Report claims Expo failure

via news-leader.com

Inadequate facilities and the lack of a connecting hotel have been cited as reasons Springfieldʼs Expo Center isnʼt doing more business.

In a report distributed to City Council on Tuesday, city staff said John Q. Hammons Hotelsʼ management of the center has fallen short of expectations, as well.

“Staff does not believe the Exposition Center has been marketed or used to its maximum potential,” the report says, noting Hammons Hotels has failed to submit required reports on a regular basis.

The memo, drafted in response to questions posed by Councilman Tom Bieker, said the problems likely fall short of justifying termination of the Hammonsʼ management contract, which runs through at least 2028 and could be extended a decade past that.

City Council voted Nov. 28 to buy back a tract of land next to the Expo Center after Hammons failed to build a connecting hotel as promised.

Echoing a concern contained in an August consultantʼs report, Bieker said finding another developer to build a hotel could be difficult if Hammons continues to manage the Expo Center. He asked whether the city had reason to cancel the contract and what the consequences of doing so would be.

An answer to the latter part of the question is still being drafted, said Mary Lilly Smith, the cityʼs economic development director. The memo distributed Tuesday focuses on the first part.

“We donʼt think thereʼs been a material breach” of the contract, said Smith who worked with Phil Broyles and Jonathan Gano from Public Works and Convention & Visitors Bureau President Tracy Kimberlin to draft the memo.

Still, “we think there are some things that could potentially be better addressed,” Smith said.

Shortcomings mentioned in the report included Hammonsʼ failure to adequately market the facility and failure to coordinate with the CVB to the extent required in the contract.

The memo also notes that Hammons typically has turned over various financial reports and other documentation only when asked, rather than submitting them on the schedule outlined in the contract.

Changes being made

Justin Harris, a senior vice president and spokesman for Hammons Hotels, did not respond Wednesday to a message seeking comment.

Smith said the company has agreed to do a better job of reporting to the city and working with the CVB to market the facility.

But, as noted in the report, some issues are beyond Hammonsʼ control, she said.

In addition to high utility costs and inadequate facilities, Hammons staff “pointed out that there are some things that may be inconsistent just on their face in the operating agreement,” Smith said.

Different provisions in the agreement require Hammons to try to maximize business while at the same time operating “at least on a break-even basis.”

“They shouldnʼt be losing money” hosting shows, Smith said, but hosting shows at a loss might bring in more business.

The Catch-22 in the contract is a consequence of the way the Expo Center was financed, Smith said.

“It was smart on the one hand because the city has no financial responsibility,” she said.

The city issued bonds to build the Expo Center, but the debt is being repaid solely with special taxes assessed on nearby Hammons properties.

“We own the facility, but Mr. Hammons is responsible for all of the debt service on the bonds and he is responsible for any shortfall,” she said. “But he has no incentive to discount the space or to bring in shows that may be money losers on the Expo Center side but have greater economic benefit to the community.”

Councilman reaction

Bieker said Wednesday heʼs only had time to skim the report, but thinks it will help foster improvements.

“I think it was an honest look into what has been happening there,” he said. “Now we know what the deficiencies are … If we can tackle them and correct them and keep on that path, then good. If not, then we need to address that again.”

Kimberlin, from the visitors bureau, said he thinks better coordination with Hammons and other actions outlined in the memo “hopefully will pay dividends.”

A significant increase in business at the Expo Center likely will require additional changes and a larger investment, he said.

“As the consultantʼs report pointed out, the Expo Center is an exhibit hall. It is not a convention center,” Kimberlin said. “I think if we wind up getting a true convention complex over there, changes to the operating agreement certainly would be in order.”

Kimberlin said “itʼs way too early in the process to say” how or when the contract might be amended.

“I think we know we have a problem …,” he said. “How itʼs addressed will depend a lot on what happens with the total complex, whether another hotel developer comes in.”

Another study coming

The Expo Centerʼs ability to attract convention business to Springfield has been a focus of several recent reports.

In a study released in August, consultant Rob Hunden described the Expo Center, which opened in 2003, as underused and ill-equipped to compete with newer convention centers in the region.

Hunden said Springfield needs to “go big or go home” when it comes to investing in a convention center complex.

His initial report, paid for by the city in partnership with John Q. Hammons Hotels and the Springfield Convention & Visitors Bureau, suggested as much as $55 million in public funding might be needed.

CVB President Tracy Kimberlin said a follow-up report analyzing the benefit the city might gain from that investment is almost complete and could be released “hopefully in the next several days.”

Consultant evaluates city’s Expo Center

Written by Amos Bridges News-Leader
9:24 AM, Aug. 3, 2011|

As much as $55 million in public funding is needed to make Springfield convention facilities competitive but more study is needed to know whether the investment would pay off.

Those were among the conclusions consultant Rob Hunden presented to City Council and other local officials during a lunch meeting Tuesday at John Q. Hammons’ University Plaza Hotel.

Hammons’ company, in partnership with the city and the Springfield Convention and Visitors Bureau, paid Hunden $39,000 to evaluate the city’s Expo Center and determine the best use for the 1.7-acre lot just east.

The city sold the tract to Hammons in 2008 with the promise that the hotelier would build an Embassy Suites connected to the center. Hammons’ failure to do so means the city can buy back the land for $1, but officials agreed to wait for Hunden’s report before making a decision.

Mayor Jim O’Neal said Tuesday he thinks council should make that decision soon. “The ball’s back in council’s court, we need to decide what to do,” said O’Neal, who thinks “it’s clear (the city) should buy it back.”

“No matter who owns it, I’m of a mind that that piece of land needs to sit still right now,” the mayor said. “There’s no rush to judgment or sense of urgency now.”

O’Neal said he thinks the recommended investment “just doesn’t seem feasible in this economy.”

CVB President Tracy Kimberlin and City Manager Greg Burris acknowledged the funding likely is beyond the city’s reach right now, but said they want the city and other stakeholders to continue the discussion.

“We know that nothing is going to happen any time soon,” Kimberlin said. But by doing nothing, Springfield will continue losing ground to Branson and other cities that have or plan to build new facilities.

“Staying where we are today, we are in effect packing up.”

Even if money is not available right away, plans could be developed, Burris said.

“This could literally be years of work before it gets to the point of spending much money.”

As a next step, he and Kimberlin recommended signing a new contract with Hunden for a follow-up study evaluating the benefit — in new jobs, spending and
tax revenue — the city could expect in return for investing in the Expo Center.

Kimberlin said the CVB and Springfield Area Chamber of Commerce each have agreed to pay for 1/3 of the $15,000 cost of the study if the city will pay the
remainder.

Burris said Tuesday that — seeing no opposition from City Council — he likely will authorize the expense.

“We know how much (the improvements) will cost … now we need to see the other side of the equation,” Burris said. “For us to invest $5,000 to avoid making a $50 million mistake, I think it’s worth it.”

To read the consultant’s report, go to News-Leader.com.

Recommended upgrades

If Springfield wants to compete for convention business, consultant Rob Hunden recommended a number of upgrades to the existing Expo Center and nearby
facilities.

In addition to an estimated $53 million in private investment, the improvements would require between $24 million and $55 million in public investment, as well, according to his report.

Suggested improvements include:
» Construction of a 240-room convention hotel on the former arena site east of the Expo Center.
Private cost: $26 million
Public cost: $5.2 million to $16 million

» Renovation of the Expo Center, including demolition of the old Sears portion of the building (to be replaced with ballrooms, meeting rooms and a kitchen) and construction of pedestrian connections to University Plaza and the new hotel on the old arena site.
Private cost: $0
Public funding: $10.2 million to $17 million

» Renovation of University Plaza Hotel and Convention Center, including an upgrade to a branded hotel.
Private cost: $9.5 million
Public cost: $3.5 million to $8.5 million

» Development of additional restaurants, retail and entertainment venues in the immediate area.
Private cost: $13.1 million
Public cost: $1.8 million to $7.7 million

» Construction of a parking garage with restaurant and retail space next to the Discovery Center.
Private cost: $5 million
Public cost: $3.8 million to $6.3 million