San Diego Convention Center Corp. Backs Off from Fee/Contract Changes

TSE STAFF
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San Diego, CA – The San Diego Convention Center Corp. (SDCCC) wasted no time in backing down from immediate implementation of new fees and exclusive services after a substantial number of protests and inquiries were received from convention center clients and the Society of Independent Show Organizers’ (SISO) Chairman Rick McConnell, Executive Director Lew Shomer.  McConnell is also president of Hanley Wood Exhibitions.

One of the fees included a $5 facility improvement fee for each 10’x10’ equivalent booth ($5 per 100 square feet equivalent) sold to an exhibitor by show management. SDCCC said the fees were necessary to repair, maintain, and upgrade the facility in a “timely and efficient manner.” Other fees were levied on paid advertising displayed during trade shows, and also would have required shows coming into the center after June 1 to utilize the convention center’s exclusive security and event staffing services.

The fees were proposed in response to a request from the San Diego City Council in April that SDCCC find ways to fund capital improvement projects outlined in the center’s five-year plan. Reserve funds set aside for such improvements have been steadily depleted since 2008 and the fees and in-house services were designed to help replenish those funds.

President and CEO of SDCCC Carol Wallace replied to TSE’s request for comment, saying she was on the road for the next week. She referred questions to Steve Johnson, vice president of public affairs for SDCCC. Johnson told Trade Show Executive that the requirement to use exclusive services for both security and staffing services at the convention center had been “put on hold” as a result of industry feedback.

PUT ON HOLD, NOT REVERSED

While the actions were put on hold, they were not completely reversed, Johnson said. “The board would have to act to rescind the fees,” he said. Should the board recommend rescinding those fees and the requirement to use exclusive contractors for security and event staffing, the issue would then return to City Council for final action.

“We raised the possibility of strong client reaction with City Council before this was announced,” Johnson said. Since the fee implementation was put on hold, sales managers have been in contact with clients to discuss the issue.

Though the changes would not have impacted any contract currently in place, they could be a factor in future negotiations if they are reinstated by City Council. Comic-Con International: San Diego is one of the city’s largest and longest-standing shows, and is signed through 2015 with the convention center. Its 2014 event is set for July. Last year’s event drew 130,000 attendees and more than 1,000 exhibitors who used approximately 460,000 sf of exhibit space, according to San Diego Comic Convention, the not-for-profit organization that owns and manages the event. That would have generated at least $23,000 in ‘facility improvement fees’ if the proposed booth fees had applied to the 2013 convention.

Both Los Angeles and Anaheim have courted Comic-Con for years — unsuccessfully so far. Additional fees could up the ante on that competition. Here are some excerpts from the letter written by McConnell and Shomer to San Diego Mayor Kevin Faulconer (and copied to all city council members):

“We understand the need to maintain a ‘state of the art’ facility but believe that is the responsibility of the owner of that facility, not those that use it.  There is certainly a better solution to helping you attain that goal through communicating with your customers and those that use the facility, however, indiscriminately changing the nature of existing contracts with virtually no notice or acceptance by your customers is just bad business. If your Center is not producing the revenues needed to sustain itself, it would be more valuable to San Diego, as a destination, to seek professional advice to help the city achieve a reasonable return on their assets.

“How does the center and indeed the stakeholders justify these onerous fees for no other consideration than to ‘ensure necessary repairs and upgrades’ to your facility? It is obvious that the Convention Center wants to deter conventions and exhibitions from coming to San Diego, which I am sure you will agree will result in significant economic losses to the Center and to the City of San Diego. Some of my members have already reacted to this letter and are considering moving their shows to more friendly venues.

“The act of forcing existing customers to use services provided by the facility, that organizers have to pass on to their customers without any control over how and who your management select to serve as security and staff for events is a practice that has never worked and damages both parties as to the ineffectiveness and inefficiencies it employs. These exclusive arrangements take away all of the organizer’s rights to protect their customers by forcing them to use agents that they might not necessarily consider competent or cost efficient. These new policies also threaten the organizer’s existing agreements they have with their exhibitors, thereby interfering with the results they have previously projected based upon their existing leases without these new fees and service arrangements being forced upon them.

“How do you justify implementing such policies without even contacting the Associations whose members deliver the majority of the revenues at SDCC, and without regard as to the best way to implement policies that you need to preserve the integrity of your facilities?”

In their letter, McConnell and Shomer suggested a meeting between the key stakeholders in San Diego and executives of SISO, the International Association of Exhibitions and Events (IAEE), and Exhibition Services & Contractors Association (ESCA) to seek a workable solution. As of mid-day June 2, they have not received a reply.

Reach Carol Wallace at (619) 525-5200 or carol.wallace@visitsandiego.com; Steven Johnson at (619) 525-5251 or steven.johnson@visitsandiego.com; Lew Shomer at (310) 450-8831 ext. 106 or lshomer@shomex.com; Rick McConnell at (972) 536-6348 or rmcconnell@hanleywood.com

 

FULL TEXT OF SISO LETTER TO SAN DIEGO MAYOR KEVIN FAULCONER

Dear Mayor Faulconer:

This past week, a member of the Board of Directors of the Society of Independent Show Organizers (SISO) and a long-time customer of the San Diego Convention Center received a letter virtually telling him and his company that the Convention Center is unilaterally changing the conditions of his and other show organizer’s leases by implementing fees that have previously not been part of their contractual agreements.

This letter also indicated that the Convention Center is taking away from their customers the freedom for them to choose contractors of their choice. Policies like that will severely challenge and limit the services they are able to offer to their customers, those who exhibit at exhibitions in your facility. These new conditions under which San Diego is forcing on their customers is surely not in the best interests of the Convention Center or the City.

As the Executive Director of SISO, it is my responsibility to advise our members of practices that inhibit their ability to provide their customers with the best possible services and insure their success at the events we organize. San Diego, with these new policies, will inhibit our ability to provide the best possible services that our exhibitors have come to expect from us.

We understand the need to maintain a “state of the art” facility but believe that is the responsibility of the owner of that facility, not those that use it.  There is certainly a better solution to helping you attain that goal through communicating with your customers and those that use the facility, however, indiscriminately changing the nature of existing contracts with virtually no notice or acceptance by your customers is just bad business. If your Center is not producing the revenues needed to sustain itself, it would be more valuable to San Diego, as a destination, to seek professional advice to help the city achieve a reasonable return on their assets.

How does the center and indeed the stakeholders justify these onerous fees for no other consideration than to “ensure necessary repairs and upgrades” to your facility? It is obvious that the Convention Center wants to deter conventions and exhibitions from coming to San Diego, which I am sure you will agree will result in significant economic losses to the Center and to the City of San Diego. Some of my members have already reacted to this letter and are considering moving their shows to more friendly venues.

The act of forcing existing customers to use services provided by the facility, that organizers have to pass on to their customers without any control over how and who your management select to serve as security and staff for events is a practice that has never worked and damages both parties as to the ineffectiveness and inefficiencies it employs. These exclusive arrangements take away all of the organizer’s rights to protect their customers by forcing them to use agents that they might not necessarily consider competent or cost efficient. These new policies also threaten the organizer’s existing agreements they have with their exhibitors, thereby interfering with the results they have previously projected based upon their existing leases without these new fees and service arrangements being forced upon them.

How do you justify implementing such policies without even contacting the Associations whose members deliver the majority of the revenues at SDCC, and without regard as to the best way to implement policies that you need to preserve the integrity of your facilities.

Therefore, Mr. Mayor, before subjecting the City of San Diego to ridicule and pushback from our industry, I would suggest that we set up a meeting with the main exhibition member associations, SISO, IAEE and the service contractor’s association ESCA so that we can understand your needs and help you execute a plan to achieve your objectives and maintain an orderly implementation of policies that will not harass or impair your customer’s ability to provide positive experiences for all.

 

Sincerely,

The Society of Independent Show Organizers (SISO)

Lewis R. Shomer, Executive Director

Rick McConnell, Chairman