AUTHOR’S NOTE: This article was co-authored by Patrick Sarcinella. Patrick has over 25 years of event technology experience in the convention industry. His experience includes positions as Sr. Director of Sales for Millennium Technology Group (Rosen Hotels and Resorts) and Sr. Director of Southeast Operations with Smart City Networks, where he worked for over 16 years of his career, As part of this position Patrick led the Smart City team at the Orange County Convention Center.

The timing coincidence of two random events – the pandemic, and the other, the rapid success of groundbreaking improvements in wireless communications, have made the future of internet services at convention centers challenging.

As this issue of The Convention Center Advisor is being written, event market uncertainty persists. Convention centers have again been re-purposed from field hospitals, homeless shelters and COVID testing sites, to new roles as vaccination-sites and temporary shelters for unaccompanied migrant children. Until recently business reporting favored the dark side. Cancellations of leading sector events scheduled for Q2 2021 were reported regularly. Economic consultants serving CVBs and tradeshows were predicting a return to pre-pandemic event numbers anywhere from 2022 to as late as 2024. Grim forecasts for the airline and hotel sectors also portended an uncertain recovery. The International Air Transport Association (IATA) reported that US domestic air travel was down 65% from 2019 with return to pre-pandemic levels coming in 2024. Hotels were also voicing a similar forecast. Reported by hotel data firm STR, the pandemic was projected to erase a decade’s worth of revenue per available room (RevPAR) gains with room demand and average daily rate (ADR) unlikely to bounce back to 2019 levels until 2023 and 2025.

Now that Q1 2021 has come to an end, there are positive industry news stories about events taking place, albeit smaller and often virtual. Last month at a conference for the Association of Performing Arts Professionals, Dr. Anthony Fauci expressed optimism that live concerts and festivals could return sometime this Fall. Most believe this news also applies to conferences, conventions, and tradeshows. Vaccination progress improves daily and is reflected in most market news. Normally circumspect Forbes Magazine, in a March 1^st article titled “Trade Shows Will Regain Importance After the Covid-19 Pandemic”, predicted a healthy comeback for tradeshows. The writer, Bill Conerly, characterized it this way, “Companies, like bicyclists, can coast now and then, especially if they have good momentum and especially if their competition also coasts.  However, when competitors start pedaling again (or peddling), companies that ignore trade shows will fall behind. The benefits of exhibiting will help trade shows and conventions to resume, though with some changes.”  A more cautious tone was expressed in a recent Wall Street Journal article on March 14^th. Some recognition was given to tradeshows which have been piloting events of reduced size as well as ‘hybrid’ events that combine live exhibits and virtual presentations. However, the Journal opined that tradeshows will not return to their pre- COVID levels until 2023. For us, in conversations with industry contacts there is talk of fewer event cancellations, the recall of furloughed employees, and renewed enthusiasm from the exhibiting community for resuming tradeshows. Nevada’s Governor just relaxed capacity limits for mass gatherings to 50%. Our sense is that consumer pent up demand is transforming from palpable to tangible, evidenced in part by a surge in discretionary spending and experiential activities like restaurant dining and travel. Let us hope the “animal spirits” that drive today’s stock markets will revitalize our industry as well.

Where Things Stand –Business Environment Considerations for Convention Center Communications Services (Telephone – Analog Wired and Cell Service, WiFi Service, Wired Internet Service)

Given this business environment, it’s time for convention centers to actively plan a re-opening strategy. The business consultancy, McKinsey, expressed it this way, “….,organizations are transitioning from their only agenda item being near term survival to peering through the fog of uncertainty, thinking about how to position themselves once the crisis has passed and things return to normal”. We all sense that the “new” normal will be quite different than 2019. As the recovery takes hold, we will see fewer events, smaller in size and less attended. Convention centers will have a multitude of challenges, some of a general business nature such as:

• Getting as many events as possible through the doors and regaining 2019 their market share of events.
• Reckoning with stark reductions in event service revenue due to fewer exhibitors and attendees. Also, expect demands for rent concessions from event organizers who have the advantage of a buyer’s market.
• Dealing with the possibility of reduced subsidies to support operating deficits and capital projects. One prime source, hotel occupancy tax receipts which are already at diminished levels, will have a difficult recovery.

Other challenges deal directly with the convention center’s phone and internet service:

• Having capital resources to catch up with the pace of digital technology innovations that have been popularized during the pandemic.
• Developing a plan that prepares for increased internet service demand due to growth forecasts in 5G mobile device ownership and use.

On an operational level:

– Improving the relatively poor WiFi quality of service experienced with slow speeds and lost connections.
– Dealing with sub – standard cell phone coverage in many parts of convention centers with degraded signal
strength and dropped calls. These problems are due to the facility’s dense concrete and steel construction or LEED approved glass exterior curtain walls.

The graphics below depict the scale of capital and operations expenses for different size convention centers:  

Pandemic Recovery – A Business Case for New Capital Investment

WiFi6

1. The industry changed the naming of specific wireless internet services to something simpler and memorable. That means the technical standard, IEEE 802.11, became WiFi. and follow – on versions were named in sequence, so Wifi 4 became WiFi 5 and now WiFi 6. Within the standard for WiFi 6 is a feature called Orthogonal Frequency Division Multiple Access (OFDMA) which differentiates WiFi 6 from other WiFi versions in a material way. The feature solves convention center WiFi’s most vexing problem. It allows multiple users with varying bandwidth needs to be served simultaneously from APs without the nuisance of slow speeds or sudden loss of connection. It supports earlier WiFi versions with better performance and provides a platform for innovative applications, such as 4K video streaming, virtual reality, augmented reality and collaborative apps like Zoom and other video conferencing applications. In sum, WiFi 6 improves speed, capacity, and control.
2. With technical problems solved, business will improve. It is reasonable to assume that a WiFi 6 equipped venue will likely generate more revenue and improve customer confidence in WiFi quality. It is also plausible that a WiFi 6 venue may have a competitive advantage for booking certain technology events.
3. WiFi 6 is commercially viable. Many large venues, particularly stadiums, have installed WiFi 6. Examples are, Ohio State Stadium – Columbus, Lucas Oil Stadium – Indianapolis and Nissan Stadium – Nashville. As of this writing we do not know if WiFi 6 has been installed in any convention centers.
4. Making an investment in WiFi 6 as we come out of the pandemic is a smart way of preparing for a surge in WiFi demand. The surge will follow close behind growth of 5G mobile device ownership. Services such as 4K streaming will become commonplace and you should expect event exhibitors and attendees to use them routinely.
5. The cost of WiFi 6 can be managed and be gradual. The overall cost has a wide range based in part on the continued use of some WiFi 4 or 5 equipment and communications cable. The purchasing power of the convention center (public venues often utilize the purchasing advantages of state contracts) or the purchasing power and leverage of an outsourced internet contractor like Smart City Networks or Cox Communications will also reduce costs. Know that an outsourced contractor would normally absorb the full cost. Using the cost per AP as a guide, a rough estimate should range from $500 to 1000 per AP. Each AP has an effective coverage of 1,500 to 1,750 square feet.

Note 1: Small and mid-sized convention centers that have a WiFi 4 or 5 system in place that satisfies WiFi demand and service levels for event organizers, exhibitors and attendees may want to delay the WiFi 6 investment until market penetration becomes widespread and therefore necessary.

Note 2: Read the section below titled “5G and the Combination of 5G with WiFi 6 and DAS”.

Improving Cell Service – Distributed Antenna System (DAS) and Small Cells

1. A DAS or small cells will reduce weak signal strength and dropped calls. For most mid to large convention centers DAS is an elegant solution because it expands coverage, improves \ quality and eliminates capacity shortages. Smaller convention centers should look at small cell technology as an alternative to DAS. Small cells are less expensive than DAS.
   
2. A well- designed DAS will enable the convention center to keep up with future advances in cellular technology.
   
3. There are alternatives for funding a DAS or Small Cell. If your phone/internet service is self-operated, then we recommend a hybrid business arrangement where the entire process is outsourced and paid for by a DAS owner as an exclusive contractor. There are companies which focus almost exclusively on building out and operating cell sites on properties owned by others. The leading companies are Crown Castle, American Tower Corp., and SBA Communications. Together they own and operate over 100,000 cell sites. You also have choices if phone/internet service is outsourced. You can proceed as described above and have two outsourced exclusive contracts, one for DAS (installation, operations and maintenance) and the other for analog telephone and internet service. For administrative simplicity you could request your current exclusive Phone/Internet contractor to handle the entire transaction and take on the construction and operating responsibilities with the DAS owner and operator as a sub-contractor. Again, the entire process will be outsourced and paid for by others.
   
4. The convention center will share in the revenue obtained by the cell owner and operator by renting DAS space to carriers such as, Verizon or AT&T.
   
5. DAS is proven and commercially viable. Several convention centers have already installed and profited by it; Las Vegas Convention Center, the Javits Center, the San Diego Convention Center and more.

Note: Read the section below titled “5G and the Combination of 5G with WiFi 6 and DAS”

5G and the Combination of 5G with WiFi 6 and DAS

1. If yours is a large convention center in a top tier city with a consistent occupancy rate of 50% or more, then it’s resolved. At some point, business demands will force your convention center to become a 5G venue.
   
2. 5G uses higher frequency bands which support faster speeds (100 times faster than 4G), less latency, and the capacity to simultaneously handle more devices.
   
3. 5G will enable convention centers to provide several advanced, provocative features that enhance events and exhibitor product demonstrations. Listed below are a few of them:
   
   • Highly reliable connectivity in dense crowded space
   • The ability to view ultra- high resolution 4K video calls. It will also support 8K video which is out of its R & D phase and will become commercially viable in the next few years.
   • Greatly improved virtual environments which replicate reality in a compelling way with clarity and realism. Virtual Reality (VR) and Augmented Reality (AR) are two of these applications.
   
4. The combination of WiFi6 and 5G is technically compatible. For a convention center it would first require that the carriers be prepared to offer 5G in the convention center locale and provide the required circuits or bandwidth. Bandwidth costs will increase somewhat but service revenue will easily make up for it. Additionally, there may be equipment upgrade costs.
   
   The benefits of combining WiFi 6 and 5G are best described in this Cisco infograph:
   
   cisco.com/c/m/en_us/solutions/enterprise-networks/802-11ax-solution/nb-06-5-things-WiFi6-5G-infograph-cte-en.html
   
   
5. Be cautious. The combination of a DAS and 5G poses some uncertainty. An existing DAS with 4 or 5G compatible equipment will not support the higher frequencies that a carrier’s 5G network does. For convention centers that have a DAS in a 4G network and plan on becoming a 5G network we recommend that they consult with the DAS manufacturer to see if the current system can adapt or be converted to 5G. We doubt it can.
   
   We found one venue that elected to have a 5G carrier operate with the knowledge that 5G features are only available at the lower frequency range. AT&T Stadium, owned and operated by the Dallas Cowboys, elected to do that in 2019. Their marketing literature is very enthusiastic about their network performance capability. It would be interesting to learn how they came to that decision. It appears the complete conversion from 4G to 5G venue requires a new 5G capable DAS. AT&T Stadium elected to continue with their 4G DAS, operate 5G level services at 4G frequency ranges and forfeit 5G high frequency connections. We believe this is the approach AT&T Stadium took and will probably be reviewed by other sports venues.
   
   There is one serious critic, Cisco, which expressed concerns about the limiting 5G full capabilities by using a 4G DAS. In a recent white paper they said, “We feel the current set of multi-operator solutions are ill equipped to enable 5G to thrive indoors.” The core of the criticism is that this combination limits the scalability or growth potential of 5G. We presume this is because a 4G DAS cannot operate at the higher frequencies that 5G can. To read the entire white paper click the link below:
   
   cisco.com/c/dam/en/us/solutions/collateral/service-provider/ultra-services-platform/5g-ran-indoor.pdf
   
   If the plan is to install your first DAS then the system engineer must specify that the DAS works reliably as part of a 5G in-building network.
   
   
6. 5G is commercially viable if there is a 5G tower in the locale. There are at least 43 stadiums and arenas that are 5G venues. Among them are Citi Field in NYC (MLB – NY Mets), SoFi Stadium in Los Angeles (NFL – Rams and Chargers), and FedEX Forum, (NBA – Memphis Grizzlies). We know of only one convention center which is a 5G venue, the Los Angeles Convention Center.

Pandemic Recovery – A Business Case for Reviewing Internet Service Price Strategy

The FCC investigations in 2013 and 2014 and their 2015 Consent Decree about wireless internet “blocking” cast a pall over the business practices of exclusive internet contractors at convention centers. The Consent Decree affirmed the rights of public use of the internet, prohibited “blocking” and took actions against companies that practiced blocking tactics. Fines were assessed and the venue industry’s credibility as a whole was harmed. These outcomes surprised many convention center managers. In the end though, they recognized the root cause of this controversy as the perception of excessive pricing for wireless internet services. The FCC’s 2015 actions were soon joined by more albeit less dramatic difficulties. Objections about the lack of “free” WiFi arose where event attendees made comparisons to free WiFi available at public libraries and coffee houses like Starbucks. Event organizers were also vocal on this point. The other issues were more subtle and revolved around the generally poor performance of exhibit hall WiFi during large events with high demand. These trials put convention centers and their exclusive contractors in a tough defensive position. Rather than awkwardly defending themselves, they took the high road and proceeded to look for solutions and made changes. Free Wifi quickly became universally offered for “light business” purposes (checking email for example). Contractors continued to wrestle with WiFi performance issues and improvised as best they could while being limited by the current AP technology. This is where things stood at the beginning of 2020.

Now with the pandemic ebbing and business confidence building, an opportunity exists to review pricing strategy with the aim of understanding complaints and objections, preserving profit margins and, venue commissions if outsourced and making sensible changes for the future. Where do we start? How does one approach this in a disciplined way? See below:

1. Understanding the Nature of Convention Center Pricing
   • Nothing pleases convention center management more than to have event services operate profitably by:
   –  Offering fair pricing based in part on local and competitor market conditions
   –  Growing profit margins organically through sales of premium products and services at premium prices
   • Event service prices are generally high for several reasons:
   –  One obvious reason is that the customer is in effect captive. License Agreement terms require event organizers to use in-house services and exclusive contractors.
   –  A convention center’s physical plant and utility infrastructure is robust in nature. The event industry depends on the scale of the facility, its supporting property elements and the enormous utility capacity and distribution. These characteristics make centers much more expensive to operate than other buildings.
   –  Most License Agreement terms require workers to be labor union members. Service work performed by union labor greatly affects price.
   –   For outsourced services event revenue is shared as commissions with the convention center

2. Determining which Services are Regarded as Commodities or Premium
   • Make professional judgments about which services are considered a commodity or premium. Commodity pricing should be applied to services which are common, comparatively easy to set up and is in a reasonable range of phone and internet services at other venues. Premium services have opposite attributes from commodity services. They require more programming and testing, take up higher bandwidth and are generally of higher value for exhibiting companies. Higher pricing for more complex and more valuable services is more widely accepted by exhibitors.
   • For many exhibitors it’s easy to characterize the price for some services as a form of price gouging. This is especially true if the prices are far above industry averages for what an exhibitor may regard as rudimentary work.  For convention centers and their exclusive contractors, it’s wise to have a menu of services that effectively mix commodity products and services with premium products and services.  A smart mix presents opportunities to preserve profit goals and control exhibitor complaints and resentment. Easy- to- fulfill orders can be priced more reasonably where there is natural price sensitivity and, value added, customized services can be priced at premium levels.
   
3. Taking Inventory – Comparing Pricing for Each Service Category Among Competitors
   • Calculate a mean and a median for each service category. For a self – operated unit, it’s always a good policy to set your prices slightly below the mean.
   • If possible, list the percentage changes in price for each category over the past three to five years.
   • Footnote if time and material charges are applied separately and in addition to service prices and if any sales or temporary utility taxes are applied.
   • Obtain data on service order volume by each service category.
   • Classify services as either commodities and premiums and make this a consideration when making price changes. 
   
4. Reviewing Each Service’s Profit Margin
   • Each service category has a profit margin which should remain relatively consistent over time. Margins comparing current data should be compared to the multi-year mean.
   • Profit margin data should regularly be compared to their multi-year mean and median.
   • Knowledge of margin data will reveal opportunities for controlling labor costs and assist in making data based decisions when revising prices.
   
5. Actionable Items to Consider
   • Seriously consider going through steps 2 to 4 above.
   • For outsourced services, hold service pricing at 2019 levels and, if services are outsourced, in turn roll back commissions for a time with the condition that the contractor presents a plan for new technology investments. This can be done by a contract amendment that specifies the amount or percentage and a schedule for the roll back.
   • For self-operated phone/internet services hold service pricing to 2019 levels until business recovers measured by occupancy rate growth and/or recovery of 2019 occupancy rates.
   • Think about offering a grand good will gesture to event exhibitors and attendees. Here is one; offer free WiFi up to 5 mbps in such areas such as food courts and lobby entrances. At these speeds video calls with applications like Facetime or Facebook Messenger and most SD Streaming videos will work.  Our guess is that there will be an increase for paid higher speed services so exhibitors and attendees can view 4K streaming. Know that CNET recently reported Starbucks offers free WiFi at 51.16 mbps, Taco Bell 14.29, Arby’s 14.24 and Subway at 4.78 mbps.
   • Both self- operated and outsourced operators alike should sharpen their marketing and service messaging to exhibitors. Focus on the following:
   – Fully understanding your pricing power and confidently defending premium prices. Developing a business logic and technique to defend premium vs. critics and competitors.
   – Launching innovative and differentiated services at premium prices. Experienced managers can introduce new technology and services that create genuine and proven value for event exhibitors and event organizers.
   – Raising prices annually without losing demand.