Overview of the Southern Nevada Convention and Meeting Segment

Executive Summary Applied Analysis was retained by the Las Vegas Convention and Visitors Authority (the LVCVA ) to review and analyze the economic impacts associated with its various operations and southern Nevada s tourism industry more generally. This brief is the thirty-second in the series of reports; it is specific to the economic impact of the Las Vegas Convention Center (the LVCC ). In fiscal year 2013, convention and meeting attendees comprised 12.7 percent of all visitors to the southern Nevada region, or approximately 5.1 million visitor trips. Convention and meeting space can be found in nearly every hotel, resort and public hall throughout southern Nevada. As the third largest convention center in the U.S., the LVCC is a valuable tool in attracting largescale events to the region, offering 2.2 million square feet of exhibit and meeting space. The total annual economic impact of the LVCC is estimated at $1.6 billion. Accounting for approximately 1 in 4 convention trips to southern Nevada, the LVCC hosted 1.2 million visitors during fiscal 2013. LVCC convention and meeting attendees spent nearly $1 billion on lodging, dining, shopping, entertainment, sightseeing, local transportation and gaming, directly supporting 7,800 leisure and hospitality jobs throughout the region and generating $306 million in wage and salary payments. Including indirect and induced economic impacts, LVCC attendees generated $1.6 billion in economic output, supporting 13,400 local jobs and $503 million in wage and salary payments. The indirect and induced impacts generated by the LVCC extend to nearly every sector of the local economy. Indirect impacts include suppliers and vendors supported by the convention and meeting segment spanning goods and services industries such as food suppliers and restaurants, building maintenance services, advertising products and services and shipping and mailing services. Induced impacts include spending by employees directly supported by the convention segment, such as at restaurants, health practitioners offices and retail stores. Based on the latest historical data available, the LVCC s direct benefit-cost ratio is estimated at 17:1. Taking into account the annual expense of operating the LVCC as well as the return on operations measured by convention and meeting attendee spending, the direct return on investment of LVCC operations is estimated at 17:1. Taking into account indirect and induced impacts to derive a total return estimate, the overall return on investment rises to 27:1. 1

Overview of the Southern Nevada Convention and Meeting Segment In fiscal year 2013, convention and meeting attendees comprised 12.7 percent of all visitors to the region, or approximately 5.1 million visitor trips. 1 As an important component of the broader tourism industry in southern Nevada, the convention and meeting segment continues to be valued for its positive impact on average daily room rates and its contributions towards smoothing out seasonality associated with leisure travel patterns. Visitor survey results also indicate that convention and meeting travelers tend to spend more on non-gaming expenditures per trip compared to the average leisure visitor. 2 The convention and meeting segment is estimated to have directly supported 33,900 jobs paying $1.3 billion in wages and salaries, and generated $4.2 billion in economic impact during fiscal year 2013. 3 Including indirect and induced impacts, or the ripple effects throughout the broader local economy, the convention segment supported 58,000 jobs, $2.2 billion in wages and salaries, and over $6.8 billion in economic output. Convention and meeting space can be found in nearly every hotel, resort and public hall throughout southern Nevada, which hosts 3 of the nation s top 10 convention centers. The largest convention centers in the region include the LVCC (2.2 million square feet of meeting space and theater capacity of 2,000), Mandalay Bay Convention Center (1.7 million square feet of meeting space and theater capacity of 12,000), and Sands Expo & Convention Center (1.2 million square feet and theater capacity of just under 2,000). 4 Exhibit 1 Convention and Meeting Segment as a Share of All Visitors, FY 2013 87.3% 12.7% 1 Source: LVCVA monthly visitor statistics, 2012-2013 2 Source: LVCVA and GLS Research 3 Applied Analysis based on IMPLAN model and adjusted survey-based spending Convention and Meeting Visitors All Other Visitors reported by convention and meeting attendees 4 Source: LVCVA and individual convention center websites 2

The LVCC s Role in the Convention and Meeting Segment The LVCC, which is owned and operated by the LVCVA, functions as a tool to attract visitors to the region. Opening in 1959, the LVCC was originally built to attract more visitors to the area during slow periods of the year; the convention segment was identified as the best way to achieve this goal. With the LVCVA s sole mission being to attract visitors by promoting Las Vegas as the world s most desirable destination for leisure and business travel, it does not compete with other facilities in the destination for convention business; rather, it functions as a public-private partnership. As the third largest convention center in the U.S. behind McCormick Place in Chicago and the Orange County Convention Center in Orlando, the LVCC is able to attract the largest conventions in the world, thereby bringing visitors to the region to stay, play and dine at destinations throughout southern Nevada. As the site of one of 46 World Trade Centers in the United States and the center of the planned Las Vegas Global Business District, the LVCC is expected to play an important role in plans to lead the region towards becoming a prominent international business destination. Reporting nearly 40 million visitors last year, the city is unique in that its core economy is built around hospitality and visitor travel. The billions of dollars that Las Vegas resorts have invested in providing premium facilities, services and amenities to its visitors are valued by tourists, convention organizers and business meeting planners alike. The LVCVA directly employs approximately 500 individuals, including marketing professionals, advertising specialists, and staff directly involved in daily LVCC operations. 5 However, similar to the broader hospitality industry in southern Nevada, the direct impacts of the LVCC are better represented when viewed in terms of the impacts generated by the users of its services convention and meeting attendees. Exhibit 2 LVCC Attendees as a Share of the Total Convention and Meeting Segment, FY 2013 76.9% 23.1% LVCC Attendees All Other Convention and Meeting Visitors 5 Source: LVCVA CAFR (figure is per the FY 2012 audited CAFR) 3

The Economic Impact of the LVCC The economic impact of the LVCC on the southern Nevada region is most accurately represented by the impact of the spending by the visitors it attracts. Attendees at LVCC conventions and meetings spent an estimated $961.4 million on lodging, dining, shopping, entertainment, sightseeing, local transportation and gaming in fiscal year 2013, thereby directly supporting 7,800 leisure and hospitality jobs throughout the region and generating $305.8 million in wage and salary payments. Including indirect and induced economic impacts, LVCC attendees generated $1.6 billion in economic output, supporting 13,400 local jobs and $503.0 million in wage and salary payments to southern Nevada workers. Exhibit 3 Economic Impact of Spending by LVCC Convention and Meeting Attendees, FY 2013 6 Total jobs: 13,400 Total wages/salaries: $0.5 B Total economic output: $1.6 B Induced 2,900 Indirect 2,700 Induced $0.1 B Indirect $0.1 B Induced $0.3 B Indirect $0.3 B Direct 7,800 Direct $0.3 B Direct $1.0 B Employment Wages and Salaries Economic Output 6 Applied Analysis based on IMPLAN model and adjusted survey-based spending reported by convention and meeting attendees; LVCC attendance based on LVCVA estimates 4

Focus on Indirect and Induced Impacts The ripple effects of the convention and meeting segment extend to nearly all sectors of the local economy. The indirect economic impacts of the convention and meeting segment include the hospitality industry suppliers and vendors that would not exist but for the events segment, such as building and convention equipment suppliers. The induced impacts are generated by spending by direct convention and meeting segment employees, including providers of goods and services such as dining out, health care and retail establishments. Exhibit 4 Top 10 Indirect and Induced Employment Categories Supported by LVCC Operations 7 Indirect Employment (Total - 2,700) Suppliers and Vendors of the Events Segment Food services and drinking places (403) Services to buildings and dwellings (398) Real estate establishments (188) Employment services (151) Maintenance and repair construction (143) Management of companies and enterprises (133) Advertising and related services (113) Securities, investments, banking and related (75) Dry-cleaning and laundry (64) U.S. Postal Service/shipping services (59) Induced Employment (Total - 2,900) Jobs Supported by Spending by Direct Employees Food services and drinking places (309) Real estate establishments (229) Offices of physicians, dentists and other medical (156) Securities, investments, banking and related (145) Retail stores - general merchandise (114) Private hospitals (101) Retail stores - food and beverage (94) Wholesale trade businesses (86) Retail stores - motor vehicles and parts (66) Individual and family services (65) 7 Applied Analysis based on IMPLAN model and adjusted survey-based spending reported by convention and meeting attendees; LVCC attendance based on LVCVA estimates 5

Return Return on Investment: LVCC Operations The LVCC s direct benefit-cost ratio is estimated at 17:1. Taking into account the annual expense of operating the LVCC (approximately $58 million) 8 as well as the return on operations measured by LVCC convention and meeting attendee spending (just under $1 billion), 9 the direct return on investment of LVCC operations is approximately 16.6:1. Taking into account the indirect and induced impacts of LVCC attendee spending to derive a total return estimate, the overall return on investment rises to 27.2:1. Exhibit 5 LVCC Return on Investment, FY 2013 30.0 25.0 20.0 Direct Indirect Induced ROI based on: Direct Spending: 16.6:1 ROI based on: Direct + Indirect + Induced (Total) Spending: 27.2:1 ROI based on: Direct + Indirect Spending: 21.7:1 5.6 5.0 5.0 15.0 10.0 16.6 16.6 16.6 5.0 - Direct Direct + Indirect Direct + Indirect + Induced 8 Source: LVCVA CAFR (figure is per the FY 2012 audited CAFR) 9 Applied Analysis based on IMPLAN model and adjusted survey-based spending reported by convention and meeting attendees; LVCC attendance based on LVCVA estimates 6

Developments Reported by the Largest U.S. Convention Centers (by Exhibit Space) 1. McCormick Place (Chicago, IL) In May 2013, the 13. Moscone Center (San Francisco, CA) In February 2013, the San Francisco Board of Supervisors approved the creation of the Moscone Expansion District, which will provide the majority of funding for the expansion of the city's convention center (hotel assessments will provide 2/3 and the city's General Fund will provide the other 1/3). The expansion will add approx. 400,000 sq ft, including 80,000 sq ft of contiguous exhibit space. Metropolitan Pier and Exposition Authority (MPEA) announced details of the "McCormick Place Entertainment District", an $841-million redevelopment featuring a 10,000 seat events center, dining and entertainment venues, hotels and streetscapes. Plans for the District were unveiled as part of a larger announcement of Elevate Chicago, an extensive tourism and trade show infrastructure program. 13 3 LVCC (Las Vegas, NV) 1 10 Javits Center (New York, NY) 12 Los Angeles CC (LA, CA) 5 Sands Expo Center 7 Kentucky International CC (Louisville, KY) 11 Anaheim CC (Anaheim, CA) 14 9 Mandalay Bay CC 8 Kay Bailey Hutchison CC (Dallas, TX) 4 Georgia World Congress Center (Atlanta, GA) 14. San Diego CC (San Diego, CA) An expansion project is up for 2. Orange County CC (Orlando, consideration at the October 2013 meeting of the California Coastal Commission; the proposal includes adding approx. 225,000 sq ft of contiguous exhibit space, 101,000 sq ft of meeting space and an 80,000 sq ft ballroom, as well as improving waterfront access, opening views of the San Diego Bay, re-routing truck traffic away from pedestrian areas, and a 5-acre rooftop public park. 6 Ernest Morial CC (New Orleans, LA) 2 FL) In early 2013, a $187-million, five-year capital improvement project was announced that will begin this year and include aesthetic and life safety renovations. 7

Methodology General and industry-specific employment and wage data reported on a quarterly basis were obtained from the Nevada Department of Employment, Training and Rehabilitation. Baseline leisure and convention travel volume, visitor spending data and room tax collections were obtained from the Las Vegas Convention and Visitors Authority, the Nevada Gaming Control Board and the Nevada Commission on Tourism. To identify the interrelationships in a regional economy, the IMPLAN (Impact Analysis for Planning) software, databases, and methodology were used when estimating the economic impacts generated by the southern Nevada tourism industry. IMPLAN is one of three generally accepted applications that are used to model how industries within an economy are interrelated. The model attempts to demonstrate mathematically how the outputs of one industry become the inputs of other industries. IMPLAN employs a regional social accounting system that is used to generate a set of balanced accounts and multipliers. The social accounting system is an extension of input-output analysis. Inputoutput analysis has been expanded beyond market-based transaction accounting to include non-market financial market flows by using a social accounting matrix framework. The model is designed to describe the transfer of money between industries and institutions (e.g., households) and contains both market-based and non-market financial flows, such as inter-institutional transfers. IMPLAN uses regional purchase coefficients generated by complex econometric equations that predict local purchases based on a region s characteristics. In this case, the region is Clark County, Nevada. Output from the model includes descriptive measures of the economy including total industry output, employment and valueadded contributions for over 500 industries. Analysis Limitations This analysis used the best available data to analyze the economic impact of the Las Vegas Convention Center. It relies heavily on data reported by third-party data providers; and, although we have no reason to doubt the accuracy of these data, they have not been subjected to any auditing or review procedures by AA. Finally, it is important to note that this is a preliminary undertaking that will be supplemented by on-going and future analyses. This report is not intended to be comprehensive and may not be appropriate for all purposes. 8