Property management is a distinct discipline in the real estate industry. These are third party companies hired by property owners to manage the operations of a particular property, and in most cases, property management companies niche themselves to specialize in the management of one type of property or another. Hotel management and multifamily management tend to be the niches where many companies have grown to scale, with companies like Greystar or Pinnacle that operate hundreds of thousands of apartment units, and companies like Aimbridge Hospitality or GF Management that operate tens of thousands of hotel rooms. But the one niche most interesting through the lens of event management is that of event venue management. In this category, SMG is a company that stands in a league of its own.
Part of the reason why the event venue management category lacks the pool of competitors apparent in the multifamily and hotel management fields is that “event venues” is a significantly more disorganized category of real estate. Multifamily complexes and hotel properties are typically clearly defined in a city’s zoning for planning and development purposes, but event venues tend to be highly flexible spaces with loosely defined purposes. In New York City as an example, over 50% of all “event space” are inside the walls of our hotels, in which case, the hotel management company would be responsible for. Of the remainder, much of the spaces are restaurants, museums, libraries, retail shops, or other spaces that leverage event bookings as a means to extra revenue from the property’s core business. As is the case with “events” itself, the concept and definition of “event spaces” is an elusive one.
SMG was started by the Hyatt Corporation in 1977, and is a private company that specializes in operating publicly owned event venues. These are typically a given city’s infrastructural venues such as its convention center, its sports arena or stadium, or its major theaters or performing arts centers. It operates McCormick Place in Chicago — the largest convention center in the United States — along with 71 other convention centers around the country, 66 arenas, 13 stadiums, and 68 performance arts theaters. No other company comes close.
As urbanization becomes an increasingly significant phenomenon shaping human society, I suspect event venues as a category of real estate would require its own innovations in order to survive. I use the word “survive” rather than “thrive”, because in the world today event venues as a general category of real estate is decidedly underperforming. Cities typically have to put up significant portions of money to get properties like convention centers or stadiums built, because it rarely makes enough economic sense for private developers to undertake these kinds of projects. Though there have been a lively scene of convention center developments around the world in recent decades, almost every convention center that has been completed have underperformed initial expectations of its economic impact on its respective city, a metric typically measured by the total number of hotel room bookings the convention center is responsible for generating over a certain period of years.
A company like SMG has a unique perspective on urban development and the economic role of major events for a given city. Categorically, event venues is a type of real estate that I believe will never ever go away, and there will always be infrastructural venues that play a significant role in shaping the culture of its host city. But these venues cannot continue to operate on a status quo of being the accepted loss leaders or at best breakeven properties for some notion of a “greater good” for the rest of a city’s economy. As the world’s population become increasingly concentrated in cities, and as our new generations give increasingly more value to experiences, I see it as only inevitable that the real estate category of event venues will have a major renaissance.
See you at the next exploration!