HVS ACC Market Study 10-31-2013

CONVENTION CENTER MARKET STUDY
The Albany Capital Center

ALBANY, NEW YORK
SUBMITTED TO:
EXISTIN G
PREPARED BY:
HVS Convention, Sport& Entertainment Facilities Consulting 205 West Randolph Suite 1650 Chicago, Illinois 60606 +1 (312) 587-9900
Mr. Duncan Stewart, Albany Convention Center Authority 386 Broadway Albany, New York, 12207-2903 dstewart@ACCANY.com +1 (518) 275-4920
October 31, 2013
Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois
October 31, 2013
205 West Randolph Suite 1650 Chicago, Illinois 60606 +1 312-587-9900 +1 312-488-3631 FAX www.hvs.com
Mr. Duncan Stewart Albany Convention Center Authority 386 Broadway Albany, New York, 12207-2903 dstewart@ACCANY.com Re: The Albany Capital Center Albany, New York
Atlanta Boston Boulder Chicago Dallas Denver Las Vegas Mexico City Miami Nassau New York Newport San Francisco Toronto Vancouver Washington Athens Buenos Aires Dubai Hong Kong Lima London Mumbai New Delhi Sao Paulo Shanghai Singapore
Dear Mr. Stewart: Attached you will find our Convention Center Market Study of the proposed Albany Capital Center. We hereby 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 Managing Director
Brian Harris Senior Analyst
Table of Contents
SECTION
1. 2. 3.
TITLE
Summary of Findings Statement of Assumptions and Limiting Conditions Certification
1. Summary of Findings
NATURE OF THE ASSIGNMENT The Albany Convention Center Authority (the Authority) engaged HVS Convention, Sports & Entertainment Facilities Consulting (HVS) to analyze the development of a proposed convention and conference center called the Albany Capital Center (ACC). HVS previously studied the Albany convention center market and published its results in an October 2009 report. Our prior study included a market assessment, competitor analysis, and a survey of event planners. For our updated research, HVS relied on information from the 2009 study to the extent it remains relevant. HVS Convention, Sports & Entertainment staff collected and analyzed all information contained in this report. HVS sought out reliable sources and deemed information obtained from third parties to be accurate. Thomas Hazinski and Brian Harris traveled to Albany to inspect the site, confer with the physical planning team, and meet with representatives of the Authority and other key project stakeholders. CONVENTION CENTER ANALYSIS The Authority proposes to construct the ACC in downtown Albany. See the figure below.
October 31, 2013
Summary of Findings Convention Center Market Study Albany Capital Center
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FIGURE 1-1
PROPOSED CONVENTION CENTER SITE
The proposed site is bounded by Eagle Street, Howard Street, Wendell Street, and the skywalk, which would connect it to the Empire Plaza and the Times Union Center. The images below show the proposed site in its current condition.
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AERIAL VIEW OF THE PROPOSED SITE
VIEW OF THE PROPOSED SITE FROM THE SOUTH
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EXISTING PEDESTRIAN CONNECTION TO TIMES UNION
The proposed development would include the following elements: A divisible exhibit hall of approximately 25,000 square feet, 6,300 square feet of pre-function space adjacent to the exhibit hall with retractable walls such that it could combine with the exhibit hall and provide over 30,000 square feet of contiguous space, A 10,000 square foot divisible junior ballroom that would also serve as meeting breakout space, 9,000 square feet of dedicated breakout meeting space, A commercial production kitchen, Storage, service, loading and other support areas, A total floor area of approximately 85,000 square feet, and Facility parking for 250 vehicles and adjacent parking for 1,000 cars at the Times Union Center.
The figures below show preliminary conceptual floor plans.
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FIGURE 1-2
LEVEL ONE - PRELIMINARY FLOOR PLANS
Source: Clough Harbor Associates
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FIGURE 1-3
LEVEL TWO - PRELIMINARY FLOOR PLANS
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FIGURE 1-4
PARKING LEVEL - PRELIMINARY FLOOR PLANS
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The project plan also includes conversion of the skyway connection to the Times Union Center and the Empire Plaza to an enclosed, secure, and conditioned pedestrian walkway. This connection would allow use of the ACC in conjunction with its neighboring venues. For example, a convention could use meeting and banquet space in the ACC and the Empire Plaza. A consumer show could use the arena floor area and the exhibition hall in the ACC. The historic DeWitt Clinton building sits on the northwest boundary of the proposed ACC site. See the image below.
FIGURE 1-5
VIEW OF DEWITT CLINTON HOTEL FROM SITE
In cooperation with Marriott Hotels and Resorts, the Columbia Development Companies proposed returning the DeWitt Clinton building to its original purpose as a hotel. A $48.5 million renovation would create a 204-room Renaissance Hotel with an adjacent 200-car parking garage. Public support for the project would come from the Upstate Regional Blueprint Fund, which would contribute $4.0 million toward the project. The project could be completed by 2015 and coincide with the opening of the ACC. Connection of DeWitt Clinton to the ACC Current plans for the Dewitt Clinton redevelopment do not include an enclosed connection to the ACC despite its location adjacent to the proposed ACC. A direct connection to the hotel, perhaps through the proposed parking deck, could significantly improve the attractiveness of the ACC for meeting, conference, and convention events, especially during months of inclement weather. Most event planners prefer self-contained venues that allow their attendees to move quickly and conveniently between their lodging accommodations and meeting facilities. HVS highly recommends further consideration of establishing a direct and
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enclosed connection between the hotel and the ACC, but for the purposes of this study, we do not assume the connection will be built. Ownership and Management We assume that the Authority would own the ACC and a contracted professional building management company would operate it. This management company would enter into cooperative agreements with management of the Empire Plaza and the Times Union Center to host events that would use more than one venue. Alternatively, a single management company could operate the ACC, one, or two of the adjacent venues. Combined management could offer a single point of contact for customers and reduce overhead and operating costs. While HVS recommends exploring opportunities for joint management of multiple venues, for the purposes of this study we have modeled a stand-alone operation of the ACC. The building management company and the Albany County Convention and Visitors Bureau (the Bureau) would share market and sales responsibilities. The Bureau would focus on longer term convention business, with the primary goal of attracting out-of-town visitors. The building managers and sales force would focus on shorter-term bookings and events such as consumer shows and social events with mostly local attendees. We assume that similar to most cities, the Bureau and building managers would establish priority booking policies and protocols placing emphasis on generating new visitation to Albany. The figure below shows the floor areas of the Empire Plaza, Times Union and the proposed ACC.
FIGURE 1-6
CAPACITIES OF COMBINED VENUE

ACC Exhibition Ar ea* Banquet Space Meeting Rooms 25,000 10,000 9,000 Empire Plaza 17,000 26,000 14,000 Times Union 58,000 0 0 Total 100,000 36,000 23,000
*Inclu des exibition s pace on aren a floor.
Combined use of the venues would significantly expand the capacity of Albany to host convention, consumer shows, conferences and meetings. The lack of contiguous exhibit space could limit the attractiveness of the venue to many event planners who prefer that exhibitors all have similar access to space and attendee traffic.
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Comparable Venues
Analysis of comparable venues provides a basis for forecasts of event demand and financial operations. The proposed ACC would compete with other cities in the state of New York and across the U.S. for a share of the meetings market. Event planners select host cities for their events based on the overall package that a city offers. Several factors determine a citys strength and potential in the meetings market, including the attributes of the convention facilities, lodging supply, the economic and demographic profile of the community, transportation access, tourism amenities, and overall destination appeal. HVS analyzed two sets of competitive and comparable venues shown in the figure below.
FIGURE 1-7
Name of Venue
COMPARABLE VENUES
Location Total Function Space NY NY NY NY NY NY NY NY 115,897 sf 52,866 86,990 55,827 71,875 33,000 28,000 159,000
State Competitors Buffalo Niagara Convention Center Conference Center Niagara Falls Convention Center at Oncenter Empire State Plaza Convention Center Rochester Riverside Convention Center Saratoga Springs City Center Times Union Center Combined Albany Venues Comparable National Venues Monona Terrace Convention Center Kansas Expocentre MassMutual Center Mid-America Center Convention Center St. Charles Convention Center Century Center Evansville Auditorium and Convention Centre Combined Albany Venues
Buffalo Niagara Falls Syracuse Albany Rochester Saratoga Springs Albany Albany
Madison Topeka Springfield Council Bluffs St. Charles South Bend Evansville Albany
WI KS MA IA MO IN IN NY
68,370 sf 68,050 72,232 78,000 58,924 54,151 59,932 159,000
Exhibition Space Assessment
Exhibition space is critical for conventions, tradeshows, and consumer shows. The amount and quality of exhibition space determines the size and types of events that the venue can accommodate. The exhibition space available at each of the selected comparable facilities provides an indication of the amount of space appropriate for Albany.
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FIGURE 1-8
EXHIBITION SPACE IN COMPARABLE VENUES

State Competitors Combined Albany Venues Convention Center at Oncenter Buffalo Niagara Convention Center Rochester Riverside Convention Center Conference Center Niagara Falls Times Union Center Proposed Albany Capital Center Saratoga Springs City Center Empire State Plaza Convention Center Average Comparable National Venues Combined Albany Venues Kansas Expocentre Mid-America Center Convention Center MassMutual Center Monona Terrace Convention Center Evansville Auditorium and Convention Centre St. Charles Convention Center Proposed Albany Capital Center Century Center Average sf 100,000 65,250 64,410 49,275 32,300 28,000 25,000 20,000 17,000 44,582 sf 100,000 68,050 54,000 49,000 37,200 36,252 35,700 25,000 24,472 47,742 # halls 2 2 1 2 1 1 2 4 1 2 # halls 2 3 0 3 2 2 6 2 2 3
Due to site constraints, the proposed venue would have less exhibition space than most of the comparable venues. However, joint use of the Times Union arena floor or the Empire State Plaza Convention Center for large exhibits could address this deficiency. Ballroom Space Assessment Facility operators consider banquet space important in their convention centers. They want to grow food service revenues at their facilities and event planners seek a higher level of service for their attendees. In addition to social events (such as weddings and fundraisers) that host banquets, several other types of events, such as conventions and tradeshows, typically require food services in a ballroom setting. Event planners hold general assemblies at conventions and tradeshows in a ballroom with a theater or banquet set-up. Consequently, the size of the ballroom can determine a venues event size capacity. The ballrooms maximum number of divisions affects its ability to host simultaneous events that require banquet space. The figure below compares available banquet space in the comparable venues.
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FIGURE 1-9
BALLROOM SPACE IN COMPARABLE VENUES

State Competitors Combined Albany Venues Empire State Plaza Convention Center Convention Center at Oncenter Buffalo Niagara Convention Center Conference Center Niagara Falls Rochester Riverside Convention Center Proposed Albany Capital Center Saratoga Springs City Center Times Union Center Average Comparable National Venues Combined Albany Venues Mid-America Center Convention Center St. Charles Convention Center MassMutual Center Monona Terrace Convention Center Evansville Auditorium and Convention Centre Century Center Proposed Albany Capital Center Kansas Expocentre Average sf 36,000 25,827 14,880 12,367 10,500 10,028 10,000 0 0 17,086 sf 36,000 23,000 16,200 14,880 13,524 13,312 12,012 10,000 0 17,366 # divisions 3 0 2 1 2 1 3 0 0 2 # divisions 3 4 6 3 4 4 2 3 0 4
The proposed ACC has the smallest ballroom among the comparable venues other than the Kansas Expocentre which does not have a ballroom. Management would need to use the exhibit hall (multi-purpose) for banquets and space in the Empire Plaza to make up for its relatively small size. Meeting/Break-out Room Assessment Meeting rooms can accommodate sub-groups as they break out of larger general sessions at conventions and tradeshows. Additionally, these smaller rooms can accommodate self-contained meetings, training sessions, seminars, classes, and a variety of small meeting functions. Event planners tend to use a facilitys meeting rooms most frequently. Generally, convention centers should offer meeting space proportionate to the exhibition space available at the facility. However, the optimum amount of meeting space can vary depending on a facilitys target market. The following figure presents a comparison of available meeting space.
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FIGURE 1-10 MEETING SPACE IN COMPARABLE VENUES

State Competitors Buffal o Niagara Convention Center Combined Albany Venues Empire State Plaza Convention Center Saratoga Springs City Center Rochester Riverside Convention Center Conference Center Ni agara Falls Proposed Albany Capital Center Convention Center at Oncenter Times Union Center Average Comparable National Venues Combined Albany Venues Century Center Monona Terrace Convention Center Evansville Auditorium and Convention Centre Proposed Albany Capital Center MassMutual Center St. Charles Convention Center Mid-America Center Convention Center Kansas Expocentre Average sf 39,120 23,000 13,000 13,000 12,572 10,066 9,000 6,860 0 15,827 sf 23,000 17,667 17,646 10,368 9,000 8,352 7,024 1,000 0 11,757 # rooms 20 6 7 4 20 12 6 10 0 11 # rooms 6 18 14 12 6 5 7 6 0 9
The proposed ACC has lower than average amounts of meeting breakout space. Use of the ballroom as breakout space and use of space in the Empire Plaza would make Albany more competitive for convention and conference events. Adjacent Hotel Capacity To attract out-of-town groups, an adequate supply of nearby hotel rooms should support the lodging needs of delegates, exhibitors, and other attendees. Event planners value proximity and connectivity when evaluating hotel packages available in competing communities. Generally, they compare the number of rooms offered at one or more hotels adjacent or connected to the convention centers. Other important factors include hotel brands, service levels, building ages, management, and available meeting and banquet spaces in these hotels.
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FIGURE 1-11 ADJACENT OR INTEGRATED HOTEL CAPACITY

State Competitors Rochester Riverside Convention Center Proposed Albany Capital Center Empire State Plaza Convention Center Times Union Center Combined Albany Venues Buffalo Niagara Convention Center Convention Center at Oncenter Saratoga Springs City Center Conference Center Niagara Falls Average Comparable National Venues Proposed Albany Capital Center Combined Albany Venues Century Center Evansville Auditorium and Convention Centre Monona Terrace Convention Center Kansas Expocentre Mid-America Center Convention Center MassMutual Center St. Charles Convention Center Average 1,165 590 590 590 590 400 350 242 0 565 590 590 474 471 240 224 133 0 0 389
Assuming the addition of the DeWitt Clinton and with the proximity of the Hilton Hotel, the ACC would offer an above average number of adjacent hotel rooms. Ability to Meet Event Planner Space Requirements In 2009, HVS conducted an event planner survey that provided data on the exhibit, banquet, and meeting space requirements for their events. HVSs 2009 study provides the complete results of this survey. The figure below shows the percent of events that the proposed program for the ACC could accommodate.
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FIGURE 1-12 PERCENT OF EVENTS ACCOMMODATED BY PROPOSED DEVELOPMENT
ACC Only
Banquet Space Meeting Space Exhibit Space Accommodated by Plan 44% 74% Not Accommodated by Plan 60%
Banquet Space Meeting Space Exhibit Space
Combined Venues
88% 86% 93% Percent NOT Accommodated
Percent of Events Accommodated
Based on HVS Survey Results
These results show that management of the ACC must jointly use the Empire Plaza and the Times Union to capture a larger share of the market, particularly for meeting space. Lost Business Analysis HVS reviewed lost business reports from the Bureau for the years 2009 through 2012. Lost business included events that considered Albany by reserving dates but ultimately decided not to come to the City. The figure below summarizes this lost business data.
FIGURE 1-13 LOST BUSINESS

Year 2012 2011 2010 2009 Total Average Visitors 41,093 37,172 33,600 28,788 140,653 35,163 Room Nights 30,514 31,897 17,404 27,083 106,898 26,725
Source: Albany County Co nvention & Visitors Bureau (ACCVB)
For most events, the Bureau was unable identify the reason for the event planner or their boards decision to use another destination. But, this information provides an indication of the overall level of business lost each year. An improved ACC would enable the Bureau to capture a share of this business and to open up Albany to new events that cannot be accommodated due to a lack of adequate facilities.
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Demand Projections
HVS developed a demand scenario for the proposed ACC assuming that: 1. It functioned as a stand-alone venue, 2. The Times Union and Empire State Plaza venues continued to operate as they do today, and 3. The three venues establish a cooperative relationship that allows them to jointly host events. The figure below breaks out event projections by type of event. Total and average attendance figures represent individual event attendees.
FIGURE 1-14 DEMAND PROJECTIONS FOR ACC

2016 Events Conventions Tradeshows Consumer Shows Special Events Assemblies Banquets Meetings Total Average Attendance Conventions Tradeshows Consumer Shows Special Events Assemblies Banquets Meetings Total Attendance Conventions Tradeshows Consumer Shows Special Events Assemblies Banquets Meetings Total 8 6 11 8 6 18 66 123 690 900 2,000 1,000 1,125 250 80 5,520 5,400 21,000 8,400 6,750 4,500 5,280 57,000 2017 12 8 14 11 7 24 88 163 690 900 2,000 1,000 1,125 250 80 8,280 6,750 27,000 10,800 8,100 6,000 7,040 74,000 2018 14 9 15 12 8 30 110 198 690 900 2,000 1,000 1,125 250 80 9,936 8,100 30,000 12,000 9,000 7,500 8,800 85,000 2019 16 10 15 12 8 30 110 201 690 900 2,000 1,000 1,125 250 80 11,040 9,000 30,000 12,000 9,000 7,500 8,800 87,000 2020 16 10 15 12 8 30 110 201 690 900 2,000 1,000 1,125 250 80 11,040 9,000 30,000 12,000 9,000 7,500 8,800 87,000
A brief description of the event types and explanation of demand projections follows.
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Conventions Conventions are events that require a combination of exhibition, banquet, and meeting space. Planners could divide and set up the existing exhibit hall in various configurations to accommodate these events. If needed, the new multi-purpose hall could provide additional exhibition space. Meeting and ballroom space could accommodate the break out meetings and meals in these multi-day events. Most conventions would comprise of national, regional, and state associations. This demand category could also include religion and other SMERF groups rotating to Albany for annual events. TradeshowsTradeshows provide a means for wholesalers and retailers to transact business with industry buyers. As such, these exhibit-oriented events involve the display and demonstration of their products. Tradeshows require some meeting and meal space; however, tradeshow planners require much less space than they need for conventions. The expansion of existing shows produced by regional corporations and enterprises would drive additional tradeshow demand. HVS projects that the average trade show would modestly increase in both exhibit size and attendance. Consumer ShowsConsumer shows are ticketed, public events that attract local and regional attendees, such as home and garden shows and car shows. The existing exhibit hall would remain the main exhibit space for vendors. These events would need some meeting space for support and back of house uses. Food and beverage services would be limited to concessions. HVS projects consumer show demand to be consistent with historical levels. MeetingsMeetings require breakout meeting space but do not use banquet or exhibit space. Food service consists simply of coffee breaks, breakfasts, or luncheons in meeting rooms. Civic organizations, local corporations, state associations, religious groups, and government agencies all host meetings. Although the size of the meetings ranges from 10 to over 1,000 persons, most meetings and conferences have fewer than 100 attendees and take place in breakout meeting space. The multi-purpose hall and ballrooms could also handle larger meetings or several smaller simultaneous meetings as needed. HVS projects that the improved meeting space and reduced conflicts would moderately increase overall demand for meetings. ConferencesConferences occur over multiple days and have similarities with meetings. However, conferences typically have a banquet component. Conferences require a mix of banquet and breakout space set-up with occasional assembly space. But, they do not require any exhibit set-up. With the introduction of the multi-purpose hall and the additional ballroom and breakout meeting space, HVS incorporated this new event category into its demand projections. Similar to
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conventions, conference demand would primarily come from national and state associations and corporations. BanquetsBanquets consist of stand-alone social events, luncheons, and other meals typically booked by local corporations, social and civic organizations, and private clients. The flexibility of the ballroom and pre-function spaces would allow for a variety of banquet sizes and multiple simultaneous events. Since the ballrooms must also accommodate the needs of the venues convention clients, this flexibility is crucial to operate the facility with minimal scheduling conflicts. OtherOther events include a variety of local-oriented facility rentals that include such events as exams, charity events, press conferences, radio/television satellite broadcasts, blood drives, and other civic uses. HVS projects that the demand for these other events would remain consistent with historical levels. Event Demand at Comparable Venues A venues ability to expand its established base of business indicates strength of demand. An analysis of demand at comparable facilities and markets tests the reasonableness of these demand projections. In order to evaluate the demand projections effectively, HVS expanded its comparable analysis to include a much broader selection of markets with conference center venues of similar size. The following figure compares the average convention and meeting demand for several years of recent historical demand of five venues with similar sized function spaces. These venues represent a wide range of markets with a mix of population size, economic breadth, and destination appeal. Because of the unique operating characteristics of exhibit and meeting facilities, no single facility or market serves as a direct comparable to the proposed ACC. The averages from a large set of event data provide evidence for the reasonableness of our projections.
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FIGURE 1-15 COMPARABLE CONVENTION CENTER EVENT DEMAND

MidSt. Charles America Convention Center Convent ion Center Center Buffalo MO FY 2011 St. Charles MO CY 2011 Monona Terrace Convention Center Madison WI CY 2011 Century Center Rochester Riverside Convention Center Rochester NY FT 2013 Sarasota Springs City Center Saratoga Springs NY CY 2012 Proposed Albany
Average*
South Bend IN CY 2010
Albany NY FY 2019
Data Year Number of Events Conventions & Tradeshows Consumer Shows Banquets Meetings & Conferences Assemblies, Sports, Concerts & Other Total Average Att endance Conventions & Tradeshows Consumer Shows Banquets Meetings & Conferences Assemblies, Sports, Concerts & Other Overall Average Total Attendance Conventions & Tradeshows Consumer Shows Banquets Meetings & Conferences Assemblies, Sports, Concerts & Other Total *Average the only available data.
31 29 39 46 47 192 556 1,392 280 109 728 561 17,230 40,366 10,916 5,031 34,228 107,771
34 30 64 155 28 311 642 4,389 444 120 986 734 21,829 131,680 28,423 18,647 27,619 228,199
30 23 210 239 128 630 NA NA NA NA NA 339 NA NA NA NA NA 213,301
15 16 69 297 114 511 973 2,789 259 93 464 308 14,594 44,629 17,844 27,533 52,896 157,496
26 14 0 36 251 327 2,931 3,258 0 194 388 692 76,201 45,609 0 6,966 97,500 226,276
7 0 22 71 50 150 NA NA NA NA NA 949 NA NA NA NA NA 142,404
24 22 81 141 103 354 1,275 2,957 328 129 642 597 32,464 65,571 19,061 14,544 53,061 179,241
26 15 30 110 20 201 771 2,000 250 0 0 435 20,040 30,000 7,500
87,340
Sources: Event Data from Respective Facilties as Classified by HVS
HVS projections fall below the results of most of these comparable venues due to the proposed ACCs smaller size. Combined use of the Times Union and ACC could generate more events, greater attendance, and lift the ACCs performance toward the average level of comparable venues. Room Night Projections Using assumptions regarding the percentage of attendees that require lodging, double room occupancy and length of stay, HVS calculated the potential generation of room nights. See the figure below.
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FIGURE 1-16 ROOM NIGHT ESTIMATES

Type Conventions Tradeshows Consumer Shows Total 2016 12,420 6,750 2,100 21,270 2017 18,630 8,438 2,700 29,768 2018 22,356 10,125 3,000 35,481 2019 24,840 11,250 3,000 39,090 2020 24,840 11,250 3,000 39,090
In a stabilized year of demand, the ACC would induce nearly 40,000 room nights into the Albany hotel market. HVS demand projections should show the expected levels of event numbers and attendance. Projections show smooth growth over time. However, event demand and booking cycles do not always move smoothly. Unpredictable local and national economic factors 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. Financial Analysis HVS uses a proprietary financial operating model to estimate revenues and expenses at conventions centers. This model quantifies the key variables and operating ratios that determine revenue potential and expenses levels. Unless otherwise indicated, the model assumes that an annual inflation rate of 2.5 percent applies to both revenues and expenses. The convention center industry does not use a standardized set of accounting principles for reporting financial performance. Convention center operators employ a variety of accounting methods. Financial statements from different convention centers organize revenues and expenses differently. However, most convention facilities commonly use a few major revenue and expense categories. HVS developed a financial operating model that organizes financial operations according to these primary revenue and expense categories. We organized the financial operating projections presented below differently from most financial operating statements. Operating Revenues Revenue line items include facility rental, food and beverage sales, event services, event labor, and parking fees. The model uses a series of revenue assumptions based on attendance, floor area utilization, or occupied days. HVS measures attendance in delegate-days, the average daily attendance times the number of event days. HVS measures floor area utilization in Gross Square Foot Days (GSFD)the amount of floor area rented times the number of rental days
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including move-in and move-out days. Occupied days only include days with present attendees. To formulate the revenue assumptions, HVS relied on industry information, knowledge of the performance of comparable venues, and information on price levels from local area sources. We adjusted the assumptions for inflation and other anticipated trends in price levels. The figure below summarizes the departmental revenue assumptions for the proposed center by type of event. A brief description of each revenue item follows.
FIGURE 1-17 REVENUE ASSUMPTIONS IN A BASE YEAR (UNINFLATED)

Type Conventions Tradeshows Consumer Shows Special Events Assemblies Banquets Meetings Space Rental per GSFD $ 0.11 0.11 0.11 0.11 0.11 Event Services per GSFD $ 0.06 0.06 0.06 0.06 0.06 Food & per Attendee $ 6.40 3.70 2.25 2.25 2.25 42.40 32.00 Other Revenue per GSFD $ 0.02 0.02 0.02 0.02 0.02 -
Space RentalFacility rental revenue includes the revenue the venue receives 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. Facilities do not charge a rental fee for every event. A facility may reduce or waive the exhibit rental charges to book an event that has a strong economic impact on the local market. Event ServicesEvent Services include the fees charged to tenants for services such as business services, audio and video 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 audio, video, communications and internet services. Banquets and other upscale events can often require elaborate decorating services. Almost all events require cleaning services. Some venues include complimentary cleaning of common areas, 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 incur rental charges for using the facility.
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Food and BeverageMost events that use the proposed facilitys function space would also 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 the course of these multi-day events. Meetings and banquets generally include a single meal or refreshment services. HVS projects estimated gross food and beverage revenues on a per delegate-day basis depending on the type of event. Events like conventions and tradeshows typically spend the most per attendee. Consumer shows have lower per capita spending. OtherThe HVS model estimates other revenue based on occupied square foot days. Other revenue may include advertising revenue, damages billed to tenants, interest income, special fees, and other non-recurring ancillary income. Operating Expenses HVS estimated operating expenses as a blend of fixed costs and variable percentage of operating revenues as summarized in the figure below. HVS based these fixed and variable assumptions on multiple years of historical revenue and expense data and other industry standards. An explanation of these estimates and a brief description on each expense line item follows.
FIGURE 1-18 EXPENSE ASSUMPTIONS (2012 DOLLARS)

Expenditure Personnel Benefits G&A Contractual Services Cost of Event Services Food & Beverage Cost Marketing & Sales Costs Utilities Maintenance & Repairs Supplies & Equipment Insurance Management Fee Reserve for Replacement 0.5% of Total Operating Rev 4.0% of Total Operating Rev 50.0% of Event Services 70.0% of Food & Beverage $60,000 $220,000 $50,000 $40,000 $40,000 $75,000 30.0% of Personnel $100,000 $70,000 Percentage Revenue Fixed Expense for Base Year $910,000
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Salaries & BenefitsBased on existing staffing level and salary & benefit expenses, HVS estimated the salaries and associated benefits for permanent full and part-time employees dedicated to administration, marketing, building operations, and other functions. This category does not include part time food & beverage staffing, which includes vendor costs. Food & Beverage CostsHVS assumes that an in-house food service operator would operate the food and beverage operation. Costs of food service include the raw costs of food and beverages sold as well as the labor associated with food preparation and service. Event Services CostsEvent services costs are the costs incurred by the facility for client reimbursed expenses such as audio visual set-up, security, cleaning, and event set-up. HVS estimated event services costs as a percentage of gross event services based on historical operations. Contractual ServicesContractual services include any outsourced operations and maintenance services as well as professional services in conducting venue operations such as legal, accounting, tax, consulting or other advice. Administrative & GeneralOffice and administrative operations incur day-today facility expenses. Such expenses typically include travel, telephone, printing, permits, and other miscellaneous services. Repair & MaintenanceThis category includes both routine and one-time facility maintenance expenses that in-house facility operations personnel handle. It also includes more specialized activities, such as HVAC system maintenance, electrical work, and maintenance of other mechanical systems often contracted out to third parties. Supplies & EquipmentThis category includes items such as computers, office machines, furniture, consumables, and chemicals that are required to support and maintain the operations of the facility. UtilitiesUtilities, including electricity, gas, water, and other charges often represent one of the largest expenses incurred by facility operators. InsuranceInsurance costs include property insurance and other liability insurance required for facility operations. Other ExpensesOther expenses could include miscellaneous operations costs, legal costs, special training expenses, collection costs, credit losses, bank fees, and other small miscellaneous expenses.
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Management & Incentive FeesHVS assumes the Authority pay management fees for the operation of the ACC. HVS based these fees on a typical qualified management agreement for a venue of this size. The base management fee increases by an inflationary rate of 2.5 percent each year from a base rate of $75,000 in 2012 dollars. Reserve for Replacement HVS assumes the Authority will fund a reserve for replacement account for future building needs. Operating Pro Forma The figure below presents the five-year financial projections for the proposed property, including the expanded multi-purpose hall, banquet and meeting spaces. HVS made projections in inflated dollars beginning July 1, 2016, the projected opening of the proposed ACC.
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FIGURE 1-19 PROJECTED FIVE YEAR FINANCIAL OPERATIONS FOR THE ALBANY CAPITAL CENTER (ACC)
Expansion 2016 ACC OPERATING REVENUE Space Rental Event Services Food & Beverage Other Revenue Total ACC OPERATING EXPENSES Personnel Benefits G&A Contractual Services Cost of Event Services Food & Beverage Cost Marketing & Sales Costs Utilities Maintenance & Repairs Supplies & Equipment Total ACC OPERATING INCOME (LOSS) ACC NON-OPERATING EXPENSES Insurance Management Fee Reserve for Replacement Total SUBTOTAL ACCA Operations 1 SUBTOTAL Estimated Hotel Tax Receipts
1/2
2017 $494,000 247,000 748,000 76,000 $1,565,000
2018 $578,000 289,000 937,000 89,000 $1,893,000
Stabilized 2019 $616,000 308,000 973,000 95,000 $1,992,000
2020 $632,000 316,000 997,000 98,000 $2,043,000
$184,000 92,000 274,000 28,000 $578,000
$502,000 $1,030,000 $1,055,000 $1,082,000 $1,109,000 151,000 309,000 317,000 325,000 333,000 55,000 113,000 116,000 119,000 122,000 39,000 79,000 81,000 83,000 85,000 46,000 123,000 144,000 154,000 158,000 192,000 524,000 656,000 681,000 698,000 33,000 68,000 70,000 71,000 73,000 121,000 249,000 255,000 262,000 268,000 28,000 62,000 70,000 77,000 79,000 22,000 45,000 46,000 48,000 49,000 $1,189,000 $2,602,000 $2,810,000 $2,902,000 $2,974,000 ($611,000) ($1,037,000) ($917,000) ($910,000) ($931,000) $24,000 $53,000 $56,000 $58,000 $59,000 41,000 85,000 87,000 89,000 91,000 12,000 47,000 76,000 80,000 82,000 $77,000 $185,000 $219,000 $227,000 $232,000 ($688,000) ($1,222,000) ($1,136,000) ($1,137,000) ($1,163,000) $292,000 $2,194,696 $500,000 $3,799,956 $2,077,956 $525,000 $3,837,957 $2,176,957 $551,250 $3,876,336 $2,188,086 $578,812 $3,915,099 $2,173,287 ($980,000) ($1,722,000) ($1,661,000) ($1,688,250) ($1,741,812)
ACC COMBINED NET INCOME (GAIN) $1,214,696 (1) Source: ACCA (2) Based upon existing hotel tax distribution formula
HVS financial projections should show the expected levels of revenues and expense. Projections show smooth growth over time. Again, 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.
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HOTEL MARKET IMPACT ANALYSIS
HVS analyzed the competitive hotel room supply and demand and assessed the impact of reopening the DeWitt Clinton Hotel on the Albany hotel market. HVS defined a competitive set of hotels based on three factors, 1) the proximity to the proposed ACC, 2) the amount of meeting space in the hotel, and 3) their ability to provide rooms for city-wide events at the proposed ACC. The figure below lists the hotels in the competitive set and includes the number of rooms in each hotel and the level of competitiveness in the downtown Albany market.
FIGURE 1-20 COMPETITIVE PROPERTIES
Primary Competitors Property 74 State Hotel Hampton Inn & Suites Albany Downtown Hilton Garden Inn Albany Medical Center Hilton Albany Sub-Totals/Averages Secondary Competitors Totals/Averages No of Rooms 74 165 129 386 754 995 1,749 Total Comp 2012 Weighted Level Annual Rm Count 100 % 100 100 100 100 % 61 % 78 74 165 129 386 754 610 1,364
Secondary Competitors Property Desmond Hotel & Conference Center Holiday Inn Albany Wolf Road Marriott Albany Sub-Totals/Averages Totals/Averages No of Rooms 324 312 359 995 1,749 Total Comp 2012 Weighted Level Annual Rm Count 75 % 60 50 61 % 78 % 243 187 180 610 1,364
Hotels fit in two possible categories: primary competitors (100 percent competitive) and secondary competitors (partially competitive). The secondary competitors do not exist in the downtown market but still compete with downtown hotels for meeting and group business.
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Supply Changes Demand
The DeWitt Clinton project described earlier in this report is the only known new supply expected to enter the market. The following figure presents the available room nights, accommodated room nights, occupancy, average daily room rate (ADR), and revenue per available room (RevPAR) for the years 2010 through 2012 for the competitive set.
FIGURE 1-21 HISTORICAL ALBANY COMPETITIVE HOTEL MARKET TRENDS

Year Estimated 2010 Estimated 2011 Estimated 2012 Accommodated Room Nights 293,264 293,649 294,644 % Change 0.1 % 0.3 Room Nights Available 497,751 497,751 497,751 % Change 0.0 % 0.0 Market Occupancy 58.9 % 59.0 59.2 Market ADR $112.91 115.88 119.62 % Change 2.6 % 3.2 Market RevPAR $66.52 68.36 70.81 % Change 2.8 % 3.6
Avg. Annual Compounded Chg., Estimated 2010-Estimated 2012:
0.2 %
0.0 %
2.9 %
3.2 %
The Albany market exhibited weak demand growth in 2011 and 2012. Market ADR increased at a faster pace in 2012 versus 2011. Demand Analysis Using Market Segmentation For the purpose of analyzing demand, HVS divided the overall market into three segments based on the nature of travel. Based on our knowledge of the local lodging market, we estimate the 2012 distribution of accommodated room night demand as shown in the figure below.
FIGURE 1-22 ALBANY COMPETITIVE MARKET ACCOMMODATED ROOM NIGHT DEMAND

Competitive Market Accommodated Percentage Demand of Total 133,811 106,319 54,514 294,644 45 % 36 19 100 %
Market Segment Commercial Meeting and Group Leisure Total Room Nights
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Commercial demand (45 percent) includes individuals traveling for business purposes and represents the strongest source of demand in this market. Meeting and group events generate approximately 36 percent of market demand. Leisure demand (19 percent) consists of individual travelers on vacation or visiting family and friends. HVS assumes the Albany competitive hotel market will grow at the rates shown in the below table.
FIGURE 1-23 AVERAGE ANNUAL COMPOUNDED MARKET SEGMENT GROWTH RATES

Projected Annual Base Demand Change 2018 2015 2016 2017 1.0 % 0.5 1.0 0.8 % 1.0 % 0.5 1.0 0.8 % 1.0 % 0.5 1.0 0.8 % 1.0 % 0.5 1.0 0.8 %
Market Segment Commercial Meeting and Group Leisure Base Demand Growth
2013 3.0 % 3.0 2.0 2.8 %
2014
2019 1.0 % 0.5 1.0 0.8 %
2020 1.0 % 0.5 1.0 0.8 %
1.0 % 0.5 1.0 0.8 %
Latent Demand
In addition to growth in base demand, which should mirror overall economic growth, HVS projected changes in latent demand. Latent demand reflects potential room night demand not absorbed by the existing competitive supply and includes unaccommodated demand and induced demand. Unaccommodated demand refers to individuals who cannot secure accommodations in the market because of unavailable rooms. These travelers must defer their trips, settle for less desirable accommodations, or stay in properties located outside the market area. Because this demand does not yield occupied room nights, estimates of historical accommodated room night demand do not include them. Analysis of weekly and monthly patterns of occupancy reveals the number of soldout days during which the market cannot accommodate all room night demand. High occupancy during the legislative session causes much of the unaccommodated demand. The following figure presents our estimates by market segment.
Unaccommodated Demand
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FIGURE 1-24 UNACCOMMODATED DEMAND ESTIMATE FOR THE COMPETITIVE SET

Accommodated Room Night Demand 133,811 106,319 54,514 294,644 Unaccommodated Demand Percentage 1.8 % 2.7 0.9 1.9 % Unaccommodated Room Night Demand 2,347 2,870 516 5,732
Market Segment Commercial Meeting and Group Leisure Total
Induced Demand
Induced demand represents the additional room nights the Albany market could gain following the introduction of a new demand generator. Situations that could result in induced demand include the opening of a convention center, or the addition of a new hotel with a distinct chain affiliation or unique facilities. The proposed Albany Capital Center would induce demand into the meeting and group segment of the competitive hotel market. The reopening of the DeWitt Clinton Hotel would induce new demand into all three sectors of the local hotel market. The following figure summarizes our estimate of induced room night demand in the Albany competitive hotel market.
FIGURE 1-25 INDUCED DEMAND CALCULATION FOR THE COMPETITIVE SET

Induced Room Nights 2017 2018 3,600 24,800 3,600 32,000 3,600 27,600 3,600 34,800
Market Segment Commercial Meeting and Group Leisure Total Room Nights
2016 3,600 10,800 3,600 18,000
2019 3,600 30,400 3,600 37,600
We incorporated approximately 37,600 induced room nights into our analysis, phased in over a four year ramp-up period for induced demand both from the reopening of the DeWitt Clinton Hotel and the ACC. The induced demand from the ACC is estimated to provide 28,000 of those room nights.
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Accommodated Demand and Occupancy for the Competitive Set
Aggregating estimates of base growth and latent demand yields projections of total future room night demand for the competitive set. The figure below shows our estimates of room night demand assuming the ACC opens in July of 2016.
FIGURE 1-26 FORECAST OF AVERAGE COMPETITIVE SET OCCUPANCY WITH THE ALBANY CAPITAL CENTER
Albany Capital Center Opens July 2016 2012 Commercial Base Demand Unaccommodated Demand Induced Demand Total Demand Growth Rate Meeting and Group Base Demand Unaccommodated Demand Induced Demand Total Demand Growth Rate Leisure Base Demand Unaccommodated Demand Induced Demand Total Demand Growth Rate 133,811 2013 137,825 2,417 0 140,243 4.8 % 109,509 2,956 0 112,465 5.8 % 55,604 526 0 56,130 3.0 % 2014 139,204 2,441 0 141,645 1.0 % 110,056 2,971 0 113,027 0.5 % 56,160 531 0 56,691 1.0 % 2015 140,596 2,466 2,700 145,762 2.9 % 110,606 2,986 1,800 115,392 2.1 % 56,722 536 2,700 59,958 5.8 % 2016 142,002 2,490 3,600 148,092 1.6 % 111,159 3,001 10,800 124,960 8.3 % 57,289 542 3,600 61,431 2.5 % 2017 143,422 2,515 3,600 149,537 1.0 % 111,715 3,016 24,800 139,531 11.7 % 57,862 547 3,600 62,009 0.9 % 2018 144,856 2,541 3,600 150,996 1.0 % 112,274 3,031 27,600 142,905 2.4 % 58,441 553 3,600 62,593 0.9 % 2019 146,304 2,566 3,600 152,470 1.0 % 112,835 3,046 30,400 146,281 2.4 % 59,025 558 3,600 63,183 0.9 %
106,319
54,514
Totals Base Demand Induced Demand Total Demand Overall Demand Growth Competitive Hotels Mix Commercial Meeting and Group Leisure Existing Hotel Supply Proposed Hotel Rooms Total Supply Nights per Year Available Rooms per Night
294,644
302,938 0 308,837 2.8 % 45.4 % 36.4 18.2 1,364 0 1,364 365 497,751
305,420 0 311,364 0.8 % 45.5 % 36.3 18.2 1,364 0 1,364 365 497,751
307,924 7,200 321,112 3.2 % 45.4 % 35.9 18.7 1,364 154 1,517 365 553,851
310,450 18,000 334,483 6.2 % 44.3 % 37.4 18.4 1,364 204 1,568 365 572,211
312,999 32,000 351,077 5.0 % 42.6 % 39.7 17.7 1,364 204 1,568 365 572,211
315,570 34,800 356,494 1.5 % 42.4 % 40.1 17.6 1,364 204 1,568 365 572,211
318,165 37,600 361,935 1.5 % 42.1 % 40.4 17.5 1,364 204 1,568 365 572,211
45.4 % 36.1 18.5 1,364 1,364 365 497,751
Rooms Supply Growth Competitive Set Occupancy
59.2 %
0.0 % 60.8 %
0.0 % 61.3 %
11.3 % 56.9 %
3.3 % 58.5 %
0.0 % 61.4 %
0.0 % 62.3 %
0.0 % 63.3 %
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To assess the impact of the proposed ACC, we estimated market growth without the proposed ACC as shown in the following table.
FIGURE 1-27 FORECAST OF AVERAGE COMPETITVE SET OCCUPANCY WITHOUT THE ALBANY CAPITAL CENTER
2012 Commercial Base Demand Unaccommodated Demand Induced Demand Total Demand Growth Rate Meeting and Group Base Demand Unaccommodated Demand Induced Demand Total Demand Growth Rate Leisure Base Demand Unaccommodated Demand Induced Demand Total Demand Growth Rate 133,811 2013 137,825 2,417 0 140,243 4.8 % 109,509 2,956 0 112,465 5.8 % 55,604 526 0 56,130 3.0 % 2014 139,204 2,441 0 141,645 1.0 % 110,056 2,971 0 113,027 0.5 % 56,160 531 0 56,691 1.0 % 2015 140,596 2,466 2,700 145,762 2.9 % 110,606 2,986 1,800 115,392 2.1 % 56,722 536 2,700 59,958 5.8 % 2016 142,002 2,490 3,600 148,092 1.6 % 111,159 3,001 2,400 116,560 1.0 % 57,289 542 3,600 61,431 2.5 % 2017 143,422 2,515 3,600 149,537 1.0 % 111,715 3,016 2,400 117,131 0.5 % 57,862 547 3,600 62,009 0.9 % 2018 144,856 2,541 3,600 150,996 1.0 % 112,274 3,031 2,400 117,705 0.5 % 58,441 553 3,600 62,593 0.9 % 2019 146,304 2,566 3,600 152,470 1.0 % 112,835 3,046 2,400 118,281 0.5 % 59,025 558 3,600 63,183 0.9 %
106,319
54,514
Totals Base Demand Induced Demand Total Demand Overall Demand Growth Competitive Hotels Mix Commercial Meeting and Group Leisure Existing Hotel Supply Proposed Hotel Rooms Total Supply Nights per Year Available Rooms per Night
294,644
302,938 0 308,837 2.8 % 45.4 % 36.4 18.2 1,364 0 1,364 365 497,751
305,420 0 311,364 0.8 % 45.5 % 36.3 18.2 1,364 0 1,364 365 497,751
307,924 7,200 321,112 3.2 % 45.4 % 35.9 18.7 1,364 154 1,517 365 553,851
310,450 9,600 326,083 3.5 % 45.4 % 35.7 18.8 1,364 204 1,568 365 572,211
312,999 9,600 328,677 0.8 % 45.5 % 35.6 18.9 1,364 204 1,568 365 572,211
315,570 9,600 331,294 0.8 % 45.6 % 35.5 18.9 1,364 204 1,568 365 572,211
318,165 9,600 333,935 0.8 % 45.7 % 35.4 18.9 1,364 204 1,568 365 572,211
45.4 % 36.1 18.5 1,364 1,364 365 497,751
Rooms Supply Growth Competitive Set Occupancy
59.2 %
0.0 % 60.8 %
0.0 % 61.3 %
11.3 % 56.9 %
3.3 % 57.0 %
0.0 % 57.4 %
0.0 % 57.9 %
0.0 % 58.4 %
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FIGURE 1-28 PROJECTED OCCUPANCY FOR THE COMPETITIVE SET WITH AND WITHOUT THE PROPOSED ALBANY CAPITAL CENTER
Stabilized Occupancy without the Albany Capital Center Stabilized Occupancy with the Albany Capital Center Increase in Occupancy in the Competitive Hotel Set New Induced Room Nights from the opening of the ACC 58.4% 63.3% 4.9% 28,000
We conclude that occupancy within the competitive set would increase by nearly 5.0% due to the development of the ACC. The market would absorb 28,000 new room nights induced by the opening of the ACC. The local area economy would benefit from the spending generated by new visitors on lodging, restaurant, retail, transportation, and other visitor spending. The following Economic Impact Analysis section breaks down the quantity of impact from the new room nights.
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ECONOMIC IMPACT ANALYSIS
Based on the demand projections presented previously in this report, HVS identified the new spending that would occur in the local economy due to the operations of the proposed Albany Convention Center (ACC). HVS direct spending estimates include only new spending that originates from outside the market area. We analyzed two market areas: the State of New York, and Albany County. Spending by attendees who live within the market areas is a transfer of income from one sector of the areas economy to another; therefore, this analysis does not count spending by local residents as a new economic impact. HVS further removes attendee spending from groups that transfer business to the ACC from another property within the state or county. Spending falls into three categories: Direct spending impacts include the new spending of event attendees and organizers. For example, an attendees expenditure on a restaurant meal is a direct spending impact. Indirect spending impacts stem from the business spending resulting from the initial direct spending. For example, an event attendees direct expenditure on a restaurant meal causes the restaurant to purchase food and other items from suppliers. The portion of restaurant purchases that occur within New York or Albany counts as an indirect impact. Induced spending impacts represent the change in local consumption due to the personal spending by employees whose incomes are affected by direct and indirect spending. For example, a waiter at a local restaurant may gain personal income from an event attendee dining at the restaurant. The amount of the increased income that the waiter spends in the local economy counts as an induced impact.
Direct, Indirect, and Induced Spending
HVS enters the direct spending estimate into the IMPLAN input-output model of the local economy to estimate indirect and induced spending. The sum of direct, indirect, and induced spending estimates make up the total estimated spending impact of the proposed ACCs operations. Many refer to indirect and induced impacts as multiplier effects. The relationship between direct spending and the multiplier effects can vary based upon the specific size and characteristics of a local areas economy. Sources of Direct Spending HVS identified three sources of new direct spending impact for state and Albany County market areas: Overnight Attendee SpendingParticipants, including convention and trade show delegates, meeting attendees, banquet guests, and other group event attendees, who attend ACC events and require paid lodging.
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Daytrip Attendee SpendingParticipants, including convention and trade show delegates, meeting attendees, banquet guests, and event attendees, who attend ACC events and do not require paid lodging. Event OrganizersIndividuals, associations, or other organizations that plan, sponsor, organize, and coordinate events that would take place at the ACC. Event organizer spending is a combination of venue event revenues and spending which occurs outside the venue.
Overnight and Daytrip Attendee Assumptions
HVS classifies attendees at conventions, trade shows, and other events as either overnight or daytrip delegates, depending on their overnight lodging requirements. Typically, events attract a mix of local and non-local attendees, depending on the type of event. HVS estimated the percentage of overnight guests and day trip attendees that are new to the Albany market area for both program scenarios. The figure below summarizes these assumptions.
FIGURE 1-29 NEW VISITORS TO THE MARKET
Geographic Area/Visitor Type
Overnight Guests
Day Trips
New York Conventions Tradeshows Consumer Shows Special Events Assemblies Albany County Conventions Tradeshows Consumer Shows Special Events Assemblies
20% 20% 2% 2% 2% 60% 60% 10% 10% 10%
10% 10% 2% 2% 2% 60% 60% 10% 10% 10%
While overnight guests primarily originate from outside of Albany, HVS estimates that, depending on the type of event, a percentage of both overnight and daytrip guests would be from groups that have moved their event to the ACC from another venue in Albany or the State of New York. HVS further assumes that a portion of new overnight guests would stay in properties outside of the City of Albany and that some spending would occur outside Albany or New York. We use exhibitor attendee numbers to calculate spending by event exhibitors at exhibit-based
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events only. The origin of exhibit attendees is not relevant in this case; however, HVS assumes that a portion of exhibitor spending would occur outside Albany or the State of New York. Sources of Impact HVS combined the event demand forecasts for a stabilized year of demand following the opening of the proposed ACC with the assumptions of the percent of demand that is new to the market. This analysis yields an estimate of the sources of new impact shown in the figure below.
FIGURE 1-30 SOURCE OF NEW IMPACT IN STABILIZED YEAR

Event Type New York Conventions Tradeshows Consumer Shows Special Events Assemblies Total Albany County Conventions Tradeshows Consumer Shows Special Events Assemblies Total 4,968 2,250 60 0 0 7,278 14,904 6,750 300 0 0 21,954 690 1,350 588 240 180 3,048 4,140 8,100 2,940 1,200 900 17,280 5,520 5,400 6,000 0 0 16,920 16,560 16,200 18,000 0 0 50,760 Overnight Visitors Day Trips Convention Delegate Days
The above figure is net of the existing demand at the ACC and represents only new sources of impact to Albany and New York as a direct result of the development of the ACC. These estimates of overnight stays and day trips provide the basis for estimating new spending in the local market. Spending Parameters Attendees and event organizers spend locally on lodging, meals, recreation, local transportation, facility rentals, vendor services, meeting room rentals, equipment rentals, and other goods and services. In order to estimate average spending by overnight guests, day trippers, and event organizers in Albany and the State of New York, HVS compiled and evaluated data from two sources. First, the 2004 Destination Marketing Association International (DMAI) survey (the most recent one available) focuses on spending by
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convention participants and organizers. Second, the 2011 Corporate Travel Index (CTI) survey focuses on visitor spending in the top 100 business destinations in the country. HVS uses the CTI survey to index the national results contained in the DMAI survey so that they more accurately reflect the probable level of spending in Albany. Based on these three sources, HVS estimated total spending by overnight attendees, day trippers, and event organizers. All daily spending parameters are stated as the daily spending by individual overnight stays and day trippers in 2013 dollars. The following figures present the direct spending estimates for each spending category.
FIGURE 1-31 OVERNIGHT ATTENDEE DIRECT SPENDING 2013 DOLLARS

Daily Spending Parameter Hotel Rate Hotels and motels, including casino hotels Automotive Equipment Rental and leasing Food services and drinking places Retail Stores - Gasoline Stations Retail Stores - General Merchandise Transit and ground passenger transportation Scenic and sightseeing transportation and support activities for transportation Motion picture and video industries Museums, Historical Sites, Zoos, and Parks State and local government passenger transit Total Sources: DMAI, CTI, and HVS Spending Per Overnight Stay $119.62 $50.25 $8.25 $64.31 $1.99 $29.68 $9.05 $4.80 $1.34 $10.23 $1.75 $301.26
Multiplying the number of new overnight stays projected in each of the demand scenarios by the daily spending parameters produces an estimate of new gross spending by overnight attendees for each program scenario. Approximately 22,000 new overnight visitors spending 301.26 dollars implies 6.61 million dollars of spending would occur in the local market in a stabilized year. For the State of New York, approximately 5,000 new overnight visitors would yield 1.50 million dollars of spending in a stabilized year.
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FIGURE 1-32 DAYTRIP ATTENDEE DIRECT SPENDING 2013 DOLLARS

Daily Spending Parameter Food services and drinking places Retail Stores - Gasoline Stations Retail Stores - General Merchandise Scenic and sightseeing transportation and support activities for transportation Motion picture and video industries Museums, Historical Sites, Zoos, and Parks State and local government passenger transit Total Sources: DMAI, CTI, and HVS Spending Per Daytrip $64.31 $1.99 $29.68 $4.80 $1.34 $10.23 $1.75 $114.09
Attendees at conventions and other events who do not stay overnight generate daytrip spending. Multiplying the number of new attendees to the Albany or New York market area by the estimated daily spending figure produces an estimate of new spending by daytrip delegates in Albany for each program scenario. Approximately 17,300 new daytrip visitors spending 114.09 dollars yields approximately 1.97 million dollars of spending in the local market in a stabilized year. In the State of New York, 690 new daytrip visitors would yield approximately 79,000 dollars of spending in a stabilized year. Event Organizer Spending Event organizers spend money to rent the ACC. Organizers and exhibitors pay the venue for event services, catering, decorating, and other charges related to produce an event. The following figures present the new venue revenues for each program scenario, net of existing group business revenues collected by the ACC, for a stabilized year of demand in 2013 dollars. The following figure includes only those revenues that pertain to group meeting events.
FIGURE 1-33 NEW VENUE REVENUE (IN 2013 DOLLARS)

New York OPERATING REVENUE Space Rental Event Services Food & Beverage Other Revenue Total Source: HVS $70,000 $35,000 $114,000 $11,000 230,000 Albany County $282,000 $141,000 $456,000 $44,000 923,000
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Some of the new venue revenues collected at the ACC would transfer over from other properties within Albany County or the State of New York. Based on existing competition within the Albany market area, HVS estimated the percent of the above venue revenues that represent new spending in the City or State. In addition to facility spending, event organizers also spend on outside lodging, meals, local transportation, facility rentals, equipment rentals, and other goods and services required to plan and organize a successful event. Adjusted DMAI data provides estimates of organizer spending per attendee-day as shown in the figure below. Note that event organizer spending is based on the total number of attendees, regardless of from where those attendees originate. Event organizer spending on facility rental, facility services, and event food and beverage is included in the above facility revenue estimates.
FIGURE 1-34 EVENT ORGANIZER SPENDING (IN 2013 DOLLARS)

Daily Spending Parameter Hotel Room Rate Hotels and m otels, including casino hotels Automotive Equipment Rental and leasing Food services and drinking places Retail Stores - General Merchandise Transit and ground passenger transportation Advertising and Related Services State and local government passenger transit Total Sources: DMAI, CTI, HVS Spending Per Convention Delegate Day $0.97 $0.14 $0.05 $0.43 $1.32 $0.02 $1.03 $0.04 $3.99
Approximately 50,760 new convention delegates spending four dollars would yield 202,000 dollars of spending in Albany in a stabilized year. Approximately 16,920 new convention delegates would yield 67,000 dollars of spending in the State of New York in a stabilized year. IMPLAN Impact Modeling HVS uses the IMPLAN input-output model to estimate indirect and induced impacts. IMPLAN, a nationally recognized model developed at the University of Minnesota, estimates indirect and induced 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 shown here represent the estimated changes in the flow of income and goods caused by the estimated direct spending. The
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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 are inputs into the IMPLAN model. Specifically, the IMPLAN model relies on spending categories defined by the U.S. Census according to the 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 the intent of the data. Retail Margining Spending at retailers does not create as large of an impact on the economy as spending in other industries. Retailers add value equal to the margin or price increase of the good above the paid amount 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. Albany cannot accommodate all of the direct spending demand in the market area. For example, an event organizer may need to buy novelty items not produced in the market area for attendees. The direct spending leaks outside the market area to the extent that services and others produce goods outside the market. This effect occurs for direct, indirect, and induced spending. HVS uses the IMPLAN SAM values to track the percentage of a good purchased within the market area. As a result, the realized direct spending in a region is lower than the spending in the market area. We refer to indirect and induced impacts (as defined earlier in the report) as multiplier effects. The relationship between direct spending and the multiplier effects can vary based on the specific size and characteristics of a local areas economy. HVS enters the gross direct spending estimate into the IMPLAN input output model of the local economy to estimate the realized direct, indirect, and induced spending. HVS obtained data from IMPLAN on Albany County and created an input-output model for the City. The following figures present the output of the IMPLAN modelthe new, realized direct, indirect, and induced economic impacts and that are attributable to the proposed ACC operation. IMPLAN also estimates the jobs created based on the direct, indirect, and induced spending estimates. Spending estimates are for a stabilized year of demand in 2013 dollars.
Local Purchase Percentage
Indirect and Induced Spending
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FIGURE 1-35 ANNUAL TOTAL SPENDING (IN MILLIONS OF DOLLARS)

Effect Type Direct Indirect Induced Total New York $4.0 1.1 0.7 $5.8 Source: IMPLAN Albany County $13.0 3.6 2.3 $18.9
FIGURE 1-36 ANNUAL TOTAL JOBS

Effect Type Direct Indirect Induced Total New York 38 7 5 49 Source: IMPLAN Albany County 121 21 15 157
The IMPLAN output forecasts that almost 70 percent of the impact in a stabilized year on both State and Albany County levels would occur through direct spending. Fiscal Impacts Fiscal impacts represent the public sector share of the economic impacts, as represented by tax collections on new spending. The previously discussed spending estimates provide a basis for estimating potential tax revenue, as Albany and the State of New York would tax some of the spending. The IMPLAN analysis results in direct, indirect, and induced spending classified into hundreds of detailed spending categories. HVS evaluated each of these spending categories to determine which taxes would apply to each type of spending output. We then used appropriate tax rates to estimate the amount of tax revenue. See the figure below for the effective tax rates used in the analysis.
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FIGURE 1-37 EFFECTIVE TAX RATES

Tax Base Effective Tax Rate State City 11.10% * 4.00% 5.00% 0.00% 5.00% 0.00% 4.00% 6.00% 4.00% 4.00%
Gasoline gross sales of gas Auto Rental gross revenue from auto rentals Personal Income Tax personal income Hotel Occupancy Tax hotel room sales Sales & Use Taxes taxable sales *State tax of $0.08/gallon of gasoline, excise tax of $0.08/gallon, state petroleum business tax
of $0.171/gallon, and spill tax of $0.002/gallon
Sources: State of New York, City of Albany, and HVS
HVS applied the effective tax rates to a detailed breakdown of spending and income categories that result from added spending in Albany and the State of New York from operation of the proposed ACC. HVS then estimated the potential annual revenue from each tax source.
FIGURE 1-38 FISCAL IMPACTS (STABILIZED YEAR)

Fiscal Impact Gasoline Auto Rental Personal Income Tax Hotel Occupancy Tax Sales & Use Taxes Total State $1,000 5,000 10,000 74,000 96,000 $186,000 Sources: IMPLAN, HVS City $1,000 0 0 395,000 306,000 $702,000 Total $2,000 5,000 10,000 469,000 402,000 $888,000
HVS estimates that the additional event activity in Albany would generate almost 900,000 dollars per year in combined State and City tax revenue in a stabilized year. Almost all of the impact would occur through additional room nights and sales and use taxes. These economic and fiscal impact estimates are subject to the assumptions and limiting conditions described throughout the report. Although we consider these assumptions reasonable, we cannot guarantee that the project will achieve the forecasted results. Actual events and circumstances could differ substantially from the assumptions in this report. Consider these estimates as a mid-point in a range of potential outcomes.
October 31, 2013
1-41 41
2. Statement of Assumptions and Limiting Conditions
1. 2. 3.
This report is to be used in whole and not in part. No responsibility is assumed for matters of a legal nature. 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. 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. We take no responsibility for any events or circumstances that take place subsequent to the date of our report. The quality of a convention 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. 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 facilitys management.
4.
5. 6.
7.
8. 9.
10.
October 31, 2013
Statement of Assumptions and Limiting Conditions Convention Center Market Study Albany Capital Center
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11.
We do not warrant that our estimates will be attained, but they have been developed on the basis of information obtained during the course of our market research and are intended to reflect reasonable expectations. 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. 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. This report was prepared by HVS Convention, Sports & Entertainment Facilities Consulting. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of this organization, as employees, rather than as individuals. This report is set forth as a market study of the subject facility; this is not an appraisal report.
12.
13.
14.
15.
16.
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Statement of Assumptions and Limiting Conditions Convention Center Market Study Albany Capital Center
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3.
Certification
The undersigned hereby certify that, to the best of our knowledge and belief: 1. 1. 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 (or the specified) present or prospective interest in the property that is the subject of this report and no (or the specified) personal interest with respect to the parties involved; 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 appraisal; Thomas A Hazinski and Brian Harris personally inspected the property described in this report; and Alex Moon participated in the analysis and reviewed the findings, but did not personally inspect the property;
2.
3. 4. 5.
6.
Thomas A Hazinski Managing Director
Brian Harris Senior Analyst
October 31, 2013
Statement of Assumptions and Limiting Conditions Convention Center Market Study The Albany Capital Center
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CONVENTION CENTER MARKET STUDY

The Albany Capital Center

October 31, 2013

Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

October 31, 2013

Thomas A Hazinski Managing Director

Brian Harris Senior Analyst

Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

October 31, 2013

Summary of Findings Convention Center Market Study Albany Capital Center

Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

PROPOSED CONVENTION CENTER SITE

October 31, 2013

Summary of Findings Convention Center Market Study Albany Capital Center

Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

AERIAL VIEW OF THE PROPOSED SITE

VIEW OF THE PROPOSED SITE FROM THE SOUTH

October 31, 2013

Summary of Findings Convention Center Market Study Albany Capital Center

Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

EXISTING PEDESTRIAN CONNECTION TO TIMES UNION

The figures below show preliminary conceptual floor plans.

October 31, 2013

Summary of Findings Convention Center Market Study Albany Capital Center

Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

LEVEL ONE - PRELIMINARY FLOOR PLANS

Source: Clough Harbor Associates

October 31, 2013

Summary of Findings Convention Center Market Study Albany Capital Center

Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

LEVEL TWO - PRELIMINARY FLOOR PLANS

Source: Clough Harbor Associates

October 31, 2013

Summary of Findings Convention Center Market Study Albany Capital Center

Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

PARKING LEVEL - PRELIMINARY FLOOR PLANS

Source: Clough Harbor Associates

October 31, 2013

Summary of Findings Convention Center Market Study Albany Capital Center

Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

VIEW OF DEWITT CLINTON HOTEL FROM SITE

October 31, 2013

Summary of Findings Convention Center Market Study Albany Capital Center

Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

CAPACITIES OF COMBINED VENUE

*Inclu des exibition s pace on aren a floor.

October 31, 2013

Summary of Findings Convention Center Market Study Albany Capital Center

Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

68,370 sf 68,050 72,232 78,000 58,924 54,151 59,932 159,000

Exhibition Space Assessment

October 31, 2013

Summary of Findings Convention Center Market Study Albany Capital Center

Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

EXHIBITION SPACE IN COMPARABLE VENUES

October 31, 2013

Summary of Findings Convention Center Market Study Albany Capital Center

Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

BALLROOM SPACE IN COMPARABLE VENUES

October 31, 2013

Summary of Findings Convention Center Market Study Albany Capital Center

Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois

FIGURE 1-10 MEETING SPACE IN COMPARABLE VENUES