ProposedConferenceCenterDemandNarrative_Morabito-7Mar2011

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March 7, 2011

Conference Center Demand Narrative:

Prepared by: S. J. Morabito

The Need for a Residential Conference Center at UCLA

The primary purpose of the proposed center is to support the campus strategic plan in furtherance of the academic mission. The objectives of the center can be summarized as follows:

 Facilitate UCLA’s move to become a ‘global research institution’  Enable opportunities for international, national and local collaboration for the academic enterprise  Support and advance UCLA’s partnerships with major institutions of higher education in Asia, Latin America and Europe as well as public and governmental entities  Assist UCLA Professional Schools in competing with elite peers  Facilitate UCLA’s strategic objective to “Reconnect with Los Angeles”  Provide a venue where faculty, students, staff, elected officials and community members from a broad range of demographic and socioeconomic groups can interact to discuss/debate contemporary societal issues  Serve as a welcoming place for faculty to present their work to potential private sector partners and/or research investors

The Preferred Location for the Conference Center and Faculty Club

The Faculty Center site is the proposed location for the project because it is the only site that meets the major project objectives of providing a modern conference facility on the core campus while providing a permanent solution to the problems encountered by the existing Faculty Center. The gift from the donors provides additional emphasis to this point. The donors are keenly focused on the role of the University in engaging with the Los Angeles region. The gift to the School of Public Affairs (SPA) and for the Conference Center is transformational because it gives SPA the resources to support academic programs related to this mission, and provides SPA and the rest of the campus, a cutting edge facility imbedded in the midst of the academic community to make that connection possible. Constructing the conference center far from the core academic campus could not meet these objectives. The facility would be inconvenient for faculty, and visitors to campus would not be as easily exposed to the campus environment and the academic core. In addition, the challenges faced by the current Faculty Center would remain unresolved.

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Campus Policy Governing Use of the Conference Center

The University will establish a policy governing use of the conference center facility, which will ensure that use is consistent with the University’s tripartite mission of teaching, research and public service. While the categories of individuals and groups that may be accommodated under the policy governing use are yet to be determined, it is currently anticipated that examples of allowable use under the policy will include accommodation for academic and other related conferences, individual travelers (e.g. visiting faculty and other scholars from higher education and other institutions, parents of students, prospective students on visits, commencement attendees, athletic department guests and spectators, alumni and other donors, patients or families of patients, prospective job applicants on interviews, individuals attending a university function etc.), business conferences that have a direct link to the university or have as part of their event an educational or training and development component , plus accommodation for other local municipal, county or state government or other non‐profit organizations in keeping with UC’s public service mission.

Demand for a UCLA Residential Conference Center

An on‐campus residential conference center has been a long held UCLA aspiration dating back to the 1980’s. Over the past 20 years multiple site planning, market and feasibility studies have been completed with both internal staff and external consultants. Generally, these studies have confirmed the need for and feasibility of a residential conference center located on the UCLA campus.

In the past two years, prompted by inquiries from the academic enterprise and in consideration of the campus long term strategic plan, the issue of building a residential conference center surfaced once again. The campus convened a small administrative group, working with the Deans of Law, Medicine, Engineering and Management to review the feasibility of a conference center on campus. A report prepared with the assistance of a Capital Programs architectural planning team to review alternative sites and Housing & Hospitality Services staff to prepare preliminary pro‐forma data including anticipated occupancy and cost projections, concluded that a residential facility of about 300 guest rooms with related meeting rooms was feasible at certain price points and occupancy provided gift funding could be identified. Research was conducted by internal UCLA staff in October 2008 that included (i) a review of International Association of Conference Centers (IACC) market data; (ii) discussions with local hoteliers and review of relevant occupancy data; (iii) review of the demand for on‐ campus facilities for group conferencing and day meetings; (iv) review of the occupancy levels of the Patient Family Guest House (Tiverton House) and the UCLA Guest House and (v) a review of thirteen university affiliated conference centers and an on‐site visit to five of these facilities, in October 2008. Based on the information gathered from the activities mentioned above, a demand estimate was prepared by H&HS staff indicating a 300 room residential conference center could achieve 70% occupancy or 71,400 room

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nights by the third full year of operation. Moreover, assuming competitive construction bids and the identification of a major gift, this preliminary feasibility assessment concluded that a conference center of the size and scale proposed would be feasible.

In early 2009, H&HS retained the services of PKF Consulting, one of the premier hotel and conference center consultants operating in the USA to augment UCLA’s occupancy and operating projections. PKF delivered their market analysis report to the University in August 2009. In addition, an outside architectural firm was hired to review UCLA‘s early site feasibility work and a cost estimating firm was retained to review construction cost projections.

As is typical for an external consult, the PKF report starts with an assessment of the local and regional market place that would impact any proposed conference center project whether it is a private sector venture or one proposed by the University. As part of this approach, the consultant uses three methodologies to assess potential demand. These methodologies include the following:

 Build‐ Up Approach: This approach estimates demand levels individually from the commercial, leisure and conference and group segments. This method is typically administered through a direct sampling and use of surveys augmented by the consultant’s knowledge of comparable demand sources. This method was utilized in discussions with UCLA CAO’s.  Fair Share and Market Penetration Approach: This approach estimates the level of demand that, when total market demand is distributed evenly across all competitors, a given property should be expected to accommodate.  Population Multiplier Approach: This approach estimates demand levels based on the subject market population, in this case the population of students and faculty at UCLA.

Using these three approaches, the consultant estimates room night demand from 70,600 (fair share and market penetration approach) to a range of 70,635 ‐ 78,945 for the Population Multiplier method. The Build‐Up approach which included a direct sampling of information provided by thirty‐nine campus CAO’s, yielded a room night demand of 34,200 to 36, 200. This estimate was influenced by the timing of the 2009 survey; the survey coincided with the beginning of the historic recession and thus generated a very conservative estimate, since campus units were limiting their events programs due to budgetary concerns.

The approach taken by PKF with regard to this study, which included a scan of the total potential market, is standard practice for a project of this scope, and serves to round out the campus understanding of potential demand from all sources. However, it must be emphasized that the campus is not relying on any aspects of demand that might be inconsistent with the University’s guidelines on “Use of the Center” as described above. Rather, the campus analysis of demand factors has been developed based on selected data elements from the study and from independent evaluation of data derived from the operation of the two on campus hotels, a residential conference center in Lake Arrowhead, a robust summer conference program in the

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residence halls as well as numerous conversations with Deans, faculty and staff about campus needs. These elements included:

First, as mentioned earlier in this Demand Narrative, the University made its own internal projections of demand which resulted in an estimate of approximately 71,400 room nights. This estimate was based on the factors described above and completed as part of the preliminary feasibility work done by the campus on the project and prior to retaining PKF to do a market analysis study.

Second, PKF’s direct research with 39 of 45 academic CAO’s reporting (using the Build‐Up approach) existing group demand yielded a room night total of approximately 24,000 for the period June 2008 through May 2009, a time at which the recession was starting to impact campus event bookings. The consultant indicated in their report that this projected room night yield “most likely understates actual demand levels, as the University does not formally track this information on an aggregate basis”. According to the consultant, not included in this 24,000 estimate were 15,000 to 17,000 room nights that could be generated from transient commercial and leisure segments. The consultant indicates that these transient commercial and leisure segments are “predominately related to visiting families, prospective students, sporting event spectators, newly‐relocated faculty and administrators and professionals doing business with UCLA. “ Moreover, the consultant estimates that 6,700 room nights or 15 to 25 sell out nights per year could be reasonably expected to come from major regularly scheduled campus events including student move‐in, homecoming, parents’ weekend, football and basketball games, graduation, and class reunions.

Considering all of the above, the consultant estimates approximately 34,200 to 36,200 room nights from existing University events based on a survey of CAO’s. Once the University community becomes aware of the existence of an appropriate facility on campus, it is anticipated that significantly greater demand will result from these segments including conference and group demand as well as individual travelers coming to UCLA on University related business. For example, during commencement weekend alone, over 75,000 individuals come to campus to attend various graduation activities, many of whom travel long distances or come from out of the area. As stated by the consultant, “With the availability of a facility such as the proposed center, the potential for new meetings and conferences that was expressed in the survey and in planning meetings suggests that group demand generated by UCLA would increase significantly from the current level”.

Third, in PKF’s population multiplier approach, the total campus population multiplied by a factor is used to estimate potential occupancy. Using a sample of thirteen universities with comparable facilities, the consultant uses a factor of 1.7 to 1.9 room nights per student and faculty combined. This method yields an anticipated demand ranging from 70,635 to 78,945 annual room nights. It is important to note that these factors of 1.7 and 1.9 are considered very conservative when one considers the actual data from the thirteen institutions studied and the urban area in which UCLA is located. This study revealed a range of room night to student/faculty ratios from 0.4 to 10.8 with a weighted average of 2.0. Of the three methodologies employed by the consultant, this approach is perhaps the most applicable to the UCLA circumstance since it draws actual data from other universities with conference centers or hotels comparable to the proposed project.

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Fourth, the two hotels on campus, the Patient Family Guest House and the UCLA Guest House are operating at near capacity (approximately 93% and 80% respectively with mostly week day bookings for the latter) and routinely turn away individuals coming to campus on patient or university business who need accommodations. Based on turn away data for the UCLA Guest House and extrapolating this demand to the Patient Family Guest House (which does not currently track this type of data) we estimate approximately 4500 room night demand from the overflow of these two facilities which are currently very difficult to book. It is contemplated that a large portion of the individuals who cannot otherwise be accommodated in these two facilities could be housed in the proposed center assuming space was available. These two hotels, which total approximately 161 rooms generated almost 50,000 room nights in FY 2009‐10. For context and comparison, the proposed center is estimated to generate 66,905 room nights in the first full year of operation. This projection is conservative when one considers the room night demand currently being generated by only individual travelers to UCLA since neither of these two campus hotels can accommodate conference or group meetings due to lack of meeting room space.

Fifth, the demand for day‐long meeting space on campus (versus residential overnight conferences and other bookings) continues to pose a major challenge for UCLA. There is currently a lack of modern meeting rooms on campus to accommodate day meetings. The existing faculty center has about six meeting rooms but they do not meet contemporary requirements since they lack modern presentation technology, appropriate acoustics and sight lines and other amenities found in modern meeting rooms. The campus does have modern meeting rooms in the Covel and De Neve Plaza commons buildings which are widely used by campus planners for day meetings. However, these facilities are part of the on‐campus student housing program. As such, there is constant competition for this space between housing residents, the summer conference program and broader campus use. Many of the meeting rooms in these two facilities are currently booked more than 70% of the time by students and other campus users. The proposed center, with its planned 31 meeting rooms will help to alleviate the shortage of rooms demanded by campus departments for day meetings.

Demand Conclusion:

The campus has carefully considered many multiple elements of potential demand described in this narrative. In preparing its feasibility study and projected occupancy and cost scenarios, the campus has considered all of the data available to it including the campus internal assessment of demand, discussions with 39 CAO’s about existing demand, the PKF market analysis, the performance of the two campus hotels, the research on thirteen university affiliated conference centers and staff visits to five, discussions with campus meeting planners, the robust summer conference program in the residence halls and the overall average occupancy of selected hotels in the area used by UCLA (currently over 75% according to Smith Travel Summary – January 2011) and the lack of appropriate dedicated meeting room space in many of these hotels.

After consideration of all of the above, the campus concludes that the projected first year occupancy of 65% or 66,905 room nights is a conservative estimate of demand that is achievable. Further, the projected stabilized occupancy of 70% or 72,051 room nights (in the third full year of operations) is consistent with all of the data at hand and represents a prudent and conservative estimate of future demand. In addition, the campus recognizes that the proposed project may not meet the needs of some current and future conference groups and

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individual travelers from a price perspective. These groups may not need the type of amenities included in the proposed center and offered by modern conference centers. As such, it is contemplated that these groups would continue using the existing hotels on campus as well as local hotels that may provide pricing lower than the proposed project.

Finally, the $10 million endowment, which will be used on a selected basis to assist the academic enterprise in organizing conferences will further enhance the proposed center as a viable venue and bolster overall usage and occupancy while directly furthering the academic mission of the institution.