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Tākina: costs, risks, and co-operation

takina 2

by Lindsay Shelton
The Wellington City Council is being remarkably forthcoming this week, with details of a plan for its new Tākina Convention Centre to be operated by Te Papa, its neighbour (and till now its competitor) across the road. .

The information comes in a paper for a council meeting on Thursday. The financial arrangements are being discussed in secret. But everything else that councillors are being asked to approve is in the public arena.

The key proposal for the council’s new Convention Centre is that

Te Papa will be contracted to provide event services under a Management Agreement. The Wellington Regional Economic Development Agency (aka WellingtonNZ) will handle marketing under a Service Level Agreement. The Council will provide building owner services. … Te Papa’s venues and the Tākina venue will be operated together under a new trading name “Tākina Events.”

With less than two years till the Convention Centre is due to open (in July 2023), there’s not only a need to get some events and conventions confirmed. There’s also an evident feeling of urgency about organising the first exhibitions in the 1651sqm ground floor exhibition space. (The space was originally intended for Peter Jackson’s movie museum.) It sounds as if much is not yet agreed:

Officers together with Te Papa are in discussions to secure the first exhibitions for Tākina. A report will be brought to Council covering the nature of the exhibitions and an appropriate process to assess and approve [them] … The first is a strong family attraction that will have broad appeal through the winter and school holiday period following opening, followed by an internationally recognised and acclaimed exhibition that will take place over the summer months.

The exhibitions won’t be free. They’ll be “commercial ticketed public exhibitions.” Te Papa will organise them and will maintain “a five-year rolling exhibition programme”. The council will cover all the considerable costs, and receive all the revenue, with Te Papa being paid a management fee. For each exhibition there will be a business case setting out visitation projections, commercial terms, a full risk assessment and financial modelling. And there’s a financial risk for the council:

Depending on the nature of each exhibition there will be instances where Council will have the full commercial risk from the exhibition, particularly major exhibitions. The main risks to Council for any exhibition are related to visitor numbers and this is mitigated by a strong assessment process for each exhibition, a robust business case and having well considered protections in contracts and management plans with respect to Covid-19.

As justification for the large new exhibition space, councillors are told that its aims include to

Ensure the building and surrounding area remains activated during periods where conference activities are not taking place;
and provide the opportunity for local talent to develop home-grown exhibition product and showcase the creative talents of Wellington.

There’s a remarkably ambitious target of attracting 270,000 paying customers to Takina’s two exhibitions every year. (A total of 74,000 people bought tickets for Te Papa’s popular Wonderland exhibition.)

As the first two exhibitions seem to be coming from offshore, perhaps the third will be local. Will Peter Jackson decide to return to the space?

takina other side

The council paper stresses a co-operative city-wide approach (“not a venue-centric approach”) to attracting “business events” for the new Convention Centre. (The word “convention” seems to have fallen out of favour.) A new entity named Tākina Events is to be formed, in which Te Papa and the Convention Centre will be treated as “one venue.” They will agree not to compete with each other.

Officers have worked with Te Papa and WellingtonNZ to develop a co-operative operating model for Tākina that builds on the primary competencies of each entity, aligns incentives, ensures that the key parties have sufficient skin in the game, enables delivery of a Wellington experience, supports delivery of broader city outcomes, and provides a platform to deliver services in line with best industry practice.

convention centre operating model

And the financial arrangements:

Te Papa will receive all the event revenues and meet all the event direct operating costs and overheads.
Te Papa will pay a Fee to Council based on the total gross revenues generated through Tākina Events. That is, it includes the gross revenues generated at Tākina and also the gross revenues generated from the Te Papa venue spaces operated under Tākina Events. This is an important aspect of the model as it ensures that the incentives of Council and Te Papa are aligned and there are no benefits or impacts of favouring one venue space over another.
Council will meet the Tākina building ownership costs associated with exterior cleaning, maintenance, depreciation, insurance and financing.
Te Papa will meet the Te Papa building costs associated with the Te Papa spaces.

But there’s an unexpected caveat:

Both Te Papa and [the council-owned] Venues Wellington will lose business and be negatively impacted by … the introduction of Tākina into the Wellington market … which can be expected to attract the larger business events away from Te Papa.

And away from the council’s other conference venues too, no doubt. A management agreement for the “integrated management and operation of the Te Papa and Tākina venue spaces” is yet to be completed.

And there’s another revelation in the documents for this week’s meeting:

Because the nature of the Agreement is a long term commitment by both parties, the Agreement incorporates a right of first refusal that can be exercised by Te Papa in the event Council wishes to sell Tākina.

During the long period of building the $200m Convention Centre (which some critics referred to as a potential white elephant), there were often suggestions that the council should sell it, and rid itself of the financial burden. So now the possibility is set down in an official document. For further discussion, no doubt.

In the meantime, what of the reality of expecting big conventions? Here’s the hopeful advice that council staff are giving to councillors:

Covid-19 has had a material impact on travel both domestic, due to lockdowns, and international travel restrictions, as well as restrictions on event sizes. Business Events rely on freedom and willingness to travel, and the ability to hold events of scale. Covid-19 operating protocols will be in place to ensure the fullest range of events can be maintained depending on any Covid-19 restrictions at time of opening. Tākina does not open until mid-2023 at which point expectations are that international borders will have opened and populations will have high levels of vaccination protection thereby reducing the potential for future lockdowns or event size limitations.

WCC: “An authentic Wellington experience … amazing new asset … adding vitality…” etc etc

23 comments:

  1. Ms Green, 26. October 2021, 10:09

    Why secret? Our money, our asset/liability, our rates. This venture smells high risk, which the Council seems willing to take on our behalf. The report spells wishful thinking by officers, with no gain all pain for ratepayers.

     
  2. JAB, 26. October 2021, 11:06

    The ticket numbers mean 740 visitors every day of the year or 92 every hour for an 8 hour day. It will also need to make a profit after expenses of about $24 per ticket to pay off the $200million cost over 30 years. That’s about $125,000 per week. It’s going to be a continual drain on the ratepayers. We could turn it into housing and do better or sell it.

     
  3. michael, 26. October 2021, 11:11

    It’s secret because they are trying to save face – ratepayers are going to be paying megabucks for a long time, not only for this venue but also for the lost revenue from the other council venues. As soon as Peter Jackson pulled out with his guaranteed rent and pulling power, the project should have been canned. But no, a quickly revised business case that didn’t really stack up was produced, and councillors rubber stamped it.

     
  4. Ian Apperley, 26. October 2021, 14:36

    Operating on a 170-year-old business model in a COVID world. What could go wrong?

     
  5. Lyndon Hood, 26. October 2021, 14:37

    I’m seeing that some of the rooms could be re-configured to a not necessarily very special intermediate size theatre venue, if they end up getting desperate.

     
  6. Keith Flinders, 26. October 2021, 22:05

    One shudders to imagine what the operating expenses will be for this building.

    A staffing level of 50 was suggested a few years back including several senior managers. Add to this the depreciation, internal and external cleaning, energy input, insurance, as well as repairs and maintenance.

    The $200 million capital cost is unlikely to ever be repaid.

     
  7. J Chris Horne, 27. October 2021, 13:09

    Tākina, as at present planned, looks set to become a financial catastrophe, costing future generations of ratepayers millions of dollars every year. The project began in the pre-Covid-19, pre-Zoom world. Large conventions attended by delegates from around the world are unlikely to ever again occur in New Zealand/Aotearoa.

    The solution: re-design the top two floors for small conventions and all the lower floors as the NZ Museum of the Performing Arts and Film. Sited directly opposite Te Papa Tongarewa, the two museums would be a powerful draw-card for Wellingtonians, visitors from elsewhere in New Zealand and from overseas.

     
  8. Wellington Inc, 27. October 2021, 18:03

    Good to see the council’s cooperation with Te Papa, although it looks like most of the risks will lie with the council.
    Perhaps next we can see some of Te Papa’s national art collection, currently hidden away in storage, on display at the City Gallery.

     
  9. George, 27. October 2021, 20:17

    The predicted visitor numbers sound unachievable. Have the council learnt nothing from the Zealandia catastrophe where predicted numbers of visitors were wildly wrong and ratepayers picked up the tab?

     
  10. K, 28. October 2021, 4:46

    J Chris Horne: good idea about turning the ground floor space into a national museum for performing arts and film.

    I would also suggest it should be used as the Wellington central library temporarily until repairs are complete on the existing library.

     
  11. Lindsay, 28. October 2021, 7:51

    These are both public organisations and there is no justification for discussing the financial arrangements in secret. The council, however, may want to avoid public scrutiny of the high level of risk involved in running its big new building – not only the issue of how many events are needed to cover the overheads, but also the reality of the enormous costs of its newly-acquired (and non-core) activity of becoming an entrepreneurial promoter of exhibitions from overseas.

     
  12. Traveller, 28. October 2021, 8:03

    Is it a monopoly? Or will the council try to compete with itself by continuing to promote all its other city venues, while acknowledging that it expects them to lose business.

     
  13. Ms Green, 28. October 2021, 9:22

    The totality of the Council’s losses in its City Venues operations should be publicly disclosed, along with transparent discussion of the viability of this high-risk convention centre (without conventions!). All should be public. The risk was always very high. It adds risk to Council’s already risky venues business.

     
  14. michael, 28. October 2021, 10:11

    Ms Green you will be waiting a long time to get transparency from WCC regarding this issue. Unfortunately for us the councillors seem to be happy to rubber stamp almost everything put in front of them; watching their meetings on-line it is very rare to hear any substantial probing questions asked of the council officers. And, when that does happen, too often the answers are less than satisfactory.

     
  15. Driver, 28. October 2021, 10:12

    Wellington will soon be unrealistically over-supplied with too many convention spaces. How many thousands of people are waiting to come to Wellington for big “business events” every week? How many of the competing spaces – including the council’s other venues which will be losing bookings – will be left empty for weeks at a time?

     
  16. Iona Pannett, 28. October 2021, 11:41

    Great to be partnering with Te Papa on the new convention centre Takina. Pleased that my suggestion to ensure staff are paid the Living Wage was incorporated into the paper. [via twitter]

     
  17. michael, 28. October 2021, 12:09

    Iona, surely you must be concerned about the viability of this. Why did the council push on regardless after losing the income from Peter Jackson’s museum which would have made all the difference? It is all very well WCC patting itself on the back over a partnership with Te Papa, but did councillors ever ask for a risk assessment on the impact of being in direct competition with Te Papa and all the other council owned venues?

    It all seems like hype to try and downplay the fact the council has again left ratepayers facing massive payments to keep the convention centre afloat.

     
  18. Ms Green, 28. October 2021, 12:38

    Iona. I read this as not partnering with Te Papa, but rather trying to get a no competition MOU, with Council agreeing to shoulder all operating costs and losses. But then of course I don’t have all the information … can you let us know the secrets please.

     
  19. K, 28. October 2021, 12:39

    Let’s be honest, most of the existing Wellington venues owned by the council are not fit for purpose for large conferences, and most are also fairly old/rundown or temporary solutions with minimal facilities and comfort for conferences. The new conference center will be a dramatic improvement in quality, size & versatility – which will allow the other council-owned venues to focus on what they were designed for (mostly cultural performances).

     
  20. walker, 28. October 2021, 12:44

    Just to those who are against the Convention Centre and think it is a waste of money – a small note from me if I may.

    I’ve been trying to get a large conference of architects to come to Wellington for a number of years now – and they’ve never been able to come because our “conference venues” were thoroughly inadequate. We had the choice of Shed 6 (great for basketball, rubbish for nearly everything else), the Old Town Hall (good for concerts, rubbish for conferences), the Michael Fowler (good for concerts, vaguely OK for conferences), the St James (good for concerts, rubbish for conferences) etc. Obviously many of those options are also out at the moment for rebuilding, and yes, obviously, at the moment no-one wants to sit in a room full of other people, but Covid will pass and one day conferences will be on again.

    I know that this is just one conference (which always has to go to Auckland instead – they have 2 good venues) but there will be many other professions out there that would dearly love to go to a conference anywhere other than SkyCity Auckland – which is competent but soulless. I honestly do believe that Wellington needs a good venue.

    We also certainly need more / better exhibition space generally in Wellington – we’ve all been saying for years that we do need that – so now that we have a chance to get a custom-made exhibition space, partnering with Te Papa, it just sounds like a great bonus for the city.

     
  21. Bob, 28. October 2021, 15:10

    Wasn’t there a council venue that got 3,000 people in each day & was more popular than Te Papa? What was it called again? Oh yeah, the Central Library…

     
  22. hel, 28. October 2021, 16:36

    Totally agree Walker. The city has been crying out for decent conferencing facilities for years and years. Always been a supporter of this investment by Council and great to see it emerging and looks fantastic. For all the doomsdayers, I see there is a report that a big international conference has been secured for the conference centre.

     
  23. mike hor, 28. October 2021, 21:22

    Iona – how about a “living wage” for the ratepayers?