HomeMy WebLinkAbout2002-25052 Reso
RESOLUTION NO. 2002-25052
A RESOLUTION OF THE MAYOR AND CITY COMMISSION
OF THE CITY OF MIAMI BEACH, FLORIDA,
AUTHORIZING REVISIONS TO THE RENTAL RATE
STRUCTURE OF THE MIAMI BEACH CONVENTION
CENTER TO ALLOW FOR CERTAIN DEFINED PRICING
DISCRETION NEGOTIABILITY.
WHEREAS, the City owns the Miami Beach Convention and is desirous of
facilitating the continued high impact convention, trade show, and community events at
that venue; and
WHEREAS, the City is desirous of maximizing revenue opportunities of
the rental rates and condition charged at the Convention Center and minimizing facility
operating deficits; and
WHEREAS, the convention and meeting facilities industry has become
increasingly competitive due to proliferation of meeting space inventories and
challenging economic conditions; and
WHEREAS, SMG, managing agent for the City at the Center has
recommended revisions to the Convention Center rental rate conditions allowing for
increased competitiveness for events in such an atmosphere, to include discounting
negotiability, ancillary revenue credits to offset rent, "half-hall" rates to encourage
booking of smaller, fill-in events, and creation of a marketing fund to provide bookings
incentives; and
WHEREAS, the Administration, Convention Center Advisory Board, and
SMG have determined that adoption of these revisions are in the best interest of the
City
NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND CITY
COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City
Commission hereby authorizes revisions to the rental rate structure of the Miami Beach
Convention Center to allow for certain defined pricing discretion negotiability
JMG:CMC:DT:dt
APPROVED AS TO
FORM & lANGUAGE
& FOR EXECUnON
PASSED AND ADOPTED this 13th day of November, 20
ATTEST:
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CITY OF MIAMI BEACH
COMMISSION ITEM SUMMARY
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Condensed Title:
A resolution approving revisions to the rental rate structure of the Miami Beach Convention Center to allow
for certain defined pricing discretion negotiability.
Issue:
Shall the City Commission approve revisions to the rental rate structure of the Miami Beach Convention
Center?
Item Summa IRecommendation:
In light of the competitive environment for convention and trade show bookings, additional negotiability is
needed in order to compete for and secure business for the Miami Beach Convention Center.
This item recommends approval for five initiatives to allow the sales entities for the Miami Beach
Convention Center, SMG and the Greater Miami Convention & Visitors Bureau, to offer certain discounts
and offsets for high-impact conventions and meetings. It also allows for creating a "half-hall" rental
structure to entice smaller events to book the Center during slower periods of event activity, and
encoura es creation of a marketin fund to rovide convention bookin incentives.
Adviso Board Recommendation:
The Convention Center Advisory Board unanimously approved the recommendations at its meeting of July
23, 2002, and b the Finance and Ci ide Pro'ects Committee meetin on October 25, 2002.
Financial Information:
Source of Amount Account Approved
Funds: 1
D 2
3
4
Finance Dept. Total
City Clerk's Office Legislative Tracking:
I Doug Tober
Si n-Ofts:
Department Director
Assistant City Manager
City Manager
T:\AGENDAI2002\NOV1302\CONSENTlrental-rate.doc
AGENDA ITEM C 76-
DATE 1/-/]-02-
CITY OF MIAMI BEACH
CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139
www.ci.miami-beach.fl.us
COMMISSION MEMORANDUM
To:
Mayor David Dermer and
Members of the City Commission
Date: November 13, 2002
From:
Jorge M. GOnZaleZ~.l~
City Manager r U
A RESOLUTIO OF THE MAYOR AND CITY COMMISSION OF THE CITY
OF MIAMI BEACH, FLORIDA, AUTHORIZING THE MAYOR AND CITY
CLERK TO APPROVE REVISIONS TO THE RENTAL RATE STRUCTURE
OF THE MIAMI BEACH CONVENTION CENTER TO ALLOW FOR
CERTAIN DEFINED PRICING DISCRETION NEGOTIABILITY.
Subject:
ADMINISTRATION RECOMMENDATION
Adopt the Resolution,
BACKGROUND
Due to the rapidly increasing competitive environment, it is incumbent at this time to review
the pricing policies with regard to the ability to book conventions, tradeshows, and
corporate meetings for the Miami Beach Convention Center. While the published prices
still compare very favorably with other destinations (see attached recent rate survey), the
discretion with regard to discounting and taking into account high-volume ancillary revenue
opportunities have been extremely limited. Therefore, the following pricing discretion
initiatives are submitted for approval.
Extension of National Convention and Tradeshow Initiative
With the adoption of Commission Memorandum 244-90 on May 9, 1990, (see attachment),
the City granted authority to discount prevailing rental rates up to 25% for ~ational
conventions and tradeshows booked through the Greater Miami Convention & Visitors
Bureau (GMCVB) occurring in the years 1997-2003, It is requested that this discounting
ability be extended for events occurring between 2003 and 2012 for First Priority Events,
as defined by the Miami Beach Convention Center Booking Policy through the verification
of hotel room night usage by either the GMCVB or independent audit. This should be
available to events booked through any entity, either the GMCVB or SMG, and offering of
this discount shall require the approval of the General Manager. The cost of this initiative
is estimated to be less than $75,000 annually, based on the assumption of it being applied
to three shows annually, at an average published rental revenue of $100,000 each, and
thus discounting $25,000 per show, It should be noted, that these shows generate in
excess of $1 00,000 in net revenue to the Convention Center and have economic impact to
the City in excess of $2 million.
Food and Beveraae Commission Offset for Food and Beveraae Space Rental
The Center has the ability to host stand-alone catered functions in the exhibit halls, and
often have an exhibit hall used exclusively for food and beverage services in conjunction
with larger events, In order to be competitive, and meet user's expectations with rental
charges for food service spaces, the proposal is to formalize the ability to apply a portion of
the food and beverage commissions toward an offset of the facility rental for space used
for food and beverage service. The facilities' catering commission return increased after
the contract was extended in May 2001 with Volume Services America, This increased the
return from 10% up to a minimum of 28,5%, The proposal is to request the ability to offer
up to 15% of commissionable food and beverage expenditures to be available for offset
towards the food and beverage space rental regardless of overall expected event
revenues, with offset not-to-exceed the associated space rental.
Example: The Widget Corporation Annual Meeting will be using Hall B for lunch and dinner
for a period of 2 move-in days, 3 show days, and 1 move-out day. The rent for this space
would be $27,000 (2 x $3000 + 3 x $6000 + 1 x $3000), and it will be spending $150, 000 in
food and beverage. At a 15% offset, it will receive credit for $22,500 in rent (15% x
$150,000), leaving a balance due of $4,500 ($27,000 - $22,500),
The cost of this initiative is estimated to be less than $72,000 annually, based on the
assumption of it being applied to four shows at an average published rental revenue of
$18,000 each and estimating three event days at $6,000/day,
Food and Beveraae Commission Offset for All Facility Rental
Occasionally, opportunities have arisen to pursue events that are projected to return
extremely high commissions, In those instances, it is proposed to have the ability to apply
up to 15% of commissionable food and beverage revenues as an offset toward all facility
rental charge, with offset not-to-exceed the total space rentals, SMG recommends that this
be applicable only to events which are projected to spend in excess of $500,000 for food
and beverage, that are anticipated to generate in excess of $200,000 in net revenues to
the facility, and are First Priority Events as defined by the Miami Beach Convention Center
Booking Policy through the verification of hotel room night usage by either the GMCVB or
independent audit.
Example: The Mega-Software Corporation Annual Meeting will be using the entire facility
for a period of 3 move-in days, 6 show days, and 1 move-out day. The rent for this space
would be $192,000 (3 x $3000 x 4 halls + 6 x $6000 x 4 halls + 1 x $3000 x 4 halls), and it
will be spending $1,500,000 in food and beverage, At a 15% offset, it will receive credit for
the entire rent (15% x $1,500,000=$225,000).
The cost ofthis initiative is estimated to be approximately $100,000 annually, based on the
assumption of it being applied to one show. It should be noted that the general size of
events to which this incentive could be applied are typically citywide conventions having
from 5,000 to 20,000 attendees and having an economic impact to the City of at least
$2,000,000 and over $15 million.
The effect of the previously mentioned three initiatives would generally not be considered
to be cumulative, but it could be expected that a maximum of anywhere from four to six
shows annually would enjoy some element of these initiatives in some combination of the
three. The total effect on the Convention Center Enterprise Fund in the form of reduced
revenues would generally not be expected to exceed $200,000 annually, but could return
three to four times the effect in direct revenue to the Center and $8 to $10 million annually
in economic impact to the City,
Reduced Capacity Confiauration Rental Rate
In contemplation of a similar initiative to that of the half-house configuration and rates
recently approved for the Jackie Gleason Theater, in 2003/2004 fiscal year, SMG suggests
to purchase a divider curtain to offer a reduced hall capacity configuration. This
configuration would allow smaller events, which have been unable to consider the Miami
Beach Convention Center due to size and budget considerations, to pursue, This curtain
will allow flexibility to create a smaller-feel exhibit hall of approximately 60,000 square feet,
and enable SMG to fill in empty date periods, The proposed minimum rental rate for this
reduced capacity hall is at $3000 per show day and $1500 per move-in or move-out day,
Events utilizing this rate will be contracted no further than nine months out from the first
move-in date.
There are no costs associated with this change, as all of this business will be new.
"Growina Show" Rental Discount Discretion
On occasion, SMG has had requests from existing events looking to grow into an additional
exhibit hall above and beyond their historical space, but may have been hesitant to do so
because of the minimum cost for the second hall. The proposal is to give the General
Manager the discretion to negotiate terms surrounding an additional hall, with a minimum
rental of 50% of the prevailing daily rate or net square footage rate, and with the ability to
contract that "growth space" no further than nine months out at the reduced rate pricing.
This particular incentive is expected to be offered to no more than two shows annually, with
a discount effect of approximately $13,000 each, for a total cost of $26,000, Again, this is
considered new revenue, as these shows might not otherwise expand if the incentive was
not in place,
These initiatives were presented to the Convention Center Advisory Board and were
unanimously approved for recommendation to the City for adoption, The only amendment
was the approval of the General Manager for the 25% discount offer to clients be required
only for events occurring before September 30, 2008, and that events booked by the
GMCVB beyond that term and offering the discount as a condition of booking, not require
General Manager approval.
Creation of a Marketina Fund
While the incentives created in the above-referenced action will help to enhance the ability
to attract business, one of the recurring themes being discussed is that of convention
centers being offered with no rental charges to users. This is aimed primarily at citywide
conventions expecting to maximize economic impact to the hospitality and tourism industry,
SMG heard of cities such as Los Angeles, Ft. Lauderdale, Washington D,C" and Boston
(the two latter readying new convention centers) presenting packages absent of convention
center rental charges. These proposals rely on the foundation that the convention center is
designed as an economic generator, a "loss leader," usually funded with bed tax dollars to
generate economic impact, with such generation proving to outweigh the importance of
self-sustaining operating results of the venue.
In order to replicate the successes of recent years at the Miami Beach Convention Center,
it is important to explore opportunities to create a marketing fund to provide funding of
rental charges for high-impact convention business, With the increase in City revenues
from the Convention Development Tax to $4,5 million next year, the City should consider
establishing such an account to incentivize such events. As a start, a contribution of
$100,000 per year, with the possibility of matching cooperative contributions from other
sources, would create a source to offer incentives to the desirable convention business so
important to our community, Such a mechanism could be set up to require City Manager
approval for issuance, or thresholds could be developed for such enticements,
Additionally, by this funding being developed and considered as "below the line"
expenditure in the Convention Center Enterprise Fund, no side calculations would be
required affecting SMG incentives based on financial performance, Assuming a number of
years to build up this fund, it is anticipated that no more than two shows annually, at an
average rental cost of $1 00,000 each, would enjoy benefit of this incentive, but again these
shows may not necessarily be considered as cumulative with the aforementioned
incentives. These events would typically be those having maximum economic impact to
the City, most likely requiring similar thresholds as those of the Full Rental Food and
Beverage Offset Initiative proposed above,
With the reduction in leisure travel and smaller corporate business bookings over the past
year, we have seen the local hotel community develop a newfound appreciation for the
importance of citywide convention business. That newfound appreciation has manifested
itself in the form of aggressive rates coupled with much more liberal room block offerings,
In the spirit of that aggressive new approach, the City should explore these aggressive new
approaches to enable to not only survive, but to thrive in this highly competitive
environment. While our destination remains as attractive, economic realities continue to
play strongly into the decision-making process of meeting planners,
These initiatives were approved by the Convention Center Advisory Board on July 23,
2002, and approved by the Finance and Citywide Projects Committee on October 25,
2002,
CONCLUSION:
In order to maintain and enhance the competitiveness of the Miami Beach Convention
Center, the Mayor and Commission should approve the recommendations,
JMGICM6t[n
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OFFICE OF THE CITY MANAGER
AOe W. PAR KINS
CITV MANAGER
CITY HALJ.
1700 CONVENTION CENTER DRIVE
TELEPHONE: 673.7010
COMMISSION MEMORANDUM NO,-=< ~l./,qO
DATE:
Hay 9., 1990
FROM:
Mayor Alex Daoud and'
Members of the City Commission .
,) /l ? [
Rob W, Parkins,+[)...,Ul"'( :::::, ~"'1'4'1 \..
City Manager (..J
I
TO:
SUBJECT:
REQUEST OF CONVENTION CENTER AOMINISTRATXON AND GREATER
MIAMI CONVENTION , VXSITORS BUREAU TO ESTABLISH A RENTAL
RATE STRUCTURE FOR NATIONAL CONVENTIONS AND TRADESHOWS
BOOKED THROUGH THE GREATER MIAMI CONVENTION , VISITO~S
BUREAU FOR THE YEARS 1997 THROUGH 2003
At the March 14, 1990, meeting of the convention Center Advisory
Board, the Convention Center Administration and the Greater Miami
convention & visitors Bureau requested establishment of a rental
rate structure for national conventions and tradeshO\~s booked
through the Greater Miami convention & Visitors Bureau for the
years 1997 through 2003,
Due to the shortage of hotel rooms, the Convention Bureau is having
a difficult time firming up commitments for those conventions that
we are holding for the years 1997-2002. (Attached is a schedule
of the conventions that are tentatively booked,) A committed
rental rate would be a strong selling point; it would give the
Greater Miami Convention , Visitors Bureau a tremendous edge over
other cities and could well make the difference in enabling
conventions to commit to book Miami Beach.
The Convention Center Advisory Board agreed to recommend to the
City commission the establishment of a firm rental rate structure
for national conventions and trade shows booked through the Greater
Miami Convention & visitors Bureau for the years 1997 through 2003,
as follows:
1. Twenty-five (25%) percent less than the rental rate prevailing
on the date of the event, but not to exceed $1.50 per square
foot of net exhibit space per hall;
2. The prevailing minimum guarantee to remain in effect for the
date that the convention is booked;
3, To be reevaluated on a year to year basis by the Advisory
Board, the Administration and the Greater Miami Convention &
Visitors Bureau,
ADMINISTRATION RECOMMENDATION:
^r~~ove the recommendation of the Convention center Advisory Board
to establish a firm rental rate structure for national conventions
and tradeshows booked through the Greater Miami Convention &
Visitors Bureau for the years 1997 through 2003, as stated above.
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