phi (totient) wrote,
phi
totient

worldcon bid function space comparison: finances

Every convention that uses function space is paying for that function space somehow, even if it doesn't appear in their budget anywhere. They can do this in several ways:

  • Build the cost into the hotel room rates (as Arisia does). Typically 30% of the room rate counts towards function space cost.

  • Build the cost into the catering budget (as most hotel weddings do). Typically 50% of catering expenses count towards function space cost.

  • Build the cost into tax revenue from conventiongoers (as some cultural festivals held in government owned facilities do). Amounts here are a little opaque.

  • Build the cost into associated revenue from attendees and/or payments from captive contractors. Amounts here are completely opaque.

  • Pay cash (as most Worldcons do). The least opaque option.


In the US we tend to prefer the hotel rate solution, because it is effectively sliding scale. Those less well off can share rooms or stay in cheaper offsite lodging that's not supporting the cost of function space. Regionals especially prefer this because so many of their attendees have the option of commuting, so the hotel room is really a convenience tax. In fact we like this answer so much that it's not unusual to raise the rates even more and have the hotel provide a cash payment to the convention. Albacon, for instance, for years got $10 per room night from the hotel. Overseas, smaller hotels and different economic patterns make this less desirable or effective.

Running a convention in function space is a financial risk, both to the convention and to the facility. The convention doesn't know what its income will be and risks falling short, and sometimes doesn't know how much space it will need either and risks overbuying. The facility for its part doesn't know how much associated food-and-beverage, parking, wifi, etc business it will do, or how much hotel-room or sales-tax supporting revenue there will be. The convention and the facility will each want the other to assume the risk. Of course each party has a different view of how much risk there is, which plays into the negotiations. And some negotiators are better at getting their partners to assume risk, or sometimes at hiding how much they are getting their partners to assume.

If you have ever worked in theatre, you will know that Disney's negotiators are *excellent* at getting their contract partners to assume risk. Cue ominous music...

So let's look at the three bids and what their function space is going to cost them.

Helsinki's space is not part of a hotel, which means we can't use hotel room support as a way to put risk on the facilities, and the headquarters hotel is small so kickbacks aren't very useful either. The convention center does run food concessions and stands to benefit a little if we get more attendees, but mostly the model is that we are paying cash. We were able to get the facility to give us a lot of flexibility post contract signing as to what space we took, even though their costs don't really vary. This puts a lot of risk on the convention center, and the convention's costs not only for space but also for decorator and tech (both included) are close to linear with attendance at about $80 per attendee.

You may have heard that Finncon gets a subsidy from the government to make the memberships free. I don't know details of Finncon's budget but I am sure it is much more like Arisia's than like Worldcon's. To make Arisia free would require a subsidy of $30 per attendee. Worldcon with its space and publications obligations spends several times more than that per person, and the size of a Worldcon in Helsinki is less predictable than the size of either Arisia or Finncon, so we weren't able to get the same kind of deal. Instead we are getting free public transit for congoers, which is risk neutral for the government (their costs scale directly with their revenues). And the value of the benefit comes to the same $30 per attendee.

Spokane has a fairly typical fixed price US convention center deal. It includes a little of the decorator expense. Tech is not included, and neither are a number of nickel and dime expenses. The space itself is about $75,000 minus a $25,000 fixed government subsidy funded from tax revenue as Helsinki's transit subsidy is. Decorator is probably another $50,000 and the nickel and dime expenses are probably $25,000. Tech is likely to be $75,000. Add it all up, and if the Worldcon is bigger than 4000 people Spokane is a better deal. Fewer than 4000 and Helsinki is a better deal. Reno and Glasgow were both around 4100, so 4000 is a pretty good guess for how big either con might be. But in Spokane all the financial risk is on the convention.

Orlando's premise is that their function space deal is like that of a regional -- supported by hotel room revenue. Their room rates are $139/night which is the same as nearby function space supporting rates such as the Peabody. It's also similar to Arisia's rates, and Arisia figures that $40 per room night is going to support our function space. On top of this Orlando is getting a $10 per room night kickback. Rates in similar quality hotels in Orlando without function space are about $90, so the numbers add up here. Their minimum room night commitment is 6828 so that's a bit over $270,000 in support. It's also somewhat more function space than Spokane or Helsinki are getting, and all in all $270,000 is a pretty fair price for space+decorator for the quantity of space in question.

But.

First, this means that of the three bids, Orlando has the highest hotel room rates once taxes are included.

Second, Orlando *also* has a banquets minimum of $170,000, plus various taxes and service charges. The contract gives them a small discount on F&B so only 40% of this is support, but that's still another $70,000 going to function space.

Third, Orlando has to deal with captive vendors, so presumably there is a kickback there and needlessly high pricing for the convention to pay for it.

Finally, Orlando's attrition and block clauses put all of the risk on the con -- not just the cost of the function space, but the cost (at roughly their actual value, $90) of the hotel rooms too. If 10,000 people show up it will be glorious. At 6,000 with the rates they're talking about they could probably squeak through, and at 5,000 they could make it with more typical rates. Any smaller than that and they are in big, big trouble.

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