Prepared By Revitalising the Convention & Exhibition Industry in Sydney February 2007 Table of Contents 1. Executive Summary 2. Nature of the Assignment 3. Convention, Exhibitions, and Tourism Trends 4. Primary Sydney Venues 5. Analysis of SCEC Demand 6. Australian and Regional Competition 7. Industry Participant Surveys and Interviews 8. Demand Forecast 9. Expansion Options 10. Management, Marketing and Sales 11. Assumptions and Limiting Conditions Appendix - Definitions 11. Executive Summary 1.1 PURPOSE AND METHOD The Property Council of Australia and the Tourism & Transport Forum engaged HVS International to estimate Sydney’s market demand potential and to recommend approaches to facility development and expansion that would best meet future exhibition and conference demand. This executive summary highlights key findings of the study. For a complete understanding of the research, analysis, conclusions, and recommendations the reader should refer to the full report. Through a methodology that involved: • Assessment of exhibition and convention industry trends, • Market Area Analysis, • Assessment of convention and exhibition venues in Sydney, • Analysis of competition, and • Surveys and interviews of industry participants, HVS assessed the event demand potential for Sydney as a convention and exhibition destination. 1.2 MARKET POSITION • Sydney’s destination appeal is unrivalled in Australia. This fact is confirmed by tourism data presented in our market area overview, a comparative review of tourism infrastructure, and input from exhibit event planners and conference organisers. Sydney also has much to offer international event planners and attendees, although accessibility as a long-haul destination hinders its ability to penetrate some international markets. Important factors influencing destination appeal include: o Most hotel capacity o Superior quality of lodging o Most air access o Best entertainment venues Executive Summary Page 1-2 o Physical attractiveness o Preferred climate • Sydney ranks second to Melbourne in venue capacity, and Sydney has average venue quality • Sydney is the highest cost destination in Australia, including the costs of venues and surrounding amenities • New South Wales has lost market share of exhibition events to Victoria and Queensland. In the early part of this decade, New South Wales held a market share of over one-third of all events. Currently, New South Wales remains the leading destination for exhibition events in Australia; with a 28 percent market share according to the most recently available data from the Exhibition and Events Association of Australia (see Table 1-1). As current trends continue, Victoria will overtake New South Wales. Table 1-1 Location of Australian Exhibition Events by State and Territory in 2003 State/Territory Number % of Total New South Wales 84 28% Victoria 75 25% Queensland 57 19% Western Australia 33 11% Australian Capital Territory 24 8% Southern Australia 21 7% Tasmania 6 2% Source: EEAA 1.3 QUALITY, CAPACITY, AND UTILISATION OF EXISTING VENUES HVS staff inspected all the major non-hotel venues in Sydney that host meetings, conferences, conventions, tradeshows, consumer shows, and other local events and gathered data on their physical plant and operations. Five venues have significant exhibition hall capacity. See Table 1-2. 12-Feb-07 Executive Summary Page 1-3 Table 1-2 Capacities of Venues in Sydney Exhibition Space Function Space Ratio of Function Facility Name (m2) (m2) Space Sydney Convention & Exhibition Centre 27,200 9,800 36% Sydney Show grounds at Sydney Olympic Park 14,400 9,000 63% Rosehill Gardens 4,000 3,425 86% Playbill Venues at Moore Park 9,700 1,476 15% Australian Technology Park 6,900 2,300 33% Sources: Respective Venue • The Sydney Convention and Exhibition Centre (“SCEC”) is the largest and primary venue, hosting most of the large exhibition and convention events in Sydney. With 27,200 m2 of exhibition space, it has excellent access to the supportive convention tourism infrastructure of Darling Harbour and the central business district. However, due to its age the SCEC does not meet many current industry standards. Exhibition halls are too small for many events and inefficient in their operations. Convention space lacks an adequate mix and divisibility of breakout space. The ballroom is poorly configured, and the plenary hall lacks divisibility and staging capacities. • Despite the fact that the design of the Sydney Convention & Exhibition Centre creates some significant operational limitations, it is currently operating at its maximum practical occupancy. Given the lack of demand for space during the holiday seasons and inevitable gaps between start dates and ends of events, increasing occupancy over current levels is not feasible. See Figure 1-1. Figure 1-1 SCEC Exhibit Hall Occupancy by Month 1997-2005 Conventions & Tradeshows Consumer Shows Other 100% 90% 83% 80% 76% 69% 70% 70% 66% 65% 60% 57% 55% 55% 53% 50% 40% 30% 24% 20% 20% 10% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sources: SCEC & HVS International 12-Feb-07 Executive Summary Page 1-4 • Over the past four years, annual exhibit hall occupancy at the SCEC has ranged from 63 to 72 percent, which is exceedingly high. Exhibit hall occupancies of approximately 50 percent strike a better balance between the need for revenue producing activity in the building and providing enough available dates and space during peak periods to accommodate most demand. Since 1997, the average exhibit hall occupancy has exceeded 50 percent in ten out of twelve months of the year. Of greater concern is that occupancy in the peak months of March and October is dominated by consumer show activity rather than conventions and tradeshows that have higher state economic impact. • Lost business reports indicate that date and space conflicts are the primary reason for lost business at the facility. The SCEC provided monthly data on business that was lost during the period January 2003 through July 2006 (554 events). The SCEC data demonstrates a significant amount of lost business (approximately 40 events per year) can be attributed to a lack of adequate exhibit and function space and available dates. The data also indicate that the level of lost business is growing even before the full impact of an improved Melbourne venue is felt. National competitors are already the leading source of lost business and the improvement in Melbourne is likely to increase their capture of potential SCEC business. • HVS estimates that the SCEC could recapture 50 to 75 percent of the business it currently looses to space and date conflicts if the facility were expanded, which would result in an increase of exhibit use of between 16 to 32 percent. In addition, 12 existing events are under-served such that organisers are not able to rent the desired amount of space. If an expansion were sufficient to accommodate the growth of existing events, exhibit hall utilisation could increase by an additional 8 to 10 percent. Clearly, the SCEC has an immediate and urgent need for expansion. • The Showgrounds, with 14,400 m2 of exhibition space, is the second largest venue in Sydney, serving approximately 30 national tradeshows and local consumer shows each year. Historical the Showgrounds has served as and agricultural and equestrian events centre and as such, it is not a purpose built exhibition venue. Although its exhibit hall occupancies are substantially lower than the SCEC’s, expansion and improvement of this venue would allow it to serve a broader range of consumer and tradeshow events and become a much more important source of desperately needed supply. • Other venues in Sydney host relatively small events and offer no significant potential for expansion. 1.4 COMPETITION Although Sydney has more overall exhibition space than any other Australian city, it currently ranks second to Melbourne with respect to amount of contiguous exhibition space available in its primary venue (see Figure 1-2). 12-Feb-07 Executive Summary Page 1-5 Figure 1-2 Comparison of Exhibition Hall Capacity of Primary Venues in Australian Cities Melbourne ECC Sydney CEC Brisbane CEC Sydney RAS Perth CEC Adelaide CC Gold Coast CC Cairns CC Canbera NCC - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 Source: Respective Venues Sydney is soon to lose its status as home to the premier convention venue in Australia to the Melbourne Exhibition and Convention Centre (“MCEC”), which is currently undergoing a $370 million renovation and expansion. This project, which will be completed in 2008, includes a new plenary hall with a capacity of 5,000 people and a compliment of 50 meeting rooms with approximately 5,000 m2 of function space. A connected hotel is also in development. The renovation and expansion of the MCEC convention centre will create an integrated hotel, convention, and exhibition centre that will be the largest and most flexible convention and exhibition facility in Australia. Once the renovation and expansion of the convention centre is complete, the overall MCEC’s capacity will exceed that of the Sydney Convention and Exhibition Centre. The Queensland Government has recently authorised the further study of a major expansion of the Brisbane Convention & Exhibitions Centre, which would add eleven meeting rooms, foyer space, and banqueting facilities. This $100 million expansion is targeted at increasing Brisbane’s share of national and international conventions, in direct competition to Sydney and other Australian cities. The improvements underway in Melbourne, Brisbane, and also Darwin; and the increased marketing and sales efforts associated with these developments will result in a significant erosion of Sydney’s market share of national and international conventions unless action is taken to counter these competitive threats. Internationally, a new casino resort venue in Macau as well as expansions and improvements to existing venues will increase competition for conventions and tradeshows that rotate through the Asia-Pacific region. 12-Feb-07 Executive Summary Page 1-6 1.5 SYDNEY’S DEMAND POTENTIAL To estimate Sydney’s demand potential, HVS relied on the market area overview, analysis of industry trends, historical demand for existing venues, the analysis of competition, analysis of lost business reports, event organiser surveys, and professional conference organiser interviews. For the purpose of keeping the focus of this analysis on large scale events, “demand” is defined as the events, attendance, and space utilisation in major existing venues or in proposed new and expanded venues in Sydney. As such, the HVS demand projections represent a subset the entire MICE industry in Sydney. Using historical demand as a starting point derived event demand projections using a specific set of assumptions for each type of event. The rationale for each assumption is described in detail in the full report. HVS constructed two demand scenarios. • Baseline Scenario - Assumes that there are no significant new exhibition facilities or expansions in the market. • Unconstrained Scenario - Assumes that new facility development and/or expansion increases the supply of exhibit space sufficiently to satisfy existing levels of non-accommodated demand and also future growth. Figure 1-3 shows the actual number of major exhibition events in Sydney in 2006 and estimated event from 2007 through 2016 under the two scenarios. In the unconstrained scenario the number of events increases in 2009 because HVS assumes for the purposes of this report, that new or expanded facilities are implemented in this year. 12-Feb-07 Executive Summary Page 1-7 Figure 1-3 Estimated Conventions with Exhibitions and Tradeshow Events at Major Venues Baseline scenario Unconstrained Demand 120 100 80 60 40 20 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: HVS International The estimated annual number of conventions with exhibitions and tradeshows stabilises (in 2009) at 82 in the baseline scenario, reflecting the anticipated decline in Sydney’s market share. HVS anticipates a decline in the number of events from current year levels due existing lack of capacity and increased competition from other Australian cities. In the unconstrained scenario the number of events increases dramatically along with the assumed facility improvements in 2009. The number of conventions with exhibitions and tradeshows stabilises at just over 100 events by 2012 in the unconstrained scenario, a 23 percent increase over the baseline scenario. Figure 1-4 shows the estimated attendance growth for all types of events, including both exhibit and non-exhibit events, in the unconstrained scenario for all venues in Sydney. 12-Feb-07 Executive Summary Page 1-8 Figure 1-4 Attendance Growth in Unconstrained Scenario (Exhibit and Non-Exhibit Events) Local National International 1.4 1.2 1.0 0.8 Millions 0.6 0.4 0.2 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: HVS International The unconstrained scenario anticipates growth in all three geographic segments. With more available space the number of events, the size of average attendance, and the amount of floor area utilised in Sydney could all grow. This growth would be generated by the expansion of existing events, the recovery of lost business, and an increase penetration of the national and international markets that would follow the development of a state-of-the-art convention and exhibition venue. 1.6 SITE ANALYSIS Working with client representatives and by review of numerous potential expansion sites, HVS identified four sites that had sufficient capacity and suitable locations to satisfy future demand. See Table 1-3. 12-Feb-07 Executive Summary Page 1-9 Table 1-3 Summary of Site Options (total recommended space, existing and new) Barangaroo (East Sydney Showgrounds Type of Space SCEC Expansion Glebe Island Darling Harbour) Expansion** Exhibition Halls (m2) 30,000 to 40,000 37,000 40,000 40,000 Function Space* (m2) 15,000 to 20,000 15,000 10,000 to 15,000 15,000 3,000 in one 5,500 Plenary Hall Seating none none divisible hall in three halls 500 to 750 proximate Seek nearby hotel Seek nearby additional Hotel Development none hotel rooms development hotel development Iconic building, Light, water taxi, rail Design primarily for Upgrade existing green technology, connection to Darling consumer shows, Other Considerations facilities and improve 50% parkland, Harbour, continue SCEC continue SCEC flexibility commercial land uses operation Operation *Includes meeting, ballroom, and plenary halls **Complements Barangaroo and SCEC expansion scenarios Source: HVS International The approach to development on each site or a combination of sites was designed to meet building programme requirements necessary to accommodate the demand projected in the unconstrained scenario. These sites are discussed below. • Barangaroo (East Darling Harbour) is the only remaining site proximate to the central business district that has capacity for significant new convention and exhibition centre development. The Barangaroo Site is 22 hectares with 1.4 km of shoreline. Surrounding land uses include the historic neighbourhoods of Millers Point, and the Rocks. The building programme recommended for Barangaroo does not envision that this convention and exhibition centre would be designed to accommodate convention and trade shows but not large consumer shows that can be located elsewhere in Sydney. A preliminary concept plan created by Skidmore, Owings and Merrill LLP for the purposes of this study, shows that through the use of best practices in green roof design the site has capacity for: An iconic convention centre structure; 40,000 m2 of exhibition hall space and associated ballroom, meeting rooms, and parking; A plan that is consistent with the Government’s terms of reference including the provision for 50 percent green space; and Approximately the same amounts of commercial development and other land uses envisioned in the current site plan. • SCEC Expansion - Expansion and improvement of the SCEC has been discussed for several years and management of the SCEC has proposed a 12-Feb-07 Executive Summary Page 1-10 redevelopment plan. The expansion option proposed herein is consistent with the general outlines of that plan as described to HVS by SCEC management. The management plan was developed without consideration of any other venue expansion in Sydney. HVS offers an alternative building programme plan that assumes the Sydney Showgrounds would also be expanded as a consumer show venue. • Glebe Island is located immediately west of the central business district and proximate to the Balmain Peninsula. The area forms a crescent around White Bay. The primary asset of the site is its size and ability to accommodate a large venue, as well as future expansion of that venue. The Anzac Bridge connects the site to the central business district and Darling Harbour, but pedestrian connections to tourism amenities are not currently available. Consequently, the site is more suitable for a consumer show venue than a venue that is primarily devoted to conventions. For this reason, HVS recommends that any exhibition centre development on this site would involve the continued operation of the SCEC. A 40,000 m2 exhibition space could accommodate the demand for the largest consumer shows in the market today. Future expansion of 20,000 m2 may be necessary to support growth in future demand and a master plan should provide for that expansion. As a consumer show and local tradeshow venue, the amount of necessary meeting and ballroom space is less than what would be required in a convention centre. HVS recommends 10,000 m2 of breakout space, but does not see the need for a theatre venue as long as the SCEC remains in operation. • The Sydney Showgrounds is currently the secondary exhibition venue in Sydney, hosting approximately 30 trade and consumer shows each year. Despite the inadequacy of current facilities, existing event demand has demonstrated that the Showgrounds site is viable for local exhibitions. Its primary advantages are its location in the centre of the Sydney metro area, excellent transportation access, and availability of parking. For this reason, HVS recommends expansion and improvement of the Sydney Showgrounds to serve the local consumer and tradeshow market. This expansion should take place in addition to convention centre development in the central city area. The Showgrounds expansion plan would roughly double the amount of exhibit space, bringing the total to approximately 29,000 m2 (excluding the Dome of 7,200 m2 which is multi-purpose space). HVS’s recommendations for building programme development at the Sydney Showgrounds are intended to provide a framework for a development that will support market demand for local trade and consumer shows as well as enhance the vibrancy of the Sydney Olympic Park Precinct. The design of the venue should allow for the separation of truck loading and attendee access to the building. HVS recommends replacement of the existing exhibit halls, which would also afford the opportunity to provide state-of-the art halls that create efficiencies for exhibitors and other users. The Dome could be maintained and serve as an anchor for the architecture of the rest of the 12-Feb-07 Executive Summary Page 1-11 building. The concept presented above is just one of many ways to achieve the necessary amounts of highly functional space and supports the overall development of the Precinct. Further physical planning work will be needed to consider future expansion alternatives and to determine the optimal approach to achieving the recommended building programme. 1.7 RANKING OF SITES To evaluate the relative strengths and weaknesses of the four alternative development sites discussed above, HVS considered 22 criteria related to site capacity, location, availability of supporting infrastructure, financial, and other considerations. Each concept was rated on a scale of one to three. While a certain level of objectivity can be achieved in rating the development options based on each of these criteria, the relative importance of each criterion will differ depending on the viewpoint of the observer. For example, a convention event planner will be more concerned with the proximity of lodging than would a consumer show organiser. For this reason, HVS created a system of rating each criterion in importance on a scale of one to five, with one being of least importance and five being of greatest importance. For each criteria, the rating (1 to 3) was multiplied by the importance of the criteria (1 to 5). The sum of the ratings provides an overall score for each plan. These scores can then be ranked. HVS created two different rankings assuming the perspective of: 1) an organiser of local exhibition events and 2) a national and international tradeshow and convention organiser. The results of these weighted rankings are compared to an un-weighted ranking in Table 1-4. 12-Feb-07 Executive Summary Page 1-12 Table 1-4 Ranking of Expansion Options Weighted for: Site Alternative Unweighted Exhibitions Conventions Score Barangaroo (EDH) 183 192 247 SCEC Expansion 153 161 208 Glebe Island at White Bay 147 175 180 Sydney Showground Expansion 156 181 199 Rank Barangaroo (EDH) 1 1 1 SCEC Expansion 3 4 2 Glebe Island at White Bay 4 3 4 Sydney Showground Expansion 2 2 3 Strength of Rank (compared to average) Barangaroo (EDH) 115% 108% 118% SCEC Expansion 96% 91% 100% Glebe Island at White Bay 92% 99% 86% Sydney Showground Expansion 98% 102% 95% Source: HVS Barangaroo emerges as the top ranked development approach in all rankings. The Sydney Showground expansion ranks second highest with respect to exhibitions but third behind the SCEC expansion for conventions. The strength of each ranking was assessed by comparing the score of a development approach to the average score for all approaches. Here, Barangaroo shows the greatest advantage as convention venue, scoring 18 percentage points higher than the second ranked SCEC plan. The Glebe Island exhibition plan demonstrates the weakest overall rankings. 1.8 PREFERRED EXPANSION OPTION The analysis in this report demonstrates that significant investment in convention and tradeshow infrastructure is necessary to maintain and improve Sydney’s position in the national and international event markets. The overall combined approach to development should attempt to create the maximum economic benefit to the State. HVS identified three options expansion as shown in Table 1-5. 12-Feb-07 Executive Summary Page 1-13 Table 1-5 Evaluation of Expansion Options Site Utilisation Barangaroo SCEC Showgrounds Glebe Island Iconic convention and Reuse for highest and best Expand showgrounds with Option 1 exhibition centre No convention or exhibition land use (commercial, hotel, state-of-the-art consumer Preferred development consistent with centre development retail, etc. ) oriented exhibition venue existing land use plans Expand SCEC exhibition Expand showgrounds with No convention or exhibition halls, increase meeting No convention or exhibition Option 2 state-of-the-art consumer centre development space, and improve centre development oriented exhibition venue flexibility New state-of-the-art Add meeting space and No convention or exhibition consumer oriented No convention or exhibition Option 3 improve SCEC flexibility and centre development or exhibition venue with master centre development functionality expansion plan for future convention uses and adjacent hotels Source: HVS International Option 1 is highly preferred because this approach is the only one that has potential to place Sydney in the undisputed lead in the Australian market and reassert itself as a premier destination in the international MICE market. Every effort should be made to achieve governmental approval of this plan before consideration of secondary alternatives. The efficiency of simultaneous operation of a central city site and the Showgrounds could be improved by a coordinated management and/or booking policy gives priority to convention and tradeshow events in the central city and local consumer show events at the Showgrounds. 1.9 APPROACH TO VENUE MANAGEMENT, MARKETING, & SALES Interviews with Professional Conference Organisers (“PCOs”) indicate serious concern regarding the future of convention and conference business in Sydney. Foremost among their concerns is the relative lack of funding for conference sales and marketing in Sydney, which is confirmed by an Association of Australian Convention Bureau (AACB) funding survey. The heavy funding burden placed on the local hospitality industry in Sydney leaves less capacity for individual organisers, hotels, and PCOs to conduct their own marketing activities. Further, some of the PCOs expressed a concern that the limited sales and marketing resources that are available are not always utilised as effectively as they could be. Some respondents reported that the current efforts lack focus and that an increased emphasis on competing for specific major events with incentives was needed. The general consensus was that while Sydney could take for granted high levels of interest in holding events here, they cannot continue to allow individual event decision makers to feel as though Sydney was taking them for granted. 12-Feb-07 Executive Summary Page 1-14 Compared to Melbourne, Sydney’s primary competitor, marketing efforts are poorly funded as shown in Table 1-6. Table 1-6 Comparison of Melbourne and Sydney CVB Funding Melbourne SCVB CVB State Governement 1 $4.5 $2.3 Convention Centre $1.5 $0.3 Private 2 $1.9 $3.1 TOTAL FUNDING $7.9 $5.7 1State Government funding is recent and effective for 2006/07 2Private sector funding information comes from a 2005 comparison study by the AACB Source: SCVB. Annual public funding of the Sydney Convention and Visitors Bureau is $2.2 million less than the public funding for the Melbourne Convention and Visitors Bureau. This causes the SCVB to rely more heavily on private sources, but these private sources are not sufficient to provide overall competitive levels of funding and are inefficient to raise and maintain. A comprehensive model for distribution of the overall Sydney convention tourism product provided a basis for the following recommendations: o Expand the bid processing by the SCVB with more emphasis on national events; o Establish a method of joint oversight of the bookings at major venues in Sydney; o Increase overall levels of funding to effectively compete with Melbourne and other Australian destinations; o Decreased reliance in private funding sources should accompany an increase in public resources; o Establish processes to effectively coordinate convention tourism distribution channels. Sydney and New South Wales are at a crossroads where the choices made today regarding public investment in the convention and exhibition industry will determine whether Sydney can build on its historic role as the premier destination in Australia, or relinquish that role to its competitors. Industry participants and government representatives need to reach consensus on the optimal approach to development and initiate a master planning process that leads to timely development of convention and exhibition venues. 12-Feb-07 2. Nature of the Assignment 2.1. PURPOSE Historically, Sydney has been the premier convention and exhibition destination in Australia and an international congress destination. Now it is faced with increasing competition from convention and exhibition centres in Australia and Southeast Asia. Most industry participants believe that existing facilities, in particular the Sydney Convention and Exhibition Centre (“SCEC”), do not have capacity to accommodate either many events that have previously taken place in Sydney or the expected market growth. In response to these circumstances, the Property Council of Australia and the Tourism & Transport Forum engaged HVS International to estimate Sydney’s market demand potential and to recommend approaches to facility development and expansion that would best meet future demand. The aim of the study is to determine the need for additional convention and exhibition space in Sydney from 2007 - 2016. This study should not be considered a feasibility analysis. Rather, it provides a road map for improving Sydney’s long-term market share and fortifying its premier position as the leading event destination in Australia. 2.2. SCOPE OF STUDY Most of the industry research in this report focuses on convention and tradeshow venues and the business organisations that use these venues. Hotel venues with conference and exhibition space were intentionally excluded from this analysis in order to keep the focus on venues that were typically developed primarily with public funding. Venues and event organisers are only part of a complex array of organisations that produce, distribute, and consume the convention tourism product. HVS gathered available information from all major industry participants to identify and quantify the supply and demand for the convention tourism product in Sydney. 2.3. METHODOLOGY The methods used to arrive at our recommendations for improvements to Sydney’s convention and exhibition industry are depicted in Figure 1-1. Key analytical tasks included: • A review of convention and exhibition industry trends and an assessment of their implications for Sydney; • A market area overview that details selected elements that are particularly relevant to Sydney as an event destination; Nature of the Assignment Page 2-2 • A review of existing convention and exhibition venues in Sydney, including a detailed assessment of the Sydney Convention and Exhibition Centre; • A review of competing convention and exhibition venues in Australia and the Asia Pacific region; • Interviews with key industry participants including venue managers, SCVB representatives, PCOs and event organisers. Figure 1-1 Analytical Tasks and Methodology Australian Event Demand Market Trends Projections Market Area Overview Number of Exhibit Hall Attendance Assessment of Events Occupancy Sydney Venues Competitor Analysis Approaches to Site Analysis Expansion Industry Participant Interviews & Management & Surveys Marketing Recommendations Source: HVS International Based on the information provided in the previous analytical steps, HVS projected the convention and exhibition demand potential for Sydney under two scenarios: 1) baseline demand, where existing venues remain unchanged, and 2) unconstrained demand, where new venue construction and/or expansion provides sufficient space to fully accommodate demand. HVS uses three metrics to measure demand: • The number of events by type; • The number of attendees and delegates to events; • Exhibit hall occupancy as measured in occupied square metre days. With this understanding of building floor area requirements, HVS recommended building programmes for four possible sites and analysed each site based on a detailed set of criteria and various weighting schemes that indicate suitability for convention and exhibition space development. 12-Feb-07 Nature of the Assignment Page 2-3 Finally, HVS formulated a set of recommendations regarding future management and marketing of the expanded venues. 12-Feb-07 3. Convention, Exhibition and Tourism Trends 3.1 PURPOSE AND SCOPE The purpose of this section is to describe international and Australian convention and exhibition industry trends that are likely to affect the level of business in Sydney. Trends in the growth of the number of events, attendance, and supply of convention and exposition facilities serve as indicators of the size and strength of the industry as well as the level of competition for events. The convention industry data provided in this section relies on the following data sources: A Business Strategies Group report sponsored by UFI (a Global Association of the Exhibition Industry), Data collected by the International Congress and Convention Association (“ICCA”), and Information included in The National Business Events Study: An Evaluation of the Australian Business Events Sector. This analysis of industry trends focuses on two areas of the meetings, incentive, convention, and exhibition markets that are directly relevant to larger convention and exhibition centres: 1) The market for large national exhibitions that are focused in Australia; and 2) International conventions and meetings that use convention centre and plenary hall spaces. 3.2 UNDERSTANDING CONVENTION TOURISM Convention tourism consumers include the businesses and associations organising the events, as well as delegates and attendees. Suppliers include the venues, hotel accommodations, transportation providers, and a myriad of other tourism attractions that delegates enjoy before, during and after the event. Exhibitors play a dual role of producing a component of the product, the exhibition itself, and consuming other components of the product such as exhibit space and lodging. The primary role of venue management and marketing & sales organisations is to foster the relationships among these industry participants. Convention, Exhibition and Tourism Trends Page 3-2 Smith and Garnham (Journal of Convention and Event Tourism, 2006, Vol. 8 No. 1) offer a model for distribution of the convention product that describes the complex relationship between multiple suppliers and consumers of the convention tourism product. This model identifies the types and modes of distribution channels, or the means by which consumers and producers are brought together. See Figure 3-1. Figure 3-1 Distributing the Convention Tourism Product Source: Journal of Convention & Event Tourism, Vol.1 2006, Smith and Garnham A variety of intermediaries bring together the producers and consumers of the convention tourism product. These intermediaries include: Associations and event organisers – are the representatives of the business entities or industry groups that create the convention or exhibition event. Reed Exhibitions is an example of an event organiser that works on behalf of a variety of business industries. For example, the Gift and Homewares Association organises exclusively on behalf of their industry. 12-Feb-07 Convention, Exhibition and Tourism Trends Page 3-3 In-house organisers – some larger associations and business organisations form in-house groups to create events for their industry (e.g. Nike). Professional Conference Organisers (“PCOs”) – provide event sponsors with knowledge of and relationships with the local market participants. They organise the details of the events; and negotiate with venue management, hotels, transportation providers, and providers of pre- and post-event tourism activities. HVS conducted a survey of PCOs that are active in the Sydney market; the results of this survey are described in Section 6 of this report. Inbound Operations – sometimes called Destination Management Companies (“DMCs”), function to provide transportation services and organise other tourism activities. Their role in the distribution chain can be performed by or overlap with the PCO role, but their services tend to be more highly specialised than PCOs. Travel Agents – book transportation, lodging, auto rental, and otherwise arrange the details of the visit on behalf of delegates and attendees. Online Booking – is a growing form of electronic intermediation that supplants the role of the travel agent, and to some extent the PCOs and DMCs. Smith and Garnham have also identified that distribution channels can offer bundled services (such as group hotel bookings and group tours) or provide independent services that are initiated by individuals attending the events. The National Business Events Study 2006, which evaluated the Australian Business Events Sector, identified a growing trend toward the use of independent intermediaries. As an example, only 43 percent of delegates use the bundled services of the conference organisers to book accommodations and most use direct channels such as a direct hotel reservation, a travel agent, or the internet. This trend toward the use of individualised and independent distribution channels has important implications for the approach to marketing and sales of the destination. The strength of Sydney as a business tourism destination is dependent on the effectiveness of these distribution channels as well as on the quality of the product in the destination. In addition to evaluating the various venues in Sydney, HVS assessed the role of the Sydney Convention and Visitors Bureau, venue management and other tourism promotion organisations as facilitators of the private distribution channels that deliver Sydney’s convention tourism product. 3.3 SUCCESSFUL DESTINATIONS The successful convention and tradeshow destinations generally show the following attributes: 12-Feb-07 Convention, Exhibition and Tourism Trends Page 3-4 • relatively well-developed economies and cultural sectors that are open to the outside world; • availability of advanced convention and exhibition facilities and the services related to providing events; and • effective and well funded public and private event organisers and marketing organisations. Sydney clearly excels at the first attribute, but may need to improve its standing on the succeeding two based on its recent decline in relative market share. The significant investment Melbourne is currently making in its convention capabilities and rapid growth in competitive supply in Asia and Australia stand as additional threats to future event demand in Sydney. Resort destinations in Queensland, a new centre Darwin, and potential expansion in Brisbane have potential to dilute market share for national events in more established markets like Sydney. New and expanded venues in Asia (particularly in Macau) have increased the competition for international and pan-pacific events and placed increasing emphasis on offering modern, spacious, and attractive event venues. 3.4 AUSTRALIAN EXHIBITION INDUSTRY Australia is characterised by smaller venues than its Asian counterparts, with eleven major venues having an average of approximately 12,000 square metres of exhibition space, approximately one-third the size of the average Asian venue. The aggregate supply of exhibition space in primary venues in eleven Australian cities is shown Figure 3-2. 12-Feb-07 Convention, Exhibition and Tourism Trends Page 3-5 Figure 3-2 Australian Exhibition Space in Primary Venues (thousand of m2) 140 120 100 80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008e 2009e Source: HVS International Growth in exhibition space has been flat since 2004 when the Gold Coast and Perth venues added nearly 20,000 m2 of space to the market. The new Melbourne Exhibition & Convention Centre is scheduled to open in 2008 replacing the existing convention centre with a hotel and function space attached to the existing 30,000 m2 of exhibit space. Also in mid-2008, a new convention and exhibition centre is planned to open in Darwin with a 1,500 seat plenary hall and 4,200 m2 of exhibition space. Beyond 2009, new space is likely to be added in Canberra and the Gold Coast through expansions of existing venues. Table 3-1 ranks exhibition venues in Australia by size. 12-Feb-07 Convention, Exhibition and Tourism Trends Page 3-6 Table 3-1 Australian Venues Ranked by Amount of Exhibition Space Exhibition Venue Year Open Space (m2) Melbourne Exhibition and Convention Centre* 1996 30,000 Sydney Convention & Exhibition Centre 1988 27,200 Brisbane Convention & Exhibition Centre 1995 24,088 Perth Convention Exhibition Centre 2004 16,650 Adelaide Convention Centre 1987 10,077 Darwin Convention and Exhibition Centre 2008 4,200 Cairns Convention Centre 1996 3,190 Gold Coast Convention Centre 2004 3,106 National Convention Centre (Canberra) 1989 2,400 * Excludes 7,300 m2 of exhibition space in the existing MCC which will be displaced by the new development. 8,800 m2 of foyer space will also be available for light exhibition in the new MECC. Source: Respective Venues Melbourne is ranked first, with Sydney a close second; however, only 25,000 m2 of the 27, 000 m2 of the Sydney exhibit halls are contiguous, which reduces flexibility, compared to the 30,000 m2 of contiguous space in Melbourne. In addition, the planed foyer space in the new MECC will provide 8,800 m2 of space for light exhibits. Brisbane is ranked third with 24,000 m2 of exhibition space, and Perth is fourth with nearly 17,000 m2. 3.4.1 Australian Exhibition Events Using Exhibition and Events Association of Australia (“EEAA”) data, the National Business Events Study analysed 300 “large” exhibitions (a precise definition of large events is not included in the report.). Table 3-2 shows a breakdown of these events by type for the year 2003, the most recent available data. 12-Feb-07 Convention, Exhibition and Tourism Trends Page 3-7 Table 3-2 Australian Exhibition Events, Attendance and Exhibitors in 2003 Number of Events Average Attendance Average Events by Type Number % of Total Trade Public Total Exhibitors Trade 102 34% 12,206 0 12,206 528 Trade and Public 24 8% 5,381 19,483 24,864 1,012 Public 120 40% 0 26,501 26,501 493 Convention Related 54 18% 4,176 2,615 6,791 679 Source: EEAA Exhibitor Survey and National Business Events Study • Thirty four percent of the events are tradeshows, with an average of 12,200 attendees and 528 exhibitors producing a ratio of 23 visitors for each exhibitor. • Forty percent of the events are public events with an average of 26,500 attendees and 493 exhibitors; a ratio of 54 attendees for each exhibitor. • Trade and public events are similar in size to public events but have a higher proportion of exhibitors. • Fifty-four conventions also used substantial amounts of exhibition space, with an average attendance of nearly 7,000. EEAA also categorised these events by the geographic scope of their advertising media. Figure 3-3 shows a breakdown by region. 12-Feb-07 Convention, Exhibition and Tourism Trends Page 3-8 Figure 3-3 Geographic Scope of Events Local 12% International National 23% 41% State-Wide 24% Source: EEAA Exhibitor Survey and National Business Events Study 3.4.2 Location of Exhibition Events Table 3-3 shows the location of exhibition events in 2003. Table 3-3 Location of Australian Exhibition Events by State and Territory in 2003 State/Territory Number Percent of total New South Wales 84 28% Victoria 75 25% Queensland 57 19% Western Australia 33 11% Australian Capital Territory 24 8% Southern Australia 21 7% Tasmania 6 2% Source: EEAA Exhibitor Survey and National Business Events Study Due to the location of the largest exhibition centres in Sydney and Melbourne, the majority of events occurred in their respective states in 2003. New South Wales tops the ranking with 28 percent of the events, and Victoria is a close second with 25 percent of the events. Noteworthy, however, is that New South Wales’ share of events has slipped from 36 percent in 2002 and more recently available booking data from 12-Feb-07 Convention, Exhibition and Tourism Trends Page 3-9 the SCEC and other Australian centres indicate that this is an ongoing shift in market penetration of the respective states. 3.5 INTERNATIONAL CONGRESS AND CONVENTION TRENDS A second component of the MICE market, and perhaps more important to Sydney and its larger convention facilities, is the convention and congress segment. Governments target these events as a first priority because of their higher economic impact. The International Congress and Convention Association (“ICCA”) collects information on the international meetings market, key excerpts of which are presented in the following tables. In order to be included in ICCA’s database events must meet the following criteria: • The event must occur on a regular basis, • It must attract between 50 and 10,000 attendees, and • The event must rotate between a minimum of three different countries. ICCA’s database includes approximately 80 percent of the estimated 14,000 events organised regularly that meet the preceding criteria. 3.5.1 Overview of Meetings by Continent The ICCA database of events tracks the number of events by the continent where they occurred. Figure 3-4 shows the market share per continent by number of meetings. 12-Feb-07 Convention, Exhibition and Tourism Trends Page 3-10 Figure 3-4 Market Share per Continent by Number of Meetings Africa Australia 2% 4% Latin America 7% North America 10% Europe 58% Asia/Middle East 18% Source: ICCA 2005 According to the ICCA database, Australia is capturing four percent of international meetings. Most of the events in the ICCA database were held in Europe, while the Asia/Pacific region ranked second with 18 percent of the events. 3.5.2 Meetings by Country and City Table 3-4 shows the number of international meetings held per country. 12-Feb-07 Convention, Exhibition and Tourism Trends Page 3-11 Table 3-4 Number of Meetings per Country Number of Rank Country Meetings 1996 2005 1 U.S.A. 360 376 2 Germany 199 320 3 Spain 139 275 4 United Kingdom 203 270 5 France 196 240 6 Netherlands 163 197 7 Italy 169 196 8 Australia 126 164 9 Austria 102 157 10 Switzerland 80 151 11 Japan 146 142 12 Brazil 36 142 13 Sweden 93 134 14 China-P.R. 50 129 15 Singapore 33 125 Total 2,095 3,018 Source: ICCA 2005 The United States holds 376 meetings out of the total sample of 3,018, while Australia (with 164 events) ranks 8th among the list of countries where events were held. The total number of meetings in Australia and in the world as a whole is substantially greater in 2005 than 2006; however, the number of meetings in Australia has not grown as fast the number in the rest of the world. Figure 3-5 shows the percent change in the number of events by year for Australia and the rest of the world. 12-Feb-07 Convention, Exhibition and Tourism Trends Page 3-12 Figure 3-5 Percent Change in the Number of International Meetings (1997 through 2005) 50% 40% Australia World 30% 20% 10% 0% -10% 1 -20% 1997 1998 1999 2000 2001 2002 2003 2004 2005 -30% Source: ICCA 2005 While the rest of the world has demonstrated consistent growth except for 2001, Australia’s performance has been more erratic with a large increase associated with the 2000 Olympics and large decreases in 2001, in the aftermath of the terrorist’s attacks. Overall Australia grew at an average rate of 3.0 percent over the past ten years, while the number of meetings in the rest of the world grew at 5.1 percent. 3.5.3 Overview of Participants The average number of participants per meeting per year from 1995 to 2005 has declined, as shown in Figure 3-6. 12-Feb-07 Convention, Exhibition and Tourism Trends Page 3-13 Figure 3-6 Average Number of Participants per Year 1996-2005 1000 842 758 778 800 743 729 728 699 672 670 651 600 400 200 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: ICCA 2005 After reaching a peak average of 842 participants per event in 2000, the average number of participants declined to a low point of 672 in 2003. Over the next two years, the average continued to decline to 670 and 651 participants in 2004 and 2005 respectively. 3.6 THE EXHIBITION INDUSTRY IN THE ASIA PACIFIC REGION The SCEC and other Australian venues compete with Asian venues for international tradeshows and conventions that rotate throughout the Asia Pacific region. Primary Asian competitors include: The Kuala Lumpur Convention Centre, The Hong Kong Convention Centre, and The Suntec Singapore. The preceding venues are currently the most prevalent Asian competitors for rotating conventions and tradeshows. However, numerous venues in Asia have the potential to compete for individual events and a current boom in convention centre construction in China has the potential to significantly increase this regional competition for events. Consequently, awareness of the overall trends in the supply of and demand for space in the Asia Pacific region is important to assessing the prospect of future international tradeshow and convention business in Australia. 12-Feb-07 Convention, Exhibition and Tourism Trends Page 3-14 Asia and Australia currently have 3.7 million square metres of indoor function space in 112 venues. The amount of available indoor function space at exhibition facilities by host country is shown in Table 3-5. Table 3-5 Indoor Function Space of Exhibition Facilities in Asia SQM of Indoor Number of Country Exhibition Percent of Total Venues Space* China 56 2,202,090 60.0% Japan 12 396,034 10.8% India 10 244,623 6.7% South Korea 5 127,206 3.5% Thailand 4 186,666 5.1% Taiwan 3 97,710 2.7% Hong Kong 3 132,100 3.6% Singapore 2 81,000 2.2% Indonesia 2 11,835 0.3% Malaysia 2 49,244 1.3% Pakistan 1 6,690 0.2% Phillipines 1 8,300 0.2% Vietnam 1 7,134 0.2% Australia 10 118,022 3.2% Total 112 3,668,654 **Available Space in 2005 Sources: Business Strategies Group Ltd. for all countries except Australia which is based on HVS International research on primary venues in ten cities. China has the largest amount of available indoor function space (2.2 million square metres) and the most facilities in Asia (56). The second-ranked country in the region is Japan, with 396,034 square metres of exhibit space in 12 facilities. Due to its historic role as Asia’s premier centre of trade and the availability of high-quality exhibition space, Hong Kong has been the most successful producer of tradeshows in Asia. The Hong Kong Convention and Exhibition Centre is undergoing expansion and the newly opened Asia World Expo near the Hong Kong airport has recently doubled its amount of exhibition space. Considering the size of its population and economy, Australia has a relatively large number of convention centres and exhibition floor area. 12-Feb-07 Convention, Exhibition and Tourism Trends Page 3-15 The mainland Chinese market is currently focused primarily on domestic tradeshows, sourcing Chinese products to the rest of the world, and trade fairs that do not rotate outside their host region. Similarly, the Japanese market has a primary focus on domestic events. Consequently the growth in supply and demand in the rest of Asia is likely to have the most impact on Australia and Sydney’s capacity to attract international events. 3.6.1 Growth of the Supply of Exhibition Space Figure 3-7 indicates the historical and projected growth of tradeshow venues in Mainland China, Japan and the rest of Asia. Figure 3-7 Historical & Projected Growth of Tradeshow Venues in Asia Mainland China Other Asia Japan 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2004 2005 2006 2007 Source: Business Strategies Group Ltd. China has experienced the most rapid growth, due primarily to a rush of government- sponsored projects that came on line over the past five years. This rapid growth in space has outpaced the growth in the number of and size of tradeshows and, as a result, the utilisation of exhibit space in China is reported to have declined. More relevant to Sydney is the significant growth in the rest of Asia, as expansions in Hong Kong and a new venue in Macau opening in 2007 are likely to introduce new competition for international events. 12-Feb-07 Convention, Exhibition and Tourism Trends Page 3-16 3.6.2 Demand for Exhibition Space in Asia The demand for events can be measured by the amount of net square metres sold each year. Event organisers typically rent exhibition halls from the tradeshow venue operator; the amount of space rented by the organisers is referred to as the gross area of the exhibition. The event organiser in turn leases booth space to exhibitors, the amount of which is called the net area or net square metres of the exhibition. The number of events, net area sold, and the average net area of events by country are shown in Table 3-6. Table 3-6 Net Square Metres of Exhibition Space Sold in Asia in 2004 Net Area Sold Average Size Country Number of Events (sqm) (sqm) China 555 3,551,500 6,399 Japan 476 2,107,000 4,426 Korea 141 509,000 3,610 Hong Kong 56 501,000 8,946 India 130 427,500 3,288 Taiwan 47 301,250 6,410 Thailand 65 191,750 2,950 Singapore 53 179,250 3,382 Indonesia 56 123,250 2,201 Philippines 62 120,250 1,940 Malaysia 41 110,250 2,689 Pakistan 17 38,000 2,235 Vietnam 48 28,250 589 Total/Average 1,747 8,188,250 3,774 Source: Business Strategies Group Ltd. China dominates the Asian market in number of events and total net square metres sold. No specific tradeshow industry dominates the market in China; however, the engineering, manufacturing, furniture, household items, and toys industries each lease 7 to 10 percent of net exhibition area in China. Japan has the second-largest number of events and net area sold, but this market is dominated by domestic tradeshows, which are unlikely to migrate to other locations. 12-Feb-07 Convention, Exhibition and Tourism Trends Page 3-17 Thus, tradeshow venues in Japan are not positioned as primary direct competitors to Sydney. 3.7 CONCLUSION Considering the size of its economy, Australia has a relatively large amount of convention and exhibition infrastructure. The majority of events in Australia are domestic; however, approximately one fourth of the events have an international component. Sydney is facing increased competition from both domestic and regional sources. • In the domestic market, new and improved venues are providing increased competition and soon Victoria is likely to overtake New South Wales as the premier location of convention and exhibition events. • The number of international meetings has shown strong growth over the past decade, but Australia has grown at a slower rate. • The amount of available exhibition space in the rest of Asia has grown dramatically, while Australia has shown little growth. • In the context of dynamic and growing national and international markets, Sydney has been comparatively stagnant in the number of events it has attracted and has done little over the past decade to improve or expand existing venues. 12-Feb-07 4. Primary Sydney Venues 4.1. SCOPE OF VENUE ANALYSIS HVS identified five venues in Sydney may have potential to host significant conventions and exhibitions and to some extent, compete with each other. This section presents an overview of these venues, with the objective of describing the amount available space and the character of the venues. HVS has inspected each of these venues in the course of its research and sought data from all regarding their respective operations. • Sydney Convention and Exhibition Centre – the largest venue in Sydney; located in Darling Harbour and the primary location of national and international conventions, tradeshows, and exhibitions. • Sydney Showgrounds at Sydney Olympic Park – the second largest venue in Sydney; oriented more toward local trade and consumer shows. • Rosehill Gardens – a tertiary venue located on the grounds of the Sydney Turf Club; serves small, local exhibitions and social events. • Australian Technology Park – a tertiary venue located in an historic building in Eveleigh; suitable for small exhibitions and conferences. • Playbill Venues at Moore Park – a tertiary venue located in the Moore Park entertainment district; offers three small exhibit pavilions along with other meeting spaces. In order to keep the focus of this report on the supply and demand for larger venues developed most often with support from the public sector, HVS has chosen to consider only “stand-alone” venues, excluding from its analysis the many hotel properties in Sydney that also accommodate MICE business. While hotels often compete with stand-alone venues for certain types of conference business and local social events, this report is concerned only with the ability of the hotel supply to support the stand-alone venues by providing lodging for convention and tradeshow attendees. The demand profiles of the SCEC and Sydney Showgrounds, generated through detailed analysis of events, attendance, and exhibit hall utilisation, are key inputs into the projection of future event demand. Primary Sydney Venues Page 4-2 4.2. SYDNEY CONVENTION AND EXHBITION CENTRE The Sydney Convention and Exhibition Centre (SCEC), one of Australia’s largest meeting facilities, is the primary venue in Sydney. It hosts both national and international business events. Located on Darling Harbour, the SCEC’s proximity to the central business district is its primary asset, as shown in the photo below. Figure 4-1 SCEC and Sydney Central Business District While the SCEC is owned by the Sydney Harbour Foreshore Authority and the Darling Harbour Convention and Exhibition Pty Ltd. (both entities of the New South Wales Government) is responsible for its daily operation. The SCEC is managed privately by the Convention Centre Management Pty Ltd (CCM), which in turn is owned jointly by the hotel group Accor Asia Pacific and the Compass Group. When the SCEC opened in 1988, the five exhibition halls, each with 5,000 m2 of gross floor area, were linked via internal corridor under the highway overpass to the convention centre building. In 1999, the connection between the Exhibition Centre and the Bayside Convention Centre was enhanced due to an expanded building (the Parkside Convention Centre) that added 2,200 m2 of exhibition space along with other meeting and breakout space. Currently, the SCEC has 27,200 m2 of exhibition space in six halls, 30 meeting rooms, two auditoriums, and a banquet hall able to accommodate 1,000 people. The SCEC is currently investing $6 million in a capital improvements programme that is aimed at updating and improving the appearance of the property. This programme involves carpet replacement, the purchase of art, and other improvement necessary to maintain the quality of the property. The improvement programme does not involve the addition of space or significant improvement of functional capabilities. 12-Feb-07 Primary Sydney Venues Page 4-3 4.2.1. Precinct Infrastructure Figure 4-2 illustrates much of the supporting infrastructure in the area, including the Harbourside retail development, Star City Casino, the Australian National Maritime Museum, the Powerhouse Museum, the IMAX Theatre, and the Sydney Aquarium. Within short walking distance is the Sydney Entertainment Centre, a 12,500 seat arena venue sometimes used for plenary session for large conventions at the SCEC. Figure 4-2 Darling Harbour Map 4.2.2. Transportation Access The commercial centre of the business district is a ten-minute walk from the SCEC. The Metro Monorail, which has a convention centre stop, connects the SCEC to many of the downtown hotels and restaurants. SCEC management reports that the Metro Monorail is highly utilised by convention and tradeshow attendees. A separate light-rail transportation system originating in Lilyfield in the Western part of the City has convention centre and exhibition hall stops and connects the SCEC to Chinatown and the Sydney Central Station, the central rail terminal that serves the entire metro area. 12-Feb-07 Primary Sydney Venues Page 4-4 Vehicular transportation is viable from Darling Drive on the west side of the SCEC. An attendee drop area is located between the convention centre and the exhibit halls. Truck access for loading the exhibit halls is also on the west side of the building, with the loading docks facing Darling Drive. While the exhibition hall loading is functional with each hall having its own dock, exhibition organisers report some dissatisfaction with the efficiency of truck access. The auto access to the venue for attendees on the same side of the building as the loading docks has somewhat of a “back-door feel,” since the more active pedestrian access to the building is on the east side. Sydney Airport is located 20 minutes from the SCEC. Sydney Airport is Australia’s busiest airport; approximately half of all international passengers to Australia arrive and depart from Sydney. Domestically, 25 percent of airline passengers in Australia have some type of passenger movement involving a connection with Sydney Airport. Total passengers at Sydney Airport have steadily increased throughout the past decade. From 1995 to 2005, passenger movements have increased by 4.3 percent annually. Preliminary passenger totals for 2006 show a modest increase in total passengers at Sydney Airport from 2005. Continued increase in international travel and domestic travel throughout Australia suggests Sydney Airport will continue to experience growth in total passenger volume in years to come. The SCEC is served by its own Exhibition Centre Carpark, which can accommodate 900 cars, and the Wilson Entertainment Carpark just to the south of the exhibition halls, which has a 1,900 car capacity. Approximately 5,000 spaces are available in the Darling Harbour District. 4.2.3. Hotel Infrastructure Thirty lodging properties in the Darling Harbour and central business district that support the SCEC are shown in the table below (See Table 4-1). 12-Feb-07 Primary Sydney Venues Page 4-5 Table 4-1 Supportive Lodging Capacity No.* Name Room Count Star Rating 1 Star City (Hotel and Apartments) 352 5.0 2 Grand Mercure Apartments 121 4.5 3 Ibis Hotel 256 3.0 4 Novotel Sydney 525 4.5 5 Goldsbrough Hotel & Apartments 520 4.5 6 Novotel Century 223 4.0 7 Holiday Inn 304 4.0 8 The Waldorf Apartment Hotel 266 4.0 9 Medina Grand 144 5.0 10 Crowne Plaza Hotel 323 4.5 11 Somerset 119 4.5 12 Four Points by Sheraton 631 4.0 13 Medina Grand Harbourside Apartments 114 5.0 14 All Seasons Premier Menzies Hotel 446 4.0 15 The Wentworth 431 5.0 16 Radisson Plaza Hotel 362 5.0 17 ANA Harbour Grand Hotel 561 5.0 18 Quay West 132 5.0 19 Four Seasons Hotel 531 5.0 20 Renaissance Sydney Hotel 550 5.0 21 Sir Stamford at Circular Quay 105 5.0 22 Hotel InterContinental 498 5.0 23 The Westin Sydney 416 5.0 24 Hilton Sydney 577 5.0 25 Sheraton on the Park 557 5.0 26 Sydney Marriott 241 5.0 27 Travelodge Hotel 406 3.5 28 Radisson Hotel and Suites 102 4.5 29 Pacific International Apartments 160 4.0 30 Aaron's Hotel 93 3.0 TOTAL/AVERAGE 10,066 4.5 * Number shows location on the previous map of Darling Harbour Source: Sydney Convention & Exhibition Centre According to the SCEC, these 30 lodging properties support the SCEC by supplying room blocks and accommodating delegates and exhibitors. These properties include hotels and serviced apartments with a total over 10,000 rooms. The size of the hotels ranges from 631 rooms at the Sheraton Four Points to 93 rooms at Aaron’s Hotel, with an average room count of 336. The quality of the properties is generally excellent, with all but three properties rated at a 4-star level or higher; a highly supportive lodging supply. 4.2.4. Summary of SCEC Function Spaces The quality, flexibility, and functionality of a convention and exhibition venue are some of the most important criteria in determining site selection. A detailed description of the SCEC, along with an evaluation of its capabilities, is presented in Table 4-2. 12-Feb-07 Primary Sydney Venues Page 4-6 Table 4-2 Sydney Convention & Exhibition Centre Function Space Summary Capacity Divis- 2 Type of Space Area m ibility Theatre Banquet Class Bayside Grand Hall 1 2,500 1,460 1,550 720 Bayside Auditoria 2 -- 3,500 -- -- Bayside Breakouts 17 3,770 -- -- -- Parkside Ballroom 2 1,160 1,300 1,000 800 Parkside Auditorium 1 1,000 Parkside Breakouts 13 2,306 -- -- -- Parkside Exhibition Hall 6 1 2,200 -- 870 -- Exhibition Halls 1 - 5 5 25,000 3,000 2,000 -- Source: Sydney Convention & Exhibition Centre 4.2.5. Exhibition Capacity and Functionality The SCEC consists of three separate but connected building structures: • the exhibition centre event halls 1 through 5; • the Parkside Convention Centre; and • the Bayside Convention Centre. The following image shows the floor plans of these three buildings. Figure 4-3 SCEC – Exhibition Centre, Parkside, and Bayside Buildings 12-Feb-07 Primary Sydney Venues Page 4-7 The five original exhibition halls each measure 5,000 m2 in gross floor area and although they are contiguous, their alignment is staggered. Consequently, the divisibility of the halls is less flexible than in a state-of-the-art exhibition facility. The exhibition halls are each divided by operable walls, but these walls can only be used in 5,000 m2 increments without further operability, as opposed to a more standard rectangular configuration with movable walls that can subdivide more efficiently. Furthermore, required setbacks for exhibition stands within the halls limits exhibition organisers in their efficient use of space. That is, the percentage of floor area that can be sold to exhibitors is less than in a more standardised rectangular hall. In the 1999 expansion, a sixth exhibition hall was added in the lower level of the Parkside building. Hall 6 has 2,200 m2 of floor area and its own loading dock, but the limited capacity of the loading dock creates challenges for move-in and move- out during simultaneous events. Unlike the other halls, it has permanent carpet tiles and is more appropriate for light exhibitions associated with conventions. It can also be used for large banquets. The exhibition halls 1 through 5 are separated from the pre-function area by a glass “storefront” wall. Pre-function areas are carpeted and adequate in width. Glass exterior walls face the harbour side of the SCEC, providing views to the active pedestrian side of the building. The glass design of the pre-function and exhibition hall walls allows ambient light into exhibition halls one through five. While this lighting may be favoured by some exhibit hall users, it presents an obstacle to most others. Ambient light often obscures electronic displays and otherwise interferes with the light preferences of exhibitors. Most exhibitors prefer a visual separation between the pre-function areas and the exhibit halls. Motorised blinds are used to diffuse sunlight, and on rare occasions exhibition organisers cover the exhibit hall windows for security purposes. Each exhibition hall is serviced by a separate loading dock so that each hall can be loaded independently. The exhibit hall floors are designed to support heavy loads; trucks can drive onto the floor to unload. However, loading dock capacity is generally inadequate to handle a high volume of truck movements, and reliance on a public roadway (Darling Drive) as a vehicle staging area presents traffic and safety issues. The halls are fully air conditioned and provide access to fibre optics, CAT 5 network, telecommunications, power, water and compressed air contained in floor boxes. Ceiling heights are 10.5 to 14 metres. The air conditioning, ceiling heights, and utilities meet standard industry expectations. Lounges on the second level, which can be used as exhibitor offices or small breakout meeting rooms, look out on each exhibition hall. 4.2.6. Convention Spaces Conventions and tradeshows typically require varying types of spaces, including plenary halls for general sessions, ballrooms for banquet events, meeting breakout spaces, registration areas, and room for adequate pedestrian circulation. The availability, location, quality, and flexibility of these spaces influence the appeal of the centre and the efficiency in its operation. 12-Feb-07 Primary Sydney Venues Page 4-8 The following figures depict the floor plans of the SCEC, Parkside, and Bayside convention facilities and show the relationships between the various types of spaces. Figure 4-4 Convention Facilities – Bayside Ground Level Figure 4-5 Convention Facilities – Bayside Level 1 12-Feb-07 Primary Sydney Venues Page 4-9 Figure 4-6 Convention Facilities – Parkside Ground Level Figure 4-7 Convention Facilities – Parkside Level 1 12-Feb-07 Primary Sydney Venues Page 4-10 4.2.7. Theatre Capacity The largest plenary hall or theatre, with a capacity for 3,500 delegates, is located in the Bayside Convention Centre. It sub-divides only once, into two theatres with seating for 950 and 2,485. By current standards, it provides inferior flexibility and does not allow the SCEC to adapt the size of its theatres to meet the wide range of desired capacities or to host simultaneous sessions in various halls. While the stage area is expansive, its functional capability is limited because it lacks any theatrical or musical staging capacity. This factor limits the uses of the Bayside Auditorium for other types of entertainment events, thereby reducing its overall revenue productivity for the SCEC. The seating is comfortable and well maintained, but the chairs lack flip-up desk tops, which are often expected in a lecture hall setting. More recently built state- of-the art plenary halls incorporate flexible seating systems that convert raked seating into flat floor space for banquet halls or dinner theatre events. The SCEC does not have this capability. A second smaller theatre (Parkside Auditorium) seating 1,000 persons is located in the Parkside Convention Centre. Although smaller than the main plenary hall, it has some desirable features lacking in the large plenary hall, including foldaway tables and a fly tower for scenery and props. The Parkside Auditorium walls do not sub-divide. 4.2.8. Ballroom Capacity The largest ballroom in the venue is the Bayside Grand Hall, with capacity for 1,550 in a banquet setting. It is a semi-circular hall with entrances on the straight side of the hall and service corridors on the circular sides of the hall. Columns in the Bayside Grand Hall can obstruct views and otherwise interfere with event set up. The Grand Hall is not divisible, which is another important example of the inflexibility that characterises the entire venue. Despite this limitation, the Grand Hall is useful for banquet functions and smaller exhibitions that may accompany convention events. A second ball room with banquet capacity of 1,000 is located in the Parkside Convention Centre. This hall divides into two sections with an operable wall, but more optimally, a banquet hall of this size would divide in half and in thirds, providing more flexibility. Two rear projection screens are fixed in place on each side of the ballroom. Typically, movable audio visual equipment is preferred because it allows the hall to be used in a wider variety of configurations. 4.2.9. Meeting Rooms Thirty meeting rooms with a total of 6,076 m2 of floor area serve the SCEC. One block of meeting rooms is clustered around the Bayside Auditorium and two large meeting rooms are located in the Parkside Convention Centre. Like the exhibit halls, the blocks of meeting rooms lack divisibility that would allow them to be used in various combinations and sizes. As was evident during a tour of the facility, small breakout sessions are often forced into large rooms with too much capacity. 12-Feb-07 Primary Sydney Venues Page 4-11 The inability to schedule simultaneous use of smaller blocks of space reduces the usable capacity of the venue as compared to a state-of-the art convention centre. 4.2.10. Function Space Ratio The ratio of function space to exhibition space is often used to assess efficiency of a convention centre (i.e. the total meeting and ballroom area divided by exhibition area). In the SCEC, the ratio is 36 percent. For venues that host a combination of conventions and tradeshows as does the SCEC, a ratio of between 40 to 50 percent is desirable. Increased amounts of more flexible function space would improve the SCEC’s ability to schedule and host more simultaneous events. 4.2.11. Other SCEC Amenities Other amenities in the venue include the Bayside Gallery, a multi-purpose function space with panoramic views of the harbour, and the Bayside Terrace, a banquet hall serving up to 200 persons that also offers stunning views of the city and Darling Harbour. The overall setting for the SCEC is exceptional with its access to the harbour and nearby dining and entertainment venues. 12-Feb-07 Primary Sydney Venues Page 4-12 4.3. SYDNEY SHOWGROUNDS AT SYDNEY OLYMPIC PARK The Sydney Showgrounds (Showgrounds) at Sydney Olympic Park is a collection of event facilities located about 30 minutes outside Sydney’s central business district. The site is connected to downtown Sydney by rail service, with a station directly adjacent to the Showground. The Royal Agricultural Society of NSW (RAS) leases the Showground site from Sydney Olympic Park Authorities owned by NSW Government and operates the event venues. RAS is a not for profit organisation with a membership base of 13,000 people. In addition to managing the Showgrounds, the RAS is responsible for conducting the Sydney Royal Easter Show and the Sydney Royal Wine, Dairy and Fine Food Shows, as well as other activities throughout the year. Figure 4-8 Aerial View Sydney Showgrounds at Sydney Olympic Park 4.3.1. Description of the Showgrounds The Showgrounds are well suited for public consumer shows, and local exhibitions, because of its size and location in the geographic centre of the Sydney market area. However; due to its history as an agricultural and equestrian venue and its role in the 2000 Sydney Summer Olympics, the Showgrounds is not a purpose- built exhibition and convention centre. The Showgrounds offer a variety of venues with capacity to host large banquets for 4,000 people to intimate dinners of 20 people. In addition to mid-sized meeting and boardrooms, the Showgrounds offers nearly 22,000 m2 of continuous clear- span space combining the Dome and Exhibition Halls (See Table 4-3). Consequently, its ability to serve the convention and exhibition industry is somewhat limited. 12-Feb-07 Primary Sydney Venues Page 4-13 Table 4-3 Sydney Showgrounds Programme of Function Spaces Area Venue Theatre Banquet Cocktail (m2) The Clydesdale Pavillion 965 80 150 300 The Dome 7,200 5,000 4,000 6,000 The Halls 14,400 7,200 6,000 7,200 The Southee Complex 1,360 1,000 800 1,500 The Wynne Pavilion 510 300 200 500 The Howie Pavillion 2,230 1,000 800 1,000 1 Playfair Room 510 250 260 400 1 Charley Room 440 250 250 350 Jamison Room 370 220 1601 280 The Badgery Pavillion 2,540 1,500 1,000 1,800 1 Banquet capacity allows for stage and small dance floor Source: Sydney Olympic Park Authority The function spaces at Sydney Showgrounds are not integrated in a single venue. The Dome and the Halls are connected, but the other pavilions and meeting areas are spread out over the grounds. Thus, event planners that use the exhibit space provided by the dome and halls cannot readily draw upon the other meeting areas without requiring event attendees to leave the exhibition halls. Event planners are reluctant to accept an event plan where meeting spaces are housed in separate venues from the main show floor because the volume of traffic on the show floor is a key element of the value events provide to exhibitors. If event attendees are required to leave the dome and halls to access ancillary meetings, there is a risk they may not return to the show floor, and these activities may actually reduce the volume of people on the show floor rather than serve as additional attractions for them. Thus, the Sydney Showgrounds has difficulty competing effectively with venues that have integrated exhibit, ballroom, plenary, and meeting spaces all contained within a single building. The exhibition halls are equipped with utilities located in floor boxes. Recently, air conditioning systems were installed but these systems reportedly provide less than optimal climate control. Divisibility is limited, as the exhibition halls can only be divided in half. Loading docks are plentiful; the halls are loaded from two sides, but the loading areas cross over pre-function spaces that are small and wholly inadequate. The overall design or the venue does not meet the standards of most exhibition venues. 4.3.2. Showgrounds Event Profile The Showground hosts a number of different types of events, including product launches, corporate functions, large convention dinners, conferences, cocktail parties, outdoor events, exhibitions, and concert performances. The Showground hosts several recurring large consumer shows, including: 12-Feb-07 Primary Sydney Venues Page 4-14 The ABC Gardening Show; The PGA Golf Show, Parents Babies & Children's Expo, and Gifts and Homewares Australia Show. RAS provided HVS with annual event data on larger consumer and tradeshows occurring at the Showground for 2004 and 2005 (see Table 4-4). Table 4-4 Sydney Showgrounds Average Event Profile for 2004 and 2005 Occupied Number of Total Exhibit Hall Type of Event SQMD Events Attendance Occupancy (millions) Consumer Shows 15 198,567 1.5 19.0% Tradeshows 14 73,020 0.9 12.0% Other 2 2,910 0.0 0.4% TOTAL 32 274,497 2.5 31.4% Source: Royal Agriculture Society Consumer shows account for roughly half of the total number of events, but over 70 percent of attendance. Exhibit hall occupancies indicate that the Sydney Showgrounds is operating below capacity. Given that the SCEC is operating well above capacity and turning away events, it is clear that the Sydney Showgrounds is not an adequate substitute for the SCEC and does not compete with SCEC. While the supply of exhibition space at the Sydney Showgrounds is nominally available in the market place, in practice it does not provided additional supply. Its inadequate size, location away from the central business district, and lack of amenities in and around the venue are all barriers to growing event demand, even though that demand is present in the market place. The majority of business at the Showgrounds is local as shown in Table 4-5. Table 4-5 Sydney Showgrounds Event Characteristics (2004 and 2005) National Local Overall Number of Events 13 18 30.5 Percent of Events 43% 57% 100% Event Length 5.8 5.9 5.9 Average Attendance 5,305 11,110 8,714 Average Floor Area (m2) 10,674 15,343 13,432 1Including move-in and move-out days Source: Royal Agricultural Society 12-Feb-07 Primary Sydney Venues Page 4-15 RAS has developed an expansion plan for the Showgrounds that calls for building a second exhibition hall adjacent to the existing hall and dome. This second exhibition hall would feature 15,000 m2 on the ground level and a lower level with a 10,000 m2 500-car parking lot that can double as auxiliary exhibit space and 2,500 m2 of meeting space. One level below the auxiliary exhibit space and meeting rooms would be an additional level of with another 10,000 m2 that accommodates a 500 space car park. An expanded Showgrounds venue would partially overlap the local consumer and tradeshow market currently served by the SCEC. This expansion plan would significantly increase the Showgrounds’ capacity to accommodate large tradeshows and consumer shows and the additional meeting space would improve its ability to host events with more of an emphasis on educational sessions, a growing trend in the tradeshow industry. However, the expansion plan does not expand upon the existing halls’ contiguous exhibit space; as the new and existing halls would be separated by a concourse. As a result, the expansion may be more effective in attracting simultaneous events than in accommodating events that require in excess of 22,000 m2 of exhibit space, as event planners generally prefer to have all of their exhibitors in a single, contiguous exhibit hall. 12-Feb-07 Primary Sydney Venues Page 4-16 4.4. ROSEHILL GARDENS Figure 4-9 Exterior Rosehill Gardens Rosehill Gardens, located near Parramatta on the grounds of the Sydney Turf Club, features a 4,000 m2 exhibition hall, adjacent conference rooms, and outdoor event spaces. The site is accessible via rail and ferry service and has 5,000 free parking spots on site. With a high ratio of meeting to exhibit space, Rosehill Gardens is particularly appealing to small and mid-sized conferences that may have light exhibits. For additional measurement and capacities please see Table 4-6. 12-Feb-07 Primary Sydney Venues Page 4-17 Table 4-6 Rosehill Gardens Programme of Function Spaces Area Room 2 Theatre Banquet Cocktail (m ) Lower Ground Floor Winner's Circle 840 300 300 800 Ground Floor Exhibition Centre 4,000 2,000 2,000 2,000 Hollywood 1,700 1,000 500 600 Churchill 1,450 600 250 250 Tulloch 1,092 600 400 400 Level 3 Chantilly 200 150 150 150 Longchamps 260 150 150 150 Palms 175 300 200 200 Level 4 Ascot 575 300 500 300 Epsom 730 300 500 300 Champagne 185 350 300 250 Level 5 Baguette 200 125 150 130 Marscay 200 125 150 130 Source: Rosehill Gardens With a divisible exhibit hall, the venue has the flexibility to host a variety of different events. The non-uniform dimensions of the long, somewhat narrow hall and the vertical circulation area divide the Churchill Downs and Hollywood Park rooms, making it less appealing for exhibition events. Due to the size and configuration of the exhibition hall as well as its location, Rosehill Gardens does not directly compete with the SCEC for major national, international or local convention and exhibition events. 12-Feb-07 Primary Sydney Venues Page 4-18 4.5. AUSTRALIAN TECHNOLOGY PARK Figure 4-10 Exhibit Hall Australian Technology Park The Australian Technology Park Conference Centre is located in Eveleigh and features a 6,850 m2 exhibit hall and 2,277 m2 of meeting space. The centre offers a 524-seat theatre and ten meeting rooms. As a test-bed for the more than 100 resident companies of Australian Technology Park, the ATP Conference Centre hosts over 400 events per year. Its comprehensive and convenient amenities include wireless electronic and video conferencing equipment, contemporary landscaped grounds, security, parking and the convenience of a location within 4km from Sydney’s central business district, 5km from Sydney Harbour, 8km from Sydney Airport and only 200m from Redfern Railway Station, where all Sydney’s rail lines converge. Although the Australian Technology Park Conference Centre is busy with small local events, it lacks capacity necessary to compete with the SCEC. The small exhibition hall with numerous columns does not meet the requirements of major exhibitions. Expansion or renovations seem infeasible due the size of the surrounding site and its Heritage status. 12-Feb-07 Primary Sydney Venues Page 4-19 4.6. PLAYBILL VENUES AT MOORE PARK Figure 4-11 Moore Park Exterior The Moore Park precinct is a collection of leisure and entertainment facilities and amenities located approximately 10 minutes from downtown Sydney. A company called Playbill Venues operates three event facilities in the park. For a summary of the type and amount of function space at Moore Park’s three event venues see Table 4-7. Table 4-7 Moore Park Venues Function Space 2 m of Function Space Venue Foyer / Exhibit Meeting Courtyard Hordern Pavilion 3,100 320 258 Royal Hall of Industries 5,400 -- 137 Byron Kennedy Hall 1,250 650 111 Total 9,750 970 506 Source: Moore Park Hordern Pavilion - The Hordern Pavilion is a performance hall with retractable seating that accommodates 3,500 people. A domed ceiling rises above the stage and seating areas. Originally constructed in 1924, the Hordern Pavilion was modified in 1972 to make it more versatile. Most of the columns were removed and replaced with a new truss system, false ceilings were introduced and a bar and ticketing boxes, together with a mezzanine corporate box area, were constructed. Known primarily as a venue for rock music concerts, the facility has hosted a wide variety of events, including: Live music, Film premieres, 12-Feb-07 Primary Sydney Venues Page 4-20 Gala dinners, Product launches, Awards nights, Corporate parties, and Exhibitions. 4.7. CONCLUSIONS This review of the existing venues in Sydney shows that: • The SCEC does not have a peer or direct competitor in Sydney. The SCEC is the only venue in Sydney with sufficient capacity to serve the national and international convention and exhibition market. Other exhibition venues in Sydney do not offer an attractive alternative to event planners due to inadequacy of their size, location, and configuration. • An expanded Showgrounds has potential to complement the SCEC by serving the consumer and local show market niche, thereby relieving pressure on the SCEC schedule during peak months of demand for national and international conventions and tradeshows. • Smaller venues play an important role by hosting numerous local events that do not need large amounts of exhibition space. They too can complement the larger venues by incubating new events that could eventually grow to a size that requires a larger venue. 12-Feb-07 5. Analysis of SCEC Demand 5.1 INTRODUCTION Since the SCEC hosts the majority of large convention and exhibition events in Sydney, analysis of its historical event demand provides an understanding of the amount and type of event demand for Sydney as a whole. This section of the report analyses the historical number of events, attendance, and utilisation of the exhibition halls. HVS also quantified the amounts of lost business and unaccommodated demand for the SCEC, culminating in estimates of the amounts of business that could be recovered if the SCEC had increased capacity. The organisation of historical event information provided by SCEC management, along with the definitions provided in Section 2 of this report, dictate the categorisation of event types used in the analysis of SCEC demand. The SCEC hosts events that use exhibition space as well as meetings, conferences, banquets, and other events that do not use exhibit space. 5.2 ANALYSIS OF SCEC EVENTS The SCEC provided data for only one year on events that do not use exhibition space (See Table 5-1). Table 5-1 Non-Exhibition Events for the Year 2005 Number of Average Total Event Avgerage Total Data / Type of Event Events Length Days Pax Pax Meetings & Conferences International 10 3 30 247 2,471 National 187 2 331 447 83,664 Local 19 1 19 491 9,322 Sub-total 216 2 380 442 95,457 Social 122 1 128 415 50,677 Concert 8 2 14 1,738 13,900 Total 346 656 160,034 Source: SCEC National and international events made up over half of the estimated attendance of 160,000 persons at non-exhibition events in 2005. These events attract business tourists, and therefore have a higher economic impact on Sydney than local, social, and concert events. Analysis of SCEC Demand Page 5-2 The SCEC provided ten years of historical data on their exhibition events through June 2006. The remainder of our analysis of SCEC utilisation focuses on these exhibition events. For the purposes of this study HVS used three metrics to measure the accommodated historical event demand for events with exhibits: 1) the number of events, 2) square metre days (area rented times the number of days rented), and 3) attendance. HVS classified exhibition events into conventions and tradeshows, consumer shows, and other events. The categorisation serves to distinguish between the different ways in which events use the events spaces in the SCEC. Conventions and tradeshows typically use exhibit, meeting, and ballroom space while consumer shows primarily use exhibition space. The delegates to conventions and tradeshows also require the use of tourism amenities surrounding the SCEC such as lodging, restaurant, retail, and entertainment, whereas local consumer show attendees do not make extensive use of surrounding amenities. 5.2.1 Number of Events Conventions and tradeshows show the most variability in number, while the level of consumer shows and other events are more constant (See Figure 5-1). Figure 5-1 Number of Exhibition Events by Year Conventions & Tradeshows Consumer Shows Other 140 120 100 80 60 40 20 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: SCEC & HVS International The number of annual events has increased significantly over the past ten years, from 88 in 1997 to a peak of 118 in 2004. Tradeshows and conventions make up the largest share of events in every year. However, when measured by the number of occupied square metre days, consumer shows take up a higher proportion of exhibit hall occupancy than conventions and tradeshows (See Figure 5-2). 12-Feb-07 Analysis of SCEC Demand Page 5-3 Figure 5-2 Total Occupied Square Metre Days by Exhibition Event Category 1996-2005 Conventions & Tradeshows Consumer Shows Other 8.0 Millions 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: SCEC & HVS International Occupied square metre days have trended upward from 1998 through 2005, with conventions and tradeshows showing the greatest amount of variability. 5.2.2 Geographic Scope The geographic scope of an event is indicative of its economic impact potential and its propensity to generate overnight visitation and incremental spending. International exhibition events, for example, tend to have the highest ratio of room nights to attendees and the length of these events are typically the highest. A breakdown of convention and tradeshow events by geographic scope shows, that in every year, the majority of events and attendance are national (see Table 5-2). 12-Feb-07 Analysis of SCEC Demand Page 5-4 Table 5-2 Convention and Tradeshow Number of Events and Attendance by Origin of Demand 1997 1998 1999 2000 2001 2002 2003 2004 2005 Number of Events National 40 47 42 52 51 56 55 55 58 International 18 14 23 18 18 23 11 26 19 Local 2 3 5 2 2 5 2 2 4 Total 60 64 70 72 71 84 68 83 81 Average Attendance National Not Available 3,740 3,423 4,606 3,649 International 3,330 1,551 2,172 2,582 Local 9,656 2,650 3,135 4,015 Overall Average 3,980 3,098 3,808 3,417 Total Attendance National Not Available 209,417 188,292 253,320 211,632 International 76,580 17,060 56,469 49,065 Local 48,282 5,300 6,270 16,060 Total 334,279 210,652 316,059 276,757 Source: SCEC and HVS International National conventions and tradeshows have the largest annual average attendance, ranging from 3,700 to 4,600. The annual average attendance at international events ranges from 1,500 to 3,300. Over the ten-year period analysed here, international events constituted 26% of events but only 18% of estimated attendance. The data clearly indicate that the SCEC primarily serves a national audience. 5.2.3 Event Length and Exhibit Hall Utilisation The event length and average floor area also varies by the geographic scope of the events (seeTable 5-3). 12-Feb-07 Analysis of SCEC Demand Page 5-5 Table 5-3 SCEC Conventions & Tradeshows by Scope, Average 1997-2005 Event Data / Type of Event 1997 1998 1999 2000 2001 2002 2003 2004 2005 Average 1 Average Event Length International 7.5 6.0 7.5 6.4 6.2 7.3 7.8 6.8 7.4 7.0 National 5.3 5.6 5.8 5.1 5.0 5.0 4.9 5.4 5.3 5.3 Local 4.0 2.7 5.2 4.5 4.5 7.0 3.5 3.0 4.3 4.3 Total Event Days1 International 135 84 172 116 111 167 86 177 141 132 National 212 263 244 265 256 278 268 298 307 266 Local 8 8 26 9 9 35 7 6 17 14 Total 355 355 442 390 376 480 361 481 465 412 Average Floor Area (m2) International 11,278 6,339 8,885 8,063 8,350 8,820 8,866 6,958 7,094 8,295 National 10,778 9,278 10,476 8,951 8,595 9,478 9,124 10,491 9,633 9,645 Local 16,250 5,000 12,115 8,444 10,978 7,297 7,857 7,500 10,247 9,521 1 Includes move in & move out days Source: SCEC and HVS International International conventions and tradeshows have the highest average event length, but use the smallest amount of floor area. National conventions and tradeshows with exhibitions account for an average of approximately two thirds of the total occupied square metre days. 5.2.4 Seasonality Typical of most convention centres, the SCEC demonstrates a high degree of seasonality in the number of events (See Figure 5-3). Figure 5-3 Seasonality of SCEC Events by Type 1997-2005 Conventions & Tradeshows Consumer Shows Other 15% 12% 12% 11% 11% 10% 10% 9% 8% 8% 7% 7% 5% 4% 2% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: SCEC & HVS International 12-Feb-07 Analysis of SCEC Demand Page 5-6 The seasonal patterns of event demand show December and January as the only months of weak demand. This seasonal pattern reflects the impact of holiday seasons and a typical pattern of demand for convention and tradeshow events. 5.2.5 Exhibition Hall Occupancy The seasonal pattern of the number events does not reflect the same pattern as exhibit hall occupancy (See Figure 5-4). In several peak months, a small number of events fully occupy the SCEC for long periods and generate high levels of exhibition hall occupancy. Figure 5-4 SCEC Exhibit Hall Occupancy by Month 1997-2005 Conventions & Tradeshows Consumer Shows Other 100% 90% 83% 80% 76% 69% 70% 70% 66% 65% 60% 57% 55% 55% 53% 50% 40% 30% 24% 20% 20% 10% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: SCEC & HVS International Unlike the number of events, exhibit hall occupancy peaks in October, as there is more demand for space from both conventions and tradeshows and consumer shows in this month than any other. January and December as holiday periods have the most excess capacity, when there is the least amount of space used for conventions and tradeshows and nearly the least used for consumer shows. All other months of the year show exhibit hall capacities in excess of 50 percent. 5.2.6 Insufficient Exhibit Hall Capacity Over the past four years annual exhibit hall occupancy has ranged from 63 to 72 percent, which are exceedingly high levels of occupancy. Given the lack of demand for space during the holiday seasons and inevitable gaps between start dates and ends of events, it is clear that the SCEC has reached its maximum practical levels of occupancy. As illustrated by the yellow line of Figure 5-4, exhibit hall occupancies of approximately 50 percent strike a better balance between the need for revenue producing activity in the building and providing enough available dates and space during peak periods to accommodate most demand. Of greater concern is that occupancy in the peak months of March and October is dominated by 12-Feb-07 Analysis of SCEC Demand Page 5-7 consumer show activity rather than higher economic impact convention and tradeshow events. 5.3 SCEC LOST BUSINESS The evidence for pent-up and unaccommodated demand for the SCEC shown in the analysis of historical event patterns is reinforced by lost business data. The SCEC provided monthly data on business that was lost during the period January 2003 through July 2006. Business is considered lost if an event organiser requested space at the SCEC, but ultimately decided to not to hold the events at the SCEC. The SCEC records cancellation of business that is lost or denied for events valued at over $50,000. The data include business lost in the years 2003 through 2006 for events seeking a place on the SCEC schedule for all future years. SCEC also provided information on the reasons for lost business, and the amount of lost revenue associated with each event (See Figure 5-5). Figure 5-5 Lost Events in the Years 2003 through July 2006 153 134 137 130 2003 2004 2005 2006 Jan-Jul Source: SCEC & HVS International From 2003 to 2006, a total of 544 events have been lost, and the number lost each year appears to be growing. An estimated $103 million in lost SCEC revenue is associated with these events. This revenue includes only the rental value of the events, that is, the space rental, food and beverage and other service revenue generated by the SCEC. The much greater loss of direct and indirect economic impact to Sydney as a whole, generated by the spending of delegates, exhibitors, and show organisers is not included. Not only is the number of lost events growing, the amount of lost revenue associated with those events appears to be increasing at an even faster rate (See Figure 5-6). 12-Feb-07 Analysis of SCEC Demand Page 5-8 Figure 5-6 Average Revenue Lost per Lost Business Event (thousands) Thousands $298.2 $218.3 $145.5 $154.2 $139.1 $80.7 2003 2004 2005 2006 2007 2008 Source: SCEC & HVS International The average rental revenue associated with lost business grew from approximately $81,000 for 2003 lost events to nearly $300,000 per event for 2008 lost events. Some of this growth in average lost revenue may be due to inflation of rates charged by the SCEC, but this growth also reflects an increase in the size of events that are being lost. Whatever the underlying causes may be, the negative financial implications for New South Wales and the SCEC are becoming increasingly severe. 5.3.1 Reasons for Lost Business HVS summarised the reasons for a total of 554 lost business events based on information provided in SCEC monthly reports. Of these 554 events, 100 were officially cancelled, and 86 were lost for unknown reasons. A breakdown of the known reasons for lost business (not including cancellations) is shown in the chart below. 12-Feb-07 Analysis of SCEC Demand Page 5-9 Figure 5-7 Reasons for Lost Business Lack of Hotels Location 7% /Rotation 10% Date or Space Conflict Cost (SCEC or 36% Sydney) 21% Other 26% Source: SCEC & HVS International Date or space conflicts are the main reason for 36 percent of the lost business, which includes the inability to book a sufficient amount of space in the SCEC on the required dates. Nearly $20 million in revenue over this three and a half-year period is associated with date or space conflicts. The cost of the SCEC, hotels, or of Sydney as a destination was cited in 21 percent of known lost business, and $11.6 million in revenue is associated with this lost business. The location of the event or required rotation to another city is responsible for 10 percent of lost business, and the lack of hotel rooms has been the cause of 7 percent of lost business. Other reasons include preference for other cities of venues, lack of local support for events, and financial inducements provided by competing cities. 5.3.2 Competitors Winning Lost Business The identity of the winning competitor is known for approximately half of the lost business. HVS summarised the competition as international competitors, national competitors, local venues, and hotels. National competitors win the plurality of business from the SCEC (See figure 5-17). 12-Feb-07 Analysis of SCEC Demand Page 5-10 Figure 5-8 Breakdown of Lost Revenue by Type of Competitor Hotel 17% National Competitor 38% Local Competitor 21% International Competitor 24% Source: SCEC & HVS International While 24 percent of business is lost to international competitors, 38 percent of potential revenue is lost nationally. Of those national competitors, Melbourne is cited for nearly forty percent of the events and Brisbane is cited for 20 percent of the events. International competitors constitute 14 percent of the lost events and 24 percent of the lost revenue. Local competitors include facilities at the Sydney Showgrounds and other venues in the Sydney Olympic Park, Rosehill Gardens, Playbill Venues at Moore Park, and other local venues. Although business is lost most frequently to hotels in and outside of Sydney (36 percent), only 17 percent of the lost revenue is associated with this business, since the events are smaller than convention centre based events. 5.3.3 Seasonality of Lost Business The seasonality of lost business is important in considering the impact that an expansion of available space would have on the ability to retain the lost business. Overall, the lost business shows a high degree of seasonal variation that is similar to the seasonal variation in accommodated business. The Figure 5-18 shows the percentage of lost business in each month for all lost events and for date conflicts only. 12-Feb-07 Analysis of SCEC Demand Page 5-11 Figure 5-9 Seasonality of Lost Business All Lost Business Date Conflicts Only 25% 20% 15% 10% 5% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: SCEC & HVS International A relatively small percentage of business is lost business in January, April and December, and business is lost most frequently in May. Business lost due to date conflicts shows greater seasonal variation than all lost business. The data indicate that expansion could significantly reduce the amount of lost business in nine months of the years, the same months with relatively high exhibit hall occupancies. 5.3.4 SCEC Lost Business Conclusions The SCEC data demonstrates a significant amount of lost business that can be attributed to a lack of adequate exhibit and function space and available dates. The data also indicate that the level of lost business is growing even before the full impact of an improved Melbourne venue is felt. National competitors are already the leading source of lost business, and the improvement in Melbourne is likely to increase their capture of potential SCEC business. While the SCEC will continue to operate in a competitive environment and always loose some business, increased capacity would allow the SCEC to recover a significant number of events. Using this history of lost business, HVS estimated a range of lost business that could be recovered if adequate space were provided by the SCEC. See Table 5-4. 12-Feb-07 Analysis of SCEC Demand Page 5-12 Table 5-4 Estimate of Recovery of Lost Business through Expansion Low High Scenario Scenario Number of Annual Events Lost Due to Date 38 45 Conflicts / Lack of Space Percent Recoverable with Expansion 50% 75% Number of Potentially Recovered Events 19 34 Average Square Meter Days Per Event 52,000 58,000 Total Recoverable Square Meter Days 988,000 1,972,000 Existing Square Meter Days 6,162,000 6,162,000 Percent Potential Increase in Business 16% 32% Source: SCEC & HVS International Approximately 38 events have been lost per year, primarily due to a lack of space or date conflicts. The number of lost events grew by 14 percent in 2005 and based on year-to-date data for the first half of the year, lost business is likely to grow at a higher rate in 2006. Considering this trend, HVS assumed that lost business due to date conflicts could grow by 20 percent to 45 events per year. We further assume that somewhere between 50 to 75 percent of date conflicts could be resolved if adequate space were available in the SCEC. Based on the average amount of square metre days rented per event, the SCEC could increase its level of business between 1.0 and 2.2 million square metre days per year, a 16 to 32 percent growth in overall level of business. 5.4 SCEC PARTIALLY ACCOMMODATED DEMAND Potential growth in business that does not appear in the lost business reports relates to events that are currently underserved. The SCEC provided information on 12 existing and recurring events in the SCEC that could grow if space were available. Since information on these events is proprietary and confidential, HVS cannot identify the names of the events. However, the event organisers have requested between 87,000 to 109,000 m2 of additional space for existing events. For an analysis of unaccommodated business and its current impact on the SCEC see Table 5-5. 12-Feb-07 Analysis of SCEC Demand Page 5-13 Table 5-5 Estimate of Partially Accommodated Demand in the SCEC Low High Range Range Number of Partially Accommodated Events 12 12 Desired increase of floor area (m2) per year* 87,000 109,000 Average Event Length 6.5 days 6.5 days Unaccommodated square meter days 566,000 709,000 Accommodated square meter days (2005) 7,145,000 7,145,000 Potential Expansion of Existing Events 8% 10% *Adjusted for the frequency of the event Source: SCEC & HVS International Assuming the average event length is 6.5 days, the amount for additional space in existing events could increase by 22,000 to 109,000 square metre days. If space were available, the expansion of existing events in the SCEC would increase the amount of exhibit hall use by 8 to 10 percent per year. 5.5 KEY FINDINGS This detailed analysis of SCEC event demand reveals the following key issues facing Sydney as a convention and exhibition destination: • Demand for the Sydney is strong for all types of events. • The SCEC is operating at a level of maximum practical occupancy rather than preferred lower levels of occupancy that would increase its efficiency and capacity to accommodate events. • Due to the lack of capacity, the SCEC is loosing substantial amounts of business, which reduces the revenue of the venue and more importantly, causes significant loss of positive economic benefit to Sydney as a whole. • As the only venue with sufficient capacity to host large exhibitions, SCEC is forced to play the dual role of supporting local consumer show events and national and international conventions and exhibitions. The primary mission of the SCEC to generate economic impact by attracting out-of-town visitation for Sydney is compromised by the necessity to host local consumer shows during peak periods of demand. • Expansion alone would allow the SCEC to increase exhibition hall utilisation by 24 to 42 percent through the growth of existing events and the recovery of lost business. 12-Feb-07 6. Australian and Regional Competition 6.1 INTRODUCTION The purpose of this section of the report is to assess Sydney’s competitive position in the national and international convention and exhibition markets. HVS compared Sydney to seven national destinations and their primary venues: • Adelaide – Adelaide Convention Centre • Brisbane – Brisbane Convention & Exhibition Centre • Broadbeach (Queensland) – Gold Coast Convention & Exhibition Centre • Cairns – Cairns Convention Centre • Canberra – National Convention Centre • Melbourne - Melbourne Exhibition & Convention Centre • Perth – Perth Convention & Exhibition Centre • Sydney – Sydney Convention & Exhibition Centre This section of the report assesses the relative competitiveness of each of these convention and exhibition centres using the destination choice criteria of event planners. 6.2 EVENT PLANNER DESTINATION CHOICE CRITERIA In the convention and exhibition industry, a small number of people make destination selection decisions for many. Consequently, understanding the competitive position of Sydney requires an understanding of the criteria that event planners use to make their planning decisions. In 2005, the Sustainable Tourism Cooperative Research Centre sponsored the National Business Events Study: An Evaluation of the Australian Business Events Sector, which included a comprehensive survey of meeting and conference organisers. Over 160 event planners responded to the survey. They were asked to rate the level of importance of destination selection criteria on a scale of one to five, with one indicating low influence and five indicating high influence. Australian and Regional Competition Page 6-2 The figure below shows the average rating of the importance of 14 different destination selection criteria for meeting and convention planners. Figure 6-1 Meeting and Convention Planner Destination Choice Criteria Suitability of Venue Local Host Organisation Quality & Range of Venues Previous Event Held in City Air Access Size of Market Public Transportation Quality & Range of Hotels Support of CVB/Tourism Range of Social Activities Referrals Cosmopolitan Destination Climate Safety/Security 0.0 1.0 2.0 3.0 4.0 5.0 Source: The National Business Events Study Suitability of venues and support from local host organisations rank the highest in importance for meeting and convention planners. Suitability of venue implies that the venue has physical capacity and the necessary amenities to service the events. So, in addition to available floor area, event planners consider the functionality of the venues (e.g. ease of loading) and the level of services such as the quality of food and beverage service. Previous experience and air access also rank high in importance. The chart below summarises the National Business Study data on exhibition organiser destination choice. 12-Feb-07 Australian and Regional Competition Page 6-3 Figure 6-2 Exhibition Organiser Destination Choice Criteria Relevance of Local Market Exhibition Infrastructure Availability of Suitable Facililites Previous Events Access to Destination Travel Times Availability of Lodging Destination Appeal Safety and Security Cosmopolitan Destination Referrals 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Source: The National Business Events Study Exhibition organisers have different priorities than meeting and convention planners, which reflect the fundamental purpose of exhibitions as trade and sales events rather than information and social exchanges. Exhibition organisers depend more heavily on the local economy to support events. Therefore, market size, income, demographics, and business presence are key criteria and distinguish destinations. The suitability of venues is an important criterion shared by all types of event planners; however, the definition of suitability is not the same. Exhibition organisers need, first and foremost, flexible and functional exhibition space. Meeting and convention organisers require a mix of plenary, breakout, and exhibition space. HVS has organised this analysis of the competitive environment to focus on these event planner selection criteria, with the goal of evaluating how effectively Sydney and its venues compete for convention and exhibition business. 6.3 COMPARATIVE ANALYSIS OF NATIONAL COMPETITION Seven primary venues in Australia compete for business with convention and exhibition centres in Sydney. The following table lists these primary venues and summarises key characteristics of convention and exhibition destinations. 12-Feb-07 Australian and Regional Competition Page 6-4 Table 6-1 Competitive Australian Cities Revenue Metro Average Gross State Inner City Passengers City Primary Venue Population Room Rate Product Hotel Rooms 2004-2005 (millions) in 2005 (billions) (millions) Adelaide Adelaide Convention Centre 1.1 4,246 $113.19 5.4 60.7 Brisbane Convention & Brisbane 1.8 6,487 $128.49 15.4 168.9 Exhibition Centre Cairns Cairns Convention Centre 0.2 0 $110.83 3.6 168.9 Broadbeach Gold Coast Convention 0.4 na na 3.1 168.9 (Queensland) Centre Melbourne Exhibition & Melbourne 3.6 8,453 $133.97 20.3 228.2 Convention Centre National Convention Centre Canberra 0.3 4,910 $110.64 2.5 19.1 (Canberra) Perth Convention Exhibition Perth 1.4 2,590 $96.20 6.5 107.9 Centre Sydney Convention & Sydney 4.2 9,975 $195.69 27.9 310.1 Exhibition Centre Average National Competitors 1.6 5,237 $127.00 10.6 154.1 Sources: Australian Bureau of Statistics, HVS International, and Bureau of Transport and Regional Economics As the most populous metro area, Sydney is commonly thought of as the First City of Australia. Its population of 4.2 million is more than twice the size of the average of its domestic competition. Melbourne follows as a close second with a population of approximately 3.6 million persons. While not directly correlated with convention and exhibition demand, population serves as a proxy for the capacity to host large exhibitions. Consumer shows and, to a lesser extent, tradeshows rely on the local population for attendance. Clearly, Sydney and Melbourne have the most capacity in this regard, with Brisbane and Perth following in more distant third and fourth places respectively. The availability of lodging is a key element of tourism infrastructure that supports convention and tradeshow business. The availability of a sufficient number of hotel rooms is an absolute requirement of event planners. The price of hotel rooms also influences choice, which is determined by the supply and demand relationships in the larger hotel market. Melbourne, Sydney, and Brisbane offer the most metro area hotel rooms. Sydney has the largest hotel supply, but also the highest average room rates in Australia. While Sydney’s relatively high room rates indicate a healthy lodging market with strong business and tourism demand, the relative high average room rate also creates a disadvantage with respect to attracting price sensitive convention and tradeshow business. Sydney enjoys the best air access of any city in Australia. In fiscal year 2004-05, Sydney had 27.9 million revenue passengers as compared to 20.3 million in Melbourne, which had the second most passenger movements. This advantage is more pronounced with respect to international flights where Sydney has more 12-Feb-07 Australian and Regional Competition Page 6-5 than twice as many international revenue passengers as Melbourne (9.3 million to 4.1 million). Passenger activity in Australia has grown at an average rate of 5.9 percent per year for the past ten years. New South Wales has the largest economy of all the Australian states, approximately twice the average, and 35 percent larger than Victoria. Given the relative size of its state economy, it follows that Sydney should have the strongest market for local tradeshows, consumer shows and other events that rely on local business and attendees. As the primary urban centre in New South Wales, Sydney enjoys the most domestic tourism traffic of all the States and Territories in Australia. Queensland attracts the next highest number of domestic tourists to its coastal resort areas and this tourism infrastructure also supports convention and tradeshow activity in Brisbane, Cairns, and Gold Coast. Melbourne has average levels of tourism, reflecting its status as primarily as a business rather than tourism destination. 6.3.1 Exhibition Hall Capacity The suitability of a venue is the most important of the event planner decision criteria, as nearly 70 percent of meeting and convention organisers and near 50 percent of exhibition organisers ranked the suitability of the venue as having a high level of influence on their selection. The supply of space or the size of a venue is most often measured by its exhibition hall capacity. The following chart compares the exhibit hall capacity of the competitive Australian convention and exhibition centres. Figure 6-3 2 Exhibit Hall Capacity (m ) Melbourne ECC Sydney CEC Brisbane CEC Sydney RAS Perth CEC Adelaide CC Gold Coast CC Cairns CC Canberra NCC - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 Source: Respective Facilities The Melbourne Exhibition and Convention Centre has the largest exhibition hall capacity with 30,000 m2, followed by the SCEC with 27,200 m2. Brisbane 12-Feb-07 Australian and Regional Competition Page 6-6 Convention and Exhibition Centre and the Sydney RAS facility also have capacity to host large events with 24,100 m2 and 21,600 m2 respectively. Perth is the fifth venue in Australia that hosts rotating trade shows. The remaining venues do not have sufficient capacity to effectively compete for large tradeshows. Consequently, their business is oriented primarily toward smaller convention, tradeshows, meetings, and local events that do not require large amounts of exhibition space. Other key characteristics that distinguish convention and exhibition facilities and in part, determine their market niche include: Flexibility or divisibility of exhibition space Exhibition hall loading capacity Plenary hall or theatre seating capacity and divisibility Number of breakout meeting rooms Proximity of a headquarters hotel property Adequacy of foyer or pre-function areas Ease of transportation access Car parking capacity Overall quality and architectural distinction Service quality 6.3.2 Hotel Capacity Comparative data the number of inner city hotel rooms provides the best measure of the extent to which each destination has a supportive lodging supply (See Figure 6-4). 12-Feb-07 Australian and Regional Competition Page 6-7 Figure 6-4 Number of Inner City Hotel Rooms in Peer Markets Sydney Melbourne Cairns Brisbane Canberra Adelaide Darwin Perth 0 2,000 4,000 6,000 8,000 10,000 12,000 Source: HVS International Sydney has the highest number of quality hotels, by far, providing guests with a wide range of accommodation from budget to five-star. By comparison, Melbourne has approximately 800 fewer inner city rooms than Sydney but substantially more that most other competitors. The proximity of rooms to convention and exhibition venues is also an important consideration, and in this regard Sydney is superior to its competitors. The amount of investment in lodging infrastructure in Sydney indicates a high level of private sector participation in the convention and exhibition industry. Hotel owners and operators rely on the SCEC to induce a significant portion of their group demand. 6.3.3 Peer Hotel Market Occupancy and ARR The chart below illustrates the achieved occupancy levels in Sydney and peer markets in 2005. 12-Feb-07 Australian and Regional Competition Page 6-8 Figure 6-5 Hotel Occupancy Rates in Peer Markets Brisbane Perth Melbourne Sydney Adelaide F Cairns Darwin Canberra 0% 20% 40% 60% 80% 100% Source: Australian Bureau of Statistics Although Sydney has the most hotel rooms, it does not have the highest annual occupancy rate. The 2005 average annual hotel occupancy rate was 75.7 percent, below the level of its three primary competitors—Melbourne, Perth and Brisbane. Not only does Sydney’s have more total room capacity, it currently has a slight advantage with respect to the availability of rooms. The following chart shows the average room rate (ARR) for the peer markets. 12-Feb-07 Australian and Regional Competition Page 6-9 Figure 6-6 Average Room Rate in Peer Markets Sydney Melbourne Brisbane Adelaide Darwin Cairns Canberra Perth $0 $50 $100 $150 $200 $250 Source: Australian Bureau of Statistics Exhibitor and attendee cost is an important consideration to event organisers, and the cost of lodging is a significant component of that cost. Sydney is at a disadvantage in this regard, with the highest average room rate among the peer markets ($196 in 2005). However, the average room rate is also a reflection of the value of the destination and higher rates contribute to a vibrant hotel market. The higher room rates in Sydney also hold the promise of more growth in hotel capacity as new hotel development projects are likely to be more feasible than in the lower priced peer markets. 6.3.4 Accessibility Airline access and capacity is critical to Sydney’s attractiveness as a convention destination, particularly from long haul markets. Sydney Airport remains Australia’s busiest airport, with over 47 percent of international passenger traffic arriving or departing at Sydney and 24 percent of Australia’s domestic airline passenger movements involving a connection with Sydney. Table 6-2 shows the top ten domestic tourism destinations in Australia, the number of overnight trips, share of all domestic trips, and average nights in the region. 12-Feb-07 Australian and Regional Competition Page 6-10 Table 6-2 Air Service Data and Nights in Region Share of All Overnight Avg. Nights Market Area Domestic Trips (000) in Region Overnight Trips Sydney, NSW 4,614 8.6% 3.0 Melbourne, VIC 3,955 7.4% 3.3 Brisbane, QLD 3,125 5.8% 3.5 Gold Coast, QLD 3,031 5.7% 4.9 North Coast, NSW 2,731 5.1% 4.1 Sunshine Coast, QLD 2,484 4.6% 4.0 South Coast, NSW 2,052 3.8% 4.0 Perth, WA 2,041 3.8% 4.4 Hunter, NSW 1,654 3.1% 4.1 Australia's South West, WA 1,623 3.0% 2.8 1 Total 53,477 1 Includes destinations outside of the top ten Source: Australian Airports Association Sydney is the most popular domestic tourist destination in Australia and accommodates 8.6 percent of all domestic overnight trips in the country. Sydney is, in many respects, the cultural heart and international identity of Australia. The slightly shorter average stay in Sydney is likely the result of a higher proportion of business travellers than other coastal markets that have a higher proportion of leisure to business travellers. Melbourne and Brisbane follow Sydney as the leading urban destinations. Coastal destinations that offer beaches, tropical climates, and other environmental attractions follow in the list. Sydney Airport experienced a continued expansion of international services in 2005/06 including Emirate’s second service to Dubai, Qantas new services to Beijing, San Francisco and Vancouver and Jetstar new Trans-Tasman operations. However, the uncertainty in fuel prices is resulting in airlines seeking to preserve viability by dropping lower-profit routes, which is causing a wide range of seat capacity reductions, as demonstrated by the planned withdrawal of Austrian Airlines and Japan Airlines in early 2007. On a more positive note, the aviation industry expects a more buoyant market in 2008 owing to the new aircraft (A380) deliveries, which will primarily be focused on arrivals from Europe and the USA. 6.3.5 Destination Appeal The destination appeal of a market plays an important role in the overall convention and tradeshow potential of a locale. Event attendees typically take time to explore the host city while attending an event and many conferences, conventions, and tradeshows have significant social as well as business and 12-Feb-07 Australian and Regional Competition Page 6-11 educational components. Industry participant interviews conducted by HVS (see Section 7) indicate that Sydney has by far the greatest destination appeal of any city in Australia. 6.3.6 Climate Comparison The chart compares average maximum temperatures in Sydney with its peer markets. Figure 6-7 Average Maximum Daily Temperatures (Celsius) Adelaide Brisbane Cairns Canberra Darwin Melbourne Perth Sydney 40 35 30 25 20 15 10 5 0 jan feb mar apr may jun jul aug sep oct nov dec Source: Australian Travel Source Sydney enjoys a more moderate climate than most of its competitors, with cooler summer temperatures and warmer winter temperatures than most. Sydney has higher than average rainfall, but that rainfall is more evenly distributed throughout the year than cities in more tropical climates that have heavier rains in the summer seasons and drier winters. Sydney’s best weather is typically in the spring months, which are also the peak months for conventions and tradeshows. 6.4 DESCRIPTIONS OF NATIONAL COMPETITORS The following table summarises key features of competitive convention and exhibition venues in Australia. 12-Feb-07 Australian and Regional Competition Page 6-12 Table 6-3 Comparison of Australian Competitive Venues Summary Exhibition Number of Largest Year Open/ Competitive Venue Space Meeting Theatre Expanded (m2) Rooms (Cap.) Canberra NCC 2,400 15 1,748 1989 Gold Coast CC 4,174 9 6,021 2004 Cairns CC 3,190 18 2,330 1996 Adelaide CC 12,410 15 2,614 2001 Perth CEC 16,644 13 2,500 2004 Sydney Showgrounds 14,400 -- -- 1998 Brisbane CEC 24,088 13 3,958 1995 Sydney CEC 27,200 20 3,500 1988 Melbourne ECC 30,000 39 5,000 2008 Avg. National 14,945 18 3,459 -- Competitors *Multi-Purpose Arena Seating Source: Respective Facilities The comparison demonstrates that Sydney is no longer the first ranked city in Australia with respect to the size and quality of its primary venue. This criterion is the most important to meeting and convention organisers and highly important to exhibition organisers when selecting a destination for their events. Exhibition Space – While the combined venues in Sydney have the most exhibition space of any city, Melbourne currently has an advantage with respect to the overall size and flexibility of their exhibit halls in a single venue. That advantage will grow when the planned expansion of the Melbourne Convention Centre is complete. Although smaller in size, the primary venues in Perth and Brisbane have exhibit halls with superior divisibility and functionality relative to Sydney’s venues. Theatre Seating Capacity – The SCEC, with a plenary hall capacity of 3,500 seats, ranks third in this category, although the Gold Coast theatre seating over 6,000 is in a multi-purpose arena setting. Melbourne’s expanded convention centre will have a state of the art plenary hall with 5,000 seats and superior divisibility into smaller theatres and flat floor settings. Meeting Rooms – Sydney also falls short of Melbourne with respect to the number of available meeting rooms and is just above the average of the competitive set. 12-Feb-07 Australian and Regional Competition Page 6-13 The following descriptions of each of the domestic competitive venues are provided to assess the strengths and weakness of Sydney’s competition. 6.4.1 Melbourne Convention and Exhibition Centre The Melbourne Convention and Exhibition Centre (“MCEC”) is owned by the State of Victoria and operated by the Melbourne Convention and Exhibition Trust (“MCET”), a governmental agency established by the State in 1996. A replacement of the Melbourne Convention Centre is currently being constructed adjacent to the existing Melbourne Exhibition Centre under a Public Private Partnership arrangement between the State of Victoria and Plenary Convention Hotel Pty Ltd. Under a complex lease arrangement, the new convention centre and its attached hotel will be operated by the Hilton Corporation, but Hilton will utilise the food and beverage services operation of MCET. Since the MCEC is Sydney’s and the SCEC’s primary competitor, this report provides more detailed description of the MCEC than the other competitors. Figure 6-8 Exterior Melbourne Convention & Exhibition Centre Source: MCEC Table 6-4 Facilities Summary New Centre Existing Centre Year of Opening 2008 1990 Construction Cost $370,000,000 NA Capacity Max 2 Class- Type of Space Area m Theatre Banquet Breakouts room Exhibit Hall 14 30,000 Theatre / Auditorium 4 -- 7,463 -- -- Ballroom 1 3,000 -- 1,000 -- Meeting Room 50 5,000 -- -- 2,500 Source: Melbourne Exhibition & Convention Centre Located on the banks of the Yarra River at the west end of the current boundaries of the downtown development in Melbourne, the Melbourne Convention and Exhibition Centre (MCEC) has two distinct venues: the convention centre on the 12-Feb-07 Australian and Regional Competition Page 6-14 North bank and the exhibition centre on the South bank. The convention centre venue opened in May 1990 and the exhibition hall opened in February 1996. The exhibition hall features 30,000 m2 of clear span exhibition space. The divisibility of the hall is exceptional as the operable walls can be moved at 13 different locations dividing the hall into 1,500 m2 increments. This flexibility allows the MEC to offer event organisers a hall size that precisely matches the needs of their events. A bridge with a covered pedestrian walkway connects the two venues, but the outdoor connection creates a barrier to integrated use of the two facilities even if the walk between them is relatively short. Construction is currently underway on a $370 million renovation and expansion of the convention centre component of the MCEC. This project, which will be completed in 2008 includes a new theatre/plenary hall with a capacity of 5,000 people and a compliment of 50 meeting rooms with approximately 5,000 m2 of function space. The following table shows a summary of the new function space in the renovated and expanded convention centre. Table 6-5 Summary of new Function Space in the renovated MCEC Convention Centre Total Floor Theatre Style Function Area Divisibility Area Capacity Plenary Hall Theatre Configuration NA 5,000 6 rooms with minimum capacity of 600 Flat Floor Mode 2,500 m2 3,000 Not divisible in flat floor mode 2 Foyer 8,800 m 6,000 Not divisible Banquet Room 2,500 m2 3,000 2 rooms with 1,500 person theatre seating capacity Meeting Rooms 6 Large Meeting Rooms. 3,000 m2 3,600 Each room divisible in half with 300 person capacity 2 6 Medium Meeting Rooms 900 m 1,080 Not-divisible 6 Small Meeting Rooms 900 m2 1,080 Each room divisible in half with 90 person capacity Sub-total Meeting Rooms 4,800 m2 5,760 Minimum of 18 rooms, maximum of 30 rooms Total Function Space 18,600 m2 Source: KA Architects The renovation and expansion of the MCEC convention centre will create an integrated hotel, convention, and exhibition centre that will be the largest and most flexible convention and exhibition facility in Australia. Once the renovation and expansion of the convention centre is complete, the overall MCEC’s capacity and quality will far exceed that of the SCEC. The new Melbourne Convention Centre development is part of a larger mixed use project that also includes a hotel, retail, and residential development, as shown in the following rendering. 12-Feb-07 Australian and Regional Competition Page 6-15 Figure 6-9 Rendering of the New MCEC Convention Centre Development Source: MCEC Convention Centre The key features of the new convention centre development include: A 5,000-seat plenary hall with theatre style seating that is divisible to accommodate simultaneous events with 500 persons. The plenary hall will have a seating system that allows it to be easily converted to a flat floor venue for banquets and social events. A 2,500 m2 banquet hall Six large meeting rooms of 500 m2 each A maximum of 30 meeting rooms with a total of 4,800 m2 of breakout space Direct connection to and integration with the MEC An 8,800 m2 multipurpose foyer Integration with the proposed Hilton Hotel, which will have direct access to the function space for hotel based groups A pedestrian bridge connection to the North bank of the Yarra River, which will connect existing and future commercial demand generators to the hotel and convention centre 12-Feb-07 Australian and Regional Competition Page 6-16 The new Melbourne Convention Centre development will replace the existing Centre. MCET management has indicated that the existing Centre will be converted to some undetermined alternative use. The new plenary hall (depicted below) will be the largest and most flexible in Australia. The plenary hall has a main floor, balcony, and seats a total of 5,000 persons. Employing state-of-the-art technology, the hall is divisible in a number of ways. Both levels can be sub-divided into thirds such that three halls could host simultaneous sessions for up to 1,600 persons. Efficient movable walls can be put in place in minutes, so that the hall could be used for a general assembly and for breakout sessions on the same day. The plenary hall further divides by closing off the balcony sections, creating intimate spaces for as few as 600 persons. Figure 6-10 Proposed Plenary Hall Source: MCEC The main stage will have the capability to stage entertainment events that require elaborate stage sets and light rigging. Thus, the hall will also be suited to accommodate theatrical and concert events. A Gala Venue seating system will allow the conversion of the first level seating to a 2,500 m2 flat floor venue for banquet and social events in ten minutes. Individual rows of self-guided seating risers will store the seats below the floor when not in use. The Gala Venue system also can be used to create adjustable sight lines that can be adapted to each type of event. Ballroom and meeting room spaces are strategically located below and adjacent to the hotel room tower, connecting this function space and the hotel to the plenary hall. A 2,500 m2 ballroom on the second level is divisible in half with 12-Feb-07 Australian and Regional Competition Page 6-17 operable walls and will seat up to 1,500 persons in theatre style seating and 625 persons in a banquet capacity. Six large meeting rooms of 500 m2 each can also serve as junior ballrooms. Meeting spaces are located on levels one through three above the ground floor foyer of the plenary hall. The plenary hall is a “building within a building”, surrounded on three sides by an expansive foyer with a total 8,800 m2 of space. A glass curtain wall will provide views to the river front and downtown Melbourne. In addition to serving as a pre- function area for the plenary hall, the foyer can be used for light exhibits that may accompany a convention, or for banquet and social events. The large multi- use foyer space will enable convention events with exhibits to be contained entirely within the new convention centre area, allowing the existing exhibition hall to host simultaneous public exhibition and entertainment events. This feature creates a level of event scheduling flexibility that will exceed that of any of Melbourne’s competitors. 6.4.2 Adelaide Convention Centre The Adelaide Convention Centre (“ACC”) is owned and operated by the State of South Australia. The marketing and sales function is performed by the Adelaide Convention Tourism Authority. The ACC is centrally located in downtown Adelaide, surrounded by a city park. (See Figure 6-11.) Figure 6-11 Exterior Adelaide Convention Centre Source: Adelaide Convention Centre 12-Feb-07 Australian and Regional Competition Page 6-18 Table 6-6 Adelaide Convention Centre Facility Summary Year Opened 2001 (expansion and renovation) Construction Cost $85,000,000 Capacity Max Class- Type of Space Area m2 Theatre Banquet Breakouts room Exhibit Hall 6 10,400 5,212 4,500 -- Great Hall 5 2,010 2,614 1,280 798 Meeting Room 15 1,215 1,590 850 550 Pre-function 13 3,422 -- -- -- Source: Adelaide Convention Centre The ACC is a member of the Global Congress Centre Alliance. Formed by four convention centres in May 2004, the GCCA is a cooperative marketing and educational organisation. The GCCA enables regional city convention centres in various countries to trade marketing leads, staff exchange, and education programmes, as well as other cooperative ventures. Members of the GCCA include the Hong Kong Convention Centre, the International Convention Centre in Durban South Africa, and Hamburg Messe and Congress in Germany. A major renovation and expansion project was completed in 2001 at the cost of $85 million. This expansion of the Adelaide Convention Centre added 7,000 m2 more in exhibition space. The ACC currently has a total of 10,450 m2 of column- free exhibition space and 14 meeting rooms. Additional features include: An atrium linking new and existing exhibition halls, Banquet and conference areas, Views of the surrounding Adelaide city park from most of the pre- function/reception areas, A 367-room Hyatt hotel connected to the centre, and An underground parking structure. Recent ACC events include the 2005 Entrepreneur of the Year Awards Ceremony, the Global Social Work Convention, and the third Australian Wine Industry Environment Conference and Exhibition in 2004. With a tendency to host local, regional, and small international association/specialty events, the ACC is not considered a primary competitor in the international convention & exhibition market. 12-Feb-07 Australian and Regional Competition Page 6-19 6.4.3 Brisbane Convention & Exhibition Centre The Brisbane Convention & Exhibition Centre (“BCEC”) was built by the State of Queensland and its ownership is vested in the South Bank Corporation which is a government owned corporation. The Centre is managed under contract by Convex (Qld) Pty Ltd a wholly-owned subsidiary of Ogden International Facilities Corporation. Figure 6-12 Brisbane Convention & Exhibition Centre Source: BCEC Table 6-7 Brisbane Convention & Exhibition Centre Facility Summary Year Opened 1995 Construction Cost $203,000,000 Capacity Max Class- Type of Space Area m2 Theatre Banquet Breakouts room Exhibit Hall 8 20,000 16,000 8,000 -- Great Hall 4 4,088 3,958 2,740 -- Ballroom 3 3,040 3,040 2,030 1,839 Meeting Room 13 2,840 1,593 902 972 Source: Brisbane Convention & Exhibition Centre The BCEC opened in Queensland’s capital city in 1995. It has approximately 24,000 m2 of exhibition space and a total of 23 meeting rooms. The Queensland Government is considering a major expansion of the Brisbane Convention & Exhibition Centre and announced funding of $3.4 million for detailed design and planning work for a major expansion of the BCEC. The 12-Feb-07 Australian and Regional Competition Page 6-20 planned expansion of the Centre’s convention facilities will target an urgent need to accommodate more conventions of 400 to 600 delegates. The preliminary cost estimate of the expansion is approximately $100 million. The proposed expansion of the Centre includes an additional 11 meeting rooms with accompanying breakout areas, foyer space, and banquet facilities. Two new tiered plenary auditoriums will provide much needed facilities to accommodate an increasing demand for concurrent conventions up to 600 delegates. Known for its unique architecture and dramatic interior design, the roof makes the building a Brisbane architectural landmark. Cox Rayner, a specialist in convention centre architecture, designed an efficient and flexible venue. Figure 6-13 Floor Plan of the Brisbane Convention & Exhibition Centre Source: BCEC 12-Feb-07 Australian and Regional Competition Page 6-21 6.4.4 Cairns Convention Centre Located north of Brisbane in Queensland, the Cairns Convention Center (“CCC”) is owned by the Queensland State Government and operated by the Brisbane based Ogden International Facilities Group of Australia. Figure 6-14 Exterior Cairns Convention Centre Source: CCC Table 6-8 Cairns Convention Centre Facility Summary Year Opened 1996 Construction Cost $28,500,000 (stage 2) Capacity Max 2 Class- Type of Space Area m Theatre Banquet Breakouts room Exhibit Hall 1 1,470 5,000 3,500 1,750 Great Hall 4 1,720 2,330 1,631 816 Meeting Room 18 917 780 400 352 Source: Cairns Convention Centre The CCC has won several AIPC APEX awards (convention industry honours) including the 2004 award for World’s Best Congress and in 2005 was voted one of the top three in the world. With a total of 3,190 m2 of exhibition space, the main hall can be divided into four quadrants with 430 m2 of space each. In addition to the large hall, there are seven individual meeting rooms with space for 60 to 140 delegates depending on seating arrangements and an additional large hall with 1,470 m2 of non-divisible exhibition space. The CCC employs local exhibition, audio visual, destination, and event companies to manage their events. With no headquarters hotel, delegates stay at the various hotels in the Cairns area. 12-Feb-07 Australian and Regional Competition Page 6-22 Figure 6-15 Cairns Convention Centre Floor Plans Source: Cairns Convention Centre 6.4.5 National Convention Centre Located in Canberra, the National Convention Centre (“NCC”) is owned by the Australian Capital Territory Government and operated under a management agreement by Intercontinental Hotels Group. 12-Feb-07 Australian and Regional Competition Page 6-23 Figure 6-16 Exterior National Convention Centre Source: NCC Table 6-9 National Convention Centre Facility Summary Year Opened 1989 Construction Cost NA Capacity Max Type of Space Area (m2) Theatre Banquet Classroom Breakouts Exhibit Hall 1 2,400 2,000 1,700 1,300 Ballroom 1 650 600 500 300 Meeting Room 15 2,013 1,265 -- 616 Pre-function 4 2,130 Theatre / Plenary Hall 1 2,334 2,468 450 400 Source: NCC Opened in 1989, the NCC is centrally located in Glebe Park close to the Australian War Memorial, the National Museum of Australia, and the popular Casino Canberra. Canberra offers a number of major tourist attractions. The facility holds a variety of events including concerts, banquets, association meetings, and school functions. The NCC is located within Canberra’s central business district and is adjacent to a 295-room Crowne Plaza hotel. While working concurrently with the NCC, the hotel is advertised as an alternative to the purpose-built convention centre for smaller, more intimate events. The Crowne Plaza has 12 mid- to small-sized meeting and support rooms and a capacity for 2,500 people. 12-Feb-07 Australian and Regional Competition Page 6-24 In the spring of 2005, the Australian Capital Territory Government announced a $30 million initiative to upgrade the facility. This capital improvement programme includes aesthetic changes to the exterior of the building as well as functional improvements to the interior of the venue that address maintenance issues and improve amenities and functionality of the venue. New amenities include a fibre optic cable system, video conferencing, new kitchen systems, security infrastructure, vertical transportation systems, and improved divisibility of the theatre. These improvements are likely to improve the competitiveness of the facility. 6.4.6 Perth Convention and Exhibition Centre The Perth Convention and Exhibition Centre (“PCEC”) was developed through a Public Private Partnership, built by Multiplex Constructions Pty Ltd and financed by the Western Australian Government. The Wyllie Group owns the PCEC through a long-term lease arrangement. It is operated by Spotless Services of Australia. Figure 6-17 Exterior Perth Convention & Exhibition Centre Source: PCEC 12-Feb-07 Australian and Regional Competition Page 6-25 Table 6-10 Perth Convention & Exhibition Centre Facility Summary Year Opened 2004 Construction Cost $225,000,000 Capacity Max Type of Space Area m2 Theatre Banquet Classroom Breakouts Exhibit Hall 6 16,644 2,600 1,710 1,900 Theatre / Plenary Hall 1 -- 2,500 -- -- Ballroom 2 1,790 1,700 1,150 1,390 Meeting Room 13 1,657 1,900 1,280 Source: PCEC As the largest convention centre in Western Australia, the PCEC can accommodate up to 5,000 delegates. Construction began in 2001 and the Centre opened in 2004. As the only major city on the west coast, it is uniquely influenced by Asian markets and tradeshow business conducted in the PCEC. The PCEC is located in the centre of Perth's central business district between the Swan River and the downtown area, accessible by Perth’s public transportation system. The centre is built on top of a 1,500-space parking facility. Spread over three levels are 19 meeting rooms, able to seat between 60 and 450 people each, and 16,650 m2 of exhibition space spread over six halls. The centre also has an auditorium that can be separated into breakout spaces of varying size. On the north side of the PCEC is a 138-room Medina Grand Perth hotel which opened in conjunction with the PCEC. The PCEC is not as directly competitive with Sydney as most other national venues because of its location in Western Australia. It has better access to the rest of Asia than most of Australia. 6.4.7 Gold Coast Convention and Exhibition Centre The Gold Coast Convention and Exhibition Centre (“GCCEC”) is owned by the Queensland State Government and operated under a management agreement by Jupiter Ltd, which is part of the TABCORP Group. 12-Feb-07 Australian and Regional Competition Page 6-26 Figure 6-18 Gold Coast Convention & Exhibition Centre Source: GCEC Table 6-11 Gold Coast Convention & Exhibition Centre Facility Summary Year Opened 2004 Construction Cost $127,000,000 Capacity Max Area Class- Type of Space Theatre Banquet Breakouts m2 room Exhibit Hall 5 4,174 1,360 2,690 2,820 Arena / Auditorium 3 2,600 6,021 1,600 1,620 Meeting Room 9 1,040 1,180 400 606 Pre-function 5 2,615 -- 1,831 -- Source: GCEC The GCCEC opened in June 2004 and is the Gold Coast’s first convention centre. With two levels and 7,000 m2 of function space, it is the largest convention centre in the Queensland region. The GCCEC currently consists of a 6,000-seat arena, nine meeting rooms, and two exhibition halls. A 3,000 m2 expansion is currently in the early stages of development. The expansion will double the size of the existing exhibition halls. 12-Feb-07 Australian and Regional Competition Page 6-27 Figure 6-19 Gold Coast Convention & Exhibition Centre Floor Plan Source: GCEC The Gold Coast is one of Australia's many prime tourist destinations attracting about 10 million day and overnight visitors each year. The Gold Coast is positioned in a resort location bordered by 70 kilometres of Australia’s famed coastline and tropical rainforests. In terms of population and commerce, it is one of the fastest growing regions in Australia. 6.4.8 Summary of Domestic Competition With respect to the quality of venues, Sydney is lagging most of the domestic competition but maintains advantages in location and destination appeal. Table 6- 12 provides a summary analysis of the competitive of each national venue with Sydney and the SCEC. 12-Feb-07 Australian and Regional Competition Page 6-28 Table 6-12 Summary Analysis of Domestic Competition Competitive Venue Location/Access Size of Venue Quality of Venue Destination Appeal Ample exhibition Superior quality, Less air access Moderately good Adelaide CC and convention highly flexible with and poorer climate destination appeal capacity connected hotel High quality, Slightly smaller expansion and Third largest city in Brisbane CEC Good access exhibition capacity improvements Australia with good than SCEC under urban appeal consideration Oriented toward High quality and Great Barrier Reef, Somewhat remote Cairns CC smaller convention superior remoteness a but accessible events functionality strength Location of Aesthetic and Relatively poor national Only suitable for functional Canberra NCC access and small government but small conventions improvements population base little corporate underway presence Small exhibition but large Multi-purpose Good access as a Strongest resort Gold Coast CC convention venue decreases resort destination appeal capacity, being functionality expanded Post expansion, Excellent access Superior to SCEC largest and most Second in appeal Melbourne ECC slightly less in quality and flexible venue in only to Sydney attractive climate functionality Australia Removed from Good exhibit hall New and high majority of Relative lack of Perth CEC and convention quality state-of-the Australian destination appeal capacity art venue population Source: HVS International The number, quality, and capacity of exhibition and convention centres in Australia has dramatically increased over the past two decades, and thereby, increased competition for Sydney. Gold Coast, Perth and Adelaide are relatively new or recently expanded. Melbourne, Brisbane, and Gold Coast are expanding or contemplating expansion in the near future. In this dynamic environment, failure to expand or improve the venues in Sydney will likely result in the erosion of its competitive position in the national markets. 12-Feb-07 Australian and Regional Competition Page 6-29 6.5 INTERNATIONAL COMPETITION In addition to competing with other cities and convention centres in Australia, Sydney competes with similar venues in Asia for rotating international convention and tradeshow business. Although, the number of potential competitors is quite large and dispersed throughout Asia a few venues have historically been primary competitors. In discussions with SCEC management and the Sydney Convention and Visitors Bureau we have identified four primary Asian competitors: Hong Kong Convention and Exhibition Centre Kuala Lumpur Convention Centre Suntec Singapore International Convention and Exhibition Centre The Venetian Macao (opening in 2007) Table 6-13 International Competitors Summary Number of Capacity of Year Exhibition Attached Connected Competitive Venue Meeting Largest Open Space (m2) Hotel Rooms Hotel Brand Rooms Theatre Hong Kong Exhibition 1988 64,000 52 1,000 556 Grand Hyatt Centre Kuala Lumpur Convention 2005 9,710 20 3,000 -- -- Center Venetian Macao 2007 75,000 68 15,000 3,000 The Venetian Convention Center Pan Pacific Suntec Singapore 1995 12,000 31 596 1,284 Conrad Centennial Average International 40,178 43 1,532 1,613 -- Competitors Sydney (SCEC) 1988 27,200 20 3,500 -- -- Source: Respective Facilities Sydney’s primary venue, the SCEC, does not compare favorably to its primary international competition: The SCEC has a below average amount of exhibition space. While 27,000 m2 is sufficient capacity to support most international events, the large venues are more likely to have date availability. The SCEC has fewer breakout rooms than all venues except the Kuala Lumpur Convention Centre. Breakout rooms are an important requirement for international meetings and conferences. 12-Feb-07 Australian and Regional Competition Page 6-30 The SCEC has more plenary capacity than most venues, but as discussed earlier, the flexibility of that capacity is questionable. Other venues such as Hong Kong also use flat floor ball rooms for plenary sessions. The lack of a headquarters hotel capacity is also a disadvantage for the SCEC. Following are detailed descriptions of the international venues. 6.5.1 Hong Kong Convention & Exhibition Centre The Hong Kong Convention and Exhibition Centre (HKCEC) opened in 1988. An expansion was built on reclaimed land in 1997, doubling the size of the HKCEC at a cost of approximately US$620 million. The Hong Kong Convention and Exhibition Centre Ltd. manages the daily operations of the facility. The HKCEC makes a strong architectural statement and is a prominent feature of the Hong Kong sky line. A glass curtain wall provides views from the pre-function space overlooking Victoria Harbour. Designed by Skidmore, Owings & Merrill, LLP, the HKCEC is a prime example of a convention centre as an icon that has gained global recognition. Figure 6-20 Hong Kong Convention & Exhibition Centre Source: HKCEC, SOM Architects 12-Feb-07 Australian and Regional Competition Page 6-31 Five exhibition halls provide a total of 46,600 m2 of exhibition space. The exhibition space is not contiguous and is spread throughout multiple levels. Two multipurpose convention halls can be used for exhibits, banquets, and entertainment events. The HKCEC also provides 6,900 m2 of meeting space. Generous pre-function areas adjoining the exhibit and convention halls are sometimes used for exhibits and banquets. The HKCEC serves an important role in the Hong Kong export economy and its proximity to mainland China is an important part of its appeal. The HKCEC hosted a variety of export oriented tradeshows in 2005. Jewellery shows, textile tradeshows, and household goods tradeshows accounted for approximately 39 percent of the shows held in the HKCEC in 2005. Entertainment industry events composed 12 percent of tradeshows held in 2005. Unlike venues in Australia, much of the demand for the HKCEC is driven by events owned and organised by the Hong Kong Trade Development Council. Table 6-14 Hong Kong Convention & Exhibition Centre Facility Summary 2 Type of Space Max Breakout Area m Exhibition Hall 5 46,000 Convention Hall 2 6,100 Meeting Room 52 6,900 Theatre 2 1,000 (persons) Pre-Function Area -- 8,000 Source: Hong Kong convention & Exhibition Centre, Business Strategies Group Ltd. Air access to Hong Kong is excellent but the airport is distant from the Centre. The HKCEC is accessible by motor vehicle and public transportation. The Star Ferry, a Hong Kong ferry service, operates two routes from the HKCEC across the Victoria Harbour. With approximately 1,300 car parking spaces, and 50 bus parking spaces, the HKCEC is also accessible by city bus routes. A second venue in Hong Kong, the Asia World Expo opened for business in 2006 and competes for some of the tradeshow business at the HKCEC. This provides an important example of how two separately owned and operated venues compete with each other in the same market and may be somewhat analogous to the relationship between the Showgrounds and the SCEC in Sydney. HKCEC has maintained is primacy as the preferred location for convention and congresses because of its central city location; however the two venues have become fierce competitors for consumer and trade shows, competing on price, services, and date availability. 12-Feb-07 Australian and Regional Competition Page 6-32 6.5.2 Kuala Lumpur Convention Centre Opened in 2005, the Kuala Lumpur Convention Centre (KLCC) is the latest addition to the Kuala Lumpur City Centre, a self contained community within greater Kuala Lumpur. Designed by Neuformation Architect Malaysia and Cox Group Architects, the Centre has 9,710 m2 of exhibition space spread across five halls. The centre also has three conference halls totalling 1,800 m2, one 500-seat auditorium, and 20 meeting rooms on the third and fourth floors. All meeting, exhibition, and conference space is column-free and constructed with soundproof panels that can be arranged according to event needs. Table 6-15 Kuala Lumpur Convention Centre Facility Summary Capacity Max Area Type of Space Breakouts m2 Theatre Banquet Classroom Exhibition Hall 5 9,710 -- -- -- Conference Hall 3 1,800 1,780 1,330 1,122 Banquet Hall 1 738 740 600 459 Meeting Room 20 1,922 -- -- -- Ballrooms 2 2,389 2,380 2,000 1,491 Plenary Hall 1 -- 500 -- -- Plenary Theatre 1 -- 3,000 -- -- (Auditorium) Source: KLCC The KLCC is equipped with typical convention centre amenities including data networking, structured cabling, wireless internet, and digital telecommunication and audiovisual facilities. One of the most unique features of the Kuala Lumpur Convention Centre is called the AQUARIEA@KLCC located on the Concourse level, directly below the centre. Called an underwater “edu-tainment experience”, it aims to combines multi-media technologies and the areas natural marine resources into an educational and entertaining experience. 12-Feb-07 Australian and Regional Competition Page 6-33 Figure 6-21 Kuala Lumpur Convention Centre Floor Plan (Ground Level) Source: KLCC The Centre has three hotels less than five minutes away: integrated within the Convention Centre proper is a 622-room Traders Hotel; the adjacent 643-room Mandarin Oriental Hotel; and across the street the 335-room Imiana@KLCC. The Kuala Lumpur City Centre was designed to be a self-contained community. Measuring 100 acres, the KLCC surrounds a 50-acre park expressly designed by Roberto Burle Marx for the city centre. The entire 1.67 million m2 development is located within the capital city of Malaysia, Kuala Lumpur. The City Centre is home to the Petronas Twin Towers, the Asy-Syakirin Mosque, the Dewan Filharmonik PETRONAS (home of the Malaysian Philharmonic Orchestra), and the Suria KLCC shopping centre. These facilities were constructed during the first phase of development in 1992; the second phase was completed in 2005 with the opening of more residential facilities and the Kuala Lumpur Convention Centre. 12-Feb-07 Australian and Regional Competition Page 6-34 Figure 6-22 Aerial View Kuala Lumpur Convention City Source: Kuala Lumpur Convention City Malaysia is accessible by air, with most major airlines flying directly to Kuala Lumpur. For international destinations the country is serviced by Air Asia Fly and Malaysia Airlines. A contemporary highway infrastructure connects Malaysia to Thailand and Singapore. 6.5.3 Suntec Singapore International Convention & Exhibition Centre The Suntec Singapore International Convention & Exhibition Centre (“SSICEC”) opened in the August of 1995; it was built and operated by a publicly held company. Like the Kuala Lumpur Convention Centre, Suntec Singapore is part of a larger multiuse development in Singapore called the Marina Centre. The SSICEC is located twenty minutes from the Changi Airport. Currently in its third year of operation, the Asia’s Convention City initiative was developed by The Suntec Singapore, The Oriental Singapore, Marina Mandarin Singapore, the Swissôtel, the Stamford, Conrad Centennial, Pacific World Singapore, Singapore Airlines, and the Singapore Exhibition and Convention Bureau. With a 10,600 m2 multi-use convention hall, Suntec Singapore has the largest column-free space in Asia. On the fourth floor there is an additional 12,000 m2 Exhibition Hall. The rest of the six-floor facility consists of 31 meeting rooms allowing for 3,655 m2 of meeting space; a 2,150 m2 ballroom, a 596-seat theatre, and 3,700 m2 of multi-purpose gallery space. There are two main pre-function spaces, a concourse on the third level with 930 m2 of open space and the main lobby on the ground flood. Suntec Singapore has hosted several high-profile international events including the World Economic Forum’s East Asia Economic Summit, the International Food 12-Feb-07 Australian and Regional Competition Page 6-35 Festival, IT Show, and the 1996 World Trade Organisation Ministerial Conference. In 2006 one of their major events was the International Monetary Fund and World Bank Meeting. Table 6-16 Suntec Singapore Convention Centre Facility Summary Capacity Max Type of Space Area m2 Breakouts Theatre Banquet Classroom Reception Exhibition Hall 4 12,000 -- -- -- -- Convention Hall 3 10,600 12,000 5,000 5,442 8,800 Meeting Room 31 3,940 113 62 60 93 Ballroom 3 2,150 1,800 1,100 1,208 1,760 Theatre 1 624 596 -- -- -- Pre-function Space -- 4,600 -- -- -- -- Source: Suntec Singapore Easily accessible by Singapore’s Mass Rapid Transit (MRT) system Suntec is adjacent to the city’s Central Business District as well as the Financial District. Twenty minutes from the Changi International Airport (CIA), Suntec is served by 68 airlines and is the hub of Singapore Airlines and has direct connections to over 140 international destinations. Suntec Singapore is part of Asia’s Convention City precinct. Suntec and the ACC form a fully integrated convention city with easy access to greater Singapore. Most of the ACC facilities connect via covered walkways and/or air-conditioned tunnels. Attracting about two million visitors each month, the daily “working population” of the ACC is approximately 15,000. 12-Feb-07 Australian and Regional Competition Page 6-36 Figure 6-23 Suntec Singapore Convention City Map Source: SSCC Singapore is located on the southern edge of Malaysia and has served as a link between the east and west for many centuries. As Asia’s commercial centre, Singapore has long been a popular point of entry for both trade and travel to Asia. 6.5.4 Venetian Macao Macao is a small territory off the southern coast of China. The Macao territory consists of a peninsula, and the islands of Taipa, and Coloane. The region was under Portuguese rule until 1999. In December of 1999, sovereignty was transferred to the People's Republic of China (“PRC”) and it is now a Special Administrative Region (“SAR”) of the PRC. Due to liberalisation of gambling laws and the successful attraction of foreign investment, Macao is undergoing a rapid transition from a relatively small gaming destination of poor reputation to a large upscale resort gaming, convention and entertainment resort similar and perhaps larger than Las Vegas in the United States. 12-Feb-07 Australian and Regional Competition Page 6-37 Figure 6-24 Planned Exterior of the Venetian Macao Source: Las Vegas Sands Corporation The Las Vegas Sands Corporation is one of the many entities undertaking resort development in Macao and it is currently developing the Venetian Macao, a new convention centre, hotel, and casino, scheduled to open in 2007. The Macao development is modeled on its successful Venetian Casino Resort Las Vegas and the Sands Expo and Convention Centre in Las Vegas. This new convention centre/hotel/casino will feature 3,000 suites, approximately 425,000 m2 of convention centre, exhibition and meeting space as well as a 166,000 m2 casino. The proposed meeting space breaks down as follows: 268,000 m2 of convention space, a congress meeting centre of approximately 40,000 m2 and a theater that can seat 2,000 people. Table 6-17 Venetian Macao Conference & Exhibition Centre Facility Summary Facility Area (m 2) Exhibition Centre 75,000 Meeting & Breakout Space 11,500 Event Centre (Arena) 18,400 Source: Venetian Macao This venue has potential to attract a substantial share of the Asian convention and tradeshow market because it offers ample function space, is proximate to a large number of hotel rooms, and has the distinction of being an integrated resort destination. Consequently, its entry in the market will increase regional competition. 12-Feb-07 Australian and Regional Competition Page 6-38 6.6 CONCLUSIONS Sydney is clearly the premier destination in Australia, but its convention and exhibition venues are less efficient and of lower quality than some primary domestic competitors. The new Melbourne Exhibition and Convention Centre offers a competitive advantage over Sydney for national events and for international events that are determined to rotate to Australia. Brisbane, Sydney’s second most effective competitor has also embarked on expansion and improvement plans that will place Sydney at a further disadvantage if no action is taken to expand and improve Sydney’s convention and exhibition facilities. The quality and size of Sydney’s venues is the primary disadvantage it faces in the domestic MICE market and hampers its ability to take advantage of it unmatched destination appeal and supporting infrastructure. Internationally, Sydney faces strong competition from high quality venues in attractive destinations, including Hong Kong, Singapore, Kuala Lumpur, and emerging destinations such as Macao. Despite this competition and its disadvantage as a “long haul” destination, Sydney has met with a measure of success in the international arena. Creation of a world class convention venue would raise Sydney’s stature in the international MICE market and help Sydney to achieve a higher level of penetration in the market for large and rotating international conventions and congresses. 12-Feb-07 7. Industry Participant Surveys and Interviews 7.1 SCOPE OF SRUVEYS AND INTERVIEWS HVS surveyed and interviewed local industry participants to gain their insight into the demand characteristics and trends of the convention and exhibition industry in Sydney. Industry participants included: • Sydney Convention and Visitor’s Bureau, • Event organisers, • Professional conference organisers, and • Venue managers. 7.2 SCVB The Sydney Convention and Visitors Bureau (“SCVB”) provides the primary marketing as sales force to promote meetings, incentive travel programmes, conventions, exhibition, and special events. SCVB management and sales staff shared their views on the state of the industry and provided information on their marketing and sales effort. The SCVB focuses on attracting international conventions and tradeshows and represents Sydney in competition with other Australian cities for the opportunity to represent Australia in bids for international events (referred to herein as “Showdowns”). SCVB research over a two years period identified that the average international win rate for other Australian cities was 36% compared to Sydney’s average win rate of 63%, an indicator of Sydney’s strong destination appeal. The SCVB’s management pointed out that the key variable in promoting Sydney is its status as a “long-haul” destination, which causes event planners to focus on destination appeal and air access as the primary criteria for site selection. International event planners have a relative lack of familiarity with the destination and heightened concerns about the associated risks of an unfamiliar and distant location for their events. In contrast, in the National Business Event Survey results show that event organisers rate the quality and capacity of the venue as the most important selection criteria. Furthermore, SCVB Management believes that Sydney would benefit from having a venue that is an icon and draws interest in its own right, similar to the Sydney Surveys and Interviews Page 7-2 Opera House, which is Australia’s leading tourist attraction. Consequently, when considering expansion of venue infrastructure, Barangaroo (formerly East Darling Harbour) provides, potentially, the most significant opportunity to increase international market share due to its attractive waterside location and the opportunity to develop a state-of-the-art venue. SCVB management believes that a combination of Sydney’s destination appeal, coupled with the design and location of the venue in Barangaroo would maximise the overall potential demand for Sydney. 7.3 ANALYSIS OF LOST BUSINESS Loss of market share to Australian cities is evidenced by Sydney’s performance in competing for international business. Despite its superior win record in international competitions as compared to the win record of the Australian cities, the analysis of lost business shows that Sydney only wins one in three Showdowns or competitions against other Australian cities. The SCVB tracked the number of total bids and showdowns by financial year between 2000 and 2006, as shown in Table 7-1. Table 7-1 Number of Total Bids and Showdowns No. of Showdowns No. of Total Financial Year Showdowns Submitted as % of Bids Submitted Submitted Total Bids 2000/2001 66 22 33% 2001/2002 86 14 16% 2002/2003 63 8 13% 2003/2004 50 5 10% 2004/2005 57 4 7% 2005/2006 45 2 4% Total 367 55 15% Source: SCVB The data reveals a decline in the number of showdowns over this period. The SCVB attributes this decline to the following: • More targeted lead qualification causing a reduction in the number of qualified leads, • Different focus by the SCVB and a change of strategy for showdowns, • Realisation that a showdown is as costly to the SCVB as a standard bid, and • Limited financial resources. 12-Feb-07 Surveys and Interviews Page 7-3 Table 7-2 shows that the trends in the number and win rate of Showdowns are negative. Table 7-2 Annual Result of Showdowns by Fiscal Year Showdowns Showdowns Showdowns Financial Year Total Lost Withdrawn Won 2000/2001 6 2 5 13 2001/2002 8 3 4 15 2002/2003 4 2 5 11 2003/2004 2 1 3 6 2004/2005 0 3 2 5 2005/2006 3 0 0 3 Total 23 11 19 53 Source: SCVB The number of showdowns has declined and Sydney has won an average of less than two per year over the past three years, compared to almost five over the three preceding years. Five cities have effectively competed against Sydney as shown in Table 7-3. 12-Feb-07 Surveys and Interviews Page 7-4 Table 7-3 Australian Cities That Won Bids Sydney Competed for and Reasons for Their Selection Outcomes Number of Main Reasons for losses against national Australian City Still Pre-Selections competition Won Lost Open Melbourne 8 Funding (3) 3 4 1 Local Politics (2), International Politics (1) Destination Appeal (1) Not enough local support (1) Brisbane 8 Cost (4) 4 3 1 Funding/ strong support (2) Local Politics (1) Already hosted in Sydney (1) Adelaide 2 Proposed venue not suitable (1) 1 1 0 Local Politics (1) Cairns 2 Climate (1) 2 0 0 Local politics (1) Gold Coast 1 Local Politics (1) 0 0 1 Perth 1 Cost (1) 0 1 0 Main reasons: 6x Local Politics, 5x Cost (mainly TOTAL 22 10 9 3 due to venue cost), 4x Funding Source: SCVB Melbourne and Brisbane accounted for over 70 percent of the bids Sydney lost to other Australian cities. The main reasons for these lost bids were local politics (e.g. the relationship between national and local associations), cost (e.g. convention centre and hotel rental rates), and funding (e.g. ability to provide incentives to event organisers). Additional analysis by the SCVB revealed that Sydney was primarily losing bids on larger events. For example, between financial years 2003/04 and 2005/06, the five showdowns Sydney lost had an average attendance of 4,240 and the five it won had an average attendance of 660. The analysis of lost business conducted by the SCVB indicates improvement initiatives on multiple fronts are likely necessary to reinvigorate Sydney as an event destination relative to its primary competitors. 7.4 EXHIBITION ORGANISER SURVEYS Exhibition organisers represent the privately owned tradeshow and consumer show sectors of the industry. HVS surveyed exhibition organisers that have held events at one or more of the venues in Sydney and received information on 41 events. This sector is dominated by national tradeshows and local consumer shows as shown in Figure 7-1. 12-Feb-07 Surveys and Interviews Page 7-5 Figure 7-1 Respondent Events by Type 30 25 25 20 15 12 10 5 4 0 Tradeshow Consumer Show Combination Show Source: HVS International Among the respondents, 61 percent plan tradeshows, 29 percent consumer shows, and 10 percent plan combination shows—tradeshows that also have a public component. The large majority of organisers hold their event at the SCEC as shown in Figure 7- 2. Figure 7-2 Venues Where Respondents Plan Events 30 27 25 20 15 10 8 4 5 2 0 0 0 EC TP rk ill rk s nd eh Pa Pa A SC ou os c re pi gr R oo m ow M ly Sh O Source: HVS International Discussions with event organisers reveal that the high level of use of the SCEC is primarily due to the availability of exhibition space. Its location in Darling Harbour 12-Feb-07 Surveys and Interviews Page 7-6 is also preferred by organisers for events that have a substantial amount of national and international attendance. Most organisers of local events do not express the same preference for locating their events at the SCEC but do not see the Showgrounds as a viable alternative because of its lack of capacity. Many events cannot accommodate all exhibitors that want to participate, a key indication of a deficit of available exhibit space in a market. Unless the supply of exhibit space is constrained, event planners will typically increase the size of their shows to accommodate most of the demand for exhibit booths at their events. Among respondents, 23 percent indicated that they had waitlists of exhibitors that wanted to buy space in their shows but could not due to a lack of available space. In total, existing shows need an average of 14 percent more exhibit space than is currently available to them. The surveys and interviews also provided the opportunity for event planners to relay their comments and concerns about existing exhibit space in Sydney and factors that are currently limiting their ability to function as effectively as they would if these issues were addressed. • Event planners prefer to hold their events in Darling Harbour when they draw interstate and international exhibitors and/or attendees. • The Showgrounds is an acceptable location for consumer show and local tradeshow events. The Showgrounds’ location at the centre of the metro area, good public transportation access, and ample parking availability are its most positive attributes. However, it currently lacks exhibition and function space to accommodate most events appropriately. In recent years a number of events have moved to the Showgrounds, only to return to the SCEC in subsequent years. • Most event planners report difficulty in securing dates for their events, particularly at the SCEC. • The cost of conducting events at the SCEC reduces the profitability of shows due to higher rental rates and inefficient floor space, but does not deter use because it is the only venue available for most large events. • There is no private incentive to invest in venues, and event planners expressed concern over the perceived lack of government commitment to the convention and tradeshow industry in Sydney. 7.5 PCO INTERVIEWS HVS conducted a series of interviews with Professional Conference Organisers (PCOs) to obtain their views on the current state of the convention and meetings industry in Sydney. PCOs in Sydney plan local, state, national, and international events and most often become involved in the planning after the bid for the event is won. Some of the larger PCO companies generate a portion of their business without the involvement of the SCVB. The interview subjects included professional organisers of conventions, tradeshows meetings, incentive events, and other types 12-Feb-07 Surveys and Interviews Page 7-7 of events. HVS used a survey guide in the interviews, but the nature of the discussions was intentionally more conversational than a strict series of questions and answers. Several themes consistently emerged from the interviews. 7.5.1 Sydney is the Premier Destination in Australia The PCO contacts were unanimous in their view that Sydney is and will continue to be the most desirable event destination in Australia. Recent convention facility development in Melbourne and other areas may have increased competition and raised people’s expectations of convention centres quality and services. However, Sydney remains the preferred destination in Australia. According to the PCOs, their clients are willing to pay more for Sydney than other Australian destination. They estimate that a 10 to 15 percent cost premium for everything from space rental to hotel rooms and restaurants is part of holding and event in Sydney. In their view, Sydney’s mix of urban culture and attractions, climate, and visitor infrastructure (hotels, restaurants, retail) provides inherent advantages over other Australian destinations. They cited its reputation as a safe city and its climate as two major advantages. 7.5.2 Current Marketing Efforts are Disjointed and Lack the Proper Focus PCOs expressed a high level of concern over the effectiveness and lack of aggressiveness of existing efforts to market the city as a convention and meetings destination. Some contacts were convinced that current funding levels for marketing were grossly inadequate. Others were as or more concerned about how existing resources are being applied. In either case, there was a consistent belief that Sydney was resting on its laurels and as a result was losing market share to its competitors. Some contacts described a situation where the SCVB was grossly under funded and was doing what it could with the resources at hand. Others expressed concern that the SCVB’s marketing efforts were focused entirely on international events, which in the words of one organiser, “are declining at the moment,” and that the national market was neglected. PCOs expressed a desire for more emphasis on generating specific leads and less on general promotion of Sydney as an event destination. PCOs insisted that for certain events, Sydney needs to become more aggressive in providing financial incentives to counter similar incentives offered by competing destinations in Australia. Most often cited were the efforts of the government of Victoria to invest in the convention and meetings industry on a variety of levels—facilities, marketing, incentives—as an example of what could and should happen in Sydney and New South Wales. 7.5.3 The Sydney Convention & Exhibition Centre Views on the SCEC were generally favourable, although PCOs were uniformly aware of the new venues in Melbourne and several other cities that have placed the SCEC in a less competitive position. Because the PCOs generally plan conventions with “light” exhibits and meetings, their need for exhibition space is relatively limited. The respondents could generally fit their events into one or at the most two halls of the SCEC. They expressed frustration at not being able to 12-Feb-07 Surveys and Interviews Page 7-8 secure dates at the SCEC from September though November, the busiest months for many types of conventions and exhibits. PCOs also indicated a desire for more conference and meeting space at the SCEC. In particular, they expressed the need for breakout space that was located closer to the exhibit halls. If each hall had a block of meeting rooms adjacent to it the facility could accommodate simultaneous events more effectively and increase the overall level of utilisation, particularly in the busiest months. PCOs also noted that it would be beneficial to have a theatre or plenary hall that was directly adjacent to the exhibit space and associated breakout space. They also noted deficiencies in the ease of loading the exhibit halls and problems with trucks queuing up for several blocks down the street for larger events due to the in ability to get them into and out of the halls efficiently. 7.5.4 International Events While PCOs view Sydney as the premiere destination for international conventions and tradeshows, they express scepticism about its ability to penetrate the international market because of the limitations inherent in a long-haul destination. As one PCO put it, “if you could get people here from the US or Europe in four hours or less, Sydney would be a premiere international event destination.” As it stands, Sydney is largely limited to Asian regional events. The competition for such events has primarily been Hong Kong, Singapore, Kuala Lumpur, and Macao. In the future, the rapid development of convention centres in China will significantly increase the competition for such events. PCOs view the most growth potential in capturing a greater share of national events rather in the international arena. 7.5.5 If You Could Implement One Change What Would It Be? HVS asked PCOs to identify a single change that would most improve the ability of the Sydney to attract and accommodate events. Uniformly, PCOs believe that revamping marketing efforts is the top priority. The focus of current efforts are not only under funded, but too exclusively focused on international business and on generating the necessary private funding for the SCVB. One respondent characterised the difference between recent efforts in Sydney and Melbourne is that Melbourne has a process for working in the common interest, whereas in Sydney, operates in a less coordinated manner. The marketing and promotion efforts in Melbourne and Victoria are held up as examples of a commitment from everyone, from the government to the PCOs, to work together to elevate the City’s status as an event destination. The PCOs expressed serious concern that if a comprehensive plan to reinvent the approach to, and support for, group marketing is not implemented, Sydney is destined to further lose market share. Complementary upgrades to the SCEC, especially in terms of its breakout meeting and plenary hall capabilities, would further elevate Sydney’s future market potential. 12-Feb-07 Surveys and Interviews Page 7-9 7.6 VENUE MANAGER INTERVIEWS Venue managers at the SCEC and the Showgrounds share a longstanding desire to expand the supply of exhibition and meeting space in Sydney. Both have commissioned studies and developed detailed concepts for expansion of their respective venues but have so far failed to secure the necessary government funding for expansion. (These expansion plans are discussed in more detail in Section 7 of this report.) 7.6.1 SCEC Management The primary mission of the SCEC is to generate economic impact by attracting business tourism. Yet this goal often comes in conflict with the need to generate operating profit. Local consumer shows that dominate the SCEC schedule in certain peak months of demand generate relatively high profit margins but little interstate and national visitation. In contrast, international and national conventions generate lower profit margins but high levels of economic impact due to higher incremental spending. This conflict is inherent in the operation of most convention centres, but is exacerbated at the SCEC by the lack of adequate capacity. SCEC management is also well aware of the limitations of the venue discussed in Section 3 of this report. 7.7 Royal Agricultural Society The Royal Agricultural Society (“RAS”) holds a long-term land lease and manages the Sydney Showgrounds. Management is seeking to expand its business by taking advantage of the relatively new and ongoing development of the Sydney Olympic Park Precinct. Owing to the RAS history as an agricultural society, the Showgrounds is only one part of a complex of pavilions, stadiums, and event venues under RAS management. The expansion plan seeks not only to enlarge the exhibition space but to replace and consolidate some of the existing venues. RAS management believes the expanded Showgrounds venue would dramatically increase its capacity to host tradeshows, consumer shows, and other events. Adjacent precinct development of the Sydney Olympic Park is designed to transform the park into an urban growth centre. Development plans, some of which are currently under construction include new hotels, office space, retail, and residential. RAS believes that these developments will enhance the destination appeal of the Showgrounds and thereby its level of exhibition activity. 7.8 CONCLUSION All industry participants see a pressing need for expansion of exhibition space and improvements to convention centre space in Sydney. This need is felt most acutely by venue managers and exhibition organisers, for whom their business opportunities and profitability are severely constrained. PCOs concur with the need for expansion, but their first priority is to improve marketing and sales efforts. Industry participants involved in national and international events insist that the central City is the most appropriate location for expansion and the only location 12-Feb-07 Surveys and Interviews Page 7-10 that takes advantage of Sydney’s superior destination appeal. However, important segments of the industry: organisers of local trade shows, consumer shows, and other local events, view an expanded Showgrounds as a viable alternative for their events. 12-Feb-07 8. Demand Forecast 8.1 DEMAND SCENARIOS For the purpose of keeping the focus of this analysis on large scale events, “demand” is defined as the events, attendance, and space utilisation in major existing venues or in proposed new and expanded venues in Sydney. As such, the HVS demand projections represent a subset the entire MICE industry in Sydney. HVS developed two series of convention and exhibition centre demand estimates for the projection period of 2007 through 2016: • Baseline Scenario - Assumes that there are no significant new exhibition facilities or expansions in the market. • Unconstrained Scenario - Assumes that new facility development and/or expansion increases the supply of exhibit space sufficiently to accommodate existing levels of unaccommodated demand and future growth. For the purposes of this report we assume increases in the supply of space occur in 2009. Industry trends, analysis of the competition, input from industry participants, and the historical event demand for the SCEC and the Sydney Showgrounds were all used as factors in generating a forecast of event demand for both scenarios. The following assumptions guided the estimates of future demand in the two scenarios (see Table 8-1). Demand Forecast Page 8-2 Table 8-1 Assumptions Underlying Demand Forecasts Assumption Baseline Demand Unconstrained Demand Opening Year Not Applicable 2009 Stabilisation Not Applicable 2012 All of these events currently occur at the Recovery of 50 percent of current lost SCEC. Over a three year period the business plus new events attracted to number of events is forecast to decline International Conventions Sydney due to improved market from an historical average of and Tradeshows penetration is forecast to cause a 25 approximately 20 events to 17 annual percent increase in the number of events events due to the increase competition over current levels. form other Australian cities. These events currently take place at the Showgrounds and the SCEC. The RAS is expected to maintain its demand levels Recovery of lost business and incubation National Conventions and but rotating shows at the SCEC are likely of new shows is forecast to cause a 6% Tradeshows to decline by approximately 5 percent increase in business over average due to lack of date availability and historical levels. increased competition from other national destinations. The number of local events is based on Consumer Shows and These events currently take place at the the historical average. No anticipated Local Conventions and SCEC and the Showgrounds. The growth in the number of events, but the Tradeshows and Other forecast of the number of local events is size of events would grow. (See average Events based on the historical average. floor area.) Approximately 95 percent of these events are national and 5 percent are Recovery of lost business and increased Meetings and international. Increased competition from penetration of the international and Conferences without Melbourne and other Australian national markets are expected to cause a Exhibitions destinations is assumed to cause a 5% 20% increase in the number of events. decline over the next three years. Other Local Non- Based on historical average. Based on historical average. Exhibition Events Average Event Length Based on historical average. Based on historical average. Expanded space allows for the growth of existing shows and larger new shows Average Attendance Based on historical average. resulting in a 10% increase in average attendance. Expanded space allows for the growth of existing shows and larger new shows Average Floor Area Based on historical average. resulting in a 10% increase in average floor area. Source: HVS International 12-Feb-07 Demand Forecast Page 8-3 8.2 EVENT AND ATTENDANCE FORECASTS Applying these assumptions, HVS generated a forecast of the annual number of events by type and geographic scope. Table 8-2 shows a summary of the event and attendance forecasts for the two scenarios through in a stabilised year of demand (2012). Table 8-2 Summary of Event Estimates for Baseline and Unconstrained Scenarios in a Stabilised Year (2012) Type & Geographic Scope of Event Baseline Unconstrained Convention & Trade Shows with Exhibitions International 17 26 National 60 69 Local 5 5 Sub-total 82 100 Consumer Shows 40 40 Other 8 8 Total Exhibition Events 130 148 Meetings & Conferences without Exhbitions International 8 15 National 175 220 Local 20 20 Sub-total 203 255 Social 125 125 Concert 8 8 Total Non-Exhibition Events 336 388 Source: HVS International Combining the event forecasts with the previously described assumptions regarding event length, average attendance, and average floor area utilisation, HVS generated annual estimates of event days, attendance and occupied square metre days. The following charts highlight key aspects of the forecasts. Figure 8-1 shows the estimated the actual number of exhibition events in 2006 and estimated events between 2007 and 2016 in the two scenarios. 12-Feb-07 Demand Forecast Page 8-4 Figure 8-1 Number of Conventions with Exhibitions and Tradeshows at Major Venues in Sydney Baseline scenario Unconstrained Demand 120 100 80 60 40 20 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: HVS International The estimated annual number of conventions and tradeshows stabilises at 82 in the baseline scenario. In the unconstrained scenario the number of events increases dramatically along with the assumed facility improvements in 2009. The number of conventions and tradeshows stabilises at 100 by 2012 in the unconstrained scenario representing a 23 percent increase. Figure 8-2 shows the estimated square metre days of occupied exhibition space in the two scenarios. Figure 8-2 Estimated Square Metre Days of Occupied Exhibition Space Baseline scenario Unconstrained Demand 14.0 millions of square metre days 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 12-Feb-07 Demand Forecast Page 8-5 The number of square metre days is forecast to grow at a faster rate than the number of events because the average size of events is expected to grow by approximately 10%. The amount of occupied square metre days is 28 percent higher in the unconstrained scenario in 2012, compared to a 23 percent increase in the number of events in that same year between the two scenarios. The mix of events is also forecast to change as shown in Figure 8-3, number of conventions and tradeshows by geographic scope in the stabilised year of demand in the two scenarios. Figure 8-3 Geographic Scope of Forecasted Conventions and Tradeshows by Scenario Baseline scenario Unconstrained Demand 80 70 60 50 40 30 20 10 0 International National Local Source: HVS International The unconstrained forecast produces a richer mix of international and national conventions and tradeshows in Sydney, as the number of such events increases by nine and ten, respectively. The estimated increases in not only the raw numbers of events, space utilised, and attendance but also the increased share of international and national events underlies the potential for significant increases in economic impacts associated with conventions, tradeshows, and other events. The unconstrained scenario anticipates growth in all three geographic segments. See Figure 8-4. 12-Feb-07 Demand Forecast Page 8-6 Figure 8-4 Overall Attendance Growth in Unconstrained Scenario by Scope (Exhibit and Non-Exhibit Events) Local National International 1.4 1.2 1.0 0.8 Millions 0.6 0.4 0.2 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: HVS International On a percentage basis, international events show the largest growth through 2012 at 46 percent, followed by national and local at 25 and 14 percent, respectively. Note this estimate represents the potential for attendance at major venues in Sydney and not the overall attendance impact of the MICE industry as a whole. 8.3 SUMMARY The expansion of convention and exhibition space in Sydney is forecast to have a significant impact on the industry through growth in the size of existing events, recovery of lost business and increase market penetration in the domestic and international markets. However, realising this demand potential would require 65,000 to 70,000 m2 of exhibition space, and complementary breakout space as compared to the approximately 42,000 m2 of exhibition hall space available today at the SCEC and the Showgrounds. Sydney could attract an additional 19 conventions and tradeshows (a 23 percent increase) and approximately 50 meetings and conferences (a 25 percent increase) over the 2012 baseline scenario. Attendance at conventions, tradeshows, consumer shows, meetings, and other events would increase by approximately 155,000 delegates over the baseline scenario. The HVS estimates were used as the basis of a separate economic impact analysis performed by URS to determine the effect the potential growth of this industry could have on the Sydney and New South Wales economies. 12-Feb-07 9. Expansion Options The demand analysis discussed in Section 6 clearly demonstrates an overwhelming and immediate need for expansion exhibition space and the need for higher quality and more functional convention space in Sydney. The purpose of this section is to analyse various approaches to expansion and to recommend the preferred ones. Expansion options should consider the long-term convention and exhibition centre needs of Sydney over a 20- to 30-year life span of the propose venue. The growth in population, employment and income will increase the need for adequate convention, trade, and consumer show venues that support local industries and a growing business tourism market. HVS recommendations were developed considering this long-term framework. 9.1 FACILITY DEVELOPMENT RECOMMENDATIONS As a first step in the analysis, HVS developed a building programme recommendation that would accommodate the amounts and types of convention and exhibition business projected in the unconstrained demand scenario. The approach to development on each site or a combination of sites was designed to meet these general building programme requirements. Our building programme recommendations call for an expansion of exhibition space, meeting rooms, and ballroom space; improved quality and flexibility of convention and exhibition space; development of adjacent parking facilities; and where possible, new hotel development proximate to the venue. Exhibition Space - The overall amount of exhibition space in Sydney needs to be expanded such that the annual occupancy of exhibit halls in future years will stabilise somewhere between 50 and 60 percent. Today the SCEC exhibit halls have an annual occupancy of approximately 70 percent. Achieving a lower occupancy would allow for an increase in the number and size of events by eliminating most date conflicts and size constraints that face event organisers today. Under the HVS demand projections the number of occupied square metre days (“SQMD”) could reach 12 million per year by 2012, a 36 percent increase over the current level. We estimate that a total floor area of 65,000 to 70,000 m2 would be necessary to accommodate this level of occupancy. Today the SCEC and Sydney Showgrounds offer a combined total of 41,600 m2 of exhibition space. The overall requirement for exhibit space is in part determined by the number and configuration of venues in the market and the required amount of floor area may be greater if the exhibit space is located in two venues rather than a single venue. Meeting and Banquet Space – Convention and tradeshow event planners have demonstrated an increasing need for meeting and banquet space in order to accommodate the educational and food and beverage components of their events. Expansion Options Page 9-2 Many events also need a larger space for general sessions which are accommodated in a plenary hall. In aggregate, meeting, ballroom, and plenary hall space are often referred to as “breakout space.” As the industry has matured and competition for attendees and exhibitors has increased the demand for breakout space to accommodate more detailed educational and technical content has increased. These educational and technical sessions require significant amounts of breakout space. Most contemporary convention facilities are programmemed with a ratio of 40 to 50 percent of breakout space to exhibition space. This implies that Sydney needs 25,000 to 35,000 m2 of breakout space in its convention venues. This compares to the current supply of approximately 20,000 m2 of breakout space in the SCEC and Sydney Showgrounds. Plenary Hall – A plenary hall with capacity of 3,000 to 5,000 persons is necessary to accommodate large convention events. The Plenary Hall in the SCEC seats a maximum of 3,000 persons and the Sydney Entertainment Centre is used for larger plenary sessions. However, improved divisibility and staging capacities could greatly increase the utilisation of the existing or new plenary halls. Parking – Today the SCEC and the neighbouring Wilson Entertainment car parks offer 2,700 spaces. An additional 5,000 spaces are available in the Darling Harbour area. The Sydney Olympic Park offers ample parking around the Showgrounds and the various sports venues. Any expansion scenario should maintain or increase parking capacity or consider alternative transportation access. Convention Centre Hotel Development – Sydney currently offers more overall lodging capacity than any of its Australian competitors, and much of that supply is well located in the central business district. However, Sydney lacks a hotel that is connected to its convention centre, like the headquarters hotel being developed in Melbourne. Development of a headquarters hotel could enhance the overall attractiveness the convention venue and provide a location for simultaneous functions that are often associated with conventions. Furthermore, Sydney’s hotel properties have relatively low room counts when compared to international competitors. In Sydney, the largest property has 631 rooms and the average room count is 335, which causes event planners to use more hotel properties than they would prefer. HVS recommends the eventual development of a full-service convention hotel with no less than 500 rooms near the primary convention facility. The ultimate size of the property should be determined in consideration of what can reasonably be absorbed into the market to achieve a self-funding and financially feasible project. 9.2 PRELIMINARY SITE REVIEW In consultation with client representatives, HVS was directed to consider a range of options that would fulfill exhibition and convention centre space requirements. HVS reviewed eight potential sites for expansion including all five existing venues discussed in Section 4 and three new development sites: 12-Feb-07 Expansion Options Page 9-3 • Existing Venues o Sydney Convention and Exhibition Centre (including the Entertainment Centre and the related car park) o Sydney Showgrounds at Sydney Olympic Park o Rosehill Gardens o Playbill Venues at Moore Park o Australian Technology Park • Potential New Sites o Barangaroo o Glebe Island o Railyards at Central Station HVS performed a cursory review of all sites to eliminate from consideration those that did not appear to be feasible based on issues of site capacity, constructability, and location. Four sites were eliminated on this basis, and building programme recommendations were created for each of the four remaining sites. The strength and weakness of each approach to development was evaluated in detail resulting in a priority ranking of each approach. Four sites were eliminated from further consideration based on capacity, constraints, location, and constructability. • Central Station Rail Yards – The rail yards are located to the Southwest of Central Station and provide a very large site for potential development. However, development of this site would require construction of a deck over the rail lines that would serve as a site pad for convention centre development. A tour of the site area revealed the following issues that would adversely affect convention or exhibition centre development. o The ability to construct over the rail lines is problematic. Even if rights to build could be obtained, the costs and difficulties of building over active rail lines would be prohibitive. o The surrounding neighbourhood does not contain highly supportive land uses. The hotel supply in the immediate area is of lesser quality and amounts than necessary to support convention centre development. The availability of other amenities including restaurants, retail, and entertainment opportunities is also limited. o Although it could be improved, the pedestrian connection to the amenities in Darling Harbour is poor. 12-Feb-07 Expansion Options Page 9-4 • Playbill Venues at Moore Park – This site lacks capacity for expansion unless existing land uses are displaced. While existing entertainment amenities proximate to the venue create an active pedestrian and tourism environment, the area lacks adequate hotel supply and is too distantly removed from the central city. • Australian Technology Park – Expansion would require the replacement of existing facilities and heritage considerations would likely prevent the displacement of existing building uses. Access to the site is problematic and while it is currently well utilised, it simply lacks capacity for any significant expansion. • Rosehill Gardens – The existing 4,000 m2 exhibition hall is a small component of the overall operation of the Rosehill Gardens, which features horse racing as its primary activity. Any significant expansion option would most likely interfere with the core business of the owner and operator. 9.2.1 User site preferences Industry participants (exhibit organisers, associations, PCOs, and CVB representatives) communicated a clear preference for locating convention and tradeshow events that have international and interstate attendance in the central business district and Darling Harbour area. Convention delegates and tradeshow attendees are the ultimate consumers of the convention product, and this product includes many elements in addition to the venue, including transportation, lodging, retail, and entertainment amenities. Furthermore, these amenities need to be available during the event as well as before and after. The combined availability and quality of these elements of the convention product determines the value of Sydney as a convention and tradeshow destination. For this reason, the ability to continue to host conventions and tradeshows in the Darling Harbour area should be the top priority of venue expansion. In contrast, consumer shows and local events do not require the same mix of tourism amenities as most attendees come from the local area and are less likely to engage in associated tourist activities. Consumer shows and local event organisers view the proximity to the local population and their income as the most important consideration. Ease of transportation access and the functionality of the venue are much more important than the availability of nearby tourism amenities. For this reason, HVS believes that expansion of the Sydney Showgrounds at Sydney Olympic Park could well serve the local event and consumer show market, which constitutes a substantial component of the demand for exhibition space in Sydney. 9.3 MAJOR SITE ALTERNATIVES HVS developed building programme recommendations for each of the four remaining sites that meet the overall space requirements and separately addressed the needs of local and non-local events. 12-Feb-07 Expansion Options Page 9-5 9.3.1 Development at Barangaroo Barangaroo (formerly East Darling Harbour) is the only remaining site proximate to the central business district that has capacity for significant new convention and exhibition centre development. The Barangaroo Site is 22 hectares with 1.4 km of shoreline. Surrounding land uses include the historic neighbourhoods of Miller Point, and the Rocks. The Sydney Harbour Bridge is to the east and Darling Harbour is to the south. Currently land uses on the site include a container port and cruise ship terminal. With the movement of the container activities to a new location, much of the site has become available for redevelopment. The site is currently under the purview of the Sydney Harbour Foreshore Authority (“SHFA”), a State Government agency. In 2005, the State Government of New South Wales conducted an urban design competition for the redevelopment of Barangaroo. The development brief required that respondents present a plan that addresses the following general development principals. • A minimum of 50 percent of the site is to be designated as parkland. • The development should “enhance the growth and positioning of Sydney as the premier business, cultural and living centre (emphasis added) of the Asia-Pacific region.” • Development should be self funding. • Incorporate a 1.4 km Public Foreshore Promenade. • Create commercial development. • Strengthen local communities. • Be environmentally sustainable. The competition resulted in the selection of a plan from Hill Thalis Architecture + Urban Projects. The plan is impressive in its scope and urban design. However, the plan does not include any provision for a convention and exhibition centre. Land uses include residential, commercial, and parkland development. In our view, without the inclusion of significant public buildings, the plan may fall short of creating a “premier business, cultural, and living centre.” Since the State Government has already accepted this submission, the use of Barangaroo for convention centre uses would require a reworking of the plan. HVS was asked to consider an approach to convention centre development on Barangaroo that is consistent with the principles of the development brief and, to the extent possible, consistent with the accepted urban plan. Since the focus of this development would be for national and international conventions, tradeshows and conferences, it would need approximately 40,000 m2 of contiguous exhibition space to accommodate large tradeshows and conventions with exhibitions and smaller simultaneous events. Since the constraints of 12-Feb-07 Expansion Options Page 9-6 Barangaroo site would most likely preclude future expansion, consideration should be given to overbuilding in the short term so that long-term needs are addressed. A range of possible building sizes are shown in Table 9-1. Table 9-1 Barangaroo Building Programme Type of Space Low High Total Exhibition Space 30,000 m2 40,000 m2 Meeting and Ballroom Space 15,000 m2 20,000 m2 Plenary Hall 3,000 seats 5,000 seats Proximate Hotel Rooms 500 rooms 750 rooms Future Exhibit Hall Expansion none Green design & technology; Iconic conference Other Considerations centre design to complement the Opera House Source: HVS International A concept plan provided by Skidmore, Owings & Merrill LLP (“SOM”) demonstrates that the recommended development of up to 40,000 m2 of contiguous exhibition space can be accommodated on the site and retain the desired level of commercial development currently planned for Barangaroo. The SOM site plan achieves the desired maximum building programme and fulfils the objectives of the Government’s design brief through: Innovative use of green roof technology which allows for multiple use of the site as exhibition space, parkland, and commercial development; Creating an iconic convention or conference centre building at the northern most point of the site that would provide a plenary hall, ballroom, and meeting space over a public plaza; Preserving the foreshore promenade; Improving the connection to the local neighbourhood over Hickson Road; Creating an environmentally sensitive concept that preserves the requirement for 50 percent parkland; Providing excellent and separate vehicular access for truck loading and event attendees; and Potential to “self-fund” or at least partially fund the project through redevelopment of the existing SCEC site. See Figures 9-1 and 9-2. 12-Feb-07 Expansion Options Page 9-7 Figure 9-1 Barangaroo Convention and Exhibition Centre Concept (scaled site diagram) Source: Skidmore, Owings & Merrill LLP 12-Feb-07 Expansion Options Page 9-8 Figure 9-2 Floor Plan Concept for Barangaroo Convention and Exhibition Centre and Iconic Architectural Images Source: Skidmore, Owings & Merrill LLP 12-Feb-07 Expansion Options Page 9-9 The conference centre building would be placed over a public plaza and reach into Darling Harbour, creating a gateway to Sydney and an icon that has potential to be known throughout the world as is the Sydney Opera House and Harbour Bridge. The images shown in Figure 9-2 illustrate a type of structure that could be successfully implemented. A cross section of the site (looking south to north) shown in Figure 9-3 demonstrates the compatibility of exhibition space development with the existing site plan. Figure 9-3 Barangaroo Convention and Exhibition Centre Conceptual Cross Section Source: Skidmore, Owings & Merrill LLP The topography of the site lends itself to potential construction of the exhibition hall above ground level along with improved pedestrian links to the east over Hickson Road. The exhibition hall structure would support commercial buildings and parkland. Hickson Road would provide access to the convention centre for truck loading and other vehicular traffic. 12-Feb-07 Expansion Options Page 9-10 Meeting space and pre-function areas would be placed to the west side of the exhibition halls, overlooking parkland, and providing spectacular views of Darling Harbour. Meeting space would be distributed along the length of the exhibition hall on an upper level. As in the Hill Thalis Architecture + Urban Projects plan, the height of the exhibition centre and the commercial development above it could be taller on the south and of the site and gradually decrease in size as the development moves toward the north. Vehicular access for attendee drop off can also be provided on the west side of the site along the front of the exhibition hall. The combination of 1) an efficient drop- off zone, 2) loading from the back of the exhibition halls, and 3) the proper distribution of meeting space would greatly enhance the ability to host several simultaneous events and represents a quantum leap in flexibility over the current configuration of the SCEC. The structural requirements that make this concept feasible are not exceptional and have been implemented on many projects throughout the world. The following image of Millennium Park in Chicago (the largest green roof in the world) is shown in Figure 9-4. Figure 9-4 Millennium Park in Chicago (the largest green roof in the world) Source: Skidmore, Owings & Merrill LLP 12-Feb-07 Expansion Options Page 9-11 Millennium Park is constructed over commuter rail lines and a large car park that serves the central business district of Chicago. A Frank Geary designed amphitheatre, sculptures, monuments, fountains, gardens, and recreational uses combine to form one of the premier urban landscapes in the world. Similarly, development at Barangaroo can strengthen the urban environment in Sydney’s central business district. The site concept provided by SOM for this report should be viewed as preliminary and is only presented to establish the feasibility of constructing a convention and exhibition centre on the site in a manner that is consistent with the Government’s design brief. Additional concept planning and design would be necessary to refine the approach to development. The Barangaroo site offers an opportunity for Sydney that no other site can match. On it, Sydney could achieve the goal of hosting the premier convention centre in the world, known for its design, functionality, and environmental sensitivity. A monumental conference centre would serve as a tourist attraction in itself, and would complement the world-renowned, iconic monoliths of the Sydney Harbour Bridge and the Opera House. This approach to convention centre development has potential to address all the requirements of the Barangaroo development brief, including preserving parkland and maintaining the same level of commercial development already included in the approved plan. While the convention centre itself would not be self-funding, the reuse of the existing SCEC site for is highest and best creates new funding potential for SHFA that is not included in the existing SCEC expansion plan. 9.3.2 Expansion of the SCEC Expansion and improvement of the SCEC has been discussed for several years and management of the SCEC has proposed a redevelopment plan. The expansion option proposed herein is consistent with the general outlines of that plan as described to HVS by SCEC management. The management plan was developed without consideration of any other venue expansion in Sydney. HVS offers an alternative programme plan that assumes the Sydney Showgrounds would also be expanded as a consumer show venue, as shown in Table 9-2. 12-Feb-07 Expansion Options Page 9-12 Table 9-2 SCEC Building Programme Including Expansion SCEC Type of Space HVS Plan (m2) Management Plan (m2) Exhibition Space Existing 27,200 27,200 Expansion 10,000 20,000 Total Exhibiton Space 37,200 47,200 Meeting and Ballroom Space Existing 9,736 9,736 Expansion 5,000 10,000 Total Exhibiton Space 14,736 19,736 Theatre Seating Existing (Bayside and Parkside) 4,500 4,500 Expansion (in new theatre) 1,000 1,000 Total Seating Capacity 5,500 5,500 Convention Hotel none Future Exhibit Hall Expansion none Improvements to existing meeting Other Considerations and plenary space Source: HVS International The SCEC management plan could add 20,000 to 25,000 m2 of exhibition floor area, growing the total available space to between 47,000 and 52,000 m2. However, if the Sydney Showgrounds were also expanded as a consumer show venue, the size of the SCEC exhibit hall expansion could be reduced to perhaps 10,000 m2, and more resources could be dedicated to improving the functionality of existing convention spaces. A smaller expansion could be tailored to the ability to host more simultaneous convention and tradeshow events rather than events that occupy the entire venue. As described earlier in Section 4 of this report, the divisibility of the ballroom and breakout space and the functionality of the plenary hall are in need of improvement. The SCEC expansion could occur on the site of the Wilson Entertainment Car Park and the Sydney Entertainment Centre, as shown in Figure 9-5. 12-Feb-07 Expansion Options Page 9-13 Figure 9-5 SCEC Expansion Area Source: SCEC and HVS International A two-phased expansion would be necessary to maintain operations of the venue during construction. In the first phase, the new exhibition halls and meeting space would be put in place followed by a second phase of improvement to the existing facilities. Certain obstacles are apparent in this expansion plan that would most likely have the effect of increasing the overall project costs. • Roadway relocation would be necessary to connect the current exhibit halls with the new buildings. • Two current land uses, Wilson Entertainment Car Park and the Sydney Entertainment Centre would have to be displaced to accommodate an expansion of 20,000 m2. On the Wilson Entertainment Car Park would be involved in a 10,000 m2 expansion. • SCEC management reports that a site survey revealed the presence of significant utilities underground that would have to be relocated. • Continuous operation of the convention centre would be problematic during the second phase of improvements. • Options for nearby hotel development would be limited by site capacity constraints. The outcome of this expansion scenario would greatly improve Sydney’s primary convention centre venue and maintain its strategic location in the Darling Harbour 12-Feb-07 Expansion Options Page 9-14 area. However, certain compromises are inevitable in an expansion plan that is not a part of any original master plan. Although expansion of the SCEC would substantially improve Sydney’s standing in the national and international MICE industry, this approach would not provide Sydney with the premier venue in Australia. 9.3.3 Glebe Island Glebe Island is located just west of the central business district proximate to the Balmain Peninsula. A relatively large site along 2.1 km of waterfront forms a crescent around White Bay. The residential areas of Balmain, Rozelle, and Pyrmont overlook the site, as shown in Figure 9-6. Figure 9-6 Glebe Island and White Bay Source: Glebe Island Master Plan (2000) The primary asset of the site is its size and ability to accommodate a large venue, as well as future expansion of that venue. The site is largely vacant and not existing development would be displaced. The Anzac Bridge connects the site to the central business district and Darling Harbour but pedestrian connections to tourism amenities are not currently available, as shown in Figure 9-7. 12-Feb-07 Expansion Options Page 9-15 Figure 9-7 View of Glebe Island and the Anzac Bridge Source: Glebe Island Master Plan (2000) Consequently, the site is more suitable for a consumer show venue than a convention centre. For this reason, HVS recommends that any exhibition centre development on this site would necessitate the continued operation of the SCEC. With this presumption, HVS developed a building programme shown in Table 9-3. Table 9-3 Glebe Island Building Programme Type of Space Low High Total Exhibition Space 40,000 m2 40,000 m2 Meeting and Ballroom Space 10,000 m2 15,000 m2 Plenary Hall none Convention Hotel 300 rooms 500 rooms Future exhibit hall expansion 20,000 m2 20,000 m2 Other considerations SCEC remains in operation Source: HVS International A 40,000 m2 exhibition could accommodate the demand for the largest consumer shows in the market today. Future expansion of 20,000 m2 may be necessary to support growth in future demand and a master plan should provide for that expansion. As a consumer show and local tradeshow venue, the amount of necessary meeting and ballroom space is less than what would be required in a 12-Feb-07 Expansion Options Page 9-16 convention centre. HVS recommends 10,000 m2 of breakout space, but we do not see the need for a theatre venue as long as the SCEC remains in operation. The primary disadvantage of this site is lack of business tourism infrastructure in the surrounding neighbourhood (e.g. hotels, restaurants, entertainment venues, etc.). Any planned convention centre development should be accompanied by a precinct master plan that would, over time improve the suitability of this site as a convention destination. Nearby hotel development would be beneficial to the operation of the exhibition centre. However, a hotel development in this location would be less feasible than in the central business district or Darling Harbour because it is removed from the sources of commercial and leisure lodging demand. A light rail connection to the site could dramatically improve its accessibility, but that would be a very expensive proposition. Development on this site would require a long-term vision for neighbourhood improvement. 9.3.4 Expansion of the Sydney Showgrounds The Sydney Showgrounds (described in detail in Section 4 of this report) is currently the secondary exhibition venue in Sydney, hosting approximately 30 trade and consumer shows each year. Despite the inadequacy of current facilities, existing event demand has demonstrated that the Showgrounds site is viable for local exhibitions. Its primary advantages are its location in the centre of the Sydney metro area, excellent transportation access, and availability of parking. For this reason, HVS recommends expansion and improvement of the Sydney Showgrounds to serve the local consumer and tradeshow market. This expansion should take place in addition to convention centre redevelopment at either Barangaroo or the SCEC. The Royal Agricultural Society (“RAS”), the owner and operator of the Sydney Showgrounds, has proposed a concept for expansion. After reviewing that plan, HVS recommends an alternative building programme plan that we believe will better serve existing and future levels of demand in the market place. Both programme plans are shown in Table 9-4. 12-Feb-07 Expansion Options Page 9-17 Table 9-4 RAS Building Programme Including Expansion HVS Plan RAS Management Type of Space 2 2 (m ) Plan (m ) Exhibition Space Existing* 14,400 14,400 Expansion 26,000 14,700 Total Exhibiton Space 40,400 29,100 Meeting and Ballroom Space Existing* 7,200 7,200 Expansion 7,500 unknown Total Exhibiton Space 14,700 Theatre Seating none Convention Hotel none Future Exhibit Hall Expansion Yes master planned Create positive interface between exhibiton center Other Considerations and Sydney Olympic Park Precinct Source: HVS International The RAS expansion plan would roughly double the amount of exhibit space, bringing the total to approximately 29,000 m2 (excluding the Dome of 7,200 m2, which is multi-purpose space). This is accomplished by adding on to the existing exhibition halls in the configuration shown in Figure 9-8. 12-Feb-07 Expansion Options Page 9-18 Figure 9-8 RAS Expansion Plan Source: Royal Agricultural Society Currently, the exhibit hall loads from two sides of the building. Pre-function space is wholly inadequate and overlaps the loading docks. The RAS plan addresses this problem by creating a new pre-function area in between the existing exhibition hall and a new hall. HVS has proposed an alternative plan that will: • Provide more floor area to accommodate existing demand in the market. • Make the new exhibit halls contiguous with the existing hall. • Create more meeting and breakout space. • Improve pedestrian access with vehicular drop off zones that separately serve each exhibit hall. • Improve the urban impacts on the Sydney Olympic Park Precinct. The later concern regarding the urban impact of the development is particularly important in view of the master plan for development of Sydney Olympic Park. The 12-Feb-07 Expansion Options Page 9-19 Vision 2025 master plan states the goal of “transforming the area of Sydney Olympic Park adjacent to the rail station into a vibrant town.” Vision 2025 calls for 110,000 m2 of commercial office space, 45,000 m2 of leisure/entertainment/retail land uses, 24,000 m2 for hotel uses, 1,300 residential unites for 3,000 residents, and other cultural and institutional development. Further office and hotel development is currently under construction in the Precinct. HVS’ recommendations for building programme development at the Sydney Showgrounds are intended to provide a framework for a development that will support market demand for local trade and consumer shows and enhance the vibrancy of the Precinct. Figure 9-9 shows the expansion concept. Figure 9-9 HVS Expansion Concept Source: Royal Agricultural Society and HVS International The design of the venue should allow for the separation of truck loading and attendee access to the building. Murray Rose Avenue, which is between the Sydney Showgrounds and the Sydney Olympic Park Railway Station and Showground Road, should provide pedestrian and vehicular access for event attendees. The design of the pre-function areas can create an effective interface between the building and the street, one that provides an inviting pedestrian environment. Truck loading should be located at the back of the halls such that each hall can be loaded independently. 12-Feb-07 Expansion Options Page 9-20 A meeting room block should be integrated with access from Showground Road and from the exhibit halls and the Dome building. Parking would be provided under the exhibition hall as in the RAS plan. While most consumer shows do not require meeting space, many local tradeshows do. The Sydney Showgrounds could achieve higher occupancy by hosting local tradeshows, smaller local area conferences, and social events. HVS’ recommendations would require replacement of the existing exhibit halls, which would also afford the opportunity to provide state-of-the art halls that create efficiencies for exhibitors and other users. The Dome could be maintained and serve as an anchor for the architecture of the rest of the building. The concept presented above is just one of many ways to achieve the necessary amounts of highly functional space and supports the overall development of the Precinct. Further physical planning work will be needed to consider future expansion alternatives and to determine the optimal approach to achieving the recommended building programme. 9.4 EVALUATION OF SITE ALTERNATIVES To evaluate the relative strengths and weaknesses of the four alternative development sites discussed above, HVS considered 22 criteria related to site capacity, location, availability of supporting infrastructure, constructability, and other considerations (See Table 9-5). Each concept was rated on a scale of one to three with: • 1 = poor compliance, • 2 = acceptable compliance, and • 3 = good compliance. The rating criteria can be divided into five categories: site capacity, suitability of location, availability of supporting infrastructure in the surrounding neighbourhood, constructability, and other considerations. 9.4.1 Site Capacity Although a detailed land planning exercise (which is not a part of the scope of this study) would be necessary to precisely determine the size of the building foot prints for each scenario, HVS had sufficient information to make a general determination as to whether the sites had capacity to accommodate the various elements of the proposed building programme. Site capacity issues were separately rated for: • The amount of exhibition space recommended for each site, • The amount of convention and conference space recommended for each site, • On-site parking requirements, 12-Feb-07 Expansion Options Page 9-21 • A convention hotel, and • Future expansion opportunities. 9.4.2 Suitability of Location Similarly, the site location and its urban context were considered with regard to the types of activities that would occur in each venue. The suitability of the location was separately rated for: • Convention and conference use, • National and international tradeshows, • Local trade and consumer shows, and • Lodging. 9.4.3 Supporting Infrastructure The availability of supporting infrastructure has many components that influence the attractiveness of a venue to potential users. In its evaluation, HVS considered the following issues: • Accessibility to the airport, • Accessibility by trucks for loading and unloading, • General transportation access for attendees including vehicular and public transportation modes, • Parking availability in the surround neighbourhood, • Proximity to hotel rooms of the quality necessary to support event attendees, • Proximity to retail and entertainment opportunities, • Proximity to cultural activities and events, • The quality of the pedestrian environment and the degree of “walkability” to and from the venue, and • The perception that the site is safe for event attendees and delegates. 9.4.4 Constructability Although a detailed financial feasibility of each alternative is not within the scope of this report, HVS was able to rank each site on key indicators of financial feasibility, including: 12-Feb-07 Expansion Options Page 9-22 • The capacity of the site to generate income producing activities that would support financial operations. More attractive sites with a variety of land uses are likely to produce more income. • The degree of difficulty in constructing the building taking into account the complexity of the structure and other site factors that would influence the timing and cost of construction. • The extent to which construction would interfere with existing operations. Expansion options would obviously be lower rated than new construction. 9.4.5 Additional Considerations Additional important considerations include: • The ability to generate a positive or even inspiring aesthetic impact that influences the overall appeal of the venue and the destination appeal of Sydney. • Neighbourhood impacts consider the positive or negative impacts on surrounding land uses and whether the project will improve or degrade the area immediately adjacent to the project. 12-Feb-07 Expansion Options Page 9-23 Table 9-5 Ranking of Sites and Plans by Evaluation Criteria n sio pan d Ex un n ro sio wg pan nd ho oo Isla S gar Ex ey ran be EC dn Gle SC Ba Sy Site capacity for: Recommended exhibit space 3 3 3 3 Recomended conference space 3 3 3 3 Parking 3 2 3 3 Convention hotel 3 1 2 2 Future expansion opportunities 1 1 3 2 Suitability of location for: Conventions and conferences 3 3 1 1 National and international tradeshows 3 3 2 2 Local consumer and tradeshows 3 3 3 3 Convention hotel 3 3 1 1 Availability of supporting infrastructure Accessibility to airport 3 3 3 2 Accessibility by trucks for load/unload 3 1 3 3 General transportation flow/ access 2 2 2 3 Parking accessibility/ availability 2 2 3 3 Proximity to hotel rooms 3 3 1 2 Proximity to retail & entertainment 3 3 1 2 Proximity to cultural activities/ events 3 3 1 2 High degree of "walkability" 3 3 1 2 Perception of safety 3 3 2 3 Constructability Ease of development 2 1 3 3 Construction interruption of operations 3 1 3 2 Other considerations Aesthetic image/impact 3 2 2 2 Neighbourhood impact 3 2 3 3 Ratings Key 3 Good 2 Acceptable 1 Poor Source: HVS International While a certain level of objectivity can be achieved in rating the development options based on each of these criteria, the relative importance of each criterion will differ depending on the viewpoint of the observer. For example, a convention event planner will be more concerned with the proximity of lodging than would a consumer show organiser. For this reason, HVS created a system of rating each criterion in importance on a scale of one to five, with one being of least importance and five being of greatest importance. For each criteria, the rating (1 to 3) was 12-Feb-07 Expansion Options Page 9-24 multiplied by the importance of the criteria (1 to 5). The sum of the ratings provides an overall score for each plan. These scores can then be ranked. HVS created two different rankings assuming the perspective of: 1) an organiser of local exhibition events, and 2) a national and international tradeshow and convention organiser. The results of these weighted rankings are compared to an un-weighted ranking in Table 9-5. Table 9-5 Ranking of Site Alternative Weighted for: Site Alternative Unweighted Exhibitions Conventions Score Barangaroo (EDH) 183 192 247 SCEC Expansion 153 161 208 Glebe Island at White Bay 147 175 180 Sydney Showground Expansion 156 181 199 Rank Barangaroo (EDH) 1 1 1 SCEC Expansion 3 4 2 Glebe Island at White Bay 4 3 4 Sydney Showground Expansion 2 2 3 Strength of Rank (compared to average) Barangaroo (EDH) 115% 108% 118% SCEC Expansion 96% 91% 100% Glebe Island at White Bay 92% 99% 86% Sydney Showground Expansion 98% 102% 95% Source: HVS Barangaroo emerges as the top ranked site opportunity in all rankings. The Sydney Showground expansion ranks second highest with respect to exhibitions but third behind the SCEC expansion for conventions. The strength of each ranking was assessed by comparing the score of a development approach to the average score for all site alternatives. Here, Barangaroo shows the greatest advantage as convention venue, scoring 18 percentage points higher than the second ranked SCEC plan. The Glebe Island exhibition plan demonstrates the weakest overall rankings. 9.5 THREE DEVELOPMENT OPTIONS This report clearly demonstrates that significant investment in convention and tradeshow infrastructure is necessary to maintain and improve Sydney’s position in the national and international event markets. Since no single site can accommodate the total amount of exhibition space required to meet Sydney’s demand potential, a combination of sites must be utilised. The overall combined approach to development should attempt to create the maximum benefit to all key players in the convention and exhibition industry. 12-Feb-07 Expansion Options Page 9-25 HVS recommends three possible options for development as shown in order of preference in Table 9-6. Table 9-6 Evaluation of Expansion Options Site Utilisation Barangaroo SCEC Showgrounds Glebe Island Iconic convention and Reuse for highest and best Expand showgrounds with Option 1 exhibition centre No convention or exhibition land use (commercial, hotel, state-of-the-art consumer Preferred development consistent with centre development retail, etc. ) oriented exhibition venue existing land use plans Expand SCEC exhibition Expand showgrounds with No convention or exhibition halls, increase meeting No convention or exhibition Option 2 state-of-the-art consumer centre development space, and improve centre development oriented exhibition venue flexibility New state-of-the-art Add meeting space and No convention or exhibition consumer oriented No convention or exhibition Option 3 improve SCEC flexibility and centre development or exhibition venue with master centre development functionality expansion plan for future convention uses and adjacent hotels 9.5.1 Option 1 As the preferred option, HVS recommends a new convention and exhibition venue at Barangaroo, along with reuse of the existing SCEC site, and consumer show venue expansion at the Sydney Showgrounds. This approach is the only option that has the potential to place Sydney in the undisputed lead in the Australian market and establish itself as a premier destination in the international MICE market. • Only the Barangaroo site presents the opportunity to create an iconic building that would be recognised throughout the world and become an attraction in itself. • The Barangaroo development plan can be accomplished in a manner that is consistent with the government’s objectives for redevelopment of the site using the innovation of a dual land use - exhibition centre and park land. • Convention centre development at Barangaroo should be viewed as a replacement for the SCEC, requiring the subsequent redevelopment of the existing SCEC site. A significant advantage of this option is that it allows for the continuous operation of the SCEC while the development takes place at Barangaroo. The current SCEC site could be redeveloped for its highest and best uses, and those development rights could generate additional income to the government to at least partially offset the cost of development at Barangaroo. 12-Feb-07 Expansion Options Page 9-26 • The simultaneous redevelopment of the Showgrounds into a state-of-the- art exhibition venue would be essential to alleviate schedule pressure on the Barangaroo venue by moving local consumer shows and tradeshows out of the central city. Every effort should be made to achieve governmental approval of this plan before consideration of secondary alternatives. 9.5.2 Option 2 Expansion of and improvements to the SCEC along with expansion of the Showgrounds would address the need for more exhibition and convention centre capacity, but has less potential than the Barangaroo development to improve Sydney’s destination appeal. • SCEC expansion and modernisation would have to be accomplished while the existing venue is in operation. • As in Option 1, expansion Sydney Showgrounds would be necessary to alleviate pressure on the SCEC schedule. • With the redevelopment of the Showgrounds the size of the SCEC expansion could be half as large as the expansion originally proposed by SCEC management (e.g. 10,000 m2 rather than 20,000 m2 of exhibition space). 9.5.3 Option 3 Development of Glebe Island for convention and exhibition uses is the least attractive option because the surrounding neighbourhood is not supportive of convention activity. Consequently, the initial orientation of this venue would be for local exhibitions. • The primary advantage of this option is that it does not displace any existing development. • Currently, the primary disadvantage of this site is the lack of supporting infrastructure. This option should be viewed as part of a long-term master plan that involves redevelopment of the Glebe Island and White Bay area into a retail and entertainment precinct that would be supportive of a convention and exhibition centre. • The SCEC would remain in operation and focus on the convention events rather than exhibition events that would occur at Glebe Island. • HVS does not view this alternative as compatible with the expansion of the Showgrounds because it would result in excess capacity of exhibition oriented venues. 12-Feb-07 Expansion Options Page 9-27 9.6 NEXT STEPS Industry participants and government should seek consensus on one of the three general options recommended in the report. Once that consensus is achieved, the next step would be to develop a city-wide strategic master plan that would include: • A description of the overall approach and schedule for development, • Detailed site concepts of each of the chosen sites, • Environment assessment of each site, • Analysis of financial feasibility, and • An approach to financing the project. With this strategic master plan in place, Sydney could take the necessary steps to reclaim its status as a premier convention destination. Time is of the essence; as significant lost opportunities to Sydney are ongoing and the development processes for complex convention and exhibition centre developments are lengthy. 12-Feb-07 10. Management, Marketing and Sales 10.1 MARKETING AND SALES ORGANISATIONS Realising Sydney’s full potential in the MICE industry will require more than just expansion in the supply of convention and exhibition space. Coordinated management, marketing, and sales initiatives are essential to bring more events to Sydney and grow existing business. The highly competitive nature of the market is evident as Sydney’s market share has eroded (See Market Trends Analysis in Section 2.) HVS identified a number of public or quasi-public organisations that have a role or potential role in facilitating convention, exhibition, and tourism growth. Tourism Australia - Tourism Australia is the national agency responsible for international and domestic tourism marketing, as well as the delivery of research and forecasts for the sector. Tourism Australia was established under the Tourism Australia Act 2004. Their main objective is to influence people to travel to Australia. New South Wales Department of State & Regional Development - provides information, advice and assistance to foster business growth, industry innovation in Sydney and New South Wales. Tourism New South Wales - markets New South Wales as a destination, working with and providing advice to industry, government agencies, and other key stakeholders. Its objective is to create “sustainable” tourism destinations. SCEC Management - The mission of the SCEC includes the following objectives: 1) contribute to the financial well being of Sydney, New South Wales and the SCEC, 2) drive visitation through Darling Harbour, and 3) provide a financial return to the Sydney Harbour Foreshore Authority (“SHFA”). The latter objective may not always be compatible with the first two objectives, as convention events that drive visitation and high levels of economic impact may not generate as much profit for SHFA as consumer shows and other local events that generate less economic impact. Sydney Showgrounds and Other Venue Managers - Venue managers have responsibility for delivering the convention and exhibition space to users and play an important role in the marketing and sales process. The level of Management, Marketing, and Sales Page 10-2 service provided by the manager is of utmost importance in assuring repeat business and the overall quality of the convention tourism product. The Sydney Convention and Visitors Bureau (“SCVB”) is the primary convention marketing and sales organisation in Sydney. The SCVB prioritises four key market segments: 1) international congresses and five to six hall exhibitions, 2) domestic exhibitions (public and trade), 3) domestic conferences, and 4) domestic corporate events. Other short-term business is sold to fill in any gaps left after the other priorities. Data on the SCVB current business pipeline indicates an overwhelming emphasis on international events. Of 908 leads and bids currently in the system, 97 percent are for international events. It appears that only top priority events are targeted by the SCVB and the distribution channels by- pass the SCVB for other types of events. 10.2 MARKETING AND SALES RESOURCES The level and method of funding available to market a city as a location for group events can have a significant influence on the ability to effectively compete for events. Funding levels determine the size of the marketing and sales staff, the capacity to implement targeted marketing efforts, and the ability to offer incentives to high economic impact events. A comparative analysis of funding levels and sources between Sydney and peer cities in Australia provides information regarding its capacity to conduct key group sales and marketing activities relative to its peers. The Association of Australian Convention Bureaux (AACB) conducts a survey of its member organisations and the amounts and sources of their funding. HVS summarised the confidential data in the survey and conducted a comparison of Sydney versus the set of Australian peer markets for fiscal year 2005. 10.2.1 Convention Bureau Funding Comparison A comparison of the SCVB funding with the average of bureau in Australia demonstrates a lower level of overall funding and heavier reliance on private sources. See Figure 10-1. 12-Feb-07 Management, Marketing, and Sales Page 10-3 Figure 10-1 Australian Convention Bureaux Funding by Source Per Capita Sydney $0.55 $0.87 Public Private Peers $0.89 $0.59 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80 $2.00 $2.20 Per Hotel Room Sydney $71.75 $114.56 Public Private Peers $118.65 $79.49 $0 $50 $100 $150 $200 $250 Source: AACB As measured on per capita and per hotel room bases, the SCVB funding level is slightly lower (6 percent less than peers) but governmental funding is substantially lower (40 percent less than peers). The only reason the SCVB has its current overall level of funding is due its reliance on private sources. Approximately 60 percent of Sydney’s funding is private compares to 40 percent for the peer bureaux. The lower level of funding and reliance on private sources means that Sydney has fewer resources to find business and win bids from associations and event organisers. While this overall funding disparity presents a problem of resources, the substitution of private funding for public funding has a more subtle effect on the incentive of PCO’s to work in Sydney. The SCVB’s private funding comes from two sources: annual membership dues paid by PCOs and other organisations, and commissions on room night bookings of three percent of room revenue. In 12-Feb-07 Management, Marketing, and Sales Page 10-4 interviews with HVS, several PCO representatives indicated that the SCVB funding mechanism creates a disincentive to work with the SCVB and more generally in Sydney as compared to Melbourne or other Australian destinations that do not have a commission structure for funding their marketing efforts. 10.2.2 Comparison to Melbourne A direct comparison to Melbourne’s current funding plan shows a large disparity between Sydney and its primary competitor. See Table 10-1. Table 10-1 Comparison of Melbourne and Sydney CVB Funding Melbourne SCVB CVB State Governement 1 $4.5 $2.3 Convention Centre $1.5 $0.3 Private 2 $1.9 $3.1 TOTAL FUNDING $7.9 $5.7 1State Government funding is recent and effective for 2006/07 2Private sector funding information comes from a 2005 comparison study by the AACB Source: SCVB. The SCVB’s public funding is 43 percent, and total funding is 72 percent of the Melbourne CVB funding levels. Given that Sydney is larger than Melbourne and the premier destination in Australia, HVS recommends aggregate funding levels that are competitive with Melbourne. 10.3 MANAGEMENT ISSUES Like the SCVB, SCEC management has a policy of booking convention and exhibition events that provide the greatest possible overall economic impact. While this is the stated goal, the dominance of consumer show events in the venue during peak convention and tradeshow months, runs counter to this objective. The 2007 SCEC business plan shows that: Consumer shows and local events will generate 27 percent of the SCEC’s operating profit but only 12 percent of its economic impact benefit. International events deliver 13 percent of the SCEC profit and 29 percent of its economic benefit. This inverse relationship between economic benefit and profit presents a challenge to SCEC management. The need for profitability, particularly since it affects SHFA’s overall level of resources, is not always compatible with the stated goal of generating economic impact. This problem is intensified by the fact that the overall 12-Feb-07 Management, Marketing, and Sales Page 10-5 lack of supply of exhibition space forces management into difficult space allocation decisions that compromise either the profit or economic impact goals. As the only viable venue for most large events, event organisers recognise that they have little choice but to locate their events in the SCEC. As indicated earlier in this report, the costs of placing an event in the SCEC can be as much as 30 percent higher than other venues in Australia. For many events that cannot relocate to another venue in Sydney or to another city, the SCEC faces little price sensitivity on the part of event organisers. However, the relatively high cost of the SCEC affects the overall profitability of the exhibitions to organisers and exhibitors. Lower profit margins may also have the affect of reducing investment in the development of new events. Expanding the supply of space in Sydney may have the effect of placing downward pressure on SCEC rental rates, which would benefit the industry but reduce profit margins to the SCEC. This is another source of the incompatibility of profit making and wider economic goals. Earlier in this report, HVS recommended the simultaneous expansion of supply of exhibition and convention space in more than one venue. Ultimately, the State government is the likely source of all or part of the capital funding for these venues and the State government or its agencies would likely be responsible for their ongoing financial operations. While the potential competition between two venues would benefit certain industry participants, this competition would not necessarily be consistent with the governmental interests of generating economic impact, maintaining profitability, and supporting their ongoing capital requirements. Consideration should be given to coordinating the marketing, sales and operations of publicly controlled venues with the goal optimising their utilisation. Under our proposed expansion scenarios, the current venue management arrangements could remain in place; however, HVS recommends creating an entity that would establish and enforce booking policies for both venues. We view this as a cooperative arrangement between the respective venue managers, and the SCVB. Consistent with the current policies, booking priorities would be established to place primary emphasis on the generation of economic impact. The central city venue would be the primary location of international and national tradeshows and conventions. The Sydney Showgrounds would be the primary location of consumer show and other local events. 10.4 MARKETING RECOMMENDATIONS HVS has identified a clear need to change the funding mechanisms for the SCVB. While it is beyond the scope of this report to identify the specific sources of funding it is clear that: Increased overall levels of funding in excess of $8 million annually are necessary to fully capture the opportunities available to Sydney and compete effectively with Melbourne. 12-Feb-07 Management, Marketing, and Sales Page 10-6 Decreased relative reliance on in private funding sources through the increase in public resources. HVS also recommends a review of the overall marketing strategy of the SCVB with the goals of: Placing more emphasis on marketing and sales of national events rather than the current exclusive focus on international events. We believe this will be essential to increase Sydney’s market share of national events. Increasing the overall number of bids pursued by the SCVB to reverse the currently trend toward a declining number of bids. Increasing the participation of PCO’s and other business tourism organisations in the marketing and sales process. This may involve creating forums for key participants to communicate, developing joint marketing strategies, and collectively responding to specific bid opportunities. 12-Feb-07 11. Assumptions and Limiting Conditions 1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature. 3. We have not considered the presence of potentially hazardous materials on the proposed sites. 4. We have made no survey of the sites and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader to visualise the properties and sites. 5. All information, estimates, and opinions obtained from parties not employed by HVS are assumed to be true and correct. We can assume no liability resulting from misinformation. 6. The reader should not use this report to make fiduciary or individual investment decisions. 7. We take no responsibility for any events or circumstances that take place subsequent to the date of our field inspection. 8. The quality of a convention centre facility's on-site management and the organisation that markets the facility have a direct effect on a centre’s ability to attract events and its economic viability. The forecasts presented in this analysis assume responsible ownership, competent management, and effective marketing and sales. Any departure from this assumption may have a significant impact on the projected operating results. 9. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our terms of reference. 10. This report was prepared by HVS Convention, Sports & Entertainment Facilities Consulting, a division of HVS International. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of this organisation as employees, rather than as individuals. Appendix – Definitions A1. DESCRIPTION OF THE INDUSTRY AND DEFINITION OF INDUSTRY TERMS The definitions provided herein will aid in understanding the convention and exhibition market analysis and an understanding of industry trends. The meetings and exhibition industry encompasses several types of events, from large trade and exhibition events to conferences and corporate meetings. Each type of event has unique facility needs. Certain events require large amounts of contiguous space and others require several smaller meeting rooms. A single event may use different types of space, including exhibit halls, banquet rooms, breakout meeting rooms, and theatre seating. Event facilities need to offer the proportions of different types of space that are appropriate for their markets. Improvements to the event venues in Sydney must be designed to accommodate the full range of industry event types. The following is a description of these various types of events: A2. MICE (MEETINGS, INCENTIVE, CONVENTIONS, AND EXHIBITIONS) This commonly used acronym identifies four primary types of groups that may be hosted by a convention centre, exhibition centre, or hotel. These types of events are further defined below. Corporate and Other Meetings - Corporate meetings include training seminars, professional and technical conferences, sales meetings, shareholder events, product introductions, and management meetings. Attendance typically ranges between 100 and 250 persons; however, large corporations may sponsor meeting events with over 1,000 persons. These meetings are held in hotels with meeting space, conference centres, and sometimes in the meeting-room blocks of larger convention centres. Corporate meetings usually require meeting rooms or ballroom space, but not exhibition space. Larger functions are sometimes held at convention centres and may use large-capacity venues arranged with theatre seating for general assemblies. Corporate meeting planners and attendees prefer facilities with business amenities and a high-quality, professional appearance. Conferences - Conferences are events held by associations, professional groups, and other membership organisations. These events do not usually require exhibit space, but are otherwise similar to conventions. They require meeting space for general Appendix Page A-2 sessions, food-service areas, and breakout meeting rooms. Hotels and conference centres host the majority of conferences. Conventions or Congresses - Associations, professional groups, political organisations, and other membership organisations hold conventions, with attendance ranging from 300 to 30,000 attendees, the average of which is approximately 800-900. The larger of these meetings typically take place in convention centres with exhibit halls of 10,000 square metres or more. Smaller events are held in hotels and conference centres. Conventions usually consist of a number of concurrent meetings, with a few general sessions. Facility needs include assembly space for general sessions, banquet facilities, and numerous breakout rooms. Approximately two-thirds of conventions use exhibit space for displays and booths. Conventions generate a greater amount of new spending in the area economy because a large percentage of attendees originate from outside the local area, typically stay several nights in the host city, and spend money on accommodations, food, retail goods, transportation, and entertainment. Spouses, family, or companions accompany from 25 to 40 percent of attendees. In order to properly accommodate conventions, a minimum exhibit space of around 7,000 to 10,000 square metres is necessary. Without a dedicated exhibit space of this size, a market is limited to events that occur in individual hotel properties or conference centres. Incentive Travel - The Society of Incentive and Travel Executives defines incentive travel as “a global management tool that uses an exceptional travel experience to motivate and/or recognise participants for increased levels of performance in support of organisational tools.” Tradeshows or Trade Fairs - Tradeshows provide a means for wholesalers and retailers to transact business with industry buyers. Trade associations, government trade development councils, independent show organisers, and other individual companies may sponsor and produce tradeshows. Similar to conventions, tradeshows require exhibit halls and are generally restricted to convention and exhibition centres, as opposed to hotel or conference centre event spaces. Like conventions, tradeshows offer a forum for exchanging industry ideas. However, tradeshows are primarily product and sales-oriented. They are exhibit-intensive, and exhibitors prefer column-free, contiguous, open-space facilities with ceiling heights of approximately ten metres. Exhibitors construct temporary custom booths for product display. Tradeshows typically attract a large number of attendees that originate from outside the host city, but their length of stay is shorter and their average spending lower than convention attendees. In Asia, the requirements for meeting space are more limited than in the United States and Europe, as the events are often exclusively oriented toward exhibitions. However, throughout the world the trend is toward increasing the amount of meetings and other breakout sessions in order to augment the educational component of Appendix Page A-3 events, attract more attendees, and keep visitors in the host city for longer periods of time. In Asia, the types of tradeshows or trade fairs can be further defined by the origin of exhibitors and attendees. Domestic Trade Fairs - Domestic fairs are events in which the main activity is domestic companies trading with each other. Many of these types of events are typical in Australia. Many exhibitors and nearly all attendees originate within the host country. Export Sales Trade Fairs - Export sales fairs have been the focus of many international organisers for the past 20 years. The exhibitors in this case are international and the attendees or buyers originate primarily from the host country. These events mainly take place in Hong Kong and Singapore, but, as of late, have migrated to some areas of Mainland China. Sourcing Trade Fairs - Sourcing fairs have arisen in Asia as a direct result of the boom in manufacturing of consumer merchandise in Asia over the past 30 years. Visitors for these fairs are typically international, while exhibitors are domestic. Public or Consumer Shows – Public/Consumer shows are ticketed events featuring exhibitions of merchandise for sale or display, providing a means of product distribution and advertising. Some shows, such as auto, sporting goods, and boat shows, have recreational and entertainment components as well. Public shows range in size from small local, specialised shows with a few hundred attendees to large shows with many thousands of attendees. The larger public shows may occur in convention centres, shopping malls, fairgrounds, and other public-assembly facilities with large exhibition areas. Most attendees are local residents, although a few large public shows have a regional or national draw. Exhibitors often come from out of town and may follow a series of events occurring in different venues. Site selection considerations for public shows include the size and income of the local population, availability of facilities, and the number of competitive shows in the market. Many public shows are beginning to incorporate educational seminars, and the availability of meeting space is becoming increasingly important for these events. Public and Trade Shows - Sometimes called combination events, these shows typically have initial days with attendance restricted to qualified buyers followed by an exhibition open to the general public. Assemblies - Assembly events usually involve a ceremony, speech, or other similar activity that attracts a crowd of spectators. These events attract anywhere from 200 to 50,000 people or more and many require arena or stadium seating. Assemblies are Appendix Page A-4 less likely to involve a food and beverage element. These events do not usually require large amounts of exhibit and meeting-room space/ A3. OVERALL FACILITY AND EVENT CHARACTERISTICS Convention and exhibition centres typically provide several types of space that are used in different combinations depending on the type of event. Exhibition Space - typically the largest single area in a convention centre, with high ceilings (nine metres or higher) and clear spans that limit the number of support columns in the room. Large contiguous areas are divisible with movable, soundproof walls so that the halls can be used in various configurations. Most exhibition halls have a low level of finish and their concrete floors are designed to support heavy loads. Neutral in their design, exhibit halls are more like empty stages that are appropriately decorated for each event. Loading docks with high doors allow easy loading access and trucks may be allowed to drive onto the floor. Utilities for exhibition booths are provided from boxes in the floor or dropped from the ceilings. Utilities typically include electricity, telecommunications hook-ups, water, and sometimes, compressed air and natural gas. Facilities that only offer a preponderance of exhibition space are often called exhibition centres. In Europe and Asia, the term “Fair” is often used to describe a venue that typically offers one or more large pavilions or exhibition halls. Ballroom space - Primarily designed for food and entertainment functions, ballrooms typically have the highest level of finish in the convention centre with permanent carpet and various lighting fixtures. Like exhibit halls, ballrooms also offer high ceilings, clear spans, and divisible space with soundproof movable walls. Often used as assembly space or for entertainment events, ballrooms are usually equipped for staging presentations. Sound attenuation and sophisticated sound systems are also important features of a ballroom. Close proximity to kitchen facilities is vital for the efficient delivery of food service. Meeting or breakout rooms - Intended for small groups and range from 50 to 1,000 square metres, they are often divisible into smaller units to provide maximum flexibility. Meeting rooms are characteristically carpeted and have a high level of finish. Most meeting spaces have flat floors and no fixed seating so that they can be configured for an assortment of meeting styles. Meeting rooms offer variable lighting setups, sound attenuation, and in newer facilities, access to advanced telecommunications technology. Some meeting rooms are designed exclusively for presentations and may have fixed tiered theatre-style seating and video projection capabilities. Boardrooms are elegant meeting rooms with the permanent installation of a conference table. Breakout space – umbrella term for meeting and ballroom space. Assembly halls and theatres - space frequently located within a convention centre that usually has a large number of fixed seats and stages. Convention centres may also be Appendix Page A-5 connected to arena facilities that are occasionally used as assembly spaces for events with a large number of attendees. Multi-purpose space - area that can be used as an exhibit hall or a banquet space. Similar to exhibit halls, multi-purpose rooms offer the amenities necessary for hosting exhibitions, but the level of finish is more like that of a ballroom. A multi-purpose space may also combine arena and exhibit hall functions. Function space - rentable event space including: meeting rooms, ballrooms, exhibition halls, theatres, and other assembly spaces. Pre-function space - locations just outside of or adjacent to the event space. Pre- function areas support the circulation of pedestrian traffic through the facility, serve as registration areas, and are essential to the control of access to event spaces. Back-of-house space - storage, loading docks, administrative offices, service corridors, kitchens, mechanical spaces, and other areas that are vital to the operation of the facility but not visible to the public.
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