Proposed Conference Center

Transcription

1 DRAFT MARKET AND FEASIBILITY ANALYSIS Proposed Conference Center RACINE, WISCONSIN SUBMITTED TO: EXISTING Mr. Dave Blank, Racine County Convention and Visitors Bureau Washington Avenue Sturtevant, Wisconsin, PREPARED BY: HVS Convention, Sport& Entertainment 205 West Randolph Suite

2 December 4, West Randolph Suite FAX Atlanta Boston Boulder Chicago Dallas Denver Las Vegas Mexico City Miami Nassau New York Newport San Francisco Toronto Vancouver Washington Athens Buenos Aires Dubai Hong Kong Lima London Mumbai New Delhi Sao Paulo Shanghai Singapore Mr. Dave Blank Racine County Convention and Visitors Bureau Washington Avenue Sturtevant, Wisconsin, Dear Mr. Blank: Re: Proposed Conference Center Racine, Wisconsin Pursuant to your request, we herewith submit our DRAFT Market and Feasibility Analysis of a Proposed Conference Center in Racine, Wisconsin. We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. It has been a pleasure working with you. We look forward to hearing your comments. Sincerely, HVS Convention, Sports & Entertainment DRAFT DOCUMENT Thomas A Hazinski Managing Director DRAFT DOCUMENT Alex Moon Analyst

3 Table of Contents SECTION TITLE 1. Introduction and Executive Summary 2. Market Area Overview 3. Industry Trends 4. Survey Findings 5. Comparable Venues 6. Building Program Recommendations 7. Demand and Financial Analysis 8. Statement of Assumptions and Limiting Conditions 9. Certification Appendix A - Competitive Venue Descriptions

4 1. Introduction and Executive Summary RealRacine engaged HVS Convention, Sports & Entertainment ( HVS ) to conduct a Market and Feasibility Analysis of a Proposed Conference Center in Racine, Wisconsin. This study explores market demand potential and provides recommendations on the optimal building program on a site in downtown Racine. Methodology HVS performed the following tasks: 1. Tom Hazinski and Alex Moon traveled to Racine, Wisconsin in the week of September 30, 2013 during which they performed a site inspection, reviewed plans for the project, met with key industry participants, visited other venues in the city, and gathered relevant data, 2. reviewed the market and feasibility analysis HVS performed on Racine in 2004, 3. analyzed the economic and demographics that indicate whether and the extent to which the local market area could support the Proposed Conference Center, 4. conducted and analyzed a survey of local area businesses and state and local associations representatives to assess their interest in using the Proposed Conference Center, 5. interviewed local area business and managers of comparable convention and conference venues, 6. compiled data on 12 in-state competitive/comparable regional venues to inform and test the reasonableness of the building program recommendations and demand and financial forecasts, 7. recommended a facility program plan and forecasted event demand of the Proposed Conference Center, 8. compared event demand forecasts to a set of comparable venues located in Wisconsin to test the reasonableness of event demand assumptions, and 9. forecasted the financial operations of the Proposed Conference Center. HVS staff collected and analyzed all information contained in this report. HVS sought out reliable sources and deemed information obtained from third parties to be accurate. Introduction and Executive Summary Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 1-1

5 Summary of Findings Market Area HVS considered the potential for developing a conference facility with sizes ranging from a small conference center to a large convention center with exhibition space. Based on research of the Racine market area and the results of our survey, we determined that a conference center with multi-purpose ballroom space with breakout meeting rooms fit the city best. The Proposed Conference Center we recommend would primarily serve smaller state associations, corporate conferences, and larger local area events. HVS projects approximately 14,000 new annual room nights in the market and almost 50,000 total attendees per year. While these new room nights would increase occupancy rates up to five percent, we expect the Proposed Conference Center to operate at a loss. This analysis does not include any new hotel development, but HVS recommends that the City of Racine consider hotel, restaurant, and retail development to the proposed site. Because the majority of event attendees at the Proposed Conference Center Racine would drive to Racine, HVS analyzed the market area in terms of drive time radii. See the figure below for drive time demographic data. FIGURE 1-1 DRIVE TIME DEMOGRAPHICS Market/Drive Time Population Median Household Income ($) Annual Growth Annual Growth 30 minutes 327, , % 49,736 59, % 60 minutes 2,304,865 2,344, % 52,722 62, % 180 minutes 15,211,671 15,459, % 53,686 62, % Racine, WI MSA 195, , % 50,805 59, % United States 0.68% 50,157 56, % Source: ESRI The 30 minute drive time population has a slightly lower median household income than the U.S. overall, but ESRI predicts that will change over the next few years. While the larger drive time radii have sizeable populations, the metro areas of Chicago and Milwaukee make up most of those populations and Racine would struggle to pull in association groups from either major city. The Root River Council of Racine and Vandewalle & Associates created a master plan for economic redevelopment through enhancements in housing, business, transit, and public access. This initiative and a Proposed Conference Center could complement each other to strengthen Racine s local economy. Introduction and Executive Summary Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 1-2

6 Convention, Sports & Entertainment Proposed Site See the figure below for a map of the proposed site. FIGURE 1-2 THE PROPOSED SITE Source: Google Maps The proposed site sits west of the Radisson Hotel Racine Harbourwalk between Lake Ave and Gas Light Ctr. The site measures approximately 3.5 acres. We Energies previously owned the office building in the lot and has committed to demolishing it. The City of Racine plans to purchase the site and use it for redevelopment. Survey Findings HVS conducted a survey of event planners to assess the potential demand for a conference center in Racine. 46 respondents took the web-based survey, and of that group, 35 completed the survey while 11 partially completed it (left one or more questions blank). Respondents included professionals from organizations representing state and local associations, government entities, corporate, and other organizations. HVS asked respondents who had not held an event in Racine in the last five years to state their reasons. Introduction and Executive Summary Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 1-3

7 Convention, Sports & Entertainment FIGURE 1-3 REASONS FOR NOT HOSTING IN RACINE Non-central location 38% Insufficient event space 35% Need more attractive destination 15% Predetermined location 12% Lack of airport access 6% Not enough members in the area 6% Racine not chosen yet 6% City not large enough 3% Limited plane flights 3% Insufficient hotel rooms 3% The top two reasons relate to Racine s non-central location in the State of Wisconsin and insufficient event space in the City. Racine cannot improve its distance from attendee bases, but it could benefit from a state of the art venue with enough space for mid-sized events. HVS asked respondents about their likelihood of booking an event in Racine if the City built a conference center. The figure below shows their answers broken out by event attendee origin. FIGURE 1-4 LIKELIHOOD OF BOOKING EVENT BY ATTENDEE ORIGIN 67% 40% 20% 17% 8% 8% 0% 20% 15% 5% Very likely Somewhat Neutral Somewhat Very Likely Unlikely Unlikely Very likely Somewhat Neutral Somewhat Very Likely Unlikely Unlikely National/International Statewide Introduction and Executive Summary Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 1-4

8 Convention, Sports & Entertainment Event planners for national and international attendees showed little interest in a Racine conference center, while 45 percent of statewide event planners said they were at least somewhat likely to plan an event. The survey results also showed that Racine s strengths as an event destination include its attractive lakefront and low pricing. But the most important selection criteria for meeting planners relate to available event space and geographic location of the venue within the state, and Racine rated poorly on both of these criteria. These results indicate that Racine should focus on attracting event demand from local and statewide organizations and associations with its Proposed Conference Center development. Comparable Venues FIGURE 1-5 HVS analyzed competitive conference and convention centers in the State of Wisconsin and compared them to each other and Racine to determine the viability of a conference center in Racine. The following figure summarizes the various types of function spaces in each venue. SUMMARY OF FUNCTION SPACES IN COMPETITIVE SET Exhibition Halls Floor Area Divisions Name of Venue State Competitors Monona Terrace Community and Convention Center La Crosse Center Kalahari Resorts KI Convention Center Radisson Paper Valley Holiday Inn Stevens Point Westwood Conference Center Oshkosh Convention Center Holiday Inn Express and Janesville Conference Center Blue Harbor Resort and Conference Center Best Western Harborside Inn & Kenosha Conference Center 37,200 sf 38,740 17,640 16, Ballroom Floor Area Divisions 13,524 sf 6,700 37,760 17,797 13,730 8,400 7,347 15,400 13,000 9,882 9, Meeting SF Floor Area Divisions 17,646 sf 22,572 23,582 6,364 18,954 1,403 16,448 3,110 1,249 1, The function spaces of competitive venues in Wisconsin venues range from approximately 10,000 square feet to 70,000 square feet. Most of the smaller venues do not feature exhibit space, but all venues in the set have at least one ballroom and multiple meeting rooms for smaller events. HVS ranked the set of competitive venues and Racine s proposed site on eight criteria: Adjacent Hotel Capacity, Total Hotel Capacity, Population, Air Access, Highway Access, Corporate Presence, Total Venue Function Space, and Event Planner Preferences. We calculated a score with these rankings. Then, we modified Introduction and Executive Summary Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 1-5

9 Convention, Sports & Entertainment the scoring by assigning each criterion a weight between one and three, where a weight of three indicates a criterion of high importance and a weight of one indicates a criterion of low importance. Multiplying the rank by the criterion s weight yields a weighted score for the venues. The figure below shows the weighted scores for each venue. FIGURE 1-6 SUMMARY OF FUNCTION SPACES IN COMPETITIVE SET Adjacent Hotel Capacity City 1 Weight Madison Wisconsin Dells Green Bay Appleton La Crosse Janesville Racine Oshkosh Stevens Point Wausau Sheboygan Kenosha Total Hotel 2 Population Capacity Air Access Highway Access Corporate Presence Total Function Space 3 Event Planner Preference Total ) Weight of the importance of the criteria on a scale of 1 to 3 with three being most important and 1 being least important. 2) Population ranked by 90 minute drive time radii 3) Assumes 20,000 square feet of function space in a proposed Racine conference center Racine ranks seventh on a weighted system. The scoring shows a top tier of competitors including Madison, Wisconsin Dells, Green Bay, and Appleton and a second tier of competitors with La Crosse, Janesville, Racine, Oshkosh, and Stevens Point. Our subsequent building program recommendations and performance should consistently follow our competitive venue analysis. Building Program Recommendations The market analysis, survey results, and review of comparable and competitive facilities indicate that a conference center with multi-purpose ballroom space and a meeting room block would best serve the demands of smaller state association and corporate meetings and conferences. This setup could also serve larger local social and entertainment events. The following figure details the recommended function spaces in the Proposed Conference Center. Introduction and Executive Summary Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 1-6

10 Convention, Sports & Entertainment FIGURE 1-7 BUILDING PROGRAM RECOMMENDATION SUMMARY Event Space Total Area (SF) Multi-purpose/Ballroom Space Meeting Room Block Board Rooms (2) 15,000 5,000 1,000 TOTAL EVENT SPACE 21,000 HVS recommends a flexible ballroom that could suit a wide range of event types and sizes. The entire ballroom space could accommodate up to 1,000 persons for a local banquet. Meeting space would provide additional room for larger conferences and support smaller individual meetings. Demand and Financial Projections HVS based demand projections of the Proposed Conference Center on the previous building program recommendations assuming the venue would open in January HVS estimates that event demand would ramp up in its first two years and stabilize in 2019, its third year of operation. The figure below breaks out stabilized event demand projections by event type. Introduction and Executive Summary Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 1-7

11 Convention, Sports & Entertainment FIGURE 1-8 STABILIZED YEAR DEMAND Stabilized Events Conferences Tradeshows Consumer Shows Assemblies Meetings Banquets Total Average Attendance Conferences Tradeshows Consumer Shows Assemblies Meetings Banquets Total Attendance Conferences Tradeshows Consumer Shows Assemblies Meetings Banquets Total ,500 1, ,250 2,500 6,000 10,000 7,500 15,000 47,250 These demand projections remain consistent with HVS s survey results and recommendations. While meetings, banquets, and conferences make up the majority of the events, the Proposed Conference Center can hold larger local assemblies and shows. The figure below shows the estimated number of new room nights that the Proposed Conference Center would introduce to the Racine market. FIGURE 1-9 ROOM NIGHTS INDUCED BY THE FACILITY Type Conferences Tradeshows Consumer Shows Meetings Banquets Total ,000 2, ,000 1,000 10, ,000 3,000 1,000 1,000 1,000 13, ,000 3,000 1,000 1,000 1,000 14, ,000 3,000 1,000 1,000 1,000 14,000 Introduction and Executive Summary Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 1-8

12 Convention, Sports & Entertainment HVS projections show that the demand for the Conference Center would stabilize in 2019, and the market would gain approximately 14,000 new room nights per year. HVS applied a set of revenue and expense assumptions regarding facility use and operations to develop a financial forecast for the Proposed Conference Center. HVS started projections in the expected opening of 2017 and used inflated dollars in its figures. See the figure below for a five-year forecast. FIGURE 1-10 FIVE-YEAR FORECAST OF REVENUES AND EXPENSES OPERATING REVENUE Facility Rental Event Services (Gross) Food & Beverage (Gross) Advertising & Sponsorships $132,000 66, ,000 55,000 $176,000 88, ,000 57,000 $193,000 96, ,000 58,000 $198,000 99, ,000 59,000 Total $980,000 $1,135,000 $1,206,000 $1,237,000 $1,268,000 OPERATING EXPENSES Salaries Benefits Event Services Costs Food & Beverage Costs Administrative & General Marketing & Sales Repair & Maintenance Supplies & Equipment Utilities $331,000 83,000 56, ,000 20, ,000 34,000 15,000 49,000 Total $339,000 85,000 75, ,000 23, ,000 40,000 17,000 57,000 $348,000 87,000 82, ,000 24, ,000 42,000 18,000 60,000 $357,000 89,000 84, ,000 25, ,000 43,000 19,000 62, $203, , ,000 61,000 $366,000 91,000 86, ,000 25, ,000 44,000 19,000 63,000 $1,192,000 $1,301,000 $1,358,000 $1,394,000 $1,427,000 OPERATING INCOME (LOSS) ($212,000) ($166,000) ($152,000) ($157,000) ($159,000) NON-OPERATING REVENUE Fund Transfers In $304,000 $283,000 $284,000 $291,000 $299,000 Total $304,000 $283,000 $284,000 $291,000 $299,000 NON-OPERATING EXPENSES Capital Maintenance Management Fees Insurance $20,000 55,000 19,000 $34,000 57,000 23,000 $48,000 58,000 25,000 $49,000 59,000 25,000 $51,000 61,000 26,000 Total $94,000 $114,000 $131,000 $133,000 $138,000 TOTAL NET INCOME (LOSS) ($2,000) $3,000 $1,000 $1,000 $2,000 The Proposed Conference Center would depend on an additional source of revenue to balance its budget, though HVS has not identified the source of revenue. A Introduction and Executive Summary Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 1-9

13 Convention, Sports & Entertainment publicly owned standalone conference venue of this size generally struggles to produce an operating profit. A proficient set of managers could run the Proposed Conference Center while maintaining a small operating loss. But complementary adjacent developments such as a hotel, retail location, or restaurant could generate additional demand and thereby improve conference center profitability. Introduction and Executive Summary Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 1-10

14 2. Market Area Overview This market area analysis reviews economic and demographic data that describe the local economy in Racine, Wisconsin. The characteristics and trends of the area economy provide indicators of the performance of the Proposed Conference Center. HVS analyzed the following indicators: population, income, sales, work force characteristics, employment levels, major businesses, airport access, transportation, hotel supply, and tourism attractions. Market Area Definition The market area for a conference center consists of the geographical region that offers transportation access, lodging, and other amenities to users of the Proposed Conference Center. See the map of Racine below. RACINE, WISCONSIN Source: ESRI Market Area Overview Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 2-1

15 RACINE, WI MSA (MAP OF MARKET AREA) For the purposes of this study, HVS defined the market area as the Racine, WI Metropolitan Statistical Area, which includes all of Racine County. The following map shows the Racine, WI MSA. Source: ESRI Wisconsin lies on the western edge of the Great Lakes and covers 58,154 square miles of land. Neighboring states include Illinois and Iowa to the south, Minnesota across the Mississippi River to the west, Lake Michigan to the east and the Upper Peninsula of Michigan and Lake Superior to the north. A network of interstate highways gives drivers from Chicago and Minneapolis easy access to Wisconsin. Madison, the state capital, lies directly west of Milwaukee in southern Wisconsin. The state s agriculture generates billions of dollars and drives the state s economy. Market Area Overview Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 2-2

16 Wisconsin s farm exports provide employment to thousands of workers who transport, process, and market food products. Because of its proximity, Milwaukee influences economic activity and employment in Racine. A diverse economy in greater Milwaukee includes the service, manufacturing, healthcare, and technological industries. Many of the manufacturing companies in the area have an international customer base that generates visits and hotel night demand for the Milwaukee area. Healthcare companies generate demand through training sessions and industry conferences. Numerous colleges and universities, including the University of Wisconsin- Milwaukee, Marquette University, Concordia University, and the Milwaukee School of Engineering have campuses in Milwaukee. These institutions provide a diverse education serving the many needs of the area employers. The City of Racine lies on the southeastern edge of Wisconsin by Lake Michigan, 25 miles south of Milwaukee and 60 miles north of. The city covers approximately 15 square miles of land. As of 2012, the city has a population of 78,326, which makes it the fifth-largest city in the state. The city s waterfront location and marina offers boating opportunities for others in the Great Lakes area. Drive Time Analysis HVS prepared the following geographic radius analysis to assess the potential drive-in markets. To augment the local market demographics, HVS used ESRI to analyze demographics of populations within drive times of 30, 60, and 180 minutes of downtown Racine. An analysis of demographics within these drive times provides insight into the persons residing in areas that would be potential drive in markets for conference, entertainment, and cultural events. The following figure presents the drive time map and demographic information for Racine. Market Area Overview Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 2-3

17 FIGURE 2-1 DRIVE TIME MAP Source: ESRI The population within driving distance indicates the potential to attract delegates to conventions and conferences and attendees to public events. The figure below shows the population and income levels in the three drive-time areas. Market Area Overview Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 2-4

18 FIGURE 2-2 DRIVE TIME DEMOGRAPHICS Market/Drive Time Population Median Household Income ($) Annual Growth Rate Annual Growth Rate 30 minutes 327, , % 49,736 59, % 60 minutes 2,304,865 2,344, % 52,722 62, % 180 minutes 15,211,671 15,459, % 53,686 62, % Racine, WI MSA 195, , % 50,805 59, % United States 0.68% 50,157 56, % Source: ESRI Racine s non-central location within Wisconsin by Lake Michigan makes it less accessible than other major cities in the state, but it lies close by many major cities and states. The above table shows the population jumps by a multiple of seven between the 30 minute and 60 minute drive radii. The Racine, WI MSA and its surrounding area show a greater level of income growth than the U.S. over the next five years. Although substantial populations live within driving distance of Racine, the neighboring metro areas of Chicago and Milwaukee account for most of that population. These metro areas create their own centers of gravity and have many potentially competitive meeting and conference facilities. Racine will not be able to draw Illinois association groups out of Chicago and it cannot effectively compete with hotel and convention venues in downtown Chicago. Racine has more potential to attract groups based in the State of Wisconsin, but its location in the southeast corner of the state is a disadvantage compared to the Milwaukee and Madison metro areas. These geographic realities should temper expectations of capturing a fair share of drive-in populations. Economic and Demographic Review For this analysis, HVS used the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc as a primary source of economic and demographic statistics. Woods & Poole runs a well-regarded forecasting service that uses a database containing more than 900 variables for each county in the nation. Their regional model yields forecasts of economic and demographic trends. Census data and information published by the Bureau of Economic Analysis serve as the basis for historical statistics. Woods & Poole uses these data to formulate projections, and the group adjusts all dollar amounts for inflation to reflect real change. These data are summarized in the following table. Market Area Overview Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 2-5

19 FIGURE 2-3 ECONOMIC AND DEMOGRAPHIC DATA SUMMARY Average Annual Compounded Change Resident Population (Thousands) Racine, WI MSA Milwaukee-Racine-Waukesha, WI CSA 1, , , , State of Wisconsin 4, , , , United States 249, , , , Per-Capita Personal Income* Racine, WI MSA 26,724 33,594 33,369 35, (0.1) 1.2 Milwaukee-Racine-Waukesha, WI CSA 28,294 37,154 37,640 40, State of Wisconsin 24,929 33,209 34,154 36, United States 26,826 33,926 36,248 38, W&P Wealth Index Racine, WI MSA (0.6) (0.1) Milwaukee-Racine-Waukesha, WI CSA (0.4) 0.1 State of Wisconsin (0.3) (0.0) United States Food and Beverage Sales (Millions)* Racine, WI MSA Milwaukee-Racine-Waukesha, WI CSA 1,699 1,971 2,251 2, State of Wisconsin 4,899 5,947 6,834 7, United States 257, , , , Total Retail Sales (Millions)* Racine, WI MSA 1,804 2,219 2,415 2, Milwaukee-Racine-Waukesha, WI CSA 17,707 21,507 23,025 24, State of Wisconsin 51,863 70,624 77,229 82, United States 2,620,710 3,642,407 4,122,972 4,465, * Inflation Adjusted Source: Woods & Poole Economics, Inc. Market Area Overview Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 2-6

20 Racine s resident population consistently increased over the past two decades, but at a slightly slower rate than the general U.S. population. Woods and Poole predicts that the city will maintain a similar growth rate over the next five years. Over the past decade, the metro area s per-capita personal income fell below the personal income levels of the State of Wisconsin and the U.S. Woods & Poole forecasts that Racine will recover to the same income levels as Wisconsin and the country in the coming years. Racine experienced stronger growth in food and beverage sales than the State of Wisconsin in the last decade, but Woods & Poole s analysis expects it to dip below the State of Wisconsin s levels in the future. Workforce Characteristics The characteristics of an area's workforce provide an indication of the type and amount of transient visitation local businesses would generate. Sectors such as finance, insurance, and real estate (FIRE), wholesale trade, and services produce a considerable number of visitors, regardless of rate. The government sector often generates transient room nights, but per-diem reimbursement allowances can limit the accommodations selection to budget and mid-priced lodging facilities. Some employers of manufacturers, construction, transportation, communications, and public utilities (TCPU) contribute many visitors to the area. The following table shows the Racine, WI MSA workforce distribution by business sector. Market Area Overview Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 2-7

21 FIGURE 2-4 HISTORICAL AND PROJECTED EMPLOYMENT (000S) Percent Percent Percent Percent Industry 1990 of Total 2002 of Total 2012 of Total 2017 of Total Average Annual Compounded Change Farm % % % % (2.2) % (0.7) % 0.1 % Forestry, Fishing, Related Activities And Other Mining (0.5) Utilities (4.0) 0.2 (0.7) Construction (3.8) 1.8 Manufacturing (2.0) (1.7) (0.4) Total Trade (0.2) (0.5) 0.8 Wholesale Trade (1.7) 2.1 Retail Trade (0.8) (0.2) 0.5 Transportation And Warehousing Information (1.5) (0.3) 0.1 Finance And Insurance (0.5) Real Estate And Rental And Lease Total Services Professional And Technical Services Management Of Companies And Enterprises (5.9) (0.5) Administrative And Waste Services Educational Services Health Care And Social Assistance Arts, Entertainment, And Recreation Accommodation And Food Services Other Services, Except Public Administration (1.0) 0.8 Total Government (0.5) 0.8 Federal Civilian Government (1.1) (0.0) (0.1) Federal Military (2.2) (1.2) (0.1) State And Local Government (0.4) 0.9 TOTAL % % % % 0.2 % (0.1) % 0.8 % MSA % (0.1) % 0.8 % U.S. 138, , , , Source: Woods & Poole Economics, Inc. Market Area Overview Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 2-8

22 The service sectors make up nearly 40 percent of employment in the metro area. The area experienced recent employment declines in construction, manufacturing, and management of companies and enterprises. The finance and insurance and real estate sectors grew most rapidly in the past decade. Other than manufacturing and utilities, Woods and Poole s analysis predicts that the sectors that recently shrunk in employment will expand in the coming years. Major Business and Industry Providing additional context for understanding the nature of the regional economy, the following table presents a list of the major employers in the in the Racine, WI MSA. FIGURE 2-5 MAJOR EMPLOYERS Rank Firm Number of Employees 1 All Saints Health Care System 2,661 2 S.C. Johnson & Son, Inc. 2,600 3 CNH America LLC 2,500 4 Racine Unified School District 2,500 5 Diversey, a division of Sealed Air Corporation 1,200 6 InSinkErator 1,000 7 Aurora Healthcare Hospital City of Racine Ruud Lighting Nestle 500 Source: Racine County Economic Development Corp. Healthcare networks and medical services lead the list of major employers and a diverse set of prominent corporations ranging from agricultural and household product manufacturing and education. The overall diversity indicates a stable corporate presence that could generate demand for a conference center. Unemployment Statistics Unemployment statistics provide a measure of the local economy s health and comparisons to state and national trends. The following table presents historical unemployment rates for the market area. Market Area Overview Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 2-9

23 FIGURE 2-6 UNEMPLOYMENT STATISTICS Year MSA State Country % 5.6 % 6.0 % Recent Month - August % 7.2 % 8.2 % Source: Local Area Unemployment Statistics Historically, Racine has experienced greater unemployment rates than the State of Wisconsin and the U.S. Like the rest of the country, the recession and financial crisis in 2007 and 2008 elevated unemployment rates in 2009 and In recent years, the gap between the unemployment rates of the county and the country has decreased, signifying greater demand for corporate meeting space and industry conferences. Root River Corridor Redevelopment Plan In 2012, the Root River Council of Racine teamed with Vandewalle & Associates, a Wisconsin-based regional economy analysis group, to compile the Root River Corridor Redevelopment Plan ( RootWorks ). The master plan aims to renew up to 325 acres of properties adjacent to Root River and increase public connectivity to the Root River Corridor by repairing pathways and potentially constructing a new boardwalk. See the figure below for a summary of the planned economic areas of redevelopment. Market Area Overview Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 2-10

24 ROOTWORKS ECONOMIC REDEVELOPMENT PLAN Source: Vandewalle & Associates, Inc. The Transit Oriented Development District could support a commuter train connection to Chicago and fill up to 250,000 square feet of vacant office space in the Mound Avenue Business Center. The Root River Council has focused on reviving the 50-acre Machinery Row industrial district. Proposed projects include cleaning and occupying the riverfront properties on Water Street, generating retail stores and business development on Marquette and 6 th Street, and increasing connectivity and access to the riverfront. Other ideas for Racine market Market Area Overview Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 2-11

25 development include utilizing the unused land in the Case New Holland Downtown Riverfront Campus, retail and entertainment venues in the Belle Harbor District, and creating mixed uses for the city-owned Walker Site Redevelopment. Airport Traffic Airport passenger counts indicate a market s ability to support conference events. Trends in passenger counts reflect local business activity and the area s economic health. Event planners consider airport access when choosing a destination for their conferences and meetings. Milwaukee County owns and operates General Mitchell International Airport ( MKE ), and it serves many of Racine County s long distance travel needs. The airport lies approximately 20 miles north of downtown Racine. O Hare International Airport, approximately 60 miles south of downtown Racine, provides a less convenient but important alternative to MKE with direct connections to every major city in the U.S. and many international destinations. Currently, AirTran, American Airlines, Delta, United Express, and Southwest service MKE. The following table illustrates the previous decade s passenger traffic statistics for MKE. FIGURE 2-7 MKE AIRPORT STATISTICS PASSENGER TRAFFIC Year Passenger Traffic Percent Change* Percent Change** ,142, ,661, % 8.4 % ,268, ,299, ,135,419 (2.2) ,956, ,946,532 (0.1) ,848, ,522,456 (3.3) ,515,070 (21.1) 2.3 *Percent change from the previous year **Compounded percent change from first year of data Source: General Mitchell International Airport In 2010, Frontier Airlines made MKE one of their hubs, significantly increasing passenger air traffic. In 2012, Frontier Airlines closed its hub at MKE due to price competition with Southwest/AirTran, resulting in a reduction in passenger traffic Market Area Overview Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 2-12

26 to pre-2010 levels. The figure below further illustrates the decrease in direct flights. FIGURE 2-8 MKE AIRPORT STATISTICS DIRECT FLIGHTS Year Direct Air Carrier Flights Change from Previous Year , , % , ,001 (7.6) ,453 (0.9) ,768 (7.1) ,107 (6.5) , ,269 (10.1) ,644 (25.8) Source: General Mitchell International Airport Tourist Attractions While it is not known as a tourist destination, Racine supports a variety of tourist and leisure attractions. The peak season for tourism starts in May and ends in September. During other times of the year, weekend demand comprises of travelers passing through en route to other destinations, people visiting friends or relatives, and other similar weekend demand generators. Primary attractions in the area include the following: ReefPoint Marina features 921 slips and serves many Great Lakes boating needs. Originally, Racine Harbor Marina owned the property. In 2012, Racine County bought the marina from the company for 6.7 million dollars. The County now owns and operates the marina. Famed architect Frank Lloyd Wright designed several buildings in Racine. They include the SC Johnson Administration Building and the Golden Rondelle Theater. Many of the buildings provide tours for visitors. The Racine Art Museum houses the third-largest collection of contemporary craft in North America. In addition to permanent exhibitions, the Museum features major exhibitions of new work, focusing on ceramics, fibers, glass, metals, and wood. Kringle, an authentic Danish pretzel-like pastry, represents one of Racine s key cultural foods. Earlier this year, the State of Wisconsin adopted kringle as its Official State Pastry. The Food Network, the Travel Channel, the Today Show, Market Area Overview Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 2-13

27 and numerous travel and food magazines have featured Racine s famous kringle creations. The City of Racine owns the 50-acre North Beach, one of only two Certified Clean Beaches designated by the Blue Wave Committee of Washington, D.C. The beach features concessions, live music, and paved bike paths running between the Racine Zoo to the north and the downtown area to the south. SC JOHNSON ADMINISTRATION BUILDING Lodging Supply A conference center s ability to attract out-of-town groups depends greatly on the availability of adjacent or nearby hotel rooms within walking distance. Moreover, different events have individual preferences with respect to the types of hotels that best meet the needs of their delegates and attendees. Most planners of professional conventions, conferences, and tradeshows prefer large blocks of fullservice hotel rooms in nationally branded upper-upscale hotels. Some consumer show and assembly event planners prefer less expensive, limited-service hotel options that offer guest amenities such as complimentary breakfast and free internet connections. The quality of hotels indicates the market s ability to support the Proposed Conference Center. The figures below show the inventory of hotels within the Racine area that may serve the Proposed Conference Center, broken out by size and service level. Market Area Overview Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 2-14

28 FIGURE 2-9 SUMMARY OF LODGING SUPPLY BY SIZE Size (Number of Guest Rooms) Number of Properties Number of Guest Rooms Less than to and over Total 18 1,327 Source: STR FIGURE 2-10 SUMMARY OF LODGING SUPPLY BY SERVICE LEVEL Chain Scale Number of Properties Number of Guest Rooms Upper Upscale Upscale Upper Midscale Midscale Economy Independent Total 18 1,327 Source: STR The majority of hotels in Racine have fewer than 100 rooms. The Marriott Racine has the most rooms with 222. Racine offers a balanced mix of hotel service levels, along with a fair number of independent properties. The Radisson Hotel Racine Harbourwalk on the lakefront features 121 rooms and sits east across the street from the Proposed Conference Center site. Conclusion This section discusses a wide variety of economic indicators for the Racine market area. It boasts a diverse economy through its variety of corporations in healthcare, agriculture, and household products manufacturers. Despite the economic recession, unemployment statistics and the RootWorks master plan indicate a strong rate of recovery relative to the rest of the country. As a conference and meeting option, Racine features moderately convenient air travel with both General Mitchell International Airport and O Hare International Airport within a reasonable driving distance. Although the drive-in population exceeds 15 million, its geographic location is a disadvantage and it lacks the extensive amenities available in Milwaukee and Chicago. The city currently lacks an event site with ballroom space, meeting space, and nearby hotel capacity in the same venue. With Market Area Overview Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 2-15

29 a Conference Center, Racine s traditional tourist offerings and North Beach could attract corporations and associations to meet in the city. Market Area Overview Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 2-16

30 3. Industry Trends In this section, HVS presents an analysis of the convention, conference, tradeshow and meeting industry, including trends in the supply and demand of meeting and event facilities, as well as trends in expenditures and meeting planner preferences. The purpose of this trends analysis is to provide background information necessary to assess the potential for a conference center in Racine, Wisconsin. This section of the report also provides definitions of industry terms used throughout the remainder of this report. OASIS Event Classification System Convention and conference centers measure their performance by tracking event activity, but the definition and classification of events lacks consistency throughout the industry. Each convention center or marketing organization has their own way of classifying and measuring event demand. HVS has developed a proprietary method of event classification called OASIS Event Classification Method or OASIS, which is a convenient acronym for five criteria of event categorization: Organization, Attendees, Scope, Industry, and Set-up. See the figure below. FIGURE 3-1 OASIS EVENT CLASSIFICATION SYSTEM Industry Trends Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 3-1

31 Following are definitions of the criteria in the OASIS Event Classification Method and descriptions of the categories within each. ORGANIZATION the organization that sponsors or owns the event provides an important area of classification and can be described in five mutually exclusive categories: Corporations corporations, or private business interests, are responsible for organizing the majority of events. The event organizers may be internal to the business or professional meeting planners. Associations associations are usually membership organizations centered on specific business types, professions, or political purposes. Government international, national, state, or local government organizations sponsor events. This category is particularly important in markets with a large government office presence. Exhibition Company exhibiting organizations are companies or subsidiaries of companies established for the purpose of owning and promoting exhibiting events, such as trade and consumer shows. Event Promoter event promoters are organizations that exist for the purpose of promoting concerts, entertainment, and other types of live events that require production set-up. Sports Enterprise sports enterprises are companies or subsidiaries of companies that exist for the purpose of owning and promoting sporting events. Social, Military, Educational, Religious, Fraternal and Ethnic ( SMERFE ) although similar to associations, this category includes the types of organizations described in the title. Sometimes called affinity groups SMERFE represents a distinct category because members of these organizations use personal disposable income for membership dues and event attendance and therefore tend to be more price-sensitive than associations with professional memberships. The Organization criterion is most useful to marketing and sales organizations that rely on this information to make decisions on the allocation of staff and resources according to the type of organization sponsoring the event. Other industry participants, such as destination management companies and venue operators, also need to understand the type of organizations active in sponsoring events and value personal relationships with the event planners that represent them. ATTENDEES Event attendees can be placed in three distinct categories that distinguish the ways in which attendees gain access to events: Industry Trends Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 3-2

32 Private attendees come to the event by invitation only and do not pay a registration or admission fee. Private attendees may be individually asked to attend, as to a wedding, or invited by virtue of belonging to a certain group, such as company employees or shareholders. Registered attendees do not necessarily need an invitation, but typically pay an advance registration fee to attend the event. Registered attendees are often called delegates or qualified buyers and they usually attend an event for multiple days. Public the event is open to the general public. Attendees may need to purchase a ticket for admission such as at a consumer show. Other civic events may be free of charge. In addition, some events have combination shows with an initial period of exclusive registered attendance and subsequent public attendance. The Attendees category is particularly important to venue operators and industry analysts. Understanding the type of attendee at a given event is critical for assessing the impact on convention center operations and projecting economic impact. The length of stay of attendees and their spending patterns varies considerably among the types of attendees. SCOPE this category refers to the geographic origin of the attendees. Events are classified accordingly if a significant proportion of the attendees come from the indicated geographic region surrounding the convention center. Five categories capture all the potential geographic scopes and are self-explanatory: International National Regional State/Provincial Local Understanding the origin of attendees is critical to event planners and in the estimation of the economic impact of events. Events that draw attendees from larger geographic regions tend to have higher new spending associated with the event. The allocation of marketing and sales resources may also break down according to the geographic scope of events. INDUSTRY in North America, HVS recommends relying on the North American Industry Classification System ( NAICS ) which replaced the previously used U.S. Standard Industrial Classification ( SIC ) system. NAICS was developed jointly by Industry Trends Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 3-3

33 the U.S., Canada, and Mexico to provide new comparability in statistics about business activity across North America. Other economic regions and countries have similar industrial classification systems that are widely used and can be adopted for the purposes of classifying events by industry. NAICS has hundreds of categories but these categories are organized hierarchically in five levels. All categories can be rolled up into twenty of the top levels in the hierarchy. However, not all top level industry classifications are useful for event classification because little or no event activity is associated with them. Other top level categories, such as Manufacturing, are too broad to provide meaningful information, and level two or three categories can be used to form a useful breakdown of events. The choice of industry classifications should result in a reasonable share of events falling into each category. According to the Tradeshow Week data book, the leading industries that are represented by conventions, tradeshows and exhibition include: Medical and Health Care Home Furnishings and Interior Design Sporting Goods and Recreation Apparel Building and Construction Landscape and Garden Supplies Computers and Computer Applications Education Gifts Associations Use of the NAICS codes allows for the orderly roll-up of industrial classifications across different events and venues, regardless of the categories or the hierarchical levels that different people may choose to use. Industrial classification information is useful for those planning to develop new events and for other analysts that need to understand how trends in economic health of the underlying industries affect the success of particular events and venues. SPACE SETUP this final criterion provides for the categorization of events by set-up of the function spaces they utilize. These categories are not mutually Industry Trends Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 3-4

34 exclusive as events may use any combination of the five primary types of event set-up. Event Types Breakout typically involves the use of meeting rooms, boardrooms or other multi-purpose spaces for meeting functions in a classroom or meeting setting. This set-up may involve some catering services such as coffee breaks or lunches. Banquet includes the set-up for catered banquets events such as a weddings and may include some staging for presentations such as at a general session event. Exhibit includes the set-up displays in exhibition halls or other multipurpose spaces. Concession services and buffet lunches are often a component of this set-up. Assembly includes set-up in theater style seating in plenary halls and fixed seat theaters or other multi-purposes spaces that are used primarily for assemblies and general sessions. Production includes the set-up for concerts, entertainment, sporting events and other types of events that require significant staging, lighting, and other live-event related set-up. Application of the OASIS system can provide precise definitions of commonly used event classifications. All commonly used terms for event types can be defined by a combination of three OASIS categories: organization, attendees, and space set-up. Conventions associations, government, and SMERFE organizations register attendees for multi-day events. Facility set up includes breakout, banquet and exhibit space set-up and may include plenary sessions. Typically, the primary purpose of a convention is information exchange. Tradeshows provide a means for wholesalers and retailers to transact business with industry buyers. Like conventions, tradeshows offer a forum for exchanging industry ideas. In order to clearly differentiate conventions from tradeshows, HVS assumes that only corporations and enterprises can sponsor and produce tradeshows. Similar to conventions, tradeshows require registered attendees. While they also require exhibit space set-up, they only sometimes require banquet, plenary, and/or breakout space set-up. Combination Shows are either corporate or enterprise produced, typically with an initial period of attendance by registered attendees only, and later by the public. Always requiring exhibit set-up, they sometimes also require plenary, banquet and/or breakout set-up for additional portions of their show. Industry Trends Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 3-5

35 Trends Supply Trends Consumer Shows public, ticketed events featuring the exhibitions of merchandise for sale or display. Exhibition companies produce consumer shows, as they provide a means of product distribution and advertising. They only require exhibit space set-up. Conferences require a mix of banquet and breakout space set-up as well as occasional assembly space, but do not require any exhibit set-up. Conferences can be conducted by any organization type, but always require attendees to be registered. Meetings only require breakout space set-up. Like conferences, they can be produced from any of the organization types, but unlike conferences, they are private events to which one must be invited. Banquets only require a banquet set-up for food and beverage meal service. These events also can be produced by any organizational type, and are either are held privately or require guests to register. Assemblies usually involve a ceremony, a speech, or another similar activity that attracts a crowd of spectators. Produced by any type of organization, assemblies are always public events. Additionally, assemblies only require a plenary set-up. Fairs usually involve an exhibit booth set-up for a public event in which a number of organizations or companies represent themselves and/or a product or service, with a similar theme or purpose uniting the event. Corporations, associations, governments, or SMERFE groups may present a fair. Concert/Entertainment usually a concert or some form of live entertainment, owned and organized by an event promoter for the public. Entertainment events only require production set-up. Sports/Amateur Sports require only a production set-up. Attendees to sporting events, which are always organized by sports enterprises, may be public or registered. Some sporting events have both a registered and public aspect to the event over the span of a few days. The purpose of this section is to describe the conference, convention, and meeting industry and analyze trends in the number of events, attendance, and the supply of facilities. The convention and conference center industry experienced significant year-overgrowth in supply from 2000 through Since 2007, the rate of growth in supply has slowed, but remained positive. As the majority of convention and meeting facilities involve public funding, economic conditions affect the level of Industry Trends Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 3-6

36 public investment in convention and meeting facilities that are intended to stimulate economic activity. As poor economic conditions continue to constrain public budgets nationwide, lack of available funding for convention and meeting facilities will continue to limit supply growth in the near future. As the economy improves, supply growth will likely remain low as convention venue projects have long lead times due to planning, financing and construction requirements. A number of facilities will be undergoing expansions in the next few years, as described below. TABLE 3-2 FUTURE FACILITY EXPANSIONS & UNDER CONSTRUCTION Year 2017 Miami Beach Convention Center (FL) Project o 1 billion redevelopment of center and surrounding district 2016 Moscone Convention Center (San Francisco, CA) o $520 million in facility improvements 2016 George R. Brown Convention Center (Houston, TX) o 1,000-room headquarter hotel 2016 Henry B. Gonzales Convention Center (San Antonio, TX) o $325 million expansion 2014 Washington Convention Center (Washington, D.C.) o 1,175-room headquarter hotel 2014 Green Bay K1 Convention Center (WI) o $20 million in facility expansion and improvments 2014 Spokan Convention Center (WA) o 90,000 sq ft expansion 2013 Owensboro Convention Center (KY) o 169,000 sq ft convention center o 151-room hotel 2013 San Jose Convention Center Expansion (CA) o 35,000 sq ft ballroom space o 39,000 sq ft meeting space 2013 Riverside Convention Center (CA) o $44 million in facility renovation o 42,400 sq ft expansion 2013 Music City Center (Nashville, TN) TBD o New 500,000+ sq ft center & 800-room hotel San Diego Convention Center (CA) o $520 mil expansion of convention center and hotel o 400,000 sq ft of event space and 500-room hotel Industry Trends Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 3-7

37 As evidenced in the above facility expansions, the type of supply growth has transformed in recent years to meet planners needs. Meeting and breakout sessions have become more common during large conventions, thus increasing the need for additional meeting space and/or flexible function space. As the industry has matured, meeting planner expectations for quality have increased, including proximity of full-service hotels to event facilities. Demand Trends The Center for Exhibition Industry Research (CEIR) has created an index of total demand in the convention and meeting industry and compared the demand index to the United States GDP. The following figure demonstrates how the combined or Total demand index shown in the above chart moves in step with the U.S. GDP. FIGURE 3-3 GROWTH IN EXHIBITION DEMAND VS. GDP GROWTH (% CHANGE) Source: Center for Exhibition Industry Research As limited funding mechanisms have slowed supply growth, demand has also decreased. Corporations, associations, and governmental entities decreased total demand for convention and meeting space in 2009, largely due to strained budgets. The year 2010 saw growth in GDP as well as the beginnings of a recovery in the exhibition industry. Industry Trends Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 3-8

38 TABLE 3-4 DEMAND INDICATORS Demand Indicator Estimated Rate of Growth 2010 Predictions 2011 Predictions 2012 Predictions Number of Meetings 3% 8% 2% Projected Attendance 5% 2% 2% Average Meeting Length 0% 0% 0% Average Expenditure Per Meeting 1-% 5% 1% Source: Future Watch 2010, 2011; Business Barometer 2012 In November of 2010, Red 7 Media conducted a survey of large convention and tradeshow producers on their top criteria for site selection. FIGURE 3-5 SITE SELECTION CRITERIA FOR PLANNERS Criteria Percentage of Show Producers Hotel Room Prices 75% Convention Center and Exhibiti on Hall Size 67% Airport Capacity and Air fare 65% Hotel Room Availibility 63% Availibility of Open Dates 59% Hotel Block Attrition Policies 57% Hotel Room Quality 57% Proximity of Headquarter Hotel(s) to the Convention Center 55% Convention Center and Exhibi tion Hall Quality 51% Source: Red 7Media In addition to actual facility size, the survey indicates that site selection is largely based on two important amenities - hotels and airports. This reaffirms the changing dynamic of the convention and meeting industry that is now focused on reducing costs for the hosting organization and its attendees as well as maximizing accessibility. Industry Trends Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 3-9

39 Conference Centers Conference centers typically have a mix of meeting and ballroom space and are ideally suited for conferences, meetings, and small conventions. Conference centers often host weddings, banquets, and other social functions along with small conventions and tradeshows. Each year the International Association of Conference Centers (IACC) conducts an in-depth survey of IACC certified conference centers in North America and issues a trends report based on its findings. The report distinguishes between residential and non-residential conference centers and provides a statistical and financial profile for each. While the majority of conference centers across the country do not have an IACC certification, the overall trends reported by survey do provide some insight into the industries which have the most direct implications on the operations of a possible conference center in Racine. FIGURE 3-6 PROFILE OF NORTH AMERICAN CONFERENCE CENTERS 50% 40% 30% 20% 10% 0% Residential Non-Residential Source: IACC Trends in Conference Center Industry, 2013 Edition Unlike convention centers, which are typically owned by a city or other public entity, conference centers have a variety of ownership structures. Public entities, private corporations, universities, and non-profit organizations often own conference centers for their internal meetings and training. Function spaces are then rented to external organizations when not in use by the primary tenant. Industry Trends Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 3-10

40 FIGURE 3-7 PROFILE OF CONFERENCE CENTER OWNERSHIP 40% 30% 20% 10% 0% Residential Non-Residential Source: IACC Trends in Conference Center Industry, 2013 Edition Unlike convention centers which utilize exhibit space to introduce new products and services in an industry, conference centers are most often used for training and continuing education purposes. Industry Trends Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 3-11

41 FIGURE 3-8 TYPES OF MEETINGS IN CONFERENCE CENTERS 50% 40% 30% 20% 10% 0% Management Planning Professional / Technical Training / Continuing Education Sales Meetings Other Residential Non-Residential Source: IACC Trends in Conference Center Industry, 2013 Edition As the meetings industry as a whole continues to rebound from recession, meeting planners also report being less concerned about the negative publicity associated with hosting events in upscale properties and destinations than in recent years. Another indicator of the national recession s impact on the meetings market is the geographic scope of meetings. As groups reduced their meetings budget, conference facilities began to rely more heavily on local meetings and events. Industry Trends Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 3-12

42 FIGURE 3-9 CONFERENCE CENTER ATTENDANCE BY TYPE 80% 70% 60% 50% 40% 30% 20% 10% 0% Residential Non-Residential Source: IACC Trends in Conference Center Industry, 2013 Edition The majority of meeting demand (75 percent) for non-residential conference centers was generated by corporate and association sources, as shown in the figure below. Industry Trends Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 3-13

43 FIGURE 3-10 NON-RESIDENT CONFERENCE CENTER DEMAND SEGMENTS 1.3% 6.0% 6.6% Corporate 11.6% Association Government 20.5% 54.0% Civic SMERF Other Source: IACC Trends in Conference Center Industry, 2013 Edition Convention and Meeting Trends for the Future Over the past few decades, the meeting and convention industry has evolved dramatically from a budding industry to a more mature one that has become an important driver of the national economy. As an established industry, the meeting and convention industry has been marked by rapid growth in the last four decades and a subsequent slowdown in supply growth in the late 2000s. As the economic recession continues to affect the level of demand and available budgets for conventions and meetings, the industry continues to evolve. Changes in Demand and Supply Transformation: As discussed earlier, the maturity of the industry has sharply increased competition. Nearby or attached hotel rooms, flexible meeting space, price points at convention centers and hotels, and airport capacity and rates continue to drive site selection, and thus dictate how supply changes over time. Quality of convention facilities and hotels continues to be an important factor in site selection. Travel Costs: Organizations hosting and planning events continue to work with tightened budgets, as do attendees. Recent increases in travel costs have decreased the desire to travel for some attendees and exhibitors. In the long run, expansions Industry Trends Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 3-14

44 in the transportation system and continued innovations, as well as improved economic conditions, are likely to support the growth of the meeting industry. Electronic Meetings: In recent years, industry experts have speculated that improvements in telecommunications technology would supplant the need for face-to-face meetings. While data indicates that some meetings and events have been replaced by webinars or other electronic forms of meetings, in the long run, electronic meetings act as a demand generator for future meeting growth by expanding the networks and interactions of businesses and organizations. Further advancements in communications technology will be necessary before electronic meeting became a realistic substitute for face-to-face meetings. Mixed-Use Developments: For many markets, the presence of conference and convention centers offer an opportunity to develop an adjacent mixed-use attraction with land uses such as hotels, retail, dining, sports venues, and other entertainment uses. Some conference and convention centers have become the center of their own districts, offering a wide variety of entertainment options to delegates, event organizers, or exhibitors. The growth of mixed-use developments, particularly as economic conditions have improved, will continue to change the meeting and convention industry as supply transforms. Implications for Racine As the meetings and convention industry continues its slow recovery from 2009 lows, Racine may have the opportunity to capture some of the local and regional market share of events. But the conference and convention industry remains highly competitive and price sensitive and has not fully recovered from the effects of the Great Recession. Some of the impacts will have lasting effects on the industry such as substitution to electronic meetings and reduced spending by associations and convention event planners. The pace of growth in convention and event space has slowed to a trickle. Expansion space in other communities is unlikely within the next decade, but improvements to and replacement of existing buildings will continue as communities understand that ongoing investment in their venues is necessary to remain competitive. Much of the recent focus has turned to improving overall destination appeal rather than expanding the amount of function space. Racine would need to make similar efforts to be successful. Industry Trends Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 3-15

45 4. Survey Findings Overview HVS designed and conducted a survey of event planners to provide a basis for assessing the potential demand for a proposed conference center in downtown Racine. The survey gathered information from professional event planners about their event needs and event destination preferences. HVS ed 263 professionals from organizations representing state and local associations, government entities, corporate and other organizations. HVS introduced the purpose of the survey and provided a link to the web-based survey. Responses included the following: 46 respondents took the web-based survey. Of these, 35 completed the survey while 11 partially completed the survey (left one or more questions blank). 6 people replied that they would not serve as good resources for the survey, due to location or not currently working in event planning. 18 percent of survey subjects with valid addresses responded to the survey. The following summary of responses highlights key results. To understand the types of organizations responding to the survey, HVS asked a series of questions for the respondents to describe the organizations they represent and their past use of venues in Racine and other locations. Respondents may represent more than one type of organization, as shown in the figure below. Survey Findings Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 4-1

46 FIGURE 4-1 RESPONDING ORGANIZATIONS BY TYPE Association 91% Education Government Sports Other Religious Corporate 6% 6% 6% 6% 3% 3% Event planners representing associations make up over 90 percent of the sample, followed by those representing educational institutions, government organizations, and sports groups. HVS asked event planners to identify the types of events they plan. FIGURE 4-2 TYPES OF EVENTS PLANNED Conference Meeting Training/Workshop Convention Trade Show Entertainment show/event Sports-related events and competition 5% 5% 40% 35% 50% 75% 90% The majority of survey respondents plan conferences, meetings, and workshops. Some respondents work with conventions and trade shows. A small number of respondents plan sports and entertainment events. Survey Findings Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 4-2

47 HVS asked event planners whether they had planned an event in Racine during the past five years. FIGURE 4-3 EVENT HELD IN RACINE DURING PAST 5 YEARS 85% 15% Yes No Only 15 percent of respondents said they had held an event in Racine in the last five years. For those respondents who have not, HVS asked them to identify their primary reason or reasons. FIGURE 4-4 REASONS FOR NOT HOSTING IN RACINE Non-central location Insufficient event space Need more attractive destination Predetermined location Lack of airport access Not enough members in the area Racine not chosen yet City not large enough Limited plane flights Insufficient hotel rooms 6% 6% 6% 3% 3% 3% 12% 15% 35% 38% Outside of the control of RealRacine, local government, and other stakeholders, almost 40 percent of the respondents cite Racine s non-central location in Wisconsin as the primary reason for not hosting in the city. Many respondents also said that Racine does not have enough space for the events they plan. Some Survey Findings Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 4-3

48 planners responded that Racine does not have destination appeal for their events, or that their events occur in a different predetermined location. For those planners who said they had held an event in Racine in the last five years, HVS asked them to identify other venues in which they placed their events. FIGURE 4-5 PAST EVENTS IN WISCONSIN BY VENUE Kalahari Resorts KI Convention Center La Crosse Center Blue Harbor Resort and Conference Center Radisson Paper Valley Hotel and Conference Center Other Holiday Inn Stevens Point Monona Terrace Oshkosh Convention Center Ramada Inn Eau Claire Convention Center Westwood Conference Center Holiday Inn Express and Janesville Conference Center 14% 29% 29% 29% 43% 43% 57% 57% 57% 71% 71% 71% Some of the largest venues in the competitive set, such as Kalahari Resorts, KI Convention Center, and the Lacrosse Center received the greatest number of responses. Meeting Planner Preferences and Perceptions Before responding to a series of questions regarding their perception of Racine as group event location, HVS asked meeting planners to identify their level of knowledge about the destination. See the figure below. Survey Findings Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 4-4

49 FIGURE 4-6 KNOWLEDGE OF RACINE 37% 37% 20% 7% Very knowledgeable Somewhat knowledgeable Not very knowledgeable Not knowledgeable at all Just over half of the respondents said they were either not very knowledgeable or not knowledgeable at all about Racine. Only a small percentage said they were very knowledgeable of Racine as an event destination. Some event planners could avoid planning events in Racine due to their lack of knowledge of the area. HVS asked meeting planners to state their beliefs on Racine s main strengths and weaknesses as an event destination. The following figures summarize their responses. Survey Findings Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 4-5

50 FIGURE 4-7 RACINE MARKET STRENGTHS Lakefront Nice downtown area Close to airport Easy interstate access Close to Chicago Low hotel prices Marriott Hotel Close to Milwaukee Good restaurants Friendly community Good service Good mayor 19% 15% 11% 11% 11% 7% 7% 7% 4% 4% 4% 41% Event planners cite Racine s waterfront location as its key market strength. Many others note that Racine s downtown restaurants and amenities attract attendees. Other strengths include its closeness to General Mitchell International Airport, good drive-in access, and low hotel prices. FIGURE 4-8 RACINE MARKET WEAKNESSES Non-central location Not a convention destination Too far from airports Insufficient event space Limited restaurant selection City is too small Low quality hotels No real strengths Crime Not enough to do City lacks unique culture Not enough attendees in area Lack of transportation Old facilities Poverty Insufficient hotel rooms 11% 9% 9% 6% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 49% Survey Findings Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 4-6

51 Almost half the event planners cited Racine s non-central location as the city s primary weakness. They ranked Racine s lack of perception as an event destination second with 11 percent of respondents. Issues related to airport access, insufficient function space, hotel quality, and restaurant selection received several mentions from the survey respondents. HVS asked survey respondents to identity their five most important criteria when selecting an event venue and destination. The following figure presents the percentage of survey respondents who indicated each selection criteria as among their top five. FIGURE 4-9 MOST IMPORTANT SELECTION CRITERIA Availability of facility event space Geographic location within state Price of facility rentals Price of hotel rooms Overall level of destination appeal Availability of hotel rooms Ability to attract attendees Availability of air travel Convenience for drive-in visitors Quality of hotel rooms Proximity of hotels to event spaces Dining, retail & entertainment options Recreation, tourism & cultural activities Cleanliness Adequate technology services Green building and conferencing practices 12% 6% 3% 3% 24% 24% 21% 21% 38% 38% 32% 32% 47% 47% 56% 68% Most event planners cite the availability of event function space and geographic location within the state as the most important criteria when selecting an event location. These findings confirm that Racine s non-central location in the state makes it less viable for statewide conferences and meetings. Almost half the planners said pricing of facility and hotel rooms determines their choice. While mentioned less often than event space, overall destination appeal also influences event planners decisions. Survey Findings Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 4-7

52 HVS then asked event planners to rate Racine on these same criteria. In the following figure, a rating of five means excellent and a rating of one means poor. FIGURE 4-10 RACINE S RATING ON IMPORTANT CRITERIA Price of hotel rooms Cleanliness Price of facility rentals Dining, retail & entertainment options Proximity of hotels to event spaces Availability of facility event space Availability of air travel Quality of hotel rooms Recreation, tourism & cultural activities Geographic location within state Availability of hotel rooms Convenience for drive-in visitors Ability to attract attendees Overall level of destination appeal Event planners ranked Racine s hotel room prices as better than other destinations. Racine received poor scores on its geographic location within the state, and more planners selected location as a criterion than any other. In addition, they gave Racine low scores on its ability to attract attendees and its destination appeal. Event Characteristics and Facility Requirements HVS asked event planners about their likelihood of booking an event in Racine if the city had a conference center that met their event needs. The following figure presents the breakdown of their responses. Survey Findings Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 4-8

53 FIGURE 4-11 LIKELIHOOD OF BOOKING EVENT IN RACINE 35% 26% 18% 18% 3% Very likely Somewhat Likely Neutral Somewhat Unlikely Very Unlikely Just over half of the survey respondents said that they would be either somewhat unlikely or very unlikely to host an event in Racine. Still, approximately 30 percent of the event planners said they would be at least somewhat likely to book an event in Racine. In order to determine building program needs, HVS asked event planners to identify and describe their most typical or important event. This information included the name of the event, the type of event, approximate attendance, and the facility and lodging requirements. For this analysis, HVS removed the results for those event planners that would be unlikely to host an event in Racine. HVS categorized the responses by event type and analyzed the aggregate requirements of the event types. The following figure presents the breakdown of events described by the event planners. Survey Findings Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 4-9

54 FIGURE 4-12 EVENTS BY TYPE Conference 44% Meeting Convention Training/Workshop 14% 17% 19% Trade Show Sports-related events and competition 3% 3% Conferences make up almost half of the events described by the survey respondents, followed by meetings, conventions, and workshops. HVS asked survey participants to identify the scope (geographic origin of attendees) of their most important or typical event. FIGURE 4-13 EVENTS BY ATTENDEE ORIGIN National/International 34% Regional (multi-state) 3% Statewide 60% Local 3% The events described by meeting planners attract a mix of national and state attendees. HVS analyzed how planners preferences would change based on event attendee origin. See the figure below. Survey Findings Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 4-10

55 FIGURE 4-14 LIKELIHOOD OF BOOKING EVENT BY ATTENDEE ORIGIN 67% 40% 0% 8% 8% 17% 5% 20% 20% 15% Very likelysomewhat Likely Neutral Somewhat Unlikely Very Unlikely Very likelysomewhat Likely Neutral Somewhat Unlikely Very Unlikely National/International Statewide Two thirds of event planners for national or international attendees said they would be very unlikely to plan an event in a proposed conference center, compared to only 15 percent of event planners for statewide attendees. Almost half the planners for statewide events said they were at least somewhat likely to plan an event. Racine would struggle to gain national or international meetings business with a new conference center, and should focus on local and statewide organizations. Event attendance levels indicate the quantity and size of function spaces that events require. HVS calculated the average attendance for each event type reported by the survey respondents. The following figure excludes sports and entertainment events which typically have significantly higher attendance. Survey Findings Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 4-11

56 FIGURE 4-15 AVERAGE EVENT ATTENDANCE BY TYPE OF EVENT Convention 670 Meeting 517 Conference 461 Trade Show 350 Training/Workshop 120 The above figure shows that attendance levels vary widely by event type. Exhibitbased conventions have higher average attendance levels than conferences and workshops that primarily use ballroom and meeting space. HVS asked event planners to identify specific facility exhibit, banquet, and meeting room needs for their events. Since facility needs vary by event type, HVS considers only those events which require a specific function. For example, HVS excluded meetings from the analysis of exhibit space requirements. The following figures show distributions of space requirements for exhibit space, banquet seating, and meeting rooms. Banquet and Hotel Room Block Requirements Banquet seats and hotel room block requirements for conventions, conferences, meetings and other events can vary significantly and do not necessarily follow attendance levels. Survey Findings Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 4-12

57 FIGURE 4-16 EVENT BANQUET SEAT REQUIREMENTS Number of Banquet Seats Required 1, % of events require 500 banquet seats or fewer Survey respondents required an average of approximately 250 banquet seats for their events. Only a few respondents claimed that their event required over 500 banquet seats, and no one said the venue needed over 1,000 seats. The following figure shows hotel room block requirements. Survey Findings Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 4-13

58 FIGURE 4-17 HOTEL ROOM BLOCK REQUIREMENTS Number of Hotel Rooms Required 2,000 1,500 1, % of events require 500 hotel rooms or fewer 0 80 percent of survey respondents require a room block of at least 50 hotel rooms. The average response indicated a hotel room block requirement of approximately 350 rooms, with a quarter of responses needing more than 500 hotel rooms. Survey Conclusions and Implications for Racine Survey respondents provide a sample representation of the target market for the Proposed Conference Center, with the vast majority of planners representing association-based groups in Wisconsin. Key findings and conclusions include the following: Based on historical bookings by event planners, the strongest competition for the Proposed Conference Center comes from larger and more populous cities in Wisconsin, such as Milwaukee. The greatest deterrent to booking events in Racine is its non-central location and distance from attendee bases. Event planners also note insufficient function space for larger events. Racine has several strengths as a group event destination, including its dining options, easy drive-in access from major population centers, and attractive lakefront. Other planners note the low price of hosting events in Racine. The most important selection criteria for meeting planners pertain to the availability of event space and the geographic location of the venue within Survey Findings Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 4-14

59 the state. Racine rates low on both of these criteria, but it rates higher on price of hotel rooms and cleanliness. Attendee origin affects the level of interest in the Proposed Conference Center. Planners of statewide events have some interest in a facility in Racine, while national and international event planners show little to no interest. Survey Findings Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 4-15

60 5. Comparable Venues This analysis of comparable venues provides a basis for our building program recommendations and forecasts of event demand and financial operations. HVS compares the function spaces in each of the facilities, adjacent hotel capacities, and characteristics of the markets relevant to the success of the venues. It concludes with an assessment of the relative strengths and weaknesses of Racine. Based on the market area overview, we assume that a conference or convention center in Racine would compete with other cities in Wisconsin. Event planners select host cities for their events based on the overall package that a city offers. Several factors determine a city s strength and potential in the meetings market, including the attributes of the convention facilities, lodging supply, the economic and demographic profile of the community, transportation access, tourism amenities, and overall destination appeal. This analysis will help in understanding the competitiveness of Racine and the Proposed Conference Center. The figure below shows the set of potentially competitive venues. FIGURE 5-1 COMPETITIVE VENUES Name of Venue Location Total Function State Competitors Monona Terrace Community and Convention Center Madison WI 68,370 sf La Crosse Center La Crosse WI 68,012 Kalahari Resorts Wisconsin Dells WI 61,342 KI Convention Center Green Bay WI 41,801 Radisson Paper Valley Appleton WI 32,684 Holiday Inn Stevens Point Stevens Point WI 25,823 Westwood Conference Center Wausau WI 23,795 Oshkosh Convention Center Oshkosh WI 18,510 Holiday Inn Express and Janesv ille Conference Center Janesville WI 14,249 Blue Harbor Resort and Conference Center Sheboygan WI 10,894 Best Western Harborside Inn & Kenosha Conference Center Kenosha WI 10,089 Exhibition Space Assessment Conventions, tradeshows, and consumer shows depend heavily on exhibition space. The amount and quality of exhibition space determines the size and types of events that the venue can accommodate. The exhibition space available at each of Comparable Venues Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 5-1

61 the selected comparable facilities provides an indication of the amount of space appropriate for Racine. See the figure below. FIGURE 5-2 EXHIBITION SPACE IN COMPETITIVE VENUES State Competitors sf # halls La Crosse Center 38,740 5 Monona Terrace Community and Convention Center 37,200 2 KI Convention Center 17,640 1 Holiday Inn Stevens Point 16,020 5 Kalahari Resorts 0 0 Radisson Paper Valley 0 0 Westwood Conference Center 0 0 Oshkosh Convention Center 0 0 Holiday Inn Express and Janesville Conference Center 0 0 Blue Harbor Resort and Conference Center 0 0 Best Western Harborside Inn & Kenosha Conference Center 0 0 Average 27,400 3 Only four of the competitive venues have exhibit space. Three of the four venues with exhibit halls also rank in the top three for total function space. Generally, smaller facilities do not have exhibit halls. If Racine builds a smaller facility relative to its potential competitors, it might not require dedicated exhibit space. Ballroom Space Assessment Conference and convention centers need banquet space as facility operators attempt to grow food service revenues at their facilities and event planners seek a higher level of service for their attendees. In addition to social events (weddings and fundraisers), several other types of events, such as conventions and tradeshows, typically require food services in a ballroom setting. Event planners hold general assemblies at conventions and tradeshows in a ballroom with a theater or banquet set-up. Consequently, the size of the ballroom can determine a venue s event size capacity. The ballroom s maximum number of divisions affects its ability to host simultaneous events. The figure below compares available banquet space in the competitive venues. Comparable Venues Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 5-2

62 FIGURE 5-3 BALLROOM SPACE IN COMPETITIVE VENUES State Competitors sf # divisions Kalahari Resorts 37, KI Convention Center 17,797 7 Oshkosh Convention Center 15,400 8 Radisson Paper Valley 13,730 4 Monona Terrace Community and Convention Center 13,524 4 Holiday Inn Express and Janesville Conference Center 13,000 3 Blue Harbor Resort and Conference Center 9,882 7 Best Western Harborside Inn & Kenosha Conference Center 9,359 6 Holiday Inn Stevens Point 8,400 1 Westwood Conference Center 7,347 4 La Crosse Center 6,700 3 Average 13,900 6 Unlike exhibit space, all venues in the competitive set have ballroom space. With the exception of the Holiday Inn Stevens Point, all of the competitive facilities have divisible ballroom space. Racine would require ballroom space with multiple divisions to offer facilities for conferences and larger social events. Meeting/Break-out Room Assessment Meeting rooms can accommodate sub-groups as they break out of larger general sessions at conventions and tradeshows. Additionally, these smaller rooms can accommodate self-contained meetings, training sessions, seminars, classes, and a variety of small meeting functions. Event planners tend to use a facility s meeting rooms most frequently. Generally, conference and convention centers should offer meeting space proportionate to the exhibition space available at the facility. The optimum amount of meeting space can vary depending on a facility s target market. The following figure compares available meeting space in the venues. Comparable Venues Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 5-3

63 FIGURE 5-4 MEETING SPACE IN COMPETITIVE VENUES State Competitors sf # rooms Kalahari Resorts 23, La Crosse Center 22, Radisson Paper Valley 18, Monona Terrace Community and Convention Center 17, Westwood Conference Center 16, KI Convention Center 6,364 9 Oshkosh Convention Center 3,110 4 Holiday Inn Stevens Point 1,403 4 Holiday Inn Express and Janesville Conference Center 1,249 3 Blue Harbor Resort and Conference Center 1,012 2 Best Western Harborside Inn & Kenosha Conference Center Average 10, All of the competitive venues offer multiple meeting rooms. Meeting room sizes range from 170 square feet to over 1,200 square feet. Racine would require meeting space to accommodate sub-groups and smaller gatherings. Adjacent Hotel Capacity To attract out-of-town groups, an adequate supply of nearby hotel rooms should support the lodging needs of delegates, exhibitors, and other attendees. Event planners value proximity and connectivity when evaluating hotel packages available in competing communities. Generally, they compare the number of rooms offered at one or more hotels adjacent or connected to the conference and convention centers. Other important factors include hotel brands, service levels, building ages, management, and available meeting and banquet spaces in these hotels. Comparable Venues Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 5-4

64 FIGURE 5-5 ADJACENT OR INTEGRATED HOTEL ROOM CAPACITY State Competitors Kalahari Resorts 750 Radisson Paper Valley 390 KI Convention Center 241 Monona Terrace Community and Convention Center 240 Blue Harbor Resort and Conference Center 182 Oshkosh Convention Center 176 Holiday Inn Stevens Point 149 Holiday Inn Express and Janesville Conference Center 142 Best Western Harborside Inn & Kenosha Conference Center 111 La Crosse Center 0 Westwood Conference Center 0 Average 265 The La Crosse Center and Westwood Conference Center have no adjacent hotel rooms. The competitive set averages 265 adjacent hotel rooms without them, and the competitive set averages 216 adjacent hotel rooms with them. The Radisson Hotel Racine Harbourwalk offers 121 rooms, below both averages, and the Proposed Conference Center could benefit from additional and adjacent hotel supply. Population Comparison Local area population data can provide evidence of a community s overall economic size and ability to support public services and visitor amenities for conference/convention center users. Because most convention centers primarily target out-of-town users, local area population figures rarely correlate directly with overall demand potential. However, population data can provide a basis for understanding a community s ability to support and sustain a meeting and conference venue, the surrounding neighborhood, and market. Additionally, population size can indicate demand potential for specific types of events such as locally generated meetings, banquets, religious events, graduation ceremonies, and consumer shows. See the figure below for a comparison of each competitive venue s population within a 90-minute drive time radius. Comparable Venues Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 5-5

65 FIGURE MINUTE DRIVE TIME POPULATION OF COMPETITIVE SET Venue City 90 Minute Drive Time Population Best Western Harborside Inn & Kenosha Conference Center Kenosha 9,160,172 Proposed Racine Conference Center Racine 6,525,619 Holiday Inn Express and Janesville Conference Center Janesville 5,753,221 Monona Terrace Madison 3,306,745 Oshkosh Convention Center Oshkosh 2,808,892 Blue Harbor Resort and Conference Center Sheboygan 2,746,945 Radisson Paper Valley Appleton 1,707,757 Kalahari Resorts Wisconsin Dells 1,452,406 Holiday Inn Stevens Point Stevens Point 1,278,167 KI Convention Center Green Bay 1,276,480 La Crosse Center La Crosse 624,472 Westwood Conference Center Wausau 579,810 Average 3,101,724 Source: ESRI Racine s proximity to both Chicago and Milwaukee yield a greater drive time population than most of the venues in the competitive set. But Racine would struggle to draw attendees away from both of those cities, so a greater drive time population does not guarantee a more successful meeting and conference venue. Corporate Comparison The density and breadth of a city s corporate base indicates its potential in the meetings industry. A city s established presence in a particular industry increases its appeal as a destination for conventions, conferences, training, and other industry-specific events. The following figures demonstrate how Racine compares with its current competitors in terms of the total number of business establishments. Comparable Venues Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 5-6

66 FIGURE 5-7 NUMBER OF BUSINESS ESTABLISHMENTS IN COMPETITIVE SET Venue Region 2010 Total Business Establishments 2010 Establishments with >500 Employees Monona Terrace Community and Convention Center Madison, WI MSA 15,132 2,352 KI Convention Center Green Bay, WI MSA 7,621 1,218 Radisson Paper Valley Appleton, WI MSA 5,818 1,071 Proposed Racine Conference Center Racine, WI MSA 4, Oshkosh Convention Center Oshkosh-Neenah, WI MSA 3, Westwood Conference Center Wausau, WI MSA 3, La Crosse Center La Crosse, WI MSA 3, Holiday Inn Express and Janesville Conference Center Janesville, WI MSA 3, Best Western Harborside Inn & Kenosha Conference Center* Kenosha County 3, Blue Harbor Resort and Conference Center Sheboygan, WI MSA 2, Holiday Inn Stevens Point** Portage County 1, Kalahari Resorts*** Columbia County 1, AVERAGE 4, *Used Kenosha County numbers in place of Chicago-Naperville-Joliet, IL-IN-WI MSA **Used Portage County numbers in place of Stevens Point, WI µsa ***Used Columbia County numbers in place of Madison, WI MSA Source: U.S. Census Air Service Capacity and Highway Access Transportation linkages, including airports, can affect the success of conference and convention centers that target regional and national user groups. One of the best indicators of an airport s ability to enhance a convention center s draw is its service capacity, generally measured as total annual passenger volume, or traffic. An airport with relatively high annual passenger volumes generally is more convenient and has a wider draw than an airport with relatively low annual passenger volumes. Comparable Venues Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 5-7

67 FIGURE 5-8 AIR SERVICE AT PRIMARY AIRPORTS IN COMPETITIVE SET Airport City 2012 Flights 2011 Flights 2010 Flights General Mitchell International Airport Milwaukee 7,515,000 9,522,000 9,848,000 Dane County Regional Airport Madison 1,578,000 1,457,000 1,500,000 Austin Straubel International Airport Green Bay 547, , ,000 Outagamie County Regional Airport Appleton 454, , ,000 Central Wisconsin Airport Mosinee 232, , ,000 La Crosse Regional Airport La Crosse 185, , ,000 Chippewa Valley Regional Airport Eau Claire 42,000 37,000 35,000 Rhinelander/Oneida County Airport Rhinelander 22,000 58,000 50,000 Source: General Mitchell International Airport, RITA Bureau of Transportation Statistics Compared to the competitive set, Racine lies closest to General Mitchell International Airport. Residents of Racine can travel approximately 20 miles north of the city to reach the Milwaukee airport. Its air traffic makes up over 70 percent of the entire competitive set s total air traffic. A proposed conference center in a market like Racine depends on local attendees. Event planners prefer more accessible venues, and they can attract attendees more effectively with a location close to the highway. The following figure shows the driving distance required between the nearest highway and the venue (or in the case of Racine, the proposed venue). FIGURE 5-9 DRIVE DISTANCE TO NEAREST HIGHWAY OF COMPETITIVE SET Venue City Drive distance to highway (mi) Holiday Inn Express and Janesville Conference Center Janesville 0.4 Kalahari Resorts Wisconsin Dells 0.5 Westwood Conference Center Wausau 0.6 Holiday Inn Stevens Point Stevens Point 1.3 KI Convention Center Green Bay 1.4 Monona Terrace Madison 2.3 Radisson Paper Valley Appleton 2.3 Oshkosh Convention Center Oshkosh 3.0 Blue Harbor Resort and Conference Center Sheboygan 3.8 La Crosse Center La Crosse 4.0 Best Western Harborside Inn & Kenosha Conference Center Kenosha 7.2 Proposed Racine Conference Center Racine 9.1 Comparable Venues Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 5-8

68 Event planners could struggle to hold events in the downtown Racine area due to its long distance from the freeway relative to other venues in the competitive set. Competitive Venue Rankings HVS ranked Racine along with its state competitors on each of the destination selection criteria discussed in this report. The criteria include hotel supply, drive time population, corporate presence, airport and highway access, total function space of the primary venue, and event planner preferences from the survey as discussed in Section 4. The rank is based on the numerical data associated with each criterion, with 12 being the highest rank and one being the lowest rank. The figure below shows the rank of Racine and each of its competitive cities on each criteria and the total of all scores. FIGURE 5-10 COMPETITIVE VENUE ANALYSIS UNWEIGHTED SCORES City Adjacent Hotel Capacity Total Hotel Capacity Population 1 Air Access Highway Access Corporate Presence Total Function Space 2 Event Planner Preference Madison Wisconsin Dells Green Bay Appleton Racine Janesville Oshkosh La Crosse Stevens Point Wausau Sheboygan Kenosha ) Population ranked by 90 minute drive time radii 2) Assumes 20,000 square feet of function space in a proposed Racine conference center Total Racine ranks 5 th best in the overall score. Its strengths are in corporate presence, air access, and drive time population. It has weaknesses in highway access, total function space, and event planner preference. The overall results show that Racine sits among a group of other mid-sized cities in Wisconsin. The event planner survey demonstrated that not all criteria place equally in importance. Event planners indicated that the amounts of available function space and hotel capacity matter most. Air access is not an important criterion because Racine has a drive-in state market. To adjust for the difference in importance of destination selection criteria, HVS assigned a weight between 1 and 3, where a Comparable Venues Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 5-9

69 weight of three indicates a criterion of high importance and a weight of one indicates a criterion of low importance. Multiplying the rank by criterion s weight yields a weighted score for each venue. The figure below shows the weighted scores for each venue. FIGURE 5-11 COMPETITIVE VENUE ANALYSIS WEIGHTED SCORES City Adjacent Hotel Capacity Total Hotel Capacity Population 2 Air Access Highway Access Corporate Presence Total Function Space 3 Weight Event Planner Preference Madison Wisconsin Dells Green Bay Appleton La Crosse Janesville Racine Oshkosh Stevens Point Wausau Sheboygan Kenosha ) Weight of the importance of the criteria on a scale of 1 to 3 with three being most important and 1 being least important. 2) Population ranked by 90 minute drive time radii 3) Assumes 20,000 square feet of function space in a proposed Racine conference center Total On a weighted basis, Racine ranks 7 th best in the state along with Oshkosh. Madison, Wisconsin Dells, Green Bay and Appleton rise to the first tier of the competitors. Racine lies in the middle of a set of second tier cities including La Crosse, Janesville, Oshkosh, and Stevens Point. Highway access emerges as a notable weakness of the important destination selection criteria. The recommended building program and demand estimates should remain consistent with Racine s competitive ranking. Racine demonstrates some potential to attract state based and local meeting and group events, but a conference center in Racine would not on operate among the first tier of cities in Wisconsin. For a detailed description of each competitive venue, please see Appendix A of this report. Comparable Venues Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 5-10

70 6. Building Program Recommendations The building program recommendations presented herein describe the floor areas of various types of function spaces and other important amenities for the Proposed Conference Center. To formulate these recommendations, HVS relied on its site inspection, a user survey, a competitive city analysis, comparisons of meeting space in competitive venues, and knowledge of standard industry practices. This building program should serve as a guide for subsequent physical planning aimed at providing the desired facility program elements. As discussed previously in this report, user surveys clearly indicate several key factors that would influence meeting planners venue selection process when considering Racine, Wisconsin and the Proposed Conference Center. The Proposed Site Surveys show that the lack of function space detracts event planners from holding their events in Racine. They rate the availability of function space as their most important destination selection criteria. Racine has an opportunity to address this deficit by building new function space. Racine s non-central location is the major barrier to attracting meetings and groups from around the state. Event planners rate location as the second most important destination selection criteria. Since the City of Racine cannot overcome this barrier, it should gear facility development to a relatively low level of anticipated meeting and conference demand. To utilize the venue fully, the proposed development should also provide space for local social, civic, and festival events. Racine has limited potential to attract business from outside the state; however, Wisconsin association, corporate and social business holds some promise. Forty-five percent of Wisconsin state event planners would be willing to place events in a new conference center if it met their needs. Dedicated exhibition space would not appropriately fit a conference venue in Racine. Event planners interested in Racine indicated little need for exhibition space. Rather, conference center development should focus on multi-purpose ballroom and meeting space that can serve up to 500 persons for meetings and conferences and up to 1,000 persons for local banquet events. The following site map identifies the location of the Proposed Conference Center. Building Program Recommendations Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 6-1

71 Convention, Sports & Entertainment FIGURE 6-1 THE PROPOSED SITE Source: Google Maps The proposed site lies at the corner of Lake and Gaslight Streets, one block west of the Radisson Hotel. The Southeast corner of the site provides waterfront access. Approximately 3.5 acres, the site would easily support the conference center building program recommended in this report along with other complimentary land uses. Adjacent land uses include the Lakeshore Towers residential units, a parking deck, surface parking, the marina, and the Radisson hotel. One block from Main Street, the site is within walking distance of downtown retail and restaurants. A vacant office building currently occupies the site, but its owner, We Energies, has committed to demolishing the building, cleaning the site, and selling it to the City of Racine by the end of The City of Racine would pay $150,000 for the site. The site would handle conference center development well. While not the subject of this study, we encourage mixed use development with an adjacent hotel, restaurant and retail development on the site. Building Program Recommendations Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 6-2

72 Convention, Sports & Entertainment IMAGES OF THE PROPOSED SITE Facility Program Recommendations HVS recommends the development of approximately 21,000 square feet of function space. The function space would have the dual purposes of serving large local social and entertainment events and smaller state association and corporate meetings and conferences. The following figure shows the recommended amounts and capacities of event function spaces in the Proposed Conference Center. Building Program Recommendations Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 6-3

73 Convention, Sports & Entertainment FIGURE 6-2 BUILDING PROGRAM RECOMMENDATION Capacities (# persons) Event Space Total Area (SF) Multi-purpose/Ballroom Space Banquet Classroom Exhibit Booths (10'x10') 1,670 1,250 1, ,500 7, Division 1 Sub-division 1a Sub-division 1b Sub-division 1c 5,000 1,667 1,667 1, Division 2 5, Division 3 Sub-division 3a Sub-division 3b Sub-division 3c 5,000 1,667 1,667 1, Meeting Room Block Division 1 Sub-division 1 Sub-division 2 Sub-division 3 Division 2 Sub-division 4 Sub-division 5 5,000 3,000 1,000 1,000 1,000 2,000 1,000 1, Board Rooms Board Room 1 Board Rooms 2 1, Half Hall 1 Half Hall 2 15,000 Theatre Third-Halls TOTAL EVENT SPACE 21,000 A divisible 15,000 square foot multi-purpose ballroom could accommodate up to 1,000 persons for a local banquet and serve meeting space for smaller groups. The venue should provide five thousand square feet of divisible breakout meeting space. Those rooms would give the venue the capacity to hold simultaneous events that require meeting and banquet space. Two board rooms would serve small corporate and association meetings. In addition to the rentable public function spaces, the conference center would require the support spaces shown in the figure below. Building Program Recommendations Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 6-4

74 Convention, Sports & Entertainment FIGURE 6-3 SUPPORT AREAS Support Space Lobby / Prefunction Areas Ballroom Support Meeting Room Support Adminstrative Offices Food Service Building Operations/Dock General Circulation Mechanical/Electrical Equipment. TOTAL SUPPORT SPACE Total Area (SF) 7,000 2, ,300 4,800 6,300 5,300 30,000 Building management would need support areas of approximately 30,000 square feet for building operations, catering services, pedestrian circulation, and other amenities in a state-of-the-art conference center. Multi-Purpose/ Ballroom While site conditions and other issues will dictate the actual layout of the proposed Proposed Conference Center, HVS recommends a flexible ballroom that planners could use for a wide range of event types and sizes. The figure below shows a recommended configuration of the multi-purpose ballroom. Building Program Recommendations Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 6-5

75 Convention, Sports & Entertainment FIGURE 6-4 MULTI-PURPOSE BALLROOM CONFIGURATION Pre-Function Area Service Corridor Attendee Entrance Service Entrance Movable Wall The ballroom should hold a well-finished space with ceiling heights of approximately 20 feet. A carpeted floor should contain utility boxes that provide power and communications services so that the room can serve light exhibits and classroom configurations that require power and internet connections. The room should offer variable lighting should and create a range of candlepower for various types of events. Visitor access should come from a well appointed pre-function area, which should surround the function space on three sides and be separated from a service corridor. The service corridor should connect to the kitchen, storage facilities, and other back of-house functions. Meeting Spaces Meeting space provides essential breakout space for larger conference and convention events and supports stand-alone meetings and food and beverage functions. Meeting room blocks in areas should maintain a separation of attendee and service access. The figure below shows the recommended configuration of the meeting space. Building Program Recommendations Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 6-6

76 Convention, Sports & Entertainment FIGURE 6-5 RECOMMENDED MEETING ROOM CONFIGURATION Pre-Function Area Service Corridor Attendee Entrance Service Entrance Movable Wall The meeting space should have the flexibility to support events that require meeting sized of 1,000, 2,000, and 3,000 square feet. One fixed wall would divide the space into two sections and movable walls should provide further divisibility. Attendees would need a ceiling height of approximately 15 feet when using the rooms in an open configuration. Meeting rooms should provide state-of-the-art audio visual technology and internet connectivity. Ancillary and Support Spaces In addition to the function spaces provided above, the gross floor area included in the Proposed Conference Center would include the following elements: Lobby and Pre-function Areas A well-appointed lobby and prefunction areas should provide event planners areas for greeting and registration, social gatherings, and well-defined public access to the multipurpose ballroom and meeting rooms. This space is also appropriate for stand-alone receptions, meals, and other community events. Circulation Circulation space should provide for the movement of attendees into and through the venue. These areas would include and hallways, connecting walkways, and bridges as required. Depending on the concept plan, these areas could also include vertical circulation (stairwells, elevators, and escalators). Building Program Recommendations Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 6-7

77 Convention, Sports & Entertainment Service access Service corridors should provide non-public access to the event hall and meeting rooms as well as connection to the facility s loading docks, mechanical rooms, and storage. Drop-off zone The venue should have a well-defined vehicular dropoff area and pedestrian access solely for the uses of event attendees. Loading areas Service access separate from the drop-off zone, truck docks, and waste disposal areas necessary to support the venue. Kitchen Further investigation should determine the extent to which the main production kitchens could also serve the needs of the venue. At a minimum, a pantry kitchen capable of accommodating a single meal of 1,000 guests should be incorporated into the space. Storage Adequate and convenient equipment storage is important to the efficient operation of the facility. Facility Operations Spaces needed to support the facility s physical plant, including HVAC, plumbing, electrical and fire protection systems. Parking the on-site capacity for parking should be determined in view of the amount of available off-site parking that could service the Convention Center. A more precise determination of the floor areas would require a concept plan created by a design firm that illustrates how the proposed venue alterations would fit on the site. The process of concept planning would likely require adjustments to the recommended floor areas. Public Spaces In addition to the meeting function spaces described above, the proposed venue should also contain a variety of public areas that define the venue as an attractive, self-contained destination for meeting attendees as well as other tourists and local residents. These public areas may include: Lounges, plazas, and other designated areas for informal meetings and relaxation, outdoor entertainment areas for small concerts, receptions, or other convention center related functions, casual food and beverage outlets including coffee shops, delis, and desserts, and Building Program Recommendations Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 6-8

78 Convention, Sports & Entertainment Complementary Land Uses waterfront views and access. The 3.5-acre site provides the opportunity to development the conference center in a mixed-use project. While the scope of this study excludes other land uses, HVS recommends investigation of the following additional land uses. A high quality focused service hotel development of 150 to 250 rooms. Along with the Radisson, a new hotel property of this size could provide the necessary supporting hotel infrastructure. Further analysis of parking needs to determine the amount of on-site parking necessary to support the conference center. The existing deck and parking lots may meet most parking needs. Restaurants on the site with a bar and lounge would help to activate the site by increasing local visitation and serve conference center and hotel guests. Further analysis of these options would be necessary to determine their scope and feasibility. Comparable Venue Layouts To verify the suitability and capacity of the proposed site ability to accommodate a venue with 21,000 square feet of function space, HVS investigated the site layouts of several similarly sized venues. Hurst Conference Center in Hurst, Texas 19,906 square feet of function space. Landers Center in Southaven, Mississippi 17,000 square feet of ballroom space. Sheraton Milwaukee Brookfield Hotel 18,659 square feet of function space. Edmonton Marriott 14,000 square feet of function space. Deerfoot Inn & Casino in Calgary, Alberta 14,000 square feet of ballroom and meeting space. The following figures show existing comparable developments. Building Program Recommendations Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 6-9

79 Convention, Sports & Entertainment HURST CONFERENCE CENTER Source: Hurst Conference Center Building Program Recommendations Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 6-10

80 Convention, Sports & Entertainment LANDERS CENTER CONVENTION HALL Source: Landers Center Building Program Recommendations Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 6-11

81 Convention, Sports & Entertainment SHERATON MILWAUKEE BROOKFIELD HOTEL FIRST FLOOR Source: Sheraton Milwaukee Brookfield Building Program Recommendations Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 6-12

82 Convention, Sports & Entertainment SHERATON MILWAUKEE BROOKFIELD B HOTEL LOWER LEVEL Source: Sheraton Milwaukee Brookfield EDMONTON MARRIOTT Source: Edmonton Marriott Building Program Recommendations Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 6-13

83 Convention, Sports & Entertainment DEERFOOT INN & CASINO Source: Deerfoot Inn & Casino As a recently developed venue, Hurst Conference Center compares best to HVS s building recommendations for the Proposed Conference Center. But the other venues also serve as examples the City of Racine might want to pursue. The Proposed Conference Center site can accommodate the 21,000 square feet of recommended function space along with the necessary entrance and loading zones. The City of Racine could require more more detailed site analysis and concept planning to determine the site s precise capacity. Building Program Recommendations Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 6-14

84 7. Demand and Financial Analysis HVS forecast the event demand and financial performance for Racine s Proposed Conference Center for a five-year period. For the purposes of this analysis, HVS assumes the proposed conference center will open on January 1, HVS based these projections on information revealed in the market overview, analysis of comparable facilities, phone interviews with local parties, and event planner surveys. The demand projections further reflect the recommended building program for the Proposed Conference Center. Demand projections also assume highly qualified, professional sales and management teams for the conference center. Demand Indicators In addition to the event planner survey, HVS interviewed representatives from local area corporations and operators of some comparable venues to understand their event needs and potential uses of the Proposed Conference Center. Key findings and conclusions of these interviews include the following. Some planners in the Racine metro area would prefer to hold their events in the downtown area rather than travel to other larger cities, but the lack of banquet and meeting breakout space prevents them from doing so. Some organizations currently hold their training sessions and meetings in the Racine Marriott, and they could hold some of these events in downtown Racine if space were available. Many companies in the area have in-house space on their campuses for their smaller meetings and administrator conferences, so the demand from local corporations would be limited to the larger meeting and special events that need to occur off campus. Some comparable Wisconsin convention and conference venues have suffered declines in state association demand. These negative trends have been attributed to: 1) economic conditions that depressed group meeting demand and 2) increased competition from Kalahari Resorts. Some venues have experienced increased demand as the economy has improved or as they have improved their venues. Venue expansions and improvements will intensify competition in the Wisconsin association market. Expansions and improvements are currently occurring in Green Bay, Appleton, and Oshkosh. Demand and Financial Analysis Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 7-1

85 Demand Projections Among the Wisconsin venues that shared information on their event demand with HVS, the number of annual convention and conference events range from 20 to 50 among the Wisconsin venues. They draw on a combination of association, corporate, and SMERF business. Participation of local business leaders in bringing home events related to their businesses and associations has proven to be an effective marketing and sales technique in some locations. Local event demand plays an important role in the utilization of most venues. If the facility opens in 2017, HVS assumes that event demand and attendance will stabilize in The figure below shows a forecast of event demand in the Proposed Conference Center, followed by a description of the different event types. FIGURE 7-1 EVENT DEMAND FORECAST Events Conferences Tradeshows Consumer Shows Assemblies Meetings Banquets Total Average Attendance Conferences Tradeshows Consumer Shows 1,500 1,500 1,500 1,500 Assemblies 1,000 1,000 1,000 1,000 Meetings Banquets Total Attendance Conferences 4,500 5,750 6,250 6,250 Tradeshows 1,500 2,500 2,500 2,500 Consumer Shows 4,500 6,000 6,000 6,000 Assemblies 8,000 9,000 10,000 10,000 Meetings 5,625 6,750 7,500 7,500 Banquets 15,000 15,000 15,000 15,000 Total 39,125 45,000 47,250 47,250 *Includes graduations, dances, job fairs, and local trade shows. Demand and Financial Analysis Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 7-2

86 Conferences Conferences require breakout meeting and banquet space but do not use exhibit space. Conferences could have a banquet component. They typically use a larger ballroom space for large general sessions, but break down into smaller sessions over the course of a two or three day event. Based on survey responses, HVS assumes that conferences would have an average attendance of 250 persons, but their size can range from 100 to 1,000 attendees. Civic organizations, local corporations, state associations, religious groups, and government agencies all host conferences. Tradeshows Tradeshows provide a means for wholesalers and retailers to transact business with industry buyers. As such, tradeshows typically function as exhibit-oriented events in which people display and demonstrate products. Tradeshows require some meeting and meal space; however, they require less space than a convention. Due to the lack of exhibition space in the program recommendations, HVS projects a small number of tradeshows that could use the full ballroom space. The source of tradeshow demand would primarily stem from local corporate shows and enterprises. Consumer Shows Consumer shows are ticketed public events that attract local and regional attendees, such as home and garden shows and bridal expos. Due to the lack of exhibition space in the Proposed Conference Center, HVS projects a small number of consumer shows that could use the full ballroom space. These events would also require breakout meeting rooms for support. Consumer show planners would only require concessions for food and beverage services. Assemblies Assembly events include religious events, lectures, tests, graduations, small concert and entertainment events, and other civic ceremonies that require a large seating capacity. Meetings Depending on their size, meetings typically require the use of a single meeting room or a group of meeting rooms. They differ from conferences in that they only require the use of one type of space and do not involve extensive catering. Unlike conferences, meetings are frequently one-day events. Meetings typically have limited food service through coffee breaks, breakfasts, or luncheons in meeting rooms. Although the size of these events can range from 10 to over 1,000 persons, most meetings have fewer than 100 attendees and only use breakout meeting space. The ballrooms could support larger meetings or several smaller simultaneous meetings as needed. Meetings would most likely have local area participation by day-trip visitors and generate fewer overnight stays than conferences. Banquets Banquets include stand-alone social events, weddings, luncheons, and other banquets typically booked by local corporations, social and civic Demand and Financial Analysis Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 7-3

87 organizations, and private clients. The flexibility of the ballroom space in the recommended building program recommendations would allow for a variety of banquet sizes and multiple simultaneous events. The figure below shows our assumptions about the length of stay and percentage of lodgers that are used to calculate estimates of room night stays by visitors who come from outside Racine. FIGURE 7-2 ROOM NIGHT GENERATION ASSUMPTIONS Type of Event Length of Stay Percent Lodgers Conferences % Tradeshows % Consumer Shows 3.0 5% Assemblies 1.0 5% Meetings % Banquets % The figure below shows the estimated number of room nights new to the market. FIGURE 7-3 ROOM NIGHTS INDUCED BY THE FACILITY Type Conferences 6,000 7,000 8,000 8,000 Tradeshows 2,000 3,000 3,000 3,000 Consumer Shows 0 1,000 1,000 1,000 Meetings 1,000 1,000 1,000 1,000 Banquets 1,000 1,000 1,000 1,000 Total 10,000 13,000 14,000 14,000 In a stabilized year of demand, the Proposed Conference Center would generate an estimated 14,000 new room nights. Currently, 1,300 hotel rooms in the Racine market generate approximately 257,000 occupied room nights per year, assuming a 53% occupancy rate from STR data. If the conference center generated 14,000 room nights per year, occupancy in the market would increase by approximately five percent. Demand and Financial Analysis Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 7-4

88 The preceding event demand and room night estimates could change with any adjustment to the assumptions and limited conditions described throughout the report. Financial Analysis HVS uses a proprietary financial operating model to estimate revenues and expenses at convention and conference centers. This model quantifies the key variables and operating ratios that determine revenue potential and expense levels. For the purposes of this study, HVS assumes that the City of Racine would own the Proposed Conference Center. The City would contract with a third party venue operator to manage the conference center spaces. Conference Center Revenues The conference center s revenue line items include facility rental, food and beverage sales, event services, and advertising. The model uses a series of revenue assumptions based on attendance that reflect the projected utilization levels of function space. To formulate the revenue assumptions, HVS relied on financial data from comparable venues, which reflect the typical revenues realized by comparable venues. HVS also relied on other industry information and knowledge of the performance of venues and adjusted the assumptions for inflation and other anticipated trends in price levels. The following figure summarizes the event revenue assumptions for the Proposed Conference Center by type of event. A brief description of each revenue item follows. FIGURE 7-4 Type REVENUE ASSUMPTIONS Facility Rental Event Food & Adverstising per per per per GSFD GSFD Attendee Fixed Amt Conferences $ 0.06 $ 0.03 $ $ 50,000 Tradeshows Consumer Shows Assemblies Meetings GSFD = Gross Square Foot Day and is calculated by multiplying the floor area used times the number of days of use. Demand and Financial Analysis Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 7-5

89 Facility Rental Facility rental revenue includes the revenue the conference center receives from clients that reserve one or more function areas in the facility. Despite having published rates, conference centers typically charge rental fees based on negotiated daily rental fees. Facilities do not always charge this fee. A facility could waive or reduce the space rental charges if the event meets a certain minimum of food and beverage charges, as most banquets do. For the purposes of modeling the rental revenue, HVS made calculations based on an assumption of a rental rate per gross square foot day ( GSFD ), which is calculated by multiplying the floor area used times the number of days of use. For example, if an event used 10,000 gross square feet for three days, then it would generate 30,000 GSFD. Event Services Event Services include the fees charged to tenants for services that could include business services, audio and video technical assistance, set-up and take down of function spaces, cleaning services, security services, electricity and other utilities, commissions from decorators, and other services provided by third-party contractors at events. Many events also require audio, video, communications and internet services. Banquets and other upscale events can often require elaborate decorating services. Almost all events require cleaning services. Service charges vary by type of event. Some of these services may be included in the rental charges for using the facility, but others will be add-on service charges. The HVS model estimates event services revenue based on the GSFDs. Food and Beverage Most events that would use the venue s function space would arrange for food service for their attendees during their events. This food service includes catering which can range from coffee breaks associated with a meeting to a full dinner associated with a conference or banquet. Concerts and other public events may generate concessions revenue. Most conferences generate demand for multiple meals throughout multi-day events. Meetings and banquets generally include a single meal or refreshment services. HVS projects estimated gross food and beverage revenues on a per capita basis depending on the type of event. Advertising The facility could earn money through other methods such as advertisements. HVS estimates other smaller sources such as advertising and sponsorships as a lump sum. Operating Expenses HVS estimated direct event and other expenses for the future operations of the Proposed Conference Center as a blend of fixed costs and variable percentages of operating revenues. The fixed components increase in tandem with the underlying rate of inflation, while the variable components adjust for a specific measure of volume such as total revenue. See the figure below. Demand and Financial Analysis Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 7-6

90 FIGURE 7-5 EXPENSE ASSUMPTIONS Expenditure Percentage Revenue Fixed Expense for Base Year Operating Expense Salaries 0.0% ## $0 $300,000 Benefits 25.0% of Salaries $0 Event Services Costs 85.0% of Event Services (Gross) $0 Food & Beverage Costs 65.0% of Food & Beverage (Gross) $0 Administrative & General 2.0% of Total Operating Rev $0 Repair & Maintenance 3.5% of Total Operating Rev $0 Supplies & Equipment 1.5% of Total Operating Rev $0 Utilities 5.0% of Total Operating Rev $0 Non-Operating Expense Capital Maintenance 4.0% of Total Operating Rev $0 Management Fees 0.0% ## $0 $50,000 Insurance $0.45 of Attendance Salaries & Benefits HVS averaged the salaries and associated benefits for permanent full and part-time employees dedicated to administration, marketing, building operations, and other functions for comparable venues. HVS adjusted these numbers for inflation and with industry knowledge. This category does not include part time food & beverage and event staffing because departmental costs include them. We assumed benefits to be 25 percent of gross salaries. Event Services Costs Event services costs include the costs incurred by the facility for client reimbursed expenses such as audio visual set-up, security, cleaning, event set-up and event labor. HVS estimated event service costs as a percentage of gross event service revenues. To determine the appropriate variable event service percentage, HVS used industry standards for quality event services. Food and Beverage Costs HVS assumes that an in-house food service operator would operate the food and beverage operation. Costs of food service include the raw costs of food and beverages sold as well as the labor associated with food preparation and service. HVS estimated food and beverage costs as a percentage of gross food and beverage sales. Administrative & General Office and administrative operations incur day-today facility expenses. Such expenses typically include travel, telephone, printing, permits, and other miscellaneous services. Demand and Financial Analysis Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 7-7

91 Marketing and Sales For the purposes of this analysis, we assume that RealRacine would hold responsibility for the long-term marketing and sales of conferences that generate room nights. The conference center manager would handle sales of short-term bookings and local events. We assume a base year marketing and sales budget of $120,000 for the production of marketing materials, website development and maintenance, travel, entertainment, and other marketing and sales related expenses. Repair & Maintenance This category includes both routine and one-time facility maintenance expenses that in-house facility operations personnel handle. It also includes more specialized activities, such as HVAC system maintenance, electrical work, and maintenance of other mechanical systems often contracted out to third parties. Supplies & Equipment This category includes items such as computers, office machines, furniture, consumables, and chemicals that help to maintain the operations of the facility. Utilities Utilities, including electricity, gas, water, and other charges often represent one of the largest expenses incurred by facility operators. Non-Operating Expenses Capital Maintenance Reserve Venue management would use an annual contribution based upon four percent of total facility operating revenues to fund major capital improvements as the facility ages. This capital reserve can ensure that the Proposed Conference Center would continue to attract event planners. Management Fees A third party management firm would receive fees for the successful marketing, operation, and maintenance of the conference center. Insurance This item represents the cost of providing building insurance for the facility. Non-Operating Income Inflation Assumption Since estimated expenses exceed operating revenues, as in most stand-alone conference facilities, we anticipate that the conference center would need an additional source of revenue to support its ongoing operations. While we have not identified the source of revenue, we assume the City of Racine would need to transfer funds to the conference center to balance its budget. Typically, municipalities use lodging taxes or other forms of tourism taxes as sources of ongoing operating support for convention and conference centers. In consideration of the most recent trends and the projections set forth previously, we applied an underlying inflation rate of 2.5 percent for all years. This stabilized Demand and Financial Analysis Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 7-8

92 inflation rate takes into account normal, recurring inflation cycles. Inflation will likely fluctuate above and below this level during the projection period. Conference Center Operating Pro Forma The figure below presents the five-year financial projections for the Proposed Conference Center. HVS made projections in inflated dollars beginning January 1, 2017, which reflects the opening of the Proposed Conference Center and implementation of strategic recommendations. HVS projects that demand will stabilize in FIGURE 7-6 DETAILED FORECAST OF INCOME AND EXPENSE OPERATING REVENUE Facility Rental $132,000 $176,000 $193,000 $198,000 $203,000 Event Services (Gross) 66,000 88,000 96,000 99, ,000 Food & Beverage (Gross) 727, , , , ,000 Advertising & Sponsorships 55,000 57,000 58,000 59,000 61,000 Total $980,000 $1,135,000 $1,206,000 $1,237,000 $1,268,000 OPERATING EXPENSES Salaries $331,000 $339,000 $348,000 $357,000 $366,000 Benefits 83,000 85,000 87,000 89,000 91,000 Event Services Costs 56,000 75,000 82,000 84,000 86,000 Food & Beverage Costs 472, , , , ,000 Administrative & General 20,000 23,000 24,000 25,000 25,000 Marketing & Sales 132, , , , ,000 Repair & Maintenance 34,000 40,000 42,000 43,000 44,000 Supplies & Equipment 15,000 17,000 18,000 19,000 19,000 Utilities 49,000 57,000 60,000 62,000 63,000 Total $1,192,000 $1,301,000 $1,358,000 $1,394,000 $1,427,000 OPERATING INCOME (LOSS) ($212,000) ($166,000) ($152,000) ($157,000) ($159,000) NON-OPERATING REVENUE Fund Transfers In $304,000 $283,000 $284,000 $291,000 $299,000 Total $304,000 $283,000 $284,000 $291,000 $299,000 NON-OPERATING EXPENSES Capital Maintenance $20,000 $34,000 $48,000 $49,000 $51,000 Management Fees 55,000 57,000 58,000 59,000 61,000 Insurance 19,000 23,000 25,000 25,000 26,000 Total $94,000 $114,000 $131,000 $133,000 $138,000 TOTAL NET INCOME (LOSS) ($2,000) $3,000 $1,000 $1,000 $2,000 HVS financial projections show the expected levels of revenues and expenses over a five-year period. Projections show smooth growth over time, but event demand and booking cycles do not always move smoothly. Unpredictable local and national Demand and Financial Analysis Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 7-9

93 economic factors can affect demand. Event demand often runs in cycles based on rotation patterns and market conditions. Therefore, HVS recommends interpreting the financial projections as a mid-point of a range of possible outcomes and over a multi-year period rather than relying on projections for any one specific year. Demand and Financial Analysis Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 7-10

94 8. Statement of 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 site, such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphenyls, pesticides, or lead-based paints. 4. All information, financial operating statements, 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. 5. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 6. We are not required to give testimony or attendance in court by reason of this analysis without previous arrangements, and only when our standard per-diem fees and travel costs are paid prior to the appearance. 7. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 8. We take no responsibility for any events or circumstances that take place subsequent to the date of our report. 9. The quality of a conference center's on-site management has a direct effect on a facility's economic performance. The demand and financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results. 10. We do not warrant that our estimates will be attained, but they have been developed on the basis of information obtained during the course of our market research and are intended to reflect reasonable expectations. 11. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded. Thus, these figures may be subject to small rounding errors. Statement of Assumptions and Limiting Conditions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 8-1

95 12. 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 engagement letter with the client. 13. Although this analysis employs various mathematical calculations, the final estimates are subjective and may be influenced by our experience and other factors not specifically set forth in this report. 14. This report was prepared by HVS Convention, Sports & Entertainment Facilities Consulting. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of this organization, as employees, rather than as individuals. 15. This report is set forth as a market and feasibility study of the subject facility; this is not an appraisal report. Statement of Assumptions and Limiting Conditions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 8-2

96 9. Certification The undersigned hereby certify that, to the best of our knowledge and belief: 1. that the statements of fact presented in this report are true and correct to the best of our knowledge and belief; 2. that the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions; 3. that we have no (or the specified) present or prospective interest in the property that is the subject of this report and no (or the specified) personal interest with respect to the parties involved; 4. that we have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment; 5. that our engagement in this assignment was not contingent upon developing or reporting predetermined results; 6. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 7. that the fee paid for the preparation of this report is not contingent upon our conclusions, or the occurrence of a subsequent event directly related to the intended use of this report; 8. that Thomas Hazinksi and Alex Moon personally inspected the property described in this report; 9. that no one other than those listed above and the undersigned prepared the analyses, conclusions, and opinions concerning the real estate that are set forth in this market study; and 10. that our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. Certification Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 9-1

97 draft Thomas Hazinski Managing Director draft Alex Moon Analyst Certification Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin 9-2

98 Appendix A - Competitive Venue Descriptions State Competitors Monona Terrace Community and Convention Center The following descriptions provide information on ownership, management, and operations of potential competitors in the State of Wisconsin. The Monona Terrace Community and Convention Center ( MTCCC ) in Madison, Wisconsin overlooks Lake Monona. Renowned architect Frank Lloyd Wright conceived of the MTCCC in 1938, but construction completed in The City of Madison and State of Wisconsin jointly own the MTCCC. The City of Madison handles day-to-day operations. Developers estimated the total cost of the facility at $67 million. The MTCCC features 37,200 square feet of exhibition space divisible into two halls, a 13,500 square-foot ballroom that can divide into four sections, 17,600 square feet of meeting space over 14 rooms, and a 315-seat lecture hall. It has a rooftop garden with 45,000 square feet of outdoor function space for events. The facility attaches via skywalk to the 240 room Hilton Madison Monona Center and 600 parking spaces. Marcus Corp, the hotel developer and operator, financed the construction of the $29 million hotel. MONONA TERRACE COMMUNITY AND CONVENTION CENTER Appendix A - Competitive Venue Descriptions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin A-1

99 MONONA TERRACE COMMUNITY AND CONVENTION CENTER FLOOR PLANS LEVEL 1 La Crosse Center The La Crosse Center ( LCC ) opened in 1980 in downtown La Crosse, Wisconsin. In the spring of 2000, a $14 million expansion nearly doubled its size to offer 68,012 square feet of total function space. It features five exhibit halls, a 6,700 square-foot ballroom, and 22 meeting rooms. The LCC also has a 21,000 squarefoot arena. The exhibit halls sit on opposite ends of the arena. Appendix A - Competitive Venue Descriptions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin A-2

100 LA CROSSE CENTER LA CROSSE CENTER FLOOR PLANS Appendix A - Competitive Venue Descriptions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin A-3

101 Kalahari Resorts Kalahari Resorts opened in 2000 in Wisconsin Dells. The resort features 756 guest rooms, four restaurants, and the largest indoor water park in the State of Wisconsin at approximately 125,000 square feet. For event planners, Kalahari Resorts includes 37,760 square feet in two ballrooms, and each ballroom can split into eight divisions. The resort has 23,582 square feet of meeting space across 19 rooms, for a total of 61,342 square feet of total function space. KALAHARI RESORTS Appendix A - Competitive Venue Descriptions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin A-4

102 KALAHARI RESORTS FLOOR PLANS Appendix A - Competitive Venue Descriptions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin A-5

103 KI Convention Center The KI Convention Center in downtown Green Bay, WI contains 17,640 square feet of exhibit space, a 17,797 square foot ballroom divisible into seven sections, and 6,364 square feet of meeting space across nine rooms. Management of the attached 241-room Hyatt hotel operates the venue. The center has skywalk access to 1,100 covered parking spaces. The Green Bay Redevelopment Authority started a $24 million dollar renovation project of the KI Convention Center to add approximately 30,000 square feet of total function space by June of The expansion includes a new banquet hall that overlooks the Fox River and connection to the Clarion Hotel. KI CONVENTION CENTER Appendix A - Competitive Venue Descriptions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin A-6

104 KI CONVENTION CENTER FLOOR PLANS PRE-EXPANSION Appendix A - Competitive Venue Descriptions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin A-7

105 Radisson Paper Valley The Radisson Paper Valley Hotel in Appleton, WI has 390 rooms. The hotel also features a 13,730 square foot ballroom with four divisions and 20 meeting rooms of varying sizes that total 18,954 square feet. The Radisson Paper Valley also owns a courtyard for outdoor weddings and ceremonies. RADISSON PAPER VALLEY Appendix A - Competitive Venue Descriptions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin A-8

106 RADISSON PAPER VALLEY FLOOR PLANS MAIN FLOOR Appendix A - Competitive Venue Descriptions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin A-9

107 RADISSON PAPER VALLEY FLOOR PLANS LOWER LEVEL Holiday Inn Stevens Point The Holiday Inn Stevens Point features 16,020 square feet of exhibit space with five divisions, an 8,400 square foot ballroom, and four meeting rooms totaling 1,403 square feet. The hotel owns 149 rooms and manages an indoor water park, restaurant, and patio bar. Appendix A - Competitive Venue Descriptions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin A-10

108 HOLIDAY INN STEVENS POINT Westwood Conference Center The Westwood Conference Center ( WCC ) in Westwood, Wisconsin features a 7,347 square feet ballroom with four divisions and 16,448 square feet of meeting space across 14 rooms. WCC has no adjacent hotel rooms, but the 84-room Courtyard Wausau and 87-room Fairfield Inn & Suites Wausau provide shuttle services to the venue. WESTWOOD CONFERENCE CENTER Appendix A - Competitive Venue Descriptions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin A-11

109 WESTWOOD CONFERENCE CENTER FLOOR PLANS Oshkosh Convention Center Originally, Nashco Hospitality Group owned the Oshkosh Convention Center in Oshkosh, Wisconsin. But in 2009, The University of Wisconsin Oshkosh Foundation, RB Hospitality, and Pfefferle Companies, Inc. purchased the property from Nashco and launched a $12 million dollar renovation project that completed earlier this year. Today, the venue features a 176-room hotel, 15,400 square feet of ballroom space with eight divisions, and 3,110 square feet of meeting space spread out across four rooms. Appendix A - Competitive Venue Descriptions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin A-12

110 OSHKOSH CONVENTION CENTER Appendix A - Competitive Venue Descriptions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin A-13

111 OSHKOSH CONVENTION CENTER FLOOR PLANS Appendix A - Competitive Venue Descriptions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin A-14

112 The Holiday Inn Express and Janesville Conference Center The Holiday Inn Express and Janesville Conference Center in Janesville features 142 hotel rooms and a 13,000 square foot ballroom that can divide into 10,000 square feet and two 1,500 square foot smaller rooms. The venue has three meeting rooms that total 1,249 square feet. In August, hotel management commenced a renovation project expected to complete in the summer of The project does not include any plans for expansion. THE HOLIDAY INN EXPRESS AND JANESVILLE CONFERENCE CENTER The Blue Harbor Resort and Conference Center The Blue Harbor Resort and Conference Center in Sheboygan opened in Great Wolf Resorts built and initially managed the property. In 2011, they sold it to Claremont New Frontier Resort for $4.2 million dollars. The new owners then remodeled the 182-room resort. The site features a 38,000 square foot indoor water park, a 9,882 square foot ballroom with up to seven divisions, a 700 square foot meeting room, and a 312 square foot meeting room. Appendix A - Competitive Venue Descriptions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin A-15

113 THE BLUE HARBOR RESORT AND CONFERENCE CENTER THE BLUE HARBOR RESORT AND CONFERENCE CENTER FLOOR PLANS Appendix A - Competitive Venue Descriptions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin A-16

114 The Best Western Harborside Inn & Kenosha Conference Center The Best Western Harborside Inn & Kenosha Conference Center features a 9,359 square foot ballroom that splits into a maximum of six divisions. It also has three meeting rooms, totaling 730 square feet. The property offers a view of Simmons Island and Lake Michigan on the eastern edge of Kenosha. The building features 111 attached hotel rooms and 180 outdoor parking spaces. THE BEST WESTERN HARBORSIDE INN & KENOSHA CONFERENCE CENTER Appendix A - Competitive Venue Descriptions Market and Feasibility Analysis Proposed Conference Center Racine, Wisconsin A-17