Weighing in on the FCC WiFi Regulation and Enforcement at Convention Centers – The Problem, the Fines, the Arguments and a Rational Path Forward for Convention Centers

In 2013 and 2014 the FCC launched three investigations of business practices relating to WiFi service at convention centers. In January 2015 the FCC issued an unequivocal Enforcement Advisory prohibiting any form of intentionally blocking or disrupting personal WiFi hotspots. The FCC has also levied heavy fines on three companies, two which hold exclusive telecommunications contracts at convention centers. Now as of this writing, a possible court challenge to FCC’s enforcement actions looms. Meanwhile show managers and exhibitors who depend heavily on reliable WiFi for their event are engaged in a level of utility planning that they are not well prepared for or used to. How did things get to this point and is there a rational effective path forward for convention centers?

For wireless internet services, things took a turn about 5 years ago with the explosive growth in WiFi. The convention center controversy started to emerge when some articles appeared in two industry publications in 2012 and 2013. They were written by the founder and Sales Director of an independent WiFi provider. One of the articles was much more than an information and marketing piece, but rather a direct disparagement of convention center wireless business practices.  The fire for this controversy was really lit with the announcement by the FCC in October 2014 of a Consent Decree to settle allegations that Marriott Hotel Services Corp. interfered with and disabled WiFi networks established by consumers in Gaylord Opryland Hotel and Convention Center. The settlement included a $600,000 fine, a development of a compliance plan and an agreement for Marriott to submit usage and compliance reports.

A Brief Chronology

  • March 2013 – FCC receives a complaint from an individual attending an event at the Gaylord Opryland Convention Center in Nashville that Marriott management was “jamming” mobile hotspots so that you can’t use them in convention space. In subsequent FCC investigations Marriott admitted that one or more employees used containment features of a WiFi monitoring system to prevent consumers from connecting to the internet via a personal WiFi network.
  • June 24, 2014 – FCC receives informal complaint regarding WiFi blocking at several convention centers in Cincinnati, Columbus, Indianapolis, Orlando and Phoenix. All these centers are municipal or government authority owned and Smart City is the telecommunications contractor in each. .
  • August 25, 2014 – The American Hotel and Lodging Association (AHLA), Marriott International (managers of Gaylord Opryland) and Ryman Hospitality Properties (owners of Gaylord Opryland) submit a Petition for a Declaratory Ruling to Interpret 47 U. S. C. – Section 333. Section 333 of the Communications Act provides that “No person shall willfully or maliciously interfere with or cause interference to any radio communications of any station licensed or authorized by or under this Act or operated by the United States Government.”
  • October 3, 2014 FCC issues a Consent Decree to settle allegations that Marriott Hotel Services Corp. interfered with and disabled WiFi networks established by consumers in Gaylord Opryland Hotel and Convention Center. The settlement included a $600,000 fine, a development of a compliance plan and an agreement for Marriott to submit usage and compliance reports.
  • October 23, 2014 – FCC receives an informal complaint about WiFi blocking at the Baltimore Convention Center. The telecommunications contractor at the center is MC Dean.
  • December 2014 –Google, Microsoft, the CTIA and others issue comments supporting the FCC’s action and agreeing with FCC’s interpretation of Section 333, their right to enforce the regulations and recommending denial of the AHLA’s Petition.
  • December 2014 – Cisco issues comments to the FCC regarding the Petition for a Declaratory Ruling to Interpret 47 U. S. C. – Section 333.
  • December 30, 2014 – Marriott issues statement explaining that the matter does not involve in any way Wi-Fi access in hotel guestrooms or lobby spaces.
  • January 5, 2015 – Smart City Networks issues comments to the FCC regarding the Petition for a Declaratory Ruling to Interpret 47 U. S. C. – Section 333
  • January 27, 2015 – .The FCC issues an Enforcement Advisory regarding intentional interference of WiFi hotspots.
  • January 30,2015 The AHLA, Marriott International (managers of Gaylord Opryland) and Ryman Hospitality Properties (owners of Gaylord Opryland) formally withdraw Petition
  • August 18, 2015 FCC issues a Consent Decree to settle allegations that Smart City interfered with and disabled WiFi networks established by consumers in various convention centers where they had contracts to manage the telecommunications systems and networks. The settlement included a $750,000 fine, a development of a compliance plan and an agreement for Smart City to submit usage and compliance reports. In an FCC press release regarding this matter, the FCC characterized the presumed intent of Smart City’s “blocking “ as an effort to collect an $80 daily fee charged for using the convention center WiFi.
  • August 18, 2015 – In response to the August 18th FCC press release, Smart City issues a press release commenting thatthere was no finding by the FCC in the Consent Decreethat the Smart City’s equipment would automatically turn off devices in response to economic considerations (for instance: payment of an “$80 fee”).
  • November 2, 2015 – FCC releases a Notice of Apparent Liability for Forfeiture fining MC Dean $718,000 for maliciously blocking personal WiFi networks in the Baltimore Convention Center and for creating interference for certain WiFi networks outside the convention center. As part of this document, two FCC Commissioners make dissenting statements regarding the Notice.
  • November 2, 2015 – MC Dean issues press release stating their objections to FCC’s action and announcing their intent to challenge the FCC Notice.
  • November 10, 2015 – On Twitter, Smart City makes statement supporting MC Dean’s intention to challenge the FCC Notice.
  • November 18, 2015 – MC Dean issues a press release referencing support for the statements made by FCC Commissioner Pai in testimony before Congress. In that testimony Commissioner Pai specifically referenced MC Dean’s Notice of Liability and stated that MC Dean did not break FCC rules. Further, he characterized the fines against certain communications companies as “egregious violations of due process.” MC Dean reiterated their intention to challenge FCC’s Notice of Liability.

The Power and Momentum of Bad Publicity

It’s hard to get past sentiments expressed in the many articles, editorials and blogs written about this matter. The headlines and vivid language portended an ugly outcome. This was typical – “It’s About Damn Time: FCC Says Convention Centers Can’t Block Wifi. Another read, “A couple months ago, Marriott got busted by the FCC for blocking personal hotspots of its guests at its Gaylord Opryland resort in Nashville. It was a simple plan: break everyone’s WiFi at a tradeshow, and then charge exhibitors $1,000 a pop to access the “official” hotel WiFi”.

Convention centers were specifically mentioned in the FCC’s Enforcement Advisory. Convention centers and their telecommunications contractors have been damaged by unfavorable publicity. Some flaws and blunders in their business strategy, pricing model and a few inelegant customer service practices have been exposed. For most of the convention centers however, especially where Smart City was the contractor, the economically driven motivation for containing or blocking unauthorized WiFi signals of personal hot spots was exaggerated. Yet FCC seemed to seize on the on the “you have to pay to play” theme. It was this emotional trigger that drove the FCC’s public statements and actions.

In retrospect there’s always been tension bubbling beneath the surface. Exhibitors are naturally suspicious of service pricing by exclusive contractors – from an event’s general decorating contractor to services provided by convention centers and their exclusive concessionaires. But the strongest sentiment and I believe the catalyst for the FCC to issue their stern Enforcement Advisory were the many written statements submitted by well known companies and organizations who were asked to comment on AHLA’s Petition requesting a Declaratory Ruling to Interpret 47 U. S. C. – Section 333. Google described Marriott’s actions as engaging in “secret jamming”. One statement by the Open Technology Institute summed it best, “There is a critical distinction between inadvertent interference and the sort of knowing and anti-competitive, economically-motivated interference that Petitioners seek to make legitimate with this Petition.” The FCC review of public comments on the AHLA’s Petition and resulting Enforcement Advisory were not thorough or objective. Indeed there is a crusading element characterizing their actions. They focused on the alleged mercenary nature of the WiFi blockage or jamming which was undertaken to coerce users to pay exorbitant fees and upsetting the principled ideals of transparency and fairness. In quick succession after the commentaries were read and published, the FCC issued their Enforcement Advisory and the AHLA and Marriott formally withdrew Petition. This was followed with these public statements by FCC’s managers and Commissioners:

  • “It is unacceptable for any company to charge consumers exorbitant fees to access the Internet while at the same time blocking them from using their own personal Wi-Fi hotspots to access the Internet,” – Travis LeBlanc, Chief of the FCC’s Enforcement Bureau
  • “….last year a bunch of hotels banded together and filed a petition with the FCC. They asked the agency to bless their ability to block hotel guests from using their own Wi-Fi connections under the guise of network security concerns. . . . let’s not let this petition linger or create any uncertainty. I hope my colleagues at the FCC will work with me to dismiss this petition without delay.” – Commissioner Jessica Rosenworcel, speaking at the Commission’s “ at the State of the Net Conference
  • “The Communications Act prohibits anyone from willfully or maliciously interfering with authorized radio communications, including Wi-Fi. Marriott’s request seeking the FCC’s blessing to block guests’ use of non-Marriott networks is contrary to this basic principle.”, – FCC Chairman Tom Wheeler

At this point in time with FCC’s Enforcement Advisory already published, investigations were well underway at other convention centers. The telecommunications service providers at those convention centers were Smart City and MC Dean. The writing was on the wall for both of them – expensive fines, public embarrassment and unreasonable regulations.

The Fundamental Flaw in FCC’s Investigations and Actions

FCC’s investigations relied on a fundamentally flawed premise – exhibit halls and meeting rooms were classified as space open to the general public. Further, attendees were regarded as consumers compared to shoppers in a mall or travelers in a train station. As one reads through the narratives presented in the Consent Decrees, Enforcement Advisories, press releases, and finally the Notice of Apparent Liability you come to understand through the FCC’s descriptions, expressed and implied, that they really did not understand what a convention center is. Several of the commentaries from other corporations and organizations talk about hotel guests as the aggrieved parties. In Microsoft’s commentary they gave an example of a hotel guest subjected to blocking:

“A proprietary network operator taking actions in the name of improving its network’s reliability or performance could also leverage these actions to compete unfairly and harm consumers.For example, if a customer arrives at a hotel with her own Mi-Fi device and the hotel interferes with the customer’s connection to that personal hotspot, the hotel can effectively force the customer to purchase the hotel’s Wi-Fi services to gain access, even though the customer has already paid her mobile operator for personal hotspot capability. In effect, the Hotel Industry Interests’ proposal would allow entities to use unlicensed spectrum in a proprietary manner, e.g., as if they were operators of licensed spectrum, thereby limiting or preventing access by lawful devices to the unlicensed spectrum, which is a public resource. It is precisely that sort of radio frequency interference — whether through use of signal jammers or sending signals to de-authenticate rival access points—that Section 333 is designed to prevent.”

 

Microsoft tells a good story. It has a real “bully vs. innocent victim” quality to it, one that seemed to resonate with the FCC. There are other comments on the record by private citizens, all from the perspective of a hotel room guest. These comments are irrelevant however. Convention centers are not hotels and their customers are not guests in a rented hotel room. The FCC carried on however and in the Marriott Consent Decree put convention centers in the same sentence as “…..places accessible to the public, such as restaurants, coffee shops, malls, train stations, airports, convention centers and parks” (quote from FCC’s Enforcement Bureau Order – In the Matter of Marriott International Inc. and Marriott Hotel Services Inc. – October 3, 2014). The FCC sees trade show and convention exhibitors and attendees as the general public in a public space. Indeed they are not. A typical trade show advertises its event to those in the trade only. In fact many times they have the tag line as “trade only”. Exhibitors do not want to use their limited time discussing their product or service with someone who has no intention of buying it. Exhibitors are not just any company. Quite often exhibitors are juried as to whether they’ll be asked to exhibit. These shows have an order and discipline that keeps them on focus and clearly excludes the general public and exhibitors who are not part of the industry sector. Conventions and professional meetings have similar methods. The public is not invited to a medical convention or an engineering seminar. The agreement or contract between an event management company and the convention center is a License Agreement, not a property lease as in a multi tenant commercial building. Licensing agreements are fairly lengthy and complex documents. The scope of the agreement normally includes a time period, financial terms, insurance matters, exclusive rights retained by the owner including access and services (such as internet access) and restrictions and rules about the use of the space. Portions of centers such as the lobbies, entranceways and concourses are public. These areas often include art for public viewing, coffee shops, restaurants and other retail. The meeting rooms and exhibit halls are not “public” (exceptions are public consumer shows such as automobile or home improvement shows – these are not the core business of convention centers).These facts were cited in Smart City’s comments to the FCC:

“….most of the parties supporting the Petition seem to agree that devices in normal operation that do not pose a threat to security or to network reliability and are operating in a public space should not be subject to containment. These parties are urging the Commission to balance the public interest for protection against carte blanche interference with the need for reasonable network management practices that ensure safe and reliable WiFi service in non-public spaces (meeting rooms and exhibit halls) and during private events.”

Cisco also described a related situation by equating a WiFi network at a convention center with an enterprise network vs. a home WiFi network or an enterprise network the public routinely uses and business security is not such an issue. An enterprise network is a common way to classify a network with a higher level of management control where network administrators can view managed and authorized access points as well as those that are not. The administrator can determine whether an unauthorized access point is a security threat or is likely to cause a reliability problem. A decision can be made to take appropriate action. This description fits what should be the network capabilities at a convention center. In their comments to the FCC Cisco describes further:

“…..in public places or places where the public is routinely invited, users have   every reason to expect that they can make use of personal hot spot technology, unless the user’s device is presenting a security threat of some type to the co-located enterprise or service provider Wi-Fi network. That balance shifts in enterprise locations where many entities use their Wi-Fi networks to convey company confidential information, trade secrets, and for the safety and security of the firm and its employees. In these situations, enterprises must be able to assert policies on the use of wireless technologies for employees and guests in order to safeguard the network, data and devices. This is not a problem limited to critical infrastructure firms or sensitive government installations, but can extend to any enterprise. Similarly, service provider Wi-Fi networks are used by members of the public with the expectation that their data and devices will be secure, and service providers must have the flexibility to use network management technology to meet that expectation.”

 

Section 333 and Rule 15 – Inconsistencies, Contrary Language, Confusion and Lack of Due Process

On legal and technical matters, the FCC in their investigations of MC Dean appeared to double down on their justification of a $718,000 fine. In a long (21 pages) Notice of Apparent Liability for Forfeiture the FCC’s narratives are much more detailed and strident. I got the impression that the FCC took this opportunity to counter the arguments posed by Cisco months earlier. The Baltimore Convention Center may have been more aggressive than most in its deauthentication of unauthorized hot spots. Additionally, continuing those actions after publication of the Marriott Consent Decree was clearly impolitic. But again, the FCC relied on a premise which was fundamentally flawed as described above. If you are close to this controversy and have the patience to wade through all the semantic arguments on Rule 15 equipment or the true meaning of licensed radio stations, or if deauthentication fits the FCC’s meaning of interference, or the fair warning rule, you will find yourself agreeing at some point with the FCC and at times with the convention centers. That in itself is at least cause to consider a rulemaking review. The dissenting opinions of Commissioners O’Reilly and Pai point out the inconsistencies and confusion of the current regulations and recommend a thorough FCC review. They have made these statements in their dissent over the Notice of Apparent Liability (MC Dean) and most recently (FCC Commissioner Pai) in front of the House of Representatives Subcommittee on Communications and Technology.

Recommendations – Next Steps for Convention Centers

  1. Be Cautious About the Possible MC Dean Court Challenge with the FCC – The disagreements MC Dean has with the FCC align well with the positions of other convention centers and their contractors and the dissenting FCC Commissioners (Pai and O’Reilly). However, I believe that in court the FCC will make a convincing case that section 333 is broad enough that it can be applied to unlicensed WiFi operations. The peculiar thing about 333 and other rules is that arguments can just as easily be made in favor of the convention centers point of view. My belief therefore is that the process or forum where disagreements can be aired and discussed is as meaningful as the substance. What should be avoided is the possibility of this becoming a face saving exercise. If this happens, given the political winds, the FCC’s current Enforcement Advisory will probably prevail. I favor something akin to the AHLA’s Petition or any alternative forum where the issues can be discussed rationally and there is recognition that a convention center’s exhibit halls and meeting rooms are classified improperly by the FCC. The forum should be non confrontational, the players have to be well prepared and knowledgeable and the message has to be well crafted. I am aware that IAVM has organized a group, the WlFi Coalition, which includes convention center, telecommunications contractor (Smart City in this case) and event manager participation. I am no fan of committees but this is a good start. Hopefully the outcome of the group’s efforts will show that the convention center industry is a bona fide industry sector and their WiFi operations unique and set apart from the general public. Perhaps such a group would have standing to represent the convention center industry in discussions with the FCC.
  1. Don’t Give Up or Forfeit Wireless Services as an Exclusive Service – You’re in a serious business with serious players. To fail at this would tell the marketplace you are not. It will damage your brand. It will adversely affect event bookings and it will further erode service revenue.
  1. Demonstrate Competence in Supplying Wireless Service and Do It Consistently – You can’t really be exclusive unless you consistently demonstrate safe and reliable services. Your clients would prefer an elegant solution with a convention center designing and operating a reliable network with ample bandwidth and proper management practices to handle high density situations. They also expect security from potential problems such as a concentration of independent (unauthorized) WiFi users adversely affecting operations to be pre-emptive so problems are solved before they can happen. At this writing, CES is underway at the Las Vegas Convention Center. It will be interesting to see how things go. Cox Communications has the exclusive contract for telecommunications there, including WiFi. They have brought in several telecommunications sub-contractors to handle volume and help manage the massive network requirements for this show. If things go well and for the benefit of all convention centers, there is a wish list:
  • For the LVCC – Write a case study about the experience. This is not a request to give away technical secrets. Rather it is simply the good news which would lift the confidence of event managers who have many other things to worry about and I believe would prefer the elegant solution of a single competent telecommunications team that their exhibitors and attendees can count on.
  • Be conscious of keeping all the success stories out there through press releases and case studies. Do not sit quietly when untrue and exaggerated claims against you are made
  • For the trade show press and bloggers – Maybe you should write about it too.
  • For the independent suppliers of WiFi equipment – Rather than shoot arrows from your comfortable chair or acting as a proxy enforcer for the FCC, get some skin in the game; compete for a convention center telecommunications contract, take the risk and make the necessary capital investment, provide the day to day resources of talent, labor, administration and equipment, and sweat over ROI and profit/loss statements.
  1. Perform a Thorough Management Review of Policies, Contracts and PricingThe optimist’s guidance is usually to try and make an asset out of a liability. This controversy is a setback but also an opportunity to make things right. If and when the FCC gets around to re-considering something akin to the AHLA’s original Petition, some clean up and thoughtful review of policies and WiFi pricing will dampen the toxic emotional environment that propelled this controversy in the first place. Some obvious suggestions:
  • The negative consequences of exclusive contractors overreaching on price is nothing new. It’s an old recurring issue in the convention center business. When there are exclusive contracts based on minimum revenue guarantees and profit sharing, contractors can easily morph into accountants and bankers rather than service providers. Convention center managers have to be assertive and review pricing structures periodically. Most exclusive service contracts give centers the discretion to change prices. Pay attention to market trends, concepts of fair price can change rapidly.
  • Convention center management has to be directly involved all the time when exclusivity disagreements arise. As operators we have all experienced this. In my time at Javits we would periodically run into a disagreement on the exclusivity of food & beverage service, on corporate sponsorships and electric service. These matters can be handled and settled with finesse and good solid judgment. When they are settled in a heavy handed fashion, the controversy ferments and the results are usually ugly.
  • If you have a contract with a telecommunications firm don’t be constrained from taking action because of contract terms. Think about whether the contract needs to be amended in light of the current circumstances. There has to be a means of keeping pace with the rapid wireless communications changes and the business habits event attendees while keeping the business terms of fair commissions for the convention center and fair rate of return for the contractor.
  1. Think Very Seriously About Offering Free WiFi for the Entire Convention Center – Many of the convention centers already have implemented this in the public spaces. Only two that I know of offer WiFi throughout the center. The Boston Convention and Exhibition Center and the San Jose Convention Center offer it throughout with no conditions. Reports from Boston show that WiFi use has doubled since free WiFi was rolled out.Reckoning with free WiFi is a tough call for many but is the best course of action. There is an author Chris Anderson who wrote a book entitled “Free: The Future of Radical Price”. He has a clever way of addressing this issue:
  • If it’s digital, sooner or later it’s going to be free. In competitive markets price falls to marginal cost. The internet is the world’s most competitive market and the marginal costs of technologies it runs on –bandwidth, processing and storage – will become less each year. Free will become not just an option but an inevitability.
  • You can’t stop free. In the digital realm you can try and keep free away with laws and locks, but eventually the force of economic gravity will win. What that means is the only thing stopping your product from being free is a secret code or scary warning, you can be sure that there’s someone out there who will defeat it. Take free back from the pirates, and sell upgrades.
  • Sooner or later you will compete with free.
  • You can make money from free. People will pay for convenience, to save time, for status, for the things they love. Free opens doors, reaching new consumers.

If implemented, convention centers and their contractors will have an expense when previously there was reliable revenue. Also, free WiFi doesn’t mean diminished service and slow reaction to problems. In fact, I would expect service expectations to intensify.

Monetizing free WiFi may not be as foreign or daunting as you think. For convention centers and their contractors, there’s a few obvious ways to exploit free WiFi for revenue opportunities; classify free as basic service and up-sell premium on the WiFi guest portal; sell advertising through ads or a downloadable mobile app for local restaurants and entertainment; sell stuff; sell push notifications; run a concierge service. In fact there are many ways to exploit free and there are countless examples from other companies’ experience about what works and what doesn’t.

 

Sales and Marketing – Making Sense of Vertical Markets

The phrase “vertical markets” has a different meaning depending on what segment of the trade show and convention industry you’re talking about. Trade show organizers regard a vertical market from a purely commercial point of view. For them, vertical shows promote a single industry category to a specific clientele. By contrast, a horizontal show has many product categories with broad market appeal. For example, Cebit, the huge technology event staged annually in Hannover, Germany, is a horizontal event. CeBit showcases a wide range of innovations and products from many vendors. The attendee base is from many industries. Compare Cebit with another IT event, the Healthcare Info & Mgmt Systems Society Conference and Exhibition held in Chicago this year. This vertical event is held specifically for the medical healthcare sector and the difference is evident.

For convention center and CVB sales and marketing teams, the meaning of vertical markets is very different. Here the meaning is broad and can refer to any event in a particular industrial sector. The phrase “verticals” is often used in marketing plans and intra-industry conferences among convention center and CVB managers. Quite often you will see staffing responsibilities defined with “vertical” sales and marketing assignments; medical, financial, manufacturing, agricultural, religious, etc.

How are vertical markets selected?

  1. The Case of Professional Associations – For cities pursuing professional association events, the destination appeal, the hotel and meeting room package and the overall cost to association members governs location decisions. Cities and convention centers should know their destination attributes, have a good sense of price point tolerances and overall be able to choose verticals which fit. Large leading convention cities which attract a wide range of association convention and conference business will naturally choose the most reliable and profitable verticals to target. For second and third tier cities the targeting of certain verticals has to be more measured and reflective.
  1. The Case of Trade Associations and Privately Owned Trade Shows – For these events, location choice is governed by the marketplace where buyers and sellers will reliably gather. Choosing which verticals to pursue is based on straight logical business reasons; the industry represents a leading employment base in the region, there is emerging industry growth giving the region leadership status and enumerated by the number of start-up companies, new patents, amounts of venture capital investment, etc. It could also be that the event’s industrial sector fits your city’s traditional brand – San Jose is “Silicon Valley”, Nashville is “Music City “ , Chicago is “Tool Maker, City of Big Shoulders”. These are all good reasons to dedicate sales and marketing resources to certain vertical markets.

We considered all this and believe the selection process for verticals falls short. What is missing is quantitative analysis of actual market behavior over time. Our belief is that the effective use of statistics and thus chances of success (probabilities) complements and improves marketing judgment. Well informed professional judgment can contribute insightful, nuanced interpretations of data and add market intelligence that cannot be enumerated. Over time quantifying things will become a basis for reliable business forecasting and provide a true rationale for pursuing verticals. It also creates a clear vision of market impediments and opportunities.

We took an in-depth look at two verticals; medical/health science and religion. Both are popular verticals; medical/health science due to its growth, reliability and spending behavior and religion because their events normally occur in summer. Our approach was to obtain as much information as possible by reviewing event directories, news articles about the same subject markets and visiting individual event websites. Our method was to select a sample of events (we chose large national events) and obtain a history of event locations. Our hope was to obtain 10 years for each event, our average was 6 years. We fit the events into eight (8) regions which were selected based on geography as well as economic and cultural similarities:

  • Hawaii – On Oahu – Honolulu, and other islands – Maui, Kauai and Hawaii
  • Pacific Northwest – Alaska, In Canada – Vancouver, Washington, Oregon and Idaho
  • California
  • Southwest – Arizona, New Mexico, Nevada and Texas
  • Rocky Mountains – Utah, Colorado, Wyoming and Montana
  • Midwest/Plains – North and South Dakota, Iowa, Missouri, Oklahoma, Nebraska, Kansas, Minnesota, Wisconsin, Michigan, Illinois, Indiana, Ohio
  • Northeast – In Canada – Toronto and Montreal, Maine, New Hampshire, Vermont, New York, Massachusetts, Rhode Island, Connecticut, New Jersey, Pennsylvania, Delaware, Maryland, District of Columbia
  • Southeast – West Virginia, Virginia, Kentucky, Arkansas, Louisiana, Mississippi, Alabama, Tennessee, North and South Carolina, Georgia, Florida, Puerto Rico

Our main objective was to record shows with fixed locations and examine and record shows that changed locations each year. For rotating events we picked out predictable patterns as they rotated regions and cities within regions. We also determined probabilities of success for individual cities. The analysis also permitted us to draw conclusions, to explore the fundamental reasons for location decisions and to offer suggestions for convention center and CVB sales teams. We feel we achieved a true and unique understanding of these event markets. The tables below show the results for leading cities:

RMHSECC_TSNN

The statistics above show a more open ability to for cities to compete for these events if a larger sample of rotating national events is used. When only surveying large and presumably more important medical/health science events the findings show the events more likely to choose higher rated cities. Interestingly, Chicago’s percentage climbs to 19.2% if all TSNN Top 250 shows are included (RSNA, ASCO and Chicago Dental among them).

RRECC

For religious events there is clearly a preference for cities in the Midwest and Southeast. Also notable is that second and third tier cities have relatively high probabilities of booking success.

Convention center and CVB sales teams need to take time to create a statistical description of each vertical shaped and informed by professional judgment as a likely market. Obtain as much history as possible, look for predicable patterns and calculate chances of success. Find out why events choose certain regions, cities and venues over others. Compare one vertical to others and determine which is worth pursuing based on probabilities. The purpose for defining these verticals and obtaining predictable patterns and probabilities is to organize your marketing/sales program to concentrate on the most likely prospects.

Click the link below and learn more about the medical/health and religious event markets by purchasing and downloading our white papers – “In the Pursuit of National Medical/Health Science Events – A Primer Focused on Convention Centers” and “Booking National Religious Events – A Primer for Convention Centers on How Event Location Decisions Are Made”  http://www.conventioncenternow.com/white-papers

 

Keeping Track of Business – All About Occupancy

For convention centers there is certain elegance in using occupancy as a key performance indicator (KPI). One indicator can reveal all – you’re busy, you’re prosperous and perhaps profitable, your operation provides a steady employment base, and your business draws a lot of out-of town visitors to city hotels, restaurants and entertainment venues – or not. High occupancy draws praise, increases revenue, supports further investment, and permits a level of selectivity when booking events. Low occupancy draws scrutiny, often unfavorable, which questions the wisdom of the investment in the first place, and the reaction from convention center management and advocates is generally uneasy and strained. However, occupancy as a performance indicator is unavoidable. As operators you should focus on it and understand how to react and use it. Occupancy is not complicated. Using the method that hotels use as a model is a simple and legitimate way to follow. The performance indicators used by hotels is based on the “Uniform System of Accounts for the Lodging Industry”. These standards are tried and true and accepted by the hotel industry:

For hotels, occupancy is the percentage of available rooms that were sold during a specific time period.

  • Supply (Rooms Available) – the number of rooms in a hotel multiplied by the days in the month
  • Demand (Rooms Sold) – number of rooms sold by a hotel, does not include comp rooms or “no-shows”

Occupancy is calculated by dividing the demand (number of rooms sold) by the supply (number of rooms available).  Therefore – Occupancy = Demand / Supply. Reporting periods for hotels are generally by month and quarter both, with a cumulative average calculated annually. Note that occupancy is not applied to other parts of the hotel such as meeting rooms. The core business of the hotel is to sell sleeping rooms, so the occupancy measure relates to only core performance.

Measuring occupancy should be very similar for convention centers. In this instance because meeting rooms are sometimes viewed differently than exhibit halls, all rentable space (meeting rooms, ballrooms and exhibit halls) should be expressed in square feet.

  • Supply (Space Available) – The amount of square feet available (sum of meeting room, ballroom and exhibit hall square footage) over a given time period
  • Demand (Space Rented/Licensed) – The amount of square feet rented/licensed (sum of meeting room, ballroom and exhibit hall square footage) over the same time period

 Occupancy is calculated by dividing the demand (amount of square        footage rented/licensed) by the supply (amount of square footage available). Therefore – Occupancy = Demand / Supply. As an example, say your convention center rented 150,000 sq. ft. for 17 days in September. Your center has 300,000 sq. ft. available to rent each day, then:

Occupancy (September) = (150,000 sq. ft. x 17 days)/ (300,000 sq. ft. x 30 days)

Occupancy = 2,550,000/9,000,000 = 28.4%

Curiously, in my time as a consultant I have run across more than one convention center using a different method which is absurd and just plain wrong. In those cases any occupancy, no matter how small, is regarded as 100% for the time period. Now that’s more than a fisherman’s lie, a great deal more.

Occupancy Nuances

Occupancy is always questioned when serious capital investments, like center expansion, are considered. If board members don’t question it, bankers surely will. There are always distinctions, implications, and complexities when measuring something so important. Know what they are and be prepared to explain things rationally. It’s best to have other performance indicators as support.

  • Event Move – In and Move – Out Days – Regard these days as occupied days. Here is where you could say that one center’s occupancy figure for an event does not equal another’s. If your occupancy level is traditionally low, you will often permit many more move-in and out days than a center with high occupancy. You may even comp or discount the rent for those extra days. Contrast this to a very busy center where aggressive date/time management means attaining a few more events. Hence, the number of move – in and move – out days is actively negotiated. The difference between the two convention centers may be inconsequential but it is a worthwhile distinction to understand.
  • What About a History of Low Nets? Doesn’t that De-value the Value of Using Occupancy as a Key Performance Indicator? – Yes it could. In my time at the Javits Center we always measured show net to gross square footage (expressed as per cent) for exhibit halls. Our purpose was to monitor net square footage performance. A low net to gross ratio was often cause for a discussion with show managers whose event may be declining. The Javits Center had many recurring events and still does. If we saw an event consistently fall below a certain net/gross percentage, after a time we’d move the event to less desirable space in favor of a show that was growing or a new show. Our advice is to measure net/gross % in parallel with occupancy.
  • What About the Quality of the Events? Where Does Occupancy Fit In? – Occupancy is agnostic to the quality of events. Agreed, there are some low quality events, like electronic wholesalers or flea market type consumer events. Let the quality issues come out in the other performance indicators such as service revenue per net square foot or the number of hotel room nights generated.
  • What About Events that Are Licensed Outside of Rentable Space? – The example set by the hotel industry applies. They only measure sleeping rooms in their equation. Sleeping room sales is their core business and a simple and pure occupancy figure avoids distortion and equivocating. Rental of meeting rooms or ballrooms is not in a hotel’s occupancy rate. But consider that most other hotel income, meeting room rental, F&B, parking etc., derive from sleeping room sales. Some convention centers conduct business outside normal rentable space (meeting room, ballrooms and exhibit halls). The LA Convention Center and the Javits Center enjoy revenues from film and photo shoots. The price basis for this business is normally a location fee, unless they are using meeting rooms or an exhibit hall. That’s not the usual way film and photo shoots operate however. They favor public spaces and tend to be free ranging, making on-site changes and often using a variety of corridors, outside space, even the roof. It’s tempting to include all the free ranging space used and include it in occupancy calculations. Our advice is stay pure, keep this square footage used out of occupancy calculations unless they operate in a fixed rentable space.

Parsing Occupancy

Now that you understand occupancy, use it as a statistical foundation for other key performance indicators:

  • Compare occupancy by exhibit hall by month – Use it as a basis for setting rental prices. Demand pricing is used in many other business sectors, most commonly airline travel and hotels. You can simulate past years occupancy to see how revenues can change with a demand pricing model. The objective of course is to increase rental revenue and create price incentives for events to consider off months and less popular halls. To our knowledge no convention centers use demand pricing as a consistent formal pricing method.
  • Calculate monthly and annual revenue and expense per Occupied Day – Use this as a basis for forecasting based on predicted occupancy.
  • Calculate monthly and annual energy use and cost per Occupied Day – Use this as a basis for forecasting energy costs, one of your largest line expenses. Graph same and you may be surprised what you find. Our good guess is the result will be non – linear.

Seventy Percent (70%) – Why is it Maximum Practical Occupancy?

More than 20 years ago the firm PWC proclaimed 70% to be the maximum practical occupancy for convention centers. Their logic was that convention and trade shows have definite dates and days of the week in mind and typically don’t compromise. Naturally there are gaps of several days or more between these events. Add holiday times of year such as Christmas when any trade show or convention is rare. Now the event day possibilities lessen, making 70% ring true. Having experienced over 70% occupancy, there are other factors to support PWC’s theory:

  • Building and plant maintenance becomes quite difficult. Deferred maintenance lists grow rapidly. Odds increase for a utility infrastructure failure – power outages, air conditioning failures
  • Labor and staff end up working long hours. Sometimes inexperienced part time workers have to be hired, leading to service complaints. Vacations and time off become difficult to schedule
  • General Decorating contractors, already working with thin profit margins, see profits shrink as they may have to fly in extra management and supervision from other cities. Labor over-time prices are unavoidable, except in cities with “1st eight straight” work rules.

 

Facility ManagementEnergy Management – Choosing a Replacement Lighting for High Bay Fixtures in Exhibit Halls – LED vs Induction Lighting

For high bay lighting applications in exhibit halls, most of you have already made the transition from mercury vapor to metal halide. Now many of you are no doubt thinking about the next transition. Lighting technology is improving at a very rapid pace and each technology transition provides material improvements in lighting efficiency (lumens/watt), lumen depreciation, lamp life, energy costs and maintenance costs. Two lighting technologies have demonstrated clear advantages over metal halide; induction lighting (IL) and light emitting diode lighting (LED).

IL lamps are a specialized type of fluorescent lamps that do not have direct electrical pin contacts but rather use an electromagnetic coil which provides a more gentle start making the lamp life much longer. Their commercial application is growing steadily and they are frequently used for street, parking lot and site lighting. IL’s long bulb life (100,000 hours) make them an excellent candidate for high bay lighting applications.

Until this past year operators of commercial buildings with ceiling height more than 20 feet had limited choices for the next generation of energy efficient lighting. LED technology could not measure up to customer expectations for providing uniform light at floor level for high bay fixtures. However, rapid improvements in luminaire design (especially in regard to brightness and glare) and lighting efficiency make LED a competitive choice. Also, the differentiator of pricing between the two technologies is slowly disappearing. Falling prices and rising lighting efficiency is beginning to generate savings that offer payback periods of 2-3 years for LED comparable to IL.

There are many quick and simple comparison charts and tables available on the internet listing the pros and cons of LED and IL. It’s important to understand that these references often promote a point of view where one technology is favored over the other. The negative references tend to focus on the case studies of low quality products which often populate markets when new technologies are rolled out- this is the case with LED.

Operating Factors – Comparison

The comparisons below between IL and LED represent a composite of actual installation experience as a facility consultant for St. Johns University in New York City, an extensive literature review and, interviews with lighting engineers and the Association for Energy Engineers:

  • Lighting Efficacy (lumens per watt – l/w)
    • LED – 85 -95 l/w; New generation LED bulbs are reported to have efficacy values of 110- 120l/w. Philips Lighting has reported development new LED bulbs with efficacy values exceeding 200 l/w.
    • IL – 70 – 85 l/w
  • Color Rendition Index (CRI) – Convention centers should consider themselves as a retail environment. CRI values less than 80 are not acceptable. Ask distributors about bulbs with CRI values greater than 80.
    • LED – 80
    • IL – 80
  • Correlated Color Temperature (CCT –in degrees Kelvin) – The higher the CCT the more clean or bluish the light quality. A lower CCT (<3000) will produce a warmer light quality.
    • LED – 2,700K – 6,500 K
    • IL – 2,500K – 6,500K
  • Lamp/Bulb Life (in operating hours)
    • LED – 50,000 to 55,000 hours
    • IL – 100,000 hours
  • Lamp Lumen Depreciation (LLD – % lumen loss over time)
    • LED – LEDs will see a gradual decrease very similar to IL in lumens to 50,000 hours then LLD will drop steeply. This performance is dependent on the ability of the fixture to dissipate heat. LLD will be greatly accelerated if this cannot be controlled.
    • IL – IL bulbs lumens decline about 10% in the first 10,000 hours then remain fairly constant until about 70,000 hours when LLD begins to drop steeply
  • Light Dispersion Characteristics
    • LED – LED has more flexibility with light-distribution patterns. With LEDs and their secondary optics, you have the ability to get the light where you need it.
    • IL – Induction luminaires must be used with a reflector in order to make use of the total light output.
  • Glare Characteristics
    • LED – Can be a serious problem. Poor fixture design and elevation placement can cause very distracting glare with LEDs. LEDs light comes from tiny sources that create very high brightness from a very small area — very high nits or candelas. The key to success is optics. This is no small matter to convention center management and you have to get it right.
    • IL – Not a problem with properly designed luminaires
  • Reliability (Failure Rates)
    • LED – There are reports of unsatisfactory reliability from poorly manufactured fixtures and bulbs. Convention center managers are wise to rely on a high quality LED manufacturers (GE, Philips, Lumileds, Cree, Nichia, OSRAM) to ensure reliability
    • IL – A more mature technology with a good reliability record
  • Ambient Temperature Sensitivity
    • LED – Very sensitive to sustained high temperatures (>25 degrees C or 77 degrees F). Many high-bay LED fixtures feature a horizontal top surface that’s susceptible to dirt accumulation. This reduces the fixture’s ability to keep the lamps cool. It will also reduce lamp life and increase LLD. Fixtures with vertical fins are less prone to clogging from dirt. For exhibit halls in most of the US, there is a definite stratification of temperatures in exhibit halls especially during event move in and move out. Temperatures at elevations above 25’ can easily exceed 90 degrees F. If LED is elected, be sure to compare a fixture’s rated temperature to the expected ambient conditions. Otherwise, you may have to consider de-stratification fans (paddle fans won’t do). If choosing LED obtain the lamp/ with the best temperature performance.
    • IL – Much better performance at high ambient temperatures (50 – 100 degrees C or 122 to>200 degrees F) with little to no effect on lumen output or lamp life
  • Fixture Appearance
    • LED – Some of the heat sink designs make the fixture look very unconventional. Also a flat topped fixture is likely to accumulate dirt.
    • IL – Very conventional looking fixtures.
  • Warranties
    • LED – Presently up to 5 years
    • IL – 5 to 10 years
  • Disposal of Hazardous Waste
    • LED – There may some exotic elements in the circuitry. Ask the manufacturers and pay attention to environmental protection regulations
    • IL – IL contains a small amount of mercury. The disposal of mercury is regulated and requires special procedures

Recommendation

We are clearly in favor of LEDs over IL. The pace of improvements in all operating factors is very rapid and we believe the IL advantages, such as lamp life, will slowly disappear. We advise that if elected, you choose on the basis of quality considering all factors, not simply energy savings. This means relying on brands that have a history and indeed legacy of manufacturing quality lighting products. Other factors to consider in this decision are listed below:

  1. Certainly no convention center manager wants to be faced with a highly visible failure of LED fixtures. For LEDs, there is still uncertainty regarding consistent quality as industry wide and governmental standardization and regulation continue to evolve.

The DOE Energy Star program is one where you can find standards which should give some safety and direction to a decision to installed high bay fixtures:

Look for the ENERGY STAR label. ENERGY STAR means high quality and performance, particularly in the following areas:

  • Color Quality
    • 6 different requirements for color to ensure quality up front and over time
  • Light Output
    • Light output minimums to ensure you get enough light
    • Light distribution requirements to ensure the light goes where you need it
    • Guidelines for equivalency claims to take the guess-work out of replacement
  • Peace of mind
    • Verified compliance with more than 20 separate industry standards and procedures
    • Long term testing to back up lifetime claims
    • Testing to stress the products in operating environments similar to how you will use the product in your home
    • 3 year minimum warranty requirement

All ENERGY STAR products are subject to random testing each year to ensure they meet the ENERGY STAR requirements.

  1. Consider the fact that most of the retail world is converting to LED. The exhibit floor during a trade show is very much like the retail environment.
  2. Philips Lighting has entirely abandoned Induction lighting and is actively promoting LEDs over all other lighting technologies (at which they are the global leaders).
  3. Convention center finance managers have grown used to very favorable ROIs and paybacks for lighting improvement projects, usually less than 3 years. In this instance, where the higher cost may push the payback higher, we recommend a life cycle costing evaluation. If capital is a problem, there are many rebate programs available related to demand reduction as well as straight energy conservation through your electric utility and/or state government.

Before you launch a lighting replacement program with LED in mind, we recommend that you engage a lighting engineering group, one that has many retail clients. In lieu of hiring a lighting engineer, choose a lighting distributor that has no strong business ties to either IL or LED manufacturers. In fact a record of installations using both technologies should be a prerequisite. Narrow your choices but first do a test in one or more areas of your exhibit halls, take measurements and seek reaction from some of your clients.