East Meets West
China’s venue world garners growing interest from international firms
by Liz Boardman
Cliff Wallace made his first trek East in 1985, when he was president of the Louisiana Superdome, New Orleans, for what was then Facility Management Group (FMG). Hong Kong had decided to build a convention/exhibition center and since the island nation had just signed the declaration between Great Britain and the People’s Republic of China to return to Chinese rule in 1997, it decided it was in their best interest to bring in private management.
They contacted FMG, and Wallace was among those who developed their marketing plan.
“I was traveling through Asia, and there were few convention/exhibition centers and hardly any sports or entertainment arenas,” Wallace said. “The venues were just facilities, with no dressing rooms and no concessions. They were just outdoor stadiums.”
The exceptions, he said, were the beautiful historic performing arts centers.
When the Hong Kong Convention and Exhibition Center was built, the only venue of significance to compare it with was Singapore’s World Trade Center, which was little more than a series of warehouses.
The HKCEC opened in 1988, and was state-of-the-art. It was expanded in 1997, and remains the busiest center in the East, with the highest grossing food/beverage and rental sales, and hosts the highest number of events.
In the years since, Wallace, who moved to Hong Kong in 1993 to work for Hong Kong Convention and Exhibition Centre (Management) Ltd./NWS Holdings, and now also for Shanghai Venue Management (Zhengzhou) Limited (VMZL,) has become the elder statesman of venue operators in the East. The Hong Kong group has partnered in management of the Zhengzhou International Convention and Exhibition Centre.
He said today’s venue market in China is similar to the United States’ venue market in the 1970s and 80s.
“In the 70s and 80s, U.S. cities, top level, secondary and tertiary, were building and building, whether they needed a center or not,” Wallace said. “Some were successful — Huntsville, Alabama, and Lakeland, Florida, for example, did great. Others were begging for business.”
The last 10 years in China have been the same. China, while still a Communist country, has begun to embrace capitalism.
“The government officials at the local level are trying to outdo each other, without feasibility studies, or marketing analysis,” Wallace said. “They are choosing contractors and architects who haven’t done [venue design and construction] before.”
There are other issues that look like the 70s, too. The glut of convention/exhibit space has led to a buyer’s market, with rates far below typical market. Back in the day in the States, venues were giving great deals, because convention bureau managers wouldn’t bring in trade shows, they only wanted events.
“Cities were bidding for events and the associations were getting great deals,” Wallace said. “The rental rate per square foot was literally nothing.”
In China today, not only is there a great deal on rates, but there are also no policies and procedures in place.
“In the secondary markets in particular, organizers have received and are receiving unbelievably favorable rental deals,” Wallace said. “They are not subjected to traditional rules and regulations — as venues apply in the west — and venues are even required to sign the organizer’s contract many times instead of utilizing a standard venue contract.”
On the upside, there is a large labor pool that is non-unionized and who work for pennies.
“When we started our due diligence, the 120 employees [at the Zhengzhou International Convention and Exhibition Centre} were making USD $130 a month,” Wallace said. “We have doubled that in two years, but we can’t do it quickly because the Chinese government is very sensitive about inflation. The government paid below market value, so we were able to raise them to market value. Our employees in Hong Kong are making seven or eight times this rate.”
Many of the Chinese employees are Communists, and have to be given time off for Party meetings. “Wages are unbelievably low, but the integrity and enthusiasm, determination and work ethic of these people, making dollars a day, is phenomenal,” Wallace said. When Wallace talks to people about doing business in the East, people ask him, if you are up against all that, why do it?
“We are betting on the future. We are making ourselves known,” he said. “In 10 years, there will be a different, viable business model in China and all kinds of opportunities.”
In recent years, a number of other Western companies have made their way into the East. Here’s a rundown of which firms have made the trek eastward:
Global Spectrum
In January, the Government of Singapore announced the Singapore Sports Hub Consortium (SSHC), led by Dragages Singapore Private Limited, was the preferred bidder for the Singapore Sports Hub Public-Private Partnership project. They expect to close on the deal this spring. Global Spectrum is the SSHC’s venue operator and has taken an equity stake in the project.
Under preliminary terms, the consortium will pay all costs for 25 years. In return the government of Singapore has pledged to pay the consortium $1.87 billion Singapore net present value over 25 years, a number that translates into about $148 million a year. Those monies help pay for operation, maintenance and debt service. After 25 years, ownership reverts to the government. (VT Pulse, Feb. 6, 2008)
The 86-acre site in Kallang, Singapore is scheduled to open in 2011. It consists of a new 55,000-seat National Stadium with a retractable roof, an indoor Aquatic Center with a capacity of 6,000, a flexible multi-purpose arena with a 3,000-person capacity, commercial space, and a water sports center. It will also include the existing 12,000-seat Singapore Indoor Stadium. The existing National Stadium will be demolished this year. It is the largest public-private partnership project of its type in Singapore.
“SSHC won the bid because they displayed significant strengths in programming, team culture and partnership, functionality and layout. It also offered the best value for money solution for Singapore,” said Vivian Balakrishnan, minister for community development, youth and sports, in a statement.
The group has an integrated strategy to promote sports participation, leisure, entertainment and lifestyle activities, and will focus on community and grassroots sports to create foot traffic and a vibrant atmosphere at the Sports Hub, Balakrishnan said.
SSHC will offer at least 90 sporting events at the National Stadium and 46 at the Singapore Indoor Stadium. They will also offer onsite media broadcasting, and will organize a club soccer league, Singapore national games, and international cricket. In addition, SSHC officials plan to establish a foundation, Premier Park Foundation, to reinvest commercial revenues in events, activities and facilities.
Contact: Ike Richman, (215) 389-9552
Ticketmaster
Ticketmaster expanded into China in 2006, after they were named the exclusive supplier of global ticketing operations for the Beijing Olympic Games. The new venture, Beijing Gehua Ticketmaster Ticketing Co., Ltd. is a joint venture between Ticketmaster, China Sports Industry Group Co., Ltd. and Beijing Gehua Culture Development Group.
Gehua Ticketmaster will provide all ticketing services for the Games, including the technology platform, order-form management, sales and distribution channel functionalities, customer service, call center and web ticketing operations, and local box office outlet staffing. Olympic tickets will be sold via the phone, online, at local box offices and through Bank of China outlets.
“Ticketing services is one of the most focused issues in Beijing Olympic preparations,” said Yuan Bin, marketing director of Beijing Organizing Committee for the Games, in 2006.
Bin said the chosen supplier had to have advanced technology, flexibility, broad operational ability and an experienced staff. Gehua Ticketmaster will provide the technology platform, order processing, and multiple sales and distribution channels for the Games.
Ticketmaster’s infrastructure allows the Olympic Committee to tap into the ticket giant’s abilities in event and patron data management, tracking and reporting, and marketing and distribution services that help them connect with current and potential patrons.
In 2007, Ticketmaster expanded in China twice, first with the Broadway China Network, and then by acquiring a majority stake in Emma Entertainment, a provider of ticketing and event promotions services in China. Financial terms were not disclosed.
“What attracted us to Emma is great local management. Jonathan Krane, Emma Entertainment’s CEO, has done a fantastic job navigating the complicated dynamics of the rapidly developing Chinese market,” said Ticketmaster Executive Vice President Eric Korman, in a statement.
Contact: Albert Lopez, (310) 360-2344
Tickets.com
In January, Tickets.com jumped into the East, forming a joint venture with China Sports Industry International (CSII) to provide ticketing and ticketing-related services for sports and associated markets in China. They will open a Beijing office this year to provide sales, support and technical services.
“The global economy is growing by leaps and bounds, with China leading the way,” said Larry Witherspoon, CEO of Tickets.com, in a statement. “Entering the Chinese live event ticketing market is a key part of our globalization strategy. We are extremely pleased to be partnering with a company that has extensive experience working with the Chinese government, as well as having a strong background in sports, culture, business, media and finance.”
China Sport Industry International works in a wide range of sports business activities, including negotiating sports sponsorships, managing major sports events, and developing commercial rights of stadiums. CSII also provides international sports public relations services.
“U.S. companies are increasingly looking to emerging markets like China as a vital source of growth, but to do so successfully requires a keen insight into the challenges, realities and dynamics of doing business here. We’re looking forward to helping Tickets.com navigate the complicated business landscape in China and are proud that the company has chosen CSII as its partner,” said Peng Liye, general manager, CSII, in a statement.
Contact: Michael Martinez, (714) 327-5625
Aramark
Aramark is another elder in China. They entered the market in 2004, after acquiring a 90-percent stake in Bright China Service Industries (BCSI), a former Aramark/ Service Master Management Services franchisee. In 2006, they added to their portfolio by acquiring the Golden Collar Dining Company. In 2008, they project $100 million in revenues in the region, and a 30 to 40-percent growth in sales.
Today, Aramark China has approximately 10,000 employees in 15 cities across China, providing facility management and food service to more than 200 businesses in healthcare, manufacturing, government, and commercial offices.
They are also the official catering service provider for the Beijing Olympics, in partnership with Beijing Tourism Group. It is the company’s 14th trip to the Olympics. They will provide catering services for the Athletes’ Village, Media Villages, International Broadcast Center and the Main Press Center for both the Summer Olympic and Paralympic games in Beijing, and project they will serve more than 3.5 million meals during the 60 days of the Olympic and Paralympic games.
In addition, Aramark will manage the design and construction of the kitchen and dining facilities for the Olympic catering venues.
Contact: Debbie Albert, (215) 238-3614
AEG
AEG has teamed with NBA China and the Beijing Wukesong Culture & Sports Center to design, market, program and operate the Beijing Olympic Basketball Arena. China’s first NBA style arena, BOBA will host Olympic basketball events this summer, before becoming the region’s home for basketball.
AEG will oversee operations both during the Olympics and after. The venue will also showcase concerts, theatrical events, local and regional events, family shows, hockey, figure skating, and ice shows.
“Our partnership with NBA China and AEG — leaders of the sports and entertainment industry — will make a significant impact to the city of Beijing in terms of sports, cultural and economic development,” said Zhao Yan, Chairman of Beijing Wukesong Cultural & Sports Center Co., Ltd., in a statement.
Naming rights, brand ownership in the arena, in-arena signage and other branding opportunities will be available after the close of the Olympic games.
The 18,700-seat venue will have 2,500 club seats, 9,600 lower bowl seats, and 48 private suites. There will be two restaurants, along with concession facilities throughout the public concourse.
The arena is part of the Chang An Plaza development in western Beijing, which includes the Wukesong Baseball Field, also an Olympic venue, 3,229 sq. ft. of commercial, cultural and entertainment space, and three office buildings.
Contact: Mike Roth, (213) 742-7155 90015 (213) 763-7700
Shanghai Venue Management (Zhengzhou) Limited (VMZL)
Opened in 2005, Zhengzhou International Convention and Exhibition Centre is managed by Shanghai Venue Management (Zhengzhou) Limited (VMZL), a private management company, which partnered with the group that manages the Hong Kong Convention Center. The exhibition hall has room for 3,650 booths, and is supported by six floors of the convention center that include the Grand Hall with seating for up to 3,160 for meetings and 1,660 for banquets; the International Theatre seating 1,090, and two additional theaters seating 400 each. There are also 17 meeting rooms, VIP reception rooms, a Chinese restaurant, a western restaurant, and a cafe. Simultaneous interpretation can be provided for up to eight languages within the International Theatre.
It is the first full public private assembly venue management contract with the government in the country.
“We have had a full management agreement since May 2006 — similar to what we’d have in the US,” said Wallace. “ZZICEC is a 15- year, renewable agreement for 100 percent of management and services. It is the first full management contract in the country. This is the trend, and we will have it as we grow into other cities and venues.”
VMZL is building in Shenyang, a Chinese city in the northeast, close to North Korea. Wallace said VMZL will have another complete management agreement there, and will own both the venue and the hotels.
“Twenty years ago, this would have been virtually impossible — it may have been done as a partnership with the state, not as an independent agreement,” Wallace said. “Almost anything is possible now in China.”
Contact: Cliff Wallace, (8) 52-2582-7800
SMG
SMG was awarded a contract to provide consulting service and marketing for the new China National Convention Center in Beijing last December. (VT Pulse, Jan. 9, 2008) During the Olympic games, the facility will serve as the media center and host a few indoor sporting events. After the Olympics, the 500,000-square-foot venue will be renovated for non-Olympic use hosting exhibitions and conventions. It is expected to reopen in July 2009. SMG has hired Mike Kelly as manager.
“It is no secret that the greatest new frontier for conventions and trade shows exists in China. To establish our first venue in the nation’s capital city, in the heart of the Olympic Green is simply the best possible opportunity we could have hoped for,” said Gregg Caren, SMG’s senior vice president of Strategic Business Development, in a statement. “As the Chinese keep opening doors for international and western niche events, we are anxious to expand our relationship with key organizers in this extraordinary venue and destination.”
Caren said working in Asia has both similarities, and differences, to the Western venue world.
The similarities clearly rest in the focus on hospitality and the desire to build the most contemporary, well-served venue possible,” Caren said. “Where you see some differences is most likely a generational issue. While many of what we would call “baby-boomers” are working hard to balance the traditional approach and new entrepreneurial spirit, many of the up and coming Chinese business professionals have some western education. For the most part, the 20- and 30-somethings speak fluent English, and are working hard to help incorporate the programs and systems introduced to them by SMG.”
“Beijing North Star Company Limited and SMG are both successful and well known in their individual arenas. While it has taken a long period of negotiation, we are now prepared to work together toward a uniform goal,” said Zhao Huizhi, CEO of Beijing North Star Company Limited, at the signing ceremony. “We have full confidence that the China National Convention Center will benefit from SMG’s consulting services and will soon become a leading convention center in the world. Our successful cooperation would also enhance the reputation of SMG in Asia. I truly believe we can expect a profitable relationship for both of us.”
Contact: Gregg Caren, (215) 592-4100
