Title
Phoenix Convention Center Service Provider Relief - Consideration of Contract Term Extensions (Ordinance S-47596)
Description
Request to authorize the City Manager, or his designee, to amend multiple Phoenix Convention Center (PCC) service provider agreements to extend the term of the contracts for two additional years, to help offset business and financial impacts of the Coronavirus pandemic.
Report
Summary
The hospitality industry continues to struggle amidst the challenging circumstances of the global Coronavirus pandemic. In early 2020, the spread of COVID-19 began to directly impact the convention and meetings industry. Meeting planners and national associations began cancelling conventions and trade shows out of an abundance of caution. In early March 2020, the World Health Organization declared the Coronavirus outbreak a global health pandemic. This was followed by similar declarations from federal, state, and local government agencies as well as public health agencies including the Centers for Disease Control and the Arizona Department of Health Services. Additionally, the Governor's office has issued COVID-19 Executive Orders establishing guidance and criteria for hosting events. The declarations and guidance referenced above have resulted in cancellations and postponements of all large gatherings including conventions, meetings, and public events.
The Coronavirus pandemic has impacted the entire visitor and hospitality industry which includes convention centers, hotels, performing arts venues, stadiums and arenas.
At the time of the outbreak the PCC was on pace to host a record number of citywide convention groups in 2020. Since that time, a total of 247 events at the PCC have cancelled or postponed including 79 citywide conventions contracted for future years. The event cancellations equate to a loss of more than 290,000 convention attendees, 342,000 hotel room nights and $448 million in direct visitor spending. While the overall economy has begun to recover from the pandemic, the meetings and hospitality industry remains largely stalled and faces a longer road to full recovery.
The loss of convention business has significantly impacted top-line revenues for the PCC as well as the service contractors who provide exclusive services to convention center clients. These contractors provide critical and integral services as a part of our business, acting as an extension of the PCC in hosting conventions and trade shows. In Fiscal Year 2018-19, these service provider agreements generated $12.7 million in commissions to the PCC.
A majority of the service provider contracts require significant capital investments into the Phoenix Convention Center venues. The investments generally include furniture, fixtures, equipment and building infrastructure. The return on these investments would typically be achieved over the term of the contracts.
In order to offset the loss of business and allow additional time to realize a return on investment, staff recommends extending the contract term for five PCC revenue generating service provider agreements for two additional years as outlined in Attachment A.
Financial Impact
Extending the contract term(s) for the service providers listed in Attachment A for two additional years would result in no additional cost to the Phoenix Convention Center, however it would defer the future solicitation and implementation of new contracts.
Concurrence/Previous Council Action
The Workforce and Economic Development Subcommittee recommended approval of this item by unanimous vote at its April 28, 2021 meeting.
Location
Phoenix Convention Center, 100 N. 3rd St.
Council Districts: 7 and 8
Department
Responsible Department
This item is submitted by Deputy City Manager Inger Erickson and the Phoenix Convention Center Department.