Title
Phoenix Convention Center Department COVID-19 Response
Description
This report provides information to the City Council on the business and operational impacts of the Coronavirus pandemic on the Phoenix Convention Center (PCC) and requests City Council approval to implement necessary and appropriate program budget reductions in response to event cancellations and projected revenue shortfalls.
Report
Summary
In early 2020, the global 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, 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, 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.
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 186 events at the PCC have cancelled or postponed including 52 contracted conventions. The convention cancellations equate to a loss of more than 160,000 delegates, 224,000 hotel room nights and $235 million in direct visitor spending. As we approach the end of the calendar year, additional group business cancellations into the first half of 2021 are anticipated.
As a non-general fund enterprise department, the PCC relies on user generated fees and dedicated excise taxes to support operations and debt service. Direct operating revenues include facility rentals, commissions from services such as catering, audio visual, IT, and parking. Excise tax revenues are derived from hotel/motel, restaurant and bar, and construction activity. As a result of the pandemic, staff projects a decrease in direct operating revenues of $18.5 million on a budget of $60.8 million and a decrease in combined excise taxes of $20.7 million in FY 2020-21.
Accordingly, staff has developed an 18- to 24-month business recovery plan that ensures long-term financial stability and aligns operating expenses and staffing with business and operational needs. Concurrently, the department will continue to remain positioned to hold limited capacity meetings and events under strict COVID-19 protocols and ultimately a return to normal business operations.
As part of the business recovery plan, the PCC will require expense reductions to the department’s operating budget. The proposed reductions include capital expenses, operating expenses, and personnel expenses. Personnel expense reductions include suspension of funding for: 22 vacant full-time positions, 21 vacant part-time positions, 25 filled full-time positions and reduction in funding for 47 filled part-time positions. A detailed summary of the proposed reductions is included in Attachment A. Staff is currently working closely with the Human Resources Department to develop a plan to transition affected full-time staff into other positions within the City organization. Pending Council approval, the transition of staff is expected to be completed by Feb. 1, 2021. Our commitment is to identify an appropriate City job opportunity for all full-time staff.
The Coronavirus pandemic has impacted the entire visitor industry which includes convention centers, hotels, performing arts venues, stadiums and arenas. A recent industry survey conducted by the International Association of Venue Management reported that through Sept. 30, 2020; 49 percent of venues have furloughed or laid off full-time staff and 42 percent of venues have reduced their operating budgets. A summary of recent staffing reductions taken by comparable convention centers is included in Attachment B.
Department
Responsible Department
This item is submitted by Assistant City Manager Milton Dohoney, Jr. and the Phoenix Convention Center Department. This item is also recommended by the Budget and Research Department.