DeVos Place Is Relying On Arena

September 10, 2004
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GRAND RAPIDS — It will likely be a few more years before

DeVos Place
, the city's new convention center, will produce a surplus.

Until then, members of the Convention and Arena Authority will be faced with deficits and they will have to fill those shortfalls with excess revenue generated by Van Andel Arena.

And the arena should be able to provide that much-needed revenue as long as the concert business continues to be the goldmine it has been in past years.

But a few recent reports have focused on a lackluster summer touring season across the country that produced cancelled tours, less than full venues, and reduced ticket prices to save some shows from being cancelled.

Rich MacKeigan, SMG general manager, said the Simon and Garfunkel concert held in the arena in June didn't live up to its fiscal expectations. He added, though, that the duo's stop here did better financially than in other markets the pair played.

But successful concerts from Sarah McLachlan and Tim McGraw a few weeks ago may have turned things around.

"A bit of the bad run we had with concerts ended that night," said Chris Machuta, SMG finance director, of the McLachlan show.

MacKeigan reported that bookings were solid for the fall and noted that the arena was getting off to a good start for the fiscal year, which began on July 1.

But if a slow summer becomes the norm for the concert season, then board members may find it difficult to fill the financial hole that

DeVos Place
is expected to dig this fiscal year.

That thought was obviously on the minds of CAA members at their August meeting.

"How much red ink are we willing to support?" asked CAA Chairman John Logie.

"I think our mandate is to break even and do a bit better," answered Steven Heacock, board member and chairman of the finance committee.

The un-audited numbers show that

DeVos Place
lost nearly $1.17 million for the last fiscal year.

The good news was that figure was about $428,000 lower than the loss that was projected.

The new convention center opened in December and was responsible for the last seven months of the fiscal year; the first five were credited to the old GrandCenter. (See related chart.)

The arena had a surplus of $1.43 million for the year, which gives the board enough funds to cover the

DeVos Place
loss. But the surplus generated by Van Andel Arena the previous fiscal year was closer to $1.6 million, meaning that excess revenue from the building fell by roughly $200,000 in a single season and that is something the CAA doesn't want to happen again this fiscal year.

For FY05, which runs through June 30, SMG has projected that the convention center will lose $1.39 million, while the firm has forecasted a $1.51 million surplus for the arena.

If both projections hold true, then the board will be able to cover the

DeVos Place
loss with arena revenue. But that still doesn't provide the board with enough funds to cover capital replacements costs at both buildings.

In late May, Kent County Fiscal Services Director Robert White — who is also a CAA staff member — told the board they have to set aside $1.7 million each year in the near future for replacement costs at the convention center. The CAA keeps roughly $3 million in reserve, but board members could go through that account rather quickly if it's used to make capital improvements while the building loses money.

Making matters a bit more difficult for the board is that the arena will begin its ninth season next month.

Before the Downtown Development Authority handed the building over to the CAA, the DDA set aside $500,000 of the surplus each year for capital replacements to that building. But some of those arena projects have been pushed back and those dollars have been used to cover losses at the convention center.

So, in effect, board members will need to set aside $2.2 million in a few years for capital costs at both buildings. White suggested that members should start looking for another revenue source to keep from draining their reserve account.

"It will be a difficult goal for you to achieve," he told the CAA in May.

The CAA's budget for FY05 projects a surplus of $212,000.

The number of conventions and meetings held in the building in the coming years will, of course, play a major role in how well

DeVos Place
performs financially.

A good omen came recently from Steve Wilson, president of the Convention and Visitors Bureau.

Wilson said the projected room nights at local hotels should reach 110,000 this year, a gain of 13.5 percent over 2003. He also said that those who have met here this year had high marks for the building and its services, and that convention-goers said they found downtown to be fun, safe and clean.

At least 29 conventions are taking place this year, with a minimum of 31 coming to town next year.

CVB's vice president and sales manager, George Helmstead, said 117 bookings have been confirmed for

DeVos Place
through 2009 and that another 64 meetings were tentative through 2011.

"We're very pleased with how things are going and how we're being perceived," Wilson said. "We're dominating the state market."    

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