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Tourism Commission Request for  Information‐ May 18, 2022      At the May 18th, 2022 meeting of the Tourism Commission, the following information was requested of   Convention Center staff:   1. The updated economic impact report based on the proof of concept  2. The estimated operating revenues and expenditures during the closure period and the years  following reopening.   3. The estimated number of hotel rooms opening in the City over the next few years  Below are the responses from the Convention Center.   1. The Convention Center contracted with HVS Consulting (HVS) to update their previous work  related to the economic impact and financial viability of the redevelopment and expansion  project. HVS evaluated the market viability and economic impact of the redevelopment and  expansion of the existing convention center based on the proof of concept, finding that an  expanded Convention Center would positively impact the City overall, and allow the Convention  Center to remain competitive by hosting simultaneous events as well as larger events. The  economic impact of the larger center is still significant, bringing in an estimated additional $285  million yearly. The full report can be found in appendix A, and will be on the Convention  Center’s website in the coming weeks.   2. As part of their work, HVS prepared financial forecasts for operational revenues and  expenditures of the expanded Convention Center as well as during the construction period.  These are contained within the report in Sections 3 & 4. However, it is important to note that it  is not appropriate to read only part of a financial statement to form an opinion about an entity’s  financial position. Accounting rules requires that HOT revenue is shown as a non‐operating  revenue, not operating revenue, as it is accounted for as a transfer to the Convention Center,  thus creating an accounting loss each year.  So, while there is an accounting loss, there is also a  positive change in the Convention Center’s overall financial net position. Finally, the Convention  Center seeks to maximize Hotel Occupancy Tax (HOT), not its own facility revenue. This  approach benefits all the HOT‐recipient funds, including the Cultural Arts Fund, Historic  Preservation Fund, and the Live Music Fund.   3. Attached is a report from Visit Austin that details the upcoming hotel projects and associated  room counts.         APPENDIX A  REDEVELOPMENT AND EXPANSION ANALYSIS Austin Convention Center AUSTIN, TEXAS SUBMITTED TO: EXISTIN G Ms. Katy Zamesnik Austin Convention Center 500 East Cesar Chavez Street Austin, Texas 78701 katy.zamesnik@austintexas.gov +1 (512) 955-4293 HVS Convention, Sports & Entertainment PREPARED BY: Facilities Consulting 205 West Randolph Suite 1650 Chicago, Illinois 60606 +1 (312) 587-9900 December 17, 2021 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 17, 2021 Ms. Katy Zamesnik Austin Convention Center 500 East Cesar Chavez Street Austin, Texas 78701 katy.zamesnik@austintexas.gov 205 West Randolph Suite 1650 Chicago, Illinois 60606 +1 312-587-9900 +1 312-488-3631 FAX www.hvs.com Re: Austin Convention Center Austin, Texas Dear Ms. Zamesnik: Attached you will find our Redevelopment and Expansion Analysis of the Neal Kocurek Memorial Austin Convention Center in Austin, Texas . This report updates the previous report on the Austin Convention Center Expansion, dated June 10, 2020. We certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. It has been a pleasure working with you. We look forward to hearing your comments. Sincerely, HVS Convention, Sports & Entertainment Facilities Consulting Thomas A. Hazinski, MPP Managing Director Anthony Davis, MPP Project Manager Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois Table of Contents SECTION TITLE 1. 2. 3. 4. 5. 6. 7. Introduction and Executive Summary Survey Findings Demand Analysis Financial Analysis Economic Impact Statement of Assumptions and Limiting Conditions Certification Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois 1. Introduction and Executive Summary Nature of the Assignment Ownership and Management The Neal Kocurek Memorial Austin Convention Center (“ACC”) engaged HVS Convention, Sports & Entertainment Facilities Consulting (“HVS”) to conduct an analysis of an development of the convention facility in Austin, Texas . A redeveloped and expanded ACC could host more simultaneous events as well as larger events and allow it to compete more effectively for business against state and national competitors. The ACC was opened in 1992 after the existing Palmer Auditorium was deemed too small to host major conventions. An expansion project began in 1999, which nearly doubled the size of the convention center, and the expanded facility reopened in 2002. The name of ACC was changed in 2004 to the Neal Kocurek Memorial Austin Convention Center, in honor of Neal Kocurek, a civic leader who rallied support for the construction of the convention center. Methodology In accordance with our Scope of Services, HVS performed the following tasks: 1. 2. 3. 4. 5. 6. 7. 8. Thomas A. Hazinski, MPP and Anthony Davis, MPP from HVS travelled to Austin, Texas on November 19th and 20th, 2019, for a site visit and client meeting. During this visit, they toured the facility, performed a site inspection, met with facility management and other key industry participants, and gathered relevant data. Analyzed the economic and demographic data that indicate whether, and the extent to which, the local market area supports the ACC development. Surveyed current and potential users of the ACC to understand their event needs, their overall impressions of Austin and the ACC, and the likelihood of booking events in the expanded facility. Reviewed and analyzed historical demand and attendance data provided by the ACC. Reviewed and analyzed sales and marketing data provided by Visit Austin. Prepared event demand and attendance forecasts based on the implementation of the expanded building program. Prepared a financial forecast for the proposed expanded ACC. Prepared an economic and fiscal impact analysis for the proposed ACC redevelopment and expansion. December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-1 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois HVS collected and analyzed all information contained in this report. HVS sought out reliable sources and deemed information obtained from third parties to be accurate. Description of Existing Facility Located in downtown Austin, the ACC serves the city as the primary public venue for conventions, conferences, and trade shows. It also hosts sporting events, consumer shows, banquets, and local meetings. The following image provides an aerial view of the ACC and surrounding infrastructure. An overview of the function spaces at the ACC and photos of the ACC interior follow. AERIAL VIEW OF THE AUSTIN CONVENTION CENTER December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-2 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 1-1 CURRENT FACILITY PROGRAM AND CAPACITIES Event Space Total Area (SF) Theatre Classroom Exhibit Booths (10'x10') 1,289 225 179 280 410 195 Capacities Banquet 17.5 14,117 2,520 1,865 2,813 4,544 2,375 1,472 994 224 254 2,646 1,824 274 274 274 20,333 4,032 3,024 4,392 5,285 3,600 2,201 1,432 373 396 3,812 2,408 471 481 452 11,016 1,728 1,300 2,052 3,954 1,982 1,142 766 176 200 2,318 1,516 274 293 235 247,052 44,100 32,640 49,232 79,525 41,555 23,418 15,288 3,896 4,234 40,510 26,540 4,470 4,570 4,930 3,693 20,432 2,465 27,602 54,192 First Floor Ballroom Exhibit Hall Ha l l 1 Ha l l 2 Ha l l 3 Ha l l 4 Ha l l 5 Ba l l room A Ba l l room B Ba l l room C Ba l l room D Ba l l room E Ba l l room F Ba l l room G Fourth Floor Ballroom First Floor Meeting Rooms (3) Third Floor Meeting Rooms (18) Third Floor Show Offices (5) Fourth Floor Meeting Rooms (18) Total Meeting Space (44) TOTAL FUNCTION SPACE 365,172 Source: ACC The current ACC has more than 365,000 square feet of function space, including a nearly 250,000-square-foot exhibit hall that can be divided into five separate halls. There are two ballrooms on the first and fourth floors of the facility, offering approximately 23,000 and 41,000 square feet of ballroom space, respectively. There is more than 54,000 square feet of meeting space, spread across 44 rooms. The following images show the interior of the ACC. December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-3 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois INTERIOR OF THE AUSTIN CONVENTION CENTER December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-4 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-5 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois Market Area Analysis Austin is experiencing a period of growth, led by the technology sector and large tech companies like Dell, Google, Apple, Tesla and Facebook. Tesla recently announced plans to move its corporate headquarters to Austin, and Apple broke ground on a new 133-acre campus in 2019. As the state capital, Austin is home to many large state associations, as well as a large government workforce. The December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-6 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois growing tech sector and the University of Texas at Austin provide a major source of demand for group events. The number of visitors to Austin, and their associated spending, has grown 70% and 93%, respectively since 2009. Before the pandemic in 2019, the number of enplanements at Austin-Bergstrom International Airport had nearly doubled since 2009. More recently, air travel has begun to return to Austin. The figure below, released by the City of Austin, shows the level of passenger traffic by month for the last five years. FIGURE 1-2 AUSTIN-BERGSTROM PASSENGER TRAFFIC - 5 YEAR TREND Source: City of Austin The red line shows the number of passengers in 2021, and the spike in travel over the summer indicates the desire to travel to Austin. July travel in 2021 was higher than every other year besides 2019. The lodging supply in Austin is plentiful, with a diverse mix of property sizes and chain scales. The area around the ACC is dominated by the JW Marriott and Fairmont, which each offer over 1,000 rooms, the Hilton, which offers over 800 rooms, and the new Marriott Downtown with over 600 rooms. The Fairmont and Hilton are directly connected to the ACC via skybridges, the Marriott Downtown is across Trinity Street from the ACC, and the JW Marriott is two blocks away. December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-7 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois The economy and amenities in Austin make it an ideal location for state, regional, and national conventions and meetings. Austin Market Area A full discussion of the Austin market area and lodging supply and demand can be found in the HVS Austin Hotel Occupancy Tax Projection Report. ACC Event Planner Survey In December 2019, pursuant to the Scope of Services for the previous Austin Convention Center Expansion Study, HVS surveyed a selected group of event planners to explore their facility needs and understand their interest in placing events in Austin. Survey respondents represented a cross-section of planners that organize a wide range of event types and sizes. Slightly less than half of the event planners in the survey sample plan events for associations, but the sample includes a mix of sports, social, and entertainment event planners. They represent a variety of entities and plan a range of meeting and event types and sizes. Key findings and conclusions include the following:  More than one-fifth of respondents believe that expanding the convention center is the most important improvement to make in Austin, the most frequent response from event planners.  The ACC generates room night demand during need periods. Most events take place from Tuesday through Thursday, which helps supplement leisure tourism, which generally occurs on weekends and drops off during the week.  Redevelopment and expansion should improve the availability of meeting space and increase the ratio of meeting space to total space. Meeting space was listed as the most important type of space to expand at the ACC at 36%, followed by ballroom and exhibit space, with 29% and 26%, respectively. This relatively even split indicates that the ACC redevelopment and expansion needs to include all three types of space in complementary amounts that would enable the expanded ACC to host multiple simultaneous events.  Event planner interest in an expanded ACC is strong, as indicated by a 79% net promoter score.  The number of breakout meeting rooms are rated the lowest by respondents, which indicates that a redevelopment and expansion of the ACC should increase the number of breakout meeting rooms.  Austin is well known as a convention destination. This level of awareness about Austin is extraordinarily high and speaks to the success Visit Austin and the ACC have had in promoting the city.  The ACC benefits from Austin’s strong destination appeal. One-fifth of respondents highlighted that Austin is popular and that prospective event December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-8 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois attendees want to be there. A similar number of respondents indicated that the number of entertainment options in Austin makes it an excellent destination for events. To supplement the event planner survey performed before the COVID pandemic, HVS also used Northstar Meetings Group pulse survey of event planners. The survey asked event planners whether they are actively sourcing new events, whether they are booking new events, and whether they are focused on in-person events, among other questions. See the figure below. FIGURE 1-3 EVENT PLANNER SURVEY- NORTHSTAR MEETINGS GROUP I am actively sourcing new events I am booking new events I am not currently focused on in-person events 35% 30% 25% 20% 15% 10% 5% 0% Source: Northstar Meetings Group, PULSE Survey The number of event planners who are not focused on in-person events have been decreasing since November of 2020, and has levelled off below 15% of event planners in October 2021. Those sourcing new events, and those actively booking new events, has grown consistently since November, but have begun to flatten in recent months between 20% and 25% respectively. This indicates that event planners are actively returning to booking new events, and a significant majority focused on in-person events. Qualtrics also performed a survey of international event planners in June of 2021 and asked respondents to compare in-person and virtual events. The results December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-9 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois ACC Demand and Financial Projections indicate that 69% attendees valued in-person events more than virtual and looked forward to returning to in-person events1. The ACC provided HVS with a summary of the number of events and corresponding total attendance that occurred at the facility from 2015 through 2019. HVS did not show data from 2020 and 2021 due to the impact of the COVID- 19 pandemic. The following figure presents the event and attendance history at the ACC for the past five years. FIGURE 1-4 HISTORICAL DEMAND AND ATTENDANCE 2015 2016 2017 2018 2019 Event Conventi ons Tra des hows Cons umer Shows Conferences Ba nquets Meeti ng Sports Concerts & Enterta i nment Other South by Southwes t Total Estimated Attendees Conventi ons Tra des hows Cons umer Shows Conferences Ba nquets Meeti ng Sports Concerts & Enterta i nment Other South by Southwes t Total 37 2 11 12 7 31 8 1 3 1 113 130,329 1,700 86,063 23,854 12,250 14,225 33,500 900 35 105,000 407,856 38 1 9 11 5 18 4 3 na 1 90 174,600 10,000 45,100 12,875 3,280 8,330 22,700 2,850 na 150,000 429,735 42 3 16 11 9 25 5 1 2 1 115 186,480 3,200 132,600 17,275 5,775 15,165 29,100 2,500 30 150,000 542,125 36 1 11 12 7 15 3 2 3 1 91 216,500 1,500 80,700 23,400 5,275 7,800 18,000 4,600 32 200,000 557,807 38 1 11 10 6 26 3 1 2 1 99 156,750 1,200 84,700 13,000 8,730 10,913 4,300 1,000 15 200,300 480,908 The ACC hosted between 90 and 115 events per year since 2015. Most events are conventions or meetings, but the ACC also hosts a significant number of 1. 1 “The future of events is hybrid—here’s how to get the perfect balance of virtual and in-person events in 2021 and beyond,” Qualtrics XM, June 17, 2021. https://www.qualtrics.com/blog/future- of-events-is-hybrid/ December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-10 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois ACC Demand Projections conferences and consumer shows. Attendance peaked in 2018 at approximately 560,000 attendees. Although the number of annual events increased from 2018 to 2019, attendance decreased because the average event size was smaller. This change reflects the periodic nature of booking patterns rather than a trend. In any given year, the booking of one or two events with high attendance can cause large swings in annual attendance levels. HVS’s analysis suggests that expanding the ACC would allow it to host larger events, as well as more simultaneous events. The following figure compares the projected demand in a stabilized year in a no expansion scenario, which assumes all planned maintenance and operations remain the same, with projected demand once the redevelopment and expansion is completed. HVS projects that it will take three years after the redevelopment and expansion is completed for demand to stabilize. FIGURE 1-5 ACC DEMAND PROJECTIONS Event Type Conventions Tradeshows Consumer Shows Conferences Banquets Meeting Sports Concerts & Entertainment South by Southwest Total Events Average Attendance Total Attendance No Construction No Construction Expansion Expansion Expansion No Construction 38 1 11 10 6 26 3 1 1 99 60 6 12 30 25 55 6 4 1 199 4,125 1,200 7,700 1,300 1,455 420 1,433 1,000 200,300 4,700 2,200 7,200 2,000 1,100 500 4,700 1,500 250,000 156,750 1,200 84,700 13,000 8,730 10,920 4,299 1,000 200,300 480,899 282,000 13,000 86,000 60,000 28,000 28,000 28,000 6,000 250,000 781,000 The redevelopment and expansion of the ACC is projected to increase the number of annual events by 100, including more than 20 more conventions, conferences, and banquets, and 30 more meetings. In terms of total attendance, the ACC is projected to draw 300,000 more attendees annually after redevelopment and expansion. In a no-construction scenario, the largest events held at the ACC will begin to outgrow the facility and will be forced to move. These lost events can be replaced with other events; however, the replacement events are going to have fewer attendees and room nights than the events that have outgrown the ACC. HVS also analyzed two construction scenarios for redeveloping and expanding the ACC and how those scenarios would impact ACC demand. The first scenario would Introduction and Executive Summary Austin Convention Center 1-11 ACC Construction Scenario Demand December 17, 2021 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois redevelop and expand the ACC in one phase, with the facility being closed from April 2024 until February 2028. The second redevelopment and expansion scenario is a two-phase scenario where half of the ACC is closed while the other half operates. Once the new half construction is completed, scheduled for April 2024 until March 2027, the new half would begin operating as the old half is closed, scheduled from April 2027 until March 2030. The following figure compares demand for the ACC in a one- and two-phase construction scenario. FIGURE 1-6 ACC EXPANSION SCENARIO COMPARISON - DEMAND Events Total Attendees Occupied Room Nights One-Phase Two-Phase One-Phase Two-Phase One-Phase Two-Phase 17 8 8 8 109 145 173 199 199 199 33 21 21 21 21 21 129 153 177 199 796 254,300 27,000 27,000 27,000 561,000 666,000 754,000 781,000 781,000 781,000 271,300 31,000 31,000 31,000 31,000 31,000 560,000 660,000 723,000 781,000 16,400 1,000 1,000 1,000 335,700 413,800 487,500 493,300 493,300 493,300 27,900 5,500 5,500 5,500 5,500 5,500 351,800 396,800 441,700 493,300 Total 1,065 4,659,300 3,150,300 2,736,300 1,739,000 Year 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 The one-phase approach enables the ACC to host 270 more events and 1.5 million more attendees from 2024-2033 due to the redevelopment and expansion being completed sooner. The two-phase approach allows the ACC to host more events during construction; however, those events will be smaller due to the limited amount of function space in half of the ACC and will be logistically harder to execute. City advisors also indicate that construction will be significantly more expensive, and lasts two more years than the one-phase construction scenario. Historic Hotel Market Impact Using data from STR and the ACC, HVS estimated the historic impact of the ACC on the downtown hotel market in Austin. While most out of town attendees to ACC events stay in the downtown area, the room nights generated by these events affect the room rates and occupancy of the entire city. HVS analysis estimates that the current ACC accounted for approximately $58 million in annual downtown hotel room revenues in Austin from 2015 to 2019. Due to a lack of available data, HVS did not provide a statistical analysis of revenue December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-12 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois ACC Financial Projections impact the ACC has in other sub-markets in Austin. However, based on previous studies in cities like Austin, downtown areas generate approximately 75% to 80% of the total hotel revenue impact citywide. If this is the case in Austin, the ACC would have induced between $72.5 and $77.3 million in annual hotel room revenue from 2015-2019. HVS analyzed historical operations of the ACC from 2015-2021 and applied a series of revenue and expense assumptions regarding facility utilization and operations to forecast operating financial statements for the venue. HVS applied an annual inflationary increase of 2.5% to generate the inflated financial projections, which represent income and expense in the year that they occur. Uninflated projections are used to compare dollar amounts from different years, and show the actual differences in revenue and expense, without inflation. The figure below compares projections of ACC financial operations in 2023 dollars once demand has stabilized with ACC historic averages. This shows the increase in revenue and expense projected for the ACC once demand has stabilized, under either redevelopment and expansion scenario. Showing both in 2023 dollars enables comparison without the impact of inflation. December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-13 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 1-7 FINANCIAL OPERATIONS IN HISTORIC AND EXPANDED ACC ($ 2023) Historic Average Stabilized Year (2015-2019) 2033 Amount % Total Amount % Total Revenue Food a nd Bevera ge (Gros s ) Fa ci l i ty Renta l Event Servi ces Pa rki ng AV Servi ces (Net) Other Interes t Income Total Revenue Operating Expense Sa l a ry a nd Benefi ts Food & Bevera ge Cos ts Uti l i ti es Repa i r & Ma i ntena nce Admi ni s tra ti ve & Genera l Suppl i es & Equi pment Ma rketi ng Ins ura nce Other Servi ces Other Total Operating Expense TOTAL NET INCOME (LOSS) $15,440 2,865 4,969 4,140 1,022 364 436 $29,236 $20,934 8,727 2,569 2,578 1,230 2,711 371 193 (985) 2,692 $41,019 ($11,783) 53% 10% 17% 14% 3% 1% 1% 100% 72% 30% 9% 9% 4% 9% 1% 1% -3% 9% 140% -40% $34,828 6,736 10,387 7,751 1,999 410 491 $62,601 $33,606 $17,414 $4,382 $4,695 $2,191 $5,008 $626 $419 ($1,226) $7,495 $74,610 ($12,009) 56% 11% 17% 12% 3% 1% 1% 100% 54% 28% 7% 8% 4% 8% 1% 1% -2% 12% 119% -19% The redevelopment and expansion of the ACC is projected to increase total revenue by approximately $34 million from $29 to nearly $62 million. Most of this increase comes from growing sales of food and beverage services associated with events. Total expenses are projected to increase by approximately $34 million, from $41 million to nearly $75 million. The largest increase in expenses comes from an increase in food and beverage costs, as well as salary and benefit increases. The following figure compares financial projections for the ACC in a one- and two- phase construction scenario. December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-14 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 1-8 ACC EXPANSION SCENARIO COMPARISON – FINANCIALS ($ INFLATED) Year 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 One-Phase Two-Phase Total Revenue Total Expense Operating Income Total Revenue Total Expense Operating Income 15,843 4,044 4,144 4,248 50,229 61,775 71,615 76,273 78,180 80,134 54,514 42,739 43,895 46,668 74,128 81,558 87,479 90,905 93,177 95,507 (38,671) (38,695) (39,751) (42,420) (23,900) (19,783) (15,864) (14,632) (14,998) (15,373) 17,267 4,573 4,687 4,804 4,924 5,047 52,338 64,233 71,540 80,134 54,973 43,035 44,179 45,283 46,415 48,780 69,243 85,424 90,082 95,507 (37,706) (38,462) (39,492) (40,479) (41,491) (43,733) (16,905) (21,191) (18,541) (15,373) Total 446,484 710,570 (264,087) 309,549 622,922 (313,373) Total operating revenue and expense are both higher in the one-phase scenario across the years studied due to the one-phase scenario being completed sooner and ramping up to demand stabilization faster than the two-phase scenario. The difference in operating income over the 10 years is nearly $50 million. Economic Impact of Redevelopment and Expansion Based on the demand projections presented in this report, HVS identified the new spending that would occur in the local economy due to the proposed redevelopment and expansion of the ACC. HVS estimated the amounts of income and employment that new visitors, event organizers, and exhibitors would generate in Austin, shown below in 2020 dollars. FIGURE 1-9 ANNUAL ECONOMIC IMPACT SUMMARY ($ 2020) Summary of Impacts* Current ACC Economi c Impa ct (mi l l i ons ) $468.8 Fi s ca l Impa ct (mi l l i ons ) Jobs *In a stabilized year. $11.75 2,715 Increase from Expansion $285.0 $13.85 1,622 Total $753.8 $25.60 4,337 HVS analyzed the annual economic impact of the ACC under each redevelopment and expansion scenario, as well as a no-expansion scenario based on historic demand. HVS did project the replacement of some larger conventions in the no- expansion scenario with smaller conventions due to the large events outgrowing the ACC. December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-15 HVS calculated the cumulative economic impact under each scenario per dollar spent on the ACC. The cumulative economic impact is the sum of all impact generated by the ACC in that year, and each previous year. The amount spent on the ACC includes the cost of expanding the facility, as well as the funding needed to support the operating loss of the ACC, capital costs, and maintenance. FIGURE 1-10 CUMULATIVE IMPACT PER DOLLAR SPENT Cumulative Economic Impact Per Dollar of Investment* One- Phase Expansion Two-Phase Expansion Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 *Includes estimated capital costs, operating deficit, and ongoing capital maintenance In the one-phase scenario, the cumulative impact per dollar spent reaches $2.79 by the time demand stabilizes in 2030, and reaches more than $7 in 2037. The two-phase scenario is below the one-phase due to the longer construction time, but reaches $2.39 by demand stabilization and more than $5 in 2037. Like the public forums that have served cities throughout the millennia from ancient Rome to the present day, convention centers are a critical part of the civic and economic life of a city. While the spending generated by visitors to the convention center provides a measurable residual impact of the ACC, this metric does not capture its primary value and importance to the City of Austin. The ACC Introduction and Executive Summary Austin Convention Center 1-16 Intangible Impacts December 17, 2021 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois COVID-19 Trends and Economic Implications serves a forum for the exchange of information and as a center of commerce. The quantity and quality of these exchanges generate immeasurable value. When civic groups meet to discuss the pressing issues of the day, when non-profit groups gather to celebrate and raise funds, when associations educate their members, when tradeshow attendees transact business, when exhibitors advertise and sell their goods to the general public, the impacts of ACC events are felt locally, nationally, and internationally. As a part of the fastest growing city in the US, the ACC should grow to meet the increasing need for information and commercial exchange. In December 2019, a novel coronavirus—SARS-CoV-2 (COVID-19) was first identified in China, which spread throughout the world. The first reported case in the United States occurred in the State of Washington in late January 2020; by mid- March, cases had been identified in all 50 states, with the number of cases increasing exponentially. The World Health Organization (WHO) officially declared COVID-19 a global pandemic on March 11, 2020, and the U.S. declared the outbreak a National Emergency on March 13, 2020. The following figure shows the number of reported cases of COVID-19 in the United States from January through the first two weeks of October 2021. FIGURE 1-11 NUMBER OF COVID-19 DAILY REPORTED CASES IN THE USA New Cases 7-Day Moving Avg 300 250 200 150 100 50 s e s a C y l i a D f o s d n a s u o h T 0 Jan 23 2020 Apr 22 2020 Jul 21 2020 Oct 19 2020 Jan 17 2021 Apr 17 2021 Jul 16 2021 Oct 14 2021 Source: Centers for Disease Control and Prevention December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-17 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois The seven-day moving average of cases peaked in the week of January 11, 2021prior to the widespread availability of effective vaccines. As the number of cases multiplied in the U.S. and throughout the world, governments implemented lockdowns and social-distancing measures to slow the spread of the virus. In most cases, these measures were effective, and the infection rates slowed substantially through the summer months of 2020. With continued implementation of prevention measures and the introduction of effective vaccines in early 2021, infection rates declined by mid-year to the lowest level since March 2020. But despite increasing vaccination rates, the highly contagious Delta variant of the virus caused a second peak of infections in September 2021, which occurred primarily among unvaccinated populations. As vaccination rates have varied among the states so have infections rates. The following figure compares the rate of infections per 100,000 persons in the US and Texas. FIGURE 1-12 COVID-19 CASES PER 100,000 IN TEXAS AND USA United States Texas 600 500 400 300 200 100 d n a s u o h t 0 0 1 r e p s e s a C 0 Jan 23 2020 Apr 22 2020 Jul 21 2020 Oct 19 2020 Jan 17 2021 Apr 17 2021 Jul 16 2021 Oct 14 2021 Source: Centers for Disease Control and Prevention The prevalence of COIVD-19 cases in Texas lagged the average in the US in the early months of the pandemic. But infections rates climbed higher than the national average in July of 2021, January of 2021, and again in September of 2021. In the U.S., economic activity declined sharply because of restrictions on business and travel beginning in the second quarter of 2020. The figure below shows the percent change from pre-COVID levels (2019) in Real Gross Domestic Product December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-18 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois 30% 20% 10% 0% -10% -20% -30% -40% -50% (“GDP”), Disposable Personal Income, and Consumption of Food Services and Accommodations for the first quarter of 2020 through the third quarter of 2021. FIGURE 1-13 PERCENT CHANGE FROM 2019 PRE-COVID LEVELS Real Gross Domestic Product Disposable Personal Income Real Consumption - Food Services and Accommodation 2020 Q1 Q2 Q3 Q4 2021 Q1 Q2 Q3 Source: Bureau of Economic Analysis Real GDP contracted dramatically in the second quarter of 2020 but has grown every quarter since. In real dollars, GDP exceeded 2019 levels in the first quarter of 2021. Throughout this period of economic disruption, Disposable Personal Income grew as consumers pulled back on consumption and increased their savings. Certain sectors of the economy grew while others suffered severely from the decline of consumer spending, none more than Consumption of Food Services and Accommodations, which in the second quarter of 2020 fell by nearly 40% from the same quarter in 2019. While the economy as a whole has recovered by the first quarter of 2021 Consumption of Food Services and Accommodations exceeded pre-COVID levels in the second quarter of 2021. Significant government support contributed to the economy’s rebound. In March 2020, the Federal Reserve pledged to maintain liquidity in debt markets by purchasing as many government and corporate-backed bonds, as necessary. A $900-million aid package was passed in December 2020. In March 2020, the U.S. Congress passed the $2.0-trillion CARES economic-aid package, which provided support to state unemployment systems, credit for small and large businesses, and direct cash payments to low- and middle-income Americans among other items. The $1.9-trillion American Rescue Plan was signed into law in March 2021. The December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-19 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois Biden administration has proposed further economic stimulus in the American Jobs Plan, which would fund $1.2 trillion in infrastructure investment, which was passed in the Senate but is pending approval in the House. A second separate but associated bill would add additional federal spending on health care, education, and climate. Unlike the prior stimulus bills, currently proposed expenditures are to be funded with tax revenue increases rather than with deficit spending. In September 2021, Federal Reserve Chair Jerome Powell indicated the U.S. central bank could begin reducing asset purchases in November 2021 and complete the process by mid-2022. In its October 2021 Beige Book publication2, the Federal Reserve noted the following economic trends:  Economic growth moderated in early July through August of 2021, which was largely attributable to a pullback in dining out, travel, and tourism related to concerns over the Delta variant.  Growth in certain sectors of the economy has been hampered by supply chain disruptions and labor shortages rather than softening demand including car production, due to a shortage of computer chips.  Demand for workers continued to strengthen, but labor shortages constrained employment gains and, in some cases, impeded business activity.  Growth in wages accelerated particularly among low-wage workers.  Inflation was at a steady or elevated pace driven by the increasing cost of inputs that face shortages. Businesses are passing along cost increases through higher prices and will continue to do so in the months ahead. This report was produced amid significant market disruption related to COVID-19. The impact of the pandemic is addressed throughout and considers market perspectives and information available on or about the effective date of the report. The direct impact of the pandemic on the travel industry has affected demand at varying levels through the first half of 2021. With COVID-19 vaccinations now available in the U.S. for all adults and children 5 years old and older, infection rates continue to decline in high vaccination states. As a result, consumer confidence in safe travel has risen in the U.S., and the outlook for recovery of the travel industry has improved. Conclusion and Future Outlook on COVID-19 2 See: https://www.federalreserve.gov/monetarypolicy/beigebook202109-summary.htm December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-20 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois Impact of the COVID-19 Pandemic on ACC Performance Similar to most convention centers across the United States, the ACC ceased normal operations in 2020. As of March 2021, Austin Public Health authorized the ACC to operate at 25% capacity, with the expectation of capacity increasing as vaccination rates rose. As of July 2021, the ACC no longer obligates social distancing and has transitioned measures such as health screenings and temperature screenings to be optional services, while cleaning and sanitization protocols remain in place. As of October 2021, the ACC requires event planners to provide information on how they plan to implement COVID mitigation efforts, including requiring a negative test within 72 hours of the event, enabling social distancing, and requiring masks when social distancing in not possible at outdoor events. Indoor events that are larger than 1,000 attendees, and outdoor events larger than 2,500, must be approved by the Austin Department of Public Health. HVS assumes the COVID-19 pandemic to be under control by the time the ACC expansion occurs and does not anticipate any long-term changes in ACC demand due to the impact of COVID-19. Expansion of and Improvements to Competitive Venues Austin is not the only city discussing redevelopment and expansion of their convention center in the wake of COVID-19. Cities that compete with Austin for events are planning expansions and updates of their own, such as Denver, Nashville, Dallas, and Los Angeles. See below for more detailed descriptions of the redevelopment and expansion plans.  Denver is in the design and construction phase at the Colorado Convention Center. Expansion plans include adding an 80,000 square foot, column-free ballroom and outdoor terrace, as well as lobby renovations, technological improvements, and additional networking spaces. The new ballroom will be the largest in Colorado and will offer views of the mountains and city skyline. The project is estimated to be completed by the end of 2023.  Nashville, despite completing a major expansion in 2017, is already planning on expanding further. The Convention Center Authority issued a request for proposals for the master plan in Summer 2020.  The Dallas City Council approved a plan to finance the overhaul and potential replacement of the Dallas Kay Bailey Hutchison Convention Center. The exact scope and specifics of plan are unclear at this time, the facility could be renovated, expanded, or demolished and rebuilt. The project would be funded by the hotel occupancy tax and must begin in the next five years.  The City of Los Angeles is partnering with AEG to expand the Los Angeles Convention Center and adjoining JW Marriott. The convention center December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-21 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois Conclusion expansion is proposed to add 193,000 square feet of exhibit space, a 100,000 square-foot multipurpose hall, and 60,000 square feet of meeting space. The JW Marriott expansion would add 861 rooms, as well as outdoor space and meeting rooms. The Marriott and Ritz Carlton complex combined offers 1,800 rooms total. A surface parking lot is also expected to be turned into a parking garage to accommodate the increased parking needs. The ACC, and Austin as a whole, are in high demand among event planners and attendees and a redevelopment and expansion of the ACC is necessary to keep pace with demand. Austin is already a popular leisure destination and the city is growing as a technological center and corporate hub. Feedback from event planners indicates that Austin and the ACC offers one of the most popular destinations in the US. The expanded ACC will accommodate more and larger events by creating a larger and more flexible spaces and increasing the amount of meeting space. The proposed redevelopment and expansion will make the ACC more compatible with evolving event space needs. December 17, 2021 Introduction and Executive Summary Austin Convention Center 1-22 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois 2. Survey Findings Overview HVS designed and conducted a survey of event planners in December of 2019 to provide a basis for assessing potential demand at a redeveloped and expanded Austin Convention Center (“ACC”). This survey gathered information from professional event planners about their event needs and event destination preferences. The survey explored the impact of an expanded building program and potential improvements to the venue on event planner interest in Austin. HVS collected contact information for 1,435 event planners from Visit Austin and the ACC. Via email, HVS introduced the purpose of the survey and provided a link to the web-based survey. We received 174 complete or partial responses to the survey, and there were 234 bounce backs, for an estimated response rate of 14%. The following summary of responses highlights key results. Not all figures shown add to 100% due to rounding. The timing of the survey predates widespread information about the COVID-19 pandemic, thus the survey results reflect opinions prior to the COVID-19 pandemic. HVS anticipates a full return of events and business travel and does not anticipate any changes to meeting planner preferences due to the pandemic. Trends in event planning during the pandemic have changed with the increase in virtual events, however surveys performed during the course of the pandemic shows that the majority of event planners are entirely focused on in-person events, and that event attendees prefer in-person meetings. Past Events at the ACC Forty-six percent of the respondents had planned an event at the ACC during the past five years. HVS asked event planners to describe the events they had held at the ACC. The figure below summarizes their answers. December 17, 2021 Survey Findings Austin Convention Center 2-1 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois Respondent Satisfaction Respondents hosted conventions most followed by conferences and meetings. Other types of events include a prom and a film festival. frequently at the ACC, HVS asked event planners who had hosted an event at the ACC to rate their satisfaction with the venue’s event space, service, and other amenities. In the following figure, a score of five indicates fully satisfied, and a score of one indicates extremely dissatisfied with their experience at the ACC. FIGURE 2-1 EVENT DESCRIPTION Conventi on 53% Conference 18% Meeti ng 10% 7% 5% 3% Cons umer Show 3% N = 60 Other - Wri te In (Requi red) Tra i ni ng/Works hop Enterta i nment s how/event FIGURE 2-2 EVENT PLANNER SATISFACTION WITH ACC Qua l i ty of Servi ces Ba l l room Si ze Exhi bi t Ha l l Si ze Audi o Vi s ua l Technol ogy Qua l i ty of Meeti ng Spa ce Overa l l Food a nd Bevera ge Servi ce Cos t of Servi ces Cos t of Spa ce Renta l Number of Brea kout Meeti ng Rooms 4.4 4.3 4.2 4.2 4.1 4.1 3.9 3.8 3.7 N = 61 Hotel Use Event planners rate the ACC highest on the quality of services, which includes event and technological support, as well as the size of the ballroom and exhibit hall. The cost of services and cost of space rental, as well as the number of breakout meeting rooms, are rated the lowest at the ACC by respondents. Forty-six percent of planners hosted an event that used hotel rooms during the event. Events that use hotel rooms have a larger economic impact because attendees come from out of town, as opposed to events that attract attendees from the local market. HVS asked event planners who had hosted an event at the ACC which hotel they had used while hosting an event. Some events require multiple hotels. December 17, 2021 Survey Findings Austin Convention Center 2-2 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 2-3 HOTEL ROOM USE DURING EVENT Hi l ton Aus ti n 24% Ma rri ott Courtyard a nd Res i dence Inn 17% JW Marri ott Aus ti n 15% Hi l ton Ga rden Inn 14% Other - Wri te In (Requi red) 13% Fa i rmont Aus ti n 10% 8% Shera ton Aus ti n N = 46 The Hilton Austin was the most frequent choice of event planners, followed by the Marriott Courtyard and Residence Inn. All hotels listed were used relatively often by event planners, with the Sheraton Austin as the least popular hotel despite being used by 8% of respondents. Other hotels listed included the Four Seasons, the Stephen F. Austin, the Hyatt Place, and the Westin. Some planners indicated that they required more than twenty hotels for their event and used hotels citywide to house attendees. The large number of different hotels used by event planners suggests that there is a diverse base of events that use the ACC, from price-sensitive state associations and conferences to more lavish medical and tech conferences and conventions. Venue Strengths and Weaknesses HVS asked event planners who had hosted an event at the ACC to describe, in their own words, what they thought the strengths and weaknesses of the ACC were, and to suggest the most important improvements the ACC. HVS then classified the answers into the categories shown below. FIGURE 2-4 ACC VENUE STRENGTHS Hel pful s ta ff 26% Wi fi / Technol ogy 15% Loca ti on 14% Downtown Proxi mi ty 12% 7% 7% 5% 4% 4% Room s i ze Hotel Proxi mi ty Wa l kabl e Hotel room ca paci ty Cos t N = 46 Event planners highlighted the helpfulness and professionalism of the ACC staff when planning events, the availability and quality of the Wi-Fi and other technology offered by the ACC, as well as the location of the ACC and its proximity to downtown Austin. December 17, 2021 Survey Findings Austin Convention Center 2-3 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 2-5 ACC VENUE WEAKNESSES Not enough meeti ng rooms /s pa ce 16% Di ffi cul t to book 15% Ha rd to na vi ga te 14% 9% 7% 7% 7% 5% 4% 3% 3% 3% 3% Meeti ng s pa ce cos t F&B Ol d Exhi bi t ha l l s i ze No pre-functi on s pa ce Need more s pa ce Homel es s nes s Pa rki ng Loadi ng docks Wi fi /Technol ogy N = 45 More meeting s pa ce 36% More exhi bit s pa ce 20% More wa l ka ble 11% 8% 7% 7% 5% 3% 3% Expa nd More fl exibl e booking poli cy More ba ll room s pa ce More pa rking Better s igna ge Improved s pa ce fl exi bi li ty N = 43 Event planners considered the lack of meeting rooms and space as a major weakness of the ACC. The difficulty of booking the ACC, due to the lack of space and available dates, and the difficulty of getting around the ACC and finding the correct meeting room were also listed as common weaknesses by respondents. The ACC has recently improved the signage and wayfinding in the facility, which may address this issue. FIGURE 2-6 MOST IMPORTANT IMPROVEMENT TO THE ACC More than one-third of respondents believe that the ACC needs more meeting space, and one-fifth of respondents believe that the ACC needs more exhibit space. Other responses from event planners include making it easier to walk around the ACC and making the whole facility larger. For event planners that have not hosted an event at the ACC in the last five years, HVS asked them to describe, in their own words, why they had not hosted an event. HVS then classified the answers into the categories shown in the figure below. December 17, 2021 Survey Findings Austin Convention Center 2-4 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 2-7 REASONS FOR NOT HOSTING EVENT AT ACC La ck of a va il a bi li ty 39% La ck of meeti ng s pa ce 19% Cos t 12% Di d not meeti ng booki ng pol icy requi rements 10% 6% 6% 3% Ca n fi t in hotel Li mi ted hotel ca pa ci ty Conventi on center too big N = 75 When explaining why they have not held an event at the ACC, event planners cited the lack of availability and a lack of meeting space, as well as a strict booking policy as three of the most common reasons. These three reasons are connected as the limited amount of space in the ACC makes it harder to book, which forces the ACC to have strict booking requirements as they do not want to fill the building with an event that does not offer as many room nights or as much revenue as they can get from another event. Expanding the ACC will enable it to host more simultaneous events, which may enable it to loosen the booking policy requirements that exist today. HVS asked those event planners that have not hosted an event at the ACC to list up to five other cities where they have hosted an event. HVS sorted the responses, and the figure below shows the most popular cities listed. FIGURE 2-8 OTHER CITIES WHERE HOSTED AN EVENT Sa n Antonio Aus tin Da l la s Hous ton Orl a ndo New Orlea ns Chica go La s Vega s Na s hvi l le Bos ton Fort Worth Denver N = 110 8% 5% 5% 5% 4% 4% 4% 4% 4% 3% 3% 3% The four Texas cities (San Antonio, Austin, Dallas, and Houston) are the most frequent locations for event planners to host an event. Outside of Texas, large convention cities like Orlando, New Orleans, Chicago, and Las Vegas were the most common cities listed. This suggests that Austin competes for state-based association events as well as larger national events. December 17, 2021 Survey Findings Austin Convention Center 2-5 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois HVS asked event planners who have not hosted an event at the ACC to describe the type of venue where they have hosted an event before. The figure below shows the most common types of venue listed by event planners. FIGURE 2-9 TYPE OF VENUE WHERE HOSTED AN EVENT Convention Center a nd Hotel Expo/ Events Center Conventi on Center 68% Hotel 15% 4% 3% Arena / Sta di um 2% 2% 2% 2% 1% 1% Other Performing Arts Center School Conference Center Expo/ Event Center N = 110 Destination Strengths and Weaknesses Nearly 70% of event planners use a convention center to host their event, the most common type of venue listed. Hotels are used by 15% of event planners, and a convention center and hotels are used jointly by nearly 5% of event planners. Other types of venues listed include museums, country clubs, the zoo, and fairgrounds. Cities compete for events primarily on the size of their facility, but also on the quality of the destination. Attendees like being in a popular or interesting destination with a variety of entertainment options. To evaluate how event planners feel about Austin as a destination, HVS asked event planners to rate their level of knowledge regarding Austin as an event destination. FIGURE 2-10 LEVEL OF KNOWLEDGE REGARDING AUSTIN Very knowl edgea ble 47% Somewha t knowl edgea ble 47% 7% 0% Not very knowl edgea ble Not knowl edgea ble a t a l l N = 120 None of the respondents considered themselves not knowledgeable at all about Austin, and only 7% considered themselves not very knowledgeable. The rest of the respondents were split between being very or somewhat knowledgeable. HVS then asked event planners to identify Austin’s main strengths and weaknesses as an event destination in unaided responses. HVS classified the responses by category in the figures shown below. December 17, 2021 Survey Findings Austin Convention Center 2-6 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 2-11 AUSTIN STRENGTHS AS AN EVENT DESTINATION Popul a r 20% Diverse enterta inment options 19% Wa l ka ble 16% Ma ny res ta ura nts 14% 9% 6% 6% 5% 2% 2% Hotel inventory Ai r a cces s Ma ny venues Wea ther Afforda ble Hotel proxi mi ty N = 108 One-fifth of respondents highlighted that Austin is popular and that prospective event attendees want to be there. A similar number of respondents indicated that the number of entertainment options in Austin makes it an excellent destination for events. The ease of walking around Austin, as well as the high number of restaurants, were also mentioned by approximately 15% of respondents. FIGURE 2-12 AUSTIN WEAKNESSES AS AN EVENT DESTINATION Ai r a cces s 19% Hotel a va il a bi li ty 17% Hotel cos t 15% Sa fety 13% 9% Tra ffic 6% La ck of meeti ng s pa ce 4% Meeti ng s pa ce a va il a bi li ty 4% La ck of publi c tra ns i t 4% Cos t 3% La ck of di vers i ty Cl ea nl ines s 2% N = 106 The most commonly listed weakness by event planners was the lack of air access. Austin-Bergstrom International Airport is undergoing an expansion, which will nearly double the number of total gates by 2037. A lack of available hotel rooms and the cost of hotel rooms were also highlighted as weaknesses, likely due to the continued strength of the lodging market. Feeling unsafe was also mentioned by event planners, and specifically, the large population of homeless people near the ACC made event attendees uncomfortable. In an unaided response, event planners important improvements to enhance Austin as an event destination. HVS then classified the responses by category in the figure shown below. identified the most December 17, 2021 Survey Findings Austin Convention Center 2-7 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 2-13 MOST IMPORTANT IMPROVEMENTS TO AUSTIN La rger Conventi on Center 21% More hotels 15% Better publ i c tra ns i t 13% Sa fer 11% 8% 7% 6% 5% 3% 3% 2% 2% More fli ghts Reduce tra ffic More meeting s pa ce i n hotels Chea per hotels Friendl ier booking poli cy Ai r a cces s Clea ner Better pa rking N = 100 More than one-fifth of respondents believe that expanding the convention center is the most important improvement to make in Austin, the most frequent response from event planners. This supports the notion that the ACC needs to expand to keep up with demand. Adding more hotels to Austin, improving the public transit, and making it safer near the convention center were also mentioned by more than 10% of respondents. Event Characteristics and Preferences To determine preferences for events, HVS asked event planners to identify and describe their most typical event. This information included the name of the event, the type of event, venue needs, approximate attendance, scheduling, and lodging requirements. The following figure breaks down the events by type. FIGURE 2-14 EVENTS BY TYPE Meeting 21% Conference 19% Convention 19% Tra de Show 15% Tra i ning/Works hop 12% 7% 3% Cons umer Show 2% 2% Ba nquet Enterta inment s how/event Sports -rel a ted events a nd competi ti on N = 108 More than 15% of respondents plan meetings, conferences, conventions, and trade shows. Trainings or workshops and banquets were also mentioned by more than December 17, 2021 Survey Findings Austin Convention Center 2-8 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois 5% of respondents. Various other event types each make up a small percentage of events. HVS asked survey participants to identify the scope (geographic origin of attendees) of their most typical event. More than 75% of events attract attendees from outside the State of Texas, and 66% of events attract attendees nationwide. Only 16% of events have attendees come from within Texas, and 8% of events have attendees from the Austin area. HVS asked event planners to identify the type of space that their event is typically held. See the figure below. FIGURE 2-15 GEOGRAPHIC ORIGIN OF ATTENDEES Na ti ona l /Interna tiona l 66% Regi ona l (mul ti -s ta te) 10% Sta tewide 16% Loca l 8% N = 104 FIGURE 2-16 EVENT SPACE USED Exhi bi t Ha l l 30% Ba l l room 29% Mee ti ng room 28% Audi tori um/ Thea ter 11% 2% Arena N = 101 Exhibit halls, ballrooms, and meeting rooms are each used by approximately 30% of respondents, emphasizing the need for all three spaces to be expanded at the ACC. Approximately 10% of respondents use an auditorium or theater, and 2% of respondents use an arena to host their event. HVS asked event planners to identify the month and the days of the week in which the typical event takes place. December 17, 2021 Survey Findings Austin Convention Center 2-9 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 2-17 EVENTS BY MONTH Ma rch Ja nua ry 13% Februa ry 10% 7% Apri l 14% 6% Ma y June 9% July 10% 5% 7% October 13% 6% 2% November December N = 104 Augus t September FIGURE 2-18 EVENTS BY DAY OF WEEK Monda y 14% Tues da y 18% Wednes da y 18% Thursda y 15% Frida y 13% Sa turda y 11% Sunda y 11% N =104, 225 responses total Events occur year-round with January, April, and October as the most frequently cited months. December was the least common response, followed by August, May, and November. Events take place throughout the week, with most occurring Tuesday through Thursday. The weekend days have the fewest events. This illustrates the valuable role the ACC plays in the Austin tourism market, as event attendees are most likely to be in Austin during the week when the leisure tourism market is relatively weak. Event planners estimated the level of attendance at their events. The figure below shows the distribution of responses for a range of attendance levels. December 17, 2021 Survey Findings Austin Convention Center 2-10 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 2-19 NUMBER OF DELEGATES 30% 25% 20% 15% 10% 5% 0% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Less than 1,000 1,001 to 2,000 2,001 to 3,000 3,001 to 4,000 4,001 to 5,000 5,001 to 6,000 6,001 to 7,000 7,001 to 8,000 8,001 to 9,000 9,0001 to 10,000 More than 10,000 N = 89 Over 50% of events had 3,000 or fewer attendees, and 25% of events had more than 5,000 attendees. Five events had more than 10,000 attendees. FIGURE 2-20 FLAT FLOOR SPACE NEEDED 0 to 50,000 50,001 to 100,000 100,001 to 150,000 150,001 to 200,000 200,001 to 250,000 250,001 to 300,000 More than 300,000 N = 85 The current ACC offers nearly 250,000 square feet of flat floor space, and 91% of events described by respondents would be able to fit in the current facility. This suggests that increasing exhibit hall size at the ACC would have a limited impact on December 17, 2021 Survey Findings Austin Convention Center 2-11 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois 30% 25% 20% 15% 10% 5% 0% expanding the potential market. Rather, additional exhibit space would alleviate date and space conflicts and enable the ACC to host simultaneous events during peak seasons. The ACC would also be able to compete for large events it was previously too small for. FIGURE 2-21 THEATER SEATING NEEDED More than 25% of events require less than 5,000 seats, and nearly 40% of events require more than 2,000 theater-style seats. N = 67 December 17, 2021 Survey Findings Austin Convention Center 2-12 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois 35% 30% 25% 20% 15% 10% 5% 0% 0-500 501-1,000 1,001-1,500 1,501-2,000 2,001-2,500 2,501-3,000 More than 3,000 N = 53 Nearly one-third of events require room for 500 banquet seats or less while 25% of events required more than 1,500 seats. At their largest, the current ACC ballrooms can host approximately 1,600 and 3,000 attendees in a banquet style. FIGURE 2-22 BANQUET SEATING NEEDED FIGURE 2-23 BREAKOUT ROOMS NEEDED Les s tha n 5 13% 6 to 10 27% 11 to 15 15% 16 to 20 10% 6% 21 to 25 3% 26 to 30 3% 31 to 35 3% 36 to 40 More tha n 40 21% N = 78 Forty percent of events described use less than ten breakout rooms, which are likely smaller meetings and conferences. However, one-fifth of the events described required more than 40 breakout rooms in total. The current ACC can offer up to 54 breakout rooms; however, this includes show offices, divisions of larger meeting rooms, and boardrooms that may not be suitable for breakout sessions. December 17, 2021 Survey Findings Austin Convention Center 2-13 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 2-24 EVENT LENGTH 1 4% 2 10% 3 30% 4 39% 8% 5 More tha n 5 10% N = 80 FIGURE 2-25 ORGANIZATION TYPE As s oci a ti on 49% Corpora te 26% Educa tion 10% 5% Sports 4% Government 2% Exhi bition Compa ny 1% Fra terna l 1% Enterta i nment Soci a l 1% N = 134 The most common event length reported was four days, shortly followed by three days. Two-day events and more than five-day events are planned by 10% of respondents. Event planners reported that they represent the following types of organizations. Nearly half of event planners represent associations, which generally hold annual meetings that rotate to different venues. Corporate and education groups make up 26% and 10% of organizations, respectively. No other type of organization was represented by more than 5% of respondents. Fifty-six percent of event planners tried but were unable to book an event at the ACC. Event planners indicated the following reasons they were unable to host an event at the ACC. December 17, 2021 Survey Findings Austin Convention Center 2-14 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 2-26 REASON UNABLE TO BOOK ACC Da tes una va i la bl e a t venue 38% Ins uffi cient functi on s pa ce 23% Other - Wri te In (Requi red) 17% Ins uffici ent hotel pa cka ge 10% 8% 4% Ava i la bl e hotel room block too sma l l Hotel room ra tes too high N = 90 The most common reason event planners were unable to book an event at the ACC is that the date was already booked by another event, or the venue was otherwise unavailable. Other reasons mentioned include insufficient function space and hotel package. Write-in answers included that the group chose another location and that the facility was too expensive. For those event planners who indicated that there was an insufficient amount of function space at the ACC, HVS asked them which specific type of space was lacking. FIGURE 2-27 LACKING FUNCTION SPACE AT ACC Meeti ng room s pa ce 42% Exhi bit s pa ce 37% Sea ting ca pa ci ty 13% 8% Ba nquet s pa ce N = 21 Meeting and exhibit space was listed by more than 35% of respondents, with 42% indicating that a lack of meeting space made the ACC unable to host their event. Seating capacity and banquet space were mentioned less frequently, by 13% and 8% of respondents, respectively. Redeveloped and Expanded ACC Feedback HVS explained to survey respondents that the ACC was considering redevelopment and expansion and asked respondents to identify the most important types of space to expand at the ACC. See the figure below. FIGURE 2-28 MOST IMPORTANT SPACE TO EXPAND IN ACC Meeting Spa ce 36% Ba ll room Spa ce 29% Exhi bit Spa ce 26% 9% Support Spa ce N = 96 December 17, 2021 Survey Findings Austin Convention Center 2-15 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois Meeting space was listed by event planners most frequently, by more than one-third of respondents followed by ballroom space and exhibit space, which were each selected by more than a quarter of respondents. Support spaces were listed by only 9% of respondents. HVS asked respondents how likely they would be to consider holding an event at the ACC if the expanded ACC had the necessary capacity. The following figure presents the results. FIGURE 2-29 LIKELIHOOD OF BOOKING EVENTS AT EXPANDED ACC Very Li kel y 57% Somewha t Li kel y 26% Neutra l 13% 2% 2% Somewha t Unl i kel y Very Unl i kel y N = 95 Event planners who are more likely to book an event at the expanded ACC outnumber the event planners who are unlikely to book an event at the expanded ACC (83% vs. 4%). This equates to an extremely high net promoter score of 79%. Slightly over 10% of event planners are neutral in booking at the expanded ACC. HVS asked how often event planners would consider holding events at the expanded ACC. See the figure below. FIGURE 2-30 FREQUENCY OF EVENTS WITH ACC EXPANSION More often tha n once per yea r 15% Once every yea r 40% 0% Every three yea rs 25% 0% Les s often tha n every fi ve yea rs 16% 4% Every two to three yea rs Every four or fi ve yea rs Never N = 53 More than half of respondents would rotate an event to the expanded ACC at least once a year, and 80% would hold an event at the expanded ACC at least once every three years. Only 4% of respondents would never hold an event at the expanded ACC. COVID-19 Surveys HVS surveyed event planners in 2019, prior to the COVID-19 pandemic. To supplement the survey results provided above, HVS tracked survey data provided by Northstar Meetings Group and Qualtrics Surveys that indicate how event planner December 17, 2021 Survey Findings Austin Convention Center 2-16 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois 35% 30% 25% 20% 15% 10% 5% 0% preferences and level of activity has changed through the pandemic, as well as attendee preferences. The figure below shows the percentage of event planners who responded to the Northstar Meetings Group PULSE survey. FIGURE 2-31 EVENT PLANNER SURVEY- NORTHSTAR MEETINGS GROUP I am actively sourcing new events I am booking new events I am not currently focused on in-person events Source: Northstar Meetings Group, PULSE Survey The number of event planners who are not focused on in-person events have been decreasing since November of 2020 and has levelled off below 15% of event planners in October 2021. Those sourcing new events, and those actively booking new events, has grown consistently since November, but have begun to flatten in recent months between 20% and 25% respectively. This indicates that event planners are actively returning to booking new events, and a significant majority focused on in-person events. Qualtrics also performed a survey of international event planners in June of 2021 and asked respondents to compare in-person and virtual events. The results indicate that 69% attendees valued in-person events more than virtual and looked forward to returning to in-person events1. 1. 1 “The future of events is hybrid—here’s how to get the perfect balance of virtual and in-person events in 2021 and beyond,” Qualtrics XM, June 17, 2021. https://www.qualtrics.com/blog/future-of- events-is-hybrid/ December 17, 2021 Survey Findings Austin Convention Center 2-17 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois Survey Conclusions and Implications for the ACC HVS surveyed a selected group of event planners to explore their facility needs and to understand their interest in placing events in Austin. Survey respondents represent a cross-section of planners that organize a wide range of event types and sizes. Slightly less than half of the event planners in the survey sample plan events for associations, but the sample includes a mix of sports, social, and entertainment event planners. They represent a variety of entities and plan a range of meeting and event types and sizes. Key findings and conclusions include the following:  Event planners strongly endorse redevelopment and expansion. More than one- fifth of respondents believe that expanding the convention center is the most important improvement to make in Austin, the most frequent response from event planners.  The ACC has national appeal. Most event attendees come from across the country to attend events in Austin.  The ACC generates room night demand during need periods. Most events take place from Tuesday through Thursday, which helps supplement leisure tourism, which generally occurs on weekends and drops off during the week.  Redevelopment and expansion should improve the availability of meeting space and increase the ratio of meeting space to total space. Meeting space was listed as the most important type of space to expand at the ACC at 36%, followed by ballroom and exhibit space, with 29% and 26%, respectively. This relatively even split indicates that the ACC redevelopment and expansion needs to include all three types of space in complementary amounts that would enable the expanded ACC to host multiple simultaneous events.    Event planner interest in an expanded ACC is strong, as indicated by a 79% net promoter score. Event planners rate the ACC highest on the quality of services, the size of the ballroom, and the size of the exhibit hall. However, the respondents to this question are event planners who have hosted an event at the ACC before, so they are understandably pleased with the size of its function spaces. Event planners who cannot fit their event in the ACC were not asked this question.  The number of breakout meeting rooms are rated the lowest by respondents, which indicates that a redevelopment and expansion of the ACC should increase the number of breakout meeting rooms. Event planners highlighted the helpfulness and professionalism of the ACC staff when planning events, the availability and quality of the Wi-Fi and other technology offered by the ACC, as well as the location of the ACC and its proximity to downtown Austin. The helpfulness of the staff and quality of the technology indicates the ACC delivers a high level of customer satisfaction. December 17, 2021 Survey Findings Austin Convention Center 2-18 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois  When asked what change is important to make at the ACC, one-fifth of respondents said adding more exhibit space. Other responses from event planners suggested improvements to wayfinding and walkability in the ACC.  The primary impact of redevelopment and expansion is to improve the availability of dates and space at the ACC. Under current booking policies, the ACC turns away certain types of business. A redevelopment and expansion would allow the ACC to relax the standards for what an event must offer to be held in the ACC.  Austin is well known as a convention destination. This level of awareness about Austin is extraordinarily high and speaks to the success Visit Austin and the ACC have had in promoting the city.  The ACC benefits from Austin’s strong destination appeal. One-fifth of respondents highlighted that Austin is popular and that prospective event attendees want to be there. A similar number of respondents indicated that the number of entertainment options in Austin makes it an excellent destination for events.  The most commonly listed weakness by event planners was the lack of air access and a lack of available hotel rooms. These weaknesses are already being addressed: Bergstrom Austin- International Airport is undergoing an expansion that will nearly double the number of gates and is planning to expand international service with flights to Asia. The Austin hotel market most recently expanded with the addition of a 600-room Marriott adjacent to the ACC that opened in March of 2021.  Event planners have returned to planning and sourcing in-person events and those hosting virtual events have dropped to below 15% of total respondents. Attendees also prefer in-person events and valued them more than virtual events. The survey results indicate that the redevelopment and expansion of the ACC would create an increase in demand at the convention center. Redevelopment and expansion of all of the ACC’s function spaces would 1) make the venue more attractive to event planners, 2) allow the facility to accommodate larger events, 3) relieve many scheduling conflicts, and 4) enable the ACC to host more simultaneous mid-size events that require exhibit, ballroom, and meeting spaces. December 17, 2021 Survey Findings Austin Convention Center 2-19 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois 3. Demand Analysis HVS based event demand projections at the Austin Convention Center (“ACC”) on the following research and analysis:  Historical ACC demand data,  Lost business data, tracked by Visit Austin,  Key market and economic indicators outlined in Section 2 of the HVS Hotel Occupancy Tax Projection Report,  Comparable venue program and demand data,  An online event planner survey, presented in Section 2 of this report,  The general program recommendations presented below, and  Discussions with representatives from the current ACC management and Visit Austin. Conventional Wisdom and Gensler prepared a revised building program for the redevelopment and expansion of the ACC. HVS used this proposed program, and the projected timeline, to inform our event demand projections. The figure below compares the current building program for the ACC to the building program following the proposed redevelopment and expansion (“Expanded Program”). FIGURE 3-1 EXISTING AND PROPOSED BUILDING PROGRAM Event Space Exhibit Ballroom Meeting Total Floor Areas (000's SF) Current ACC Expanded ACC 247 67 55 369 472 85 152 709 Source: Gensler, Conventional Wisdom The Expanded Program would nearly double the total amount of function space at the ACC. While ballroom space may seem to be limited in the redevelopment and expansion, a 100,000 square foot multipurpose hall, included under Exhibit Space, can be used as a large ballroom when needed. December 17, 2021 Demand Analysis Austin Convention Center 3-1 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois HVS projected demand at the expanded ACC under two development scenarios. Both scenarios result in the same Expanded Program by completion, however the duration of construction and the impact of construction on ACC functionality differs as follows:  A single-phase development where the entire ACC is closed for events during construction. Construction is projected to begin in April 2024 and complete by February 2028. The ACC would open in 2028 for a partial year of operation. ACC demand would ramp up and stabilize in 2031.  A two-phase development would enable the ACC to host events in the southern half of the existing facility while the northern half is expanded. After construction completes on the southern half, it would be used to host events while the northern half of the existing facility is expanded. Construction is projected to begin in April 2024, with the first phase being completed in March 2027. The second phase of construction begins in April 2027, after South by Southwest, and ends in March 2030. The ACC would fully open in 2030 for a partial year of operation. ACC demand would ramp up and stabilize in 2033. For the purposes of analysis, HVS assumes that all building program recommendations throughout this report are completed by February 1, 2028, under the single-phase scenario and by March 1, 2030 under the two-phase scenario. The timelines were created for the purposes of this report, based on input Gensler and Conventional Wisdom, and do not represent a proposed construction schedule. The figure below describes the timing of the phasing under each scenario as well as the amounts of function space available annually under each scenario. December 17, 2021 Demand Analysis Austin Convention Center 3-2 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 3-2 DEMAND PHASING AND FUNCTION SPACE AVAILABILITY Historical Demand Source: Gensler, Conventional Wisdom Demand projections also assume the continued presence of a highly qualified, professional sales and management team for the ACC. The ACC provided HVS with a summary of the number of events and corresponding total attendance that occurred at the facility from calendar years 2015 through 2019. HVS did not show data for 2020 and 2021 due to the impact of the COVID-19 pandemic. HVS reclassified event types into standard event categories to allow comparisons with other venues and for the projection of financial operations. HVS classified all events into one of the following categories. Conventions—associations, government, social, military, educational, religious, fraternal, and ethnic organizations register attendees for multi-day events. Facility set up includes breakout, banquet and exhibit space set-up and may include plenary sessions. Typically, the primary purpose of a convention is information exchange. Tradeshows—provide a means for wholesalers and retailers to transact business with industry buyers. Like conventions, tradeshows offer a forum for exchanging industry ideas and attendees must register for the event. To clearly differentiate conventions from tradeshows, HVS assumes that only corporations and enterprises December 17, 2021 Demand Analysis Austin Convention Center 3-3 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois can sponsor and produce tradeshows. While they also require exhibit space set-up, they only sometimes require banquet, plenary, and/or breakout space set-up. Consumer Shows—public, featuring the exhibitions of merchandise for sale or display. Exhibition companies produce consumer shows, as they provide a means of product distribution and advertising. They only require exhibit space set-up. ticketed events Conferences—require a mix of banquet and breakout space set-up as well as occasional assembly space, but do not require any exhibit set-up. Conferences can be conducted by any organization type, but always require attendees to be registered. Banquets—only require a banquet set-up for food and beverage meal service. These events also can be produced by any organizational type and are either are held privately or require guests to register. Meetings— only require breakout space set-up. Like conferences, they can be produced from any of the organization types, but unlike conferences, they are private events to which one must be invited. Sports—typically require the set-up of a competition area in a large function space. Attendees to sporting events, which are usually organized by sports enterprises, may be public or registered. Some sporting events have both a registered and public aspect to the event over the span of a few days. Concerts & Entertainment—usually a concert or some form of live entertainment, owned and organized by an event promoter for the public. Entertainment events only require production set-up. South by Southwest—is one of the largest music, film, and arts festivals in the US, with over 425,000 total attendees in 2018 and approximately 420,000 attendees in 2019. The ACC is one of many venues used citywide to host film screenings, lectures, and interviews, among other events. It runs for approximately ten days in mid- March; however, other SXSW-affiliated events occur in Austin throughout the entire month. The following figure presents the event and attendance history at the ACC from 2015 through 2019, HVS did not include 2020 and 2021 due to the impact of the COVID-19 pandemic. December 17, 2021 Demand Analysis Austin Convention Center 3-4 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 3-3 SUMMARY OF DEMAND HISTORY 2015 2016 2017 2018 2019 Event Conventi ons Tra des hows Cons umer Shows Conferences Ba nquets Meeti ng Sports Concerts & Enterta i nment Other South by Southwes t Total Estimated Attendees Conventi ons Tra des hows Cons umer Shows Conferences Ba nquets Meeti ng Sports Concerts & Enterta i nment Other South by Southwes t Total 37 2 11 12 7 31 8 1 3 1 113 130,329 1,700 86,063 23,854 12,250 14,225 33,500 900 35 105,000 407,856 38 1 9 11 5 18 4 3 na 1 90 174,600 10,000 45,100 12,875 3,280 8,330 22,700 2,850 na 150,000 429,735 Source: ACC 42 3 16 11 9 25 5 1 2 1 115 186,480 3,200 132,600 17,275 5,775 15,165 29,100 2,500 30 150,000 542,125 36 1 11 12 7 15 3 2 3 1 91 216,500 1,500 80,700 23,400 5,275 7,800 18,000 4,600 32 200,000 557,807 38 1 11 10 6 26 3 1 2 1 99 156,750 1,200 84,700 13,000 8,730 10,913 4,300 1,000 15 200,300 480,908 Historic demand at the ACC varied from 90 events in 2016 to 115 in 2017, while the attendance ranged from nearly 408,000 attendees in 2015 to more than 557,000 in 2018. The drop in attendance from 2018 to 2019, while the number of events at the ACC increased, was likely caused by several large conventions rotating throughout the United States and those high-attendee events being replaced with smaller events. The level of fluctuation in the number of events and attendees is typical due to changes in the booking cycle. The most common types of events are conventions and meetings, followed by consumer show and conferences. Most ACC attendees come for conventions and consumer shows. Lost Business Analysis Visit Austin provided HVS with a summary of lost convention center business for events that were lost from 2015 to 2019. Events are counted as lost if they December 17, 2021 Demand Analysis Austin Convention Center 3-5 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois tentatively reserved dates but ultimately decided not to book the ACC. Visit Austin provided lost event data for approximately 1,300 events. The data included the total room nights, projected attendance, and the reason the event was lost. HVS categorized all lost business into eleven categories by reason lost. The following figure presents the number of events lost in each category for each year. FIGURE 3-4 2015-2019 EVENTS LOST BY CATEGORY Reason Lost 2015 2016 2017 2018 2019 Total Percentage Lack of Availability* Hotel Package Lack of Function Space/Rooms* Other Location Event Cancelled or Postponed Destination Chose Alternate Year ACC Decision* Lack of Local Support ACC Cost Air Accessibility Lack of Sports Facilities Total 116 64 28 18 10 3 9 15 2 3 10 3 0 278 142 55 19 20 8 10 7 4 5 5 4 0 0 279 103 65 20 20 9 4 9 5 12 8 1 0 0 256 *Rea s ons for l os i ng a n event tha t a n expa ns i on woul d a ddres s Source: Visit Austin 121 43 34 26 11 10 7 5 2 1 0 6 1 260 103 42 20 16 5 9 4 1 6 6 3 1 0 215 585 269 121 100 43 36 36 30 27 23 18 10 1 1288 45% 21% 9% 8% 3% 3% 3% 2% 2% 2% 1% 1% 0% The most common reason for the ACC to lose an event lack of convention center availability due to date conflicts. Availability constraints made up 45% of the total events lost over the five-year period. An insufficient hotel package—which involves the price of rooms or lack of room availability —was the second most common reason for the ACC to lose an event. The third most common reason was a lack of function space or rooms. The “Other” category includes events lost for lack of third- party support and events that gave no reason for not using the ACC. Reasons for lost business that could be addressed by expanding the ACC are the lack of availability due to date conflicts, a lack of function space or rooms, and an ACC decision to turn away an event. The lack of availability and the lack of function space would be addressed by the redevelopment and expansion as the expansion would enable the ACC to host more simultaneous events. The ACC would also be able to adapt its booking policies to include events that it currently turns away due to a limited availability December 17, 2021 Demand Analysis Austin Convention Center 3-6 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois The hotel package around the ACC has also been supplemented by the opening of the Marriott Downtown, which offers more than 600 rooms across Trinity Street from the ACC. But, it is unclear whether this will satisfy event planner needs. In a separate tally, Visit Austin also tracked the number of attendees and room nights associated with the events that were lost. The table below shows the total for events lost from 2015-2019, and the annual average events, attendees, and room nights that were lost for reasons that will be addressed in the redevelopment and expansion from 2015 to 2019. FIGURE 3-5 POTENTIAL RECAPTURABLE EVENTS, ATTENDEES, ROOM NIGHTS Total (2015-2019) Annual Average Recapturable Non-Recapturable Recapturable Non-Recapturable Percentage Recapturable Events 733 Attendees 2,460,615 Room Nights 4,651,591 566 1,618,605 3,212,652 147 492,123 930,318 113 323,721 642,530 56% 60% 59% More than half of the annual lost events at the ACC are considered recapturable, as they were lost for reasons that will be addressed under the proposed redevelopment and expansion. A slightly higher proportion of attendees and room nights are also considered recapturable. The expanded ACC would not be able to recapture all the listed events because other secondary considerations may affect event planner and association decisions; however, this does indicate the amount of demand that exists for the ACC and the potential increase in demand in a redevelopment and expansion scenario. For each redevelopment and expansion scenario, HVS projected demand from 2024, when construction would begin, until 2033, including every year of operation during construction until construction is completed. Under each scenario, the base year (2024) represents three months of normal ACC operations followed by either nine months of no usable event space or nine months of half of the normal ACC event space available. Based on conversations with ACC staff, some events may be moved to the Palmer Event Center (“PEC”) during construction in the one-phase scenario. Incremental event demand would ramp up following the completion of the redevelopment and expansion and stabilize in 2031 or 2033, depending on the scenario. Event Demand Forecast December 17, 2021 Demand Analysis Austin Convention Center 3-7 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois The figures below break out event projections by type of event in a redeveloped and expanded ACC. Total attendance figures represent individual event attendees. HVS based demand projections for the expansion period on conversations with ACC staff. December 17, 2021 Demand Analysis Austin Convention Center 3-8 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 3-6 SUMMARY OF DEMAND PROJECTIONS- ONE PHASE Historic Construction Begins Apr. Construction Completed Feb. 2028 Stabilized 2019 2024 2025 2026 2027 2029 2030 2031 2032 2033 Events Conventi ons Tra des hows Cons umer Shows Conferences Ba nquets Meeti ng Sports Concerts & Enterta i nment South by Southwes t Total Attendees 38 1 11 10 6 26 3 1 1 99 3 1 5 1 1 5 0 0 1 17 0 1 3 0 2 2 0 0 0 8 0 1 3 0 2 2 0 0 0 8 Conventi ons Tra des hows Cons umer Shows Conferences Ba nquets Meeti ng Sports Concerts & Enterta i nment South by Southwes t 156,750 1,200 84,700 13,000 8,730 10,913 4,300 1,000 200,300 11,000 1,000 39,000 0 0 3,000 0 0 200,300 Total 480,908 254,300 0 2,000 22,000 0 2,000 1,000 0 0 0 27,000 0 2,000 22,000 0 2,000 1,000 0 0 0 27,000 Source: HVS 0 1 3 0 2 2 0 0 0 8 0 2,000 22,000 0 2,000 1,000 0 0 0 27,000 36 4 8 19 11 26 3 1 1 48 5 10 25 15 35 4 2 1 60 5 12 27 20 40 5 3 1 60 6 12 30 25 55 6 4 1 60 6 12 30 25 55 6 4 1 60 6 12 30 25 55 6 4 1 109 145 173 199 199 199 167,000 8,000 58,000 37,000 12,000 13,000 14,000 2,000 250,000 561,000 226,000 11,000 72,000 50,000 17,000 18,000 19,000 3,000 250,000 666,000 282,000 11,000 86,000 54,000 22,000 20,000 24,000 5,000 250,000 754,000 282,000 13,000 86,000 60,000 28,000 28,000 28,000 6,000 250,000 781,000 282,000 13,000 86,000 60,000 28,000 28,000 28,000 6,000 250,000 781,000 282,000 13,000 86,000 60,000 28,000 28,000 28,000 6,000 250,000 781,000 December 17, 2021 Demand Analysis Austin Convention Center 3-9 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 3-7 SUMMARY OF DEMAND PROJECTIONS- TWO PHASE Historic Construction Begins Apr. Phase 1 Completed Feb. Phase 2 Begins Apr. Construction Complete March Stabilized 2019 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Events Conventi ons Tra des hows Cons umer Shows Conferences Ba nquets Meeti ng Sports Concerts & Enterta i nment South by Southwes t Total Attendees 38 1 11 10 6 26 3 1 1 99 5 1 5 2 1 15 3 0 1 33 0 1 3 3 3 10 1 0 0 21 0 1 3 3 3 10 1 0 0 21 Conventi ons Tra des hows Cons umer Shows Conferences Ba nquets Meeti ng Sports Concerts & Enterta i nment South by Southwes t 156,750 1,200 84,700 13,000 8,730 10,913 4,300 1,000 200,300 20,000 1,000 38,000 2,000 1,000 8,000 1,000 0 200,300 Total 480,908 271,300 0 1,000 15,000 2,000 3,000 6,000 4,000 0 0 31,000 0 1,000 15,000 2,000 3,000 6,000 4,000 0 0 31,000 Source: HVS 0 1 3 3 3 10 1 0 0 21 0 1,000 15,000 2,000 3,000 6,000 4,000 0 0 31,000 0 1 3 3 3 10 1 0 0 21 0 1,000 15,000 2,000 3,000 6,000 4,000 0 0 31,000 0 1 3 3 3 10 1 0 0 21 0 1,000 15,000 2,000 3,000 6,000 4,000 0 0 31,000 38 3 8 23 13 38 3 2 1 45 4 10 25 17 45 4 2 1 52 5 12 27 22 50 5 3 1 60 6 12 30 25 55 6 4 1 129 153 177 199 165,000 5,000 59,000 37,000 14,000 20,000 8,000 2,000 250,000 560,000 212,000 9,000 72,000 53,000 19,000 23,000 19,000 3,000 250,000 660,000 244,000 11,000 86,000 54,000 24,000 25,000 24,000 5,000 250,000 723,000 282,000 13,000 86,000 60,000 28,000 28,000 28,000 6,000 250,000 781,000 December 17, 2021 Demand Analysis Austin Convention Center 3-10 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois Under a one-phase redevelopment and expansion, the expanded ACC would open in March 2028 and would host nearly 150 events and 650,000 attendees in its first full year of operation, 2029. The two-phase redevelopment and expansion would enable the ACC to host events throughout the construction period. The northern half of the facility would be closed from April 2024 to February 2027. The southern half redevelopment and expansion is projected to begin in April 2027 and be completed by March 2030. Under a two- phase redevelopment and expansion, the expanded ACC would fully open in March 20230 and would host over 150 events and 675,000 attendees in its first full year of operation, 2031. The redevelopment and expansion, under either construction scenario, would allow the ACC to attract 100 more events by enabling it to host larger events than it supports today as well as more simultaneous events that are similar in size to those that the ACC currently hosts. All event types are projected to increase except South by Southwest, where the attendance is projected to increase by nearly 50,000 due to the increase in function space. Total attendance at the ACC is projected to increase from a historic average of 483,000 to slightly more than 775,000 by 2031 or 2033 when demand stabilizes. These projections assume that the COVID-19 pandemic has been contained by the time of redevelopment and expansion and the number of events and attendees will recover to historical levels. The figure below shows a summary of the demand projections for each scenario and compares the number of events, and total attendance in each year. December 17, 2021 Demand Analysis Austin Convention Center 3-11 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 3-8 SUMMARY OF DEMAND PROJECTIONS Events Total Attendees One-Phase Two-Phase One-Phase Two-Phase 17 8 8 8 109 145 173 199 199 199 33 21 21 21 21 21 129 153 177 199 796 254,300 27,000 27,000 27,000 561,000 666,000 754,000 781,000 781,000 781,000 271,300 31,000 31,000 31,000 31,000 31,000 560,000 660,000 723,000 781,000 Year 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Total 1,065 4,659,300 3,150,300 The one-phase approach enables the ACC to host 270 more events and 1.5 million more attendees from 2024-2033 due to the redevelopment and expansion being completed sooner. The two-phase approach allows the ACC to host more events during construction; however, those events will be smaller due to the limited amount of function space in half of the ACC and will be logistically harder to execute. City advisors also indicate that construction will be significantly more expensive, and lasts two more years than the one-phase construction scenario. While most out of town attendees to ACC events stay in the downtown area, the room nights generated by these events affect the room rates and occupancy of the entire city. A hotel market phenomenon called “compression” occurs when high occupancies in one or more hotels increase occupancy and room rates in other hotels. Visit Austin provided HVS with historic daily Smith Travel Research (“STR”) data for the downtown market in Austin from 2015 through 2019. HVS used daily STR data and daily room block commitments from conventions to study the compression from ACC events. This analysis reveals large and statistically significant rate and occupancy compression due to ACC events. The following figure shows room night supply, room night demand, revenue, and average daily room rates (“ADR”) in downtown Austin from 2015 through 2019. Historic Hotel Market Impact December 17, 2021 Demand Analysis Austin Convention Center 3-12 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 3-9 DOWNTOWN AUSTIN HOTEL MARKET PERFORMANCE 2015-2019 (CY) Year 2015 2016 2017 2018 2019 Room Night Supply Room Night Demand Occupancy Rate Revenue (Millions) 1,519,881 1,752,428 1,753,201 2,056,697 2,037,264 1,200,360 1,379,619 1,357,933 1,523,715 1,626,866 79% 79% 77% 74% 80% $275.87 325.09 329.05 373.87 420.83 ADR $223 $228 $233 $238 $251 Sources: STR and Visit Austin Hotel revenue has increased 52%, room night supply has increased 34%, and room night demand has increased 36% since 2015. Prior to the impact of the COVID-19 pandemic, the Austin hotel market downtown was strong and grew substantially since 2015. Downtown Austin is not the only hotel market are within the City that benefits from compression caused by ACC events. STR data was unavailable for other Austin sub- markets. Similar compression analysis in other cities show that the magnitude of compression decreases as distance from the ACC increases All hotel markets within Austin a likely to benefit from compression due to ACC events. To analyze the historic impact of ACC events on the downtown Austin hotel market, HVS combined two datasets1 containing daily hotel performance and ACC performance for the calendar years 2015 through 2019. HVS calculated the average daily room rates and occupancy rates on days when the ACC generated at least 500 room nights (“ACC Event Days”) and compared that to days on which the ACC did not.2 Room blocks fewer than 500 room nights were not included in the analysis. 1 Visit Austin provided HVS with STR data on room night supply, room night demand, and ADR for a set of downtown Austin hotels. We combined this data with daily event data provided by the ACC. 2 We used a z-test to determine whether the difference in means is statistically significant. Our null hypothesis is that occupancy and room rates are the same on ACC Event Days as on non-event days. If we reject the null hypothesis, we can accept our alternative hypothesis that the means are not equal. For normally distributed populations, a z-test calculates the probability that the means of two populations are equal. To reject the null hypotheses with 99% confidence (p<.01), the z-score must be greater than 2.58 or less than -2.58. Historic Hotel Occupancy and Rate Compression December 17, 2021 Demand Analysis Austin Convention Center 3-13 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois The figure below compares the downtown hotel occupancy and ADR on ACC Event Days and ACC Non-Event Days. FIGURE 3-10 HISTORIC IMPACT OF ACC EVENT DAYS ON DOWNTOWN AUSTIN HOTELS Significant P<0.1 Non-Event Days Event Days Difference Number of Days Occupancy ADR 862 84.1% $254 964 72.1% $217 12.1% $37   Occupancy and rate compression is statistically significant (p<.01) in the downtown hotel sub-market in Austin. On ACC event days, the downtown market experiences, on average, increases of 12.1% in occupancy and a $37 in ADR. HVS used the estimated percent change in occupancy to project the net new number of room nights and the associated rooms revenue that the ACC brings to the market. In addition, hotel guests staying in Austin during events days for reasons not related to the ACC pay an average premium of $37 over what they would have paid on non- event days. HVS considers the revenue generated by this premium as an induced revenue impact of the ACC. December 17, 2021 Demand Analysis Austin Convention Center 3-14 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 3-11 ANNUAL INCREMENTAL HOTEL REVENUE IMPACT (IN THOUSANDS OF 2019 DOLLARS) Parameter Value Annual Incremental Rooms Revenue* $26,437 Occupancy Impact Total Available Room Nights Difference in Occupancy Change in Occupied Rooms Non-Event Day ADR Annual ACC Event Days ADR Impact Occupancy Total Available Room Nights Occupied Room Nights Difference in ADR Annual ACC Event Days Total Impact Occupancy* ADR* Total * (Thousands $) x x x x x x + 5,868 12% 708 $217 172 84% 5,868 4,938 $37 172 $26,437 $31,728 $58,165 Annual Incremental Rooms Revenue* $31,728 In 2019 dollars, the room nights generated by the ACC events cause annual hotel room revenues in downtown Austin to increase by approximately $26.4 million. Baseline ADR compression increases room revenues in the downtown Austin market by $31.7 million per year. In 2019 dollars, the ACC accounts for an estimated $58 million in annual downtown hotel room revenues in Austin. Annual hotel room revenue also increases due to occupancy and rate compression in other hotel sub-markets in Austin; however, the size of the increase will be less than in downtown. Due to a lack of available data, HVS did not provide a statistical analysis of revenue impact the ACC has in other sub-markets in Austin. However, based on previous studies in other cities3, downtown areas generate approximately 75% to 80% of the total hotel revenue impact citywide. If this is the case in Austin, 3 As an example, see “Convention Center Expansion Analysis, San Diego Convention Center by HVS Convention, Sports & Entertainment Facilities Consulting, April 11, 2017. Available upon request. December 17, 2021 Demand Analysis Austin Convention Center 3-15 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois the ACC would have induced between $72.5 and $77.3 million in annual hotel room revenue from 2015-2019. HVS intends for demand projections to show the expected levels of event numbers and attendance. Projections show smooth growth over time. However, event demand and booking cycles do not always run smoothly. Unpredictable local and national economic factors can affect businesses. Event demand often moves in cycles based on rotation patterns and market conditions. Therefore, HVS recommends interpreting the demand projections as a mid-point of a range of possible outcomes and over a multi-year period, rather than relying on projections for any one specific year. December 17, 2021 Demand Analysis Austin Convention Center 3-16 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois 4. Financial Analysis HVS used a proprietary financial operating model to estimate revenues and expenses at the ACC, both at stabilization and comparing the two development scenarios during the construction period. This model quantifies the key variables and operating ratios that determine revenue potential and expense levels. Unless otherwise indicated, HVS applied an annual inflation rate of 2.5% to revenues and expenses. The industry does not use a standardized set of accounting practices for reporting financial performance and operators employ a variety of accounting methods. However, a few major revenue and expense categories are common to most venues. HVS relied on the ACC's organization of revenue and expenses but condensed certain line items and restated its financial operations. HVS obtained data on historical ACC operations for the calendar years 2015 through 2020 and restated that information into various revenue and expense line items. HVS uses this same categorization of revenue and expense for the financial projections to follow. The following figure presents a restatement of historical financial operations. Historical Financial Operations December 17, 2021 Financial Analysis Austin Convention Center 4-1 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 4-1 HISTORICAL OPERATIONS ($ THOUSANDS) 2015 2016 2017 2018 2019 $11,353 $2,696 $4,127 $3,731 $711 $471 $83 $23,172 $17,689 7,016 68 4,771 728 4,078 1 403 487 $35,240 $13,751 $2,784 $5,018 $3,946 $939 $313 $189 $26,939 $19,332 7,948 88 4,604 724 3,889 3 395 -258 $36,725 $18,529 $2,726 $5,394 $4,258 $1,278 $341 $324 $32,851 $20,713 9,649 79 3,707 840 3,605 3 340 -394 $38,541 $12,995 $3,303 $5,106 $4,042 $1,032 $349 $643 $27,469 $22,741 7,766 92 9,803 801 3,635 17 409 -657 $44,605 $20,573 $2,818 $5,202 $4,721 $1,148 $345 $940 $35,748 $24,195 11,258 115 9,860 732 3,637 6 436 -222 $50,018 Revenue Food and Beverage (Gross) Facility Rental Event Services Parking AV Services (Net) Other Interest Income Total Revenue Operating Expense Salary and Benefits Food & Beverage Costs Utilities Repair & Maintenance Administrative & General Supplies & Equipment Marketing Insurance Other Total Operating Expense TOTAL NET INCOME (LOSS) ($12,067) ($9,785) ($5,690) ($17,136) ($14,269) Source: Austin Convention Center as restated by HVS From 2015 through 2019, the ACC generated between $23.1 and $35.7 million in revenue. In 2020, due to the event cancelations caused by the COVID-19 pandemic, revenue fell to $12.7 million. Food and beverage services generate the largest source of revenue, followed facility rental, event services, and parking. The ACC has incurred between $35.2 and $50.0 million in expenses over the same period, with most expenses being dedicated to salaries and benefits, as well as the cost of food and beverage services. Reimbursement for the operation of the Palmer Event Center is categorized as an offsetting expense line item (“Other”), as well as other intradepartmental transfers and miscellaneous expenses, including payment to Visit Austin. HVS projected revenue and expenses for a base year (2024) for the redevelopment and expansion of the ACC. For the purposes of this analysis, we assume that the entire redevelopment and expansion of the ACC, under either scenario, would open by at least 2030. As discussed in our demand analysis, a three-year ramp-up period would be necessary to stabilize the operation in 2031 under the One-Phase scenario Projection of Financial Operations December 17, 2021 Financial Analysis Austin Convention Center 4-2 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois Revenue and 2033 under the Two-Phase scenario. Projections assume an inflation rate of 2.5% unless otherwise stated. Staffing at the ACC would increase at various points in the redevelopment and expansion, reaching full staff levels when the entire facility opens. HVS relied on discussion with ACC staff to estimate staffing needs in an expanded ACC and the timing of addition of new positions as the venue expands. Revenue is the income derived from business operations and other business activities. ACC line items include: Food and Beverage (Gross), Facility Rental, Event Services, Parking, AV Services (Net), and Other. HVS estimates operating revenues as fixed amounts (subject to inflation) or as amounts per unit of demand. In this analysis, we used Attendees, GSFD (square feet of use times the number of days of utilization) and, Day Trips as units of demand. To formulate the revenue parameters (amounts per unit of demand), HVS relied on primarily on historical ACC demand and operating statements as well as industry information, and knowledge of the performance of comparable venues. We adjusted the assumptions for inflation and other anticipated trends in price levels. The figure below summarizes the Revenue parameters for each unit of demand and by type of event. December 17, 2021 Financial Analysis Austin Convention Center 4-3 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 4-2 REVENUE PARAMETERS ($2020) Revenue Line Item and Demand Source Revenue Estimation Unit Amount per Unit Pre-Opening Post Opening Food and Beverage (Gross) Conventi ons Tra des hows Cons umer Shows Conferences Banquets Meeti ng Sports Concerts & Enterta i nment South by Southwes t Facility Rental Conventi ons Tra des hows Cons umer Shows Conferences Banquets Meeti ng Sports Concerts & Enterta i nment Other South by Southwes t Event Services Conventi ons Tra des hows Cons umer Shows Conferences Banquets Meeti ng Sports Concerts & Enterta i nment South by Southwes t Attendees Attendees Attendees Attendees Attendees Attendees Attendees Attendees Attendees GSFD GSFD GSFD GSFD GSFD GSFD GSFD GSFD GSFD GSFD GSFD GSFD GSFD GSFD GSFD GSFD GSFD GSFD GSFD $65.00 12.00 10.00 105.00 85.00 30.00 10.00 7.00 7.00 $0.50 0.55 0.60 0.50 0.70 0.75 0.60 0.60 0.00 0.40 $1.50 1.25 1.00 1.25 1.00 0.75 1.00 1.50 0.70 $65.00 12.00 10.00 105.00 85.00 30.00 10.00 7.00 7.00 $0.62 0.67 0.72 0.62 0.82 0.87 0.72 0.72 0.12 0.52 $1.50 1.25 1.00 1.25 1.00 0.75 1.00 1.50 0.70 December 17, 2021 Financial Analysis Austin Convention Center 4-4 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 4-3 REVENUE PARAMETERS ($2020) CONT. Revenue Line Item and Demand Source Revenue Estimation Unit Amount per Unit Pre-Opening Post Opening Parking Conventi ons Tra des hows Cons umer Shows Conferences Ba nquets Meeti ng Sports Concerts & Enterta i nment South by Southwes t AV Services (Net) Conventi ons Tra des hows Cons umer Shows Conferences Ba nquets Meeti ng Sports Concerts & Enterta i nment South by Southwes t Other Interest Income Da y Tri ps Da y Tri ps Da y Tri ps Da y Tri ps Da y Tri ps Da y Tri ps Da y Tri ps Da y Tri ps Da y Tri ps Attendees Attendees Attendees Attendees Attendees Attendees Attendees Attendees Attendees Fixed Fixed $3.00 3.00 5.00 5.00 5.00 3.00 4.00 3.00 5.00 $2.50 2.00 2.00 1.60 2.50 1.00 1.50 2.00 2.50 $3.00 3.00 5.00 5.00 5.00 3.00 4.00 2.50 5.00 $2.50 2.00 2.00 1.60 2.50 1.00 1.50 2.00 2.50 363,766 435,836 363,766 435,836 The revenue parameter estimates shown above are based on analysis of historical operations. HVS calibrated revenue parameters in the VenueModel© so that they generate revenue estimates for a base year that reflect average or recent operating revenues. As examples, conferences, conventions, and banquets generate the most Food and Beverage revenue per attendee and concerts generate the least. In aggregate, these parameters produce revenue estimates that reflect historical food and beverage revenues as stated in 2020 dollars. A brief description of each line item follows. Food and Beverage—Most events that use a venue’s function space will arrange for food service for their attendees during their events. This food service includes catering which can range from coffee breaks associated with a meeting to a full dinner associated with a convention or banquet. Consumer shows, sporting events, and other events may generate concessions revenue. Most conventions and conferences generate demand for multiple meals during these multi-day events. December 17, 2021 Financial Analysis Austin Convention Center 4-5 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois Meetings and banquets generally include a single meal or refreshment services. Events like conventions and tradeshows typically spend the most per attendee. Consumer shows have lower per capita spending. Facility Rental—Facility rental revenue includes the revenue venues receive from clients that reserve one or more function areas in the facility. Despite having published rates, convention centers typically charge rental fees based on negotiated daily rental fees. Not all events incur a facility rental fee. Management may reduce or waive the exhibit rental charges to book an event that generates significant food and beverage revenue, HOT revenue, or has a positive economic impact. Increases in facility rental per GSFD are based on discussions with ACC staff. Event Services—Event Services include the fees charged to users for services that could include business services, technical assistance, set-up and take down of function spaces, cleaning services, security services, electricity and other utilities, commissions from decorators and other services provided by third-party contractors at events. Many events also require communications and internet services. Banquets and other upscale events can often require elaborate decorating services. Almost all events require cleaning services; cleaning of common areas may be complimentary for most events while cleaning services offered to individual exhibitors can represent a significant source of revenue. Service charges vary by type of event. Some of these services may be included in the rental charges for using the facility, but others will be add-on service charges. Parking—Parking revenue include charges collected by a the venue. Conventions, trade shows, and consumer shows generate a significant amount of parking revenue. AV Services (Net)—Audio visual includes the revenue generated from services related to sound and video system used for presentations and productions during events. Other—Other revenue includes miscellaneous and non-recurring revenue sources. It also includes lease revenue from storefronts on blocks with convention center parking garages. Interest Income—Interest Revenue is generated by earning on investments. HVS estimates operating expenses as a blend of fixed and variable costs. Expenses have 1) a fixed component that changes with inflation, and 2) a variable component that depends on the level facility utilization. Fixed expenses may also increase or decrease due to changes in operating conditions or management decisions. For example, the addition of staff could increase fixed salary expenses. All fixed Operating Expenses December 17, 2021 Financial Analysis Austin Convention Center 4-6 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois expenses are adjusted for inflation. HVS estimates variable expenses using a ratio- to-sales analysis, or based on amounts per unit of utilization, such as the number of events, attendees, or some other factor. Expense Line Item Operating Expense Sa l a ry a nd Benefi ts Food & Bevera ge Cos ts Uti l i ti es Repa i r & Ma i ntena nce Admi ni s tra ti ve & Genera l Suppl i es & Equi pment Ma rketi ng Ins ura nce Servi ces Other FIGURE 4-4 EXPENSE PARAMETERS ($2020) Estimation Method Unit Fi xed Amount Ra ti o to Sa l es Ra ti o to Sa l es Ra ti o to Sa l es Ra ti o to Sa l es Ra ti o to Sa l es Ra ti o to Sa l es Ra ti o to Sa l es Fi xed Amount Food a nd Bevera ge (Gros s ) Tota l Revenue Tota l Revenue Tota l Revenue Tota l Revenue Tota l Revenue Tota l Revenue Amount Per Unit Base Year Stabilized Year $26,839,821 56.52% 8.92% 8.95% 4.27% 9.41% 1.29% 0.67% $6,657,577 $29,852,811 50.00% 7.00% 7.50% 3.50% 8.00% 1.00% 0.67% $6,657,577 Fixed % 100% 0% 75% 75% 75% 50% 75% 100% 100% The expense parameter estimates shown above are based on an analysis of historical operations. HVS calibrated revenue parameters in the VenueModel© so that they generate expense estimates for a base year that reflect average or recent operating revenues. Ratios decrease from the base year to the stabilized due to anticipated economies of scale and efficiencies associated with a new building. Operating expenses are incurred to maintain the normal business operations of the venue. Many of these expenses vary with the level facility utilization. A brief description on each expense line item follows. Salary and Benefits—Salaries and associated benefits include compensation for permanent full and part-time employees dedicated to administration, marketing, building operations, and other functions. Food & Beverage Costs—Costs of food and beverage include the costs of food and beverages sold as well as the labor associated with food preparation and service. Utilities—The consumption of various utilities takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common utilities costs include electricity, natural gas, fuel oil, water, and steam. December 17, 2021 Financial Analysis Austin Convention Center 4-7 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois Repair & Maintenance—This category includes the cost of routine and one-time facility maintenance expenses performed by in-house facility operations personnel. It also includes specialized activities, such as HVAC system maintenance, electrical work, and maintenance of other mechanical systems often contracted out to third parties. Administrative & General—Administrative and general expense includes the salaries and wages of all administrative personnel not directly associated with a department. Office as well as day-to-day facility expenses. Such expenses typically include travel, telephone, printing, permits, and other miscellaneous services. Supplies & Equipment—This category includes items such as computers, office machines, furniture, consumables, and chemicals that are required to support and maintain the operations of the facility. Marketing—Marketing and sales expense consists of costs associated with advertising, sales, and promotion; these activities focus on attracting and retaining customers. Marketing creates an image, develops customer awareness, and stimulates patronage of a property's various facilities. Sales involves lead generation, responses to customer requests for proposals, and negotiation of contracts for use of the venue Insurance—Insurance costs include property insurance, casualty loss, and other liability insurance required for facility operations. Other—Other expenses could include one-time expenses and other lesser amounts of miscellaneous operations costs. They also include a reimbursement to the ACC for the operations of the Palmer Event Center. HVS included a base level of local parking garage demand in the one-phase scenario because, while the ACC is closed for redevelopment and expansion, the ACC garage will still operate and serve downtown Austin. Services Other—Includes a payment to Visit Austin for lead generation and sales support. The figure below compares uninflated projections of ACC financial operations once demand has stabilized with ACC historic averages. This shows the increase in revenue and expense projected for the ACC once demand has stabilized, under either scenario. Operating Pro Forma December 17, 2021 Financial Analysis Austin Convention Center 4-8 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 4-5 FINANCIAL OPERATIONS IN HISTORIC AND EXPANDED ACC ($ 2023) Revenue Food a nd Bevera ge (Gros s ) Fa ci l i ty Renta l Event Servi ces Pa rki ng AV Servi ces (Net) Other Interes t Income Total Revenue Operating Expense Sa l a ry a nd Benefi ts Food & Bevera ge Cos ts Uti l i ti es Repai r & Ma i ntena nce Admi ni s trati ve & Genera l Suppl i es & Equi pment Ma rketi ng Ins ura nce Other Servi ces Other Total Operating Expense TOTAL NET INCOME (LOSS) Historic Average Stabilized Year (2015-2019) 2033 Amount % Total Amount % Total $15,440 2,865 4,969 4,140 1,022 364 436 $29,236 $20,934 8,727 2,569 2,578 1,230 2,711 371 193 (985) 2,692 $41,019 ($11,783) 53% 10% 17% 14% 3% 1% 1% 100% 72% 30% 9% 9% 4% 9% 1% 1% -3% 9% 140% -40% $34,828 6,736 10,387 7,751 1,999 410 491 $62,601 $33,606 $17,414 $4,382 $4,695 $2,191 $5,008 $626 $419 ($1,226) $7,495 $74,610 ($12,009) 56% 11% 17% 12% 3% 1% 1% 100% 54% 28% 7% 8% 4% 8% 1% 1% -2% 12% 119% -19% The redevelopment and expansion of the ACC is projected to increase total revenue by approximately $34 million from $29 million to nearly $63 million by 2033. Most of this increase comes from the sale of food and beverage services associated with events. Total expenses are projected to increase by approximately $34 million, from $41 million to nearly $75 million. The largest increase in expenses comes from an increase in food and beverage costs, as well as salary and benefit increases. The figures below compare projections of ACC financial operations under two development scenarios. The first figure shows the one-phase approach, where the ACC is closed entirely for events but hosts some at the Palmer Event Center. The second shows the two-phase approach where the ACC only shut down half of the building at a time. December 17, 2021 Financial Analysis Austin Convention Center 4-9 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 4-6 ONE PHASE SCENARIO TEN-YEAR FINANCIAL OPERATING PROJECTIONS (INFLATED $000’S) Closes Apr. Stabilized 2024 2025 2026 2027 2029 2030 2031 2032 2033 Revenue Food a nd Bevera ge (Gros s ) Fa ci l i ty Renta l Event Servi ces Pa rki ng AV Servi ces (Net) Other Interes t Income Total Revenue Operating Expense Sa l a ry a nd Benefi ts Food & Bevera ge Cos ts Uti l i ti es Repai r & Ma i ntena nce Admi ni s trati ve & Genera l Suppl i es & Equi pment Ma rketi ng Ins ura nce Other Servi ces Other Total Operating Expense TOTAL NET INCOME (LOSS) $15,843 $4,044 $4,144 $4,248 $3,011 2,857 5,237 3,110 705 420 503 $30,970 1,702 4,381 3,899 2,030 4,101 714 291 -1,256 7,682 $54,514 $525 106 168 2,665 64 0 515 $31,743 263 872 934 436 1,355 441 110 -1,288 7,874 $42,739 $538 109 173 2,731 65 0 528 $32,537 269 894 957 447 1,389 539 113 -1,320 8,071 $43,895 $552 111 177 2,799 67 0 542 $34,498 276 916 981 916 1,423 622 116 -1,353 8,273 $46,668 Source: HVS Construction Completed Feb. 2028 $23,856 6,520 9,649 7,527 1,658 463 555 $50,229 $37,262 11,928 4,597 4,926 2,299 4,842 708 474 -1,387 8,479 $74,128 $32,295 7,202 10,911 8,323 1,999 475 569 $61,775 $38,973 16,148 4,892 5,242 2,446 5,375 726 486 -1,422 8,691 $81,558 $39,458 7,769 11,962 9,040 2,317 487 583 $71,615 $39,947 19,729 5,160 5,528 2,580 5,841 744 498 -1,457 8,909 $87,479 $42,434 8,207 12,655 9,444 2,436 499 598 $76,273 $40,946 21,217 5,339 5,720 2,670 6,102 763 510 -1,494 9,131 $90,905 $43,495 8,412 12,972 9,680 2,497 511 613 $78,180 $41,969 21,748 5,473 5,863 2,736 6,254 782 523 -1,531 9,360 $93,177 $44,582 8,622 13,296 9,922 2,559 524 628 $80,134 $43,019 22,291 5,609 6,010 2,805 6,411 801 536 -1,569 9,594 $95,507 ($38,671) ($38,695) ($39,751) ($42,420) ($23,900) ($19,783) ($15,864) ($14,632) ($14,998) ($15,373) December 17, 2021 Financial Analysis Austin Convention Center 4-10 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 4-7 TWO-PHASE SCENARIO TEN-YEAR FINANCIAL OPERATING PROJECTIONS (INFLATED $000’S) Construction Begins Apr. Phase 1 Completed Feb. Phase 2 Begins Apr. Construction Complete March 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 $4,199 2,991 5,629 3,168 743 35 503 $17,267 $30,970 2,373 4,236 3,863 2,028 4,063 667 347 -1,256 7,682 $54,973 $1,002 133 193 2,665 65 0 515 $4,573 $31,745 501 872 935 436 1,357 493 110 -1,288 7,874 $43,035 $1,027 137 198 2,731 66 0 528 $4,687 $32,539 513 894 958 447 1,391 573 113 -1,320 8,071 $44,179 $1,052 140 203 2,799 68 0 542 $4,804 $33,352 526 917 982 458 1,426 587 116 -1,353 8,273 $45,283 $1,079 144 208 2,869 70 0 555 $4,924 $34,186 539 939 1,007 470 1,461 602 118 -1,387 8,479 $46,415 $1,106 147 213 2,941 71 0 569 $5,047 $36,245 553 963 1,032 481 1,498 617 121 -1,422 8,691 $48,780 $25,283 6,742 9,923 7,871 1,734 203 583 $52,338 $39,148 12,641 3,231 2,153 1,005 2,535 744 334 -1,457 8,909 $69,243 $33,520 7,514 11,316 8,720 2,067 499 598 $64,233 $40,946 16,760 5,128 5,495 2,564 5,620 763 510 -1,494 9,131 $85,424 $38,433 8,064 12,283 9,322 2,315 511 613 $71,540 $41,969 19,216 5,356 5,739 2,678 5,989 782 523 -1,531 9,360 $90,082 ($37,706) ($38,462) ($39,492) ($40,479) ($41,491) ($43,733) ($16,905) ($21,191) ($18,541) ($15,373) Source: HVS Stabilized $44,582 8,622 13,296 9,922 2,559 524 628 $80,134 $43,019 22,291 5,609 6,010 2,805 6,411 801 536 -1,569 9,594 $95,507 Revenue Food a nd Bevera ge (Gros s ) Fa ci l i ty Renta l Event Servi ces Pa rki ng AV Servi ces (Net) Other Interes t Income Total Revenue Operating Expense Sa l a ry a nd Benefi ts Food & Bevera ge Cos ts Uti l i ti es Repai r & Ma i ntena nce Admi ni s trati ve & Genera l Suppl i es & Equi pment Ma rketi ng Ins ura nce Other Servi ces Other Total Operating Expense TOTAL NET INCOME (LOSS) December 17, 2021 Financial Analysis Austin Convention Center 4-11 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois HVS prepared the following figure to compare the two redevelopment and expansion scenarios, which sums the total operating revenue and expense from 2024-2033. See the figure below. FIGURE 4-8 FINANCIAL OPERATIONS BY CONSTRUCTION SCENARIO ($ INFLATED) Year 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 One-Phase Two-Phase Total Revenue Total Expense Operating Income Total Revenue Total Expense Operating Income 15,843 4,044 4,144 4,248 50,229 61,775 71,615 76,273 78,180 80,134 54,514 42,739 43,895 46,668 74,128 81,558 87,479 90,905 93,177 95,507 (38,671) (38,695) (39,751) (42,420) (23,900) (19,783) (15,864) (14,632) (14,998) (15,373) 17,267 4,573 4,687 4,804 4,924 5,047 52,338 64,233 71,540 80,134 54,973 43,035 44,179 45,283 46,415 48,780 69,243 85,424 90,082 95,507 (37,706) (38,462) (39,492) (40,479) (41,491) (43,733) (16,905) (21,191) (18,541) (15,373) Total 446,484 710,570 (264,087) 309,549 622,922 (313,373) Total operating revenue and expense are both higher in the one-phase scenario across the years studied due to the one-phase scenario being completed sooner and ramping up to demand stabilization faster than the two-phase scenario. HVS intends for financial projections to show the expected levels of revenues and expense. Projections show smooth growth over time. However, event demand and booking cycles are not always smooth. Unpredictable local and national economic factors can affect business. Event demand is often cyclical, based on rotation patterns and market conditions. Therefore, HVS recommends interpreting the financial projections as a mid-point of a range of possible outcomes and over a multi-year period rather than relying on projections for any one specific year. December 17, 2021 Financial Analysis Austin Convention Center 4-12 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois 5. Economic Impact Based on the demand projections presented in this report under each scenario, HVS identified the new spending that would occur in the local economy due to the proposed redevelopment and expansion of the Austin Convention Center (“ACC”). HVS estimated the amounts of income and employment that new visitors, event organizers, and exhibitors would generate in Austin annually once demand has stabilized. HVS compared the economic impact generated by the ACC from 2019 until 2032 under the one-phase and two-phase construction scenarios. The figure below demonstrates our methodology. FIGURE 5-1 METHODOLOGY FOR ECONOMIC AND FISCAL IMPACT ANALYSIS December 17, 2021 Economic Impact Austin Convention Center 5-1 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois Direct, Indirect, and Induced Spending Spending falls into three categories:  Direct spending includes the new spending of event attendees and organizers. For example, an attendee’s expenditure on a restaurant meal is a direct spending impact. Direct spending includes only new spending that originates from outside Austin. Spending by attendees who live within the market area is a transfer of income from one sector of the area’s economy to another; therefore, this analysis does not count local resident spending as a new economic impact. Net direct spending are the amounts of direct spending that falls into the local economy.   Indirect spending follows from the business spending resulting from the initial direct spending. For example, an event attendee’s direct expenditure on a restaurant meal causes the restaurant to purchase food and other items from suppliers. The portion of these restaurant purchases that remain within Austin count as indirect impacts. Induced spending represents the change in local consumption due to the personal spending by employees whose incomes change from direct and indirect spending. For example, a waiter at a local restaurant may have more personal income as a result of an event attendee dining at the restaurant. The amount of the increased income that the waiter spends in the local economy is an induced impact. To generate direct spending estimates, HVS applied assumptions about the amounts of new spending generated by ACC event attendees and sponsors. HVS used the IMPLAN input-output model of the local economy to estimate net direct, indirect, and induced spending. The sum of net direct, indirect, and induced spending the proposed estimates make up the total estimated spending impact of redevelopment and expansion of the ACC. Some refer to indirect and induced impacts as multiplier effects. The relationship between direct spending and the multiplier effects varies based upon the specific size and characteristics of a local area’s economy.  Overnight Guests: Visitors to the ACC who require overnight lodging, including convention delegates, meeting attendees, and attendees at other ACC events. Overnight delegate spending includes the spending on meals, shopping, local transportation, recreation and entertainment, and other goods and services while in town.  Daytrip Attendees: Visitors to the ACC who do not require paid lodging. In most markets, day-trippers typically spend money on meals, shopping, local Sources of Direct Spending HVS identified six sources of new direct spending impact: December 17, 2021 Economic Impact Austin Convention Center 5-2 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois New Visitors   transportation, recreation and entertainment, and other goods and services while in town. Event Organizers: Individuals, associations, or other organizations that plan, sponsor, organize, and coordinate events that take place at ACC facilities. In addition to facility spending, event organizers also spend on lodging, meals, local transportation, facility rentals, equipment rentals, and other goods and services required to plan and organize a successful event. Exhibitors: Individuals or companies that rent exhibition space, typically from event organizers, to display information or products at events. In addition to spending at the facility, exhibitors purchase lodging, meals, local transportation, vendor services, meeting room rentals, equipment rentals, and other goods and services.  Overnight Sports: Individuals who are travel to Austin for a sports event that stay overnight. They spend on hotels, food, retail, and recreation.  Daytrip Sports: Individuals who are travel to Austin for a sports event that do not pay lodging costs. They spend on food, retail, transportation, and recreation. Estimation of new spending of each of these sources involves three sets of assumptions: 1) the number of new visitors to the market, 2) the geographic location of their spending, and 3) the amounts typically spent by each of the sources. In the table below, HVS estimated the percentage of each visitor type that would come from outside the market rather than from the local area. The spending estimates only include new visitor spending because non-residents import income, whereas residents transfer income already in the market area. FIGURE 5-2 PERCENTAGE OF VISITORS NEW TO AUSTIN Visitor Type Overnight Guests Day Trips Conventi ons Tradeshows Cons umer Shows Conferences Banquets Meeti ng Concerts & Enterta i nment South by Southwes t 85% 77% 26% 58% 20% 29% 24% 95% Source: HVS 60% 60% 60% 37% 37% 37% 37% 95% December 17, 2021 Economic Impact Austin Convention Center 5-3 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois  Overnight Guests – HVS estimates of the number of new overnight guests, including overnight sports attendees, are based on the attendance draw of the event and averaged across each event type. Data on the attendance draw of each event was provided by ACC staff.  Day Trips – HVS estimates of the number of new daytrip guests, including daytrip sports attendees, were based on the population of the City of Austin relative to the population within different drive times of the ACC. For conference, banquet, meeting, and concert attendees, HVS used a 30-minute drive-time. For convention, tradeshow, and consumer show attendees, HVS used a 60-minute drive-time. For South by Southwest, HVS used a three- hour drive-time.  Exhibitor/Organizer spending on Attendees/Delegates – HVS based estimates on the percentage of attendees by events organized and exhibited by companies that would otherwise not hold or participate in an event in Austin. The product of the visitor forecasts and the percent of demand new to the market yields an estimate of the sources of impact shown in the table below. That is: Total Overnight Guests X Percent New = New Overnight Stays Total Day Trips X Percent New = New Day Trips Total Delegate Days X Percent New = New Delegate Days The figure below shows the number of new visitors to Austin that generate new spending. FIGURE 5-3 SUMMARY OF DIRECT SPENDING- STABILIZED YEAR Demand Type Conventi ons Tra des hows Cons umer Shows Conferences Ba nquets Meeti ng Sports Concerts & Enterta i nment Tota l Overnight Visitor Days Day Trips Attendee- Days* 127,400 1,400 100 12,100 100 1,000 3,100 100 145,300 85,100 5,400 12,700 23,000 7,400 4,800 9,700 700 148,800 361,800 9,900 44,000 65,600 20,000 24,000 18,000 800 544,100 *Used to estimate organizer and exhibitor spending. Source: HVS December 17, 2021 Economic Impact Austin Convention Center 5-4 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois Spending Parameters Delegates, attendees, event organizers, and exhibitors spend locally on lodging, meals, local transportation, facility rentals, vendor services, meeting room rentals, equipment rentals, and other goods and services. To estimate the spending for overnight and day trip visitors, HVS used results from several tourism spending data sources. Our primary source is the Travel USA study by Longwoods International. This survey is conducted annually with a sample size of approximately 350,000 trips and assesses origin, spending, party size, and primary purpose of the trip. HVS supplements this with the Destination International (“DI”) Convention Expenditure & Impact Study which surveyed event organizers across over 1,000 events to gather daily spending parameters on overnight convention attendees, day-trip event attendees, exhibiting companies, and event organizers. HVS applies parameters from the Corporate Travel Index (“CTI”) to account for local spending patterns. Adjusted data from DI provides estimates of organizer spending per visitor day. All spending parameters are stated as the daily spending by individual overnight guests and day-trippers in 2020 dollars. The following figures present the direct spending estimates for each spending category. FIGURE 5-4 CONVENTION ATTENDEE SPENDING Overnight Convention Attendees $271.15 Hotel Average Da i l y Room Rate Food & Bevera ge Retai l Trans portati on at Des ti na ti on Recreati on Other Hotel Cha rges Food & Bevera ge Retai l Trans portati on at Des ti na ti on Recreati on Daytrip Convention Attendees $176.86 26% 26% 14% 13% 12% 9% 40% 22% 20% 18% Sources: Longwoods International, STR, CTI December 17, 2021 Economic Impact Austin Convention Center 5-5 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 5-5 EXHIBITOR AND ORGANIZER ATTENDEE SPENDING Exhibitor Spending Per Overnight Day $42.52 Event Cateri ng and Conces s i ons Lodgi ng Cos ts Adverti s i ng a nd Rel a ted Servi ces Other a mus ement a nd recrea ti on i ndus tri es Automoti ve Equi pment Renta l and l ea s i ng Equi pment Renta l Reta i l Stores - Genera l Mercha ndi s e Tra ns i t a nd ground pa s s enger tra ns porta ti on Reta i l Stores - Ga s ol i ne Sta ti ons Sta te a nd l oca l government pa s s enger tra ns i t Organizer Spending per Delegate Day $6.01 Total 100% Reta i l Stores - Genera l Mercha ndi s e Adverti s i ng a nd Rel a ted Servi ces Hotel s a nd motel s , i ncl udi ng cas i no hotel s Hotel Room Ra te Automoti ve Equi pment Renta l and l ea s i ng Sta te a nd l oca l government pa s s enger tra ns i t Tra ns i t a nd ground pa s s enger tra ns porta ti on Sources: Destinations International, CTI Total 100% 38% 20% 10% 10% 7% 5% 4% 3% 1% 1% 27% 21% 25% 25% 1% 1% 1% December 17, 2021 Economic Impact Austin Convention Center 5-6 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 5-6 SPORTS ATTENDEE SPENDING Overnight Sports Attendees $411.52 Hotel Average Da i l y Room Rate Other Hotel Cha rges Food & Bevera ge Recreati on Retai l Trans portati on at Des ti na ti on Daytrip Sports Attendees Food & Bevera ge Recreati on Retai l Trans portati on at Des ti na ti on Total 100% $58.21 65% 21% 5% 4% 3% 2% 33% 28% 24% 15% Sources: Longwoods International, STR, CTI Total 100% Facility Revenue from Outside Spending Event organizers and exhibitors create additional spending impacts through spending at the ACC through facility rentals, the purchase of event food and beverage services, and other spending at the venue. Using operating revenue histories, HVS estimated future spending by exhibitors and event organizers at the expanded ACC including: Food and Beverage—Most events that use a venue’s function space will arrange for food service for their attendees during their events. This food service includes catering which can range from coffee breaks associated with a meeting to a full dinner associated with a convention or banquet. Consumer shows, sporting events, and other events may generate concessions revenue. Most conventions and conferences generate demand for multiple meals during these multi-day events. Meetings and banquets generally include a single meal or refreshment services. Events like conventions and tradeshows typically spend the most per attendee. Consumer shows have lower per capita spending. Facility Rental—Facility rental revenue includes the revenue venues receive from clients that reserve one or more function areas in the facility. Despite having published rates, convention centers typically charge rental fees based on negotiated daily rental fees. Not all events incur a facility rental fee. Management may reduce or waive the exhibit rental charges to book an event that generates significant food and beverage revenue or has a positive economic impact. December 17, 2021 Economic Impact Austin Convention Center 5-7 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois Event Services—Event Services include the fees charged to users for services that could include business services, technical assistance, set-up and take down of function spaces, cleaning services, security services, electricity and other utilities, commissions from decorators and other services provided by third-party contractors at events. Many events also require communications and internet services. Banquets and other upscale events can often require elaborate decorating services. Almost all events require cleaning services; cleaning of common areas may be complimentary for most events while cleaning services offered to individual exhibitors can represent a significant source of revenue. Service charges vary by type of event. Some of these services may be included in the rental charges for using the facility, but others will be add-on service charges. Parking—Parking revenue include charges collected by a the venue. Conventions, trade shows, and consumer shows generate a significant amount of parking revenue. AV Services (Net)— Audio visual includes the revenue generated from services related to sound and video system used for presentations and productions during events. Other—Other revenue includes miscellaneous and non-recurring revenue sources. Other revenue includes miscellaneous and non-recurring revenue sources. It also includes lease revenue from storefronts on blocks with convention center parking garages. HVS applied the previous sources of spending impacts and spending parameters to estimate gross direct spending for a stabilized year. Facility revenue was deflated from 2024 dollars to 2020 dollars using the Consumer Price Index (“CPI”). See the figure below. Gross Direct Spending FIGURE 5-7 GROSS DIRECT SPENDING Visitor Type Number of New Visitors Daily Spending Total Spending (Millions) Convention Delegate Overnight Spending = Convention Delegate Daytrip Spending = Exhibiting Company Spending per attendee = Event Organizer Spending per attendee = Overnight Sports Attendees = Daytrip Sports Attendees = 192,851 443,200 415,700 543,300 3,100 9,700 $271.56 = overni ght vi s i tors x 176.86 = x da ytri p vi s i tors 42.52 = x a ttendees 6.01 = x a ttendees 155.56 = overni ght vi s i tors x x 58.21 = da ytri p vi s i tors Facility Revenue = $52.37 78.38 17.68 3.27 0.48 0.56 21.79 Total Gross Direct Spending = $174.53 December 17, 2021 Economic Impact Austin Convention Center 5-8 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois IMPLAN Impact Modeling Annual Net Direct Spending Retail Margins Local Purchase Percentage Indirect and Induced Spending HVS uses the IMPLAN input-output model to estimate indirect and induced spending and employment impacts. IMPLAN is a nationally recognized model developed at the University of Minnesota and commonly used to estimate economic impacts. An input-output model generally describes the commodities and income that normally flow through the various sectors of a given economy. The indirect and induced spending and employment effects represent the estimated changes in the flow of income, goods, and services caused by the estimated direct spending. The IMPLAN model accounts for the specific characteristics of the local area economy and estimates the share of indirect and induced spending that it would retain. HVS categorized new direct expenditures into spending categories that we provide inputs into the IMPLAN model. Specifically, the IMPLAN model relies on spending categories defined by the U.S. Census according to the North American Industry Classification System (“NAICS”). Because the spending data from the spending surveys used by HVS do not match the NAICS spending categories, HVS translates the spending categories into the NAICS spending categories that most closely match. Not all of the gross direct spending counts as an economic impact because some of the spending does not generate income within the market . HVS adjusts gross direct spending to account for income that leaks out of the local economy by estimating retail margins and local purchase parentages. As a result, the realized direct spending (“net direct spending”) is lower than the gross direct spending in the market area. Spending at retailers creates a smaller economic impact compared to spending in other industries. Retailers add value equal to the margin or price increase of the good above the original price paid to obtain the good. The IMPLAN model is product based, so HVS uses IMPLAN margin numbers to account for the discrepancy between retail purchaser prices and producer prices. To accurately measure spending impacts, HVS counts spending on products and services located in the market area. Some of the direct spending demand in the market area cannot be accommodated. For example, an event organizer may need to buy novelty items for all attendees but find that the market area does not produce these items. This effect occurs for direct, indirect, and induced spending. HVS uses the IMPLAN SAM model values to track the percentage of a good purchased within the market area. The relationship between direct spending and the multiplier effects can vary based on the specific size and characteristics of a local area’s economy. HVS enters the gross direct spending estimate into the IMPLAN input output model of the local economy to estimate the net direct, indirect, and induced spending. HVS obtained the most recent available data from IMPLAN for . December 17, 2021 Economic Impact Austin Convention Center 5-9 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois Annual Net Spending Impacts The following figures present the output of the IMPLAN model–the net new direct, indirect, and induced economic impacts and that are attributable to the proposed redevelopment and expansion of the ACC. HVS also used IMPLAN to estimate the jobs created based on the direct, indirect, and induced spending estimates. The figure below shows the annual net direct, indirect and induced spending generated by the existing ACC, the increase in economic impact due to the redevelopment and expansion of the ACC, and the estimated total economic impact of a redeveloped and expanded ACC. The increased impact from redevelopment and expansion would occur under either scenario, though timing would vary. Employment Impacts HVS calculated the full-time equivalent jobs supported by the spending in each economic sector. The figure below summarizes the results. FIGURE 5-8 ANNUAL ECONOMIC IMPACT ESTIMATES Impact ($ millions) Current ACC Net Di rect Indi rect Induced Total Increase from Expansion $167.8 68.9 48.4 $285.0 $277.7 110.2 80.8 $468.8 Total $445.5 179.1 129.2 $753.8 FIGURE 5-9 EMPLOYMENT IMPACT IN A STABILIZED YEAR Full-Time Equivalent Jobs Current ACC Di rect Indi rect Induced Total Permanent Jobs Increase from Expansion 1,857 454 404 2,715 1,122 287 212 1,622 Total 2,980 741 616 4,337 Fiscal Impacts By a stabilized year of operation, the project would support approximately 1,625 additional permanent full-time equivalent jobs, bringing the total number of jobs supported by the ACC to more than 4,300. Fiscal impacts are the public sector share of the economic impacts generated by tax collections on new spending. The previously discussed spending estimates provide a basis for estimating potential tax revenue, as certain existing Austin taxes would apply to some of the spending. December 17, 2021 Economic Impact Austin Convention Center 5-10 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois The IMPLAN analysis generates net-direct, indirect, and induced outputs, which fall into various NAICS categories. HVS determined which taxes would apply to which category of output. HVS then used the appropriate tax rates to estimate the amount of tax revenue. HVS applied these nominal tax rates to a detailed breakdown of spending and income categories that result from direct, indirect, and induced spending through operation of the ACC. HVS then estimated the potential increase in annual revenue from each tax source as shown in the following figures. FIGURE 5-10 INCREMENTAL FISCAL IMPACT CITY OF AUSTIN Tax Category Tax Base Effective Tax Rate Estimated Tax Revenue Local Sales & Use Tax Auto Rental Lodging Tax 217,982,924 20,886,852 96,587,111 1.00% 5.00% 9.00% $2,179,800 $1,044,300 $8,692,800 Total $11,916,900 Three tax sources would generate approximately $11.9 million in additional annual tax revenue to the City of Austin in a stabilized year of operation of an expanded ACC. In the one-phase scenario, stabilization occurs in 2031, in the two-phase stabilization occurs in 2033. FIGURE 5-11 SUMMARY OF ECONOMIC AND FISCAL IMPACTS Summary of Impacts* Current ACC Increase from Expansion Economi c Impa ct (mi l l i ons ) Fi s ca l Impa ct (mi l l i ons ) Jobs *In a stabilized year. $468.8 $11.75 2,715 $285.0 $11.92 1,622 Total $753.8 $23.67 4,337 Economic Impact During Construction In order to inform the decision of whether to expand the ACC in one or two phases, HVS prepared economic impact estimates for the ACC from 2019-2032 under each scenario. These estimates are based on the demand projections for each scenario and follow the same methodology and parameters described for the stabilized economic impact of redevelopment and expansion. December 17, 2021 Economic Impact Austin Convention Center 5-11 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois HVS also prepared estimates under a “no construction” scenario where the ACC is not expanded, and demand recovers to pre-COVID-19 levels. The economic impact in the “no construction” scenario begins to decline in 2027 due to larger convention events outgrowing the ACC, and being replaced by smaller “in-fill convention” events. HVS identified convention events that are likely to move from the ACC based on the amount of function space used per event. The attendance and room night demand for in-fill conventions are based on smaller convention events that have occurred at the ACC. The table below shows the number of conventions and in-fill conventions from 2027 through 2033, as well as the number of attendees and room nights generated. FIGURE 5-12 DO NOTHING SCENARIO CONVENTION EVENT REPLACEMENT Conventions Total Conventions Total Conventions Year 2027 2028 2029 2030 2031 2032 2033 37 36 32 28 24 19 16 Events In-Fill Conventions 1 2 6 10 14 19 22 Attendance In-Fill Conventions 3,100 6,200 18,600 31,000 43,400 59,000 68,300 38 38 38 38 38 38 38 152,600 148,500 132,000 115,500 99,000 78,400 66,000 155,700 154,700 150,600 146,500 142,400 137,400 134,300 211,000 205,300 182,500 159,700 136,900 108,400 91,300 Room Nights In-Fill Conventions 4,800 9,600 28,800 48,100 67,300 91,300 105,700 Total 215,800 214,900 211,300 207,800 204,200 199,700 197,000 By 2033, HVS projects that the ACC will have lost 22 of its largest conventions and replaced them with 22 smaller in-fill conventions. This loss of events will have results in ACC attendance and room nights decreasing by more than 15,000 and 18,000, respectively. The charts below show the annual economic impact of the ACC during construction and through 2033. ACC staff provided data on ACC demand from 2019-2023 through advanced bookings and historic demand. December 17, 2021 Economic Impact Austin Convention Center 5-12 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois FIGURE 5-13 ANNUAL ECONOMIC IMPACT – ONE-PHASE One-Phase No Construction FIGURE 5-14 ANNUAL ECONOMIC IMPACT – TWO-PHASE Two-Phase No Construction $800 $700 $600 $500 $400 $300 $200 $100 $0 $800 $700 $600 $500 $400 $300 $200 $100 $0 December 17, 2021 Economic Impact Austin Convention Center 5-13 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois Cumulative Impact Per Dollar Spent Economic impacts drop significantly during construction, to COVID-19 pandemic levels of impact, because they are generated by demand at the ACC, so when the ACC is not operating, or operating at limited capacity, there is less impact than when the ACC operates at its normal capacity. The stabilized economic demand, shown in 2033, shows an increase in economic impact of nearly $300 million per stabilized year compared to the no construction scenario. Comparing the two scenarios shows that the one-phase approach generates more economic impact because it completes construction and ramps up to full operation sooner. HVS calculated the cumulative economic impact under each scenario per dollar spent on the ACC. The cumulative economic impact is the sum of all impact generated by the ACC in that year, and each previous year. The amount spent on the ACC includes the cost of expanding the facility, as well as the funding needed to support the operating loss of the ACC, capital costs, and maintenance. FIGURE 5-15 CUMULATIVE IMPACT PER DOLLAR SPENT Cumulative Economic Impact Per Dollar of Investment* One- Phase Expansion Two-Phase Expansion $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 *Includes estimated capital costs, operating deficit, and ongoing capital maintenance December 17, 2021 Economic Impact Austin Convention Center 5-14 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois In the one-phase scenario, the cumulative impact per dollar spent reaches $2.79 by the time demand stabilizes in 2031, and reaches more than $7 in 2037. The two- phase scenario is below the one-phase due to the longer construction time, but reaches $2.39 by demand stabilization and more than $5 in 2037. These economic and fiscal impact estimates are subject to the assumptions and limiting conditions described throughout the report. Numerous assumptions about future events and circumstances form the basis for these estimates. Although we consider these assumptions reasonable, we cannot provide assurances that the project will achieve the forecasted results. Actual events and circumstances are likely to differ from the assumptions in this report and some of those differences may be material. The readers should consider these estimates as a mid-point in a range or potential outcomes. December 17, 2021 Economic Impact Austin Convention Center 5-15 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois 6. Statement of Assumptions and Limiting Conditions 1. 2. 4. 5. 7. 9. This report is to be used in whole and not in part. No responsibility is assumed for matters of a legal nature. 3. We have not considered the presence of potentially hazardous materials on the proposed site, such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphenyls, pesticides, or lead-based paints. All information, financial operating statements, estimates, and opinions obtained from parties not employed by HVS are assumed to be true and correct. We can assume no liability resulting from misinformation. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 6. We are not required to give testimony or attendance in court by reason of this analysis without previous arrangements, and only when our standard per-diem fees and travel costs are paid prior to the appearance. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 8. We take no responsibility for any events or circumstances that take place after the date of our report. The quality of a facility's on-site management has a direct effect on a facility's economic performance. The demand and financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results. 10. The impact analysis presented in this report is based upon assumptions, estimates, and evaluations of the market conditions in the local and national economy, which may be subject to sharp rises and declines. Over the projection period considered in our analysis, wages and other operating expenses may increase or decrease due to market volatility and economic forces outside the control of the facility’s management. 11. We do not warrant that our estimates will be attained, but they have been developed based on information obtained during our market research and are intended to reflect reasonable expectations. December 17, 2021 Statement of Assumptions and Limiting Conditions Austin Convention Center 6-1 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois 12. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded. Thus, these figures may be subject to small rounding errors. 13. 14. 15. 16. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. Although this analysis employs various mathematical calculations, the final estimates are subjective and may be influenced by our experience and other factors not specifically set forth in this report. HVS, is not a municipal advisor and HVS is not subject to the fiduciary duty set forth in section 15B(c)(1) of the Act (15 U.S.C. 78o-4(c)(1)) with respect to the municipal financial product or issuance of municipal securities. The reader is advised that any actual issuance of debt would be done under the advice of its bond counsel and financial advisors. Financial advisor would provide advice concerning the specific structure, timing, expected interest cost, and risk associated with any government loan or bond issue. Potential investors should not rely on representations made in this report with respect to the issuance of municipal debt. This report was prepared by HVS Convention, Sports & Entertainment Facilities Consulting. All opinions, recommendations, and conclusions expressed during this assignment are rendered by the staff of this organization, as employees, rather than as individuals. 17. This report is set forth as a market study of the subject facility; this is not an appraisal report. December 17, 2021 Statement of Assumptions and Limiting Conditions Austin Convention Center 6-2 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois 7. Certification The undersigned hereby certify that, to the best of our knowledge and belief: 1. 2. 3. 4. 5. 6. 7. 8. the statements of fact presented in this report are true and correct; the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions; we have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved; HVS is not a municipal advisor and is not subject to the fiduciary duty set forth in section 15B(c)(1) of the Act (15 U.S.C. 78o-4(c)(1)) with respect to the municipal financial product or issuance of municipal securities; we have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment; our engagement in this assignment was not contingent upon developing or reporting predetermined results; our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this report; Thomas A. Hazinski, MPP and Anthony Davis, MPP personally inspected the property described in this report. Thomas Hazinski Managing Director Anthony Davis Project Manager December 17, 2021 Certification Austin Convention Center 7-1