Convention/Conference Center Feasibility Study
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The City of Sugar Land Convention/Conference Center Feasibility Study Introduction • 2007 Visioning Task Force: Identification of Five Destination Venues for City – Including a Convention Center • City Comprehensive Plan: “Regional Business Center of Excellence” – Full Service Convention / Conference Center • April 2014: Feasibility Study Awarded – Strategic Advisory Group 2 Approach Phase I – Convention / Phase II – Convention Center / Hotel Conference Center and Operational & Financial Hotel Market Analysis Feasibility Analysis – Kick-Off meetings – Development cost – Analyze community estimates resources – Operating revenues and – Industry trends expenses – Analyze comparable – Ownership and facilities management – Site analysis – Funding & financing – Target market surveys analysis – Market-based program – Economic & tax revenue recommendation benefits – Utilization estimates 3 INDUSTRY OVERVIEW Supply and Demand of Exhibit Space 400 • From 1980 to 2007, the Supply: Venue convention and tradeshow 350 Exhibit Space industry boomed 300 • Led to exhibit “space race” – All major cities now have 250 convention centers & desire lucrative economic impact Growth Index Growth 200 • Supply has outpaced 150 CAGR 1985-2012 Supply 3.7% demand leading to high Demand 2.4% GDP 2.6% vacancy 100 • Has led to a “buyers market” 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Source: CEIR, Tradeshow Week; Red 7 Media; U.S. Census Bureau Types of Facilities Used City Hotels 35% • Meeting planners prefer to use hotels for Resort Hotels 30% their events Airport & Suburban – 75% prefer hotels 10% Hotels • Prefer to meet, sleep Conference Centers 8% and eat under one roof Convention Centers 8% • Utilizing stand-alone Restaurants, Country Clubs, Unique Venues 7% convention and conference centers is Other 4% preferred by 16% of 0% 10% 20% 30% 40% those surveyed Source: Meeting Professional International 6 U.S. Hotel Performance Trends 100% $150 • The U.S. hotel industry has 90% rebounded from the $125 recession 80% 70% • Occupancy $100 60% – In 2014, the U.S. hotel industry is predicted to 50% $75 match the highest pre- Occupancy 40% Average Rate Average $120 recession levels $115 $110 $107 $106 $104 $50 $102 $98 $98 $98 30% $91 – In 2015, occupancy is $86 projected to be 63.5% 20% $25 10% • Average Rate 0% $0 – In 2014, ADR is predicted to achieve $115 and increase 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014p 2015p to $120 in 2015 Source: Smith Travel Research. 7 U.S. Hotel Market Projections STR and Tourism Economics • “The U.S. hotel industry is expected to continue to report performance increases in the remainder of 2014 and in 2015.” • "Overall our forecast is very positive for the next two years, and we expect robust growth.” PKF • “Profits have increased by more than 10% since 2011, a trend expected to continue through at least 2015.” Jones Lang LaSalle • “Hotel investors across the globe have opened the throttle on deal pace, resulting in a 35% increase in last year’s transaction volume.” • “2014 will be characterized by continuing investor confidence and a market flush with capital.” 8 Industry Summary • The convention center industry is oversupplied and vacancy is high • The meetings industry prefers to use hotels and their event space • The U.S. hotel market has rebounded from the recession – Occupancy levels are at pre-recession levels – Average rates have surpassed pre-recession levels • Hotel industry experts project continued performance growth and development growth 9 COMPARABLE/COMPETITIVE ENVIRONMENT Competitive Landscape • Researched locations within 275 miles of Sugar Land • Included mostly Texas locations but also a few cities in Louisiana • Focused on convention space and full- service hotels with 300+ rooms • Excluded civic centers and smaller event spaces 11 Convention Space City Facility Square Feet Market • Competitive landscape Houston George R. Brown CC 989,700 Major Dallas Dallas CC 831,600 Major within 275 miles is Houston NRG Center 785,200 Major significant: Over 5.3M sf of San Antonio Henry B. Gonzales CC 630,100 Major Austin Austin CC 372,800 Major leasable space Ft. Worth Ft Worth CC 340,200 Major Ft. Worth Will Rogers 292,400 Major • Major markets offer large Irving Irving CC 85,300 Suburban Arlington Arlington CC 85,000 Suburban convention centers, Plano Plano Centre 33,800 Suburban Stafford Stafford Center 24,900 Suburban supported by substantial Pasadena Pasadena CC 23,100 Suburban hotel infrastructure Waco Waco CC 144,000 Other Corpus Christi American Bank Center 136,500 Other Shreveport, LA Shreveport CC 129,000 Other • Suburban markets offer Galveston Galveston CC 68,900 Other facilities ranging from Longview Maude Cobb CC 55,600 Other College Station Brazos County Exposition Complex 54,000 Other 23,000 to 85,000 square feet Lafayette, LA CajunDome & CC 39,600 Other Alexandria, LA Riverfront Center 31,900 Other • Convention Centers are Killeen Killeen CC 31,700 Other Tyler Harvey CC 27,000 Other typically publically-owned, Alexandria, LA Sai CC 25,000 Other Temple Mayborn CC 22,700 Other operated and financially supported * Katy, TX is planning a 50-60k sf facility. Source: Facilities. 12 Hotels with Sizeable Meeting Space • Hotel competitive landscape within 275 Distance from Hotels with Sugar Land 300+ Rooms/ Number of Meeting miles of Sugar Land is Market (Approx. miles) 10k+ Meeting SF* Hotel Rooms Square Feet Houston 20 31 14,938 1,126,100 significant Galveston 65 1 418 86,400 College Station 100 1 303 27,200 • Houston market includes Austin 155 11 5,310 479,000 31 large full-service hotels San Antonio 190 16 8,561 574,700 offering 14,900 rooms and Corpus Christi 190 2 843 37,300 over 1M sf of meeting Dallas/Ft. Worth 260 39 21,796 2,074,200 space Shreveport, LA 260 3 1,489 71,200 Alexandria, LA 260 1 534 31,000 Lafayette, LA 260 1 327 18,300 • Markets researched 106 54,519 4,525,400 include over 100 large hotels offering over 54,000 rooms and over * Includes Upscale Class or higher hotels as defined by Smith Travel Research. Note: Houston market includes the Marriott Sugar Land. 4.5M sf of meeting space Source: Smith Travel Research, hotels. 13 Houston Meeting Hotels Number of Meeting Number of Meeting Hotel Hotel Rooms Square Feet Hotel Hotel Rooms Square Feet Hilton Americas Houston 1,200 92,000 Marriott Houston North 390 15,000 Marriott Marquis Houston (open 2016) 1,000 101,400 DoubleTree Houston Greenway Plaza Hotel 388 22,800 Hyatt Regency Houston 947 71,000 Sheraton Hotel Houston Brookhollow 382 15,800 Westin Oaks Houston @ The Galleria 893 93,000 Omni Houston Hotel 378 30,000 Crowne Plaza Houston Reliant Medical 652 50,000 Doubletree Houston Downtown 350 14,400 Marriott Houston Westchase 600 43,000 Marriott The Woodlands Waterway Hotel 343 70,000 Marriott Houston Airport @ Intercon 565 30,000 Hyatt North Houston 334 17,200 JW Marriott Houston 515 40,800 Hyatt Regency Galleria (open 2015) 325 n/a Royal Sonesta Hotel Houston 485 50,000 The Magnolia Hotel Houston 314 10,000 Hilton Houston North 480 52,000 Doubletree Hotel Houston Intercon 313 18,000 Hilton Houston Post Oak 448 30,000 Hotel ZaZa Houston Museum District 312 18,000 La Torretta Lake Resort & Spa 445 40,000 Hotel Derek 312 10,000 The Woodlands Resort 440 60,000 DoubleTree Houston Hobby Airport 303 17,200 Sheraton Hotel North Houston @ Intercon 419 30,000 Marriott Houston West Loop By Galleria 301 17,000 Four Seasons Hotel Houston 404 16,500 Marriott Sugar Land Town Square 300 26,000 Omni Houston Hotel Westside 400 25,000 * Includes Upscale Class or higher hotels as defined by Smith Travel Research. Source: Smith Travel Research, hotels. 14 Houston Meeting Hotel Performance 6.0m $350 • Historical supply growth 325-rm Hyatt Regency Galleria (‘16) <1.0% per year 1,000-rm Marriott Marquis (‘16/’17) $300 Supply remained flat until 5.0m • 2003/2004 343-rm Marriott Woodlands Supply 314-rm Magnolia $250 Supply to increase with 300-rm Marriott Sugar Land • 4.0m 1,200-rm Hilton Americas the opening of two new $200 comparable hotels in 3.0m 2016 Demand $150 • Demand growth has Room Nights Room Average Rate Average outpaced supply growth 2.0m Average Daily $100 • ADR has grown better Rate than inflation and is 1.0m Growth 1987-2014 Supply 0.7% $50 projected to be $160 in Demand 1.7% 2014 ADR 3.5% 0.0m $0 • Occupancy has averaged in the mid-50% to mid- 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 Occ. % 55 61 63 64 63 67 64 65 56 66 68 57 65 71 60% range and projected to be 72% in 2014 Source: Smith Travel Research. 15 Comparable/Competitive Summary • Convention Space – Significant competitive supply within 275 – U.S. convention industry is oversupplied • Meeting Hotel Market – Nationwide hotel market is growing – Houston demand growth has outpaced supply growth – Rate growth has exceeded inflation – Historically, new supply has been consumed within 1-2 years – 1,325 rooms in size range analyzed are currently under development in two hotels 16 TARGET MARKET SURVEY Who Was Surveyed Local Texas Corporations Destination Association of and Large Marketing Convention & Businesses Association Visitors International Bureaus • Less than 800 peak hotel rooms • Less than 800 peak hotel rooms • Located in TX • Located in TX, LA, OK, AR • Meet/Have met in TX ~100 Event Planners Responded 18 Total Event Space Required Total Square Feet 140,000 Respondents requiring hotel rooms AND meeting space Breakout 120,000 General Session/Ballroom 100,000 Exhibit 80,000 60,000 Total – 50,000 SF 40,000 Ballroom