What Is Centers Success Rate

September 10, 2004
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GRAND RAPIDS — How much rent should be charged to meet at a new facility that is caught in a highly competitive industry — one where longtime players freely give away space while the new building on the block is losing money?

Setting the rent too low might fill the building, but not the deficit.

Setting it too high might fill the deficit, but not the building.

Setting it just right, sometimes called the “Goldilocks Factor,” would fill both.

But what is that magical number?

This is a dilemma with which the Convention and Arena Authority has begun to wrestle as

DeVos Place
enters its first full fiscal year.

Although the board has been together for over four years, most of its work has been devoted to building the $212 million convention center.

But with construction wrapping up and expected to be finished by Feb. 1, board members have turned more of their attention to operating

DeVos Place
and eliminating the shortfall.

To that end, members recently approved rental rates at

DeVos Place
for fiscal years 2008 and 2009. The changes carry increases of about 3 percent. The rates have to be set now because conventions and conferences are booked years in advance and rental rates need to be quoted years in advance.

But the convention industry isn’t just about the convention center. The business is also about local hotels, restaurants, retail shops and entertainment spots, some of which have opened their doors because of the new and expanded facility.

CAA board member Joseph Tomaselli, also president of the Amway Grand Plaza Hotel, wondered whether now was the right time to raise the rent with the occupancy rate at local hotels seemingly stuck at 55 percent the last few years. He worried that higher rents may not help the lodging industry recover. He said others could suffer, too, if the rates are too high.

“The hotel-motel tax is at stake here, as are the success of other businesses,” said Tomaselli, whose parent firm is making plans to build another hotel downtown.

Steve Wilson, president of the Convention and Visitors Bureau, said Grand Rapids is involved with the price-sensitive side of the market, meaning the city’s most likely clients don’t have a lot of money to throw around like the big boys do and they are looking for bargains.

He said the bureau works very closely with SMG, the building manager, to come up with the best possible deals for each possible customer, which is not always an easy task.

Higher rates likely won’t make that task any easier, either, especially after losing a large convention to the city of Denver, which offered the meeting planner meeting space for free.

But Wilson, whose bureau supported the hikes, added the city hasn’t lost a convention yet solely to rental rates. He said the newness of the building, which many meeting planners are just discovering, and the competitiveness found in larger markets, like Denver, have been the major factors when another city has been chosen over Grand Rapids

“We’re doing everything creatively we can to combat that,” he said.

Lew Chamberlin, board member and managing partner of the West Michigan Whitecaps, said the CAA has given SMG the authority to lower the rent to potential clients by as much as 20 percent. And Rich MacKeigan, SMG general manager, said the cost of renting space in

DeVos Place
isn’t the only cost that customers have to consider.

MacKeigan remarked that meeting planners also must take into account local labor charges, equipment rental rates, airline ticket prices, food costs and hotel room rates, and that means everyone involved in the local industry convention industry must be aware of their prices.

“There has to be a shared responsibility on pricing,” said MacKeigan, who added that the CAA offered the building at no charge once and still didn’t get the convention.

MacKeigan said politics also plays a role in which group meets in what city. He noted that West Michigan connections to certain organizations have resulted in conventions coming to town. Each year the CVB honors residents who help bring meetings here.

Before board members approved the rates, MacKeigan reminded them that they can review the charges every year and make adjustments if they feel any are necessary.

He also said that having the rates in place makes for good business because groups won’t be facing any surprises when they arrive here.

CAA Chairman John Logie noticed that the rental rates run through June 2009 and the CVB has tentatively booked a few meetings through 2011. Logie said the board should set the rates to match the bureau’s selling period.

“We’re not going to solve this today,” said Logie. “But it will be an ongoing issue.”    

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