News for the Hospitality Executive
The Meetings and Convention Industry is Booming in Orange
County (Anaheim Area)
as Competition from Los Angeles and San Diego Intensifies
|By Sandi Cain, Orange County Business Journal Staff
Strong Market Suggests Need for More Space to Draw Largest Groups
August 2007 - The meetings and convention industry is booming in Orange County with total convention business expected to reach 678 groups and 1.17 million attendees by year’s end. A relatively strong economy and a positive image of OC are contributing to the growth in business.
With the biggest chunk of the convention business landing in Anaheim, that city benefited to the tune of $76 million in revenue from hotel occupancy tax alone for the year ended June 2006. That accounts for 39% of its total tax revenue from all sources.
Next year is shaping up to be even better, with 796 groups already on the books at the end of July.
There are 22 conventions scheduled in 2008 that will bring 10,000 to 75,000 people to Anaheim. That compares to 28 for all of 2007, and there still are four selling months left this year.
Because some groups don’t meet every year and others rotate between cities, yearly comparisons don’t always illustrate the complete picture. An increase in big conventions means that Anaheim remains a major contender in the regional market, despite new facilities going up in Los Angeles.
“We still don’t have the (convention headquarters) hotel in L.A. and that’s key,” said Jack Kyser, chief economist for the Los Angeles Economic Development Corp.
“We’ll be a more powerful competitor in 2010 (when the hotel opens),” he said.
Falling for Fall
Another positive factor is that the typically soft fall season appears to be picking up, thanks to increased efforts on the part of the tourism community.
2007 is the second year of a “Fall for OC” promotion that resulted in a 9% increase in hotel reservations last year. At the Disneyland Resort alone, hotel bookings for the quarter ended Sept. 30 are ahead of the same quarter last year, Walt Disney Co. Chief Executive Bob Iger said during a recent earnings call. Disney hotels are at 96% occupancy this year, he said, compared to a countywide average of 75% as of June.
Fall typically has been slow for convention business in OC, but this year there are almost 200 groups on the books, about double last year’s count.
Some of the largest groups scheduled for fall 2008 include the American Library Association, which expects 25,000 attendees, and the National Safety Council, which will bring in 20,000 people.
The positive outlook matches a positive report for the overall trade show industry, too. According to the most recent report from the Dallas-based Center for Exhibition Industry Research, nine of the 11 major trade show sectors last year posted positive growth in each of four benchmark areas: amount of space used, number of exhibitors, number of attendees, and revenue.
It was the third consecutive year of overall growth for trade shows. Similar growth is expected this year, unless recessionary worries begin to temper industry performance this fall.
Anaheim expects to draw 45 million visitors this year. More than 1 million attendees are expected to drop about $8.3 billion into local coffers while they’re here. For the year ended June 30, 678 groups using 960,955 hotel rooms and representing 1.12 million convention delegates filled the city. Fourteen of those were considered to be “citywide” conventions, which use a minimum of 4,000 hotel rooms on their peak night, according to Charles Ahlers, president of the Anaheim/Orange County Visitor & Convention Bureau.
During the fiscal year, the convention bureau fielded 1,462 leads that turned into 796 future bookings.
“It was our biggest year yet,” Ahlers said.
Next year, the city thinks that number will inch up to 1.18 million attendees.
Solid Grounds for Growth
OC’s strength for large conventions lies with education, health and medical and religious groups as well as retail, sales and consumer products shows, sports and technology.
The good news for the county is that several of those sectors last year had combined annual growth rates equal to or above the 4.8% growth rate posted by the exhibition industry as a whole.
OC also remains competitive in labor rates at the Anaheim Convention Center. While slightly above the U.S. average for some services, Anaheim has rates that mostly fall below those of key competitors like Los Angeles, San Diego and Long Beach.
The convention center also hosts a significant number of public shows that don’t typically do much to fill hotel rooms but still provide “significant income to the operation of the building,” said Greg Smith, executive director of the convention, sports and entertainment department for the city of Anaheim. “They’re important to sustain profitability,” he said.
Smith said public shows also help demonstrate that the convention center is a community asset.
“We reach out to the community and do a lot of banquets, proms, award programs, sometimes at minimal cost so that people become familiar with (the building) and not see it as just a place that generates traffic,” he said.
That’s not to say there aren’t challenges ahead.
One challenge is finding sufficient space for some of the large conventions not currently on the schedule, including several in the lucrative healthcare and medical sector.
Because these conventions also require significant meeting space for breakout and educational sessions, it has become more difficult for the Anaheim Convention Center to host the largest of these conventions such as American Heart Association.
“We can’t get them back until we have more meeting space,” said Jim Kissinger, vice president of convention sales for the visitor and convention bureau.
The largest conventions in healthcare and other sectors typically book as far out as 10 years because of a limited number of facilities that can handle their requirements. Though Anaheim now ranks among the nation’s largest centers for exhibit space, it lags behind in meeting rooms.
When the last expansion of the convention center debuted in 2000, exhibit space was the key concern. But after the terrorist attacks of 2001, groups increasingly focused on educational programs to entice potential attendees to come, creating the need for more meeting space.
Smith has been working with economic analysts, the visitor and convention bureau and the tourism community on a proposal to expand the Anaheim Convention Center once again. It would be the center’s sixth expansion since it opened in 1967.
As currently envisioned, the expansion would go up on what now is the parking area fronting Katella Avenue and possibly extend to the west side of the Anaheim Arena along Katella.
The surface parking area would be replaced by more underground parking. The area was identified as the most likely for future growth when the last expansion was done, Smith said.
The economic impact study was received in early August. Smith expects to schedule a presentation with the city council by the end of September.
The expansion would add about 200,000 square feet of what the city calls ‘swing space’—a flexible design that allows the space to be used for exhibits or for meeting space. The concept has become more popular with convention centers across the country as cities struggle to balance the need for exhibit and meeting space.
Moscone Center West in San Francisco incorporated flexible space in its most recent expansion and has received positive response from both meeting and trade show organizers.
“Any increase in space will help NAMM effectively manage our show’s continued growth,” said Kevin Johnstone, director of trade shows for NAMM, Anaheim’s biggest convention.
“Of course the ideal situation for NAMM would be an increase in dedicated exhibit space at the convention center,” he said.
If all goes well, design for the expansion could begin next spring with the building projected to open by the end of 2010.
Cost and funding have yet to be discussed. A proposed business improvement district to help fund the construction received cool response from hoteliers in recent years.
Another financial consideration is a new city policy that requires all new buildings to be constructed to Leadership in Energy and Environmental Design standards of design. That could add to the cost of construction, though the increase might be offset later by energy and other operational savings.
Housing vs. Tourism
Another challenge is the current flap over whether or not to allow housing development in the Anaheim Resort District. The contentious issue has ruffled some usually smooth relationships and could present future challenges for those planning commercial development in the resort district.
After the City Council last spring voted to allow a zoning change for a housing development on the edge of the resort district, the decision was challenged by the tourism community. Led by Disney and the Anaheim Chamber, a coalition named Save Our Anaheim Resort was formed and collected enough signatures to put the issue before the voters to prevent the zoning change.
Now developer SunCal wants voters to have a say in any Disney expansion.
Others support housing within the district and have painted the issue as one of affordable housing for those who work in the resort district. At a recent business breakfast, Anaheim Mayor Curt Pringle said about half of Anaheim’s existing housing units are rental units that fall within the state guidelines of affordable housing.
The controversy has “negatively colored the perception of the resort,” Pringle said.
While that may be true on a local basis, Kyser said he doubts conventioneers would notice the difference.
“They look at what the complete package is,” he said. “Orange County has a pretty compelling package (of things to do) and they hosted Pow Wow in April, which is always a very powerful selling tool.”
If housing is allowed, those developments would be subject to the same special tax assessment as other resort district businesses, according to city spokesman John Nicoletti.
“In order to continue to meet our bond obligations and maintain the integrity and consistency of the district, all developments within the Anaheim Resort District are currently subject to additional assessments,” he said.
Smith said the outcome of any compromise or election concerning residential development within the Anaheim Resort District would not affect plans for the convention center.
Lastly, there’s the never-ending challenge of competition—particularly from Los Angeles and San Diego—for the convention market.
This year, the competition has intensified.
San Diego remains top of mind in the industry as it continues to roll out additional hotels and resorts. The next to open is the Grand del Mar, a 249-room luxury resort in North San Diego County anchored by a Tom Fazio-designed golf course. The resort will feature 30,000 square feet of meeting space and a 10,000-square-foot lawn for outdoor events that could pull some business from coastal OC.
Fortunately, OC’s coastal cities also are a big draw for groups that don’t need to use a convention center. The county now has about a dozen top-rated hotels and resorts along the coast with combined indoor meeting space of almost 300,000 square feet suitable to all but the largest convention groups. When the Resort at Pelican Hill opens late next year, it will add another luxury component to the coast along with more event space and refocus attention on the OC coast.
In Los Angeles, the convention and visitors bureau has gone to work touting the new L.A. Live under construction next to the convention center. The Nokia Theatre—a key component of L.A. Live—is set to open in late October with concerts by the Eagles and Dixie Chicks and is sure to generate a buzz for downtown L.A.
“The Nokia is going after any awards show that isn’t nailed down,” Kyser said.
That will add a glitz factor for potential convention groups who will see the new hotels and the convention center in every outdoor shot of those awards programs, he said.
Meanwhile, Orange County has hit a bit of a lull in development. Just one convention hotel opened last year—partly due to a dearth of land. This year, Anaheim got its first-boutique style hotel as a former Holiday Inn became the Hotel Menage, which has garnered high marks for its restaurant, funky room design and themed function space.
A new ballroom at the Anaheim Marriott has given convention organizers more flexibility for their space needs.
“Our local catering is up almost 100% over 2006,” said resident manager Steve Montgomery. “We have a record number of groups on the books for next year.”
Across the street, the complete makeover of the Hilton Anaheim by new owner Makar Properties of Newport Beach also will be welcomed by conventioneers.
“With our new product, we’ll be able to attract more corporate business and that’s a big focus,” said Victoria Jones, director of group sales at the Hilton.
The Hilton, Marriott and convention center create the kind of attractive campus environment that convention groups seek. To that end, the convention and visitors bureau has begun to market the three properties as a campus dubbed “Centerwalk.”
“Selling it as a campus is a very positive move,” Jones said.
New restaurants Ruth’s Chris Steakhouse and Morton’s Steakhouse add to the campus environment.
Other hotels are in the pipeline and the hot hotel market may result in more proposals.
On the Horizon
Other developments attractive to conventioneers are on the horizon.
The long-awaited GardenWalk is under construction along Katella and will add a wealth of dining options to the convention center area. First phase restaurants that may be open in time for the holiday season include the Cheesecake Factory, California Pizza Kitchen and Bubba Gump Shrimp Co. The first retail phase is set to open next spring.
In downtown Anaheim, the new Muzeo will open in October with an exhibition called “Imperial Rome” that includes antiquities never before seen outside of Italy. The museum also will have space for 300-400 people for dinners or receptions, including the option to close Center Street to accommodate group events.
The expansion of John Wayne Airport also is under way. The project will add a 25,000-square-foot terminal with six gates, additional security checkpoints, new commuter facilities and 2,000 parking spaces at the airport. Though several years from completion, the promise of additional flights for Orange County is welcome. The number of air passengers at the airport in July rose 4.2% to 913,172 compared to July 2006. Commercial flights increased by 3%.
Earlier this month, the airport added a Segway and a T3 transporter
for law enforcement use at the mile-long facility.
|Also See:||Pow Wow Brought 4,700 People to Anaheim; Sponsors Spent $5 million to Host Event / Sandi Cain / May 2007|
|Disneyland Helped Cultivate Anaheim Convention Activity; Supported First Visitor and Convention Bureau in 1961 / Sandi Cain / August 2005|
|In Recent Years, the Fall Convention Business Has Been Scarce in Anaheim / Sandi Cain / August 2005|