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The Hawaii Convention Center is on track to have one of its strongest revenue-generating years since opening in 1998.
The facility is returning a gross revenue forecast of $24.1 million, which includes $1.4 million in interest income, and a net loss for the facility of $1 million, $4.3 million under budget, said Terry Orton, general manager of the convention center.
“Even after adjusting to remove $1.4 million in interest income, we continue to forecast a strong fiscal year that will exceed budget expectations and achieve a record level of revenue,” Orton said.
The revenue increase is “a combination of citywide and out-of-town business as well as local business growth,” Orton said.
“We have not reached pre-pandemic levels. “We've been averaging about 28 agreements a year, and this fiscal year we're looking at 19 agreements, and next year it's pretty much the same,” she said, but added that on the whole, fiscal years 2024 and 2025 are expected to be good.
The center is also on track to break even in fiscal year 2024, which will be the third year since ASM Global has operated the convention center that it has achieved a break-even or positive result, Orton said. She said that in 2017, the center achieved a net income of more than $1.3 million and total revenues of more than $17.5 million. In 2016, the center's net income was $808,245, with total revenues of more than $16.05 million.
“It's a big deal when we break even, providing government support,” she said.
Orton said the center is still coming back from the COVID-19-related decline in conferences and large meetings. During the first 11 months of 2023, approximately 378,547 visitors came to Hawaii for a meeting, conference or to take an incentive trip. This represents an increase of 28.4% over the same period in 2022. While conferences and incentive trips were up 34.9% and 42.1% respectively, corporate meetings were down 2.6%.
Despite a decline in “city-wide,” the industry term for large events that spread business across multiple venues, she said the center saw an improvement in its return on investment numbers. In November, for every dollar spent, the center returned $20.63 to the state, compared to $5.40 in December 2022, she said.
The center was built to support outside businesses that fill hotel rooms, Orton said. External business, coming from outside Hawaii, will always be the center's focus and goal, she said. However, she said business ebbs and flows due to recessions, pandemics and natural disasters, including the economy in the United States and abroad.
“ASM Global, the construction operator, has taken the approach of diversifying our strategic business plan for short-term businesses to help offset expenses to keep the center’s support from the state to a minimum,” Orton said. “Creating new market segments to diversify our business at the center has helped generate revenue in times when outside business has not been strong.”
For example, she said, indoor sporting events such as volleyball, basketball and futsal; Festivals such as the Okinawa Festival and the Hawaii Food and Wine Festival; Honolulu Marathon; Concerts; Weddings all contribute to increasing business at the center.
“Ten years ago, when ASM Global took over management of the convention center, local business revenue was averaging about $4 million per year, and now it is at a record high of over $10 million,” she said.
The challenge now is to increase the city's population. A shining light for fiscal 2024 is FestPAC, the 13th annual Pacific Arts and Culture Festival, which is scheduled to celebrate its 50th anniversary by being held in Hawaii from June 6-16, Orton said. Orton said the center will serve as the main venue for the event, which is expected to attract up to 2,500 delegates from 28 countries and attract up to 100,000 attendees.
“FestPAC will be huge for us. Here will be the festival village and market, where every country will have a chance to showcase their culture,” she said. “There are 100 delegates from every country participating, and I'm sure others will come to show their support. We hope that there will be opportunities for separate businesses through smaller conferences that allow us to share best practices.
Hawaii's collective actions got a boost after the state hosted the Asia-Pacific Economic Cooperation Forum in 2011 and the International Union for Conservation of Nature's World Conservation Congress in 2016, Orton said.
However, Orton said the Hawaii Convention and Visitors Bureau's Pace report shows there are challenges ahead as Hawaii's meetings, conventions and incentives market moves into 2026 and beyond.
As of November, the report showed just three designated citywide districts on the books for 2026, with only six slated for 2027, two for 2028 and one for 2029, she said.
“Normally, we would be in the double digits,” Orton said, adding that the decline in booking pace reflects the pandemic-related decline and labor shortages in the sales force that sells group business travel in Hawaii.
“Due to the increase in the cost of labor, utilities and other construction-related expenses including leak repairs and damp mitigation due to leaks, we are finding it very difficult to keep our financial bottom line positive without external business support for our operations,” she said. .
HCC also manages $145 million in repair and maintenance projects, not including $64 million worth of roof repair, Orton said.
However, she is optimistic that the center and the Hawaii Convention and Visitors Bureau will turn current challenges into opportunities.
“We are still on the road to recovery from the pandemic, but we are starting to see positive developments,” Orton said.
For starters, she said the center is seeing more inquiries and bookings over a three- to five-year period for citywide events from associations and meetings.
“Traditionally, the booking window has been seven to 10 years. So the booking window has been shortened. This is great for us because we need a short-term business,” Orton said.
Furthermore, she said there is “more traction in site inspections for potential companies that will potentially consider us in the top three cities they will choose from. We are starting to see more inquiries coming in regarding Hawaii as an option.”
Orton said there are also signs that more people are ready to meet face-to-face again and that virtual meetings, which have increased in popularity during COVID-19, are declining.
The continued recovery of the Japanese market has also helped boost entrants into the incentive market, she said.
“Our return with our first Japan-based Daito group was this year,” Orton said. “We hosted over 2,000 delegates at the dinner held in two waves for a total of over 4,000 people from Japan. This was a promising sign that this market will be back soon.
The center is also seeing one of the highest conversion rates for converting temporary reservations into selections for the 2024 to 2027 time period, Orton said.
Another new development is the acquisition of ASM Global by Legends, whose client list includes several major sports brands such as the Dallas Cowboys, Real Madrid, SoFi Stadium, One World Observatory, FC Barcelona, University of Notre Dame, New York Yankees and Ryder Cup, Orton said. Plus leagues and properties like NFL, MLB, NASCAR, PGA of America and the FIFA World Cup.
“The acquisition will take place within the next six months,” she added.
“We are thrilled to join Legends, which shares our customer-first approach and advances our goal of delivering a truly seamless experience to our partner organizations while driving their business growth,” Ron Pension, president and CEO of ASM Global, said in a statement. “Our customers will benefit from Legends’ robust services.” and global innovation, technology and partnerships, which, combined with ASM Global's venue management, content and event booking expertise, will provide our clients with locally tailored solutions and cutting-edge technologies to achieve great fan experiences and improve venue owner outcomes.
Keith Vieira, director of KV & Associates, a hospitality consultancy, said ASM Global has worked hard to pull HCC out of the pandemic-related lull and that Legends has a reputation as a good operator. But he said HCC needs the state Legislature's support for the full recovery of the market, which tends to resurface.
“Once the pandemic hit, the budget was cut, and they got rid of some people who were selling the convention center. “That's the challenge of making annual requests to the state Legislature without multiple funding plans,” Vieira said. “The big business market is one we should watch during recessions. But we stopped (booking) because we didn't have enough sales staff.
The convention center's accomplishments are critical to the success of the visitor industry, said Jerry Gibson, president of the Hawaii Hotel Alliance.
“They've done a good job booking short-term business. Now we're concerned about the pace of movement throughout the city,” Gibson said. “City residents fill different gaps at different times. We build our business base from these agreements, which helps us plan for next year's budget season.
Group travelers are desirable because they tend to spend more than leisure travelers, he said.
“Large groups also bring in a lot of banquet and catering work, which helps our bottom line and frees up hours for our employees,” Gibson said.
He added that a high percentage of group travelers bring friends and family with them on pre- and post-trips and return to Hawaii for vacations.
“It's a market with a lot of potential to give back,” he said.
In numbers
Outdoor events held at the Hawaii Convention Center during fiscal 2024, which runs through June, helped boost performance.
>> External events: 19
>> Total contracted hotel room nights: 118,810
>> Total attendance: 56,600
>> Total economic impact value: $363,151,377
>> Total tax generation: $42,488,711