San Diego Convention Center and Stadium Project Meetings Market and Impact Analysis Submitted to: Conventional Wisdom Corp. David O’Neal Chairman 2703 Rew Circle Ocoee, Florida 34761 August 23, 2016 August 23, 2016 Conventional Wisdom Corp. David O’Neal Chairman 2703 Rew Circle Ocoee, Florida 34761 Dear Mr. O’Neal, As you know, Conventional Wisdom Corp. engaged Hunden Strategic Partners (HSP) to perform a convention and meetings market analysis for the proposed San Diego Convention Center and Stadium Project initiated by the NFL San Diego Chargers franchise. The study has determined demand and projected impacts associated with the Project, specifically with relation to attendance, room nights generated, and potential incremental hotel rates associated with compression from the convention activity, as well as compression from NFL games. The attached is our final report. This deliverable has been prepared under the following general assumptions and limiting conditions: § The findings presented herein reflect analysis of primary and secondary sources of information that are assumed to be correct. HSP utilized sources deemed to be reliable, but cannot guarantee their accuracy. § No responsibility is taken for changes in market conditions after the date of this report and no obligation is assumed to revise this report to reflect events or conditions occurring after the date of this report. § HSP has no control over the timing of the Project opening. § Macroeconomic events affecting travel and the economy cannot be predicted and may impact the development and performance of the project. We have enjoyed serving you on this engagement and look forward to providing you with continuing service. Sincerely yours, Robin Scott Hunden Hunden Strategic Partners www.hundenpartners.com TABLE OF CONTENTS ----------- Executive Summary Chapter 1 Demand and Impact Appendix A Convention Industry Overview and Trends Appendix B Convention Market Competitive and Comparable Analysis Appendix C Influence of Comparable Downtown Stadiums Appendix D Meeting Planner Interviews Appendix E Hotel Market Analysis Appendix F Comparable Convention City Hotel Tax Rate Data PROJECT OVERVIEW Conventional Wisdom Corp. (Client) contracted with Hunden Strategic Partners (HSP) to perform a multi- pronged study related to the proposed San Diego Convention Center and Stadium Project initiated by the San Diego Chargers NFL franchise (Project). The study included an analysis of the likely market that the Project would penetrate for meetings, conferences and conventions, the experience of other similar facilities and cities, and the ultimate impact that the Project would have on the City of San Diego. HSP conducted market research to determine the number and type of events that have the following characteristics: ! Interested in holding conventions and meetings in San Diego, ! Require dates between August 1st and January 31st, and ! Require up to 150,000 square feet of exhibition space (between August and January), and/or will use the entire facility with approximately 260,000 square feet of exhibition space. HSP profiled the proposed mix-use Project, focusing on the convention facilities, as well as the potential opportunities and constraints provided by NFL usage. HSP also analyzed the loss of room nights and related impact, if the Project is not built. The results of the study provide a better understanding of the market for conventions and similar events. The market analysis helps inform the demand and projected impact associated with the Project, specifically in relation to attendance, room nights generated, and potential incremental hotel room rates associated with increased demand from the convention activity, as well as from NFL games. San Diego Convention Center and Stadium Project The ballot measure supporting this Project calls for approximately 385,000 square feet of net leasable exhibit hall, meeting room and ballroom space. An initial, preliminary conceptual design for the project – subject to change – allocates the space as follows: ! 130,000 square foot exhibit hall, ! 30,000 square feet of swing space ! 100,000 square feet of stadium event level exhibit space, ! 63,000 square feet of ballroom space, ! 80,000 square feet of meeting rooms, The Project would include approximately 61,000 seats, including club seats, loge seats, suites and other premium seat options. There is an expansion option to increase seating capacity to approximately 72,000 seats. Chargers Stadium and Convention Center Study Executive Summary - Page 2 KEY FINDINGS Based on HSP’s research of the market, the performance of the existing facility, meeting planner interviews, experience in other markets, and analysis of similar situations, the following conclusions have been reached: ! More than 200,000 San Diego Hotel Room Nights Annually. Based on the analysis, the Project will induce and retain more than 2 million new hotel room nights to City of San Diego hotels in the first ten years of operation and average approximately 225,000 room nights per year by stabilization. Most of these additional hotel room nights will be due to new conventions and other groups coming to San Diego that currently are not able to be accommodated. Others will be due to the impact of Chargers home games, major concerts and other sporting events to be scheduled. In total, San Diego hotel room revenue is expected to increase by more than $750 million over the first ten years. ! Event Demand Leads to Major ADR Increases. Strong demand that pushes occupancy and rates higher and ripples out to surrounding areas generated by large events will increase hotel room revenue by nearly $200 million over the first ten-year period. ! Major Hotel Tax Revenue Increase. HSP expects hotel tax revenue of more than $125 million over the first ten years solely due to the Project. ! Hundreds of New Events. The new Project is expected to be available for non-NFL events 95 percent of days per year, leading to more than 100 events per year, nearly all of which will be new to the City of San Diego, except existing NFL and college bowl games. ! Hundreds of Thousands of Attendees. HSP estimates that the Project’s events will attract more than 200,000 non-Sports and Entertainment attendees per year and more than 900,000 total attendees per year. ! Consistent Convention Activity in Multiple Venues is Preferred. Given that the existing convention venue and the Project would likely be managed to maximize combined impact and market penetration, the Project helps continue, and respond to, a major trend in the convention industry of pursuing and hosting numerous overlapping or back-to-back mid-sized conventions that provide consistent hotel usage. This is in contrast to the prior “space race” where cities have attempted to lure the few largest conventions. The drawback to this “space race” strategy is that there is often a large time gap between major events. Cities like San Francisco, Seattle and Indianapolis – all successful convention cities – have adjusted their focus to filling the calendar with consistent medium-sized conventions that can occur simultaneously or back-to-back. Convention centers today and their major hotel partners have recognized that having a “two- piston” convention engine, where one mid-sized show is occurring while another moves in or out, is more likely to lead to consistently full-hotels. ! Football Schedule Allows for Long-Term Convention Bookings During Peak Times. HSP conducted an analysis of the calendar associated with groups that would likely come to a San Diego convention facility if dates were available. HSP also analyzed a draft, theoretical and conservatively projected long-range schedule for the Chargers. The NFL has worked well with Chargers Stadium and Convention Center Study Executive Summary - Page 3 other cities that have or had convention needs associated with stadium spaces, such as Houston, Indianapolis, Seattle and St. Louis. The San Diego Chargers intend to work with the NFL to establish that during each season, one Sunday per month could be booked and blocked long term and more than a year in advance for conventions, along with every Monday and Thursday from mid-September through mid-November. The team and league will also enable three of these long-term bookings to be secured during the critical mid-September to mid- November eight-week time period (one each month), which is a busy time for conventions. This provides calendar availability and certainty for 67 percent or more of the days in this critical time period, as well as 100 percent availability from February through August (and possibly January – August, if there is no post-season play). For dates that become available after the NFL calendar is issued, the facility can sell available dates to groups that have shorter booking windows. These groups tend to pay more in hotel rates as the hotels are already filled with other long-term bookings. ! Football Calendar Dovetails Well with Convention Facilities During Holidays. Given that the Chargers are likely to play during and around holiday weekends such as Thanksgiving, Christmas and New Year’s, and conventions almost universally avoid scheduling during these times, HSP’s analysis suggests that, relative to a convention-only facility, those holiday periods at the proposed Project would likely be occupied with NFL or other events, such as concerts or the circus, during many of these periods, generating hotel room nights that would not otherwise be generated at a convention-only center. ! Benefits of a Downtown Convention and Sports Facility. The City of San Diego has experienced the positive impact of having the MLB San Diego Padres located downtown, which played a major role in revitalizing downtown and the Gaslamp Quarter’s restaurants, shopping, hotels and the overall convention environment. HSP’s analysis of other cities where the NFL stadium moved downtown shows the positive impact such a move can make on the downtown area, the overall city’s image and economy. It also makes for a fun and impactful pre- and post- game environment.