydney’s new $150 million Business School, designed
by Frank Gehry and being undertaken as part of a broader master plan and proximity
to Sydney University. The site will also enable greater connectivity of the city given its
proximity to Darling Park, Darling Walk (currently being transformed into a $560 million dollar
redevelopment combining commercial office and leisure space), Chinatown (which is planned
for a major upgrade), Broadway and the $860 million redevelopment and expansion of the
Star City casino. The SEC site is a 5 minute walk from the major new $6 billion Barangaroo
site which will generate activity and business events for the convention and exhibition centre
precinct.


In considering potential options, it was considered that any upgrade of the SCEC site to enable
high yield international events and conferences to be held at the site would require relocation
of some domestic and National exhibitions – this would require an expansion and upgrade of
the Sydney Showground which has not been considered in the context of this study.


The NSW Government’s south Darling Harbour master plan currently being prepared will
consider the best ways to integrate the Darling Harbour convention and exhibition centre
precinct with popular tourist precincts including Chinatown, the Powerhouse Museum and the
education precinct at the University of Technology. The developments planned in the precinct
will increase pedestrian and thoroughfare activity and general ambience in the precinct,
contributing to retail and hotel demand if developed at the site – an advantage not shared
by the other sites identified in this study. Even before these developments, Darling Harbour
attracts more than 27 million visitors each year, which supports greater ancillary revenue
potential and a reduction in the extent of Government support required.


 Figure ES.7 Location of the SCEC and SEC in Darling Harbour




      Star City           Barangaroo        SCEC              SEC             SEC Car Park




                                                       19
This report suggests several configurations that should be considered in developing new
facilities at Darling Harbour. Of the SCEC options presented, expansion into both the Sydney
Entertainment Centre (SEC) car park and SEC site (approximately 60,000m2), combined with
maintenance and some future potential refurbishment (or replacement) of the current facility
would be expected to address the key capacity issues identified for Sydney. This would also
allow for ancillary developments like retail, commercial and hotel space – which could assist to
encourage private sector involvement in financing and delivering the facility.



Potential options for expansion of the SCEC into a world class facility include:

     Indicative capital             Description
     cost (convention and
     exhibition centre
     component only)

 A   Approx. $500 million+          Expansion of the SCEC into the SEC car park site

                                    The SEC car park site and the area below Pier Street are
                                    approximately 20-25 ha. Expanding into this area could potentially
                                    increase convention/exhibition space by 10,000 m2 (i.e. enabling
                                    resulting in total leasable space at the combined old and new
                                    SCEC of approximately 70,000 m2). This would enable scope to
                                    increase exhibition space and also incorporate flexibility for plenary/
                                    convention facilities.


 B   Approx. $500 million-          Expansion of the SCEC into the SEC car park site and SEC site
     $700 million
                                    Combined, the SEC car park site, SEC site and the area below Pier
                                    Street is approximately 30 ha. Expansion of the SCEC into this
                                    area could result in the creation of a larger integrated, purpose built
                                    facility, whereby the SCEC, SEC and car park become a flexible
                                    space facilitating entertainment, convention and/or exhibition areas.
                                    This could potentially increase SCEC leasable space by 20,000
                                    m2 (i.e. enabling total leased space at the venue of approximately
                                    80,000 m2), also allowing for other ancillary developments. This
                                    option would have the greatest scope to incorporate supporting
                                    commercial investments as was incorporated in the recent MCEC
                                    development. The extra space would also better facilitate a
                                    refurbishment of some of the existing centre at a later date.




                                      20
As part of Option B, the live concert capacity of the Entertainment Centre could be
replaced with the new convention and exhibition centre having a large scale flexible plenary/
entertainment hall with world class stage and acoustics capable of hosting major concerts for
crowds of potentially 6,000-10,000 people, depending on stage layouts. In recent years the
age and quality of the Entertainment Centre has seen it experience increasing competition
from venues such as Acer Arena. The inclusion of state of the art concert space within a new
convention and exhibition centre would mean the CBD again has a modern, competitive and
flexible live concert venue.


Both Option A and Option B will involve expansion into the Wilson Entertainment Carpark.
This carpark currently has a 1,900 car capacity, and while some of these car parks may be
reduced due to the expansion, there will be scope to retain some of this capacity or construct
additional capacity underground. Importantly, any impact on the availability of car park spaces
will be largely offset by those being constructed as part of the new Darling Walk development.
This development includes an 800 space car park, with 600 spaces available to the public. Of
course, there are other car park options available in the Darling Harbour district, for example
the SCEC is served by its own Exhibition Centre Carpark that can accommodate 750 cars, and
the SEC reports that there are around 10,000 spaces within a 10 minute walk.


Considering Options A and B above as ‘Phase 1’ of development of a world class facility in
Sydney, ‘Phase 2’ following the expansion could include upgrades and refurbishment to the
existing facility. However, it is expected that Phase 1 would need to be completed first to
accommodate pre-booked events during construction of the new facility.



Phase 2 options for the existing facility include:


•	   Limited upgrades and maintenance - To address some issues related to ageing facilities
     relating to upgrading and maintenance of the roof, air conditioning, kitchen and loading
     docks. This would not expand capacity. (Cost estimate: approx. $320 million)


•	   Structural enhancement and refurbishment of SCEC Exhibition Halls - Converting the halls
     into a streamlined, flexible space. While this would not directly increase capacity, it would
     allow the existing venue to cater for a wider range of events, potentially simultaneously.
     As an extension to this option, the potential to convert the existing exhibition halls into
     2-storey halls to increase capacity could be explored offset by challenges to continue
     operation of current facilities during construction. (Cost estimate: approx. $400 million)


•	   Redevelop or demolish existing SCEC site – Given the underlying costs of renovating,
     especially the roof, air conditioning, IT systems, loading bays and kitchens, a further
     Phase 2 option could be to build a new wing for the centre on the existing SCEC site to
     better integrate into the new Phase 1 centre.




                                                         21
Economic benefits of creating an expanded, world class facility
in Darling Harbour

An expansion of the SCEC into the SEC car park and potentially also the SEC site has the
potential to increase leasable entertainment, convention and exhibition space by 10,000-
20,000 square metres. Importantly, it offers the opportunity to introduce more flexible space,
enabling multiple events to be hosted at one time. As a result of an expanded SCEC’s ability to
attract large scale events, the number and scale events hosted in Sydney would be expected
to increase. Attracting additional interstate and international delegates and other visitors will
generate new expenditure in NSW resulting in an increase in the economic benefit contributed
by the SCEC to the NSW economy.


As indicated in the figure below, this report finds that a new, world class convention and
exhibition centre will deliver additional economic benefit of between $160 million and $270
million each year, depending on which site configuration is adopted.



 Figure ES.8 Possible increase in economic benefit relative to a do nothing scenario
  (Phase 1 SCEC expansion only)

Compared to a ‘do nothing’ scenario, expansion of the SCEC has the potential to increase economic impacts
by $160-270 million pa, or $2.0-3.4 billion over 30 years in today’s dollars

             900

             800

             700

             600

             500
$ millions




             400

             300

             200

             100

               0
                   08

                        10

                             12

                                    14

                                          16

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                                                                                                               04
                   20

                        20

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                                                                                                             20




                                  Base Case (no expansion/do nothing)

                                  SCEC expanded into the SEC carpark and SEC site

                                  SCEC expanded into the SEC carpark




                                                     22
Economic benefits experienced from the expansion of convention and exhibition
facilities in other Australian jurisdictions are described below:


•	   The economic benefits to development of the Perth Convention Centre are derived
     through the extra visitors to the State, have been calculated as $2.2 billion over the life of
     the Centre, or approximately $63 million per year for 35 years.


•	   The Melbourne Convention Centre development alone is anticipated to inject around
     $200 million a year into Victoria’s economy for the next 25 years - a $5 billion boost to
     the Victorian economy. The investment will create another 2,500 new jobs on top of the
     almost 1,800 created during construction of the centre and commercial precinct in
     South Wharf.



Cost benefit analysis of a world class facility

Ideally, the economic contribution of an expanded, world class facility in Sydney would be
assessed as part of a cost benefit analysis (CBA). A CBA aims to understand how efficiently
funds are being allocated in order to generate benefits for NSW residents and businesses.
Such an analysis requires a sizeable amount of data and which was not available to this study.


However, a CBA was undertaken for the Melbourne Convention Centre project, which
suggested that the project had a strong benefit cost ratio (BCR) of over 2.5. The net benefits
were driven by the expanded centre attracting more overseas visitors, a large proportion of
which undertake pre or post-touring to other parts of Australia.



Delivery and funding models for a new or expanded facility

In spite of the significant wider economic benefits delivered by a highly functional convention
and exhibition centre, the revenue generated from events, conferences and exhibitions will not
be sufficient to cover upfront capital, operational and maintenance costs.


A majority of other states utilised alternative sources to fund the upfront and ongoing costs of
facilities by leveraging private sector investment. There are a range of possible roles for private
sector involvement in the development and operation of an expanded convention centre in
Sydney. The following table presents the spectrum of possible private sector involvement in
the delivery of facilities.




                                                          23
 Table ES.2 Delivery options



DELIvERY
                     Construct    Design       Maintain     Finance      Operate
OPTION



Construction
                      Private    Government   Government   Government   Government
contract




Design &
                      Private      Private    Government   Government   Government
Construct




Design, Build,
                      Private      Private      Private    Government   Government
Maintain, Transfer




Design, Build,
Operate (including
or excluding          Private      Private      Private      Private      Private
core services),
Maintain, Transfer




                                  24
Benefits of private sector participation

The benefits of private sector participation for the expanded Sydney Conference and
Exhibition facility are likely to include:


•	   Risk transfer: An opportunity to transfer various risks to the private sector such as
     integrated design, construction and refurbishment, programming and facilitating existing
     conference bookings, operational, ongoing maintenance and refurbishment as well as
     risks inherent in various commercial opportunities (e.g. retail, parking, hotel).


•	   One point of contact: The State will deal with one party to build, operate and maintain
     the facilities reducing the risk of managing and interfacing with multiple parties. This will
     reduce interface risk and ongoing administrative costs.


•	   Innovation: An innovative, integrated design that takes into consideration the urban
     design and aesthetics of the environment and expanded SCEC, facilitated by a project
     plan that considers the complexity of a staged development, refurbishment and potential
     relocation of utilities and infrastructure, within the requirements of continued
     service delivery.


•	   Flexibility: A facility that can be easily and cost effectively adapted to cater for a broad
     range of conferences, exhibitions and activities with a particular focus on international
     events using leading edge technology and approaches.


•	   Efficiency and integration: Reducing ongoing operations and maintenance costs by
     introducing efficiencies through sharing and management of resources, e.g. sharing of
     kitchen facilities for conferences and a hotel.


•	   Core services: Enhancing the State’s ability to focus on the core activities of attracting
     and scheduling key international events for the duration of the project term.


•	   Whole of life costing: Securing value for money through requiring the private sector to
     design, operate and maintain facilities that result in designs that minimise ongoing costs
     and extends the life of assets.


•	   Technology: Obtaining higher levels of private sector innovation and technology in
     flexibility and conferencing by building it into the State’s requirements.




                                                          25
•	   Commercial Opportunities: Reducing the cost of the SCEC to the State through
     leveraging core private sector skills in commercial development opportunities such as
     hotels, residential, retail, restaurants, advertising and car parks by granting 99 year leases
     or granting freehold access over parcels of land.


•	   Increased utilisation: By providing improved service outcomes, flexible facilities with
     the latest technologies, the Project is likely to attract the target local and international
     client base resulting in increased events and resultant revenue.



Funding options

There are a range of options available through a PPP that will lower the cost to government of
a new facility. Some of the commercial development opportunities previously identified for an
expanded Sydney Convention and Exhibition Centre that can be used to offset the capital cost
of the project are likely to include:


•	   Granting of airspace and development rights for a 5 star 200 bed hotel above the new
     centre as a percentage of delegates will require high-quality accommodation close to
     the event. The need for a 4 /5 star hotel is emphasised by the lack of 4/5 star hotel
     supply post the Olympics compared to Melbourne. The Hotel and the expanded Sydney
     Convention and Exhibition Centre can gain economies of scale through sharing core
     facilities such as the kitchen and ballroom, security, maintenance and cleaning.


•	   Providing 99 year lease over the property earmarked for commercial developments to
     reduce the funding requirement for the project. Commercial developments are likely to
     include car parking spaces, student apartments due to proximity to UTS, commercial
     office space and retail developments.


•	   By involving the private sector the project is likely to increase utilisation of exhibition
     space, provide increased quality of design in the Darling Harbour area generating
     increased uplift in property values and ancillary rental streams compared to conventional
     procurement by SHFA


•	   The project provides a direct link with the commercial office development in Darling Walk
     providing increased potential for business events and ‘on foot traffic’ is likely to boost retail



Contributions from government and resulting benefits to the
NSW economy

As discussed, the expansion of the SCEC has the potential to increase economic benefits
received by NSW (currently $466 million per annum) by $160 million each year for expansion
into the SEC car park, and up to $270 million each year for expansion into the SEC car park and
SEC site, as described above.




                                        26
The annual net cost to government for an expanded SCEC procured through a service
payment PPP is estimated at $40 to $60 million.


The estimated cost assumes a 30 year PPP project term with an initial capital cost of $500
million, which is offset by the realisation of commercial revenue opportunities. The quantum of
commercial revenue offset reflects indicative proposals received from the private sector for an
expanded SCEC. The cash flows making up the net cost is illustrated in the diagram below.



 Figure ES.9 Estimated net annual cost of an expanded SCEC procured through a PPP



    PPP Gross                                                   Sydney Events
                                           Net Annual
      annual           Commercial                                   Centre                Net Annual Cost
                                           Availability
    Availability        Revenue                                    Income                 to Government
                                            Payment
     Payment                                                      received




                                                               Revenue from events -
                                                               New facilities $65m
                     Retail $5 - 6m
                                           Government
   Service Payment                                                                         Net Cost to NSW
                                           Availability
     $130 - 150 m                                                                            Government
                                            Payment
                                                                                            $40 - 60m p.a.
                                           $115 - 135m
                     Car Parks $11 - 13m                       Revenue from events -
                                                               Existing facilities $10m




The gross annual Availability Payment reflects the total annual payment to be made by
Government for the expanded SCEC. The private sector will determine and deliver the
commercial opportunities that reduce the gross annual Availability Payment to $115-135 million
per annum. In addition, the NSW Government would receive income from events hosted at
the expanded SCEC that further reduces the net cost of the expanded SCEC to $40-60
million per annum.



Proposed way forward

A proposed way forward is described below, though this could be expanded and altered
following private sector submissions and outcomes of work such as the SHFA master plan to
redevelop and expand NSW’s convention and exhibition facilities (due for completion at the
end of 2010):




                                                          27
Site options


1   Utilise Darling Harbour as the preferred central location for Sydney’s flagship convention
    and exhibition facility, with a focus on international events


2   Undertake an economic cost benefit analysis on expanding facilities at the SCEC
    including using land containing the SEC car park and also potentially the SEC, with
    integration with the existing facilities to create a large scale, world class venue



Leveraging private sector involvement


3   Utilise a PPP for the development, construction and finance and operation of the
    expanded facility as well as potentially maintaining and operating the existing facility,
    to take advantage of innovation and to reduce the funding requirement for the project
    through additional commercial investments in the precinct. Prior to proceeding with a
    PPP, the PPP would need to demonstrate value for money relative to a public sector
    comparator


4   Combine the existing and expanded facility in the PPP arrangement, so as not to
    create two competing facilities and optimise private sector involvement and to extract
    operational synergies that are available through integrated operation


5   Consider the following inclusions in the PPP arrangement, with flexibility for the private
    sector to propose ideas and incorporate innovation relating to:


    •	   Phase 1 expansion options into the SEC car park or both the SEC car park and SEC
         site, as well as the private concessionaire potentially maintaining and operating the
         existing facility


    •	   Undertaking a future Phase 2 SCEC refurbishment or replacement options, either
         bundled with the Phase 1 PPP, or as a separate PPP subsequent to the Phase 1
         expansion


    •	   The PPP should involve either an availability payment, upfront contribution or
         combination of both from the NSW Government; with this being a bid criteria to
         encourage greater ancillary revenue development to lower the cost to Government




                                      28
•	   Consider approaches for the availability payment and the role of SCEC operation
     undertaken (i.e. whether it includes all or only some of the following: maintenance,
     security, food and beverage, some event marketing, event booking, etc., noting that
     most of the operating roles at the existing facility are already outsourced)


•	   NSW Government retains control over use of the facility and the types of events
     hosted. To facilitate this, and to aid attraction of private sector interest, the NSW
     Government should retain demand risk for the number and types of events, with the
     private sector financially incentivised to attract extra events to increase utilisation


•	   Ensure new exhibition, convention and entertainment facilities developed in the
     expansion are flexible, multi-use space and at a minimum comprise:


     - 10,000-20,000 m2 dedicated to exhibitions and conventions if the site is developed
       into the SEC car park site


     - 20,000-30,000 m2 dedicated to exhibitions, conventions and entertainment
       space if the site is developed into the SEC car park site and SEC, with facilities
       incorporating flexibility to host live concerts for 6,000-10,000 attendees


     - Innovation and connectivity, including conjoining the expanded site with the
       existing SCEC


     - Opportunity to include underground car park


•	   The concession would include development rights of the precinct, which may include
     retail, commercial, residential, hotel – with the height, room number and rating of
     the hotel reflecting preferences of the private sector operator and NSW Government
     planning and zoning restrictions. The merit of a new 5 star 200-plus bed hotel sited
     above the new venue should be further considered, as few delegates choose
     budget accommodation when attending conferences. Post the Sydney Olympics the
     extent of new 4-5 star hotel supply in Sydney has been low, especially compared
     to Melbourne. There would be potential for the hotel and the new convention and
     exhibition centre to share facilities such as a kitchen and ballroom, as well as security,
     maintenance, cleaning and other ongoing costs, creating a range of capital and
     operating cost synergies.




                                                     29
6   Utilise a two-staged tender process (instead of a design competition approach with the
    bidders having to deliver a design, this approach assumes the bidders will put forward
    designs):


    •	      Expression of interest process to canvass the private sector’s interest and potential
            plans, and to shortlist tenderers


    •	      Tender process to select a preferred tenderer (with suggestions from the private
            sector to shortlist 2-3 parties only given the cost of bidding). This may include final
            negotiation to refine designs and layouts.



Indicative project timings

The table below presents some indicative project timings



 Table ES.3 Indicative timings – Phase 1


Milestone                          Estimated project timing
Release expression of interest     June 2011

Shortlist                          September 2011

Financial close                    Within 12 months (by June 2012)

Construction start                 July 2012

Opening                            Within 3 years (by June 2015)




After opening of the expansion (Phase 1), the project could progress to Phase 2 with either
refurbishment or rebuilding of the existing SCEC site.




                                          30
2. Introduction

This chapter provides background to the convention and exhibition
industry in Sydney and outlines the scope of this review.



Background
The current Sydney Convention and Exhibition Centre (SCEC) was opened in 1988 for                                         Increased competition
a construction cost of $287 million (or $630 million in today’s dollars), with a $57 million                              from other venues is
extension opened in 1999 ($85 million in today’s dollars).1 These facilities are ageing and its                           challenging Sydney’s
                                                                                                                          traditional role as
capacity is limited due to competing demand from domestic and international exhibitions and
                                                                                                                          a leader in hosting
other factors related to size and flexibility of its offering.
                                                                                                                          conventions
                                                                                                                          and exhibitions
This is contributing to Sydney’s drop from number seven in 1999 to number twenty-four
in 2008 on the International Congress and Convention Association (ICCA) rankings for the
number of association meetings.2


In addition to increased international competition, there has been a recent increase in
competition between cities within Australia for conventions and events, following the opening
of the new Melbourne Convention Centre (integrated with the Exhibition Centre to create the
Melbourne Convention and Exhibition Centre (MCEC)) in 2009, and the opening of the Darwin
Convention Centre in 2008. Other cities in Australia, such as Brisbane and Perth, have recently
or are currently upgrading or expanding their facilities.


Although the SCEC offers a size and location comparable, or even superior, to other venues,
the ageing facilities do not adequately provide for the needs of all potential conventions and
exhibitions. Stakeholders have indicated that event bookings can be constrained by available
space, and the facilities do not offer the flexibility increasingly demanded by event planners.


A number of recent reviews, such as that prepared by John O’Neill in 2007 and the Property
Council of Australia (PCA) and Tourism & Transport Forum (TTF) also in 2007 have highlighted
the importance of Sydney maintaining its competitive position with regard to conventions and
exhibitions, in particular international events, given their flow on economic benefits.




1 SCEC (2009), Fact File, February 2009, available at:

 http://www.scec.com.au/content/fact_files/Centre_Fact_File_2009.pdf; and Australian Bureau of Statistics (ABS) (2010),
 6427.0 Producer Price Indexes, Building construction, NSW, June 2010 (10 year historical average)
2 International Congress and Convention Association (ICCA) (2008) The International Association Meetings Market 1999-

 2008, ICCA Statistics Report


                                                                      31
                        Scope of this study
This high level study   This study is a high level pre-feasibility study of options of new or expanded convention centre
examines the options    capacity in Sydney. It aims to analyse options on how to best improve the ability to host
for new or expanded     conventions and exhibitions, which could be either at a new location or further extending the
convention capacity     existing Darling Harbour site.
in Sydney

                        The study was prepared by PricewaterhouseCoopers (PwC) on behalf of Infrastructure
                        Partnerships Australia (IPA) and in conjunction with a steering committee comprising the
                        Australian Tourism Export Council, Property Council of Australia (PCA), Sydney Business
                        Chamber (SBC) and Tourism and Transport Forum (TTF).



                        The terms of reference for the study are to:


                        •	   Identify the best location for a new or expanded Sydney conference and exhibition centre


                        •	   Specify the size and key facilities required to make a convention and exhibition centre
                             world class and internationally competitive


                        •	   Identify vacant or underutilised state government owned land that could be used as a site
                             to build or expand the existing convention and exhibition centre


                        •	   Develop a funding model for the convention centre, including consideration of private
                             investment, public private partnerships, in kind contributions from the State Government
                             and minimising the impact on NSW taxpayers


                        •	   Identify benefits to the NSW economy from the new facility including models to ensure
                             that regional NSW benefits from the infrastructure


                        •	   Develop a target list of international conferences and events that could be attracted to the
                             new convention centre.


                        Given the timings and available resources, the assessment draws heavily on available literature
                        and published data/studies as well as other convention/exhibition developments in Australia.
                        Data and suggestions contributed by the steering group, and other key stakeholders including
                        Business Events Sydney (BESydney), NSW Business Chamber, Tourism NSW, Sydney
                        Harbour Foreshore Authority (SHFA), and a range of private sector parties (including possible
                        operators, financiers, construction companies and architects) were considered.




                                                              32
3. Rationale for providing convention
and exhibition facilities in NSW
This chapter describes the role of convention and exhibition venues
facilitating business events, and the value of business events to
New South Wales.



Role of convention and exhibition facilities
Convention and exhibition space exists to service business, government and industry events.                                  Each year NSW hosts
Conventions are held to discuss matters of common interest among delegates. Exhibitions                                      more than 81,000
bring together suppliers of products, services and information within an environment to                                      business events
promote and display their products to prospective customers.                                                                 involving more than
                                                                                                                             8 million participants.
                                                                                                                             Nationally expenditure
Each year, Australia hosts more than 300,000 business events, involving more than 20 million                                 at business events totals
participants with total expenditure of $17 billion. Meeting and conference delegates contribute                              $17 billion per annum
more than half of this expenditure.3 Of these events, NSW holds the largest share of events
amongst all the states and territories. In 2003, a study into national business events found that
NSW hosted 27% of all meetings in Australia, which accounted for approximately 40%
of delegates and resulted in $7 billion of expenditure. In that study, Sydney hosted the
largest events.4



Some of the major events hosted in Sydney in 2010 included:


•	   7th International Orthodontic Congress


•	   International Federation of Surveyors Congress


•	   Lions Clubs International Convention


•	   Annual World Congress of the Human Proteome Organisation


•	   Sydney International Boat Show


•	   Australian International Motor Show.5




3 Deery, Margaret, Jago, Leo, Fredline Liz and Dwyerhe, Larry (2005), The National Business Events Study: An Evaluation of

 the Australian Business Events Sector
4 Deery et al. (2005), The National Business Events Study: An Evaluation of the Australian Business Events Sector, p19

5 Business Events Sydney (2010), Sydney and NSW Business Events Calendar, ’Examples of 2010 Sydney and NSW

 business events’, available at:
 http://www.businesseventssydney.com.au/why-sydney/business-events-calendar/; and SCEC website (2010),
 available at: http://www.scec.com.au/


                                                                        33
Value of business events to the community
Business events contribute value to the community as a whole – not just the participants.


Although there has been substantial focus on events over the last decade, most of this
has related to major events that tend to capture the imagination of the general public. The
business event sector, which is an ongoing and high yield component of the event sector, is
the ‘quiet achiever’ and has not received adequate recognition for its contribution.6


Business events play a vital role in the broader economic strategy of the State.
Business events:


•	    Contribute to the economy from a tourism perspective


•	    Contribute in areas such as innovation, education, networking, trade, research and
      practice – which are likely to far outweigh the financial returns of the tourism spend.7



Tourism impact

The business events industry is one of the highest yielding tourism segments. International
and interstate delegates attending business events in Sydney generate significant tourism
expenditure for NSW. This contribution is driven by expenditure of these visitors across
a wide range of areas from transport and entertainment through to shopping, dining and
accommodation.


International delegates make a significant and disproportionately high contribution to the
economy. International convention delegates spend (on average) five to six times that of
international leisure tourists; and 28% of international delegates also bring their partner.8 As
an example, a six day international conference for approximately 2,000 delegates contributes
an average of $9 million to the NSW economy.9


At the Sydney Convention and Exhibition Centre (SCEC) in 2008-09, international delegates
comprised 3% of all delegates attending events at the venue, but contributed 23% of the total
delegate/visitor expenditure generated at the SCEC, with $109 million in expenditure from
delegates at international conferences and congresses that year.10




6 Deery et al. (2005), The National Business Events Study: An Evaluation of the Australian Business Events Sector, p19

7 Foley et al. (2010), A Scoping Study of Business Events: Beyond Tourism Benefits, Executive Summary.

8 Melbourne Convention and Visitors Bureau (2010), Business Events Facts & Figures, available at: http://www.mcvb.com.au/

  about-mcvb/research/business-events-facts-and-figures.aspx
9 SCEC (2009), Fact File, February 2009, available at: http://www.scec.com.au/content/fact_files/Centre_Fact_File_2009.pdf

10 SCEC (2009), Fact File, February 2009, available at: http://www.scec.com.au/content/fact_files/Centre_Fact_File_2009.pdf



                                                 34
Interstate visitors also contribute expenditure to the NSW economy that may not otherwise
occur. Interstate visitors can comprise 15-20% of major trade show visitors, further boosting
visitor expenditure in NSW. This could result in $70-95 million expenditure for delegates to
the SCEC alone each year.11



Regional impact

The tourism impact generated from providing world class convention and exhibition facilities in
Sydney that can attract international delegates extend well beyond Sydney:


•	     46% of all international convention delegates participate in pre or post-touring to other
       parts of Australia


•	     58% of international convention delegates indicate that they will return to Australia for a
       holiday within the next five years, after the convention has been held.12


As this suggests, attractions such as the Western Plains Zoo in Dubbo may provide for
possible pre or post-touring destinations. Furthermore, the ability to portray and market
Sydney as a hub for business activity supports the scope for regional areas to host side or
supporting events. In addition, business events could generate innovation and knowledge
transfer for regional universities. For example, Newcastle University is known for its medical
research; and hosting medical industry events in Sydney may help to promote medical activity
and research more broadly in NSW.



Innovation and knowledge impact

It is well established that business events make a significant contribution to the economy from
a tourism perspective. However, Foley et al. in A Scoping Study of Business Events: Beyond
Tourism Benefits show that beneficial outcomes are also realised in areas including:


•	     Knowledge expansion


•	     Networking, relationships and collaboration


•	     Educational outcomes




11 Stakeholder interviews as part of this study

12 Melbourne Convention and Visitors Bureau (2010), Business Events Facts & Figures, available at:

     http://www.mcvb.com.au/about-mcvb/research/business-events-facts-and-figures.aspx


                                                                        35
•	   Fundraising and future research capacity


•	   Raising awareness and profiling


•	   Showcasing and destination reputation.13


Foley et al. suggest that these benefits are realised because business events connect the
world’s best practice and international knowledge with local researchers and practitioners
- in fields including medicine, law, sport and the environment. In turn, growth in local NSW
knowledge contributes to capacity building within each sector. Such events allow for
dissemination of new knowledge, techniques, materials, and technologies in each of the
sectors, providing Sydney/NSW based educators, practitioners and researchers with access
to a network of international colleagues. This networking provides local delegates with
new business and research collaborations, and will generate innovation, ideas and research
agendas for many years to come.14


More broadly than this, business events showcase Sydney’s capacities, fostering a reputation
as a place of highly skilled, capable, world leading researchers.15




Rationale for government investment in expanding
Sydney’s convention and exhibition facilities
Large scale convention and exhibition centres tend to require government subsidies for their
construction and, in some cases, their operation. The rationale is that some types of business
events provide benefits to NSW beyond what can be captured and paid for directly by the facility.


As described in the earlier parts of this chapter, business events attract visitors to Sydney who
stay at hotels, eat at restaurants, and shop at local retailers. Some of those people extend their
visits as tourists and travel elsewhere in the State. Some events lead to overseas or interstate
sales by local businesses or build international networks for local firms that later have valuable
payoffs for those firms and the broader State economy. It is not possible for the convention
and exhibition centre as a standalone entity to capture a share of these benefits adequate for
the facility to be financially self-sufficient, which creates a need for Government support.




13 Foley et al. (2010), A Scoping Study of Business Events: Beyond Tourism Benefits, p. 26

14 Foley et al. (2010), A Scoping Study of Business Events: Beyond Tourism Benefits, Executive Summary.

15 Foley et al. (2010), A Scoping Study of Business Events: Beyond Tourism Benefits, Executive Summary.



                                                 36
As considered further in O’Neill’s 2007 Review into Sydney Convention and Exhibition
Space, some large hotels in Sydney provide internal convention facilities. However, there is
a limit on the size of convention space they can economically provide, requiring facilities to
be proportionate to the number of rooms in the hotel. As such O’Neill suggests the need for
government funded convention and exhibition facilities is for business events beyond the size
that the private sector alone can economically provide - and particularly where those events
have substantial external benefits for NSW.


Business events, particularly those with a strong international component, lead to more
extensive purchase of tourism services and, in the case of major international conventions,
strong interaction that enhances Sydney’s position as a global city and the international ties of
its businesses and other knowledge workers.


It follows that government investment in convention and exhibition facilities should be done
to serve business events of a size beyond what the private sector alone is able to cater for.
Additionally, it should be offered in a way that maximises Sydney’s ability to attract business
events likely to make the greatest contribution to NSW: international conventions and major
national conventions.16




16 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space, pp 11-12



                                                                       37
                            4. Current facilities in Sydney

                            This chapter provides an overview of the current convention and
                            exhibition facilities in Sydney, and how Sydney’s facilities compete
                            both nationally and internationally for events.



                            Current facilities in Sydney
Sydney typically hosts      Convention and exhibition space exists to service business, government and industry events.
international conventions   Broadly, the market for such events comprises conventions and exhibition events. Although
and exhibitions, but        the categorisation of these events is fluid, they are generally defined as:
not large international
consumer trade shows
                            •	   Conventions are held to discuss matters of common interest among delegates.
                                 Professional conventions can encompass various commercial, academic and
                                 social groups. (Conventions, of a medium to large scale, sometimes host
                                 exhibitions simultaneously)


                            •	   Exhibitions bring together suppliers of products, services and information within an
                                 environment to promote and display their products to prospective customers. These
                                 events primarily lead with show floor activity.17



                            Sydney currently hosts:


                            •	   International, national and local conventions (including corporate meetings)


                            •	   National and local consumer trade shows


                            •	   Industry related exhibitions.18


                            Due to the typical large scale of events and relatively small market (compared to Asian
                            centres), Australia in general is not suitable for most international consumer or trade
                            exhibitions and does not host them. Australia is, however, competitive for international
                            conventions due to regional location.




                            17 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space, p12

                            18 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space, p2



                                                                            38
 Table 1 Sydney’s target in the international market
                                                                                                                                                                                                                                   There are a variety
Sydney is a suitable venue for international and domestic conventions
                                                                                                                                                                                                                                   of convention and
                                                                                                                                                                                                                                   exhibition facilities in




                                                                                                               International consumer
                                                                                                                                                                                                                                   Sydney, each offering
                                                                                                                                                                                                                                   different capabilities




                                                                                                                                                          National consumer
                                                                                                                                        and trade shows




                                                                                                                                                                              and trade shows




                                                                                                                                                                                                                 and trade shows
                                                                                                                                                                                                                                   and targeting slightly




                                                                                                                                                                                                Local consumer
                                                                                                                                                                                                                                   different markets
                             International
                                             conventions




                                                                      conventions




                                                                                            conventions
                                                           National




                                                                                    Local
 Sydney                                  •                        •                     •                                                                               •                                   •
 Hong Kong                               •                        •                     •                                           •                                    •                                   •
 Singapore                               •                        •                     •                                           •                                    •                                   •
 Kuala Lumpur                            •                        •                     •                                           •                                    •                                   •



There are a variety of convention and exhibition facilities in Sydney, each offering different
capabilities and targeting a range of markets. A majority of the facilities in Sydney are publicly
owned by the New South Wales Government. These venues are generally for larger-scale
conventions and/or exhibitions, including the:


1     Sydney Convention and Exhibition Centre (SCEC), Darling Harbour

2     Sydney Entertainment Centre (SEC), Darling Harbour

3     Sydney Showground (SSG), at Sydney Olympic Park (Homebush)

4     Moore Park; and

5     The Australian Technology Park (ATP), Eveleigh.

Alternative venues are also owned and operated by the private sector, which provides:


6     Facilities for some exhibitions and plenary events – e.g. Rosehill Gardens hosts the
      Sydney Stitches and Craft Show and the Rosehill Gardens Boat Show; and Star City
      casino also provides facilities for events (with Star City’s capacity set to expand with its
      development of a 3,000-seat event centre comprising 2,400 m2 of column-free space and
      views over Sydney Harbour and the city skyline)19.


7     Facilities with convention capacity of up to 800 participants – e.g. at some hotels, with
      the Hilton Hotel in Sydney one option for exhibitions, with capacity of approximately 800
      participants.20 Star City’s new 2,400 m2 Events Centre will be the largest event space
      of any hotel in Sydney.



19 Tabcorp (2010), Tabcorp increases investment at Star City, 5 August 2010, available at: http://afr.com/rw/2009-2014/

    AFR/2010/08/04/Photos/c257fc76-a019-11df-8dca-9e56e9d3303d_tabcorp%20increases%20invest.pdf
20 Private stakeholder interview, 9 June 2010



                                                                                                          39
The locations of the five major facilities are presented in figure 1


 Figure 1 Map of current facilities in Sydney




        Australian Technology Park                          Moore Park
        SCEC, Darling Harbour                               Sydney Showground, Homebush
        Sydney Entertainment Centre,
        Darling Harbour




The major venues suitable for hosting conventions and exhibitions are geographically spread
throughout the greater Sydney metropolitan area and target different markets. In addition to
these larger facilities, there are a wide range of Sydney spaces for conventions; especially
those catering for less than 800 delegates. These include various hotels, theatres, town
halls and other purpose-built convention facilities. While stakeholders suggest that the ability
of Sydney hotels to host smaller scale conventions and exhibitions may be limited when
compared to Melbourne,21 the range and scope of small to medium sized facilities has not
been considered as part of this study – indeed the O’Neill review suggests that there are
sufficient facilities to service the needs of this segment of the market.22


Each of the current facilities is described in the table overleaf. The primary convention and
exhibition space facilities in Sydney are the Sydney Convention and Exhibition Centre located
at Darling Harbour and the Sydney Showground located at Sydney Olympic Park, Homebush.




21 Private interview with industry stakeholder, June 2010

22 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space, p14



                                                 40
Sydney Convention and Exhibition Centre                            Sydney Entertainment Centre (SEC)
(SCEC)                                                             Darling Harbour
Darling Harbour
                                                                   The SEC is located in the southern area of Darling Harbour,
Located in Darling Harbour, the facility was built in 1988         near Chinatown opened in 1986.
and expanded in 1999. It consists of two main convention
                                                                   A majority of events are for entertainment shows or those
facilities with associated meeting rooms and has the ability
                                                                   that require large seating capacities.
to offer SEC facilities for plenary sessions.
                                                                   Ability to cater for plenary session of up to
The high profile location is favourable to attract business-
                                                                   11,500 delegates.
related events, including those with an international focus.
                                                                   The SEC is operated by SHFA for the NSW Government.
The SCEC is owned by the NSW Government, with the
                                                                   The centre was privately managed but the operator exited
Sydney Harbour Foreshore Authority (SHFA) managing the
                                                                   when it lost market share to a newly opened Acer arena.
leasing and contractual arrangements for the centre.




Sydney Showgrounds (SSG)                                           Moore Park Entertainment Quarter
Sydney Olympic Park, Homebush
                                                                   Located south of the Sydney CBD, the Entertainment
Located in Homebush, 15km from the CBD, the SSG                    Quarter offers a range of facilities including the Showring,
operates as the site of the Royal Easter Show, and also            Byron Kennedy Hall and Hordern Pavilion. It caters to a
hosts a number of public and trade exhibitions.                    boutique market, and the age, heritage listing, physical
                                                                   layout and limited hotel accommodation in close proximity.
The Show Grounds are owned by the NSW Government
                                                                   This means it is generally unsuitable for major international
and leased to the Royal Agricultural Society (RAS), with
                                                                   conventions.
the Sydney Olympic Park Authority (SOPA) managing the
leasing and contractual arrangements.                              The site is managed by Colonial Fist State with Playbill
                                                                   Venues operating the three event facilities: Hordern
                                                                   Pavilion, Royal Hall of Industries and Byron Kennedy Hall.

                                                                   Earlier in 2010 there was reportedly a State Government
                                                                   plan to transfer the management of Moore Park from
                                                                   the Centennial Park Trust to the Sydney Cricket Ground
                                                                   (SCG) Trust. Following public response it is understood the
                                                                   Premier committed instead that the two trusts develop
                                                                   solutions to traffic, transport and parking problems at
                                                                   Moore Park.




Sources: Sydney Convention and Exhibition Centre Website (2010), http://www.scec.com.au/media_centre/index.cfm; O’Neill,
John (2007), Review into Sydney Convention and Exhibition Space, pp 13, 14, 15; Sydney Showground Website (2010): http://
www.sydneyshowground.com.au/documents/SS_Brochure2009.pdf; HVS International (2007) Revitalising the Convention &
Exhibition Industry in Sydney, p4-19, Redfern Waterloo Authority (2005) Australian Technology Park, Eveleigh - 2005 Master
Plan; Wentworth Courier (2010), Rally to save Moore Park this Saturday, 4 June 2010, available at: http://wentworth-courier.
whereilive.com.au/news/story/rally-to-save-moore-park-this-saturday/; City of Sydney (2010), Light Rail Solution to Moore Park
Mess, 25 June 2010, available at: http://www.sydneymedia.com.au/html/4304-light-rail-solution-to-moore-park-mess.asp


                                                                          41
Australian Technology Park                                        Rosehill Gardens Event Centre
Eveleigh                                                          Canterbury Park
Located in Eveleigh close to railway lines.                       Located near Parramatta on the grounds of the Sydney Turf
Established in 1996 and home to numerous technology               Club (STC), the facility offers a divisible exhibit hall and a
and media companies.                                              high ratio of meeting to exhibit hall space.

Offers 6,850 m2 of exhibition space, a 524 seat theatre           Serves small, local exhibitions and social events. It is
and ten meeting rooms. As with Moore Park, caters to              appealing for small and mid-sized conferences that have
small local boutique exhibitions and conferences, but the         light exhibits.
small exhibition hall does not meet requirements of major
exhibitions. Heritage issues and multiple pillars in exhibition   Owned and operated by the STC.
spaces limit useability of the facility.

Owned and managed by Redfern Waterloo Authority
(RWA), a government organisation, since 2005.




                                                    42
Each facility is compared in table two in terms of capacity and other key indicators.


 Table 2 Major Sydney facilities hosting conventions and exhibitions (as at July 2010) 23



                          Maximum          Continuous           Distance                                 Facility issues
                         convention         exhibition      from Sydney                                  and potential
 Facility                  capacity             space               CBD Types of events                  for expansion
 Sydney                     12,000 m2         30,000 m2              1km    All types including fairs,   Lack of floor
 Convention                                                                 conventions, exhibitions     layout flexibility
 and Exhibition            (max 3,500                                       (fashion and motor),
 Centre (SCEC)         seats per event)                                     parties and galas            Booking conflicts
                                       2
 Sydney                      1,564 m                 N/A             1km    Auditorium-style             No exhibition
 Entertainment                                                              events, seminars,            space
 Centre (SEC)             (max 12,500                                       banquets
                       seats per event)

 Sydney                      7,200 m2         21,600 m2             15km    Corporate functions,         Not integrated in
 Showground                                                                 convention dinners,          a single venue.
 (SSG)                     (max 4,000                                       conferences, large           Second exhibition
                       seats per event)                                     consumer shows               hall co-located
                                                                                                         with existing
 Moore Park,                  3,100 m2         5,400 m2              5km    Markets, entertainment       Not close to train
 Playbill Venues                                                            events, corporate            network
                           (max 3,500                                       parties, boutique
                       seats per event)                                     markets
 Australian                  2,277 m2          6,850 m2              4km    Technology, fashion,         Constrained by
 Technology Park                                                            industry, and boutique       Heritage status of
 (ATP)               (max 2,500 seats                                       markets                      surrounding site
                            per event)

 Rosehill Gardens               840m2          4,000 m2            18km     Convention dinners,          Non-uniform
                                                                            outdoor events,              dimensions of hall
                     (max 2,000 seats                                       conferences with small
                            per event)                                      exhibits




As table two suggests, the SCEC and SSG are the two major facilities for exhibitions and
conferences in Sydney. Not only is the SCEC larger than SSG, its CBD and waterside location
make it the preferred location not only for many domestic events, but also for international
conventions. 24 Furthermore, the SCEC and SSG attributes make them more suited to
different types of events. For example, SSG’s western Sydney location and large amount of
parking makes it suited for consumer-targeted events. Meanwhile, the SCEC may be better
located for business-related events, especially those that have an international focus.25




23 Sources: TTF & PCA (2007); The Entertainment Quarter, http://www.eqmoorepark.com.au/home/; Playbill Venues,

  http://www.playbillvenues.com/; O’Neill (2007)
24 Private interview with industry stakeholder, June 2010

25 TTF & PCA, Revitalising the Convention & Exhibition Industry in Sydney, 2007



                                                                      43
Although comprehensive and complete data sets are not available, the number of domestic
and international events held at the SCEC and SSG in 2005, are listed in Table 3. While the
SSG hosts primarily domestic exhibitions, the SCEC attracts a significant number of domestic
and international conventions and exhibitions; more domestic than international events were
held by the SCEC in 2005.



 Table 3 Number of Events by venue, 200526


                                                                                         SCEC            SSG
 Domestic                         Exhibition (some with conventions)                     40              31

                                  Convention only                                        206             0

 International                    Exhibition (some with conventions)                     38              1

                                  Convention only                                        10              0




In 2005, the SCEC was operating at 60% exhibition capacity and 42% convention capacity,
while the SSG was under a comparably low 31% capacity; the exhibition facilities at the SSG
are currently underutilised.27 Over the four years between 2003 and 2007, the annual exhibit
hall occupancy ranged from approximately 60 to 70 percent occupancy, whereas a lower
target of 50% may strike a better balance between the need for revenue making activity while
providing enough available dates and space to accommodate most demand.28



 Table 4 Occupancy of the SCEC and SSG, 2005 (%)29


                                                                                         SCEC            SSG
 Exhibition space                                                                        60              31

 Convention rooms                                                                        42              0




Since the O’Neill review, the Sydney Convention and Visitors Bureau (initially established in
1969) was renamed ‘Business Events Sydney’ in September 2008. This was to better reflect
its core operations as a business events marketing organisation, in part arising from a separate
John O’Neill study.30




26 Source: TTF and PwC analysis; For the SCEC, the ‘conventions only’ comprises those events that do not use exhibition

  space. The number of exhibitions comprises events with both conventions and tradeshows, as well as consumer shows
  (those that use exhibition space)
27 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space, p15

28 TTF & PCA, Revitalising the Convention & Exhibition Industry in Sydney, 2007, p5-6

29 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space, p15

30 O’Neill, John (2007), Review into a possible events corporation for New South Wales, available at:

  http://www.dpc.nsw.gov.au/__data/assets/pdf_file/0005/15809/Events_Report.pdf


                                                 44
Data supplied by Business Events Sydney (BESydney) on the major events that the
organisation assisted to attract to Sydney in the past few years, suggests the SCEC is the
primary venue to host such events. Over 35% of 89 major business events attracted through
BESydney between 2007 and 2009 were held at the SCEC. Furthermore, a majority of the largest
events were held at the SCEC averaging 1,300 delegates, compared with the overall average
of 794 delegates per event. Smaller events, of less than 500 delegates, comprised 57% of the
business event market. Ten, of a total 29 venues, including the SCEC, Hilton, Shangri-La and
Sheraton on the Park, hosted more than one event, indicating their facilities are sufficiently flexible
with adequate size to host small scale business events.31 Although the SCEC held some small
events, all events larger than 2,000 delegates were held at the SCEC, indicating a market niche.




Conventions and exhibitions in Australia
In 2003, a study into national business events found that NSW hosted 27% of all meetings
in Australia, which accounted for approximately 40% of delegates.32 Sydney also hosted the
largest events in 2003, with approximately 162 delegates per event, followed by the Gold Coast
(102), Melbourne (96), Adelaide (92), the ACT (89) and Perth (80).33 Although Sydney continues
to dominate the domestic market, the percentage of International Congress & Convention
Association (ICCA) meetings held in the city has declined since 1999. Sydney’s share of
ICCA meetings in 2008 is approximately comparable to 2003. With the opening of the newly
integrated MCEC in mid-2009, Melbourne’s market share may continue to trend upwards.


 Figure 2 Share of ICCA meetings in Australian cities34

Sydney holds the largest share of international events of all cities in Australia, however this has diminished over the
past decade through competition with cities such as Melbourne and Brisbane. With the opening of the integrated
Melbourne Convention and Exhibition Centre in 2009 the market share is likely to diminish further.

                                   1.5%

                                                                                         Construction on
    Share of events in each city




                                                                                           new MCEC
                                                                                             begins
                                   1.0%




                                   0.5%




                                   0.0%
                                      1999   2000   2001       2002   2003      2004         2005          2006       2007   2008


                                                           Sydney            Melbourne                     Brisbane

31 BESydney (2010), Information supplied by Business Events Sydney to PwC, July 2010: List of events BESydney has

  secured that were held from 2007 to July 2010 and future business confirmed into this list, as well as data on the venue of
  each event
32 Deery et al. (2005), The National Business Events Study: An Evaluation of the Australian Business Events Sector, p19

33 Deery et al. (2005), The National Business Events Study: An Evaluation of the Australian Business Events Sector, Page 15

34 International Congress and Convention Association (ICCA) (2008) The International Association Meetings Market 1999-

  2008, ICCA Statistics Report


                                                                                  45
As can be seen from Figure 2, Sydney holds the largest share of international events of all
cities in Australia; however this has diminished over the past decade through competition
with cities such as Melbourne and Brisbane. In terms of ICCA ranking for future scheduled
meetings, Sydney has slipped over the last decade as other cities in the region develop their
convention and exhibition facilities. The most recent data shows Sydney ranking 11th in 2005
in terms of future scheduled meetings; this shows a progressive decline from 1st in 1999 and
2000 to 4th in 2002.35


Table 5 presents a comparison of the key Sydney facilities with other major venues in
Australian cities.




35 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space, p19



                                               46
                                 Table 5 Current facilities in Sydney

                                How Sydney’s facilities compare with major facilities nationally

                                 Facility                 Max. convention           Exhibition             No. of Events                       Types of conventions                Types of consumer                     Event focus                 Distance    Private
                                                             capacity                space                                                                                           & trade shows                                                  from CBD     sector
                                                                                                                                                                                                                                                                involve-
                                                                                                                                    International     National       Local       National         Local                                                                1
                                                                                                                                                                                                                                                                 ment
                                                                                                                                    conventions     conventions   conventions   exhibitions     exhibitions

                                 Sydney Convention           3,500 seats            30,000 m2        Average of 600 events per           •              •             •             •                  •      Local and international conventions     1 km         B
                                 and Exhibition               33 rooms               (6 halls)                 year                                                                                                     and exhibitions
                                 Centre

                                 Sydney                  11,500 seat (limited          None          Average of over 300 events          •              •             •                                      Auditorium style, entertainment        1 km         B
                                 Entertainment            dedicated rooms)                                    per year                                                                                                events, banquets
                                 Centre

                                 Sydney Showground           4,000 seats            21,600 m2          Average 400 events per                           •             •             •                  •       Royal Easter Show, gala dinners,      15 km         C
                                                           Up to 10 rooms                            year, with approximately 32                                                                                cocktail parties, conferences
                                                                                                              exhibitions

                                 Moore Park (Playbill        3,500 seats             5,400 m2                                                         Smaller         •             •                  •       Boutique events, small meetings        5 km         C




     Sydney
                                 Venues)                   Up to 10 rooms                                                                             events                                                   to medium scale exhibitions and
                                                                                                                                                                                                                     corporate functions

                                 Australian                  2,500 seats             6,850 m2          Average of 400 events                           •             •             •                  •       Boutique events, small meetings        4 km         B
                                 Technology Park                                                             per year                                                                                          to medium scale exhibitions and




47
                                                               11 rooms
                                                                                                                                                                                                                     corporate functions

                                 Private facilities        Up to 800 seats             Up to                                                         Smaller         •                                •       Boutique events, small meetings                     D
                                 (hotels, Rosehill         Up to 15 rooms            8,000 m2                                                         events                                                   to medium scale exhibitions and
                                 Gardens, etc)                                                                                                                                                                       corporate functions

                                 Melbourne              5,000 seat plenary hall     30,000 m2        Average of 700-800 events           •              •             •             •                  •      Local and international conventions     1 km         B
                                 Convention and           32 meeting rooms          (3 flexible      per year (35 conventions, 56                                                                                       and exhibitions
                                 Exhibition Centre                                   spaces)           exhibitions in 2008-09)

                                 Brisbane Convention         8,000 seats            40,000 m2        Average of 800-900 events           •              •             •             •                  •      Local and international conventions     2 km         B
                                 and Exhibition               20+ rooms            (divisible into            per year                                                                                          and exhibitions, entertainment
                                 Centre                                              four halls)                                                                                                                            events

                                 Darwin Convention        1,500 seat plenary       4,000 m2 (up      Newly opened 65 bookings            •              •             •             •                  •           national and international         1 km         B
                                 Centre                  hall, 12 meeting and       to 3 flexible    for events (as at June 2009                                                                               conference and exhibition events
                                                            function rooms            spaces)                                                                                                                         and sporting galas

                                 Adelaide Convention    3,500 capacity plenary      10,500 m2        Average 180 events per year         •              •             •             •                  •      Local and international conventions    0.5 km        C
                                 Centre                  hall, with capabilities                                                                                                                                        and exhibitions
                                                              to extend for
                                                             6,000 people




     Other Asustralian cities
                                                               14 rooms

                                 Perth Convention         2,500 seat plenary       16,500m2(in 6                                         •              •             •             •                  •      Local and international conventions    0,.5 km       A
                                 Centre                 hall, 19 meeting rooms       pavilions)                                                                                                                         and exhibitions


                                Note1: ‘A’ = Government owned and operated; ‘B’ = Government owned and operated, private sector providing facilities management; ‘C’ = Government owned and operated

                                Sources: BCEC Fast Facts, SCEC Factsheet; MCEC annual report 2008-2009, p 6; IMEX May 2010, MCEC expansion to boost tourism and Victorian Economy; Adelaide Convention Centre Annual Report, 2008-09;Darwin Waterfront Corporation
                                Annual Report, 2008-09; Redfern Waterloo Authority Annual Report 2008-09; NSW Treasury Budget Estimates Paper 3, 2007-08; PCEC FAQs; AEG Ogden website (2010), http://www.aegogden.com/aegogden/BrisConExhibCentre.asp
As is evidenced in Table 5 and Figure 3, there are not significant capacity/size differences
between the SCEC facilities and other major facilities in comparable Australian cities.


 Figure 3 Comparison of the SCEC and other major domestic venues

The SCEC is one of the largest facilities in Australia and historically hosts the largest share of major events in
Australia. It is difficult to compare facilities in this way as many modern facilities such as the MCEC and BCEC
are designed with high flexibility and multi use options.


40,000

35,000

30,000

25,000

20,000

15,000

10,000

 5,000

     0
            Sydney      Sydney         Sydney      Acer Arena      Melbourne       Brisbane        Darwin       Adelaide       Perth
          Convention Entertainment   Showground                    Convention     Convention      Convention   Convention   Convention
         and Exhibition Centre       (Homebush)                   and Exhibition and Exhibition     Centre       Centre       Centre
            Centre                                                   Centre         Centre

                                              Max. convention capacity (seats)      Exhibition space (m2)




While there are not significant capacity/size differences between the SCEC facilities and other
major facilities in Australian cities, there has been a recent increase in competition between
cities within Australia for major conventions and exhibitions. In part, this is due to the $1 billion
investment in improved convention and exhibition facility infrastructure in Australia over the
past ten years, for example the $413 million development at the MCEC – developed along
with a $750 million ‘mixed-use’ surrounding commercial precinct – which introduced an
additional 30,000 m2 of convention centre space with seating for 5,000 - co-located with the
existing Melbourne Exhibition Centre facility.



Recent expansions around Australia

A number of cities within Australia have recently upgraded or expanded their convention and
exhibition facilities in order to attract more and larger events. This has contributed to increased
competition in the domestic convention centre market. The relative characteristics are
highlighted in Table 6.




                                                    48
 Table 6 Recent domestic convention and exhibition facility expansions


                                        Cost of
                Recent develop-        develop-
 venue              ments                ment                Cost m2            Private sector involvement
 Melbourne          Additional        $413 million        $12,200 (2009)        Victorian Government contributed $367 million, and City of Melbourne
 Convention         30,000 m2           (2009)                                  contributed $43 million towards municipal works
 and            convention centre                                               Expansion was a PPP developed by a Plenary Group Consortium. State
 Exhibition      with seating for                                               Govt received $93.2 million from Plenary Group for development rights
 Centre         5,000 co-located                                                of the precinct and facilities management role
 (MCEC)          with the existing
                   Melbourne                                                    The $750 million ‘mixed-use’ surrounding commercial precinct is
                Exhibition Centre                                               financed by Austexx and a syndicate of four banks, who will receive a
                      facility                                                  99-year leasehold for the commercial centres and 25-year leasehold for
                                                                                MCEC land
 Adelaide           Two-stage         $394 million              N/A             Following initial $85 million expansion in 2001, another expansion is
 Convention        expansion to         (2010)                                  currently being planned
 Centre          replace plenary                                                In 2010, SA Government announced plans to upgrade newly
 (ACC)            building with a                                               refurbished facilities This will likely be completed by 2014 in two stages:
                3,500-seat venue                                                expansion and then building a new multi-purpose facility with plenary
                 and expanding                                                  auditorium of 3,500 seats with capabilities to accommodate 6,000
                the existing main                                               for concerts36
                 building toward
                   Morphett St                                                  The planned expansion will also include upgrading the Riverbank to
                      bridge                                                    increase pedestrian numbers, and water and light features in
                                                                                the Torrens
 Brisbane          Additional         $146 million         $5,500 (2011)        Queensland government contributed $69.5 million in 2009-10 and
 Convention     24,000 m2 with          (2010)          Corporate functions,    $74.5 million in 2010-11 to complete the $146 million expansion. Lang
 and             18 additional                          convention dinners,     O’Rourke is the contracted builder of the project. Managed by
 Exhibition     meeting rooms                            conferences, large     AEG Ogden
 Centre                                                   consumer shows
 (BCEC)
 Darwin         Opened mid-2008           $263         $5,100 (2008) Markets,   Developed by Darwin Cove Consortium, a PPP arrangement between
 Convention       Entire facility      million total    entertainment events,   the Northern Territory Government, Laing O’Rourke, ABN Amro, Toga
 Centre           (22,600 m2)         (2008), with        corporate parties,    and Sitzler Bros. Managed by AEG Ogden
 (DCC)           with 1,500 seat      government          boutique markets      Part of $1.1 billion Darwin Cove redevelopment with wave park and
                convention centre       receiving                               convention centre majorly financed by PPP, with government costs
                                      $113 million                              offset by property sales
                                     commissions

 Perth            Opened 2004         $260 million        $15,000 (2002)        A 138-apartment hotel built over six levels was opened in conjunction
 Convention        2,500 seat           (2002)          Technology, fashion,    with Perth Convention and Exhibition Centre. The hotel is operated by
 and             plenary hall, 19                      industry, and boutique   the Medina Group
 Exhibition      meeting rooms                          markets Convention      A PPP built by Multiplex, with the support of the Western Australian
 Centre          and 16,500m2                             dinners, outdoor      Government
 (PCEC)         exhibition space37                      events, conferences
                                                         with small exhibits    Managed by Spotless Services Australia and owned (through a lease
                                                                                arrangement) by the Wyllie Group.38 Ownership will return to the
                                                                                Government after 35 years

Sources: Skidmore, Owings & Merrill LLP, http://www.som.com/content.cfm/adelaide_convention_ centre_expansion; SA Auditor General Report 1999-
2000, http://www.audit.sa.gov.au/99-00/partb-vol2.pdf; Queensland Government, State Budget announcements, 2009-10 and 2010-2011, http://www.
budget.qld.gov.au/; ABS Stateline, Darwin Waterfront, 29 February 2008, http://www.abc.net.au/stateline/nt/content/2006/s2176880.htm; Northern Territory
Government Budget Papers, http://www.budget.nt.gov.au/; AdelaideNow (2010), ‘Mike Rann and Labor vow River Torrens, Adelaide Convention Centre
revamp’, 14 March 2010, http://www.adelaidenow.com.au/news/in-depth/mike-rann-and-labor-vow-river-torrens-adelaide-convention-centre-revamp/story-
fn2sdwup-1225840537731; Business Events Australia (2010), http://www.businessevents.australia.com/rsc/Assoc_website_2010/ACC_expansion_May2010.
pdf; Odyssey Media, January 2, 2002, Work Started On $260 million Perth Convention & Exhibition Centre http://www.odysseymediagroup.com/apn/Editorial-
MICE-Venues.asp?ReportID=31783; Perth Convention and Exhibition Centre, PCEC Facts, http://www.pcec.com.au



36 Business Events Australia, http://www.businessevents.australia.com/rsc/Assoc_website_2010/ACC_expansion_

  May2010.pdf
37 Odyssey Media, January 2, 2002, Work Started On $260 million Perth Convention & Exhibition Centre http://www.

  odysseymediagroup.com/apn/Editorial-MICE-Venues.asp?ReportID=31783
38 Perth Convention and Exhibition Centre, PCEC Facts, http://www.pcec.com.au



                                                                      49
                           In the past ten years, there appears to have been over $1 billion investment in convention and
                           exhibition facility infrastructure, not including surrounding precinct developments. Each of
                           these developments has required state Government funding, reflecting the broader economic
                           value of such facilities in the local area.




                           Conventions and exhibitions internationally
The growth in ICCA         Internationally, Australia competes principally for international conventions and business
events held in Australia   events. With respect to exhibitions, Australia is not suitable for most international consumer
has not reflected the      or trade events and, given its geographic distance from other countries, does not host them.39
growth in numbers of       In general, Australia is unlikely to host the very large exhibitions targeted by mega facilities in
international events
                           Asian cities such as Hong Kong and Singapore. Importantly, these cities are much closer to a
                           supporting population and economic base.


                           Although Australia attracts a number of international conventions, there has been growing
                           competition from venues in South-East Asia and North America. During the year ending
                           May 2010, there were 155,900 convention or conference arrivals in Australia, a decrease
                           of 8% from the previous year ending May 2009. Conversely, overall business arrivals were
                           unchanged at 773,400, while total arrivals to Australia increased 2% to 5.7 million from
                           the same period.40 This declining proportion of conventions and conferences for Australia
                           is reinforced by data from the ICCA suggesting a decline in the proportion of ICCA events
                           hosted in Australia from 3.2% in 1999 to 2.4% in 2008. This is despite the number of events
                           held globally increasing since 1999.


                            Figure 4 Percentage of ICCA meetings held in the Asia Pacific region, 1999-200841

                           The number of events being hosted in the Asia Pacific region has been steadily increasing, indicating the potential
                           for Sydney to take advantage of this trend

                                                                  3,500                                                                                   7,000
                                                                                                                                                                  number of meetings in the rest of the world




                                                                                    Asia Pacific    Rest of the World
                                                                  3,000                                                                                   6,000
                              number of meetings in Asia Pacific




                                                                                                                                                   82%

                                                                  2,500                                                                                   5,000

                                                                           84%
                                                                  2,000                                                                                   4,000

                                                                  1,500                                                                                   3,000
                                                                                                                                                   18%
                                                                  1,000                                                                                   2,000
                                                                           16%

                                                                   500                                                                                    1,000


                                                                          1999   2000   2001      2002     2003        2004   2005   2006   2007   2008

                                                                                                                Year
                           39 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space, p19

                           40 Business Events Australia (2010), Business Events Arrivals, May 2010

                           41 International Congress and Convention Association (ICCA) (2008) The International Association Meetings Market

                             1999-2008, ICCA Statistics Report


                                                                                                    50
Although the number of events held in the rest of the world has increased from around 4,000
to over 6,000 between 1999 and 2008, the share of events held outside of the Asia Pacific
region has fallen from 84% to 82% (Figure 4). This highlights the growing importance of
Asia in hosting international meetings and conventions. Sydney’s role as a potential gateway
between Europe, the United States and Asia, creates the potential to capitalise on this trend.


This trend is presented in table 7 comparing the number of meetings in each city.


 Table 7 Number of meetings per city (global) 42


 Rank      City               2002         2003         2004         2005         2006           2007   2008
 1         Paris              89           91           133          127          162            135    139
 1         Vienna             76           101          117          139          163            168    139
 3         Barcelona          102          95           137          133          110            112    136
 4         Singapore          66           80           109          128          137            128    118
 5         Berlin             74           96           119          103          114            135    100
 6         Budapest           71           67           93           96           100            98     95
 7         Amsterdam          66           60           77           95           90             89     87
 7         Stockholm          74           64           73           72           69             72     87
 9         Seoul              70           52           87           83           99             73     84
 10        Lisbon             59           72           80           80           76             96     83
 11        Copenhagen         95           69           81           79           83             78     82
 12        Sao Paulo          19           13           29           29           60             62     75
 14        Prague             60           89           84           84           110            86     74
 14        Beijing            58           31           104          95           95             102    73
 15        Athens             42           43           57           57           71             64     72
 15        Buenos Aires       35           26           59           56           58             65     72
 15        Istanbul           33           45           52           57           73             70     72
 18        Bangkok            51           63           75           68           72             80     71
 19        London             69           68           77           90           85             79     68
 19        Tokyo              33           37           41           63           52             55     68
 21        Hong Kong          45           39           91           94           73             76     66
 22        Brussels           54           41           58           69           77             75     65
 22        Madrid             55           61           69           67           62             81     65
 24        Sydney             58           47           45           55           57             66     64




42 ICCA (2008) The International Association Meetings Market 1999-2008, ICCA Statistics Report



                                                                      51
Cities like Singapore and Bangkok have shown strong growth in the number of meetings held,
with an annual trend rate of growth 13.8 percent and 11.8 percent respectively over the ten
years to 2005. Sydney held more meetings than Singapore in four of the five years to 2000.
By 2004 and 2005, Singapore was hosting more than double the number of meetings in
Sydney. Australia lacks a large base of producers or customers for most trade goods so cannot
compete with some venues for such events – for example locations such as Singapore, Hong
Kong, Frankfurt, London, Los Angeles or Shanghai for international trade exhibitions. However,
Australia/New Zealand has a large population of well educated professionals who typically
are well connected into relevant international professional associations. O’Neill suggests
this is a clear competitive advantage that Australia/New Zealand currently has over most of
Asia, including Singapore and Hong Kong, for hosting international professional conferences.
Sydney also has a very attractive, safe environment, with good convention services. So
internationally, Sydney has a major competitive advantage in gaining international conventions
while having a competitive disadvantage in gaining genuine international trade or
consumer exhibitions.43



Comparison of SCEC with international, world class facilities

The Suntec Singapore and Hong Kong Convention and Exhibition Centre (HKCEC) are
international, world class facilities that compete with Sydney for major international
conventions in the Asia Pacific region. With 100,000 m2 of available floor space, Suntec
Singapore caters to events from 10 to 10,000 people. It is located next to the CBD, and only
20 minutes from Changi International Airport, and enjoys a waterfront location. Following
its second expansion, which opened in April 2009, the HKCEC’s total rentable space for
events and activities has reached 91,500 m2. The majority of this space is versatile and
accommodates a variety of mega-exhibitions, global meetings and major entertainment
events. The HKCEC, like the Suntec, is situated near the CBD and on the waterfront.


 Figure 5 World class facilities44

Singapore




Hong Kong




43 O’Neill (2007), Review into Sydney Convention and Exhibition Space, pp 17 & 31

44 Suntec Singapore website (2010), International Convention and Exhibition Centre, available at: www.suntecsingapore.

  com; Hong Kong Convention and Exhibition Centre website (2010), available at: http://www.hkcec.com/about-hkcec/
  image-gallery/exterior-hkcec


                                                52
Table 8 compares the SCEC’s facilities with those in Hong Kong, Singapore & Kuala Lumpur.


 Table 8 How Sydney’s facilities compare with major facilities internationally45




                     Total space       Convention          Exhibition
 Facility             available         capacity             space           Multipurpose and other
 Sydney                 Approx.        3,500 seats       30,000 m2: halls    30 flexible meeting rooms, ranging
 Convention and        60,000 m2         33 rooms        can interconnect    from smaller spaces suitable for events
 Exhibition Centre                                        to form 25,000     for up to 50 people to an auditorium
 (excluding SEC)                                         m2 column-free      accommodating 3,500
                                                               space         Ballroom
                                  2
 Suntec               100,000 m         12,000 m2        Exhibition Halls:   Theatre: 596-seat
 Singapore                             column-free         12,000 m2 of      Concourse: multi-purpose 930 m2 open
                                        convention        space that can     area - flexible space, can seat up to 600
                                       halls, flexible    be subdivided      banquet-style
                                       with 10,000       into 4 sections,
                                       theatre-style       ceiling height    Ballroom: 2,150m2, versatile, sub-dividable
                                         seating or          of 8.5 m        function hall, up to 1,800 theatre-style / up
                                        10,600 m2                            to 1,300 banquet-style seating.
                                         exhibition                          Other: 31 meeting rooms, groups from
                                           space                             10 to 400 people, all fully equipped with
                                                                             state-of-the-art
                                                                             audio-visual
                                                                             Other: 3,700 m2 of versatile space, 1,000
                                                                             banquet-style or 3,000 theatre-style
 Hong Kong             91,500 m2         2 Multi-          6 Exhibition      2 Theatres (with seating for 336 and 637):
 Convention and                       Purpose Halls      Halls: 66,000 m2    800 m2
 Exhibition Centre                    (conventions                           52 Meeting Rooms: 6,000 m2
 (HKCEC)                              or banquets):
                                        5,700 m2                             Other multi-functional rental space:
                                                                             13,000 m2
                                                                             7 restaurants
                                                                             Adjacent and linked to two
                                                                             world-class hotels
 Kuala Lumpur         120,000 m2       Conference         Four exhibition    Plenary hall and theatre with total capacity
 Convention                           Hall with total      halls totalling   of 3,500
 Centre                                capacity for          9,710 m2        Grand Ballroom of 2,389 m2 with capacity
                                          1,800                              of 2,380 theatre-style or 2,000 in banquet
                                                                             style seating
                                                                             Banquet hall of 738 m2 with capacity of
                                                                             800
                                                                             20 meeting rooms with a total
                                                                             of 1,922 m2
                                                                             2 hotels on-site, 1 adjacent
                                                                             Aquarium
                                                                             Co-located restaurants




45 SCEC (2009), Fact File, available at: http://www.scec.com.au/content/fact_files/Centre_Fact_File_2009.pdf; Suntec

  Singapore (2010), International Convention and Exhibition Centre, available at: http://www.suntecsingapore.com/
  facilities/convention.htm; Hong Kong Convention and Exhibition Centre website (2010), available at: http://www.
  hkcec.com/about-hkcec/image-gallery/exterior-hkcec and http://www.hkcec.com/sites/default/files/usefulmaterial/
  HKCEC_Brochure_240310.pdf; Kuala Lumpur Convention Centre, Background Information, available at http://www.
  klccconventioncentre.com/index_flash.html


                                                                       53
Figure 6 compares the composition of space offered for lease at the SCEC, Suntec Singapore,
HKCEC and Kuala Lumpur Convention Centre:


 Figure 6 Comparison of the SCEC and world class facilities: total leasable space

The SCEC and SEC combined are approximately 30-40% smaller in terms of total space compared to Suntec
and HKCEC, and 70% smaller than space at the Kuala Lumpur Convention Centre


                                                                      120,000 m2

     120,000                                                                                 100,000 m2
                                          91,500 m2
     100,000
                Approx 70,000 m2
     80,000

     60,000

     40,000

     20,000

          0
                      SCEC                  HKEC                     Kuala Lumpur             Suntec
                 (including SEC)                                   Convention Centre         Singapore

                                   Convention         Exhibition     Multi purpose & other




The mix of exhibition, convention and other space is more challenging to compare given the
scale of ‘flexible’ space at world class facilities that could accommodate either type of event.



Size and key facilities to make a convention and exhibition centre
world class and internationally competitive

Considering world class venues Sydney most competes with in the Asia Pacific, the following
size and key facilities have been identified as making a convention and exhibition centre
internationally competitive:


•	    Size - compared to other world class venues, for example the Suntec in Singapore, the
      HKCEC in Hong Kong, and the Kuala Lumpur Convention Centre, the SCEC and SEC
      combined are currently 30-70% smaller in terms of total space. These three venues
      claim total sizes between 90,000-120,000m2. Given the lower proportion of international
      exhibitions hosted in Australia, relative to these three cities, there may not be a need
      to expand space to this extent – though it does suggest that Sydney’s offering trails its
      competitors in this respect.


•	    Location – an aspect that the SCEC already shares with the Suntec, HKCEC and other
      locations such as Brisbane, Darwin and Perth is a convention and exhibition facility that is
      not only close to the central business district (CBD) but is also waterfront.




                                            54
•	     Mix of convention, exhibition and other flexible space – as indicated in Figure 6,
       there does not appear to be a particular mix of types of space that comprises a world
       class facility. Rather best practice appears to be provision of flexible, multi-function
       space that can be divided or combined to suit a range of events. For example, at Suntec
       approximately 12% of the total 100,000m2 is marketed as convention space and a further
       12% as exhibition space, with the remainder a mix of flexible space and other facilities.
       This suggests that expansion of space in Sydney should maximise provision of flexible
       and multi-use areas.


•	     Other key facilities – key facilities at world class facilities include ballrooms, theatres,
       meeting rooms, restaurants and hotels.



Criteria demanded by event planners

Beyond the factors that distinguish world class, internationally competitive facilities, table
9 lists factors in the facility ‘selection process’. In selecting a venue, organisers of large,
international conventions and exhibitions typically consider a wide range of criteria in their
decision-making process. Decision making can be extremely complex and frequently covers a
period of months or years, beginning as formal enquiries and evolving on to negotiations and
the involvement of consultants and stakeholders.


 Table 9 Criteria used to assess venue and location for international
  conventions and exhibitions46


                                                    Factors considered in the assessment process
 Logistical criteria                                •	Date	and	timing	related	factors
                                                    •	International	accessibility
                                                    •	Local	accessibility
                                                    •	Main	venue
                                                    •	Nearby	accommodation

 Financial criteria                                 •	Financial	responsibility	and	objectives
                                                    •	Venue	costs	and	additional	charges
                                                    •	Flexibility	of	transport,	accommodation	and	venue
 Internal association objectives                    •	Membership	growth	potential
                                                    •	Audience	for	products	and	programmes	offered	by	association
                                                    •	Opportunity	to	leave	local	legacy

 Political/emotional criteria                         A
                                                    •		 ttractiveness	of	location,	including	tourism,	cultural	appeal,	and	
                                                      link to major important events
                                                    •	Bidder	related	factors
                                                      D
                                                    •		 ecision	makers	influence,	such	as	lobbying	and	
                                                      political reasons
                                                    •	Emotional	appeal	of	bid	presentations
 Venue Criteria                                     •	Capacity
                                                    •	In	house	facilities	and	equipment
                                                    •	Catering
                                                    •	Security

46 ICCA Intelligence, International association meetings: bidding and decision-making; AIPPI, Questionnaire for Hosting an

     AIPPI Congress


                                                                        55
Constraints of current facilities in Sydney
As described above, Sydney is facing increased competition for hosting large scale,
international convention and exhibition events, as well as capacity issues related to the
constraints at the SCEC. The PCA and TTF 2007 report, prepared by HVS International, found
that Sydney has been losing around 220 business events per annum, which equates to lost
rental revenue of approximately $300,000 per event or $65 million per annum.47 These
numbers are further supported by key figures produced by SHFA that indicate the economic
contribution of the SCEC has declined from $478 million in 2006-07 to $466 million in 2008-
09, which are levels that fail to meet key performance indicators.48


Contributing factors include:


•	   Ageing facilities at Sydney Convention and Exhibition Centre given it was built in
     1988 and expanded in 1999:


      – Investment required for maintenance: The SCEC facilities managers suggest the
        SCEC requires the following upgrades as minimum to maintain current event levels,
        estimated to require around $320 million over the next ten years:

        •	Air	conditioning

        •	Roof

        •	Kitchen

        •	Loading	docks.49


      – Lack of flexibility in the size of rooms: The age of the building means its facilities
        do not align with trends for flexible seating and walls needed to accommodate various
        sized events. The suitability of a venue varies with the type of event, but generally,
        exhibition organisers need flexible and functional exhibition space. Meeting and
        convention organisers, on the other hand, require a mix of plenary, breakout and
        exhibition space. The ability to manipulate floor plans allows a venue to cater to a
        wider range of events, potentially simultaneously. Although comparable in size, other
        domestic venues, in Melbourne, Perth and Brisbane offer greater divisibility and
        functionality relative to Sydney’s venues.50 The recent development of the Melbourne
        Convention Centre provides 30,000 m2 of pillar-less exhibition space, which is
        divisible by 4 operable walls at 13 location points, providing up to 5 separate bays or
        20 additional meeting rooms.51 In contrast, the current exhibition space in the SCEC
        (approximately 30,000 m2) is comprised of 5 fixed areas.




47 TTF & PCA, Revitalising the Convention & Exhibition Industry in Sydney, 2007, p5-8

48 Sydney Harbour Foreshore Authority, Annual Report 2008-09

49 Information supplied by Darling Harbour Convention and Exhibition (DHCE) Pty Ltd / SHFA, June 2010

50 TTF & PCA, Revitalising the Convention & Exhibition Industry in Sydney, 2007, p5-8

51 Melbourne Convention and Exhibition Centre (MCEC), Floor Plans and Space Capacities



                                                 56
      – Structural alignment of exhibition halls: the current structural layout of the SCEC
        exhibition hall has a stepped or staged configuration. This restricts exhibition aisle layout
        in events that utilise all five halls.




         This can be compared to other facilities where a single rectangular space is provided




•	   Some capacity constraints at Sydney Convention and Exhibition Centre, linked to:


      – High Occupancy: In 2005 the SCEC was operating at 60% exhibition space occupancy
        and 42% convention room occupancy. O’Neill (2007) suggests a rate of 50% provides
        a more reasonable balance to enable management to have the flexibility to offer
        available exhibition space dates to conventions that require exhibition hall capacity. This
        high occupancy has reportedly left limited opportunities for SCEC to accommodate
        international and national conventions with associated exhibition space.52


      – Domestic events demand more space: Exhibition space at the SCEC is not
        large enough for some major domestic consumer and trade exhibitions. Noting the
        international events hosted here do not generally require equivalent space. Australia
        hosts international conventions – which may have exhibitions attached – but does not
        generally host international consumer and trade exhibitions. Reports such as the TTF/
        PCA study in 2007 raised the concern that the insufficient exhibition capacity at the
        SCEC is resulting in SCEC/NSW losing important business events.53


      – International events demand more space: There are occasions when it is unsuitable
        for an international convention. This tends to be either because it has insufficient space
        for an accompanying exhibition or demands convention space greater than can
        be accommodated.54




52 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space, p15

53 TTF & PCA, Revitalising the Convention & Exhibition Industry in Sydney, 2007, p5-9

54 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space, p3



                                                                       57
      – Conflict between domestic and international demand: High value national and
        international conventions tend to have little flexibility in dates. This means that from a
        purely financial sense, there is preference to prioritise domestic events at the SCEC.
        O’Neill (2007) suggests that despite the current SHFA management contract for the
        SCEC facilities making some mention of the importance to prioritise international
        conventions, in practice the agreement provides very strong incentives to maximise
        operational profit (i.e. by maximising use of exhibition space rather than prioritising
        higher value, larger, international conventions).55


•	   Other constraints, linked to:


      – Inadequate IT quality, especially audio-video-visual, relative to competing venues in
        Australia and overseas.


      – Limited kitchen capacity.




Economic implications of these constraints

Broader economic implications if the trend of losing market share of
domestic and international events continues

In 2008-09, SHFA estimated that the economic contribution of the SCEC was $466 million in
terms of direct economic impact, based on estimated spend per type of delegate.


However, SHFA indicates the economic contribution of the SCEC has declined from $478
million in 2006-07, to $474 million in 2007-08, then $466 million in 2008-09, suggesting an
average year-on-year decline of 1% per annum (or a 4% real decrease per annum taking into
account impacts of inflation). Furthermore, the number of international events hosted at the
SCEC has decreased 8% year-on-year between 2006-07 and 2008-09, suggesting that if this
continues, given the high economic impact generated from international visitors, the economic
impact of the facility will continue to decrease.




55 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space, p 6



                                                58
 Figure 7 ‘Do nothing scenario’ - economic impact of the SCEC if current trends continue

If current trends continue, the SCEC’s direct economic impact could decrease from the $466 million currently to
around $310 million in 2040

   500
   450
   400
   350
   300
   250
   200
   150
   100
     50
      0
             08

             10

             12

             14

             16

             18

             20

             22

             24

             26

             28

             30

             32

             34

             36

             38

             40
          20

          20

          20

          20

          20

          20

          20

          20

          20

          20

          20

          20

          20

          20

          20

          20
      20




                                   International             Domestic              Total



The inability of Sydney to offer a new/state of the art world class convention and exhibition
centre may result in the SCEC losing out on a range of international events and becoming
more domestic-event focused, as indicated in figure 7 by the decreasing trend of international
economic impact if current trends continue. This is a major adverse trend as international
delegates and visitors have a larger spend per day. Furthermore, NSW is able to fully capture
this expenditure as incremental economic benefit, whereas expenditure of local intrastate
domestic delegate/visitor spend is diluted by a substitution effect (e.g. if a local Sydney
resident does not attend the Motor Show they may have attended the movies and generated
expenditure anyway).




                                                                   59
Events that could be facilitated by a world class venue in Sydney

Events Sydney is missing out on


New South Wales is losing business due to capacity constraints at SCEC. The O’Neill Review
examined SCEC’s database of lost business from 1 January 2003 to mid May 2007 and the
reasons for this loss. After excluding cancelled events, local banquets, lunches, Christmas
parties and other local events there were 494 individual entries listed as being ‘lost’. Of
these 27% were lost for space or date conflicts at SCEC. The majority of this lost business
represents national corporate and conference events, followed by national association events.
International events comprise 14% of the total.



 Figure 8 Type of business lost by SCEC due to space or date conflict 56




                                                              Exhibition
                                                                17%

                                   National
                                 Corporate &
                                                                    International
                                 Conferences                            14%
                                    46%


                                                           National
                                                          association
                                                             23%




Particular examples of major events that are either constrained at the SCEC, or that have been
recently relocated to other venues are:


•	   Swift International Banking Operations Society can no longer be hosted in
     Sydney due to space constraints - In Sydney during 2006 the major international
     exhibition, Swift International Banking Operations Society (Sibos), was held in Sydney at
     the SCEC. This event was a major success for Sydney. However we are unable to hold
     this event again, despite its potential to generate $54 million in economic benefits, due to
     space constraints at SCEC. Sydney will not be considered for 2015 (or future years) unless
     an expansion of SCEC is announced.



56 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space, p22



                                                60
•	   Some current events are forced to operate at smaller than desired levels to utilise
     the SCEC – events such as the Motor Show, Fine Food Show, and Boat Show would use
     more exhibition/flexible space at the SCEC if it was available, as they currently use the
     whole centre for events they host at the SCEC.



 Case study 1 Impact of capacity constraints for Sydney to host Sibos 57




       One event that was held in Sydney                         Some of the key characteristics
       during 2006 was Swift International                       of this event are:
       Banking Operations Society (Sibos).
       This event, hosted at SCEC, was a                         •	    7,000 delegates
       major success for Sydney.
                                                                 •	    900 exhibition booths (est.)
                                                                 •	    5 days
       However, Sydney is unable to hold
       this event again due to current space
       constraints at SCEC. BESydney                             In summary the dynamics of
       and the SCEC were bidding for the                         the event have changed and will
       2015 event but withdrew this bid                          continue to change in future years.
       in the early stages due to space                          This translates into exhibitors
       requirements. This 2015 event was                         wanting more space to build self-
       expected to generate economic                             contained business units including
       impacts of $54,038,800. The                               meeting rooms and catering areas.
       event is being hosted Amsterdam                           Currently SWIFT restrict exhibitors
       this year and the event organisers                        to a maximum of 8 units (a unit is
       have already sold over 58,000                             24 m2) however they feel they will
       m2 of exhibition space (already                           need to increase this for the future.
       far exceeding the 25,000 m2 of
       exhibition space, and nearing the                         Sydney will not be considered for
       full 60,000 m2 total leasable space                       2015 (or future years) unless an
       available at the SCEC).                                   expansion of SCEC is announced.


                                                                 The information above was sourced
                                                                 through correspondence between
                                                                 BESydney’s bid managers and SCEC.




57 BESydney (2010), Information provided by BESydney to PwC, August 2010: Details on the Sibos event



                                                                      61
Events held at International venues

A new or refurbished convention and exhibition centre in Sydney would provide the
opportunity to compete with other cities, including Hong Kong, Singapore and Melbourne,
for international events. Some potential types of events that could be hosted in Sydney, if a
suitable venue were present include:


•	   Medical Industry


     – Options for the Control of Influenza, September 2010, HKCEC. Expected
       attendance of 1,200 delegates


     – International Conference on Materials for Advanced Technologies, July 2011,
       Suntec Singapore, There will be 37 technical symposia with 9 plenary lectures, 3
       Theme lectures, panel discussion on entrepreneurship in materials science and
       engineering, exhibition, and banquet. More than 3,000 delegates coming from all over
       the world are expected to attend.


•	   Business Events


     – Corporate Social Responsibility (CSR) Asia Summit, September 2010, HKEC,
       The CSR Asia Summit is an annual event which aims to be the most innovative and
       challenging conference on CSR in the Asia-Pacific region. Each year, the event gathers
       over 300 international thought leaders to explore key CSR issues and strategies,
       bringing new insights for businesses, governments, NGOs and other CSR practitioners.


     – Aussiecon4 68th World Science Fiction Convention, 2010, MCEC, The World
       Science Fiction Society (WSFS), promotes interest in science fiction. The annual
       Worldcon conventions are run by non-profit, volunteer fan organisations have been
       held since 1939 and are most often held in the United States, occasionally being held in
       other countries, most recently in Glasgow, Scotland (2006), Yokohama, Japan (2007),
       and Montreal, Canada (2009)


•	   Property


     – MIPIM Asia – The World’s property market in Asia, November 2010, HKCEC,
       MIPIM Asia focuses exclusively on facilitating real estate transactions and investment in
       the Asia Pacific markets and will attract over 2,000 participants, 400 investors and 200
       journalists from over 40 countries.


     – SMART Investment & International Property Expo, October 2010,
       Suntec Singapore,




                                      62
•	   Education and Networking


     – World Congress on Conducive Education, December 2010, HKCEC This congress
       seeks to encompass the rapid advancement and expansion of Conductive Education
       and to gather the experts, conductors and practitioners of CE all over the world to
       discuss and to share the theory and practice of CE The Congress is held every 3 years
       at various international locations


     – APCO Australasia Conference & Exhibition, 2011, MCEC, APCO Australasia’s 8th
       Annual Conference & Exhibition is the premier learning and networking event for the
       Asia-Pacific public safety sector. The exhibition will showcase emerging technologies
       and the latest information on products and services affecting the emergency services
       and public safety sector. The program will deliver the industry’s best speakers,
       professional development workshops, interactive forums and tour.


•	   Environment and Agriculture


     – Sustainable Risk Rationalisation Conference 2010 – An international learning
       experience, MCEC, SRR 2010 is the most important and unique Australian based
       conference providing Australian, American and Chinese professional insights into the
       mitigation of risk within the Brownfield’s environmental arena


     – International Conference on Solid Waste 2011, HKCEC, The ICSWHK2011 will bring
       together various stakeholders at international level to deliberate on issues pertaining to
       solid waste management, so as to share experience and have a better understanding of
       needs, required for sustainable resource management in the contemporary world.


     – Clean Energy Expo 2010, November 2010, Suntec Singapore, Clean Energy Expo
       Asia is a unique trading and knowledge-sharing platform bringing together the leading
       players in the Technology, Services, Finance and Government sector to address key
       issues in the areas of renewable energy, energy efficiency and sustainable development
       in the Asia Pacific region. In 2009, the conference attracted over 3,500 professionals,
       more than 70 international exhibitors and 80 speakers from over 40
       countries worldwide.




                                                        63
                            5. Options for new or expanded
                            facilities in Sydney
                            This chapter presents possible options for a new and/or
                            expanded facility in Sydney



                            Introduction to options for expansion
There is a need for an      With increasing domestic and international competition and indication there is some unmet
evaluation of the present   demand due to capacity constraints, there is a need for an evaluation of the facilities in
and future potential        Sydney, and their present and future potential to host international and large national
of Sydney to host           conventions. John O’Neill’s 2007 review suggests the most valuable business events for
international conventions   Sydney are genuinely international ones. According to the Sydney Business Chamber, there
                            are two potential solutions to this challenge: make better use of existing facilities and add to
                            the facilities currently in operation.58 But to effectively compete for international conventions,
                            this will require a venue with:


                            •	   Capacity or flexibility to accommodate larger conventions beyond the size the SCEC can
                                 currently accommodate


                            •	   Space for accompanying exhibitions


                            •	   High quality facilities


                            •	   Vicinity to transport links and accommodation (see table 10)


                            •	   Ease of access from the CBD.59


                            As identified in the 2005 The National Business Events Study, very few international delegates
                            choose budget accommodation when attending conferences, with most of the internationals
                            staying in deluxe 4-4.5 star accommodation (41.0%). And, the majority of the interstate and
                            intrastate delegates stay in deluxe accommodation (58.2% and 57.3% respectively).60


                             Table 10 Hotel and motel accommodation for national business events attendees (2005)


                                                                        International (%)       Interstate (%)     Intrastate (%)            Total (%)
                             Luxury                                                     21.6               14.8                11.1               14.1
                             Deluxe                                                     41.0               58.2                57.3               55.3
                             Standard                                                   30.3               23.6                27.5               26.2
                             Budget                                                       7.1                3.4                4.1                   4.3



                            58 Sydney Business Chamber (2007) Submission to the review of NSW tourism, events and conventions

                            59 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space

                            60 Deery et al. (2005), The National Business Events Study: An Evaluation of the Australian Business Events Sector, p27



                                                                             64
There are numerous options available to address facility issues in Sydney, ranging from the
redevelopment and expansion of current SCEC facilities to a relocation and development of a
completely new facility.


O’Neill suggested the following solutions, focused on achieving two large convention and
exhibition precincts in Sydney:


•	   Expand exhibition space – this could be undertaken at the Sydney Showground, so
     that most of the national and domestic consumer and trade shows currently held at the
     SCEC could be moved there. Alternatively, expansion of exhibition space at SCEC could
     overcome this while also enhancing exhibition offering to international event organisers


•	   Increase capacity for international conventions in the CBD through expansion of
     the Sydney Convention and Exhibition Centre, or creation of an entirely new facility. This
     would allow more aggressive pursuit of international conventions.


•	   Change the booking policies at the Sydney Exhibition and Convention Centre so
     that high value international and national conventions requiring exhibition space are not
     impeded by domestic exhibitions. Current practice by SHFA is to maximise operational
     profit by maximising use of exhibition space, rather than prioritising higher value, larger,
     international conventions. The involvement of the private sector in provision of facilities
     could provide a forum to revisit and revise this approach.


The redevelopment of the SCEC involves a spectrum of potential actions. Other alternative
options relate to development of a new convention and exhibition facility on a different site.
Due to space constraints in the CBD, new facilities are likely to be restricted to the new
Barangaroo redevelopment, development of Glebe Island and White Bay or utilisation of
latent air space over Central Station, as proposed in the Sustainable Sydney 2030 strategy.
Alternatively, existing facilities at the SSG could be expanded, with the sale or redevelopment
of the current SCEC site.


Organisers of international conventions not only consider the facilities when deciding on
a venue. The location of convention facilities and activity in the surrounding precinct are
secondary, yet important in the decision process – delegates generally desire a well rounded
experience.


There are numerous options to expand the convention and exhibition capabilities of Sydney,
however some options are not suitable for various reasons. For example, ATP at Eveleigh and
Moore Park both cater to a boutique market; with the age, heritage issues, physical layout
and the limited hotel accommodation in close proximity to these facilities meaning they are
generally unsuitable for major international conventions.




                                                         65
Table 11 lists potential sites to build or expand the existing convention and exhibition facilities
in Sydney on land that is vacant or underutilised.


 Table 11 Potential options for expanding convention and exhibition capacity in Sydney



                                                                       Activity in
 Facility/                                      Location and           surrounding           Factors to
 location          Available capacity           Transport links        precinct              consider
 1.                Up to 10,000-20,000          Monorail to Central    Darling Harbour       Continued facility
 Expansion of      m2 of additional space       and Pitt Street        Chinatown,            use during
 SCEC              if the SEC site and car      Darling Harbour        Haymarket             construction
                   park are incorporated        ferry                  University precinct

 2.                Potential for additional     Further distance       Limited activity      Potentially lower
 Expansion         14,700 m2 expansion          from CBD               Sporting events       cost than expanding
 of Sydney         bringing total exhibition    Transport                                    in CBD
                                                                       Homebush Bay
 Showground        space to 36,300 m2           connections (train                           Likely to be
                                                                       parklands
 (Sydney                                        and motorway)                                attractive if there is
 Olympic Park)                                                                               more development
                                                                                             in precinct

 3.                Up to 500,000 m2             Transport              Office                Surrounding
 Central Station   in airspace above            connections            developments          precinct amenities
 (as part of       railway lines,               (rail and              George Street         Impact on transport
 the Sydney        as proposed in               George Street)                               links during
 2030 Vision,      Sustainable                                                               construction
 proposed by       Sydney 2030
                                                                                             Cost of building in
 Clover Moore                                                                                air space

 4.                40 hectares                  Moderate distance      Balmain, Glebe        Impact on cruise
 Glebe Island      Potential for 40,000  m2     from CBD               Fish Market           ship industry
 and               space (i.e. smaller than     ANZAC Bridge only      Mostly residential    Redevelopment
 White Bay         existing SCEC venue)         existing transport                           and/or sale of SCEC
                                                corridor to the CBD                          Lack of business
                                                Potential ferry link                         tourism
                                                                                             infrastructure

 5.                22 hectares                  Close to northern      CBD                   No mention of
 Barangaroo and    A previous report            CBD                    King St Wharf         facility in current
 Millers Point     suggested potential for      No current                                   Lend Lease
                                                                       The Rocks
 precinct          40,000 m2 exhibition         infrastructure or                            development plan
                   space and up to 5,000        transport links
                   seat capacity plenary
                   hall, but this capacity is
                   now uncertain


Each of these options is described further in the following pages.




                                                66
1. Expand the Sydney Convention and Exhibition Centre

Description of the site

As shown in Figure 9, the current SCEC facility comprises two convention areas and five
exhibition halls. The convention facilities front Cockle Bay, while the exhibition halls back onto
Darling Drive south towards the Sydney Entertainment Centre, the Powerhouse Museum
and Chinatown.


 Figure 9 Darling Harbour map61




 Figure 10 Darling Harbour Photograph62




        Star City                Barangaroo           SCEC                  SEC        SEC Car Park




61 Sydney Harbour Foreshore Authority

62 SHFA (2010), Asset Divestment Information Memorandum, January 2010, available at:

  http://www.shfa.nsw.gov.au/content/library/documents/B3D856DA-E97E-68BA-DE3A0D306FD68799.pdf


                                                                    67
Stakeholders have suggested that a lack of flexibility of the exhibition halls and breakout space
limits the SCEC facility. Furthermore, there is some maintenance spend required due to the
ageing of the facility. Options for redevelopment are listed in Table 12.


 Table 12 Expansion options for the SCEC


        Indicative capital      Description
        cost (convention and
        exhibition centre
        component only)


A       Approx. $500 million+   Expansion of the SCEC into the SEC car park site
                                The SEC car park site and the area below Pier Street are approximately
                                20-25 ha. Expanding into this area could potentially increase convention/
                                exhibition space by 10,000 m2 (i.e. enabling resulting in total leasable
                                space at the combined old and new SCEC of approximately 70,000 m2).
                                This would enable scope to increase exhibition space and also incorporate
                                flexibility for plenary/convention facilities.
                                Factors to consider: Continued facility use during construction, potential need
                                to elevate freeway to allow for continuous facility, potential need to relocate
                                car parking facilities

B       Approx. $500            Expansion of the SCEC into the SEC car park site and SEC site
        million-$700 million    Combined, the SEC car park site, SEC site and the area below Pier Street
                                is approximately 30 ha. Expansion of the SCEC into this area could result in
                                the creation of a larger integrated, purpose built facility, whereby the SCEC,
                                SEC and car park become a flexible space facilitating plenary events and/
                                or exhibition areas. This could potentially increase SCEC leasable space by
                                20,000 m2 (i.e. enabling total leased space at the venue of approximately
                                80,000 m2), also allowing for other ancillary developments. This option would
                                have the greatest scope to incorporate supporting commercial investments
                                as was incorporated in the recent MCEC development. The extra space
                                would also better facilitate a refurbishment of some of the existing centre at
                                a later date.
                                Factors to consider: Continued facility use during construction, potential need
                                to elevate freeway to allow for continuous facility, potential need to relocate
                                car parking facilities




As part of Option B, the live concert capacity of the Entertainment Centre could be
replaced with the new convention and exhibition centre having a large scale flexible plenary/
entertainment hall with world class stage and acoustics capable of hosting major concerts for
crowds of potentially 6,000-10,000 people depending on stage layouts. In recent years the
age of the Entertainment Centre and lesser quality features has seen it experience increasing
competition from venues such as Acer Arena and inclusion of state of the art concert space
within the new convention and exhibition centre will mean the CBD will once again have an
exceptional live concert venue.




                                        68
Other potential options for the SCEC that have been discussed relate to expansion of the
existing site into the current retail precinct at Darling Harbour, Harbourside Shopping Centre,
which is also owned by the NSW Government and operated by SHFA. While this remains
a possibility, there were some stakeholder views that the retail site is constrained with the
footprint lacking depth. This option will also be impacted by the outcomes of the current
asset divestment process being undertaken by SHFA of some of its key assets as part of
the NSW Government’s Mini-Budget announced in 2008, which includes the Harbourside
Shopping Centre. Furthermore, Harbourside Shopping Centre is currently leased from SHFA
by Bevillesta Pty Limited and is not set to expire until March 2087.63 Beyond this, there
are benefits of retaining the Shopping Centre for its current use relating to the attraction of
pedestrian footfall to the precinct.


The high level options for redevelopment or expansion of the SCEC described above are
displayed diagrammatically in Figure 11. Each option utilises existing infrastructure in the
southern Darling Harbour precinct, but the area impacted varies among options.


 Figure 11 Darling Harbour map extending to UTS and Chinatown64




                                                        




    SCEC Option A            SCEC Option B




63 SHFA (2010), Asset Divestment: Information Memorandum, January 2010, available at:

  http://www.shfa.nsw.gov.au/content/library/documents/B3D856DA-E97E-68BA-DE3A0D306FD68799.pdf

64 Pacific (2010), http://www.pacific2010.com.au/images/DarlingHarbourTransMap-big.gif



                                                                     69
There are currently redevelopment activities being undertaken in the Darling Harbour precinct,
nearby to the SCEC, including:


•	      A new University of Technology Sydney (UTS) Business School building. The new
        UTS Faculty of Business building, to be designed by renowned architect Frank Gehry, will
        be named the Dr Chau Chak Wing Building. The building is scheduled to be completed by
        the end of 2013 at a total cost of $150 million.65 In late 2009, UTS commissioned Gehry
        to develop a design concept for UTS Business School’s new building, as part of the UTS
        Campus Master Plan. The ideas were based on Vice-Chancellor Ross Milbourne’s vision
        to create a world-leading university of technology. Gehry’s flowing forms and unique
        constructions reflect UTS ambitions to lead the development of business ideas in the
        creative, connected, fluid and fast changing twenty-first century.66 The City Campus
        Master Plan comprises a number of distinct projects, which will be delivered on a staged
        basis from December 2009, as presented in figure 12:


 Figure 12 UTS Master Plan Projects – City Campus Master Plan67




65 Australia China Connections (2010), UTS receives A$25 M donation for new business faculty, 10 July 2010, available at:

     http://www.chinaconnections.com.au/News/UTS-receives-A$25-M-donation-for-new-business-faculty.html

66 UTS Business (2010), Frank Gehry concept design is approved, 16 June 2010, available at: http://www.business21c.com.

     au/2010/06/frank-gehry-concept-design-is-approved

67 UTS (2010), Master Plan Projects, ‘City Campus Master Plan’, available at:

     http://www.fmu.uts.edu.au/masterplan/projects.html


                                                  70
•	      Chinatown upgrades, including a revitalisation of Dixon Street, with improved
        pedestrian facilities and improved streetscape. Hay Street will be reconfigured to see
        the complete removal of cars, and Little Hay Street to have reduced traffic access and
        a tree lined corridor. The planned redevelopment is expected to be completed in
        November 2010.68


 Figure 13 Chinatown Mall Redevelopment – draft master plan69




•	      Darling Walk site will be transformed in a $560 million dollar redevelopment
        combining commercial office and leisure space, with the 1.5 ha site being developed by
        Lend Lease. The 65,000 m2 development will comprise 58,000 square metres of low
        rise, campus style office space, a Youth Theatre, a rejuvenated retail precinct, a water play
        park and associated car parking.70


 Figure 14 Darling Walk project71




68 Ben.ism (2010), Sydney’s Chinatown to get a facelift, available at: http://benism.wordpress.com/2010/05/24/sydneys-

     chinatown-to-get-a-facelift/

69 Valley Chamber (2008), Draft Master Plan: Key Concepts, ‘Chinatown Mall Redevelopment’, 10 December 2008, available

     at: http://www.valleychamber.com.au/fileadmin/html/valleychamber/pdf/Other_Misc /MasterPlanA1_IssueD_12_dec_1.pdf

70 Lend Lease (2010), Lend Lease selected for landmark redevelopment in Sydney CBD, available at:

     http://www.bovislendlease.com/llweb/llc/main.nsf/all/news_20080910; SHFA (2010), Darling Walk, available at:
     http://www.shfa.nsw.gov.au/sydney-Our_places_and_projects-Our_projects-Darling_Walk.htm

71 SHFA (2010), Darling Walk, available at:

     http://www.shfa.nsw.gov.au/sydney-Our_places_and_projects-Our_projects-Darling_Walk.htm


                                                                        71
•	      Redevelopment and expansion of Star City casino commenced last year, and has
        recently been expanded to include a 3,000-seat multi-purpose entertainment venue.
        The current $575 million redevelopment project that commenced last year includes
        developments such as reorientation of the property towards Sydney Harbour, a new
        5-star hotel, several new restaurants and bars, 4,000 m2 of retail space and refurbishment
        and expansion of the casino. In August 2010 Tabcorp announced plans to invest an
        additional $285 million including the multi-purpose Events Centre and VIP customer
        facilities. The Events Centre will comprise 2,400 m2 of column-free space have views
        over Sydney Harbour and the city skyline and designed to host performers as well as
        domestic and international conferences, exhibitions and functions.72


 Figure 15 Artist’s impression of the Star City redevelopment 73




•	      Barangaroo development – the major new $6 billion Barangaroo site (including a 6
        star hotel), will generate activity and business events for the Darling Harbour and the
        convention and exhibition centre precinct. This development has the potential to generate
        up to $1 billion for the NSW economy each year for the next 10 years. It will comprise
        commercial office towers mixed with residential apartments in a public waterfront
        precinct, public open space and a new Headland Park in the centre of the Sydney CBD.74




72 Tabcorp (2010), Tabcorp increases investment at Star City, 5 August 2010, available at: http://afr.com/rw/2009-2014/

     AFR/2010/08/04/Photos/c257fc76-a019-11df-8dca-9e56e9d3303d_tabcorp%20increases%20invest.pdf

73 Gibson, Jano (2008), Sydney Morning Herald, ‘Plans unveiled for casino’s star turn’, 24 September 2008 available at: http://

     www.smh.com.au/news/national/ugly-duckling-casino-set-for-major-makeover/2008/09/23/1221935641177.html

74 NSW Government (2010), News Release, Premier of NSW, ‘Sydney’s Barangaroo Precint – Asia’s Newest Financial

     Centre, 14 July 2010, available at: http://www.business.nsw.gov.au/NR/rdonlyres/91ED0DD2-A77C-4F75-9AD5-
     FFAD6924B3B3/0/rel_20100714_barangaroo.pdf


                                                  72
Each of these developments will contribute to increased pedestrian and thoroughfare activity,
number of visits and general ambience in the precinct. Furthermore, this may contribute to an
increased value associated with potential retail and hotel developments. Even before these
developments, the range of attractions in Darling Harbour attracts more than 27 million visitors
each year.75


Options for expanding the SCEC are discussed further below. In considering potential options,
it has been assumed that Tumbalong Park and the Chinese Garden of Friendship would not
be affected by any SCEC development. While these sites may present additional space for
expansion, it has been considered that the cultural and political relevance of each site may
preclude development and would only require relocation of open space elsewhere.


Furthermore, it was considered that any upgrade of the SCEC site to enable high yield
international events and conferences to be held at the site would require relocation of some
domestic and National exhibitions – this would require an expansion and upgrade of the
Sydney Showground which has not been considered in the context of this study.



A – Expansion of the SCEC into the SEC car park site

This option involves extending the exhibition facilities into the site currently occupied by the
SEC car park. The SEC car park site and the area below Pier Street combine as approximately
20-25 ha. Expanding into this area could potentially increase leasable floor space by 10,000
m2 76 (i.e. enabling resulting in total leasable space at the combined old and new SCEC of
approximately 70,000 m2). This would enable scope to increase exhibition space and also
incorporate flexibility for plenary/convention facilities.


The Wilson Entertainment Carpark currently has a 1,900 car capacity. While some of these
car parks may be reduced due to the expansion proposed in Option A (and Option B), there
may be scope to retain some of this capacity or construct additional capacity underground.
Furthermore, any impact on availability of car park spaces will be offset by those being
constructed as part of the new Darling Walk development – this will involve a 800 car park,
with 600 spaces available to the public increasing the number of spaces in the precinct.
Furthermore, there are other car park options available in the Darling Harbour district, for
example the SCEC is served by its own Exhibition Centre Carpark that can accommodate 750
cars, and the SEC reports that there are around 10,000 spaces within a 10 minute walk.77


Consultations have suggested cost estimates for such a plan expanding the SCEC into the
SEC car park site to be $500 million+.78

75 SHFA (2010), Asset Divestment Information Memorandum, January 2010, available at: http://www.shfa.nsw.gov.au/

  content/library/documents/B3D856DA-E97E-68BA-DE3A0D306FD68799.pdf
76 TTF & PCA, Revitalising the Convention & Exhibition Industry in Sydney, 2007

77 SEC (2010), Major Transportation Links, available at: http://www.sydentcent.com.au/index.cfm?s=content&p=map; and

  Transport and Traffic Planning Associates (2007), Concept Plan for the ‘Darling Walk’ Site, Darling Harbour, ‘Assessment
  of Traffic and Parking Implications’, 29 November 2007, available at: http://majorprojects.planning.nsw.gov.au/files/19412/
  Part%201.pdf
78 PwC communications with SHFA, July 2010



                                                                         73
Issues in this expansion plan that may need to be considered and could impact on the
capital expenditure required are:


•	      Roadway relocation may be necessary to seamlessly connect the current exhibit halls
        with the new building79


•	      The issue of proximity of exhibition space to convention space during this development80


•	      Displacement of parking facilities in Darling Harbour may occur as a result, and the
        demand for such facilities may require an alternative option


•	      A site survey has revealed the presence of significant utilities underground that may have
        to be relocated81


•	      Current road access is from Darling Drive, behind the main exhibition hall, and this road
        may need to be extended to service the newly expanded section.



B – Expansion of the SCEC into the SEC car park and site

This option is the most comprehensive undertaking for Darling Harbour convention and
exhibition facilities discussed with stakeholders as part of this study, as it could result in
the creation of a larger integrated, purpose built facility incorporating the simultaneous
redevelopment of SCEC and SEC to create synergies between the two.82


Consultations indicate that the cost of this option could be more than $500 million depending
on the extent of the expansion, including size, quantity of finishes and incorporation of flexible
space options (e.g. stackable seating).


Combined, the SEC car park site, SEC site and the area below Pier Street is approximately
30 ha. Expansion of the SCEC into this area could result in the creation of a larger integrated,
purpose built facility, whereby the SCEC, SEC and car park become a flexible space facilitating
entertainment events, convention and/or exhibition areas. This could potentially increase SCEC
leasable space by 20,000 m2 (i.e. enabling total leased space at the venue of approximately
80,000 m2) to allow inclusion of flexible space incorporating convention and exhibition areas.83




79 TTF & PCA, Revitalising the Convention & Exhibition Industry in Sydney, 2007 p9-13

80 Stakeholder consultation, June 9, 2010, highlighted the lack of connectivity of convention with exhibition space in the

     SCEC currently. It is possible that further extension of the exhibition hall will exacerbate this issue. Thus, architectural plans
     may need to consider alternative layouts.

81 TTF & PCA, Revitalising the Convention & Exhibition Industry in Sydney, 2007, p9 - 13

82 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space, p28

83 Confidential discussions with private sector stakeholders



                                                      74
The option provides the potential to incorporate supporting and co-located commercial
development, making this option more comparable with the recent MCEC expansion, which
involved $367 million of capital expenditure for the convention centre and $750 million private
sector investment in the surrounding ‘mixed-use’ commercial development. Additional
revenue streams and funding from co-located commercial investments may be able to offset
construction costs and provide convention and exhibition attendees with nearby attractions
and retail opportunities. These aspects could include hotel development, residential and office
space as well as a retail precinct in the SEC site.


The issues relating to this development option are akin to those of Option A, but also involve
the displacement of events and space currently occupied by the SEC. The SEC has capacity
for up to 12,490 84, and hence some events may be relocated to the SSG Main Arena (capacity
15,000 seated85) or the Acer Arena (capacity 21,000 seated86). However, almost no indoor
events require a capacity of more than 10,000 seats.87


The SEC and Acer Arena are both owned by the NSW Government, and operated by private
operators who rent the venue from the State. The SEC was previously managed by Arena
Management since it opened in 1983, however their lease agreement was cancelled in
August 2009 after the company went into receivership. Arena Management suggested its
financial issues were in due to increasing competition from Acer Arena, as well as higher
rental fees for its CBD location.88 Acer Arena is ranked in the top 10 arenas in the world and is
the largest indoor entertainment and sporting arena in Australia.89 It was also recently reported
as number 3 in terms of the world’s most profitable venues, behind London’s 02 Arena and
Madison Square Garden, New York.90 In comparison with the SEC, Acer Arena has corporate
boxes available and more modern IT facilities.


The SEC is now operated by the same private operator as the SCEC (Darling Harbour
Convention and Exhibition Pty Ltd). The previous operator, Arena Management had spent $4.1
million renovating the SEC before their lease agreement was cancelled.91




84 Sydney Entertainment Centre, Building information, accessed at http://www.sydentcent.com.au

85 Sydney Showground, Main Arena Fact Sheet, http://www.sydneyshowground.com.au

86 Acer Arena, History, accessed at http://www.acerarena.com.au

87 Searle, G. (2002) Uncertain legacy: Sydney’s Olympic stadiums, European Planning Studies, vol 10, no. 7

88 Carson, Vanda (2009), Sydney Morning Herald, ‘Rocked – veteran venue operator gets eviction notice’, 6 August 2009,

  available at: http://www.smh.com.au/business/rocked--veteran-venue-operator-gets-eviction-notice-20090805-ea4h.html

89 Acer Arena (2010), Venue information: history, available at: http://www.acerarena.com.au/Venue_Information/History.aspx

90 Sydney Morning Herald, 1 September 2010, Acer Arena boss headed to Perth, available at:

  http://news.smh.com.au/breaking-news-national/acer-arena-boss-headed-to-perth-20100901-14n0w.html

91 Carson, Vanda (2009), Sydney Morning Herald, ‘Impresario handed eviction notice’, 6 August 2010, available at:

  http://pandora.nla.gov.au/pan/101523/20090806-1000/business.smh.com.au/business/impresario-handed-eviction-notice-
  20090805-ea4l.html


                                                                        75
Integration of the SCEC car park and SEC into an expanded SCEC further has the potential to
develop a ‘research and education corridor’, linking the University of Sydney, in Camperdown,
to UTS and Darling Harbour. Similar activities have been undertaken in Qatar, with the Qatar
National Convention Centre, a 40,000 m2 exhibition hall with capacity for 4,000 delegates,
located in Education City, a cluster of over 30 elite educational and research institutions.92



Where expansion/improvement of the SCEC has been
previously recommended

Expansion and improvement of the SCEC has been discussed for several years, and was
considered in previous studies. Although detailed plans were not laid out in either report, both
O’Neill (2007) and TTF/PCA (2007) discuss high level redevelopments and expansion of the
current SCEC facilities. The potential increase in convention and exhibition space ranges in
these previous studies from 10,000 m2 (O’Neill) up to 25,000 m2 (TTF/PCA).


According to the TTF/PCA 2007 study prepared by HVS International, management of the
SCEC had proposed a redevelopment plan at around the time of that study. This plan was
reported by HVS International to involve redevelopment of the SEC car park and the SEC into
an integrated facility with the SCEC. The plan proposed by SCEC management, and reported
in that 2007 report, could add an additional 20,000 m2 of exhibition floor area, growing the
total available space to approximately 50,000 m2.93


SHFA is also currently preparing a master plan for south Darling Harbour at the request of
the NSW Government. This master plan will be overseen by a committee of stakeholders
including the Land and Property Management Authority, Industry and Investment NSW,
Tourism NSW, NSW Treasury, SOPA, Department of Premier and Cabinet and SHFA. It is
also understood that this plan is likely to consider options for an expanded convention and
exhibition facility in Darling Harbour, the refurbishment of the SEC, and integration of new
facilities with the adjacent UTS and Barangaroo project. Also being considered are ways to
integrate the convention and exhibition centre precinct with other tourist precincts including
Chinatown, the Powerhouse Museum and the education precinct at the University of
Technology.94 The report is due for release in November 2010.


In addition to the previous plans put forward by SHFA, as part of this study PwC has held
discussions with some private sector parties to discuss their preliminary interest in the
development of facilities in Sydney. Through this, there have been indications there is
some private sector interest in development of the SCEC. This interest included options to
incorporate commercial opportunities such as hotels, retail and commercial options that do not
appear to have been previously considered by SHFA.




92 Qatar National Convention Centre, www.qatarconvention.com

93 TTF & PCA, Revitalising the Convention & Exhibition Industry in Sydney, 2007, p9-13

94 NSW Government, News Release, 5 May 2010, $1 million to expand Sydney’s Convention and Exhibition facilities’

  accessed at http://www.shfa.nsw.gov.au


                                                76
Advantages and disadvantages

There are advantages and disadvantages to development options for the Darling Harbour
SCEC site and surrounding precinct, as discussed below.


 Table 13 Advantages and Disadvantages of SCEC redevelopment and expansion options


       Advantages                                                         Disadvantages


A      •	   Proximity to the CBD, transport links and
            accommodation
                                                                          •	   Construction activity may
                                                                               require some events to be
                                                                               relocated to secondary sites
       •	   Relative to non-SCEC options provides the ability to
            leverage existing facilities                                  •	   Challenges to expand given
                                                                               existing infrastructure, e.g.
       •	   Retains iconic Darling Harbour as a flagship exhibition            cable tunnels and tunnel for
            and convention site                                                forklifts

       •	   Increases flexibility of SCEC’s offering                      •	   Costs associated with
                                                                               roadway relocation if
       •	   Increases potential to host multiple events                        continuous facilities required
            simultaneously                                                     (approximately $30 million has
                                                                               been previously estimated)
       •	   Can take advantage of other developments in the
            precinct

       •	   Increases capacity and space

       •	   Ability to ensure functionality and flexibility of
            new floor space

       •	   Some continued use of SCEC possible during the
            construction phase, relative to Option B

B      All advantages of Option A, plus:                                  All disadvantages of
                                                                          Option A, plus:
       •	   Potential to create a purpose built, integrated facility by
            using extra land from SEC                                     •	   Construction costs likely to
                                                                               be higher than other SCEC
       •	   Contributes to development of a research and education             options
            precinct along corridor, with proximity to UTS and
            Sydney University                                             •	   Construction activity would
                                                                               affect the SCEC and SEC
       •	   Connection of the city with Chinatown and Broadway                 events.

       •	   Greater potential to integrate commercial developments        •	   Suitable alternative sites for
            and encourage private sector interest (in particular               events scheduled at SEC
            considering the Darling Walk, Chinatown and UTS                    during the construction period
            Business School developments that will increase footfall           are limited given the SEC is
            and boost retail and hotel opportunities)                          larger than many venues in
                                                                               the Sydney area

                                                                          •	   Loss of CBD live concert
                                                                               venue for 2-3 years and
                                                                               increased reliance on Acer
                                                                               Arena over this period




                                                                 77
Phase 2 development/refurbishment of the SCEC site

Considering Options A and B above as ‘Phase 1’ of development of a world class facility in
Sydney, ‘Phase 2’ could include upgrades and refurbishment to the existing facility. However,
it is expected that phase 1 would need to be completed first to enable these further
developments to accommodate pre-booked events during construction:


•	   Limited upgrades and maintenance – To address more immediate issues related
     to ageing facilities. As discussed in the previous chapter, issues raised by the SCEC
     facilities managers indicate the following upgrades are required, which will need around
     $320 million over the next ten years for air conditioning, roof, kitchen and loading
     dock maintenance/refurbishment.95 This would involve core maintenance upgrades
     to the existing SCEC facility, with no additional capacity provided. This would need to
     be undertaken considering the impact on ongoing operation of the facility, hence the
     advantages of undertaking this following the initial Phase 1 expansion.


•	   Structural enhancement and refurbishment of SCEC Exhibition Halls – In order to
     address the issue of lack of flexibility and general layout of the exhibition hall, this would
     involve redeveloping the existing SCEC Exhibition Hall into a streamlined, flexible space.
     While this would not directly increase capacity, it would allow the existing venue to cater
     for a wide range of events, potentially simultaneously. Undertaking this development
     would address the ability of the facilities to meet current trends to incorporate flexible
     floor plans and integrated meeting rooms, such as in the MCEC.96 For a full refurbishment
     of the SCEC including flexible spaces, storage, AV, etc, a high level capital cost estimate
     of above $400 million was suggested during this study. The ultimate cost of such a
     development would depend on the level of flexibility and continuity introduced.97 As an
     extension, there may be potential to convert the existing exhibition halls into 2-storey halls
     to increase capacity.


•	   Redevelop or demolish existing SCEC site – Given the underlying costs of renovating,
     especially the roof, air conditioning, IT systems, loading bays and kitchens, a further
     Phase 2 option could be to build a new wing for the centre on the existing SCEC site to
     better integrate into the new Phase 1 centre.




95 Information supplied by Darling Harbour Convention and Exhibition (DHCE) Pty Ltd / SHFA, June 2010

96 Melbourne Convention and Exhibition Centre (MCEC), Floor Plans and Space Capacities

97 Personal communication with SCEC management, June 2010



                                                78
2. Expansion of Sydney Showground

Description of the site

The SSG is currently the secondary exhibition site in Sydney, hosting over 400 events per year,
of which approximately 7-10 percent are exhibitions.98 A majority of these events are large
scale exhibitions and trade shows with a national and domestic focus. The primary advantages
of the SSG are its location in the Sydney metro area (proximity to both Parramatta and Sydney
CBD), transport access by rail and motorway, as well as availability of parking.99


The next largest exhibition space after SCEC, the SSG, may not have the capacity to host
large events in their exhibition halls.100 Hence, in order to provide adequate facilities at the SSG
for the typical conventions and exhibitions held at the SCEC, expansion of the current SSG
facilities would likely be needed.



Where this option has been previously recommended

The Royal Agricultural Society (RAS) has previously developed a plan to redevelop the
Showground, increasing the total exhibition space from 21,600 m2 to 29,000 m2 by adding on
to existing exhibition halls. Further to this plan, TTF/PCA (2007) discussed an expansion of the
SSG to serve the local consumer and tradeshow market.101 The plan proposed by TTF/PCA
would increase the exhibition space up to 40,000 m2.


Following the government’s announcement to establish a Western Sydney AFL team, the
Royal Agricultural Society of NSW will receive $20 million in the NSW 2010-2011 Budget
for the redevelopment of the Sydney Showground Arena, with $12.6 million also allocated
for facility improvements at Sydney Olympic Park. This includes $5.8 million for precinct
improvements at ANZ stadium and facilities at Homebush Bay.


In order to justify such a development and also to justify government funding into expansion
or upgrading of privately operated SSG facilities, changes to the existing management
agreement may be needed. According to O’Neill (2007) this will involve changes to the
revenue sharing as well as the management approach.102




98 TTF & PCA, Revitalising the Convention & Exhibition Industry in Sydney, 2007, p9-160

99 ibid

100 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space, p25

101 ibid

102 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space, p36



                                                                       79
If the SSG were expanded as a consumer show venue, then the need to expand the SCEC
would be reduced and more resources could be dedicated to improving the functionality of
existing convention spaces in the SCEC.103 A smaller expansion of the SCEC could focus
on the ability to host conventions and small trade shows simultaneously by addressing the
flexibility and divisibility of halls.


 Table 14 Advantages and Disadvantages of expanding the SSG


 Advantages                                                             Disadvantages

 •	      May be lower capital cost than expansions in the               •	    Would not address desires of
         Sydney CBD                                                           delegates to be located nearby the
                                                                              CBD and at more iconic SCEC site
 •	      Location in the Sydney metro area and proximity
         to transport                                                   •	    Future use and utilisation of SCEC site

 •	      Redevelopment could align with the Olympic Park
         precinct master plan.




3. Develop airspace over Central Station

Description of the site

Central Station is a major CBD railway station on the City Rail network, which also serves
as a transport hub located nearby to the Sydney CBD. The airspace above the station is
not currently being utilised to its potential. It has previously been suggested that future
redevelopment could include major public facilities, including a convention centre, as
suggested in the City of Sydney’s vision for the CBD.104 Up to 500,000 m2 of retail and
business space could be created above the railway lines. According to Ken Maher, ‘a major
new public venue using the air space over the rail lines could have a front door to a more
pedestrian friendly Railway Square, giving greater vitality and meaning to this southern
gateway to the city centre’.105




103 TTF & PCA, Revitalising the Convention & Exhibition Industry in Sydney, 2007, p9-12

104 City of Sydney, Sustainable Sydney 2030,

      http://www.cityofsydney.nsw.gov.au/2030/documents/2030Vision/2030VisionBook.pdf

105 Ken Maher, Chairman of Hassell, Sydney Media, 26 March 2008, Grand vision to develop Central Station as Sydney’s

      green gateway, http://www.sydneymedia.com.au/html/3557-grand-vision-to-develop-central-station-as-sydneys-green-
      gateway.asp,


                                                80
Prior Studies of Central Station

In March 2008, Clover Moore, the mayor of the City of Sydney, unveiled Sustainable Sydney
2030, an initiative of the City of Sydney prepared by SGS Economics and Planning. Under the
plan a centre for business, residents and education was suggested for the air space above
Central Station.106


Building over railway lines is not a new idea; for example, large developments have occurred
above the Chatswood and St. Leonards railway stations in Sydney and there have been
proposals to build over rail lines in Melbourne’s inner eastern suburbs. The project in
Melbourne was proposed to create more than 100,000 m2 of new land, with costs between
$200-300 million.107 If this figure is equated to the 500,000 m2 potentially available at Central
Station, costs to develop the Central Station site could be over $1 billion, not including the cost
of incorporating a new convention centre. Furthermore, developers must take into account the
costs and risks of building over operating train lines and the need to reinforce the building so it
will remain structurally sound in event of a derailment.



 Table 15 Advantages and Disadvantages of developing the airspace over Central Station


 Advantages                                                          Disadvantages

 •	      New facility in close proximity to CBD and                  •	   Costs of building over railway
         transport options
                                                                     •	   Future use of SCEC site
 •	      Ability to continue ‘business as usual’ at current SCEC
                                                                     •	   Site not likely to be iconic from
 •	      In line with Sustainable Sydney 2030 plan                        delegates point of view (not waterside)




106 City of Sydney, Sustainable Sydney 2030,

      http://www.cityofsydney.nsw.gov.au/2030/documents/2030Vision/2030VisionBook.pdf

107 Sydney Morning Herald, March 30,2010, Covering our tracks



                                                                   81
4. Glebe Island and White Bay

Description of the site

Glebe Island, a relatively large site with 2.1 km of waterfront, is located just west of the
CBD. The peninsula is bounded by White Bay and the residential areas of Balmain, Rozelle
and Pyrmont are located nearby. The primary asset of the site is its size and ability to
accommodate a large venue; the site is largely vacant and would not displace any
existing development.108


The area of Glebe Island is owned by the Sydney Ports Corporation (Sydney Ports) on
Ministerial Order of the NSW Government. At this time, the current plan for the area
incorporates provisions for general cargo and container shipping use. Also certain aspects of
the Glebe Island area, including grain silos and a coal loader, may constrain development as
they are recognised as historical items.109


Although the Anzac Bridge provides road transport routes to the site, there are limited (if any)
viable pedestrian connections to tourism amenities. Recent proposals to site a metro train
line have been put on hold for the long-term, thereby decreasing likelihood of improved public
transport access. Furthermore, the metro has been opposed by a coalition of community
groups.110 Thus, the site may be more suited for a consumer or trade show than convention
centre, and may therefore necessitate the continued use of the SCEC.111



Where this option has been previously recommended

TTF/PCA (2007) highlighted the development of a 40,000 m2 exhibition hall at White Bay that
would be able to accommodate the largest consumer shows in the market. In the case that
only an exhibition hall was built in White Bay, there would be a continued need to operate the
SCEC. But, there would be less need for additional exhibition space at the SCEC. However,
separating the SCEC from additional exhibition capacity may be less than ideal, especially
since dedicated transport between the two sites is not yet operational.




108 HVS International (2007) Revitalising the Convention & Exhibition Industry in Sydney, prepared for PCA and TTF, p9-14

109 Sydney Ports, November 2000, Glebe Island and White Bay Master Plan

110 Alternative Media Group, 18 Jun 2009, Pyrmont people power mounts against Metro plans, available at: http://www.

   altmedia.net.au/pyrmont-people-power-mounts-against-metro-plans/7721

111 HVS International (2007) Revitalising the Convention & Exhibition Industry in Sydney, prepared for PCA and TTF, p9-14



                                                 82
 Table 16 Advantages and Disadvantages of developing at White Bay


 Advantages                                   Disadvantages

 •	      Ability to continue ‘business as     •	    Lack of business tourism infrastructure in the surrounding
         usual’ at current SCEC                     neighbourhood

 •	      Waterfront site with a large         •	    Need to create a precinct master plan to underpin
         amount of available space                  development, also inability to leverage off existing
                                                    infrastructure

                                              •	    Other than vehicular access via Anzac Bridge, there is limited
                                                    public transport options to move delegates e.g. ferry, light rail
                                                    or existing bus routes are absent

                                              •	    Distance from the CBD

                                              •	    Not as ideal to provide convention and exhibition facilities or
                                                    target international events

                                              •	    Lack of nearby accommodation




5. Barangaroo precinct

Description of the site

Barangaroo, formerly known as East Darling Harbour, is the only remaining large site in the
CBD with capacity for new development.112 The site comprises 22 ha with 1.4 km of shoreline.
To the east of the site lie Millers Point and the Rocks, with the CBD close-by, and King Street
Wharf at the southern end.


With the movement of vehicle container and cruise ship terminals to other locations, the use
of the site has been the subject of major redevelopment planning. Subsequently, Lend Lease
has been selected as the developer of the site,113 and a range of project applications have
been submitted by the Barangaroo Development Authority and Lend Lease over the proposed
development of the site.114 Currently, the development plan makes no consideration for the
development of a convention and exhibition facility.




112 TTF & PCA, Revitalising the Convention & Exhibition Industry in Sydney, 2007

113 Lend Lease, 21 December 2009, Lend Lease selected developer for Barangaroo, http://www.bovislendlease.com/llweb/

      llc/main.nsf/all/news_20091221

114 Barangaroo Sydney Australia, http://www.barangaroo.com/index.cfm?menu_id=1



                                                                      83
The current Lend Lease plan is being undertaken in three redevelopment areas – the Headland
Park, Barangaroo Central and Northern Cove and Barangaroo South, with construction
expected to commence in late 2011 for completion in late 2014. Approximately half the
Barangaroo site will be dedicated to open space and public domain, with a new Headland
Park at the northern end of the site. Barangaroo will include transport infrastructure such as
a new ferry terminal and pedestrian links to existing public transport networks and complete
the 14km Sydney Foreshore Walk from Anzac Bridge to Woolloomooloo. Overall, the current
plan sees a maximum of 508,300m2 of commercial, residential, tourism, retail and community
space in the development zone, and 11,500 m2 in the public domain.115


A previous report believed the site had potential for 40,000 m2 exhibition space and up to
5,000 seat capacity plenary hall (TTF/PCA 2007 report Revitalising the Convention and
Exhibition Industry in Sydney) but capacity is now uncertain as the commercial space is fully
allocated and retaining high levels of green space is important for the precinct.116



Where this option has been previously recommended

According to TTF/PCA (2007), if the focus is to attract national and international conventions,
tradeshows and conferences, a facility would need approximately 40,000 m2 continuous
exhibition space. Furthermore, with potential constraints on future development, there may be
a need to overbuild to ensure sufficient space for future demand growth.


A concept plan provided to TTF/PCA (2007) demonstrated that a convention centre with the
desired amount of exhibition space can be built alongside sufficient commercial and business
development at Barangaroo. Under this plan, a potential convention centre would be located
in the northern area, referred to as ‘Headland Park’. The potential conference centre building
would be placed over a public plaza and reach into Darling Harbour, with the exhibition hall
supporting commercial buildings and parkland. Hickson Road, to the immediate East, would
serve transport and access needs to the facility.117


However, under the current site plan developed by Lend Lease or more broadly within The
Barangaroo Development Authority Master Plan, there are no plans to build a convention
centre at Headland Park, or elsewhere in Barangaroo. Proposals are for an open space
featuring waterfront commercial, residential and leisure precinct, including the creation of the
harbour-side park and restoration of the entire harbour headland to a more natural shape.118
Inclusion of a convention and exhibition centre would require modification of the current plan,
which may require community consultation as well as approval from stakeholders.




115 NSW Government, Barangaroo, Key Facts, available at: http://www.barangaroo.com/keyfacts.cfm?menu_id=2

116 Refer to NSW Government, Barangaroo Development Authority, Barangaroo Consolidated Concept Plan 2007, Part B:

   Concept Plan, available at http://www.barangaroo.com/concept_plans.cfm

117 HVS International (2007) Revitalising the Convention & Exhibition Industry in Sydney, prepared for PCA and TTF, p9-7

118 NSW Government,Barangaroo Development Authority, Headland Park,

   http://www.barangaroo.com/headlandPark.cfm?menu_id=3


                                                 84
 Table 17 Advantages and Disadvantages of convention and exhibition centre
  development at Barangaroo


 Advantages                                                  Disadvantages

 •	   Use of an iconic harbour front site                    •	   Inability to leverage off existing infrastructure

 •	   Proximity to CBD                                       •	   Loss of green space and increased
                                                                  building density
 •	   No displacement of current developments or
      infrastructure                                         •	   No integration with existing Darling Harbour
                                                                  convention and exhibition centre or nearby
 •	   May no longer require operation of SCEC as a                complementary infrastructure
      convention and exhibition facility, allowing sale or
      other development of the site




Assessment of site options
A comparison of the advantages and disadvantages of each of the options described above
for a new and/or expanded facility, and discussions with stakeholder groups including tourism
industry representatives and potential private sector operators and developers, has supported
that the current SCEC site is retained as the location for high value conventions
and exhibitions.


Advantages of this include the ability to leverage existing facilities, in particular the iconic
Darling Harbour site. Furthermore, its location relative to the CBD and to transport networks
will require minimal upgrades to access arrangements. In addition, there is the more long term
potential to contribute to development of a research and education precinct along the corridor,
with proximity to UTS and Sydney University, and also to take advantage of connecting the
city with Chinatown and Broadway.


Of the SCEC options presented, expansion into both the SEC car park and SEC site, combined
with maintenance and some refurbishment of the current site would be expected to address
the key capacity issues identified for Sydney, as well as allowing for scope for ancillary
development such as retail, commercial, office and a hotel – which could assist to encourage
private sector involvement in financing and development. Such a development would involve
incorporation of convention, exhibition and entertainment facilities in order to accommodate
current SEC demand. If the entertainment facilities are retained at the SEC with expansion
occurring principally into the SEC car park site, this would enable retention of the current SEC
with some linking of it into the ‘multi-use’ facility available to host international entertainment
acts, business conferences and trade exhibitions – though this option may require some
expansion of the existing SCEC site into two storeys in order to expand convention and
exhibition space while still allowing for commercial development.




                                                                   85
Economic benefits of creating an expanded, world
class facility in Darling Harbour

Economic impacts of a world class facility

An expansion of the SCEC into the SEC car park and potentially also the SEC site has the
potential to expand leasable entertainment, convention and exhibition space by
10,000-20,000 m2. This also has the potential to increase flexibility for events. As a result
of the increased space and flexibility, there is potential to increase the number and scale of
events hosted in Sydney by enhancing the international profile of the SCEC and its ability
to attract large scale events. As a result of attracting additional interstate and international
delegates and other visitors, new expenditure would be undertaken in NSW resulting in an
increase in the economic benefit contributed by the SCEC to the NSW economy.


As indicated in the figure below, the economic benefit may initially reduce relative to the ‘do
nothing’ scenario described earlier due to construction impacts. However, over a 30-year
period, there is a significant increase in the economic benefit.


 Figure 16 Possible increase in economic benefit relative to a do nothing scenario
  (Phase 1 SCEC expansion only)

Compared to a ‘do nothing’ scenario, expansion of the SCEC has the potential to increase economic impacts
by $160-270 million per annum, or $2.0-3.4 billion over 30 years in NPV terms (today’s dollars)

             900

             800

             700

             600

             500
$ millions




             400

             300

             200

             100

               0
                     8

                            0

                                   2

                                          4

                                                 6

                                                        8

                                                               0

                                                                      2

                                                                             4

                                                                                    6

                                                                                           8

                                                                                                  0

                                                                                                         2

                                                                                                                4

                                                                                                                       6

                                                                                                                              8

                                                                                                                                     40
                      0

                             1

                                    1

                                           1

                                                  1

                                                         1

                                                                2

                                                                       2

                                                                              2

                                                                                     2

                                                                                            2

                                                                                                   3

                                                                                                          3

                                                                                                                 3

                                                                                                                        3

                                                                                                                               3
                   20

                          20

                                 20

                                        20

                                               20

                                                      20

                                                             20

                                                                    20

                                                                           20

                                                                                  20

                                                                                         20

                                                                                                20

                                                                                                       20

                                                                                                              20

                                                                                                                     20

                                                                                                                            20

                                                                                                                                   20




                                        Base Case (no expansion/do nothing)

                                        SCEC expanded into the SEC carpark and SEC site

                                        SCEC expanded into the SEC carpark




                                                             86
This suggests there is potential to increase the economic benefit (currently $466 million per
annum) by $160 million each year for expansion into the SEC car park, and up to $270 million
each year for expansion into the SEC car park and SEC site.119


Economic benefits experienced from expansion of convention and exhibition facilities in other
Australian jurisdictions are described in case study 2.


 Case study 2 Economic benefits from convention and exhibition facility development
  and expansion in Australia




        The economic benefits to development of the Perth Convention Centre are derived
        through the extra visitors to the State, have been calculated as $2.2 billion over the life
        of the Centre, or approximately $63 million per year for 35 years.120


        The Melbourne Convention Centre development is anticipated to inject around
        $200 million a year into Victoria’s economy for the next 25 years - a $5 billion boost
        to the Victorian economy. The investment will create another 2,500 new jobs on top
        of the almost 1,800 created during construction of the centre
        and commercial precinct in South Wharf.121




Economic benefits of a world class facility

Ideally, the economic contribution of an expanded, world class facility in Sydney would be
assessed as part of a cost benefit analysis (CBA). A CBA was undertaken for the Melbourne
Convention Centre project, which suggested that the project had a strong benefit cost ratio
(BCR) exceeding 2.5. The net benefits were driven by the expanded centre attracting more
overseas visitors, a large proportion of which undertake pre or post-touring to other parts
of Australia.


A CBA aims to understand how efficiently funds are being allocated in order to generate
benefits for NSW residents and businesses. Such an analysis requires a significant amount of
data (ranging from a range of detailed SCEC specific data, base case capital expenditure, visitor
mix over a 30+ year timeframe, etc.) and hence was not undertaken for as part of this study.

119 Assumptions to estimate economic impact net change: expansion enables a capacity increase of 10,000-20,000 m2; events,

   delegates and economic impact decrease by 20% during construction years as activity is displaced during 2011 and 2012;
   over the first 5 years of operation events, delegates and economic impact ramp up to achieve an increase proportional to the
   increase in exhibition space increases by 30-70%; it is possible to attract events by a similar portion as exhibition space is
   increased; after events per square metre reaches current levels, growth in delegates, events and therefore economic impact
   would increase at only 1% pa; discount rate of 7% real used to consider the annual economic impact.
120 Infrastructure Partnerships Australia, Case Studies, Perth Convention and Exhibition Centre, http://www.infrastructure.

   org.au/DisplayFile.aspx?FileID=16
121 Melbourne Convention and Exhibition Centre, Student Information Kit, Economic Benefits of the Melbourne Convention

   Centre, http://www.mcec.com.au/Utility/MCEC-Information/Student-Information-Kit.html


                                                                           87
6. Delivery and funding models for a
new or expanded facility
Funding options for the redevelopment or refurbishment of
convention facilities generally include a spectrum of private
sector involvement approaches. Developments in other domestic
convention centres utilise a range of public and private funding
arrangements. This chapter considers how existing facilities in
Australia were delivered and funded. It considers alternative delivery
models, the benefits of private sector involvement and the funding
options available for the expanded SCEC.


Existing facilities in Australia
Funding and delivery options for convention and exhibition facilities generally include a
spectrum of models for private sector involvement. Delivery and funding experiences from
existing facilities in Australia can be leveraged for the expanded SCEC. This section of the
report specifically focuses on whether existing facilities are:


•	   Delivered through conventional government procurement or through private sector
     involvement - and the extent of private sector involvement.


•	   Self sufficient and generate sufficient cash flow to fund ongoing operational and
     maintenance costs, and where relevant, repay debt facilities and equity investments
     utilised to fund the capital cost of the projects.


•	   How and by whom the upfront capital costs of projects were funded.


The models at the SCEC, SEC, Sydney Showground, MCEC and Perth Convention Centre are
described further below.




                                     88
Sydney Convention and Exhibition Centre model

The private sector was involved in the design and construction of the SCEC,122 with initial                               Government ownership
funding support from the NSW Government,123 and is owned by SHFA, a NSW Government                                        with private operation
responsible entity. Under current agreements, Darling Harbour Convention and Exhibition
(DHCE) Pty Ltd manage the facility. DHCE is the operating company under Convention Centre
Management (CCM) Pty Ltd, a private sector consortium jointly owned by the hotel group
Accor Asia Pacific (60%)124 and food services organisation Compass Group (40%).125


 Figure 17 Parties involved in management of the SCEC 126




                                                                                                         Darling
                              Land and                 Sydney                 Sydney
                              Property                 Harbour                Convention                 Harbour
   NSW
                              Management               Foreshore              and Exhibition             Convention
   State
                              Authority                Authority              Centre                     and Exhibition
   Government
                                                                                                         (DHCE)
                              (LPMA)                   (SHFA)                 (SCEC)
                                                                                                         Pty Ltd




It is our understanding that DHCE’s role involves facilities management, catering, cleaning,
maintenance, event marketing and other venue operations. SHFA retain demand risk in
relation to events, conferences and exhibitions and DHCE receives a management fee.
DHCE receives a variable payment which is linked to volumes for some of its other operations
(e.g. catering).127




122 The SCEC architecture was designed by Philip Cox Richardson Taylor and Partners (Source: http://www.

   sydneyarchitecture.com/PYR/PYR17.htm ) and constructed by Baulderstone and Leighton Contractors
   (Source: http://www.baulderstone.com.au/index.php?page=projects&id=400)
123 Sydney Convention and Exhibition Centre, February 2009. Fact File

124 Sydney Convention and Exhibition Centre, February 2009. Fact File

125 Sydney Convention and Exhibition Centre, Media Centre, 19 May 2009, Art Reflects Sydney’s Essence,

   http://www.scec.com.au/media_centre/details.cfm?objectID=44
126 Information supplied by Darling Harbour Convention and Exhibition (DHCE) Pty Ltd / SHFA, June 2010

127 Information supplied by Darling Harbour Convention and Exhibition (DHCE) Pty Ltd / SHFA, June 2010



                                                                        89
                         Currently the management structure has four objectives for the SCEC:


                         1          To generate economic benefit for the State, with a particular focus on
                                    international conventions


                         2          To maximise utilisation of the SCEC


                         3          Generate cash returns to the State


                         4          To offer a world class convention facility.128


                         The private sector is incentivised through meeting or exceeding certain Key Performance
                         Indicators (KPIs) related to the attraction of international and national delegates and attaining
                         the required occupancy levels.


                         O’Neill recommended that management contracts for such facilities should motivate the
                         managers to give greatest priority to large international conventions. O’Neill highlights the
                         current SHFA/SCEC management agreement makes some mention of this but actually
                         provides strong incentives for the manager to maximise both the operational profit of the
                         facility and use of the exhibition space. Maximum use of exhibition space is achieved through
                         primarily serving domestic exhibitions. Thus, if priority should be given to international and
                         large national conventions, a key SCEC issue in addition to capacity, is with booking conflicts
                         between international and domestic events.129



                         Sydney Entertainment Centre

Government ownership     Similar to the SCEC, the SEC is owned by the SHFA (NSW State Government). Arena
with private operation   Management, a private company which had a lease agreement to operate the SEC, was
                         placed into voluntary administration and terminated the prior lease agreement in August
                         2009.130 The facility is now operated by DHCE Pty Ltd.131




                         128 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space, p33

                         129 O’Neill, John (2007), Review into Sydney Convention and Exhibition Space, p33

                         130 Sydney Harbour Foreshore Authority, Annual Report 2008-09

                         131 Sydney Entertainment Centre, About the SEC,

                             http://www.sydentcent.com.au/index.cfm?s=content&p=dynamicpage&menu_id=100001


                                                                         90
Sydney Showground

In 1996 the RAS entered into a 99 year lease over management and operation of the SSG              Government owned,
(with a further 99 year option) with the NSW Government. Commencing from September                 privately operated
2000, SOPA makes annual payments to a Major Repair Fund (MRF) that is sourced from                 through long term lease
the payment made by the RAS. The RAS payment to the MRF is calculated based on a                   and private management
percentage of the Royal Easter Show revenue and a percentage of the profit from other
activities. Dependent upon certain terms and conditions, the RAS is obligated to contribute
approximately $2.1 million per annum.132


The TTF/PCA study prepared by HVS International suggests this ownership structure does
not currently provide adequate incentive to undertake significant maintenance and facility
upgrades. Similarly run facilities may face shortfalls in necessary maintenance and expansion
funding if the specified lease term does not accurately reflect the asset life.133



Melbourne Convention and Exhibition Centre

The MCEC development was delivered under the Partnerships Victoria (PV) policy by three            Public Private Partnership
main public entities:                                                                              (PPP) project



•	    Major Projects Victoria (MPV), then a division of the Department of Infrastructure (DOI)


•	    Department of Innovation, Industry and Regional Development (DIIRD)


•	    Melbourne Convention and Exhibition Trust (MCET).134


These groups partnered with a PPP consortium led by Plenary Group, which delivered a $1.4
billion revitalised riverside precinct incorporating the expanded convention and exhibition
centre, a new Hilton Hotel, an office tower, 60,000 m2 of retail and a rejuvenated river
promenade.135 A Hilton Hotel is located next to the convention centre, with 396 rooms,
including 26 suites and 32 apartments.136




132 Royal Agricultural Society (RAS) Annual Report 2008-09

133 TTF International (2007) Revitalising the Convention & Exhibition Industry in Sydney

134 Victorian Auditor – General’ Office, Audit of Melbourne Convention Centre Development,

     http://www.audit.vic.gov.au/reports__publications/reports_by_year/2007/20071031_ppp.aspx
135 The Fifth Estate, Case Study – Melbourne Convention Centre, last updated 24 September, 2009,

     http://www.thefifthestate.com.au/archives/5986
136 MCEC and Hilton, Meet by the river in Melbourne, South Wharf Meetings and Events



                                                                         91
                       The Victorian Government contributed $367 million toward construction of the centre, with
                       the City of Melbourne contributing a further $43 million spent on municipal works around
                       the precinct, including roads and street lighting, a new footbridge to the north bank of the
                       Yarra River, and marketing of the new centre. The $750 million commercial precinct was fully
                       financed by Plenary and its syndicate of four banks comprising of the Bank of Scotland, NAB,
                       St. George, and Suncorp Metway.137


                       As part of the PPP arrangements, Victoria received $93.2 million from the Plenary Group for
                       development rights of the precinct. A subsidiary of the group, Austexx Plenary Melbourne,
                       received a 99-year leasehold for the commercial areas and a 25-year leasehold for the land
                       relating to the convention and exhibition centre. Plenary Group is responsible for the facilities
                       management including maintenance for 25 years.138 The private sector receives a quarterly
                       service payment from the State of Victoria to repay debt and to operate and maintain
                       the MCEC.


Public ownership and   The newly operating MCEC is owned by the Victorian State Government. The Melbourne
some management        Exhibition Centre (MEC), the old Melbourne Convention Centre (MCC) and the new
                       Melbourne Convention Centre (MCCD) are referred to as the Melbourne Convention and
                       Exhibition Centre (MCEC). They are fully integrated operationally and trade as the MCEC under
                       the direction of the Melbourne Convention and Exhibition Trust (MCET). Since completion of
                       the expansion in 2009, MCET is responsible for marketing and operation of the centre.139


                       Currently, in order to achieve the MCET’s vision of optimum utilisation of space and enhance
                       the profile of the MCEC and Victoria as a ‘place to do business’, there are five objectives.


                       1          To ensure high quality operations


                       2          To optimise profitability levels from the MCET’s operations while maximising
                                  economic benefits to Melbourne and Victoria


                       3          To maintain and further develop international standard convention and exhibition
                                  facilities


                       4          Enhance Melbourne’s position as an international city and the events capital of
                                  Australia through ongoing attraction of international events


                       5          Maintain the MCET’s venues and work environment.140




                       137 Victorian Auditor – General’ Office, Audit of Melbourne Convention Centre Development,

                           http://www.audit.vic.gov.au/reports__publications/reports_by_year/2007/20071031_ppp.aspx
                       138 Victorian Auditor – General’ Office, Audit of Melbourne Convention Centre Development,

                           http://www.audit.vic.gov.au/reports__publications/reports_by_year/2007/20071031_ppp.aspx
                       139 Victorian Auditor – General’ Office, Audit of Melbourne Convention Centre Development, http://www.audit.vic.gov.au/

                           reports__publications/reports_by_year/2007/20071031_ppp.aspx
                       140 Melbourne Convention and Exhibition Trust, Annual Report 2008-2009, p19



                                                                       92
In conducting a performance review of the second objective, the MCET asserts:


‘The prime objective of the Centre is to attract international and national conventions
to the Centre and Melbourne to maximise economic impact for the City and State’ 141


The industries targeted to host events at the MCEC are the priority industry areas of the
Victorian Government, including the medical and industry research portfolios.


As discussed above, Plenary Group is responsible for facilities management of the MCEC
under a 25-year arrangement.



Perth Convention Centre Model

The Perth Convention Centre, opened in 2004, was developed with significant private                                      Private operation with
involvement; the facility was built by Multiplex, financed by ANZ and the Commonwealth                                   transfer of ownership to
Bank, with support of the Western Australian Government (landowner and partial funder).                                  Government
Although on a smaller scale compared to the MCEC, the construction of the PCEC
was complemented with the redevelopment of the surrounding precinct, including a
138-apartment hotel now privately operated by the Medina Group.142


In order to address the funding needed to finance the project, the Government announced
an incentive package and the provision of Crown Land for the development of the PCEC. The
Perth CEC Pty Ltd. was established as the development vehicle with Multiplex constructing
the facility, under a project agreement whereby the Government loaned the $100 million
towards construction costs. This lease-own arrangement is to be repaid in 35 years, with the
transfer of ownership of the PCEC to the state government over this period.143


The facility is now owned by Wyllie Group,144 and managed by Spotless. Overall, the private
sector played key roles in the design, construction, finance, maintenance and operation of the
convention centre.145


Spotless Group has managed the facility since 2005, and in their 2008 Annual Report, the
group highlighted that “the centre is now trading profitably and has a strong forward events
pipeline”.146




141 Melbourne Convention and Exhibition Trust, Annual Report 2008-2009, p19

142 Perth Convention and Exhibition Centre, PCEC facts, http://www.pcec.com.au/faqs.cfm)

143 Carlsen, J., 2004, Issues in Dedicated Convention Center Development with a Case Study of the Perth Convention and

   Exhibition Center, Western Australia, Journal of Convention & Event Tourism, 6:1,45-61
144 Perth Convention and Exhibition Centre, Frequently Asked Questions, http://www.pcec.com.au/faqs.cfm

145 Mianich, R., 2005, Encouraging and Establishing Partnerships, IPAA Seminar, WA Department of Treasury and Finance

146 Spotless, 2008 Annual Report, p14



                                                                       93
                            This is the only convention and exhibition facility, which was compared and discussed in the
                            paragraphs above, with full demand risk held by the private sector. Benefits of this approach
                            are that it aligns all aspects of facility operation with an objective of attracting events and
                            maximising profits. It was fully funded by the private sector through private finance and
                            commercial opportunities and no contribution was required from government. The State
                            Government elected to allocate responsibility for planning and strategic control of the facility
                            to the private sector.



                            Summary

These types of facilities   Revenue generated from events, conferences and exhibitions are generally not sufficient to
are important to the        cover upfront capital, operational and maintenance costs. The majority of major capital city
broader economy             convention and exhibition facilities in Australia are government owned; reflecting the strategic
and Government’s            importance of these facilities to the broader economy.
desire to maintain
strategic, planning and
scheduling control of       The majority of the large convention and exhibition facilities utilised alternative sources to fund
the convention and          the upfront and ongoing costs of facilities by involving the private sector through including
exhibition facility
                            commercial opportunities such as retail, offices, parking, hotel, and so forth.
offering


                            The balance of this Chapter considers private and public sector delivery and funding models.




                                                                   94
Private and public sector delivery options
Generally in Australia, large-scale convention and exhibition facilities are owned by
government statutory corporations and are delivered through either conventional procurement
methods or PPP procurement.


Beyond ownership of the facilities, however there are a range of possible roles for private    Delivery arrangements
sector involvement. Private sector participation in the development and operation of an        for convention centre
expanded convention centre in Sydney could comprise some or all of the following roles:        developments can
                                                                                               include roles for both the
                                                                                               public and private sectors
•	   Design (including furniture, fittings and equipment)


•	   Construction


•	   Financing


•	   Maintenance and periodic refurbishment (a key aspect of PPPs is the requirement for the
     private sector to maintain the facility to a high quality)


•	   Commercial opportunities such as revenue received from conferences, exhibitions and
     events, office, hotel and retail facilities, restaurants, car parks and advertising


•	   Operation, with a spectrum of possibilities for involvement in operation including:
     − Set-up/dismantle
     − Cleaning
     − Food and beverage
     − Security
     − Management of bookings
     − Marketing of events
     − Marketing of the facilities and services.




                                                        95
Table 18 presents the spectrum of possible private sector involvement in the delivery
of facilities.


 Table 18 Delivery options


 Delivery option            Construct                                                        Design                                                   Maintain                                                   Finance                                            Operate

 Construction contract      Private                                                          Government                                               Government                                                 Government                                         Government



 Design & Construct         Private                                                          Private                                                  Government                                                 Government                                         Government


 Design, Build, Maintain,
                            Private                                                          Private                                                  Private                                                    Government                                         Government
 Transfer

 Design, Build, Operate
 (including or excluding
                            Private                                                          Private                                                  Private                                                    Private                                            Private
 core services),
 Maintain, Transfer



An overview of current Australian approaches to involve the private sector is presented in
table 19.


 Table 19 Comparison of models for private sector involvement
                            Sydney Convention and Exhibition



                                                               Sydney Entertainment Centre




                                                                                                                 Exhibition (prior to expansion)
                                                                                                                 Melbourne Convention and




                                                                                                                                                                               Melbourne Convention and
                                                                                                                                                                               Exhibition (post expansion)
                                                                                                                                                   Convention and Exhibition




                                                                                                                                                                                                                                       Brisbane Convention and
                                                                                                                                                                                                             Adelaide Convention and
                                                                                                                                                   Expansion of Melbourne




                                                                                                                                                                                                                                                                 Darwin Convention and



                                                                                                                                                                                                                                                                                         Perth Convention and
                                                                                             Sydney Showground




                                                                                                                                                                                                             Exhibition Centre



                                                                                                                                                                                                                                       Exhibition Centre



                                                                                                                                                                                                                                                                 Exhibition Centre



                                                                                                                                                                                                                                                                                         Exhibition Centre




 Construction                     •                                 •                           •                          •                               •                            •                            •                         •                        •                       •
 Design                           •                                 •                           •                          •                               •                            •                            •                         •                        •                       •
 Maintenance                      •                                 •                           •                          •                               •                            •                                                      •                        •                       •
 Finance                                                                                                                                                   •                                                                                                            •                       •
 Commercial
 revenue                                                                                        •                          •                                                                                                                   •                        •

 Operate                    •*                                                                  •                                                                                                                                                                                               •

•	indicates	private	sector	delivered	this	component
* There is joint government and private sector involvement
  Source: PwC understanding of facilities based on available public data




                                                                                                   96
Considering this range of activities of private sector involvement, four alternative delivery
options for a new or expanded convention and exhibition centre in Sydney are listed below.


•	   Government ownership and operation involving public sector financing through a
     government-owned corporation, e.g. Adelaide Convention Centre


•	   Government ownership with private sector operation involving public sector financing
     through a government-owned corporation, similar to the current SCEC contract


•	   Government ownership with private sector operation involving a combination of public
     and private sector financing through a PPP arrangement, similar to the MCEC contract.
     Options under this approach may include:


         - Private sector providing facilities management (and potentially events management)
           with no demand risk, receiving monthly or quarterly service payments that are
           designed to cover cleaning, maintenance, financing and other facilities management
           costs e.g. MCEC, which also involved an upfront private contribution for leasehold
           of surrounding commercial land for further development


         - Private sector undertaking full operation of facilities and taking a demand risk,
           e.g. Perth Convention and Exhibition Centre under a lease-owned arrangement,
           whereby the government is not involved in ongoing operation or selection of event
           types to be hosted, but assisted to fund construction of the centre.


It is unlikely that the private sector and more specifically lenders, will have appetite for
demand risk, given current market conditions especially following the impact of the GFC. This
is demonstrated by the private sector’s reluctance to assume demand risk on toll roads and
recent rail projects, which may require governments to modify the PPP model for economic
infrastructure projects. Moreover, lenders are more conservative with credit approvals and
selective with projects that they choose to fund.


A key motivator of maintaining public involvement relates to retaining strategic and
planning control with government so that government can achieve the broader social
outcome objectives.


There are still advantages of involving the private sector in the procurement of the expanded
Sydney Convention and Exhibition Centre project and these potential benefits are
explored below.




                                                        97
Benefits of private sector participation
In Australia, over the last ten years, there was marked increase in co-operation between
governments and private sector to develop, finance and operate an array of economic
and social infrastructure ranging from toll roads, water and sewerage treatment plants,
sewerage outfall tunnels, power stations, hospitals, schools and prisons; through to
defence-related equipment.


These Public Private Partnership (PPP) projects are primarily driven by governments wanting
to secure value for money outcomes through risk transfer or sharing; improving quality and
efficiency of delivering infrastructure facilities and on-going services to the public; obtaining
whole of life cost benefits by considering ongoing maintenance requirements as part of the
facility design; and seeking innovation in reducing overall costs of these types of facilities
through efficient pricing and commercial opportunities.


These benefits can be accessed through involving the private sector in delivering and financing
an expanded convention and exhibition venue through a PPP. Furthermore, the integration
of expanded convention and exhibition facilities with retail, commercial and/or residential
development will provide opportunities for government to offset some of the expansion and
refurbishment costs, as well as contributing to a vibrant and active precinct.


The benefits of private sector participation for the expanded Sydney Conference and
Exhibition facility are likely to include:


•	   Risk transfer: An opportunity to transfer various risks to the private sector such as
     integrated design, construction and refurbishment, programming and facilitating existing
     conference bookings, operational, ongoing maintenance and refurbishment as well as
     risks inherent in various commercial opportunities (e.g. retail, parking, hotel).


•	   One point of contact: The State will deal with one party to build, operate and maintain
     the facilities reducing the risk of managing and interfacing with multiple parties. This will
     reduce interface risk and ongoing administrative costs.


•	   Innovation: An innovative, integrated design that takes into consideration the urban
     design and aesthetics of the environment and expanded SCEC, facilitated by a project
     plan that considers the complexity of a staged development, refurbishment and potential
     relocation of utilities and infrastructure, within the requirements of continued
     service delivery.




                                       98
•	   Flexibility: A facility that can be easily and cost effectively adapted to cater for a broad
     range of conferences, exhibitions and activities with a particular focus on international
     events using leading edge technology and approaches.


•	   Efficiency and integration: Reducing ongoing operations and maintenance costs by
     introducing efficiencies through sharing and management of resources, e.g. sharing of
     kitchen facilities for conferences and a hotel.


•	   Core services: Enhancing the State’s ability to focus on the core activities of attracting
     and scheduling key international events for the duration of the project term.


•	   Whole of life costing: Securing value for money through requiring the private sector to
     design, operate and maintain facilities that result in designs that minimise ongoing costs
     and extends the life of assets.


•	   Technology: Obtaining higher levels of private sector innovation and technology in
     flexibility and conferencing by building it in to the State’s requirements.


•	   Commercial Opportunities: Reducing the cost of the expanded SCEC to the State
     through leveraging core private sector skills in commercial development opportunities
     such as hotels, residential, retail, restaurants, advertising and car parks by granting 99 year
     leases or granting freehold access over parcels of land.


•	   Increased utilisation: By providing improved service outcomes, flexible facilities with
     the latest technologies, the Project is likely to attract the target local and international
     client base resulting in increased events and resultant revenue.


It is clear that there is benefit in involving the private sector in the delivery of the Sydney
Convention and Exhibition Centre. The intention of this report is to consider the qualitative
benefits rather than the quantitative benefits and further consideration needs to be given to
the quantitative benefits.




Funding options
There is a spectrum of funding options already tested in convention centre development in
Australia, from limited private involvement to greater private ownership of the facility. Each
offers slightly different allocation of risk and utilise various funding arrangements and are
dependent on the particular State government objectives.


There are a broad range of options available to fund the expansion and development of an
improved SCEC, ranging from purely public financing to a PPP arrangement. Funding options
for the public and private sectors are discussed in table 20.




                                                          99
 Table 20 Public/private sector funding options



Public sector                                           Private sector

 Public sector funding may come from a number            Where the project is delivered partially or in whole
 of options:                                             by the private sector, possible sources of funding
                                                         may include:
 •		 overnment budget allocation: government
   G
   funding may be acquired through federal               •	Debt: domestic and international debt sources
   and/or state budget allocations where the
                                                         •		 quity sources: project sponsors,
                                                           E
   government contributes to the cost of the
                                                          superannuation funds, and institutional
   project through either paying through the
                                                          investors.
   upfront and ongoing costs as its occurred or an
   ongoing service payment or through an upfront
                                                         •		 roperty rights: upfront payment for 99 year
                                                           P
   capital contribution or a combination of a service
                                                          lease or freehold over properties earmarked for
   payment or upfront capital contribution
                                                          commercial development

 • Incremental tax funding / value uplift:
   increase in land value in close proximity
   to the convention centre and commercial
   developments resulting in increased rates
   and taxes

 •GST and payroll tax increases: increase in
  GST and payroll taxes collected as a result of
  increased employment and services provided
  by the private sector and increased spent by
  international delegates

 •		 sset divestments: selling of assets or leases
   A
   to the private sector

 • Infrastructure bonds: allowing companies to
   issue tax efficient infrastructure bonds




                                              100
Some of the commercial development opportunities previously identified for an expanded
Sydney Convention and Exhibition Centre that can be used to offset the capital cost of the
project are likely to include:


•	    Granting of airspace and development rights for a 5 star 200 bed hotel above the new
      centre as a percentage of delegates will require high-quality accommodation close to
      the event. The need for a 4 /5 star hotel is emphasised by the lack of 4/5 star hotel
      supply post the Olympics compared to Melbourne. The Hotel and the expanded Sydney
      Convention and Exhibition Centre can gain economies of scale through sharing core
      facilities such as the kitchen and ballroom, security, maintenance and cleaning.


•	    Providing 99 year lease over the property which is earmarked for commercial
      developments to reduce the funding requirement for the project. Commercial
      developments are likely to include car parking spaces, student apartments due to
      proximity to UTS, commercial office space and retail developments.


•	    Through involving the private sector the project is likely to increase utilisation of exhibition
      space, provide increased quality of design in the Darling Harbour area generating
      increased uplift in property values and ancillary rental streams compared to conventional
      procurement by SHFA.


•	    The project provides a direct link with the commercial office development in Darling Walk
      providing increased potential for business events and ‘on foot traffic’ is likely to
      boost retail.


In addition to these opportunities the SHFA is currently undertaking an asset divestment
process of some of its key assets as part of the NSW Government’s Mini-Budget announced
in 2008, which will provide revenue to the State government which can be used to offset
the cost of the expanded SCEC. This process involves the sale of the future lease income
from a portfolio of assets including Darling Walk, IMAX Theatre, Sydney Aquarium and
Wildlife World, the Harbourside Shopping Centre, Harbourside Car Park, Promontory Car Park
(Pyrmont) and six hotels in Darling Harbour and the Rocks.147


These opportunities should be explored with the private sector to reduce the funding
requirement of the expanded Sydney Convention and Exhibition Centre. It is unlikely that the
State or SHFA will consider these opportunities without private sector involvement.




147 SHFA (2010), Asset Divestment: Information Memorandum, January 2010, available at:

     http://www.shfa.nsw.gov.au/content/library/documents/B3D856DA-E97E-68BA-DE3A0D306FD68799.pdf


                                                                    101
Contributions from government and resulting benefits
to the NSW economy
Experience in procuring convention and exhibition facilities indicate that the new or expanded
Sydney Convention and Exhibition facility is not likely to be financially feasible on a standalone
commercial basis and is likely to require some form of contribution by government.
The government contribution can be either in the form of a periodic availability payment for the
duration of the project term or an upfront contribution, if private sector delivery is pursued. An
availability payment is likely to result in the recognition of a liability on the State’s balance sheet.


The government’s contribution (upfront or ongoing) can be reduced by involving the private
sector in the delivery of the project and identifying specific commercial opportunities for the
expanded SCEC.


The expansion of the SCEC has the potential to increase economic benefits received by NSW
(currently $466 million per annum) by $160 million each year for expansion into the SEC car
park, and up to $270 million each year for expansion into the SEC car park and SEC site, as
described in the previous chapters.


The annual net cost to government for an expanded SCEC procured through a service
payment PPP is estimated at $40 to $60 million. The estimated cost assumes a 30 year
PPP project term with an initial capital cost of $500mil which is offset by the realisation of
commercial revenue opportunities. The quantum of commercial revenue offset reflects
indicative proposals received from the private sector for an expanded SCEC. The cash flows
making up the net cost is illustrated in figure 18.


 Figure 18 Estimated net annual cost of an expanded SCEC procured
  through a PPP


             PPP Gross                                                   Sydney Events
                                                         Net Annual
               annual          Commercial                                    Centre                Net Annual Cost
                                                         Availability
             Availability       Revenue                                     Income                 to Government
                                                          Payment
              Payment                                                      received




                                                                        Revenue from events -
                                                                        New facilities $65m
                             Retail $5 - 6m
                                                         Government
           Service Payment                                                                          Net Cost to NSW
                                                         Availability
             $130 - 150 m                                                                             Government
                                                          Payment
                                                                                                     $40 - 60m p.a.
                                                         $115 - 135m
                             Car Parks $11 - 13m                        Revenue from events -
                                                                        Existing facilities $10m




The gross annual Availability Payment reflects the total annual payment to be made by
Government for the expanded SCEC. The private sector determine and deliver the commercial
opportunities which reduces the gross annual Availability Payment to $115 – 135million.
Government receives the income from events which reduces the net cost of the expanded
SCEC to $40 – 60 million per annum.

                                                   102
7. Risk allocation

This chapter presents possible risks for delivery of the expanded
Sydney convention and exhibition facilities, along with potential
allocation under a PPP model.



Risk allocation matrix
As discussed briefly in the previous chapter, delivering expanded convention and exhibition
facilities in Sydney through a PPP will allow transfer of investment and other risks from the
government to the private sector.


Risk allocation structures for PPPs are based on the principle of allocating risks to the party
best able to manage those risks. Key considerations for risk allocation for the expanded SCEC
include:


•	   Identification and allocation design and construction risks – the ability of the State
     government to transfer the risk of cost and time overruns, both resulting in an increase
     in the cost of the project. The private sector is best placed to manage the construction
     programme and cost risk.


•	   Identification and allocation of key operational and maintenance risks including
     the facilities management and maintenance risks. The private sector will need to gain
     comfort, to the extent that it can, with the condition of the existing facilities.


•	   Identification and allocation of commercial and economic risk which is likely to
     depend on the risk appetite of the private sector.


•	   The risk allocation structure needs to be bankable so that it can sustain a
     combination of worse-case scenarios for the project.




                                                       103
Generally, the private sector concession company manages risks through:


•	   Identification and implementation of processes to mitigate the risks


•	   Transferring risks, where appropriate, to another party in the consortium (such as the
     contractor or operator)


•	   Using external risk management measures such as insurance.


The risk allocation for each project is dependent on the scope of the project, the project
specific risks and the risk appetite of the private sector and how it impacts upon the
bankability of the project.


Table 21 presents an initial summary of potential risks and possible allocation between
government and the private sector for development of an expanded and world class
convention and exhibition facility in Sydney. The risk matrix has been derived from guidance
provided by the NSW Government relating to privately financed projects and PV guidelines for
PPP risk allocation and contractual issues.




                                      104
       Table 21 Preliminary risk matrix

                                     Risk category                        Description                                                                                                     Preferred
                                     Existing structure (refurbishment/   Risk that existing structures are inadequate to support new improvements, e.g. it is not possible to create
                                                                                                                                                                                          Government
                                     extensions)                          a continuous facility with the existing SCEC

                                                                          Ground conditions are discovered which cause construction costs to increase and/or cause construction
                                     Site conditions risk                 delays, e.g. a site survey has revealed the presence of significant utilities underground the SEC car park      Government / shared
                                                                          that may have to be relocated

                                                                          Risk that necessary approvals may not be obtained or may be obtained only subject to unanticipated
                                     Approvals                            conditions which have adverse cost consequences or cause prolonged delay, e.g. planning,                        Government




             Site risks
                                                                          environmental approvals

                                                                          Risk that the project site (e.g. the car park or existing SEC site) is contaminated requiring significant
                                     Environmental                                                                                                                                        Government
                                                                          expense to remediate

                                                                          Risk that tenure/access to parts of the site cannot be negotiated (e.g. if the site involves areas not
                                     Availability of site                                                                                                                                 Government
                                                                          controlled by SHFA)

                                                                                                                                                                                          Private party will be responsible except where an express government
                                     Design                               Risk that the design of the facility is incapable of delivering the services at anticipated cost
                                                                                                                                                                                          mandated change has caused the design defect

                                                                                                                                                                                          Private party will be liable unless the event is one for which relief as to
                                     Construction                         Risk that events occur during construction which prevent the facility being delivered on time and on cost       time or cost or both is specifically granted under the contract, such as
                                                                                                                                                                                          force majeure or government intervention




105
                                                                                                                                                                                          Private party, although government will assume an obligation




         commissioning risk
                                                                          Risk that either the physical or the operational commissioning tests which are required to be completed
                                     Commissioning                                                                                                                                        to cooperate and facilitate prompt public sector attendance on




       Design, construction and
                                                                          for the provision of services to commence, cannot be successfully completed
                                                                                                                                                                                          commissioning tests


                                     Interest rates pre-financial close   Risk that prior to financial close interest rates may move adversely thereby undermining bid pricing            Government may assume or share


                                                                          Risk that the private party is unable to provide the required services or becomes insolvent or is later found
                                     Sponsor risk                         to be an improper person for involvement in the provision of these services or financial demands on the         Government
                                                                          private party or its sponsors exceed its or their financial capacity causing corporate failure

                                                                          Risk that when debt and/or equity is required by the private party for the project it is not available then
                                     Financing unavailable                                                                                                                                Private party
                                                                          and in the amounts and on the conditions anticipated

                                                                          Risk that by reason of a change in law, policy or other event additional funding is needed to rebuild, alter,   Government takes the risk of specific changes in law that affect the
                                     Further finance                                                                                                                                      project directly whereas general changes in law is the private sectors
                                                                          reequip etc the facility which cannot be obtained by the private party                                          risk




             Sponsor and financial
                                                                          Risk that a change in ownership or control of the private party results in a weakening in its financial         Government risk as to the adverse consequence of a change if it
                                     Change in ownership                                                                                                                                  occurs; private party risk that its commercial objectives may be inhibited
                                                                          standing or support or other detriment to the project                                                           by a restrictive requirement for government consent to a change

                                                                          Risk (upside) that at completion or other stage in project development the project finances can be
                                     Refinancing benefit                                                                                                                                  Shared 50:50 with Government
                                                                          restructured to materially reduce the project's finance costs

                                                                          Risk that before or after completion the tax impost on the private party, its assets or on the project, will
                                     Tax changes                                                                                                                                          Private party
                                                                          change
                              Risk category                             Description                                                                                                     Preferred
                                                                        Risk that required inputs cost more than anticipated, are of inadequate quality or are unavailable in           Private party unless government controls inputs e.g. cost of marketing
                              Inputs
                                                                        required quantities, e.g. cost of IT/AV or cost of marketing for events to be hosted at the SCEC                events


                                                                        Risk that design and/or construction quality is inadequate resulting in higher than anticipated maintenance
                              Maintenance and refurbishment                                                                                                                             Private party
                                                                        and refurbishment costs



                              Changes in output specification outside   Risk that government's output requirements are changed after contract signing whether pre or post
                                                                                                                                                                                        Government
                              agreed specification range                commissioning, e.g. specifications to address road between new and existing sites




      Operating
                                                                        Risk that a subcontract operator may fail financially or may fail to provide contracted services to             Private party is fully and primarily liable for all obligations to government
                              Operator failure
                                                                        specification                                                                                                   irrespective of whether it has passed the risk to a subcontractor

                                                                        Risk of the contracted service and its method of delivery not keeping pace with competition and/or public
                                                                        requirements, e.g. if a facility is upgraded or constructed in the region that is more innovative and creates   Private party except where contingency is anticipated and government
                              Obsolescence or innovation
                                                                        increased competition for the expanded SCEC, or if technological changes increase the use of virtual            agrees to share risk possibly by funding a reserve
                                                                        events

                                                                                                                                                                                        Private party except to the extent that government has committed to an
                              General economic downturn                 Risk of a reduction in economic activity affecting demand for the contracted service                            availability payment element or agreed to provide redress for impact of
                                                                                                                                                                                        government subsidised competition

                                                                                                                                                                                        Private party except to the extent that government has committed to
                              Competition                               Risk of alternate suppliers of the contracted service competing for customers                                   an availability payment element or agreed to provide benchmarking or
                                                                                                                                                                                        market testing during the project term




      Market




106
                                                                                                                                                                                        Private party except where government accepts the demand risk for
                              Demographic change                        Risk of a demographic/socio-economic change affecting demand for contracted service
                                                                                                                                                                                        the project


                                                                                                                                                                                        Private party takes risk on the methodology adopted to maintain value;
                              Inflation                                 Risk that value of payments received during the term is eroded by inflation
                                                                                                                                                                                        government shares to the extent of agreed indexation

                                                                        Risk that, where the facility relies on a complementary government network, that support is withdrawn or
                              Withdrawal of support network             varied adversely affecting the project, e.g. CityRail, light rail or monorail changes, or changes to BESydney   Government where the change discriminates against the project
                                                                        role


                                                                        Risk that an existing network is extended/changed/re-priced so as to increase competition for the facility,
                              Changes in competitive network                                                                                                                            Private party except to the extent that government retains demand risk
                                                                        e.g. other NSW event facilities are expanded or if other venues in the region are expanded



                                                                        Risk that the delivery of core services in a way which is not specified/anticipated in the contract adversely
                                                                                                                                                                                        Private party except to the extent that government provides redress for
                              Interface with core services              affects the delivery of contracted services, e.g. international conventions are not attracted to the level
                                                                                                                                                                                        appropriate, discriminatory changes




      Network and interface
                                                                        anticipated



                                                                        Risk that the delivery of contracted services adversely affects the delivery of core services in a manner
                              Interface with contracted services                                                                                                                        Private party
                                                                        not specified/anticipated in the contract
                                     Risk category                               Description                                                                                                   Preferred

                                                                                 Risk that additional approvals required during the course of the project cannot be obtained, e.g. height
                                     Approvals                                                                                                                                                 Private party
                                                                                 approvals or subsequent refurbishment of the existing SCEC


                                                                                                                                                                                               Government: although the parties may share the financial
                                                                                 Risk of a change in law/policy of the State Government only, which could not be anticipated at contract
                                     Changes in law/policy directed at the                                                                                                                     consequences of capital cost increases in an agreed way, for example
                                                                                 signing and which is directed specifically and exclusively at the project or the services and which has
                                     project                                                                                                                                                   by the private party meeting a percentage of the cost up to a specific
                                                                                 adverse capital expenditure or operating cost consequences for the private party
                                                                                                                                                                                               limit and government meeting any excess




                   policy
                                                                                 I some cases, the risk of a change in law/policy (at whatever level of government it occurs) which could      Government: although the parties may share the financial
                                     Changes in law/policy not directed at the   not be anticipated at contract signing specific) in its application and which causes a marked increase in     consequences of capital cost increases in an agreed way for example
                                     project                                     capital costs and/or which is general (i.e. not project has substantial operating cost consequences for the   by the private party meeting a percentage of the cost up to a specific
                                                                                 private party                                                                                                 limit and government meeting any excess




        Legislative and government
                                                                                 Where there is a statutory regulator involved there are pricing or other changes imposed on the private
                                     Regulation                                                                                                                                                Private party
                                                                                 party which do not reflect its investment expectations




                                                                                 Risk of strikes, industrial action or civil commotion causing delay and cost to the project, e.g. during      Private party will be responsible except where an express government
                                     Industrial relations and civil commotion
                                                                                 construction or maintenance of the expanded SCEC facility                                                     mandated change has caused the design defect




         relations
        Industrial




107
                                                                                                                                                                                               Private party takes the risk of loss or damage to the asset and loss of
                                                                                                                                                                                               revenue, government takes some risk of service discontinuity both as to
                                                                                 Risk that inability to meet contracted service delivery (pre or post completion) is caused by reason of       contracted service and core service subject to insurance availability and
                                     Force majeure




         Force
                                                                                 force majeure events                                                                                          will need to arrange alternative service provision the cost of which will




        majeure
                                                                                                                                                                                               be met from redirected service payments and (if insurable) any shortfall
                                                                                                                                                                                               made up from insurance proceeds


                                                                                 Risk that design life of the facility proves to be shorter than anticipated accelerating refurbishment        Private party, but in certain high technology projects costs may be
                                     Technical obsolescence
                                                                                 expense                                                                                                       anticipated and shared



                                                                                 Risk of 'loss' of the facility or other assets upon the premature termination of lease or other project
                                     Default and termination                                                                                                                                   Private party will take the risk of loss of value on termination
                                                                                 contracts upon breach by the private party and without adequate payment




              Asset ownership
                                                                                 Risk that on expiry or earlier termination of the services contract the asset does not have the value
                                     Residual value on transfer to government                                                                                                                  Government
                                                                                 originally estimated by government at which the private party agreed to transfer it to government



      Sources: Adapted from: New South Wales Government (2006), Working with Government: Guidelines for Privately Financed Projects, Appendix 3: Risk Table, December 2004, available at: http://www.treasury.nsw.gov.au/__data/assets/
      pdf_file/0009/3141/wwggui_1.pdf; and Partnerships Victoria, ‘Risk Allocation and Contractual Issues’, Appendix A: Risk matrix, available at: http://www.partnerships.vic.gov.au/CA25708500035EB6/WebObj/RiskAllocationandContractualIs
      sues5-Appendix/$File/Risk%20Allocation%20and%20Contractual%20Issues5%20-%20Appendix.pdf
8. Proposed way forward

This chapter presents a proposed way forward for the NSW
Government to develop the expanded, world class facility in Sydney.



Proposed way forward
A proposed way forward is described below, though this could be expanded and altered
following private sector submissions and outcomes of work such as the SHFA master plan to
redevelop and expand NSW’s convention and exhibition facilities (due for completion at the
end of 2010)148:


Site options


1          Utilise Darling Harbour as the preferred central location for Sydney’s flagship
           convention and exhibition facility, with a focus on international events


2          Undertake an economic cost benefit analysis on expanding facilities at the SCEC
           including using land containing the SEC car park and also potentially the SEC, with
           integration with the existing facilities to create a large scale, world class venue


Leveraging private sector involvement


3          Utilise a PPP for the development, construction and financing of the expansion, as
           well as ongoing operation of the expanded facility (as well as potentially maintaining
           and operating the existing facility) to take advantage of innovation and to reduce the
           funding requirement for the project through additional commercial investments in the
           precinct. Prior to proceeding with a PPP, the PPP would need to demonstrate value
           for money relative to a public sector comparator


4          Combine the existing and expanded facility in the PPP arrangement, so as not to
           create two competing facilities and optimise private sector involvement and to extract
           operational synergies that are available through integrated operation




148 NSW Government (2010), News Release, Premier of NSW, ‘$1 million to expand Sydney’s Convention and Exhibition

    Facilities’, 5 May 2010, available at: http://www.shfa.nsw.gov.au/content/library/documents/66DA43D3-CBFE-F7AC-
    EA1323936A639D2E.pdf


                                              108
5   Consider the following inclusions in the PPP arrangement, with flexibility for the
    private sector to propose ideas and incorporate innovation relating to:


    – Phase 1 expansion options into the SEC car park or both the SEC car park and SEC
      site, as well as the private concessionaire potentially maintaining and operating the
      existing facility


    – Undertaking a future Phase 2 SCEC refurbishment or replacement options, either
      bundled with the Phase 1 PPP, or as a separate project subsequent to the
      Phase 1 expansion


    – The PPP involve either an availability payment, upfront contribution or combination
      of the aforementioned from the NSW Government to the sector with this being a
      bid criteria to encourage greater ancillary revenue development to lower the cost
      to Government


    – Consider approaches for the availability payment and the role of SCEC operation
      undertaken (i.e. whether it includes all or only some of the following: maintenance,
      security, food and beverage, some event marketing, event booking, etc., noting that
      most of the operating roles at the existing facility are already outsourced)


    – NSW Government retains control over use of the facility, and also strategic planning
      control of the site and types of events hosted. To facilitate this, and to aid attraction
      of private sector interest, the NSW Government retain demand risk for number and
      types of events but the private sector is able to, and is financially incentivised, to
      attract extra events to increase utilisation


    – Ensure new exhibition, convention and entertainment facilities developed in the
      expansion are flexible, multi-use space and at a minimum comprise:


         •	10,000-20,000 m2 dedicated to exhibitions and conventions if the site is
          developed into the SEC car park site


         •	20,000-30,000   m2 dedicated to exhibitions, conventions and entertainment
          space if the site is developed into the SEC car park site and SEC, with facilities
          incorporating flexibility to host live concerts for 6,000-10,000 attendees


         •	Innovationand connectivity, including conjoining the expanded site with the
          existing SCEC


         •	Opportunity   to include underground car park




                                                    109
            – The concession would include development rights of the precinct, which may
              include retail, commercial, residential, hotel – with the height, room number and
              rating of the hotel reflecting preferences of the private sector operator and NSW
              Government planning and zoning restrictions. (The merit of a new 5 star 200+ bed
              hotel sited above the new venue should be further considered, as few delegates
              choose budget accommodation when attending conferences. Also, post the
              Sydney 2000 Olympics the extent of new 4-5 star hotel supply in Sydney has been
              low especially compared to Melbourne. There would be potential for the hotel
              and the new convention and exhibition centre to share facilities such as a kitchen
              and ballroom, as well as security, maintenance, cleaning and other ongoing costs,
              creating a range of capital and operating cost synergies.)


6           Utilise a two-staged tender process (instead of a design competition approach with
            the bidders having to deliver a design, this approach assumes the bidders will put
            forward designs):


            – Expression of interest process to canvass the private sector’s interest and potential
              plans, and to shortlist tenderers


            – Tender process to select a preferred tenderer (with suggestions from the private
              sector to shortlist 2-3 parties only given the cost of bidding). This may include final
              negotiation to refine designs and layouts.



Indicative project timings

Table 22 presents some indicative project timings


 Table 22 Indicative timings – Phase 1


MILESTONE                                            ESTIMATED PROJECT TIMING
Release expression of interest                       June 2011

Shortlist                                            September 2011

Financial close                                      Within 12 months (by June 2012)

Construction start                                   July 2012

Opening                                              Within 3 years (by June 2015)



After opening of the expansion (Phase 1), the project could progress to Phase 2 with either
refurbishment or rebuilding of the existing SCEC site.




                                         110
Appendices

Appendix A
Acronyms
List of acronyms used in this report

ACC     Adelaide Convention Centre              MRF         Major Repair Fund

ATEC    Australian Tourism Export Council       NSW         New South Wales

ATP     Australian Technology Park              PCA         Property Council of Australia

CBD     Central Business District               PCEC        Perth Convention and Exhibition
                                                            Centre
CCM     Convention Centre Management
                                                PPP         Public Private Partnerships
DCC     Darwin Convention Centre
                                                Pv          Partnerships Victoria
DHCE    Darling Harbour Convention and
        Exhibition Pty Ltd                      PwC         PricewaterhouseCoopers

DIIRD   Department of Innovation, Industry      RAS         Royal Agricultural Society
        and Regional Development
                                                RWA         Redfern Waterloo Authority
DFO     Direct Factory Outlet
                                                SBC         Sydney Business Chamber
DOI     Department of Infrastructure
                                                SCEC        Sydney Convention and Exhibition
GFC     Global Financial Crisis                             Centre

HKCEC Hong Kong Convention and                  SCG         Sydney Cricket Ground
      Exhibition Centre
                                                SEC         Sydney Entertainment Centre
ICCA    International Congress and
        Convention Association                  SGG         Sydney Show Ground

IPA     Infrastructure Partnerships Australia   SHFA        Sydney Harbour Foreshore
                                                            Authority
MCC     Melbourne Convention Centre
                                                Sibos       Swift International Banking
MCEC Melbourne Convention and                               Operations Society
     Exhibition Centre
                                                SOPA        Sydney Olympic Park Authority
MCET Melbourne Convention and
     Exhibition Trust                           STC         Sydney Turf Club

MEC     Melbourne Exhibition Centre             TTF         Tourism Transport Forum

MPv     Major Projects Victoria                 UTS         University of Technology, Sydney




                                                      111
Appendix B
Artist impression of an expanded SCEC

 Figure B.1 Illustrations of possible expansion




          Source: Confidential stakeholder




                                       112
Infrastructure
Partnerships
Australia
8th Floor
8-10 Loftus Street
Sydney NSW 2000
T +612 9240 2050
F +612 9240 2055
E contact@infrastructure.org.au
www.infrastructure.org.au

				
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