HVS Market Pulse: Hawai‘i Convention Center
November 29, 2018 1:30pm
By Thomas A Hazinski, Anthony Davis
The State of Hawai‘i and the Hawai‘i Convention Center (HCC) are uniquely positioned in the US convention and meetings market. This market analysis explores the advantages and disadvantages of the HCC’s position in the convention industry. HVS analyzes the differences in the types of events, event attendance, room nights, and the financial operations between the HCC and comparable mainland convention centers.
It is often said that a great tourism market makes a great convention market. While this may be true of US mainland destinations, island convention destinations tell a different story. The logistical challenges of shipping event materials to Hawai‘i, the cost of airfare for out-of-state attendees, and the perception of Hawai‘i as a paradise vacation destination, and not a meetings destination, makes hosting large conferences, conventions, and consumer shows at the HCC more complex and expensive than hosting an event in a mainland convention center.
Honolulu Market Area
Honolulu is part of the greater O‘ahu economy, which is fueled in large part by the tourism industry, as well as by the government and military sectors. The year-round moderate climate is highly conducive to agriculture, especially the production of sugar cane, pineapples, macadamia nuts, and a multitude of exotic flowers. The City and County of Honolulu encompasses the island of O‘ahu and several minor outlying islands, including all of the Northwestern Hawai‘ian Islands. Therefore, according to the Guinness Book of World Records, Honolulu is technically the longest city in the world.
Hawai‘i, the Aloha State, was admitted to the union as the nation's 50th state in 1959. Hawai‘i consists of eight major islands and 124 minor islands, which form a chain extending more than 1,600 miles across the mid-Pacific Ocean. The islands are either volcanic in origin or are small coral atolls. These islands have an aggregate land area of 6,425 square miles, with a total of 750 miles of coastline. Honolulu, the state's capital and its largest city, is about 2,400 miles southwest of San Francisco and the United States mainland. Hawai‘i's eight major islands total ±4,112,000 acres of land, with the six primary islands accounting for approximately 98.0% of this area. Presented in order of descending size, these six primary islands are: Hawai‘i (“the Big Island”), Maui, O‘ahu, Kaua‘i, Moloka‘i, and Lāna‘i. The seventh island in size, Ni‘ihau, is privately owned. Kaho‘olawe, the eighth island, is presently uninhabited, and was previously used for military practice.
Hawai‘i Convention Center
The HCC opened in 1998 and is the largest exhibition center in the state. It is located adjacent to the popular Waikiki District in Honolulu on the island of O‘ahu. With approximately 343,000 square feet of total function space, it’s size ranks in the midrange of venues in the United States. The exhibition hall of approximately 204,000 square feet is supported by a 35,000 square foot ballroom, and 104,000 square feet of meeting space. Over 15,000 hotel rooms are within a mile of the facility, but no hotel is immediately adjacent. The HCC is owned by the Hawai‘i Tourism Authority (“HTA”) that conducts the sales and marketing efforts of the HCC and contracts the operations to a management company. Originally operated by SMG, AEG began its first full year of operations in 2014.
Trends in event bookings at the HCC show how facility and HTA staff have responded to the unique challenges they face in booking events. The figure below shows the number of events at the HCC, by event type for the years 2008 through 2017.
FIGURE 1: ANNUAL NUMBER OF EVENTS AT HCC BY EVENT TYPE
Source: HCC as classified by HVS
The overall number of events has been slightly higher in recent years and the mix of event types has changed since 2008. Notably, the number of conventions and assemblies have declined while the number of banquets, conferences, and consumer shows have increased.
HVS analyzed the attendance at each type of event as shown in the figure below.
FIGURE 2: TOTAL EVENT ATTENDANCE AT THE HCC BY EVENT TYPE
The increase in attendance levels since 2013 reflects the shift toward more consumer shows, banquets, and other events that primarily attract local audiences. Convention attendance has varied from approximately 40,000 to over 100,000. The booking of one or two high impact events in any given year can cause this amount of variation.
Room Night Generation
Data on the actual consumption of room nights per event is not available, but the HCC tracks the requested room blocks per event. While an imperfect measure of room nights consumed, as attendees may book hotel rooms outside the requested room block and may stay for pre- and post-event activities, this information approximates the number of room nights generated annually by events at the HCC.
HVS analyzed the requested room nights for each type of event as shown in the figure below.
FIGURE 3: REQUESTED ROOM NIGHT GENERATION BY THE HCC
Conventions have, by far, the largest impact on hotel lodging. While room night generation varies greatly from year to year, there has been no discernable pattern of growth or decline since 2013. This analysis demonstrates that the HCC faces a highly volatile market. The difference between a high demand year and a low demand year depends on attracting a few large convention events.
To compare the performance of the HCC with convention centers on the mainland US, HVS identified seven convention centers that have similar amounts of function space as the HCC and in cities with similar sized populations as Honolulu. Those seven venues, their location, function space, and population are shown below.
FIGURE 4: COMPARABLE VENUES
Sources: Respective Venues, U.S. Census Bureau
The HCC has the second most function space available among the set of comparable venues and Honolulu has the fourth largest population.
The table below shows the average number of events by event type for the HCC and the set of mainland convention centers. The data is from 2011-2017. Data from 2018 was not included because it is not a full year of data.
Event Mix Comparison
FIGURE 5: AVERAGE NUMBER OF EVENTS (2011-2017)
Source: Respective Venues
The HCC hosted approximately half as many events annually as the average of comparable mainland convention centers. There were eleven more assembly events at the HCC, which includes graduations and public speakers, and approximately the same number of conferences and consumer shows. However, there were significantly more banquets, conventions, meetings, and tradeshows at the set of mainland convention centers.
Local area businesses and not-for-profit groups generate meetings and banquets events. The surrounding area in Honolulu is limited by the island of O‘ahu, its population, and business presence. The mainland convention center cities have a larger business presence and sprawling suburbs from which they can draw banquet and meeting demand.
Comparison following table compares the average event attendance at the HCC and the set of mainland convention centers.
FIGURE 6: AVERAGE EVENT ATTENDANCE (2011-2017
The HCC attracted larger banquet, conference, and convention attendance than the mainland convention centers. But the set of mainland convention centers drew significantly larger audiences for assemblies, consumer shows, and tradeshows. The HCC may have fewer conventions, but they are on average larger than at mainland venues. Delegates are willing to travel to Hawai‘i and the HCC for conventions, but the primary market is for larger and longer events that justify long-haul travel.
Comparing the number of events, total attendance, and room nights at the HCC to the set of comparable mainland convention centers offers some background on the challenges faced by the HCC. However, comparing the operating revenue, expenses, and profit will reveal more about the different financial challenges the HCC faces compared to mainland convention centers.
The following figure shows the operating revenue, expense, and operating profit at the HCC and the set of comparable mainland convention centers.
FIGURE 7: OPERATING REVENUE AND EXPENSE
Source: Various Financial Reports, CAFR’s, and Annual Budgets
Comparing the operating revenue of the HCC to the average of the set of mainland convention centers shows that the HCC earned more revenue and grew at a faster rate than at the comparable mainland venues. Since 2012, HCC operating revenue nearly doubled while the set of mainland convention centers grew approximately 50%.
Operating expenses at the HCC were significantly above the average operating expenses at the set of mainland convention centers. This is likely due to the higher price of goods and services in Hawai‘i than on the mainland. In the last four years, operating expenses have increased consistently at the HCC, while the operating expenses of the mainland convention center set hovered between $11 and $12.5 million.
The net operating income at the HCC was lower than in the set of mainland convention centers. While most convention centers operate at a loss and rely on tax revenue or other form of subsidy, the HCC operated at a larger loss than the set of mainland convention centers. The operating loss at the HCC has decreased since 2011 and 2012, but remains at $4 million a year.
Hawai‘i, and the HCC, faces three unique challenges: 1) long-haul requirements, 2) relatively high visitor costs and 3) a leisure paradise reputation. These challenges create logistical, cost, and attendance problems for exhibitors, attendees, and planners.
However, the HCC is in one of the most popular tourist destinations in the world, with a consistently pleasant climate, and the facility is well supported by the HTA and the State of Hawai‘i. The HCC previously relied on high-impact conventions to drive attendance and occupancy, but the market for those events has become more competitive in recent years. Reliance on events with local attendance has proven to be an effective strategy in keeping the HCC busy.
Financially, the HCC earned more operating revenue and had higher operating expenses than the set of comparable mainland convention centers. The HCC has operated at a larger financial loss than the set of mainland convention centers over the period studied. However, from 2011-2016, the HCC has lowered the operating loss year over year.
hvs market pulse,
thomas a hazinski,
Thomas Hazinski is the Managing Director of HVS Convention, Sports, & Entertainment Facilities Consulting in Chicago, Illinois. His consulting practice is dedicated to the market and financial analysis of public assembly facilities. Mr. Hazinski has over 20 years of experience in the public policy arena, as both a public official and a consultant. He specializes in providing economic and financial research to public agencies involved in economic development initiatives. Before starting his consulting career, Mr. Hazinski served in several positions for the City of Chicago, including assistant budget director. Mr. Hazinski holds a master’s degree in public policy from the University of Chicago’s Harris School of Public Policy. Contact Tom at firstname.lastname@example.org.
Anthony Davis graduated from Santa Clara University and the Harris School at the University of Chicago. He is an associate for HVS Convention, Sports, & Entertainment Facilities Consulting and serves as project manager for the HVS Annual Lodging Tax study.
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