Starting and Expanding Advertising and Sponsorships as a Revenue Stream

July 30, 2016

Why Is this a Good Idea?

I have often been confused why more convention centers do not actively engage in an advertising and sponsorship program as a revenue stream. Perhaps it’s viewed as a business more appropriate for others; sports and entertainment venues are the logical setting for advertising and sponsorships, not convention centers. Sports stadiums and arenas and their tenant teams – football, baseball, basketball, hockey, etc., all have a loyal fan base and fans are very emotionally connected. Television and radio coverage are integral parts of the sports experience. These things don’t exist at convention centers and convention center management may not feel it’s worth the effort. I also believe there’s reluctance by some convention center management to use ad space and media that were once exclusive domain of event managers and then, charge fees and commissions for features that were once free.

My belief is that if convention centers who feel this way would conduct a thoughtful evaluation of the benefits and risks, they may change their minds.

Benefits – A well crafted ad and sponsorship program:

• Contributes a level of legitimacy with respect to the convention center being a place of business, where new products and services are rolled out and demonstrated in a setting where comparisons can be made, where deals are done, where technical and scientific information exchanged, and where like minded professionals can network and socialize.
• Strengthens the business relationships with others in the city hospitality sector. Restaurants, hotels, nightclubs, shopping districts, and other cultural and entertainment venues are likely advertising and sponsorship candidates. Having the relationship solidified by an advertising agreement helps achieve that. The character of the relationship would be different; it won’t be casual or shallow anymore, it will now be business.
• Can become a reliable revenue source which may waver up and down with the vagaries of the economy but can grow in stable and growth years. There are a few convention centers where an advertising and sponsorship program has contributed between $1 – 2 million to the bottom line annually.

Risks –

• Know that many times brands are judged by the company they keep; remember this, it will come up again. Many times an advertiser or sponsor’s business issues, such as product problems, legal issues, and financial problems become your problems. This is especially true if it’s a naming rights sponsor. Choose potential advertisers and sponsors wisely. Understand that advertisers and especially sponsors may view the convention center similarly. Convention centers are accountable to them for bad publicity and for routine items such as signage and website maintenance, or for the overall condition of the facility. Sponsors too will always be interested in their return on investment and review the returns periodically.
• An overly aggressive ad and sponsorship program can pose some problems with your trade show and association meeting clients; too much signage by advertisers takes away from space available for an event’s trade dress signage and decoration and their own sponsor advertising, inflexible terms regarding advertising and product exclusivity by sponsors may interfere with an events’ exhibitors or their sponsorship sales. Also, critics may argue that over-commercialization with garish signage and endless brand messaging detracts from the convention center’s mission. It’s best to exercise good taste and a sense of propriety here.
• An advertising and sponsorship program is very visible to others and potential event clients. An ineffective and feeble program where advertisers and sponsors are few detracts from the center’s reputation. If, after evaluation, you do not believe you can achieve revenue goals and visibility then perhaps you should forego the effort.

Taking Stock – What Is Your Inventory of Advertising Possibilities and Media?

Exterior –

• The Center’s Location – Is it located by and in view of major traffic thoroughfares? If so, call the municipality and obtain a daily traffic count. Pedestrian counts may also be available.
• The Center’s Architecture – Normally the entrance is a piece of landmark architecture. The curtain walls are high, there is usually an array of light or flag poles along the entrance drive, and the adjacent sidewalks are wide. All are possibilities for banners and signage.
• Fixed Static or LED Signage (usually located by the center’s entrance) – These signs normally announce the event(s) in-house, but have fixed signage possibilities as part of the sign structure or in the case of an LED sign, use possibilities due to the technology.

Interior –

• Center entrance, atrium, lobbies and concourses – All have high curtain walls and space frame features for banner hanging
• Well trafficked corridors – Recommend a limited number of high quality back-lit signage
• Center video screens – Large video screens are best located in the expansive entranceways, atriums and lobbies where the scale fits the setting. Smaller video screens are more appropriately located along well trafficked corridors, retail areas, taxi/shuttle bus waiting areas and food courts. The screens are normally part of a network, complete with a control room, equipment room and the capability of running different messaging (pre-programmed) for each screen.
• Columns in atrium and lobbies
• Public stair risers – Normally temporary and done with 3M product with adhesive back
• Escalator side panels and railings
• Taut cables over escalator wells for banner hanging
• Displays adjacent to Information and Concierge Stations
• Ads and wraps at water coolers and phone/tablet charging stations
• Food Court table tops – Using the same adhesive backed 3M product

Digital/Print –

• The convention center’s website – Banner ads, column and button ads on the most popular pages (event schedule, public transportation and driving directions and map). A restaurant directory as well as one for hotels, nightclubs and other attractions should be part of the website. Some convention center websites do an excellent job of posting these directories. View the San Diego Convention Center’s restaurant directory:

http://www.visitsandiego.com/attendees/restaurants.cfm

• The center’s mobile app
• The center’s WiFi Portal (opening page)
• Blogs, newsletters, annual reports, direct mail pieces
• The center’s social media (Facebook page, Twitter Feeds, Instagram, YouTube, etc.)
• Exhibitor Manuals and Order Forms

Other –

• Opportunities to publicly display product – A luxury car in the center’s atrium is a good example
• Collateral reading material and brochures at concierge/information desks
• Portable cups and napkins in the food courts

Reserving Inventory Exclusively for Events – How much inventory should be reserved for them? The short answer is – any place public that has height and visibility (exterior, curtain walls, light poles, etc.). A well organized center will publish a guide with diagrams showing locations and standards for sign and banner hanging.

Charging Event Management Fees for Advertising Outside of Their Licensed Space – This is an excellent revenue source, at times comprising half of the center’s ad and sponsorship revenue. Most event managers already use most available locations. Besides their own trade dress and directional banners, in many instances they use these locations to sell advertising to their event sponsors, normally in the form of large fabric banners, stair risers, free standing displays, etc. Ten years ago most convention centers permitted events to sell ads to exhibitors using all the aforementioned media and signage without paying location fees to the convention center. I am pleased to see that many convention centers have ceased this practice and now charge fees and commissions. Convention centers which still offer this for free should be well advised to stop the practice. As controversial as it may seem, the architectural prominence and visibility that was created by public investment and the value it creates for such things as advertising banners gives convention centers clear entitlement to reasonable fees. Use of public areas for the sale of advertising to others is normally not part of the event manager’s license agreement. Fees should be a percentage of fees collected by the event managers from their client (say 15%). In the case of public space banners, the percentage arrangement is sometimes not satisfactory. For convention centers, it’s much easier to audit and collect based on size. Exterior banners should be charged a higher rate (say 20%). Ads for other media, such as the Center’s Wifi hotspot “splash” page, use of the Center’s monitors, food court table tops, etc. should be negotiated at market prices.

What’s the Difference between Sponsorships and Advertising?

A corporate sponsorship is a form of marketing where companies connect their name, brand, and products and services to a venue for long term in order to enhance their brand, solidify and expand their markets, showcase their products and achieve future profits. It should not be confused with advertising which is direct and overt and contractually a shorter term. In sponsorships, advertising through signage is inclusive, just one element in a sponsorship plan. A well designed sponsorship generates a stronger and more subtle message. It tends to be more qualitative and has loftier goals than just customer exposure and sales. It is a marketing platform where a company can identify with the best aspects of its partner, where a company can build credibility, prestige and, create a more permanent, lasting bond with consumers.

Who Are the Potential Sponsors?

It’s useful to first separate potential sponsors from ad hoc advertisers. Sponsors should be companies that have a tangible connection and can be easily integrated into a convention center’s core business and culture. There are however more subjective considerations. There has to be the proper feel and fit. It’s difficult to define but it comes down to whether the corporate image is one that complements the convention center, the city and vice versa. While the company should obviously be prosperous, they also need to have a certain brand reputation for reliability and quality, and a high corporate standard for civic responsibility.

Certain industries seem to fit as ideal sponsorship candidates. They are; an airline with a regional or national hub at the city’s airport, a major credit card company, a regional bank which has a solid customer and investment base in and around the city, a utility, a major technology/telecommunications company (preferably one that designs and manufactures, and operates equipment), a media company (preferably local newspaper or TV station), a luxury car company and a long standing major employer for the region. If your convention center is large and busy, then a soft drink sponsor, with exclusivity for advertising and product sales (pouring rights), also makes sense.

Some sponsorship marketing consultants, such as Jim Andrews from ESP Properties in Chicago (www.sponsorship.com) favor technology companies above others. His view is that these companies are in a growth mode, spend heavily on marketing and are generally open to venue sponsorships often seeking these opportunities out, particularly sports and entertainment venues. Another consultant, Hugh Wakeham from WAM Associates in Toronto (www.wam.ca/)   believes similarly but also sees regional banks and utilities as excellent candidates.  He described an interesting case study of naming rights where a utility company Enercare has naming rights to the convention center at Exhibition Place in Toronto. Enercare uses this sponsorship to demonstrate and promote Green technologies. On site for instance, windmills generate electricity and electricity, hot water/steam and chilled water are generated by a gas fired Tri-Generation power plant.

Sponsors will of course require something more than company name and brand exposure through signage.  It is useful to have a list of other things that a sponsor could benefit from such as; exposure on your digital media (website, newsletters, blogs, twitter feeds and WiFi portal, etc.), free passes and parking to popular events that they can distribute to employees and clients, free use of public space to show or demonstrate a product, credits for rent, parking and F&B for an event like a corporate sales or board meeting. You may have to be creative here.  As mentioned earlier sponsors pay close attention to their return on investment. There are items the convention center can track on their own such as product sales on site if applicable and hyperlink openings and page views. It is very likely that a sponsor may ask and possibly tie the result to renewal and fee negotiations. In my time at the Javits Center, it was common for our soft drink sponsor, Coke, to conduct a business review and focus on cases sold per year. The Director of Marketing and Communications at the Shaw Centre in Ottawa, Sylvie Carbonneau, described how their luxury car sponsor, Porsche/Audi, tracked sales based on their car displays at the centre.

For convention centers a successful sponsorship consists of cash and/or a capital contribution (which could be cash or in-kind – telecommunications/internet equipment for example), some accommodation for day to day operations (airline ticket credits for business travel or discounted utilities), cooperative marketing when these opportunities come up and a long contract term 3 to 5 years with renewal options.

Who Are the Potential Advertisers?

A quick list should show the categories below and be accompanied by a map denoting walking time from the convention center and headquarter hotel (normally 15-20 minutes):

• Restaurants – These can be categorized by type of restaurant, ratings of same, price point and distance from major hotels and the convention center
• Hotels
• Parking Lots and Garages
• Shopping
• Nightclubs
• Attractions
• Professional Sports Venues
• Concert Venues
• Theaters
• Cultural Attractions (art galleries, museums, historical sites)
• Beer
• Wine

Other advertisers could be car rental companies, an office and hardware retail outlet, exhibit service companies – general decorating companies, exhibit appointed contractors, A/V companies, computer/technical supply retail outlets. Advertisers, especially in categories where there are many like restaurants, are typically put in easy to read directories which accessible through the center’s website, mobile app and WiFi portal. In my experience, advertisers normally didn’t track ROI closely. As with sponsorships, the convention center should track hyperlink openings and page views because it is likely that an advertiser may ask and possibly tie the result to renewal and fee negotiations.

 

A Sample Pro Forma

For the example below:

• Sponsor revenue is based on the Javits Center experience and informal conversations with other convention centers in my consulting business.
• Advertising revenue is based on my time at the Javits Center and price schedules from convention centers published on the internet. The number of restaurants, parking lots, hotels and attractions is based on those published on the Davis L. Lawrence Convention Center (Pittsburgh) website.
• Revenue obtained from fees for commercial advertising sold by event managers in public areas and video/digital media is estimated based on the Javits Center experience. Assume that the center’s occupancy in this example is high, say 60-65%. It was then estimated that 15 events would sell exhibitor advertising in public areas of the convention center;

10 events  x  $50,000 in sales = $500,000    5 events  x  $75,000 in sales  =  $375,000

$375,000  x  15% fee  =  $56,250                     $375,000  x  15% fee  =  $56,250

$75,000 = $56,250 = $131,250 (estimated total)

*Venue obligation includes;

On-site signage, possibly on-site retail
On site video time – large and small screens
Product exclusivity, possibly advertising exclusivity (w/qualifications)
Website Ad
Social media exposure (Facebook, Twitter, Instagram, YouTube)
Mobile APP Ad
Rent, F&B, Parking Credits
Free passes to public events
Cost of above –
– Sales Comm – 5%
– Credits (lost revenue) – $5,000

*Venue obligation includes;

Website Directory
Social media exposure (Facebook, Twitter, Instagram, YouTube, etc.)
Advertising exclusivity for beer and wine
Mobile APP Directory
WiFi portal directory
Concierge/Information Booth Display and Menu Catalog
On site video time large and small screens – not included in 6 mo fee schedule above; pricing should be at premium levels
Cost of above –
– Sales Comm – 10%

 

How to Get Started – Logical Next Steps

 Assuming you have already weighed the benefits and risks and reviewed the market size for sponsors and advertisers, these are logical next steps:

1. Obtain price schedules from other convention centers that have an active advertising and sponsorship program in place.
2. Build your own pricing model
3. Build a pro forma statement
4. Determine who will do all the administration and sales work. Understand that the sales work is hard work; developing marketing material, making cold calls, making site visits, and price negotiations. Add to that having patience; it will take more than a year to build revenue. Options are; outsourcing, Integrating the responsibility into existing sales force or add to staff with a new hire
5. Obtain board approval in the form of a policy statement. This is important for two reasons; board members are a good resource for potential sponsors and advertisers and obtaining advertisers and sponsors may be regulated by government procurement procedures which really do not apply to this business function, board approval may help avoid this.
6. From the city government, obtain traffic counts and pedestrian counts for adjacent streets and sidewalks. From your website administrator obtain internet traffic statistics. Invest in a survey to develop a demographic profile of attendees who normally come to events at the convention center. Typically they are business men and women between the age of 30 – 45 with a higher than average annual income.
7. Develop marketing material. The link below from the Shaw Centre in Ottawa is a good example:

http://www.shaw-centre.com/wp-content/uploads/2015/12/SHAW-1527876_Advertising_Possibilities_EN.pdf

8. Develop a face to face marketing message and a sales plan. The marketing message should be one of optimism, one that emphasizes positive changes such as an expansion or renovation, or an investment in video screens and digital technology, or the organizing of a staff to administer and look after the needs of sponsors. Persuade them of your resolve; show them that there is a parity of commitment, that the convention center has “skin in the game”.
9. Begin work and monitor progress

 

All About Convention Center Naming Rights

Establishing Naming Rights Value

It’s easy to be lured into believing that naming rights as a financial bonus for convention centers. Decision makers may be influenced by media reporting and tend to overlook that only the global level deals are reported. They hear about deals like the Barclay Center ( Brooklyn Arena-Brooklyn Net home w/18,000 seats) valued at $200M over 20 years or the American Airlines Center (Home of NBA’s  Dallas Mavericks) for $195M for 30 years. In these instances they must realize that the team’s market area is significant with a fan base which is loyal and reliable and stretches to anywhere television and radio can reach. Still, it’s hard not to think about the possibilities and I believe, beyond the blockbuster deals, at some point linear thinking takes over. They see their hometown arena achieve a significant naming rights deal in a small market area and they start thinking and believing their convention center can do likewise. As an example, the Chesapeake Energy Center in Oklahoma City (home the NBA’s Thunder w/18,000 seats) obtained a naming rights deal of $36M for 12 years. The Cox Convention Center across town has 100,000 sq. ft. of exhibit space and a 15,000 seat arena (w/ minor league hockey and an arena football team) and obtained a naming rights deal valued at $1.7M for 7 years, nothing linear about that. Linear thinking doesn’t work when comparing naming rights values to major league sports.

Linear thinking doesn’t appear to work when comparing the values of existing naming rights deals for convention centers either. If you study the table below you will see that it is very difficult to see any sense using valuation methods (cost, income or market valuation) when it comes to establishing a convention center’s naming rights value. The comparisons are too few, the market sizes and the venue sizes too diverse to see patterns. Additionally some relatively small markets have achieved surprising value; the HY-Vee Exhibition Hall in Des Moines is a good example ($8million with a term of 10 years).

From the current number of naming rights deals (14) the following characteristics are evident:

• Naming rights deals were closed during or after new, expanded or major renovations took place.
• The core market areas for most companies holding naming rights are regional. One reason to pursue naming rights is to maintain and solidify the markets they already have. For those who are not historically regional, their eye is on expansion to new regional markets. This was the case for naming rights deals in Niagara Falls, CA – Scotiabank Convention Centre and Ottawa CA – the Shaw Centre.
• Most are for 2^nd tier markets in the US. I am convinced that convention centers in 2nd tier markets in the US are the best naming rights candidates.
• Proportionally Canadian convention centres are more likely to pursue and successfully close on naming rights in 1^st and 2^nd tier markets than the US
• The financial sector (banks, finance companies and insurance) have the highest percentage at 57%, technology companies next at 22%, then utility companies at 14%. At one point an airline held naming rights but that contract has lapsed.
• About 40% of the naming rights holders were acquired by other companies during the naming rights term. Expect name changes.

What’s in a Name?

For a convention center, I think there’s a whole lot in a name. It may sound trivial and shallow but the sound and the emotional response of a name can result in a name that can be so inappropriate, awkward and some say hideous that it is cause for public embarrassment and ridicule. There are many examples; The KFC YUM! Center in Louisville, Whataburger Field in Corpus Christi, Smoothie King Center in New Orleans and the  Bargain Booze Stadium in the UK.  Fortunately none of these venues is a convention center. One convention center in Des Moines had a naming rights deal with the final name being the Veteran’s Memorial Community Choice Credit Union Convention Center. In my opinion the name is an awkward mouthful. Common sense prevailed in this instance and the exterior sign remained The Veterans Memorial with the longer version seen less prominently in the interior of the facility.

The Inherent Difficulties for 1st Tier US City Convention Centers Pursuing Naming Rights

The success rate shows and I am convinced that convention centers in 2^nd and 3^rd tier markets in the US are the best naming rights candidates. Not long after new management took over the operation of the Javits Center in 1996, a private conversation regarding Javits progress took place where I was present. .By chance the subject of naming rights came up. Business at the center was turning favorable rapidly and the idea of naming rights seemed a natural. The conversation ended but no subsequent actions were discussed or planned. Within days, a bill was introduced in the NY State legislature prohibiting any attempt for a name change to the Jacob K. Javits Convention Center. I am certain no one at the meeting talked about it and clearly the draft of that legislation was prepared long before our meeting took place. So I learned how these matters evolve. I believe wise and experienced convention center managers at 1^st tier convention centers know in advance the likely outcome if naming rights are aggressively pursued.  If the center bears the name of a beloved and respected political leader, alive or dead, the effort will be mired in controversy. Potential naming rights sponsors will steer clear of the controversy and convention center leadership will be happy to oblige. If the center only bears the city’s name it is possible that the potential deal value will drive an action plan. Expect pride of place advocates to object to a name change. If that doesn’t discourage the effort, government procurement procedures pose another impediment. Acquiring naming rights is not on any company’s annual marketing budget. Candidates for naming rights have to be courted and persuaded; a process that does not fit into the typical RFP process.  This process needs to be conducted quietly whereas the RFP process is blatantly public and gives cause for a company to decline to bid. Convention centers should also seek out the services of a marketing consultant, one who has closed naming rights deals before and understands the language and nuances of naming rights valuation. In my experience and in all the research I conducted, none of the naming rights deals closed by following a traditional RFP process and most sought the help of a marketing consultant.

Recommendation – An Alternate Idea to Full Facility Naming Rights

There are some excellent examples of convention centers where portions of the centers are offered for naming rights. The David L. Lawrence Convention Center in Pittsburgh sold rights to its 34,000 sq. ft. ballroom to Dollar Bank for $1M and a term of 5 years. The Dollar Bank graciously named the ballroom “The Spirit of Pittsburgh” and installed several displays depicting the history of Pittsburgh throughout the center. At the Colorado Convention Center in Denver naming rights to its 5,000 seat concert theater were sold to Bellco for $1.25M at a term of 5 years. There are discrete and iconic architectural spaces that have naming rights potential in many convention centers; an elegantly designed ballroom, an outside terrace or garden used for special events, an architecturally prominent lobby, a new meeting room suite or technologically advanced boardroom. Convention centers which are very large and subdivided into separate buildings offer unique opportunities for naming rights. Imagine the four principal buildings of McCormick Place (the North, South, West and Lakeside Center) bearing corporate names. The tradition and integrity of the McCormick Place name stays in place and an excellent revenue prospect is exploited. I see similar possibilities at the Orange County Convention Center, the Vancouver Convention and Exhibition Centre and the Moscone Center.

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Written by mmcgrane Posted in Keeping Track of Business, Sales & Marketing, Uncategorized Tagged with Advertising Sales, Canadian Convention Centres, Colorado Convention Center, Community Choice Credit Union Convention Center, convention center, Convention Centres, Corporate Sponsorship, David I Lawrence Convention Center, Dollar Bank, Duke Enery Center, Enercare, Enercare Convention Centre, ESP Global, Hy-vee, Javits Center, Linear Thinking, Mccormick Place, Naming Rights, Scotiabank Convention Centre, Shaw Centre, WAM Associates