Rent: plus, plus, (plus) or inclusive?
I have received numerous notes, emails, tweets, skywriting, posts, carrier pigeons, and phone calls regarding my first use of this blog. OK, there really was no skywriting or carrier pigeons. What I did receive was a steady stream of communication, both public and private, with suggestions, concerns, topics, rants, and some people that just wanted to make a personal connection. One thing I heard a lot was that I did not really define myself, as I prefaced that I would in the start of the last post. Since my goal here is not to talk about myself, I’ll include this link for anyone that cares to read my interview with Michelle Russell from the Convening Leaders Show Daily. ‘Nuff said.
At PMA, we run one of the larger trade shows in the U.S. each year, so I received a fair amount of communication from that sector of the community. Yet, when I look at the all the conversations that initial blog post spawned, nearly all of it focused on one aspect: net revenue a.k.a. money, duckets, dough, shekels, scratch, moolah, cheddar, etc. Given our current state of the world this is no surprise to any of you, however, the number one thing that continues to be un-discussed publicly is one of the largest factors that make up net revenue: rent.
This seems to hold true whether you are talking about hotel room rental for 20 people or a one million gross square foot buyout. One of the callers wanted to know what their organization should be paying for convention center hall rental. This is a great question, but it unconsciously caused me to cringe a bit before giving my non-committal answer. This got me to thinking about why I was uncomfortable answering this question. After all, I tend to not have a problem speaking my mind or sharing my opinion when asked – and sometimes even when not!
This remains one of those questions that we skirt when the topic arises, or directly avoid discussing during the conversation at the bar with colleagues. Because if everyone honestly answered the question, the answers would all be different, ranging from free to full price. Variations in hotel room rate have about a hundred different factors that can be pointed to: brand, location, time of year, competing events, supply and demand, room type, etc. Rent is a whole different animal, with far fewer limiting factors, so why is the real pricing structure nebulous?
In the U.S., convention centers focus on the NSF (net square feet) rate, which seems to make it more palatable, breaking down that big ‘ole building into 12-inch squares. In the micro view that price can seem relatively inexpensive, but in the macro it adds up quickly: $1.60/NSF X 300,000 = $480,000, and that typically just gets the lights on in the halls you just bought. Yes, in turn, show organizers re-sell that 12-inch section of concrete for upwards of $25, but (like the exhibitors that buy space) there are a host of other expenses that have to be paid. For PMA, these unique expenses also include daily air conditioning (produce goes bad quickly in a hot hall), excessive trash pulls, and special food and beverage needs to name just a few.
Each event is unique in its needs, but most organizers are having the same conversations around the world right now: Wi-Fi is an expected “must have” for the majority of attendees, who use it for everything from exhibitor freight tracking to keeping up with the office to social media. Attendees are angry when they are charged for services like this, especially on top of the expenses they are already spending to be there. Here’s an example: I recently was at an event in a recognizable property and when I inquired about Wi-Fi in the meeting room I was told that the pricing structure was $100 for the first user and $50 for each additional user. Really? If major convention centers are figuring out how to include complimentary Wi-Fi for thousands of attendees, albeit at a low speed, why are smaller venues unable to get in tune with the needs of the customer? The tech folks are already telling us that Wi-Fi will go the way of the instamatic camera, only to be replaced by another chargeable technology that new devices will need to have.
But what about the other side of the coin? No one works for free, and government and privately run convention centers, along with all those hotels, are under ever increasing pressure to show a profit. How does an entity with free or significantly reduced rent continue to exist? My opinion is that other less-savvy organizers are paying rent not only for their event, but for someone else’s as well.
How many of us have had the “Nickel & Diming” conversation with exhibitors and attendees? In turn, how many of us have had that same conversation with a building or property? This is a circular thread running through our community, which I find similar to the zero-dollar contractor invoicing discussion that continues to this day. Personally, I would not have a problem paying a reasonable rental fee, providing that it basically flipped the switch from ‘OFF’ to ‘ON’ and included all the things that my association needed and met my exhibitors and attendees reasonable expectations.
Since this is intended to be a dialogue vs. a monologue, my question to you is this: Should rental rates be day lighted as a standard operating expense and what would that rate include? Have you seen examples in use that make more sense than others?