Juan Ochoa, CEO

Juan Ochoa, CEO

MPEA

City Club of Chicago

Delivered January 21, 2010

Remarks

Thank you Jay, I’d like to begin by thanking Governor Pat Quinn and Mayor Richard M. Daley for giving me the opportunity to lead this great entity.

I would like to recognize our Chairman John Gates and the MPEA Board and thank them for their leadership. They are among the finest people in our State. It’s an honor to serve with them.

I’d like to recognize some of Governor Quinn’s staff here today –

Billy Ocasio

Mireya Hurtado

Andy Ross

And my good friend Dean Martinez.

I’d like to thank the MPEA Staff for their hard work and dedication, including…

McCormick Place’s General Manager, David Causton

Navy Pier’s General Manager,Marilynn Gardner

our Chief Financial Officer, Richard Oldshue

and our Chief of Staff, Carlos Ponce.

I’d like to recognize:

Tim Roby and his team at the Chicago Convention and Tourism Bureau, our sales and marketing arm, our partners inLabor, Hotels and other Hospitality Industry Leaders here today.

Navy Pier is an important part of the MPEA, the top tourist and leisure destination in the Midwest and a vital economic engine for our City and State.

But I am here today to talk about McCormick Place and what must be done to allow Chicago to compete as a convention destination and grow.

Make no mistake, bold, and immediate actions are required.

I want to talk first about the business reality we face, and then the critical changes we need.

We know what we have proposed is right, because like any good business we have listened to our customers and this is what they demand.

Despite what you may have read, McCormick Place is still the premier convention center in North America.

And Chicago is still the preferred destination for the vast majority of convention, trade show and meeting planners across the country.

We have a convenient, centralized location, a world-class public transportation system and the country’s finest restaurants, theaters, museums and shopping.

There’s plenty to do once the business day is over.

BUT, the main reason why exhibitors come to Chicagois to do business and that’s what they do on our show floors.

It’s why shows return to Chicago and McCormick Placeagain and again, year after year.

In fact, in the last three years we have hosted59 new pieces of business.

Las Vegas, one of our toughest competitors, has taken notice of the business successes experienced in Chicago. Their new marketing slogan is “Vegas means business.” Doesn’t that sound familiar?!

Shows in Chicagoset records for attendance…more than at other destinations. And their exhibitors leave here raving about our facilities.

But, despite the many compliments we receive, we all know that ourposition in the convention industry isatrisk- along with the thousands of jobs and millions of dollars in tax revenues and economic activity that it generates for our city and our state.

The current economic situation facing our country is plaguing all industries right now… meaningshow organizersnationwide are exploring options to cut costs.

Convention business overall has declined by at least 20 percent nationally, includingtwo of our toughest competitors, Las Vegas and Orlando.

Retailers and restaurants are experiencing a similar decline and in some instances this decline has been the reason for businesses closing their doors.

I don’t think there is anyone in this room that hasn’t been impacted by the recession. We have heard all the reports about bank closures….the loss of manufacturing jobs…all industries have been affected.

When I came to the City Club two years ago, I stated that our position in the convention industry was at risk.

I told you then, that due to our financial disadvantage --it made it extremely difficult to compete in such an already tough,challenging environment.

And that has not changed. In fact, it’s even more so in 2010.

State law requires MPEA to provide a balanced three-year operating budget. We raise revenues entirely through the operations of McCormick Place, the Hyatt McCormick Place Hotel and Navy Pier.

Our competitors are subsidized by their state and local governments at a record pace, often through a dedicated percentage of taxes.

As I’ve been saying for quite awhile… in order to realign Chicago’s competitive offering… we must face the fact that Chicago is at a major financial disadvantage.

The convention facilities in Las Vegas and Orlando are heavily subsidized by tax revenues. Las Vegasreceives an estimated 80 percent of its operating budget from tax revenues andOrlando receives more than half of its operating budget from tax funding.

These subsidies allow those venues to undercut McCormick Placecosts for utilities and other services.

Contrary to what many believe, MPEA receives no operating subsidies. That means MPEA operations must be self sustaining, just like a private business.

The tax revenue received by MPEA is dedicated to service the capital debt only.

The MPEA has been asking Springfield for six years to allow us to restructure our capital debt. In fact, our bill passed through the Senate twice but never made it to a vote in the House.

To be clear, we are not asking for a “blank check,” we’re just asking for the tools to make us more competitive!

As the Tribune wrote in a 2007 editorial when we introduced legislation to restructure our debt. (and I quote):

“The McCormick Place complex needs tending. It needs to grow if it is to stay competitive against Las Vegas, Orlando, Atlanta and other cities that yearn to steal Chicago’s meal ticket. This financial re-structuring would give McPier the tools it needs to allow that. It makes good business sense.”

Both Las Vegas and Orlando dedicate far more money to market their cities and convention centers than Chicago ever has. We need to do a better job of marketing our City to the nation and the world.

The CCTB’s budget to market this destination ranks 16th among its peers around the country, at only $13.7 million, in comparison to Las Vegas at $143 million.

But despite these obvious disadvantages, since fiscal 2007, we’ve hosted 59 new shows…including prestigious medical meetings, like American Society of Clinical Oncology which represents an economic impact of $55 million dollars a year, for the next ten years.

Cost is king when it comes to staying competitive….

Let me repeat that: Cost is king when it comes to staying competitive!

The new economic reality has shifted people’s buying patterns and our industry is no different.

We realize we can be more cost-effective at McCormick Place. We can do things better. We know that not all of our customers are happy. So, we are being very aggressive and pro-active in bringing reforms to McCormick Place.

We are proud at the MPEA to lead the way by dramatically cutting our costs and streamlining operations at McCormick Place.

An early retirement program, along with further force reductions in 2010, will leave MPEA with more than 40 percent fewer full time employees than in 2007 -- a reduction from 700 employees to approximately 400 -- despite the addition of a new building.

Salaried staff at all pay levels will take 12 furlough days and 2 unpaid holidays.

These actions have already been largely accomplished and will be fully implemented by end of first quarter 2010.

And we are leading the way on pension reform. MPEA implemented a two-tiered pension plan in 2009. New employees are no longer part of the pension plan, but rather are offered a traditional 401k plan.

In total, we will have reduced the cost of operations in our facilities by as much as 30 percent by May, 2010.

As Chairman Gates has stated “we are not aware of any private corporation or government agency that has moved as quickly to cut costs and streamline operations as MPEA has over the past six months”.

But by itself the Authority can only do so much. Change needs to come from many different sectors and stakeholders in order to truly make a difference.

Last week Governor Quinn, Mayor Daley, and MPEA proposed one of the most important pieces of jobs legislation to arrive in Springfield in some time.

We are facing a battle in the convention and hospitality industry and on behalf of the 65,000 men and women whose jobs are at stake, I am here to tell you that we could have no better generals than Mayor Daley and Governor Quinn.

I say that because making McCormick Place more competitive is first and foremost about saving jobs for 65,000 Illinois families and growing opportunities for workers in the future.

Last week the General Assembly passed legislation to install an interim MPEA board. We welcome any actions that show thatSpringfield is focusing on an issue that affects the livelihood of tens of thousands of people.

I am here to talk about doing what it takes to restorecompetitiveness at McCormick Place and position Chicago toremain as the preeminent convention and trade show destination in the world.

It will take swift action.

It will take commitment from all stakeholders – contractors, hotels, hospitality industry, unions, the MPEA, andour elected officials -- to send a message to our customers that we have heard them and we are serious about change.

It takes putting customers first.

The solutions we have proposed may seem bold to some; but these steps are the least we must do to face a crisis for the convention industry in Illinois.

Conventions at McCormick Place account for $8 billion in annual economic activity and 65,000 jobs. As I said, we must act to protect the livelihood of workers and their families across Illinois.

The legislation proposed by the Mayor and the Governor lays out what it takes to make meaningful reforms. This bill is about retaining and creating hospitality industry jobs in Chicago and Illinois.

The bill has three components:

ONE: It will seek to restructure MPEA’s capital debt and restore its financial strength.

TWO: It will simplify work rules and reduce costs.

And THREE: it will allow us to audit contracts to make sure cost savings are passed on to our exhibitors and show organizers.

Untying the complex knot of interests, contracts and labor agreements that work against our competitiveness will require bold leadership by all stakeholders.

We sink or swim together.

We can create growth.

We can create new jobs.

But what we cannot afford is to put our heads in the sand and lose not just what we have, but untold opportunities in the future.

If we are to change our offerings to customers in Chicago, MPEA must be able to assemble the most efficient and skilled work force possible and operate according to the best practices of the industry, with a focus on customer satisfaction and value.

We must have transparency in costs at all levels – including show contractors. Most services at McCormick Place are provided by private companies.

MPEA must be able to ensure that maximum value is provided to our customers to improve and protect our brand and restore and grow our business.

Which brings us to our most current efforts:

• We have done a top to bottom review of our operations in an effort to maximize our cost savings potential.

• We have cut 20 percent of our full time staff.

• We are currently reviewing our food services operations.

• We are looking to maximize the use of our convention space.

• We realize that we need to do more to reduce our electrical cost, and we will.

The Mayor and the Governor’s proposal is vital because it provides the MPEA with the tools to help us maximize this potential.

We challenge all our partners including our sales and marketing arm--the CCTB, labor, contractors and the leadership of the city and state to work together for a much needed change.

And all the businesses that depend on convention business must also step up.

We now face a clear choice: continue the status quo of everyone fighting for a bigger piece of a shrinking pie or do what it takes to come together and position Chicago to remain the preeminent destination for conventions and trade shows.

The MPEA takes the challenge seriously to realign its value proposition to match, and surpass, packages offered by our competitors.

This is not an issue for MPEA management, or labor, alone.

Facing this crisis will require all of usto step up to the challenge and pull together to restore Chicago’s reputation as a convention and trade show destination and secure one of Illinois most important economic anchors.

The time to act isnow.

We cannot afford to wait.

Delay risks losing more customers as they seek greater value and transparency elsewhere.

Some of you may have heard the news reports just this week that the Housewares show is shopping around for alternative venues. We know they prefer to stay here but they are asking all of our industry leaders to take swift action. And we can expect others to follow suit.

We must move swiftly to implement these reforms.

Nowis the time toeliminate work rules that drive up cost and confuse customers.

Now is the time to make contracts transparent and showcustomerswhere every penny goes.

Now is the time to make the changes in our work rulesthat will attract more shows which means more business and more jobs for Chicago and Illinois.

As Chairman Gates has stated “We simply cannot let work rules for a few hundred MPEA and show employees… jeopardize the livelihood of 65,000 Illinois families.

Chicago is the economic capital in the Midwest.

If we make the necessary changes today we will grow our business.

We will attract more association business, more corporate business and more regional business.

They will all want to come to Chicago if we reduce the cost of entry.

Doing what it takes to save – and grow – the convention and tourism industries and jobs in Chicago is all about putting customers first.

MPEA is committed to its customers and to the people of Chicago and Illinois.

We’re here to be part of the solution and we challenge our stakeholders to join us in creating a promising and prosperous future for everyone.

Thank you!

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