sacramento community center theater white paper

8/19/2019 Sacramento Community Center Theater White Paper

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WHITEPAPER

THE FUTURE OF THE SACRAMENTO CONVENTION CENTER / THEATER DISTRICT March 2016

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TABLE OF CONTENTS

INTRODUCTION ................................................................................................................. 1

THE CASE FOR CONVENTION CENTER EXPANSION ................................................... 2

The Path to Success is Conventional ....................................................................... 2

THE CASE FOR COMMUNITY CENTER THEATER TRANSFORMATION ....................... 3

Setting the Stage – Literally and Figuratively ........................................................... 3

Funding .................................................................................................................... 4 Sacramento 2030 General Plan ............................................................................... 5

PROPOSED SACRAMENTO CONVENTION CENTER/THEATER DISTRICT DESIGN ... 6

Proposed Meeting Space Design ............................................................................. 7

Open Space Conceptual Plan .................................................................................. 7

CONVENTION CENTER MARKET VALIDATION .............................................................. 8

Summary of Competitive Exhibit Space – National Conventions & Tradeshows ...... 8

Summary of Exhibit Space Demand – National Conventions & Tradeshows ........... 9

Summary of Meeting Space Demand – National Conventions & Tradeshows ......... 9

Summary of Ballroom Space Demand – National Conventions & Tradeshows ...... 10

Likelihood of Using the Sacramento Convention Center ........................................ 10

Image Assessment of Sacramento as a Convention Destination ........................... 11

DRIVING THE ECONOMY ................................................................................................ 12

Citywide Economic Engine ..................................................................................... 12 Impacts of a Convention Center/Theater District .................................................... 12

Visitor Spending ..................................................................................................... 12

Job Growth ............................................................................................................. 13

Sacramento County Hospitality Industry Travel Impacts: 2012-2014 ..................... 13

Sacramento International Airport Economic Contributions ..................................... 13

SACRAMENTO TRANSIENT OCCUPANCY TAX ............................................................ 14

TOT Contributions to General Fund ....................................................................... 14

Impacts of 1996 Convention Center Expansion...................................................... 14

PROPOSED DOWNTOWN HOTEL DEVELOPMENT ...................................................... 15

Convention Center Hotel Development .................................................................. 16

Outlook for Hotel Success ...................................................................................... 16


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INTRODUCTION

The simple truth is that the Sacramento Convention Center (SCC) and the Community CenterTheater (CCT) are at a historic crossroads. Over the last 20 years, the SCC has made no majorphysical improvements and like the SCC, the CCT has been neglected for several years as well.Over the same period, cities like San Diego, Anaheim, San Jose, Phoenix, Long Beach, SanFrancisco, as well as many other cities around the nation, have made significant investments in

their convention centers and theaters.The Sacramento Convention & Visitors Bureau (SCVB) recognizes that the SCC is a significanteconomic engine for the Sacramento region and we wholeheartedly agree that the CCT is alsoa vital part of this community’s economic future. In line with that sentiment, we also believe thatwe must think even bigger than just the transformation of these two venues if the goal is tocreate opportunities that will shape our city for decades to come.

The real opportunity in maximizing the value of these venues rests in marrying the hundreds ofmillions of dollars in economic impact that’s produced annually by the SCC to the quality of lifeand cultural juggernaut that should exist within the walls of the CCT.

Connecting the CCT and the SCC presents this community with an opportunity to transform ourtheater that erases the current theater ’s shortcomings, expands the Convention Center to grow

the City’s tax base, and tie them together with the Memorial Auditorium, Wells Fargo Pavilionand the surrounding restaurants and hotels to create a Convention Center/Theater District.That’s the comprehensive downtown that so many have envisioned for so many years: a KStreet Mall with deep anchors on the east and west ends and bustling activity of commerce andentertainment in between.

In an effort to learn the best options for transformation for the theater, we engaged several out-of-market experts and internationally renowned architects. Their conclusion was unanimous: atransformation of the current CCT and the SCC offers Sacramento the opportunity to capitalize ona downtown location, one that’s supported by decades of infrastructure, to create a ConventionCenter/Theater District that would be supported and enjoyed by local residents and visitors.

A transformed CCT will put Sacramento on the forefront of the region’s art venues. ADA issues

will be resolved, the acoustics will be modernized and, steel and glass will create a new exteriorwith a lush visual of Capitol Park. Simply put, it will look, feel and operate like a brand new theater.

If our elected officials determine that a transformation of the CCT and expansion of the SCC iswarranted, the resulting Convention Center/Theater District presents the opportunity to build amodern-day product that offers this community a visionary solution to our performing arts future,while expanding a building that attracts hundreds of millions of outside dollars annually directlybenefitting the residents of Sacramento. Further, utilizing existing buildings with existingsurrounding infrastructure to meet market demands is a fiscally responsible route to grow ourcommunity assets while creating the best return on investments for our public stakeholders.

The accompanying study drills more deeply into the analysis that the SCVB believes validatesthe case for developing a Convention Center/Theater District that will modernize and leverage

economic impact opportunities for decades to come, while significantly enhancing the quality oflife experiences for residents. We hope you find the study informative and we’re looking forwardto hearing your comments. You can share those with Steve Hammond, SCVB President andCEO, at [email protected].

Richard HillSCVB Board Chair

Tony GiannoniSCVB Infrastructure Committee Chair

mailto:[email protected]:[email protected]:shammond@visitsacramento.


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THE CASE FOR CONVENTION CENTER EXPANSION

The Path to Success is ConventionalThe Sacramento Convention Center (SCC) is at a tipping point of its shelf life. For many years, wehave watched competitors like San Jose, Long Beach and Los Angeles expand and renovate theirfacilities, enlarging the gap between what amenities we and our competitors have to offer.Sacramento has worked hard to stay competitive but this gap is beginning to inhibit our ability to

book business, potentially costing the City and its small businesses millions of dollars in revenue.Because of the growing competition, in 2012 the SacramentoConvention & Visitors Bureau (SCVB) sought the services ofa qualified consulting firm to prepare a Market Analysis for aconvention center expansion. The SCVB took this initiativebecause there was an assumption that an expanded facilitywould allow the SCVB to be more successful in bookingadditional conventions and generate a more robust economicimpact. After issuing an RFP and completing an exhaustivesearch, the SCVB contracted with Convention, Sports & Leisure(CS&L) to perform an analysis that would vet the validity of theSCVB’s assumption. The research conducted as part of the Study included analysis of historical

SCC operations, extensive surveys of event planners, thorough analysis of competitive destinationsand facilities, analysis of industry trends that would impact the project, and an overview ofconditions in Sacramento that could impact the viability of potential future facility development. ThisWhite Paper presents their research, analysis and findings (pages 8-10) and is intended to assistthe City staff, the SCVB, the performing arts groups and other interested parties in evaluating avariety of issues pertaining to potential convention facility development. According to CS&L’s on-site review of the SCC, they are convinced that there are significant opportunities to retrofit andexpand areas within the facility to help address the convention center’s shortcomings. Based onthese findings, the SCVB conducted another extensive national search for a creative architecturalfirm. Of the six qualified responses to our detailed RFP, Kansas City-based Populous Group, LLC,a highly qualified and respected international convention center architect, became the clear choicedue to their recent projects in San Jose, Los Angeles and main stadiums for the Sydney and

London Olympics, as well as other expansions around the globe. Populous was contracted tocomplete a thorough planning effort aimed at smart growth expansion, while converting the manyexisting SCC spaces that are clearly underutilized or poorly integrated into the overall complex.

Note that this proposal does not assume, as convention center proposals in other cities have, that adramatic physical upgrade alone is enough to take full advantage of our existing convention centerand associated business opportunities. Instead, it builds on a data-driven, customer-focused,rational approach to the new demands of the convention delegate, which affirms that the futureviability of urban convention centers is their opportunity to be a key element within the urban core.This is made possible if convention guests and local residents are connected in a blendedenvironment that maximizes the qualities of a vibrant convention center that’s inter-twined withentertainment options, great restaurants and public open spaces. To achieve this, Populous’ design calls for the creation of a Convention Center/Theater District that significantly enhances the

opportunities that visitors and local residents are looking for. The expanded convention center,coupled with a renovated theater, maximizes the use of the architect’s footprint and would also workin concert with each other to emphasize a spirit of place that provides a better customer experienceand a more efficient and cost-effective operational strategy for both facilities and the City ofSacramento.

Additionally, Populous determined that an expanded transit system will provide improved accessthroughout the downtown core, connecting the new Golden 1 Center, West Sacramento and futureexpansion to the Sacramento Airport. By connecting the Convention Center/Theater District and theGolden 1 Center as the two bookends of the J-K-L corridor, the SCC and the renovated CCT will bein a unique position to become more powerful assets in the Sacramento economy.


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THE CASE FOR COMMUNITY CENTER THEATERTRANSFORMATION

Setting the Stage – Literally and FigurativelyNow that City staff has returned to working on the potential transformation of the existing CCT, theCity Manager has signaled his interest in finding a plan that will ensure the future success of the

CCT and the SCC. In mid-January 2016, the City Manager traveled to Phoenix, accompanied by ateam of City staff and the SCVB, to tour the Phoenix Symphony Hall which has recently gonethrough a transformation similar to the one being considered in Sacramento.

The Phoenix Symphony Hall and the CCT weredesigned by the same architect and they looklargely the same. The City of Phoenix hastransformed their similarly aging facility byconnecting it seamlessly to their conventioncenter, upgrading the interior with a beautiful newconfiguration and design, and making significantchanges in its artist and patron amenities including

acoustic upgrades. They are making plans now toretrofit the hall with a technologically superioracoustic treatment which will dramatically improvethe quality of sound and the user experience.

This acoustic retrofit technology can currently be experienced and evaluated at the Sound Box inSan Francisco (http://www.meyersound.com/news/2015/soundbox/) and the leadership of thePhoenix Symphony Hall and other users of their theater have demonstrated that such a systemhas made their existing building viable for many years to come. Like our engineers, those inPhoenix determined that the “bones” of their building were solid, negating the need to start overin a less desirable location. While the exterior of their building still appears very much like the“concrete bunker” look we experience here, they have stained theirs and landscaped it to reflectits desert setting and there is no community demand or plan to change it.

On the other hand, the option exists to dramaticallychange and expand the exterior configuration andaesthetics of the existing CCT. If that plan is fundedproperly, the building has the potential to be theiconic theater venue that Sacramento requires tocomplement the historic renaissance that is currentlytaking place throughout the downtown core. In fact,many who have been close to the planning processbelieve that some of the artist’s renderings of potential exterior designs for the CCT suggest that it could become the truly momentous presencesought by the Mayor as he explored the possibility of a new building on an alternate site. The designplan presented by Populous calls for a ballroom to be built above the theater which could become

that iconic visual that the City is looking for, however, there will be much more input and dialoguebefore the new CCT plans are agreed upon and finalized.

There is clearly a sense of urgency in the performing arts community to address its shortcomings.The transformation concept has caused some concern about whether the theater should becompletely closed for the transformation, or should the construction be done in phases betweenperforming arts seasons. Three local performing arts organizations dependent on the CCTstrongly advocate for an immediate update of current construction documents to reflect the fullestpossible transformation of the facility. In addition they make the case that while exteriorrefinements can begin immediately and continue uninterrupted until completion; the interiortransformation must be phased in over several seasons to ensure there are no interruptions intheir currently scheduled performances.

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Since it is an older building, it is likely that there will be unforeseen discoveries as interiorconstruction evolves – discoveries that could extend a shutdown period with potentiallydisastrous consequences for local performing arts. The local performing arts organizations are

just now beginning to recover from near collapse during the extended recession. CaliforniaMusical Theatre is currently operating with nearly 90 percent capacity audiences, the newPOPS series is helping to re-build the Symphony‘s base and the Nutcracker continues toundergird the budget of the still struggling Sacramento Ballet.

There is no disagreement that the CCT is in desperate need of a transformation; however thereare two lines of thought on how and when the construction of that transformation should takeplace. The performing arts organizations are advocating for a phased construction time line onthe interior of the theater and they believe they would have a difficult time remaining viable if theCCT were shut down for even a year.

While the City Manager clearly understands the concerns and needs of the arts organizations, aphased approach to construction would generate significant additional costs to the project sothe City Manager wants to explore other potential opportunities that would reduce the length ofconstruction, scale back costs and present a more cost-effective approach that will maximizeROI for the public and stakeholders while still meeting the needs of the arts organizations.

As noted, the theater is an older building and it is likely that there will be unforeseen discoveriesthat could extend a shutdown period causing adverse consequences. To not be prepared forthose potential consequences by exploring other opportunities for an alternative venue isirresponsible and would be harmful to the arts organizations. One potential plan could includesome modest renovation to the Memorial Auditorium that would accommodate Broadway Showsthat need more modest stage sets and fewer space requirements.

However, there is still a lot of work ahead and before any construction plan is developed andagreed upon, the City needs to engage an owner’s representative; rescope the project; identifythe associated time and cost estimates; and program the project to be inclusive of both the CCTand SCC.

FundingDuring the evaluation/planning process for the Convention Center/Theater Districttransformation/expansion, the SCVB retained Tim Youmans of Economic & Planning Systems,who worked with Brian Larson of Halo Hospitality Group, LLC (SCVB Board Member andInfrastructure Committee Co-Chair) in 2012-2013 on evaluating the Transient Occupancy Tax(TOT) revenue stream and the possibility of using that stream in the future as part of thefinancing of the next transformation/expansion. Youmans and Larson developed the basicstructure of a financing plan which was originally reviewed by City staff. The City staff has thatanalysis and is currently in the process of fully vetting all funding options.

Sacramento’s local performing arts organizations, which depend on the continued use of theCCT, including the California Musical Theatre, the Sacramento Opera/Philharmonic, the

Sacramento Ballet, the Sacramento Choral Society and Orchestra, and the SacramentoSpeakers Series are urging the fullest possible transformation of the facility which is perfectlypositioned adjacent to the SCC and would be a major component of the foundation of theConvention Center/Theater District.

The CCT has collected in excess of $4,000,000 in facilities fees as surcharges on ticket sales,and the City has already spent much of that on design and construction documents to prepare fora partial transformation of the existing CCT in its current downtown location. Cost estimate workhas already been approved by the City Council and there should be enough remaining funds toupgrade the current plans to reflect the complete transformation the City is looking for.


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Earlier analysis for transformation of the existing facility has established that the “bones” of thebuilding are sound and the location is perfect as its entry façade faces the State Capitol. TheCCT has also become a vital component of restaurants and other local commerce and, whentransformed along with the SCC, the two facilities will become iconic anchors at the East end ofthe K Street promenade extending west to the new Golden 1 Center and riverfront development.

While the risk has been minimized in some quarters, some are still very concerned that the CCTcould be shut down for failure to comply with ADA issues since the preparations for external

remediation, in particular, were stalled during the exploration of a new performing arts theater.Current designs for the transformation of the CCT would alleviate any further concerns about

ADA compliance but renovations should commence as soon as possible to mitigate anypotential risk in this regard.

A majority of the SCC and CCT funding would be generated by the sale of new TOT bonds. Thecurrent bond payments from the 1996 bonding for the Convention Center Expansion expire inapproximately 2021. The new TOT bonds will provide the “backbone” of financing for furtherdevelopment and construction of the Convention Center/Theater District, possibly supplementedby new markets tax credits, infrastructure grants/loans, and other financial sources. The projectwould be completed in phases based on keeping portions of the CCT and SCC open duringconstruction, cost efficiency, and other factors.

The timing of each phase would be driven by the timing of the retirement of the 1996Convention Center Bond, as well as the growth of gross TOT, which grew 46% in the five yearsfollowing the 1996 expansion. The enhanced TOT collections would service additional tranchesof bonds for construction as it progresses. Construction could commence earlier than theexpiration of the current bonds in 2021 using any number of financial mechanisms originallyidentified by Economic & Planning Systems and Halo Hospitality Group. These financialmechanisms are currently being reevaluated by the City Treasurer’s office.

Sacramento 2030 General PlanOn March 3, 2009, the City of Sacramento adopted the 2030 General Plan to guide the City’sdecision-making, growth and development for the next 20 years. In 2005, the City Council

adopted Vision and Guiding Principles, creating the framework for the new plan. Over the nextfour years, the plan was shaped through an extensive outreach process that engaged residents,businesses and developers.

During that process, the convention and tourism industry was recognized for creating thousandsof well-paying jobs, stimulating fresh revenue streams for hundreds of locally-ownedbusinesses, and helping generate sales tax and TOT for the City and County general fundswhich are reinvested into improving our neighborhoods, parks, and city infrastructure whilesupporting police, fire and first responders.

As a result of the input from the hospitality industry focus group, the City’s General Planreaffirmed the importance of increasing revenue and creating jobs through the reuse of existing

assets of infrastructure and public facilities to increase revenues and jobs, while maintainingimportant qualities of community character. These public policy objectives in the 2030 GeneralPlan clearly support a convention center expansion and theater transformation. Collectivelythey would present a great opportunity to improve the City’s quality of life offerings, reshape itseconomy, and enhance its role as a great place to convene and do business.


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PROPOSED SACRAMENTO CONVENTION CENTER/THEATER DISTRICT DESIGN

A very important goal for the proposed design is to provide superior functionality that accountsfor the future needs of the SCC and CCT. That functionality requires spaces that are flexible,adaptable, and versatile. The Populous design team identified trends in the meetings industryand responded with a design proposal that positions the SCC as a formidable west coastconvention destination which is enhanced by its connectivity to the CCT. Throughout theproposed Convention Center/Theater District, internal and external circulation through bothfacilities, with an emphasis on the flexibility of the meeting spaces, allow for use of the theaterby convention center clients when the performing arts groups aren’t utilizing the building.Having access to seasonal use of the theater will assist in addressing a long-term need for theconvention center business of the future while better utilizing the CCT during down times.

In addition to the important matters of functionality, the Convention Center/Theater District’s civic prominence will be key to its success. The design proposal aims to create a fluidconnectivity with a civic presence that promotes further development of a connected urban core.Design inspirations were drawn to take advantage of the continuity of meeting and exhibit spaceto ensure ease of access.

The core programming elements of the expansion and modernization proposal, as submitted bythe Populous team, include expanding the total exhibit space to 200,000 square feet; thecreation of a new 50,000-square-foot grand ballroom located above the theater; a net total ofapproximately 50,000 square feet of f lexible, prime meeting room space, all easily accessiblefrom any area in the SCC; and a proposed, on-site, 350-400 room headquarter hotel.

All of these program elements are essential to elevate the SCC’s space inventory to levels thatcan attract and capture more market share by accommodating larger conventions. The additionof a second main entrance on 15th Street, with adjoining food outlets, will also allow the SCC tosimultaneously host multiple large-scale events. The additional space inventory being asked forby our clients, combined with the modern design and superior functionality and flexibility,positions Sacramento to not only grow its convention business, but will elevate its standing as afirst-rate convention destination locally, regionally and nationally.

The expanded and renovated exhibit and meeting space will be designed to easily divide intosmaller space formats, as well as combine with the other spaces in the SCC to accommodatemultiple, concurrent events. By combining the primary exhibit space with the additional meetingand ballroom space, the SCC will be positioned to offer two simultaneous meeting packageswith two separate entrances, each of which would cater to the requirements of small, mediumand large convention and tradeshow groups.


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Proposed Meeting Space Design A ballroom proposed in one architect’s design to be built above the theater, would be an entirelyunique, first-of-its-kind facility in the region. As conceived, the ballroom will become one of themost stunning event venues in the region, with spectacular views of Capitol Park. This 50,000square-foot space will showcase Capitol Park while providing additional pre-function space for avariety of full-scale events, including weddings and social gatherings that would mostly be usedby Sacramento residents. The ballroom could also be used as part of the SCC meeting roominventory when not utilized by the CCT. From a pragmatic perspective, the addition of the new

ballroom could be customized to accommodate any configuration desired by the conventionindustry, while serving a wide variety of uses for theater patrons and the public. This space willcreate new, significant revenue streams for the City and the performing arts groups whileexpanding the use and improving the functionality between the SCC and CCT.

Open Space Conceptual PlanJust as important to consider are the spaces andplaces located between and around the two newlytransformed venues. The design creates acollaboration between the Convention Center/TheaterDistrict, rather than just two stand-alone buildings.Exterior spaces, including a collection of unique paths,art work and open space will create an active andflexible outdoor setting throughout the landscapedareas in the Convention Center/Theater District andalong adjacent streets that provide a bicycle andpedestrian-friendly experience. These open spacesnaturally complement the increased programming madepossible by expanding and modernizing the buildings. The open space design is also intendedto create vibrant and flexible public spaces that will activate the surrounding area and localbusinesses. The renovated CCT along with its new overhead ballroom would also become themost publicly visible and iconic component of the new Convention Center/Theater District.

The proposed design also improves the integration between the Convention Center/Theater

District and the larger urban experience at the east end of K Street. The removal of the existingSCC meeting rooms that currently impede foot traffic on K Street between 13th and 14th streetswill create a direct pedestrian link that will reconnect the downtown with midtown. Redesignedloading and service vehicle access would also create a safe pedestrian environment and easieraccess to the SCC and CCT.

Moreover, site circulation also prioritizes the multiple modes of access to the ConventionCenter/Theater District via proposed street car, light rail, local and regional bus routes, andbicycle and pedestrian routes. The ultimate result will be an active, urban ConventionCenter/Theater District that embraces a multi-modal environment.


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CONVENTION CENTER MARKET VALIDATION

The SCVB commissioned CS&L to evaluate the market viability of an expanded conventioncenter in downtown Sacramento. As part of this study, they provided a thorough overview ofcompeting facilities and conducted a series of focus groups of current users, meeting plannersand decision-makers to secure feedback concerning the performance of the current facility, andwhat improvements and amenities are needed. The focus groups were also asked to identify

what additional exhibit and meeting space, amenities, and ballroom capacity would be neededto maximize the SCC’s ability to attract more business.

Throughout this report we’ve examined several reasons why the SCC needs to be expandedbut the most compelling arguments have been made by the SCC’s clients and potential newcustomers. The following graphs and commentary are a recap of that analysis.

Summary of Competitive Exhibit Space – National Conventions & TradeshowsDespite its very positive booking pace, the SCC could be even more productive in attractingconventions, meetings and corporate events if our facilities were more comparable in size with ourcompetition. Sacramento should expect more — the SCC is an established asset, which couldserve as a long-term economic engine for the entire region if expanded to remain competitive.

Cities like San Francisco and Anaheim are currently under construction with expansion projects.San Diego is expected to resolve political and legal debates and move forward with its own

expansion project. The convention center investments made by other West Coast cities, mostnotably San Jose and Long Beach, Sacramento’s most frequent competitors, should causealarm in Sacramento because these facilities were already larger than Sacramento and they aresimply moving the bar that much higher.

For the SCC to fill a more fitting role in the local economy and to better compete with peer cities,it must address a shortage of facilities, infrastructure and state of the art technology required bythe contemporary convention and event planning industry. Without these improvements, notonly will the convention industry’s economic impact growth be inhibited, but we are at risk oflosing current clients that have outgrown our current space. We’ve been able to meet thosegrowing needs by being creative with “flex” space but our clients will eventually leave for thenewer and larger facilities being offered by the competition if we stand pat.


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Summary of Exhibit Space Demand – National Conventions & Tradeshows

The existing exhibit space can accommodate about 85 percent of the current event demandspecific to Sacramento. To reach 95 percent capture, a total of 200,000 square feet of exhibitspace would be needed. This space increase would generate a potential 10 percent increase incapture rate. An increase in exhibit space would also maximize convention bookings by allowingfor multiple overlapping events, in addition to very large events.

(1) Represents the total amount of exhibit space currently available at the SCC.

Summary of Meeting Space Demand – National Conventions & Tradeshows

The existing SCC meeting space only accommodates 40-45 percent of event demand specific toSacramento. The current inventory of meeting space is even more of a limiting factor to bookingconventions compared to exhibit space. Significant increases in meeting space would be needed toaccommodate a large majority of event demand.

(1) Represents the total amount of meeting space currently available at the SCC.Note: Data includes all organizations with a potential interest in the Sacramento Convention Center.Source: CSL Interviews

Average = 88,200Median = 75,000

- - - - - - SCC (1) - - - - - - - - - - - - - - - - - - - - - -


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Summary of Ballroom Space Demand – National Conventions & Tradeshows

Convention center ballrooms are often used for general sessions, presentations, food functionsand other events. Approximately 85 percent of the meeting planners interviewed with aninterest in the SCC require a ballroom for their event(s). The existing SCC ballroom space canaccommodate approximately 65 percent of event demand specific to Sacramento so additionalmeeting space would be needed to accommodate event demand. Exhibit space can be usedoccasionally for large general session/food functions.

(1) Represents the largest contiguous ballroom space currently available at the SCC.Note: Data includes all organizations with a potential interest in the Sacramento Convention Center.Source: CSL Interviews

Likelihood of Using the Sacramento Convention Center

The CS&L Study also asked current convention center users about their likelihood of using theconvention center in the future. Event planners that have used the SCC in the past said theyare very likely to use or consider using it again in the future. This base of potential repeatbusiness is imperative in supporting future expansion. This data also indicates support for thedesirability of the Sacramento convention package.

Average = 21,400Median = 15,000

- - - - - - -SCC (1) - - - - - - - - - - - - - - - - - - -


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Image Assessment of Sacramento as a Convention DestinationRRC Associates was hired by the SCVB to conduct a comprehensive study of meeting plannersand the meetings market in North America. A major component of the RRC Associates CustomStudy (RRC Study) is the evaluation of Sacramento on a set of image attributes, including adetailed description of meeting planners’ pref erences and their perceptions on the attributes ofthe convention center. Meeting planners were also asked to evaluate Sacramento’s strengthsand weaknesses against its set of competitive destinations on several other convention-specificamenities.

In the chart below, the colored dots are the percentage of meeting planners associating apositive travel consideration with Sacramento and competitive destinations. The RRC Studyrespondents consistently rated Sacramento favorably because many of them have had theopportunity to experience the destination. The telling parts of the chart are the attributes onwhich the gaps from Sacramento to competitive destinations are large or small. Theserepresent areas in which Sacramento holds an advantage, or areas that need work to furtherimprove its image.

As the chart demonstrates, the RRC Study respondents hold a positive image of Sacramentoas a travel destination. Among Sacramento’s clients, the destinations of Long Beach, Portland,Reno and San Jose are most competitive with Sacramento on the following chart attributes:

“wonderful climate,” “good outdoor recreation,” “scenic setting/scenery,” “good nightlife,” and“good greening policies and practices.” Sacramento indexes extremely well for logisticalattributes relating to costs and value, and there was a pronounced trend in the data thatsuggests Sacramento excels in affordability, which is important to meeting plannersconsidering a destination to host their convention. Sacramento also indexes well as being“inexpensive to get to,” having “moderate food and lodging costs,” and providing “good valuefor the money,” three important factors when a meeting planner is considering the selection ofa convention destination. However, as stated in the CS&L interviews, Sacramento indexesbelow the norm for attributes such as exhibit space and meeting rooms. These are theattributes that will be the most positively impacted by the expansion of the convention center.

Source: RRC Associates / STR / Destination Meetings Assessment Program / Sacramento Special Report


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DRIVING THE ECONOMY

Citywide Economic EngineThe impact of the convention center is maximized when out-of-town event attendees makepurchases in the city while attending an event at the facility. Therefore, the SCC also providessignificant benefits in terms of net new spending and associated employment, earnings, and taxbenefits. Expansion and enhancement of the SCC (along with increases in hotel inventory that will

be described later in this report) will also capture additional event activity and better accommodatepeak demand periods.

However, the economic impact of a conventioncenter is not measured solely within the confinesof the facility itself. The full financial gains ripplebeyond and into the hotels, restaurants, retail, andsmall businesses throughout the City. Indeed,almost all cities run their convention centers as“loss leaders” and measure their true success by“the total revenues and jobs created citywide.” Thefinancial return and positive gain to City revenuesis also made evident by the fact that major citiesthroughout the country have recently committed toconvention center expansion projects. Just to name a few: San Francisco with a project budget of$508 million; Anaheim with a project budget of $300 million; San Jose with a project budget of$130 million; and even Monterey, a third-tier destination – and competitor, is undergoing a $60million transformation.

Impacts of a Convention Center/Theater DistrictThe plan calling for the development of a Convention Center/Theater District is just onecomponent of a larger economic development strategy for the City of Sacramento. Althoughthere is no “silver bullet” to ensure the City’s place in the 21st century economy, a redesignedand reinvented SCC and CCT can become a much more significant component ofSacramento’s long-term economic development strategy. Sacramento’s proposed new hotels

would also benefit from the larger groups generated by an expanded convention center and theCity would realize additional sales and TOT.

Conversely, CS&L also considered the cost of inaction over the same span of time. In thisscenario, CS&L concluded that continuing to neglect the SCC by investing nothing intoexpansion or improvement would precipitate competitive pressure that would erode bookingsand negatively impact revenue derived from TOT, business, parking and visitor spending.

Visitor Spending As the capital of California and one of the world’s largest economies, Sacramento already benefitsfrom many of the fundamental elements necessary for a successful convention and tourismindustry. Moreover, Sacramento’s charms go beyond matters of infrastructure and geography.

The 14.6 million visitors to the Gold Country Region/County of Sacramento spent $4.4 billion in2015 and enjoyed a vibrant and growing city featuring great weather, affordable attractions,dynamic art experiences, and a flourishing restaurant and entertainment scene.

Source: Dean Runyon Associates for Visit California


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Job GrowthIn addition to the visitor spending, the leisure and hospitality industry is one of the largest andfastest growing employment super-sectors in the Sacramento County economy, with total jobsaveraging 28,400 during the fiscal year 2014. Direct destination visitor spending totaled $3.4billion and local tax receipts reached $89 million. Furthermore, the construction activityassociated with expanding and modernizing the SCC and CCT would also generate significantfull-time and part-time jobs for the duration of construction.

Creating a new and growing number of jobs at the SCC, CCT and its surrounding entertainmentand hospitality district, makes additional sense when considering the proximity of existing andlight rail, bus routes, and a potential street car line. These transit lines make it easier for diversepopulations from around the City, County and region to access this employment base and theinflux of new visitors, convention delegates and theater patrons will further enhance an alreadyvibrant and growing downtown.

Sacramento County Hospitality Industry Travel Impacts: 2012-2014

2012 2013 2014Total Direct Travel Spending ($Million)

Destination Spending 2,516 2,594 2,672Other Travel* 742 738 738

TOTAL DIRECT SPENDING 3,258 3,333 3,409

Industry Employment Generated by Travel Spending (Thousand Jobs) Accom. & Food Svc 14.6 15.3 16.1 Arts, Entertain. & Rec. 7.0 7.0 7.0Retail** 2.2 2.2 2.3Ground Transportation 11.1 1.2 1.3Visitor Air Transp. 0.3 0.3 0.3Other Travel* 1.4 1.4 1.4

TOTAL DIRECT EMPLOYMENT 26.6 27.5 28.4

Government Revenue Generated by Travel Spending ($Million)Local Tax Receipts 75 82 89

State Tax Receipts 141 148 150TOTAL LOCAL & STATE 216 231 239

* Other Travel includes resident air travel and ground transportation impacts for travel to other California destinations,travel arrangement and reservation services, and convention and trade show organizers.** Retail includes gasoline.

Source: Dean Runyon Associates 2015 study for Visit California

Sacramento International Airport Economic ContributionsThe Sacramento International Airport has also experienced significant growth. An estimated 9.6million passengers traveled through Sacramento International Airport in 2015. That was anincrease of more than 636,000 passengers over 2014, a 7.1 percent increase. As of December2015, the airport has reported 22 consecutive months of increased enplanements.

The average number of monthly seats was also up 5.6 percent from last year, with passengertraffic outpacing the increase in available seats. This increase is significant because for every 3%growth in number of airline seats to a destination, the seats translate to 1% growth in hoteloccupancy. Airport officials attribute the steady increase to carriers adding destinations and seatcapacity and continuing improvements in the regional economy. The airport has increased effortsto proactively market Sacramento International Airport to incumbent and prospective carriers, andhas made great strides to identify and attract airlines to unserved and underserved nonstopmarkets. Recent air service additions at Sacramento International Airport include nonstop serviceto Boise, Chicago-O’Hare, Seattle, Mexico City and seasonal nonstop service to Boston.

Source: Sacramento International Airport Annual Report


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SACRAMENTO TRANSIENT OCCUPANCY TAXTOT Contributions to General Fund

Fiscal Year TOT Growth Notes

2014-2015 $23,810,447 + 40.4% This is up $2,365,996; 11.03% over FY2013-14

2009-2010 $16,983,781 - 1.5% Depth of recession

2004-2005 $17,238,134 + 24.5%

1999-2000 $13,841,754 + 46.0%

1994-1995 $9,477,000 N/A Year prior to expansion

Impacts of 1996 Convention Center Expansion1. For fiscal year 2014-15, the TOT generated almost $24 million — up 151% since the 1996

expansion of the SCC. This of course could grow at an even faster rate as the newConvention Center/Theater District spawns new hotel development and attracts more visitors.

2. From 1993 to 1996, when the convention center expansion opened, the TOT grew from $8.6million to $9.2 million.

3. In the following 5 years, the TOT grew to almost $16 million in 2001-02.4. The 2001-02 recession caused the TOT to be flat over the next 3 years while the economy

recovered. However, the new expansion supported the expansion of Sacramento hotel roomsupply from 6,500 to 7,800 rooms (22% growth), positioning the hotel industry (and thus TOT)for significant growth once the economy had fully recovered from 9/11:

The Citizen Hotel, 2008, 198 Rms Le Rivage Hotel, 2008, 100 Rms Residence Inn Capitol Park, 2007, 235 Rms

Marriott Triplex Cal Expo, 2006, 156 Rms Embassy Suites Sacramento, 2002, 242 Rms Sheraton Grand Sacramento, 2001, 503 Rms

5. This new supply drove TOT from the $16 million level to a peak of $23.8 million in 2014-15.6. Select service hotels run an average of .4 full-time employees per room, while full service

hotels run an average of .7 FTE per room. The above new hotels created approximately 886new direct jobs and supported indirect jobs in suppliers, surrounding restaurants and otheramenities, etc.

7. The TOT has run an average of $20.3 million over the past 5 years, as compared with theaverage of $9 million in the 5 years previous to the 1996 expansion.8. At present, there are approximately 600 new hotel rooms in late planning or under construction.9. The convention center expansion would support a new supply of this 600, plus an additional

1,000-1,500 rooms. Each new room would support downtown businesses and amenities bygenerating an average of approximately 1 guest per night per new room (1 hotel room X72% average occupancy X 1.35 guests per occupied room).

With the overall economic recovery, and with the particularly strong growth in the leisure andhospitality job sector, TOT is now one of the General Fund’s fastest growing revenues — upover 38% during the last 10 years, while still collecting the same rate of 12% and despite theintervening Great Recession.

From its earliest inception, and with the support of the hospitality industry, TOT has been usedto support tourism-related infrastructure and has been allocated towards SCC debt service.Sacramento hotels, restaurants, and the tourism industry are in strong support of the conventioncenter expansion. Convention center upgrades have demonstrated time and again that animproved and expanded convention center will significantly increase the number of out-of-townguests and have a direct impact on the City’s taxes, most notably TOT.

Note, however, that this TOT growth does not include various property and other taxes that arepositively impacted by the convention industry, and does not break out the significant privatesector affects that will also be generated. These private sector impacts include the significanthotel, restaurant, retail and other ancillary industry profits generated as a result of theaterperformances and convention industry activity.


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PROPOSED DOWNTOWN HOTEL DEVELOPMENT

Kimpton HotelJ Street (Between 5th and 6th)250 RoomsProjected Completion Date: 2017

Hyatt Centric(Formerly Marshall Hotel)7th and L Streets159 Rooms

Projected Completion Date: 2018

Sacramento Commons Hotel7th and N Streets320 RoomsProjected Completion Date: TBD

Improving room rates and occupancy over the past fiveyears have spurred a wave of new hotel development. Atleast seven hotels are currently proposed or beingconsidered for the City of Sacramento. Our strong

occupancy downtown has caused ongoing interest on thepart of developers to add supply over the coming years,and demand generators are certainly in alignment withsupply growth. Although it’s unclear exactly how many ofthose proposed hotels will be built, there is a pent-updemand for a new supply of hotel rooms that will helpoffset the challenges of development. Anything that doesget built will be easily absorbed by the market and theexisting and planned hotels in proximity to the SCC arecritical to its success. After the 1996 expansion,Sacramento doubled its downtown hotel room inventory,yet all of that supply was absorbed by 2006.

The last surge of hotel development ended in 2007. Thelocal lodging industry was burdened with an abundance ofhotel construction just as the national economy washeading into a recession, but all of those additional roomswere absorbed by 2013. While it took a few years for theindustry to get back to profitability, in the past two yearsSacramento’s hotel market has been on a huge upswingand many of the larger hotels are experiencing recordgrowth.

Fiscal year occupancy rates for the top 14 Sacramentoconvention hotels through November 2015 averaged78.4%; up 3.3% from the same point in 2014 according tothe City of Sacramento’s TOT collection report. Averagedaily room rates for that same time frame were $137.50,up 4.3%.

Three of the proposed new hotels are in downtownSacramento. Two are near the new Golden 1 Center andwill add 409 rooms combined. A 159-room Hyatt Centricboutique hotel is proposed for the Hotel Marshall site at 7thand L streets. And a 250-room Kimpton Hotel is plannedfor construction at 5th and J streets. The third hotel will bepart of the Sacramento Commons project at 7th and Nstreets and their plans call for 320 rooms. The Kimpton

Hotel and the Hyatt Centric will be among the very few full-service hotels added in recent years. The last to open wasthe Thunder Valley Casino Resort hotel in 2010 in Lincoln.

Rooms are typically scarce on a weekday in Sacramentoand construction of Golden 1 Center in downtown will onlyadd to that scarcity. There is a place for new hotels inSacramento because of the significant growth in demand,and we will see an increase in demand from the newGolden 1 Center, especially on weekends.


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Convention Center Hotel DevelopmentEven with the additional roominventory already planned forthe downtown, it is clear thatan expansion of the conventioncenter will necessitate the needfor more hotel rooms to thedowntown market. In particular,

an additional convention centerhotel adjacent to the conventioncenter would be ideal and shouldbe considered a fundamentalcomponent of the ConventionCenter/Theater District. The sizeand scope of the hotel would bedriven by the final expansion plansof the convention center.

Fortunately, at the Southwest corner of 15th and K streets is a street level parking lot that occupiesapproximately one quarter block. That parcel is currently held by AKT Development interests.

Representatives of that organization have confirmed that in the event the convention center isexpanded to the size envisioned by the existing plans, they will be interested in proposing,developing or assisting in developing a convention center full-service hotel on that site. Theircommitment is of course conditioned upon the actual approval and construction of the conventioncenter expansion as proposed. The hotel would consist of between 300 to 400 rooms, restaurant,meeting space and other amenities associated with a full service hotel. A second floor walkwayconnecting the hotel and the SCC would offer convenient and direct access between the twovenues. A nationally prominent hotel flag would further enhance the SCC’s potential impact andthe entire Convention Center/Theater District.

Outlook for Hotel SuccessPKF Hospitality research authored a hotel sector update in October 2015 that concluded that theoutlook for the drivers that are most important to the hotels remains very favorable. This is asummary of PKF’s outlook: The Very Good… will continue. The fundamentals are solid across the vast majority of markets. Elevated industry growth will persist comfortably through 2017 and likely beyond. High occupancy levels will provide the leverage needed to achieve large real Average Daily

Rate (ADR) increases for the next two-three years. Competition for building materials and labor will continue to present challenges for

developers in most markets. Below average hotel construction will be the result for the nextthree years leading to limited new competition and continuing demand.

Above long-run average occupancy levels will lead to strong profit growth comfortablythrough 2017.

Profit growth will mitigate the impact of increased interest rates on hotel cap rates. It is a great time to be in the hotel business!

Source: PKF Hospitality Research, a CBRE Company, October 2015 Hotel Sector Update

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