LVCC to Get New Light Bill

Las Vegas—The Las Vegas Convention & Visitors Authority is changing the way it charges Las Vegas Convention Center customers for their electricity starting Jan. 1, 2008.

Whereas the center now charges tradeshows' electrical contractors a 25-percent commission on the cost of connections, next year it will begin charging an 11-percent commission on the gross electrical revenue, including connections, labor and materials.

The commission will jump to 13 percent in 2009, and 15 percent in 2010. Following that, the LVCVA will revisit the rate structure to see if it's in line with the current energy market.

One thing that won't change is non-exclusivity. Mark Haley, LVCVA vice president of facilities, said that, in his team's research, customers listed exclusive contracts as the No. 1 thing they don't like about convention center services.

Show organizers booking the LVCC will continue to have their choice of approved electrical contractors. Contractors must be licensed to operate in the state of Nevada and properly insured in order to gain LVCC approval. Show organizers negotiate electrical rates, on behalf of their exhibitors, directly with providers such as Freeman, Trade Show Electrical and Edlen Electrical Exhibition Services.

"That was probably foremost in our mind, to keep it an open market, to keep prices down," Haley said. "We know our customers want that flexibility."

Contractors contacted by Tradeshow Week declined to comment on the new arrangement.

Show organizers hadn't heard about the change yet, so they couldn't address the specific rate structure. However, they supported Haley's assessment of exclusives.

Tom Cindric, director of Hanley Wood's World of Concrete (which filled 900,000 net square feet of the LVCC this past January), said, "I'm glad they're not going to exclusive. I'm glad they're allowing the flexibility to designate our contractor. And hopefully this won't impact our rates overall for exhibitors."

The LVCVA made the change partially because calculating commissions and auditing electrical revenue had become too cumbersome. With nearly 30 different types of hookups, the LVCC was calculating its 25-percent commission on 30 different rates.

The change also will correct a shortfall in electrical revenue compared to expenses. In 2006, revenue collected from electrical contractors using the LVCC totaled $4.1 million, while the LVCVA's electrical utility costs were $5.2 million. In other words, revenue from tradeshow electrical services covered 79 percent of the authority's bill.

Under the new arrangement, the LVCVA projects its 2008 revenue will increase to $5.2 million, and it will break even on electrical service by 2009.

Still, the authority can keep its commission at a relatively low rate compared with its competitors, because of the volume of business it does.

Before formulating the rate structure change, the LVCVA audited its current finances and contracts, commissioned an independent market study, met with all its approved electrical contractors and visited the facilities in its competitive set to see how they do things. The plan settled on most closely resembles systems used in San Diego and Anaheim.

Brad Gessner, general manager of the San Diego Convention Center, said his facility began charging a 25-percent fee on gross revenue for all utilities when it opened in 1989. Today, the facility charges 25 percent for labor and 38 percent for everything else.

Last July, Gessner also implemented a minimum fee, because some contractors drastically discount electrical services in order to get other parts of a show's contracting business, and also because some public show organizers will buy all their shows' electricity, doing what's called a "blanket lay," and charge exhibitors a flat fee for electrical services as part of their booth charge.

Like the LVCC, the San Diego facility doesn't have an exclusive electrical contractor, although Gessner said these are becoming more common.

Citing the new Boston Convention & Exhibition Center as an example, Gessner said the exclusive model presents a business model more in line with the current market: "Nowadays (public facilities) have to operate more like a business. The new centers opening up, like Boston, are doing exclusives and making much more net profit than the rest of us doing it on a percentage basis."

On the other hand, he said, it takes a large capital investment to get into the electrical business. Most facilities — in Denver, San Antonio and San Francisco, for instance — are charging a percentage of gross and have an approved vendor program.