How We’ve Been Impacted How We’re Coping Gregory A. O’Dell Washington Convention Center Authority July 6, 2009

Background on U.S. Meetings Industry More than 60 million guests each year, generating more than $10.5 billion / €7.4 billion in revenues A value-focused business model –Show management does not pay full value for venue rental –Comprehensive, competitive bid process where destinations prepare pricing package that includes hotels, ground transportation, amenities and venue price –Publicly funded venues are generally expected to show the most price flexibility –Lead time for booking meetings is five to eight years

Where We Stand All U.S. destinations are feeling the global economic crisis Most of the business declines took place in late 2008 and early 2009 On average, about half of all U.S. venues have experienced a drop of at least 10 percent Larger venues (500,000+ square feet / 46,000+ m²) have fared better than smaller venues (less than 100,000 square feet / 9,000 m²) –Roughly two-thirds of smaller venues have sustained losses of at least 10 percent –Smaller venues typically operate on budgets related to building size, so a reduction of 10 percent or more has a deeper impact Sources: IAMM, CEIR, Smith Travel Research, Trade Show Week, Trade Show Executive

Impacts Average decreases in corporate spending in the range of 20 percent to 30 percent Near elimination of meeting spending by core corporate sectors –U.S. automotive industry –Financial services –Real estate –Building and construction –Aviation –Sport boating Corporations are maintaining a meetings presence, but at a sharply reduced level of participation

Impacts Reduced corporate spending has a multi-dimensional effect: –Corporations are booking less meetings and events –Corporations have reduced their participation in sponsorship activities at other meetings / conventions (non-profit, association meetings) –Corporations have scaled back on training budgets for employees, thus reducing attendance at meetings This has led to extreme pressure on the customer / show management Show management / customers are on an unprecedented bargain hunt –Canceling or renegotiating bookings within the next two to three years –Reopening bidding for meetings –Instructing bidding cities to provide deep discounts and incentives

How We’re Coping Generally, mid-sized venues with local business portfolios are doing better than their big-city and small-town counterparts High-profile meetings destinations have been the hardest hit –Orlando –Las Vegas, which estimates it lost nearly 400 meetings and one- quarter of its projected attendance in the first quarter of 2009 Political backlash against meetings, resulting from government bailouts of key financial services companies, has unified the U.S. meetings and travel industry Washington, D.C. has been less impacted than our peer set due to the federal government presence, which is a key selling point for the destination

How We’re Coping Traditional steps during times of recession –Reducing large expenses, including bulk energy purchases and capital improvements –Reducing non-essential administrative, marketing and promotional expenses –Reducing payroll expenses –Developing new revenues through aggressive short-term programs, combined with deep rent concessions and incentives Some centers have raised certain fees or imposed new fees to generate new revenues Washington, DC: exploring unconventional new markets to maintain and even grow revenues

The Future The Good News: many venue managers believe that the free-fall of late 2008 is over or is ending The Bad News: the U.S. meetings industry is a lagging indicator, and recovery typically starts a year after parent industries have seen three consecutive quarters of growth We expect to see a long recovery process for the industry Following the recession in 2002, key convention metrics didn’t start to uptick until late 2004 and early 2005.

The Future Economic downturn may slow the development of new or expanded venues –Lengthy development process of a decade or longer had already slowed down projects prior to last year –Few major U.S. venues are actively expanding –Some second-tier facilities are under construction –Several venues in various stages of development in small but increasingly competitive destinations, including Erie, Penn., Branson, Mo. –Four projects in Las Vegas are on hold; the industry is closely watching public discussions for expansions in key destinations such as San Diego and San Francisco

Conclusion U.S. venue managers are generally more optimistic than they were six months ago The actual recovery of the industry will not be quick or painless The recovery after the 9/11 attacks and the recession that followed proves that it is a difficult process, and that we have several years of hard work ahead The tone of the industry, as a whole, is that we will certainly recover