Convention/Conference Center Market & Feasibility Billings, - - PowerPoint PPT Presentation

Convention/Conference Center Market & Feasibility Billings, Montana March 16-17, 2015

March 16-17, 2015 1 HVS Convention Sports and Entertainment Consulting For Discussion Purposes Only

Project Scope and Timeline

Market Analysis

Preliminary Building Program Recommendations

Competitive and Comparable Venue Industry Trends Analysis Analysis of Financial Operations Funding Scenarios Analysis of Supporting

D INFORMATION GATHERING ATION AND DRAFT INTERIM REPORT AND PRESENTATION

Site Analysis Ownership / Management Models

March 16-17, 2015 HVS Convention Sports and Entertainment Consulting For Discussion Purposes Only 2

Event Demand and Room Night Projections

Comparable Venue Analysis Supporting Amenities Preliminary Cost Estimates

SITE VISIT IN BILLINGS AND IN CONFERENCE CALL PRESENATION FINAL REPORT AND

Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9 Week 10 Week 11 Week 12 Week 13 Week 14 Week 15

Analysis of Economic & Fiscal Impacts User Survey & Interviews

Billings Market Area Analysis

Unemployment Statistics Economic and Demographic Data Summary Economic Indicator/Area Beginning Amount 2000 2010 2014 2020 Ending Amount Resident Population (thousands) Billings, MT MSA 139 178 1.2% State of Montana 904 1,096 1.0% United States 282,162 340,554 1.0% Per-Capita Personal Income* (thousands) Billings, MT MSA $29.7 $39.5 1.3% State of Montana $26.1 $35.7 1.3% United States $33.8 $40.2 1.3% Estimate Annual Compound Change 2014 to 2020

Billings’ economy benefits from strong population growth, low unemployment and a growing employment base. Billings’ well-established healthcare, growing energy, and agricultural industries further support forecasts of continued economic growth for businesses in the city. The economic outlook for the area is generally positive with employment growth anticipated in most sectors, most notably in those associated with healthcare and professional and technical services.

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0% 2% 4% 6% 8% 10% 12% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Unemployment Statistics

MSA State Country

Billings Market Area Analysis

Passenger counts in Billings generally increased through 2008 and began falling, reaching lows in 2010. Strong growth through 2012 was erased in 2013 when passenger volumes again fell to a new low and below those at Bozeman Yellowstone International.

600,000 650,000 700,000 750,000 800,000 850,000 900,000

Passenger Volume

MAJOR EMPLOYERS

Firm Number of Employees Billings Clinic Health System 3000+

• St. Vincent Health System

2000+ Wal-Mart Stores, Inc. 1000+ Avitus Group 1000+ First Interstate Bank 500-999

• St. Johns Lutheran Ministries

500-999 Wells Fargo 500-999 Albertsons Food & Drup 500-999 Employee Benefit Management Services 250-499 CHS Inc. 250-499 Advanced Employment Services 250-499 ConocoPhillips 250-499 Costco 250-499 March 16-17, 2015 HVS Convention Sports and Entertainment Consulting For Discussion Purposes Only Page 4

500,000 550,000 600,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Billings Logan International Airport

Billings’ employment profile suggests a diversified employment base with a wide range of industry sectors. Strong healthcare, energy, and agriculture services indicate potential for generating convention and other group demand.

Costco 250-499 ExxonMobil 250-499 McDonalds 250-499 Sysco Food Services 250-499 Yellowstone Boys and Girls Ranks 250-499

Source: Big Sky Economic Development Authority

Billings Market Lodging and Meeting Infrastructure

While the supply of Billings’ meeting venues contains facilities with larger amounts of function space, many are older, outdated properties are without the amenity and finish level expected by today’s event planner and attendees. In addition, the larger properties in Billings are located in areas without convenient, walkable access to dining, retail, and entertainment establishments, a feature of major importance to event attendees.

Current Billings Meeting and Event venues

Number of Exhibit / Ballroom / Meeting Divisions Total Functions Space (Sq. ft.) Venues with Lodging Holiday Inn Grand Montana & CC 19 50,000 Billings Hotel and Convention Center 18 22,000 Crowne Plaza 16 15,800 Northern Hotel 12 11,500

Billings Lodging Inventory

Chain Scale Number of Properties Number of Guest Rooms Percentage of Guest Rooms Upscale 6 806 18% Upper Midscale 11 1,210 26% Midscale 4 343 7% Economy 8 736 16% Independent 22 1,494 33% Total 51 4,589

Source: STR

Size (Number of Guest Rooms) Number of Properties Number of Guest Rooms Percentage of Guest Rooms Less than 100 35 2,235 49%

Highway access ...

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The Billings MSA has over 50 hotel properties with nearly 4,600 hotel rooms. The majority of hotels in Billings are smaller properties with less than 150 rooms. Billings has a good mix of service levels available with the greatest percentage of properties at the upper midscale level. The market also contains a large number

• f smaller, independent properties.

Northern Hotel 12 11,500 Big Horn Resort 5 7,700 Hilton Garden Inn 6 3,700 Hampton Inn 2 2,900 Hampton Inn & Suites 2 2,400 Best Western PLUS Kelly Inn & Suites 1 1,500 Best Western PLUS Clock Tower Inn 1 1,400 Venues without Lodging Metrapark Arena/Exhibit Hall 11 50,000 Metrapark Expo Center 2 77,400 Montana Pavilion 2 28,800 Other Metrapark Facilities 3 24,609 Western Heritage Center 5 10,000 Montana State University 9 7,360 Historic Billings Depot 3 6,000 Auditoriums and Theaters

• Sq. Ft./Seats

Shrine Auditorium 3 30,000/2,340 Alberta Blair Theater 1 na/1,350 NOVA Center for the Performing Arts 8 7.100/120 max

Source: Visit Billings, Respective Venues

Less than 100 35 2,235 49% 100 to 149 12 1,354 30% 150 to 199 1 160 3% 200 and over 3 840 18% Total 51 4,589

Source: STR

Comparable Venue Function Space Analysis

HVS compared 5 competing in-state venues, 7 potentially competitive regional venues, and 8 conference hotel properties in Montana and Wyoming with respect to the amount of their function space (exhibit, ballroom , and meeting).

Name of Venue Location Montana Convention Centers Great Falls Civic Center Great Falls MT 23,938 * Proposed Bozeman Conference Center Bozeman MT 21,000 Montana State University Strand Union Building Bozeman MT 17,858 University of Montana University Center Missoula MT 17,670 Helena Civic Center Helena MT 10,730 Regional Convention Centers Bismarck Civic Center Bismarck ND 95,911 Fargodome Fargo ND 94,902 Total Function Space (square feet) March 16-17, 2015 HVS Convention Sports and Entertainment Consulting For Discussion Purposes Only Page 6 Fargodome Fargo ND 94,902 Rushmore Plaza Civic Center Rapid City SD 87,026 Sioux Falls Convention Center Sioux Falls SD 56,372 Boise Centre Boise ID 33,460 Yakima Convention Center Yakima WA 29,908 Wenatchee Convention Center Wenatchee WA 24,852 Competitve Hotels Little America Hotel & Resort Cheyenne WY 25,989 Best Western Plus Heritage Inn Great Falls MT 18,308 Parkway Plaza Hotel & Convention Center Casper WY 17,209 Hilton Garden Inn Missoula Missoula MT 15,581 Red Lion Colonial Hotel Helena MT 13,536 Hilton Garden Inn Kalispell Kalispell MT 10,046 Fairmont Hot Springs Resort Butte MT 8,614 Holiday Inn Bozeman Bozeman MT 6,398

* Estimated based on preliminary planning reports Sources: Respective Venues

EXHIBIT HALL

Exhibit Space Comparison

Fairgrounds and sports venues throughout the state of Montana are the only venues in the state which offer exhibition space. HVS excludes these venues from this analysis, because they are not competitors for conventions which typically require exhibit, ballroom, and meeting space under one roof. Some regional convention centers contain a dedicated exhibit hall, primarily with modest amounts of exhibit space. Venues in Bismarck and Fargo use a sports stadium floor for exhibit events. These venues do not have ballrooms but contain large amounts of meeting space. EXHIBIT HALL

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Regional Convention Centers sf # halls Bismarck Civic Center 80,000 3 Fargodome 80,000 1 Rushmore Plaza Civic Center 41,402 5 Sioux Falls Convention Center 33,600 2 Wenatchee Convention Center 7,506 2 Yakima Convention Center Boise Centre Average 48,502 3

BALLROOM MEETING ROOMS

Ballroom and Meeting Space Comparisons

Montana Convention Centers sf sf # divisions * Proposed Bozeman Conference Center 16,000 4 Great Falls Civic Center 15,300 1 Montana State University Strand Union Building 13,010 4 Helena Civic Center 10,730 1 University of Montana University Center 10,437 2 Average 13,095 2 Regional Convention Centers sf # divisions Boise Centre 24,426 5 Yakima Convention Center 23,568 8 Sioux Falls Convention Center 16,800 2 Rushmore Plaza Civic Center 15,264 4 Wenatchee Convention Center 10,080 2 Bismarck Civic Center Fargodome Montana Convention Centers sf sf # rooms Great Falls Civic Center 8,638 5 University of Montana University Center 7,233 13 * Proposed Bozeman Conference Center 5,000 6 Montana State University Strand Union Building 4,848 7 Helena Civic Center Average 6,430 8 Regional Convention Centers sf # rooms Rushmore Plaza Civic Center 30,000 10 Bismarck Civic Center 15,911 16 Fargodome 14,902 8 Boise Centre 9,034 12 Wenatchee Convention Center 7,212 14 Yakima Convention Center 6,340 7 Sioux Falls Convention Center 5,972 12

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Fargodome Average 18,028 4 Competitve Hotels sf # divisions Little America Hotel & Resort 18,142 11 Hilton Garden Inn Missoula 13,195 7 Best Western Plus Heritage Inn 11,244 1 Hilton Garden Inn Kalispell 8,550 4 Fairmont Hot Springs Resort 5,600 3 Red Lion Colonial Hotel 4,608 1 Parkway Plaza Hotel & Convention Center 4,380 3 Holiday Inn Bozeman 3,608 2 Average 8,666 4

Sources: Respective Venues

Sioux Falls Convention Center 5,972 12 Average 12,767 11 Competitve Hotels sf # rooms Parkway Plaza Hotel & Convention Center 12,829 12 Red Lion Colonial Hotel 8,928 9 Little America Hotel & Resort 7,847 8 Best Western Plus Heritage Inn 7,064 9 Fairmont Hot Springs Resort 3,014 5 Holiday Inn Bozeman 2,790 2 Hilton Garden Inn Missoula 2,386 6 Hilton Garden Inn Kalispell 1,496 5 Average 5,794 7

Sources: Respective Venues

Many competitive convention centers and hotels recognize the importance of a large, flexible ballroom and a large number of meeting rooms. Many venues incorporate a large number of ballroom divisions to create multiple potential room layouts.

Ranking of Billings’ Competitors

To assess Billings’ competitiveness as a state and regional convention and meeting destination, HVS ranked Billings to seven competitive regional destinations on five criteria that indicate attractiveness as a destination. Air access and hotel inventory are of immediate concern to event planners. The level of population, median income, and corporate presence indicate the quality of the destination and its ability to generate local demand for the convention center. On these five criteria, Billings ranks about average

• n all criteria. In total, Billings ranks fourth out of the eight total markets.

Destination Airport Passengers MSA Pop MSA Median Inc Number Business Total Hotel Rooms Overall Rank Sioux Falls 2 3 2 2 2 1 Boise 1 1 7 1 1 2 Fargo 3 4 3 3 5 3 Billings 4 5 5 4 4 4 Rapid City 5 6 6 6 3 5 Bismarck 6 7 1 7 6 6 Yakima 7 2 8 5 7 7 Wenatchee 8 8 4 8 8 8 March 16-17, 2015 HVS Convention Sports and Entertainment Consulting For Discussion Purposes Only Page 9 Destination Airport Passengers MSA Pop MSA Median Inc Number Business Total Hotel Rooms Overall Rank Billings 2 1 5 1 1 1 Bozeman 1 5 3 2 4 2 Missoula 3 2 7 3 2 3 Cheyenne 9 3 4 5 3 4 Kalispell 5 4 6 4 7 5 Casper 6 7 2 7 6 6 Helena 7 8 1 6 8 7 Great Falls 4 6 8 8 5 8 Butte 8 9 9 9 9 9

When performing this same analysis on competitive markets in Montana and Wyoming, Billings scores highest in overall destination rank.

Billings’ Primary In-State Competition from Regional Hotels

HVS designed and conducted a survey of event planners to provide a basis for assessing the potential demand for a proposed convention or conference center in Billings. HVS collected contact information for 881 event planners from the Billings Chamber of

• Commerce. Via email, HVS introduced the purpose of the survey and provided a link to the web-based survey. 93 respondents took

the web-based survey – a 14 percent response rate. Of the 93 event planers responding to an on-line survey, 60 percent have hosted a past event in Montana. Billings hotels are most

• ften mentioned.

MONTANA EVENT VENUES BOOKED BY EVENT PLANNERS

Crowne Plaza (Billings) 37% Holiday Inn Grand Montana (Billings) 34% Billings Hotel and Convention Center (Billings) 34% Hilton Garden Inn (Missoula) 23% Fairmont Hot Springs Resort (Butte) 23% Helena Colonia Hotel - Red Lion (Helena) 17% MetraPark/Rimrock Arena (Billings) 17% Northern Hotel (Billings) 14%

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Northern Hotel (Billings) 14% Best Western Plus Heritage Inn (Great Falls) 11% Holiday Inn (Bozeman) 11%

REASONS FOR NOT HOSTING EVENT IN MONTANA

Geography, location 40% Venues unavailable, too small 19% No interest from host cities 17% Client preference, internal reasons 14% Lack of air service 10% Lack of destination appeal, cities too small 7% Lack of knowledge about destination 10% Weather 2%

For those planners who have not hosted an event in Montana, geographic location, insufficient venues, and lack of interest are the primary reasons.

Respondents included professionals from

• rganizations representing national, regional,

state, and local associations, government entities, corporate and other organizations. This survey gathered information from professional event planners about their event needs and event destination preferences. In unaided questions, event planners were asked to list what they perceived to be the strengths and weaknesses of Billings as a group meeting

• destination. HVS categorized these responses. The

Event Planners Perceptions of Strengths and Weaknesses

DESTINATION STRENGTHS

Destination amenties 22% Customer service, friendly atmosphere 22% Natural Beauty 20% Hotels and hotel rates 18% Low cost, affordable destination 18% Event venues 16% Retail, dining, and entertainment options 16% Proxmity of national parks, outdoor activities 16% Location in state 14% Ease of transportation, highway access 14%

• destination. HVS categorized these responses. The

figures on the right show the percentage of respondents listing strengths or weaknesses in each category. The results show that Billings’ natural beauty and destination amenities are an

• attraction. But, the lack of airlift and its small and
• utdated facilities are a concern for event

planners.

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DESTINATION WEAKNESSES

Lack of airlift 51% Outdated and small event venues 40% Geography, location 34% Cost and quality of hotels 31% Lack of nearby amenities 20% Weather 14% High cost 11% Location of venues 6% Lack of knowledge about destination 6%

HVS asked event planners to rank Billings on each of 17 destination selection criteria on a scale of one to five with one meaning it does not comply with the criteria and five meaning it is highly compliant with the criteria. Since not all criteria are of equal importance, we ask them to rank the importance of each criteria. We then weighted their ranking of Billings on each criteria to produce a net weighted score as follows:

Event Planners Ranking of Billings Compared to Other Destinations

PERCENTAGE OF PLANNERS WHO CONSIDER CRITERIA MOST IMPORTANT

Adequate facility event space 70% Price of hotel rooms 60% Price of facility rentals 53% Ability to attract attendees 43% Geographic location 42% Quality of hotel rooms 32% Availability of hotel rooms 28% Overall level of destination appeal 27% Availability of air travel 25%

PLANNERS' NET RATING WEIGHTED FOR IMPORTANCE*

Price of hotel rooms 0.50 Adequate facility event space 0.47 Price of facility rentals 0.42 Ability to attract attendees 0.26 Convenience for drive-in visitors 0.18 Quality of hotel rooms 0.18 Availability of hotel rooms 0.15 Proximity of hotels to event spaces 0.14 Availability of convenient nearby parking 0.13

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The results show that Billings ranks high with respect to drive-in convenience, but poorly on issues related to air access. In interpreting these results, we assume that high and low scores make a meaningful difference in event planner decisions and middle scores minimally effect their decisions. Net weighted scores below zero indicate negative effect on demand.

Availability of air travel 25% Cost of air travel 23% Recreation, tourism & cultural activities 20% Proximity of hotels to event spaces 20% Adequate technology services 13% Dining, retail & entertainment options 13% Safety 12% Convenience for drive-in visitors 10% Availability of convenient nearby parking 7% Availability of convenient nearby parking 0.13 Overall level of destination appeal 0.12 Dining, retail & entertainment options 0.12 Safety 0.10 Recreation, tourism & cultural activities 0.05 Adequate technology services 0.00 Cost of air travel (0.09) Availability of air travel (0.10) Geographic location (0.17)

*Event planner score times the percentage of event planners who said the criteria was one of the five most important criteria.

HVS asked meeting planners to identify venues in locations other than Montana in which they have recently placed

• events. Planners identified primarily hotels and convention/conference centers in 38 states across all regions of the

U.S. The most often mentioned states were California and Texas.

Billings Faces Competition from Across the U.S.

RECENTLY BOOKED EVENTS BY STATE

California 10% Texas 9% Oregon 7% Florida 7% Tennessee 5% Missouri 5% South Dakota 5% Washington DC 5% North Carolina 4% North Dakota 4%

RECENTLY BOOKED EVENTS BY TYPE OF VENUE

Hotels and Resorts 76% Convention/Conference Center 18% Sports Venue 2% Fairgrounds 3% University Venue 2%

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North Dakota 4% Washington 3% Minnesota 3%

HVS provided event planners a list of cities and asked them to pick their top three in terms of overall appeal as a group meeting

• destination. 64% of event planners consider

Billings in the top 3. Bozeman, Helena, and Kalispell also received several mentions.

TOP EVENT DESTINATIONS IN MONTANA

Billings, MT 64% Bozeman, MT 28% Helena, MT 26% Kalispell, MT 20% Missoula, MT 8% Great Falls, MT 6% Butte, MT 2%

Likelihood of Event Bookings would Increase with Development

HVS asked event planners to indicate their likelihood of booking an event in Billings if a new convention or conference center would meet their event needs. 48 percent indicated that they would be somewhat or highly likely to book an event. This compares with 30 percent of planners who have hosted in Billings in the recent past. Approximately one-quarter of the planners remain neutral, suggesting that continued marketing efforts are warranted to positively persuade this set of planners. Thirty percent of planners report that they would be unlikely to host an event in Billings. LIKELIHOOD OF BOOKING EVENT IN BILLINGS

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30% 18% 22% 11% 19% Very likely Somewhat Likely Neutral Somewhat Unlikely Very Unlikely

Event Space Needs

HVS asked event planners to describe their most important or typical event. The following figures summarize this data for those events. Figures do not include information from planners who would be unlikely to host an event in Billings

80,000 (SF)

EXHIBIT SPACE REQUIREMENTS FOR EXHIBIT EVENTS

200 400 600 800 # Banquet Seats Required Event Distribution By Size

BANQUET SEATING REQUIREMENTS FOR ALL EVENT TYPES

0% 100%

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20,000 40,000 60,000 Exhibit Space Required (SF) Events Distribution by Size 0% 100% 5 10 15 20 Number of Meeting Rooms Required Events Distribution by Size

MEETING ROOM REQUIREMENTS FOR ALL EVENT TYPES

0% 100%

HVS Building Program Recommendations

Key Conclusions:

• Billings has enjoyed a strong presence in the state

association market.

• Billings’ meeting venues are older and outdated and fail to

provide meetings planners and attendees with the modern amenities and services they expect.

• A planned facility in Bozeman and other potential regional

development threatens Billings’ current position in the

• market. New facilities would attract event planners away

from Billings, eroding its share of the market.

• Meeting planners recognize the strengths and desirability of

Billings as a event destination.

• The development of a Billings Convention Center (“BCC”)

would allow the city to maintain and potentially grow its

Multipurpose Ballroom 40,000 Sub-Divisions Division 1 10,000 Division 2 10,000 Division 3 10,000 Junior Ballroom 10,000 Sub-Divisions Division 1 2,500 Division 2 2,500 Division 3 2,500 Division 4 2,500 Total Area (SF) Event Space

would allow the city to maintain and potentially grow its current meeting and convention demand in the face of strengthening competition from other regional markets.

• Survey results show that most events requiring large

amounts of exhibit space do not require meeting and ballroom space. These events could be accommodated by the Metrapark’s venues.

• Event demand potential must be considered in light of

Billings weak air service capacity and relatively high cost of air travel to Billings.

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Functional requirements of the proposed BCC revolve around the principal that the venue must host simultaneous events with different venue needs, such as conventions that use exhibition space and corporate meetings that use meeting and banquet space. Multipurpose hall should be able to accommodate light exhibition, banquets, and meetings. All spaces should have flexible divisions such that smaller divisions can serve as meeting and banquet space for smaller association and corporate events.

Meeting Rooms 16,000 Large (2) 6,000 Small (6) 9,000 Board Rooms (2) 1,000 TOTAL MEETING SPACE 66,000

Billings Historical Demand

HVS reviewed data contained in Visit Billings’ 2014 annual report. This report includes a summary of historical group demand and room nights generated for fiscal years 2012 through projected demand for fiscal year 2015. This data does not include all event held in Billings during these periods, only those booked through Visit Billings. The Metrapark, local hotels, and other venues book multiple additional events each year, including small meetings, sporting events, entertainment, and social

• events. Many of these events do not generate a significant number of room nights in the Billings

market

GROUP DEMAND GENERATED THROUGH VISIT BILLINGS

2011-12 Actual 2012-13 Actual 2013-14 Goal 2013-14 thru May 2014 2014-15 Goal Events Citywide Events & Large Conventions 2 4 6 2 Other Events and Small Bookings 21 16 22 20

The total number of events and room nights generated by Visit Billings has increased steadily in recent years with the

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Other Events and Small Bookings 21 16 22 20 Sporting Events 3 10 7 14 Total 26 30 35 36 36 Average Room Nights Citywide Events & Large Conventions 2,400 3,188 1,000 1,323 Other Events and Small Bookings 150 263 227 371 Sporting Events 800 718 1,286 1,315 Total Room Nights Citywide Events & Large Conventions 4,800 12,750 6,000 2,645 Other Events and Small Bookings 3,149 4,200 5,000 7,410 Sporting Events 2,400 7,180 9,000 18,410 Total 10,349 24,130 20,000 28,465 24,000

Source: Visit Billings

recent years with the 2014 fiscal year posting the highest numbers to

• date. However, the nature
• f demand has shifted

with citywide events and large conventions contributing fewer room nights per event and sporting events increasing in both event number and size.

Lost Business Analysis

Visit Billings provided HVS with a summary of several years of lost group business that would have occurred from 2012 through 2016.

REASONS FOR LOST BUSINESS (2012 THROUGH 2016)

Other, Internal Reasons 46% Air travel costs and flight availabilty 24% Insufficent Venues 8% Destination Amenities 8% Size of Market 8% Hotel costs 6%

Source: Visit Billings

U.S. REGION LOST BUSINESS TO (2012 THROUGH 2016)

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U.S. REGION LOST BUSINESS TO (2012 THROUGH 2016)

Northwest 31% Other Montana City 24% Midwest 21% West Coast 14% East Coast 10%

Source: Visit Billings

Outside of internal reasons, the cost and availability of air service to Billings is the most often reported reason for Billings losing business to other cities. Visit Billings reports that venue related reasons account for approximately 8 percent of lost business. Billings most often loses business to other cities in Montana and in the northwest U.S. The lost business profile includes all regions of the country, suggesting that Billings is actively pursuing a national market.

Projected Decline in Demand for “Do-Nothing” Scenario

HVS projects that, under a “Do-Nothing” scenario, demand for city-wide and other larger events would continue to decline as competition from other cities increases and Billings becomes less competitive in the meetings market. Without development, by 2020, HVS projects that overnight visitor days would decline by approximately 25 percent from their current levels. With FCC development, HVS projects that overnight visitor-days would more than triple.

10,000 12,000 With Development Without Development

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2,000 4,000 6,000 8,000 2015 2016 2017 2018 2019 2020

Overnight Visitor-Days

Proposed Billings Convention Center Projected Demand

DEMAND IN STABILIZED YEAR

2020 Events Conventions 10 Consumer Shows/Fairs 8 Conferences 24 Meetings 110 Local Meetings 40 Banquets 30 Concerts & Entertainment 6 Sports 8 Other 12 Total 248 Average Attendance Conventions 570 Consumer Shows/Fairs 2,500 Conferences 200

The introduction of the proposed BCC could attract a greater share of high impact conventions and conferences to the Billings market and retain events that would otherwise outgrow existing venues and move to competing markets. High impact conventions and conferences would bring a greater number of out-of-town visitors who require lodging. ROOM NIGHTS IN STABILIZED YEAR

Type 2020 Conventions 8,000 Consumer Shows/Fairs 700 Conferences 6,700

HVS based demand projections on the completion of the BCC by January 1, 2017. HVS estimates that following the completion of the proposed venue, incremental event demand would ramp up and stabilize after three years, during calendar year 2020 .

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Conferences 200 Meetings 75 Local Meetings 40 Banquets 250 Concerts & Entertainment 300 Sports 900 Other 200 Total Attendance Conventions 5,700 Consumer Shows/Fairs 20,000 Conferences 4,800 Meetings 8,250 Local Meetings 1,600 Banquets 7,500 Concerts & Entertainment 1,800 Sports 7,200 Other 2,400 Total 60,000

Conferences 6,700 Meetings 1,300 Local Meetings Banquets 1,000 Concerts & Entertainment Sports 2,000 Other Total 19,700

HVS Evaluated Three Potential Locations for the Proposed BCC

The suitability of a site for the development convention or conference center is an important consideration affecting the economic viability of a property and its ultimate marketability. Factors such as size, accessibility, visibility, and the proximity other amenities have a direct impact on the suitability of a particular site. Other factor, such as the cost of

• btaining the site, infrastructure needs,

East Side Downtown

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• btaining the site, infrastructure needs,

and costs of improving a site should be considered West Side

HVS Evaluated Locations on 22 Criteria of Varying Importance

Evaluation Criteria Importance Rank Site Considerations Capacity for recommended building program 5 Suitability for theater development 4 Ability to assemble site 4 Proximate to existing lodging 5 Proximate to existing dining & other attractions 4 Proximate to retail outlets 2 Urban Impact Potential for adjacent hotel development 5 Potential for other surrounding development 3 Timing of surrounding development 3 Displacement of existing uses 2 Compatability with neighboring land uses 3 Compliance with existing zoning 2 March 16-17, 2015 HVS Convention Sports and Entertainment Consulting For Discussion Purposes Only Page 22 Compliance with existing zoning 2 Access Ease of accces for drive-in 5 Ease of access for pedestrians 4 Ease of access for service vehicles 3 Availability of existing/planned Parking 3 Potential for traffic congestion 2 Access to public transportation 1 Financial Considerations Land assembly Costs 3 Cost of construction 5 Potential for private investment 3 Opportunity costs - alternative land uses 3

A rank of one indicates the least amount of importance and a rank of five indicates the greatest importance.

Site Selection Should Consider Complementary Development

If site constraints allow, the co-location

• f the proposed convention center and a

new or renovated Alberta Bair Theater would be beneficial to both operations and cause minimal conflicts in their independent operations.

3% 5% 6% 11% 12% 9% 8% 10% 12% 10% 8% 5%

PERFORMANCES BY MONTH

PERFORMANCES BY DAY OF WEEK

Alberta Bair Theater Performances 2008 through 2014

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Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

7% 14% 10% 9% 16% 33% 11% Monday Tuesday Wednesday Thursday Friday Saturday Sunday

For the past several years, the Alberta Bair Theater has consistently hosted approximately 90 performance and

• ther events each year attracting around 80,000 patrons.

Alberta Bair performances occur year round with the most active months in the spring and fall. Sixty percent of Alberta Bair’s events occur on Friday through Sunday

Construction Cost is an Important Consideration for Site Selection

Building Cost Estimates by Location

Downtown Site West Side Site East Side Site Building Costs Foundations $1,712,500 $2,950,000 $2,950,000 Exterior 14,174,036 12,514,782 12,514,782 Interior 10,341,777 9,981,777 9,981,777 Electrical & Plumbing 13,613,630 13,264,880 13,264,880 Equipment & Fixed Furnishings 1,705,600 1,824,000 1,824,000 Sitework 3,897,300 7,784,800 6,659,800 Net Cost $45,444,843 $48,320,239 $47,195,239 General Conditions 3,635,587 3,865,619 3,775,619 Insurance & Bonds 981,609 1,043,717 1,019,417 Fee 1,501,861 1,596,888 1,559,709 Contingency 5,154,100 5,483,537 5,355,016 Total Costs $56,718,000 $60,310,000 $58,905,000

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RLB based cost estimates on the following:

• Downtown site would require two levels covering a 75,000 square foot footprint.
• Total Downtown site would be 250,000 square feet which is currently a vacant lot.
• West side and east side sites would require one level covering a 150,000 square foot footprint.
• Total west side site would be 500,000 square feet which is currently a green field.
• Total east side site would be 500,000 square feet which is currently an industrial area.
• The downtown and east side sites have allowances for the demolition of existing structures.
• The west side site is a green field, so it has an allowance for removal of existing vegetation and topsoil.
• The west side site would require new site utilities
• Downtown and west side sites would have some re-use of existing utilities.
• RLB Unit pricing is based on February 2015 costs. No allowance for escalation has been included.

Source: Rider Levett Bucknall, restated by HVS

HVS Summed Weighted Scores in Each Criteria Category

92% 68% 47% Downtown West Side East Side

Site Considerations

% of maximum score 85% 83% 57% Downtown West Side East Side

Accessibility

% of maximum score

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96% 93% 89% Downtown West Side East Side

Urban Impact

% of maximum score 79% 74% 62% Downtown East Side West Side

Financial Considerations

% of maximum score

Total Weighted Scores Yield Most Suited Location for Convention Center

Downtown West Side East Side

Walkable access to hotels New lodging development ongoing Urban renewal district Close to downtown amenities Desireable retail outlets nearby Lower land acquisition costs Downtown TIF District, New Market Tax Credits may be option Larger parcels available Proximate to Metrapark arena and exhibit halls Desireable location for "convention center campus" Easy drive-in access for attendees and local uses Would improve and beautify east entry to downtown Higher land acquisitions costs Sites may require utility/infrastructure improvements Longer timeline for surrounding development Demolition or renovation costs likely Lacks appeal of downtown location and amenities Heavy truck / through traffic area Smaller sites would require more costly vertical construction Not walkable Lack of uniform sewer and water service PROS CONS

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88% 76% 64% Downtown West Side East Side

Total Weighted Score

% of maximum score

Parking may be issue for larger events Less suitable location for "convention center campus" Small parcels with multiple owners may make landassembly difficult No proximate hotels, not walkable, lacks appeal of downtown

Based on the site evaluation and pros and cons analysis, HVS concludes that a Downtown site would provide the most ideal location for the proposed convention center in Billings. A West Side site ranks second and an East Side site, third. Multiple sites within each of these locations may be suitable for

• development. Further detailed analysis

is recommended.

The proposed BCC would require an operating subsidy in line with those required by similar- sized stand-alone facilities in the region: Boise Center: $639,000 subsidy Yakima Convention Center: $766,000 subsidy Wenatchee Conv. Center: $500,000 subsidy

Estimated Financial Operations ($ in stabilized year - 2020)

BCC OPERATING PRO FORMA

OPERATING REVENUE Facility Rental $522,000 Event Services (Gross) 397,000 Food & Beverage (Gross) 797,000 Advertising & Sponsorships 104,000 Other Revenue 12,000 OPERATING EXPENSES Salaries & Benefits ($841,000) Event Services Costs (337,000) Food & Beverage Costs (558,000) Repair & Maintenance (63,000)

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Repair & Maintenance (63,000) Administrative & General (42,000) Supplies & Equipment (27,000) Marketing & Sales (66,000) Insurance (30,000) Utilities (357,000) Other Expense (9,000) NON-OPERATING EXPENSES Capital Maintenance ($55,000) Management Fees (133,000) TOTAL NET INCOME (LOSS) ($687,000)

Economic and Fiscal Impact Analysis Process

The proposed convention center would generate economic impact by attracting new visitors and importing their spending or new income into the local economy. Public investment in the project would increase attracting visitors that would not otherwise come to

• Billings. To measure this impact HVS calculated net new demand—the difference between event and attendance in the do-nothing and

BCC development scenarios. See the figure below.

Gross Direct Spending Net Direct Spending Indirect Spending Induced Job Impacts Spending Net New Demand Induced Spending Net Tax Impacts

Multiplying the new demand by the amounts of spending per visitor or attendee generated gross direct spending estimates. Gross direct spending provides the inputs into the IMPLAN model of the local area economics. IMPLAN then generates estimates of total net

• spending. Spending falls into three categories: net direct spending, indirect spending, and induced spending. Many refer to indirect and

induced impacts as multiplier effects. The sum of direct, indirect, and induced spending estimates make up the total estimated spending impact of BCC operations. HVS used the IMPLAN model to estimate the increase in employment associated with the total net spending.

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ANNUAL RECURRING ECONOMIC IMPACT (IN 2015 DOLLARS)

HVS estimated new gross direct spending from five sources: 1) overnight visitors, 2) day-trip visitors, 3) exhibitors, 4) event organizers, and 5) new spending at the proposed venue. Spending parameters are based on a national survey of convention related spending adjusted for inflation and the relative travel costs in Billings. Gross direct spending provides the input into an economic model that generates estimates of net direct, indirect, and induced spending. HVS projected impacts and jobs for the City of Billing, Montana and Yellowstone County. Direct spending estimates only included spending by non-residents. Spending by local residents is considered a transfer of income and is therefore excluded from this analysis HVS also used the IMPLAN model to calculate the taxes collected by spending and the number of permanent full- time equivalent jobs the project would create.

Gross Direct Spending by Source 2020 City of Billings Delegate Overnight Spending $5,807,100 Daily Delegate Spending 3,592,500 Exhibitor Spending 941,500 Organizer Spending 193,800 Facility Revenue 1,590,100 Total $12,125,000 Summary of Impacts City of Billings Yellowstone County

IMPLAN

The proposed capital investment in the BCC would most likely be repaid over a 20- to 30-year period that coincides with the useful life of the asset. As a point of comparison with the capital investment, HVS calculated the present value of the net spending that it would generate over a 20-year period. We assumed a five percent discount rate that approximates weighted cost of public sector capital. The figure below shows the present value of spending for the City Billings.

Page 29 March 16-17, 2015 HVS Convention Sports and Entertainment Consulting For Discussion Purposes Only Total $12,125,000 Yellowstone County Delegate Overnight Spending $5,807,100 Daily Delegate Spending 2,454,600 Exhibitor Spending 941,500 Organizer Spending 193,800 Facility Revenue 1,590,100 Total $10,987,100 Economic Impact $16.8 million $15.5 million Fiscal Impact 70,800 na Jobs 170 Jobs 160 Jobs

*In a stabilized year

Present Value of Net Spending* $ Millions City of Billings $237 Yellowstone County $219

*Stated in constant 2015 dollars.

Convention Center Ownership

Most convention centers in the United States are publicly owned. Municipal or county ownership is the most common ownership arrangement for these facilities. Many communities have established quasi‐governmental or non‐profit authorities to own their convention facilities on behalf of the local and/or state governments. The primary benefit of a public ownership arrangement is that the City would maintain control of:

• Future site development,

Continued presence of a convention center,

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• Continued presence of a convention center,
• Maintenance and capital improvements to the facility,
• Operating strategy for the convention center, and
• Access to tax exempt debt.

The primary risk are the ongoing capital investments require to maintain a competitive venue and the risk of financial operating losses.

Convention Center Management – 2 Primary Forms

In-house staff manages and operates the venue

Benefits: City maintains control of

• Financial reporting,
• Staffing levels and qualifications,
• Training and customer service requirements,
• Marketing priorities,
• Booking policies,
• Repair and maintenance schedules, and
• Long-term capital improvements.

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• Long-term capital improvements.

Risks:

• Locating the necessary experience and talent to manage a facility successfully,
• Replacing expert management if key personnel leave,
• Financial operating risks associated with operating losses, and
• Inability to incentivize the sales team due to public employee compensation rules.

Examples: Rapid City, Boise, Omaha

Convention Center Management – 2 Primary Forms

Private Facility Management Company

Benefits:

• Professional management has necessary expertise to manage all aspects
• f venue operation
• Financial reporting and operational procedures in place and follow

standards established by management company Risks:

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• Management fees range from $100,000 to $300,000
• City not able to monitor staff training and customer service procedures,
• City may have reduced ability to monitor facility maintenance and capital

improvements, and

• Management company may not place top managers in smaller markets

Examples: Fargo, Sioux Falls, Brookings

Convention Center Funding Models

Cities usually finance the construction of convention facilities with public debt, which is repaid over a 20- to 30-year

• period. Municipalities justify public investment either on the basis of the potential economic impact of a project or

because it represents the development of a community asset with broad support that would not be developed without public spending.

Tax-Exempt Bonds

General Obligation Bonds Revenue Bonds

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General Obligation Bonds

Not a common source for full project May be used for portion of cost, typically infrastructure May be used as short-term construction loan Can provide guarantee if other revenue source is not initially credit-worthy

Revenue Bonds

Derived from businesses that most likely benefit from the

• peration of the facility

Typical sources include: Lodging Taxes Sales Tax Car Rental Fees Parking Taxes Food & Beverage Taxes Airport Access Fees

Convention Center Funding Case Studies

Ow ner: City of Sioux Falls Operator: SMG Function Space: 56,000 sq ft Adjacent Lodging: 243-room Sheraton Expansion: 12,000-seat arena opened in 2014 Development Costs: $117 million Funding: Voters approved one penny sales tax

Sioux Falls Convention Center and Arena

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Ow ner: City of Rapid City Operator: City of Rapid City Function Space: 87,000 sq ft Adjacent Lodging: None Expansion: New 10,000-seat arena and existing arena renovation Completion Date: 2017 Development Costs: $180 million Funding: Existing Vision Fund, half-cent sales tax

Rushmore Civic Center Plaza

Convention Center Funding Case Studies

Boise Center

Ow ner: Greater Boise Aduitorium District Operator: Greater Boise Aduitorium District Function Space: 33,000 sq ft Adjacent Lodging: 254-room Grove Hotel Expansion: 15,000 sq ft ballroom and 14,000 sq ft of meeting space Completion Date: 2016 Development Costs: $38 million Funding: Existing room tax collections, District collects 5% tax on hotels w ithin its boundaries

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Farmington Civic Center

Ow ner: City of Farmington Operator: City of Farmington Function Space: 10,300 sq ft Adjacent Lodging: None Expansion: 15,000 sq ft of meeting and banquet space Completion Date: unknow n Development Costs: $6.8 million Funding: Existing $2.50 per room night lodging fee

Convention Center Funding Case Studies

Monterey Conference Center

Ow ner: City of Monterey Operator: City of Monterey Function Space: 41,000 sq ft Adjacent Lodging: 3 hotels, 700 rooms Expansion: 30,000 sq ft Completion Date: 2018 Development Costs: $32 million Funding: New hotel tax, 3 adjacent hotels pay 4%, remaining pay 0.8-1.6%

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High Country Conference Center

Ow ner: Northern Arizona University Operator: Sodexo Function Space: 25,000 Sq ft Adjacent Lodging: 160-room Drury Inn & Suties Opened: 2007 Development Costs: $26.4 million Funding: PPP betw een UNA and city of Flagstaff

Conclusions

• Billings needs to reinvest in convention facilities to remain competitive:
• Existing venues are functionally obsolete
• Billings is playing in a limited regional and drive-in market due to

geographic location and limited air access

• Bozeman and other regional cities are likely to add new venues and

grab market share

• A downtown location affords the best opportunity to enhance “destination

appeal” which is essential to attracting events

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appeal” which is essential to attracting events

• We recommend adjacent hotel development which could bring

private investment to the project

• Theater co-location could provide benefits but increases the

difficulty of land assembly and project financing

• Reinvestment comes at a high cost relative to the economic impact benefits.

The corollary benefit of fostering urban development should also be considered.

Next Steps

• Build a broad consensus among stakeholders and the general public on the

need for convention center development

• Refine site selection and identify parcels and strategies for acquisition
• Assess market and programming needs for potential complementary

development (hotel, performing arts theater, sports) and develop concept plans for specific sites

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plans for specific sites

• Identify potential public funding sources
• Identify potential private development partners through RFQ/RFP process
• Based on proposed public and private financing sources, formulate a

financing plan

Contact Information: Thomas Hazinski Managing Director HVS Convention, Sports & Entertainment 312-587-9900 Ext. 11 thazinski@hvs.com thazinski@hvs.com