DeVos Place, arena income trends upward
Convention center, in particular, sees positive operating income past two years after three years of negative income.
Business at DeVos Place and the Van Andel Arena has done well over the past two years, compared to its performance historically.
In particular, looking at the past five years, DeVos Place had a positive operating income of $485,000 in 2016 and $132,000 in 2017, which was following three years of negative final numbers.
Van Andel Arena’s operating income in 2017 was $2.47 million, an increase of more than $700,000 from 2016 and more than $1 million from 2015.
SMG’s combined revenue was $13,641,987 for 2017, up from $12,902,640 from 2016.
The Convention and Arena Authority’s end fund has fluctuated between $21 million and $23 million over the past five years. The 2017 ending fund of $23.4 million was the highest the CAA has seen during that time.
A $2-million decrease in operating expenses from 2014 to 2015 was attributed to heavy winter impact on utility costs and substantial scheduled maintenance, as reported by the Business Journal in 2016.
The operating numbers do not include debt service. Van Andel Arena’s debt expires in 2024 and DeVos Place’s in 2031, carried by the Downtown Development Authority and Kent County bonds, respectively. Once the bonds mature, ownership of the buildings will be transferred to the CAA. The DDA uses tax increment revenues to pay the bonds, and Kent County uses the lodging excise levy, or the hotel/motel tax.
Rich MacKeigan, SMG regional general manager, said he would attribute the upward trend in numbers to increased success at the box office due to a “hyperawareness of Grand Rapids as a great market.”
In the past year, there have been record-setting ticket sales for national concert tours at the arena and arts performances at DeVos, including three weeks of sold-out “Wicked” performances, which he said has never happened before.
He expects business for the arena, theater and convention center to be “favorable for the next couple years.”
“If promoters are making money, they’re going to look to keep bringing business,” he said.
He said concerts, which book six to eight months ahead, have the biggest impact to the arena’s bottom line and look favorable going forward, as well as arts tenants’ bookings, which happen about two years ahead of time, and convention bookings, which happen three to five years ahead.
“There is a very strong optimism around the concert business throughout the entire industry right now,” MacKeigan said. “I’m basing my optimism a little bit on what we have booked and what we’re trending, as well as what I’m hearing from our peers and partners in the concert business.”
MacKeigan and Chris Machuta, SMG assistant general manager, who also acts as director of finance, highlighted the financial success and pointed out these types of facilities are generally expected to operate in the red, with the intention of positively impacting the economy in the community.
MacKeigan said they “have absolutely done that and proven that.”
As previously reported by the Business Journal, a 2012 study by the Anderson Economic Group, commissioned by the CAA, concluded the three venues contributed $32.7 million in new net spending across the county in 2011. Of that, $8.1 million came from building operations and capital expenditures. Another $24.6 million was originated by attendees and performers playing at the buildings, including spending for restaurants, hotels, parking and other incidentals.
There has been talk about a convention center expansion. It was one of the projects suggested by the 2016 Grand Rapids Destination Asset Study commissioned by Grand Action. The study suggested an expansion, worth approximately $83.3 million, of about 115,700 additional square feet of space, requiring 2.5 to 4 acres, as well as a hotel with up to 500 rooms to support the expanded convention center.
Five companies recently responded to the CAA’s request for proposal regarding a headquarters hotel market demand and feasibility study that would explore the need for the hotel in two possible spaces: the Monroe Meeting Rooms on the south side of the DeVos Performance Hall, and the area behind the arena.
At a CAA Operations Committee Meeting on March 2, MacKeigan recommended HVS Convention, Sports & Entertainment Facilities, at a proposed cost of $49,450, be commissioned for the study. The company has completed more than 30 hotel-related studies in Grand Rapids since 2010 and has experience with headquarters hotel projects and hotel districts.
MacKeigan said, “Convention center expansion is still part of the conversation, but we have not started anything down that road just yet,” adding something may come from the hotel study.
“Right now, we’re running at about 55 percent occupancy, which is a good number, but it still has a ways to go for us to say that we need more meeting space today,” he said.
MacKeigan said informal conversations in the community have identified two sites for a possible expansion: the city and county site across from the current convention center, and the downtown post office a couple blocks away on Monroe. Those sites make a lot of sense geographically, he said, but moving there is easier said than done.
He expects the CAA will begin assessing convention center possibilities in three to five years, as recommended by the Destination Asset Study.
Based on current conditions, he said the six-to-10-year timeline recommended by the study to begin construction still is a good timeframe.