New Convention Hall Projected to Lose $111K Annually

CAPE MAY — A new Convention Hall the city will begin building next year is projected to lose $111,512 annually once the doors open with yearly expenses projected at $984,120 and annual revenue projected at $872,608 for 2012.
“Most convention centers lose a lot more than this amount per year,” said Aubrey Kent, associate professor and director of programs and sports recreation management at the Sports Industry Research Center at the Temple University School of Tourism and Hospitality Management, as he presented a business plan for Convention Hall to City Council at a Thur., Oct. 21 special meeting.
Kent said the mission of a new Convention Hall was to stimulate and help sustain Cape May’s economy.
“Convention halls, nationwide and around the world are not meant necessarily to be revenue drivers in and of themselves,” he said.
Kent said such facilities are built by communities to spur “ancillary economic activity” such as hotel stays for out-of-towners.
“It is terrific if they can sustain themselves through revenue but that is rarely the case,” he said.
Cape May’s Convention Hall will also be used by the local community for recreation and leisure programs as was the previous hall, said Kent. He said revenue streams for the new hall will come from recreation programs such as dances, skating and camps.
Another revenue stream will be from two retail stores for rent in the hall and spaces for ATM machines.
Rentals of the new Convention Hall for concerts, festivals, convention, meeting, seminars, shows and exhibitions will also generate revenue, said Kent.
Pricing to rent the retail space in Convention Hall will be based on area averages and rates for similar facilities in this area.
Rental fees for the hall will be based on rental fees for the old Convention Hall and comparable facilities, said Kent.
Assumptions for expenses for the hall’s 2012 budget, the year the facility opens, were “fairly liberal” with expense estimates where exact figures were unavailable and included an annual 4 percent cost increase for health insurance, pensions and taxes for employees working in Convention Hall.
Kent said assumptions for revenue were very conservative.
“I would be very surprised if what is presented in the business plan wasn’t closer to a worst-case scenario than a best-case scenario,” he said
Expense projections included full time salaries totaling $336,000 and part time salaries of $184,000 and healthcare, pension and payroll tax expenses $208,320, for a grand total of $729,120 in staffing expenses. Some of the salaries will be current city recreation department employees, said Kent.
Mayor Edward J. Mahaney Jr. said only one new position would be created for the new hall which would be a marketing position.
Operations expenses totaled $130,000, maintenance: $75,000 and marketing: $50,000 for a total of $255,000.
The total expense projection for the hall in 2012 is $984,120.
Kent projected three sources of revenue for the new facility:
• Hall-based activity: $394,690.
• Recreation (hall-based): $255,435.
• Recreation (non-hall based): $222,483
Revenue is projected to total $872,608 per year.
Kent broke down revenue for hall-based activities into specific projections: retail space rental: $150,000, ATM machine rental: $3,860, conferences: $48,750, seminars: $8,750, celebrations: $120,000, concerts and shows: $10,000,fairs and exhibits: $52,500, for a grand total of $394,690.
Revenue from recreation activities: fitness classes: $8,125, recitals: $29,100 dances: $32,625, skating: $43,750, camp: $65,000, playhouse: $8,160, shows: $68,675 other non-hall: $222,483 for a grand total of $477,918.
Kent said the new business plan for a smaller Convention Hall featured a “fairly serious downgrade of conference and seminar revenue,” because the larger hall design had more opportunity for conference and seminar hosting.
The price to rent the new hall for a wedding is projected at $8,000 per event based on a local average of $6,500 and placing a premium on the beach view, catering kitchen and allowing only 15 weddings per year in Convention Hall, he said.
For concerts, shows and festivals in the new Convention Hall, Kent stayed with the previous number of events in the old hall. He said there would be an opportunity for the staff of the new hall to bring in additional business with upwards of two and half months of evenings and days available.
He said that would produce additional revenue for the new hall. Kent said the facility is projected to be in use 250 to 270 days per year leaving three months available for additional events.
Kent said a lot of use is for recreational use in the “shoulder season,” leaving prime times available from May to Labor Day.
Councilman Bill Murray said if the city could bring in more events, the annual operating loss on Convention Hall could turn into a profit.
A summary of the business plan is posted on Cape May’s website: www.capemaycity.org