Hawaii Convention Center, Honolulu.
Implementing revenue-generating initiatives has resulted in the Hawaii Convention Center, Honolulu, finishing 2015 with the best bottom line in the facility’s 17-year history. The venue is in its second year of management with AEG Facilities.
AEG Facilities entered the bidding process to manage the convention center about three years ago. The comprehensive bid for proposals was written by the Hawaii Tourism Authority eight months prior to the state-owned facility’s contract expiring with SMG.
“We had a lot of necessary time to thoroughly evaluate the entire operation, and implemented efficiency and operational analyses using information provided by the Hawaii Tourism Authority,” said Brad Gessner, senior vice president and general manager of the Los Angeles Convention Center. “Because of this process, we were confident we could make the operation more efficient.”
Prior to AEG’s takeover Jan. 1, 2014, the venue had lost an average of $3.5 million annually in operational costs. Its first year under new management, the center reduced this operational loss to just under $2 million. This year, operational losses were reduced to $289,000.
“Before taking over the management, we immediately made changes to staffing levels, which right-sized the organization,” said Gessner. “We also reallocated some of the staffing to areas that had better ROI and enhanced the food and beverage operation.”
Food and beverage supplier Levy Restaurants played a key role in increasing revenues, generating the 45-percent flow that the Hawaii Convention Center had in its second year.
“We made sure menu items were selling and knew to the penny what it cost to produce each item so we could appropriately price it,” said Gessner. “This had a major impact on the bottom line.”
As a result, 2015 food and beverage sales were significantly higher than anticipated.
“The sweet spot for us is if we can get $1 million a month for food and beverage sales,” said Teri Orton, the convention center’s general manager. “With increased volume, we can maximize and reduce expenses, labor goes down and productivity goes up.”
In addition to upselling the menu and beverages, the convention center began offering contract incentives by providing free rent for those who spend a designated amount per person for food and beverages.
“If the food and beverage minimum comes up short, we charge more in rent,” said Orton. “This has worked really well for us as a tool to manage revenue and incentives that we didn’t have in the past.”
Adding to the bottom line, convention center departments have taken on additional business that was formerly outsourced. For example, housekeeping has been taken in-house, as has the business center, the latter of which produced $25,000 in revenue last year.
“We would pay another vendor $150 an hour to run our business center and provide it complimentary to our clients, but now our IT department runs it,” said Orton. “The revenue it’s generating doesn’t factor in the $10,000 to $15,000 we paid an outside provider annually to run it.”
The convention center also rented out parking stalls to a construction crew for two to three months as well as began charging for digital advertising and the use of its plants within the building.
The savings garnered from these new initiatives weren’t tallied last year, but will be tracked for 2016.
Orton said in the coming months, initiatives will be expanded to include LED wall and chandelier marketing and ad space available to both existing clients and outside companies.
“We’re looking to our teams for creative ideas, and they’re excited to generate extra revenue,” said Orton. “It has become a competition for all our departments, but in the end, we all win.”
The team also budgeted for 152 events in the building and at the end of the year, Hawaii Convention Center booked 181 events, a 19 percent increase from the original forecast.
The convention center’s long term goal is to hit 60-percent occupancy in the next five to 10 years. Since AEG took over, Hawaii Convention Center’s occupancy has gone up approximately 7 percent.
For their third year, Hawaii Convention Center also is focused on bringing in a diversified set of business ranging from concerts to sporting events. The venue recently purchased volleyball courts to attract tournaments and will also expand its sales team.
“With the right people in the roles and implementing operational and efficiency plans, we’ve maintained 98 percent favorable ratings,” said Gessner. “It has been a huge team effort.”
Interviewed for this story: Brad Gessner, (213) 765-4600; Teri Orton, (808) 973-0385