Facility falls short of goals

Four firms are vying to operate the state-owned Hawai‘i Convention Center, which for more than a decade has routinely underperformed at filling Hawaii hotel rooms with high-spending business visitors.

"The convention center is 15 years old," Hawaii Tourism Authority President and CEO Mike McCartney said Monday. "A lot of meeting space has been added to the U.S. market in that time, so we have to take a look at how we can enhance the use of the center and take it to the next level."

Last year, overall business travel accounted for just 5 percent of Hawaii’s visitor arrivals, and industry leaders would like to see that percentage double.

"I think we have to try new marketing strategies," said Hawaii Tourism Authority board member Rick Fried. "Five percent isn’t adequate."

SMG Hawaii, which has managed the $350 million center since before its 1998 opening, is among four groups that submitted proposals to the tourism authority by the May 21 deadline. HTA officials refused to release the names of the other three until after the contract is awarded in July.

The five-year contract will run from Jan. 1, 2014, through Dec. 31, 2018.

While the center has won many facility awards and an A-plus review from Asia-Pacific Economic Cooperation organizers in 2011, it has struggled to reach targets. Since 2002 the center just once met its annual goal of 700,000 room nights — when it generated 706,489 room nights in 2005. (A room night is one hotel room occupied for one night.) Last year only 356,515 room nights were attributed to the center.

And while the center has generated an average of $540 million in visitor spending annually over 10 years, the return to the state treasury has been disappointing; for every tax dollar spent on the center, only $1.40 in tax revenue has been generated.

To be sure, times have been tough throughout the state’s entire meetings, conventions and incentive business, which in 2012 only grew a lackluster 2 percent, bringing 405,251 of the visitors who arrived by air to Hawaii. That’s 5.2 percent of the total 7.87 million visitors who stepped off a plane last year.

"In the next few years, I’d like to see our overall meetings, conventions and incentives business grow to 10 percent and our visitor spending grow to around $1 billion," McCartney said.

He said the firm chosen to operate the convention center would also be responsible for working with HTA to design and build a Hawaiian music and dance museum, which received $1 million in annual funding during the last legislative session.

"This would be on top of the $33 million that the center already gets from HTA," he said.

The operator also would work with an HTA committee formed a year ago to look at ways to increase convention center use, including the possible construction of an entertain­ment center or a hotel on the fourth-floor garden deck, to double as a hospitality training center.

"We know for sure the museum is coming, but we are also looking at lots of other options," McCartney said. "We expect to make some announcements by the end of the year."

McCartney said an evaluation committee, made up of HTA board members and staff, and travel industry leaders, will review the four contractor proposals during a series of closed-door meetings. The committee will recommend one to McCartney, who will make the final selection.

Convention center interim General Manager Randy Tanaka said SMG Hawaii, whose contract with HTA expires Dec. 31, is well suited to continue in its role.

"We are seasoned in this game," said Tanaka, who also served as chief operating officer for the APEC Hawaii Host Committee, which coordinated the 2011 conference that brought President Barack Obama and leaders from more than 20 nations to the state.

"If you look at our track record and our customer response and sensitivity to the culture and the aspirations of this marketplace, we have done an outstanding job," he said.

SMG Hawaii is part of Philadelphia-based SMG, which operates 98 percent of the publicly owned exhibition space operated by private companies in North America.

While some in the industry say the length of SMG Hawaii’s uninterrupted tenure at the center was appropriate given the time it takes to build working relationships, others question its duration.

"That’s a long time," said Doug­las L. Ducate, president and CEO of the Dallas-based Center for Exhibition Industry Research. "In my experience, most contracts are more in the five- to seven-year range. They certainly can be renewed without a competitive look, but 16 years is a long time because a lot of things change."

But Deborah Sexton, president and CEO of the Chicago-based Professional Convention Management Association, said evaluating the success of a convention center is about more than numbers. SMG Hawaii has built international attendance and has laid the groundwork for Hawaii to host more meetings from outside the U.S., she said.

"They have been incredibly strategic," said Sexton, who knows Tanaka through his work on the convention management association’s board of directors. "Over the last six years they’ve turned Hawaii into a gateway for the Asia-Pacific."

Sexton said the association is coming to Hawaii this summer to tap into the center’s international meetings expertise.

"They book global meetings across the world, and they are specifically interested in the Asia-Pacific," Sexton said. "We want to make sure what is happening in Hawaii is being shared. They’ve got evidence they can do it."

But not all industry members and watchers are sold on SMG Hawaii.

"I think they’ve done a good job managing the center," said Keith Vieira, senior vice president of operations for Starwood Hotels & Resorts in Hawaii and French Polynesia. "However, I think their marketing needs improvement. Either your convention center is full or it’s not."

When the Hawaii Tourism Authority hired SMG Hawaii, Vieira said, facility management was the top priority.

"My own belief is that filling the center needs to be the main emphasis now," said Vieira, who has served on the HTA board. "They need to look at the (request for proposals) and choose the best contractor. If that’s SMG, great. If not, they need to look elsewhere."

Ducate said in the decade that ended in 2010, new centers were built, competition escalated and the Hawai‘i Convention Center fell to 50th from 34th among the top 100 centers that Exhibition Industry Research tracks.

"Being a good manager but not a good marketer is like winning the award for being the world’s best housekeeper and the booby prize for being the world’s worst cook," Ducate said.

It’s more common in the industry to see separate marketing and management contracts or even privatization of centers, he said.

"I’m not sure that you should expect (a center contractor) to be No. 1 at both marketing and management," Ducate said. "If that were realistic, Hawaii would be the first."

Fried, the HTA board member and an attorney, emphasized the importance of changing the perception of Hawaii among business travelers.

"People don’t realize all of the hard work that takes place in Hawaii," he said "They think people do nothing but lay on the beach. Other warm places like Miami don’t battle that perception. We have to focus on business. We should be bringing in a bigger percent of these higher-spending visitors."