REPORT TO COUNCIL
SUBJECT
Title
Action on the Santa Clara Convention Center FY 2024/25 1st Quarter Financial Status Report
Report
COUNCIL PILLARS
Promote and Enhance Economic, Housing and Transportation Development
Enhance Community Engagement and Transparency
Promote Sustainability and Environmental Protection
BACKGROUND
On February 5, 2019, the City of Santa Clara approved an agreement with Global Spectrum L.P. dba Spectra Venue Management (Spectra) to operate the Santa Clara Convention Center (SCCC). Spectra began management of the SCCC on March 18, 2019. In November 2021, Spectra merged with Oak View Group (OVG) but continues to operate under the same legal entity.
Staff is transmitting OVG’s SCCC status report to City Council for compliance with agreement terms.
DISCUSSION
This Report to Council transmits OVG’s SCCC Financial Status Report for the 1st quarter ending September 30, 2024 (attached). This report is unaudited and, therefore, subject to change.
OVG’s report provides an overview of the SCCC’s financial, operational, and strategic performance for the first quarter for FY 2024/25.
The financial summary of the report indicates that OVG exceeded net income goals by $131,248, netting $13,007 rather than the projected loss of $118,241. This was a result of implementing operational cost control measures, and an increase in other revenue (i.e. partnership funds from the new AV provider, cancellation fees and interest). Gross revenues and total events hosted were lower than projected due to event cancellations, and the rescheduling of an event to a future date which impacted the timing of the revenue recording (these revenues fell outside of the projected quarter). The Q1 results are not atypical, in that historically, July, August, and September are the slowest months for event bookings at the SCCC.
The rolling forecast included in the report is the Q1 estimate of financial results for the fiscal year and is based solely on the number of ‘definite’ events. Definite events (definites) are booked events with an executed license agreement for use of the SCCC (inclusive of services such as food & beverage, IT support, audio/video [AV], etc.) and an executed hotel agreement for room nights, as applicable. While the forecast currently demonstrates a loss at the end of the fiscal year, it only provides a financial snapshot of a specific point in time. The forecast regularly fluctuates depending on daily sales activity including but not limited to, changes in the number of incoming leads, the number of new short-term bookings (events that can book within a six to nine-month window), and the number of cancellations or rescheduled events.
In comparison to the same reporting period in previous fiscal years, OVG forecasted a year-end loss of $235,180 for FY 2022/23 and a year-end loss of $354,651 for FY 2023/24. Each fiscal year closed with net incomes of $2.4M and $2.5M respectively. While OVG’s current estimate of $1M represents a larger deficit compared to previous years, the projected loss is proportionate to OVG’s increased gross revenue target ($2.5 increase from FY 2023/24) and is a first quarter trend consistent with historical activity.
OVG expects a steadily improving financial outlook over the next three quarters with Q3 and Q4 projected to be the busiest and most profitable periods of the year. In Q1, 35 events took place, the SCCC converted 49 prospects into definites including 12 new business opportunities and conducted 30 site tours with prospective clients. Ending Q1, there were 134 events in the sales pipeline, some of which are highly likely to book a future date at the SCCC. Historically, the conversion rate of leads to definites has been around 40%.
As mentioned previously, the current forecast only includes definite events. To provide a more accurate forecast moving forward, OVG will also include events in the sales pipeline in the financial year-end estimate.
In collaboration with Levy and Discover Santa Clara® (DSC), OVG is refining its current booking strategy to streamline processes, maximize revenue potential, and position all sales teams to attract high-value events to Santa Clara. In addition, the teams are exploring innovative ways to drive additional revenue and enhance the overall client experience, i.e. developing initiatives like dynamic packaging that bundles venue space, catering, and AV or IT set-ups. In Q2, OVG will also focus on amplifying its marketing efforts, leveraging digital and social media platforms, and engaging new partnerships to make sure SCCC stays top-of-mind for event planners.
Financial Summary
|
|
Quarter Ended September 30, 2024 |
Quarter Ended September 30, 2023 |
|
|
Budget |
Actual |
Overage (Underage) |
Budget |
Actual |
Overage (Underage) |
|
Gross Revenue |
$3,882,511 |
$3,099,835 |
($782,676) |
$3,329,549 |
$3,560,256 |
$230,707 |
|
Total Expense |
$4,000,752 |
$3,086,828 |
($913,924) |
$3,462,739 |
$3,237,447 |
($225,292) |
|
Net Income |
($118,241) |
$13,007 |
$131,248 |
($133,190) |
$322,809 |
$455,999 |
In summary, for the 1st quarter ending September 30, 2024, OVG reported a net operating gain of $13,007, compared to a net operating gain of $322,809 for the 1st quarter of FY 2023/24.
Total revenues for FY 2024/25 1st quarter were $3,099,835, or $782,676 less than the budgeted revenues of $3,882,511. Total expenses for FY 2024/25 1st quarter were $3,086,828 or $913,924 less than the budgeted amount of $4,002,752. Additionally, OVG recognized $150,687 of other revenue in the 1st quarter primarily from cancellation fees and interest income.
FY 2024/25 experienced a reduction of 22 fewer events compared to 1st quarter ending September 30, 2023. Expenses in the 1st quarter 2024/25 were lower than 1st quarter 2023/24. Net income for the quarter was $13,007, compared to $322,809 in the previous year.
ENVIRONMENTAL REVIEW
There is no discretionary action being considered under this Report to Council; therefore, there is no “project” within the meaning of the California Environmental Quality Act (“CEQA”) and no further environmental review is required pursuant to section 15060 (c) of Title 14 of the California Code of Regulations.
FISCAL IMPACT
The net operating gain incurred by the Convention Center for the 1st quarter FY 2024/25 is $13,007. This amount does not include any fiscal impact related to TOT, TID, and/or sales tax activity. Any funds generated from operations are allocated and programmed in the Convention Center Enterprise Fund for operations and capital improvement projects as part of the annual budget process.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
Note and file the Santa Clara Convention Center Financial Status Report for the 1st Quarter ending September 30, 2024, as submitted by Oak View Group.
Staff
Reviewed by: Kenn Lee, Director of Finance
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. SCCC Activity Report for 1st Quarter FY 2024/25