DeVos Place More Can Be Less

August 7, 2006
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GRAND RAPIDS — While DeVos Place is expected to close the 2006 fiscal year less than $300,000 in the red, or about $500,000 less than was projected, the financial forecast for FY07 has the convention center losing roughly $725,000.

The final FY06 unaudited number for

DeVos Place
should be coming in a few weeks and it will give the Convention and Arena Authority a clearer picture of how well the center has performed the past few years.

Board members recently got a snapshot of that performance when they learned that 39 groups booked meetings in the building two years ago, while 48 did the same this past year. They also got a glimpse of the near future when they were told that 51 groups were signed to meet at

DeVos Place
during the current fiscal year.

But despite gaining three more meetings for FY07, the number of delegates coming to the convention center is expected to drop by almost 15 percent from last year’s total of 83,250 to 70,125 for this year. Fewer delegates means fewer room nights at local hotels and motels and less revenue to the lodging excise tax, which makes the payments to DeVos Place bondholders for much of the building’s construction.

“The DeVos budget is practically flat,” said CAA member Birgit Klohs after learning that bookings were up.

SMG General Manager Rich MacKeigan explained that smaller conventions, like those coming in this year, use fewer services in the building. That decline has an impact on the bottom line, with less revenue coming in from auxiliary items like equipment rentals.

MacKeigan also said the latest numbers showing more meetings with fewer attendees doesn’t reflect a trend the center is going through, but a change in the building’s event mix for the current year.

“The next fiscal year looks like it’s going to be a good fiscal year,” said MacKeigan of FY08. “FY09 also looks like it’s going to be a good fiscal year.”

Convention and Visitors Bureau Vice President of Sales George Helmstead said the lead time needed to book larger conventions can run from three to five years, and the building has meetings booked into 2010 — with one on the books for 2011.

SAG, the bureau’s Atlanta consultant, said the center’s performance can’t be accurately measured until the building has been fully operational for five years.

DeVos Place
didn’t completely open until February of 2005, even though the building hosted its first convention in December of 2003.

“You really have to be open four to five years to be able to track it,” said MacKeigan. “I think in another year or two, we will see some real numbers.”

Then there are the meetings that slip away. The Business and Professional Women’s Association recently chose St. Louis over Grand Rapids for its 2009 meeting, because the group believed there were more entertainment options there than here. The group also considered St. Louis a special place, as the city hosted the organization’s first meeting.

Overcoming ties to cities that some groups hold dear is just one obstacle the CVB and SMG have to hurdle to lure meetings here. Another is the incentive package that competing cities offer.

“They give away the space for free,” said MacKeigan.

Cities are able to offer free meeting space because local businesses tied to the convention industry — such as hotels, restaurants and entertainment venues — cover that cost in exchange for bringing people to the city. In some cases, local governments provide a subsidy to pick up the meeting tab.

“Complimentary meeting space puts us on the playing field,” said Helmstead. “I can’t say we’ve lost business because of incentives.”

Helmstead explained that different groups have different “hot buttons” that get them to sign on the dotted line. He said that one meeting the bureau was able to book wanted a wide range of room rates and not just a low rate. He also said that the city has a better chance to nab a meeting when a group’s board members make the decision on where to gather instead of an organization’s delegates.

“Our chances increase twofold when people come in and see the place and when a board votes,” Helmstead said.

CAA members recently approved a five-year rate structure for the meeting rooms in the center, an annual task that has a 3 percent increase from the year. Also, chairman Steven Heacock said the board would offer MacKeigan a special-services contract for duties related specifically to the CAA. MacKeigan is employed by SMG, the firm that manages

DeVos Place
and Van Andel Arena.

The FY07 adjusted gross income for the center has been projected at $4.56 million, while expenses are expected to reach $5.28 million during the year.    

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