The Significance of Convention Centers in India
As Brazil braced itself to host more than 100 heads of state and government and nearly 50,000 participants in Rio de Janeiro in mid June 2012 for a summit on global development, popularly known as Rio+20 UN Summit, there was a team of more than 1,000 people working in the background for more than a year to accommodate them. As host of the Earth Summit, which consolidated the concept of sustainable development in 1992, Rio de Janeiro was the ideal place to hold Rio +20, which points the way forward, in terms of development.
The legacy of Rio "92 – the Rio Declaration, Agenda 21, the Framework Convention on Climate Change and the Convention on Biological Diversity – will be linked forever to the memory of the intense participation of civil society in the UN debate, generating what is called the "spirit of Rio". To address the logistical organization of the Conference the "Brazilian Organizing Committee" (BOC) was created and was responsible for the planning and execution of all measures necessary for the Rio +20 Conference, including managing resources and contracts for the official events held within the context of the United Nations. It was also in the BOC's mandate to perform activities related to the management of man, material, finance, protocol, security and conservation of buildings used in the organization apart from hosting the Rio +20. In order to ensure that Rio +20 followed sustainable development, the Brazilian government – in the National Organizing Committee‟s context – also created a Coordination of Sustainability. The Coordination aimed on analyzing and proposing actions to reduce, mitigate or compensate social and environmental impacts generated by the Conference itself.
When the management of the Riocentro Exhibition and Convention Center changed hands in 2006, it upgraded the total area of convention and meeting space and took it on a path of profits. Consisting of 100,000 sq ft of built up area divided into five inter-connected pavilions, the center caters to all types of functions. The management continues to upgrade the center by adding a 300-room hotel by 2013. Since its inception in 1977, the journey for Riocentro Exhibition and Convention Center has been a memorable one. Not only has the Center witnessed its largest number of audience in history by receiving more than 1.30 million visitors in 2010-11, but the overall development has also added to the economic wellbeing of the city of Rio de Janeiro in particular and the country of Brazil in general by making it a hotspot for investments and being identified as a key location on the world tourist map. This just goes to show how important convention centers are for creating visibility for a country‟s tourism industry.
As far as the largest Convention Center in Latin America – RioCentro – goes, the famous adage "Build it and they will come" was adhered to, but the host country faced a somewhat unconventional problem of seeing more people come in for the +20 convention. Rio de Janeiro‟s hotel market has approximately 33,000 hotel beds and it was estimated that 50,000 guests would visit the event. The question was "where should we accommodate them?‟ Unique problems also have unique solutions. The government requested the local citizens to leave town and rent out their apartments so that guests would not get inconvenienced. Another unique solution identified was that Rio‟s 300-odd "love hotels‟ were also requested to charge daily instead of hourly rates. As for the remaining visitors, camping was the only option left. They did build a Convention Center that could accommodate the guests but not the shoulder facilities like hotels to support that sort of development. However, everyone, from the Mayor of the city to the smallest unbranded hotel in the Rio tourism industry co-operated and chipped in to make this event a success. What one can see from the above illustration is that while companies and even entire countries can make probable miscalculations in estimating the future of potential business from tourism, only those who try to develop quality facilities and alter their outlook with changing times will survive and gain from it. And yes, build it and they will come!
The chart given below highlights the top facilities in India vis-à-vis biggest international convention centers, segregated by continent. India does not compete with the biggest and the best of the world because evidently, it does not have the scale and size of centers that can attract the large sized conventions, congresses and summits that create business for the center as well as the economy in the local market.
Round about the same time as the Rio +20 Summit in June 2012, Los Cabos International Convention Center (CICC) hosted the G20 summit at Cabo San Lucas in Baja California Sur, Mexico. To accommodate the G20 summit members – which comprise prominent heads of states – the Mexican President Felipe Calderón vehemently allocated approximately rupees 1,000 crores to develop CICC as well as ancillary facilities like roadways. The 15-acre convention center was completed in record time of nearly six months, which usually takes 2-3 years to develop; and the 6,000 people capacity centre hosted the G20 summit successfully. The proactive stance of the Mexican government and the systematic planning for the development of the convention center is a cue for many countries like India to develop such facilities.
In the last decade or so, India has seen year-on-year growth in tourist arrivals. Meetings and Conference market segment has been identified as one of the new growth market segment by many analysts. India will soon be competing with the best of the international markets in many industries including meeting and exhibition industry by attracting business arising from international summits, accords and conventions. But does India have those facilities to accommodate the different types of clients that such events bring in? Can India compete with other international markets like China, Singapore and Rio de Janeiro to host events of international stature? There is no doubt that India does not even come close to compete with them. It simply does not have the number of hotels that can accommodate all the delegates in a single location, let alone the exhibition and convention centers that can host events like the +20 Summit in Rio. Our biggest and best cities like Delhi, Mumbai, Bangalore and Hyderabad could at best host the media – should they choose to work out of India – that cover and report on such events.
India‟s recent development in the convention space, the Hyderabad International Convention Center (HICC) still does not compete to the larger developments in the world. However, in the recent past during a good year, the HICC generated more than 45,000 room nights for the hotel market of Hyderabad, over and above the business that it generated for its attached Novotel Headquarters hotel. Realizing the long term potential of this business, the state government and the tourism industry have collectively formed the Hyderabad Convention Visitors Bureau (HCVB) to promote and market the city of Hyderabad. India can try to emulate this success story in other parts of the country and create destinations in their own right to not only increase tourism and earn foreign exchange but also form a center for the benefit of the local communities.
During the Commonwealth games in the capital city; India too had a similar problem like the one faced in Rio de Janeiro for the +20 UN Summit and as such, the government looked at alternative options of bed n breakfast formats to accommodate guests. If India wishes to be a focus for events of the likes of Rio +20 UN Summit, it would need to up the ante in its preparedness for events that not only bring business to the planned facilities but also revenues to the economy in general, generating business for industries such as wholesale trade and real estate in the immediate future and the economy of the city in the long term.
The most important point that drives business for a convention center is the availability of hotels and other supporting facilities like recreational areas, retail outlets and establishments in the market. Other key points in defining business drivers for convention centers is the basic infrastructure that a destination has to offer in terms of affordability, safety, ease of transport, etc. A major portion of events related to entertainment, leisure and sporting events are also determined by the availability in the market of other exhibition and entertainment facilities. As the investments in such projects is unequivocally higher in comparison to many other real estate developments, one needs to answer questions like "Does the demand exist that would allow the local market to enhance its economic development efforts in the tourism industry as well create profits over a period of time?‟, "what is the right set of facilities and other initiatives to meet that demand?‟ and "how much would they cost to build and operate?‟ After a detailed and thorough research, one could come to a conclusion to invest in it at right stages and if either the local or state government and/or a private player decide to develop a convention center together, the above points form a starting point for planning developments of this nature.
While India has ten state capital cities with a population of more than five million and 80 cities with a population of more than one million with an average age of 24 years and forms a good consumer base for any industry including the tourism industry; to create facilities like exhibition and convention centers, one cannot neglect the fact that India comes with its own unique set of problems. Every state of the country is a country in its own and as such, they are quite different from each other. India is culturally more diverse than Europe and geographically more diverse than United States of America. Hence, every micro market needs to be treated differently as doing business in India in not always kosher. But one cannot still deny the fact that the next big market for the Meeting and Conferences industry, apart from China, is India.
Being optimistic about the future and looking at India with respect to the conventions market, let us try and identify the type of clientele that would typically visit such facilities. Convention centers receive guests from local, national and international markets. The various market segments that visit these facilities are dictated by the types of events that are hosted. The table given below highlights the major types of events that an Exhibition cum Convention Center hosts along with the requirements of the destination in which it is present, the space layout that it needs and the key economic impact characteristics that broadly define the type of guests that come for it.
A recent survey conducted by UFI, a global association of the exhibition industry stated that the total indoor exhibition space available in 2011 was largely present in Europe, totaling 15.6 million sq ft with 496 venues (48%). This was followed by the Americas consisting of 7.9 million sq ft of total space (24%) and coming in third place was Asia Pacific consisting of 6.6 million sq ft with 184 venues (20%). While the leading continent with the largest indoor exhibition space is Europe, the country with the largest indoor exhibition space is USA, as the concentration of space in Europe does not lie with any one country. However, closer to India, one would think that India would pull off a lion‟s share of that 20% of worldwide indoor exhibition space achieved by Asia Pacific, but that is far from the truth. In fact, China – after building more than 1.5 million sq ft of exhibition space in the last 5 years – acquired 72% of the Asia Pacific share. India did not even come a close second as it trailed Japan (5%) and S Korea (4%) to come at fourth place with 3.9% of the Asia Pacific market share and 0.9% of the World market share.
Traditionally, government corporations have been involved in the development and operation of convention, conference and civic centers for the purpose of generating and maximizing the economic benefits such as sales, jobs, taxes, etc. within the region and for local community improvement (i.e. industry and market revitalization) but in the recent past it has been seen that a combination of private players and public bodies are coming together to create these centers as joint development. Likewise, with a joint effort from the local and state government, governmental organizations and private players, India could look at creating such facilities to accentuate the local market‟s outlook. The need for large scale convention spaces for India is further highlighted by the fact that a large number of globally significant events, which leave it‟s footprint on the global economy, such as the Doha Summit, ASEAN meets, World Congresses, etc. do not take place in India due to the present lack of a sizeable convention center. The import of these events is not just restricted to the boost in the economy resulting from the particular events held but it also galvanizes the convention and allied industries in the country and increases the prominence of the country as a convention destination, thereby increasing the overall number of international events taking place in the country. A noticeable change has been observed in locations like Geneva, Doha and Rio de Janeiro, all of which benefitted tremendously due to the international events conducted therein. Not only have they been identified on the international tourist map but their ancillary developments have also greatly profited from the same with an even higher benefit accrued to the country‟s economy.
Considering that the tourism sector in India witnessed significant growth during 2006 to 2011 with the Compound Annual Growth Rate (CAGR) of foreign tourist arrivals (FTA) and foreign exchange earnings (FEE) from tourism at 7.2 % and 14.7% respectively and India still garners less than 1% of the international meetings market, it surely has great potential for creating the infrastructure needed for developing convention centers in every region of the country.
Neither is the development of convention centers purely a business generating venture, nor is it a pure play community center. They are a mix of both and as such, it bodes well for community and civic development while generating profits in the long run. After carefully evaluating the multiple opportunities that lie in India, one should actively try and look at the right product mix for creating such facilities. And yes, build and they will come!
Premal Zaveri
CBRE, Mumbai
+91 22 4069 0000
