Geoff Donaghy from ICC shares his thoughts on the marriage between hotels and convention centres.
The partnership between convention centres and hotels is both symbiotic and contradictory, and one that is regularly analysed by both industries on an international level.We are all well aware that business events generate immediate cash injections and ongoing growth of the local knowledge economy, and that this positive impact is not limited to the host venue. Local hotels receive a huge increase in secured bookings while the rest of the city enjoys increased patronage to restaurants, shops, theatres, and other tourist attractions from visiting delegates.
Strong collaboration between hotels and convention centres can drive the overall appeal of destinations, drawing greater numbers of delegates. Yet alongside the significant mutual benefits this powerful relationship can yield, both parties still get frustrated at their inherent differences.
There is often intrinsic conflict between the long lead times convention centres work with and the profitability of hotels working with shorter term bookings. If we want a truly productive relationship, we have to respect and embrace these different requirements.
Here are my thoughts on how our industries can create better synergy for the benefit of all.
We need to consider and respect that business events clients, as lucrative and high yield they may be, are not the hotel industry’s only client segment. Where we clash as industries is when the aforementioned lead times are not taken into consideration by both parties.
A major international event can be planned up to eight years in advance and over that period we may see several changes of general manager in any hotel that a client is dealing with. The result can be a short-term focus as hotels seek profitability for what they see as the immediate future.
This makes it increasingly difficult for convention centre clients to secure sufficient room blocks up to two to three years in advance, and it can endanger a convention centre’s chances of securing events which will deliver massive benefits for hotels, and the broader city.
It is imperative that convention centres and hotels work together to bridge this gap so that they can continue to attract these important customers to their city.
Fortunately, I have seen some very established hotel managers and many hotel owners and property investors understand the need for long term reputation protection for both their individual brand and the wider region.
Engaging in ongoing dialogue enables us to work in synergy and accommodate the different forward planning needs of both industries.
Along with recognising crucial timings, we need to recognise what I call ‘the profit paradox’. I have lost count of the number of times I’ve heard business events industry colleagues complain about high hotel rates, and also the lack of hotel rooms, without appreciating the irony of what is being said. It demonstrates that we need to more fully understand the supply and demand dynamic that affects the hotel industry’s growth.
A sustained platform of profitability is needed to drive and underpin the next wave of new hotel investment, and convention centres, particularly new ones like ICC Sydney, actively drive additional demand, investment and stock of hotel rooms.
I am proud to say that amazing investment is on the agenda in Sydney, with an exciting new waterfront precincts, hotels and large-scale refurbishments being driven by long-term growth in visitors to the city.
The $3.4 billion 20-hectare revitalisation of Darling Harbour is just one precinct example and comprises numerous commercial developments including ICC Sydney, next to which will be the new luxury Sofitel hotel by Accor. Additional projects taking place close by include a new Four Points hotel by Sheraton and Aloft Sydney hotel which is scheduled to open in late 2016.
The trade off
When ICC Sydney opens in December 2016 there will be some inevitable friction. As Sydney has extensively invested in improving the city’s urban infrastructure, we have also had a three year hiatus from housing a functioning convention centre venue. Sydney’s hotels have enjoyed the resulting surplus business by hosting displaced local meetings, corporate events and award gala dinners.
The trade off to this is that Australia’s premier convention, exhibition and entertainment precinct will attract more international and national events to our city than ever before and generate hundreds of thousands of room nights for these same hotels.
ICC Sydney is proudly managed by AEG Ogden which is responsible for the management of the largest network of venues within the Asia Pacific region. Research we undertake in our venue network consistently confirms that we, the convention centre, only receive eight to ten per cent of delegate spend in the destination city. The hotel sector, by contrast, enjoys a much larger portion of that total direct spend which more than compensates for the rotation of income.
By working together convention centres and hotels can reap enormous benefits. There may well be some issues along the way, but it will be nothing that can’t be solved by cooperation and collaboration. This needs to be driven by open communication and can be achieved through the direct partnerships we are targeting with key properties or via common membership of our city bureau – in our case, Business Events Sydney – which see us all striving to create a world class destination for visitors.
Geoff Donaghy is CEO of International Convention Centre Sydney (ICC Sydney), AEG Ogden Group Director Convention Centres and President of the International Association of Convention Centres (AIPC).