_.jpg)
Anaheim Convention Center expansion renderings.
Anaheim Convention Center is operating at 60 percent capacity, 250 events a year, and bursting at the seams. It’s next once-a-decade expansion is now underway, adding 200,000 sq. ft. of flexible space and maintaining parking capacity, at a cost of $170 million.
In an unusual twist, the first level will be built below ground, with parking and a pre-function lobby at ground level and the other column-free 100,000 sq. ft. of exhibit space on top.
Meanwhile, the Los Angeles Convention Center is also eyeing expansion, though its further down the line, but it’s similarly justified. The center is operating at 71-percent capacity for 317 events and is bursting at the seams.
AEG, which manages the venue, is looking at an $8-million operating profit at the end of fiscal 2016 June 30, said Brad Gessner, general manager, citing payroll reduction through privatization (several million dollars in savings), increased rent for consumer shows and filming ($2 million more in revenue); eliminating exclusives for electrical ($1 million increase) and smarter parking management ($3 million more) among factors contributing to that number.
David Meek, general manager of the Anaheim venue, was in the midst of Natural Products Expo West, a healthy lifestyle options expo, which was expected to draw 80,000 attendance over three days. That’s a 14-percent increase over last year and it has already outgrown the confines of the 813,000 sq. ft. of exhibit space and 38,000-sq.-ft. ballroom, and even the Grand Plaza with outdoor tastings, at the Anaheim Convention Center, spilling into the nearby Hilton and Marriott for exhibits and functions.
“We need the expansion for those kinds of shows,” Meek said, citing two other annuals, NAMM and the Medical Design and Manufacturing Show, that max out the convention center. Additional shows that rotate around the country, like the National Association of Food Equipment Manufacturers, are of similar size.
Turner Construction and Populous won the design competition for 200,000 sq. ft. of flexible exhibit space that needed to come in at $170 million or less. They discovered it was more affordable to incorporate interstitial parking and the design won total approval. It also connects to an existing hall with an enclosed bridge.
A five-story, 600-spot parking tower is also part of the project to keep total parking at 1,350 spaces, and will be done in August, Meek said. Phase 2, the major exhibit building, will open in September of 2017.
“I’ve been here 20 years. We have made an operating profit every year but two or three. I’m kicking Brad’s ass. We’re friendly competitors,” Meek said, a sentiment echoed by his peer to the north.
“We made a little over $2 million last year,” Meek said. “We don’t get any hotel tax except to pay our mortgage. We’re on our own. They expect us to run the building like a regular business. They pay capital costs from the bed tax, not operations.”
Meek noted that in L.A., the city gives the convention center away for citywide events. In Anaheim, with its huge inventory of hotels in all price ranges, 8,000 of them within walking distance and 20,000 within a mile, they do not give away rent, though they will discount it.
Gessner’s E-3 conference is one Meek would love to steal. Gessner did get “my WonderCon this year because we were busy. I expect that show back next year,” Meek said.
HOW DID L.A. DO IT?
Historically, the Los Angeles Convention Center has been subsidized by the city. In the four years before it was privatized in 2013, it lost an average of $3.5 million annually.
That projected operating profit doesn’t include debt service or any capital improvement project the city funded. “I funded an additional $2 million in capital improvement projects out of the surplus. The amount I bring in versus what I spend to manage, market and maintain the facility will be $8 million.”
This year, L.A. will do 30 citywide events (compared to 55 in Anaheim and 68 in San Diego), all but one of which is rent free, Gessner said. But he still makes money on food and beverage, electrical distribution and parking. Citywide events are defined as using at least three hotels, 3,000 room nights, 1,500 on peak, and generating enough TOT (Transient Occupancy Tax) to meet or exceed the rent waived. It will be just about $5 million in rental write-offs for citywides, Gessner estimated.
He is anticipating 35 citywide events next year in L.A. and added, “I think the no-rent policy for citywides will change in the not too distant future.”
A key to the increased profit is payroll. When AEG took over, the city had reduced staffing to 125 part-time and 125 full-time, all unionized except for the GM, but had peaked at over 200 in each category. A hiring freeze improved the situation and then, when the venue was privatized, the city offered comparable pay at another job in the city or early retirement for those who requested it.
AEG came out of the gate with 95 full- and 95 part-time employees, with comparable pay but not the benefits of working for city government, which are essentially a 100 percent liability per person.
He also reimagined his three parking garages next to one of the busiest arenas (Staples Center) and entertainment districts (L.A. Live) in the second largest city in the nation. “They were running parking garages with city employees and it was not automated. Cash handling was not what we would have. And rates were artificially low so all attendees would have a place to park at reasonable rate, $12 an hour. L.A. Live was charging $20 at the time.”
In addition, the city discouraged sports and concert fans from parking there to keep it open for conventioneers. “A lot of the parking went unused. We completely changed that philosophy and policy, we raised the rates and are generating about $3.5 million net more in parking. They were at $7-8 million and we’re up to $12 million,” Gessner said.
Pre-AEG, L.A. was one of the last major convention centers where all utility and electrical distribution was run in-house on an exclusive basis. AEG opened it up, choosing three contractors on a percentage basis, 50 percent for the preferred Edlen Electric and 40 percent for the approved Freeman Electric and Trade Show Electric. That’s probably another million net off of that compared to what city was doing,” Gessner said.
Gessner also sought out the film business. “We’ve made our facility available, and hosted and lobbied the location managers association here in Hollywood to use us as a filming location.
“Now we do four TV or film shoots a month,” Gessner said. “They come in at midnight and leave at six. Capital One’s What’s in Your Wallet was filmed here. Gone Girls filmed here. CSI Los Angeles filmed here a bunch.”
Gessner said they have increased filming by 300 percent in just two years and will probably make them $750,000 this year and “it’s just found business.”
Speaking of found business, L.A. Convention Center has just booked its first EDM concert, Kaskade May 7. It sold 20,000 tickets in 20 minutes, Gessner said. He expects to net $250,000-$300,000.
Gessner has been vocal on calling it an EDM concert, not a rave, and has enlisted his coworkers at AEG Live and security through StaffPro and the LAPD. The plan is to assess the event before booking anymore, but his gut tells him this may be a future business potential. They will spend $750,000 on décor turning the exhibit hall into a Las Vegas nightclub, Gessner said.
Now it’s time to expand. In March, city council approved two parallel tracks, one seeking P-3 (Public Private Partnership) proposals to see if the private sector will fund expansion in exchange for retail and hotel rights and one traditional funding option. Arup is consulting on the proposals.
Populous is designing the $480-million, 225,00-sq.-ft. expansion of contiguous space connecting the South Hall and spanning Pico St. to the West Hall. There will also be a 65,000-sq.-ft. ballroom and 175,000 sq. ft. of meeting space, along with modernizing some existing space.
“By end of calendar year, maybe this fall, we’ll know exactly what we’re going to be doing, what will be included in design and how we’re funding it, so they can go full throttle for another 18 months, break ground in two years, and be completed, hopefully, at end of 2020,” Gessner said.
Interviewed for this story: Brad Gessner, (213) 741-1151; David Meek, (714) 765-8951