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KPMG Consulting

KPMG Consulting. Economic impact study of the new 5000-people convention centre at the Millennium City Center , Budapest Dr. Andrea Sartori Senior Manager Travel, Leisure and Tourism Group CEE. Travel, Leisure & Tourism Group CEE. Presentation objectives.

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KPMG Consulting

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  1. KPMG Consulting Economic impact study of thenew 5000-people convention centre at theMillennium City Center, BudapestDr. Andrea SartoriSenior ManagerTravel, Leisure and Tourism Group CEE Travel, Leisure & Tourism Group CEE

  2. Presentationobjectives • To present a major tourism project (i.e. new Budapest Convention Center) and the role of KPMG Consulting in such a project • Showing the economic impact of the proposed development • Questions & Answers Travel, Leisure & Tourism Group CEE

  3. Project background • KPMG`s Client: Tourism Division of the Ministry of Economic Affairs • Project scope: determine the Ec. Impact of the new 5000-people Budapest Convention Center to be developed at Millennium City Center, Budapest • Project period: April-June 2000 (3 months project) • A project`s master plan was not ready at the time the study was performed by KPMG Travel, Leisure & Tourism Group CEE

  4. The Millennium City Center is a mixed-use development The MCCwill be realized on the Danube waterfront, between the Petőfi and the Lágymányosi Bridge Site were the World Expo was originally planned Land area: approx. 10 hct Millennium City Center: background Travel, Leisure & Tourism Group CEE

  5. Projects elements: 4 hotels American style casino Cinema and other entertainment Two condominiums Office space Restaurants Exhibition center Hungarian National Theatre Convention center The importance of synergies and critical mass A place to work, live and play! Travel, Leisure & Tourism Group CEE

  6. Backgroundconference tourism industry:trends in Hungary Travel, Leisure & Tourism Group CEE

  7. International associations meetings held in Hungary and number of participants Travel, Leisure & Tourism Group CEE

  8. Prefered destinations for association meetings Travel, Leisure & Tourism Group CEE

  9. Seasonality of MICE demand Travel, Leisure & Tourism Group CEE

  10. Conference tourism in Budapest • In 1999, Budapest hosted 51% of international association meetings held in Hungary (in 1998: 52.5%) • In 1999, 91% of meetings had less than 600 participants • Average duration of meetings held in Budapest is shorter than international averages • International association meetings/conferences 3.5 days • National association meetings/conferences 1.7 days • Corporate meetings and incentive 2.5 days • The majority of meetings tourists to Hungary arrive from Europe, mainly from Germany Travel, Leisure & Tourism Group CEE

  11. Association meetings lost due to lack of capacity Travel, Leisure & Tourism Group CEE

  12. Financingconvention centres:international experience Travel, Leisure & Tourism Group CEE

  13. Financing the development • Experience shows that most international convention centres receive financial support from the public sector in their initial development • In a 1993 survey, it was found that 23 international convention centres which collectively planned to spend USD 533 million on expansions and upgrading, were expected to source for this capital expenditure as follows: • From the capital market 25% • From the public sector 46% • Own funds 28% • Other 1% Travel, Leisure & Tourism Group CEE

  14. Conference trade is a thin margin business Source: Horwath Axe Consultant Paris, 1995 Travel, Leisure & Tourism Group CEE

  15. Economic impactof proposedconvention centre Travel, Leisure & Tourism Group CEE

  16. Understanding the impact of the convention center • Type of impacts • Direct ec. effects • Indirect ec. effects • Wider benefits • Timing of impact • During construction • During operation Travel, Leisure & Tourism Group CEE

  17. Assumptions of the economic model(5th year stabilisation of business) Conservative Optimistic Nat. delegates paying only registr. fee 70,000 (40%) 84,375 (37.5%) Nat. delegates staying in hotel 70,000 (40%) 84.375 (37.5%) International delegates 35,000 (20%) 56,250 (37.5%) ________________________________________________________________ Total delegates per annum 175,000 225,000 ________________________________________________________________ Travel, Leisure & Tourism Group CEE

  18. Assumptions of the economic model(Average Expenditure) Conservative & optimisticAverage Spending per delegate- Nat. delegates paying only registration fee U$ 43- Nat. delegates with accommodationn U$ 90- International delegates with partner U$ 200 Percentages of partners (conserv. vs. optim.) 20% 25% Days spent in Bp by partners (conserv. vs. optim.) 7,000 14,063 Travel, Leisure & Tourism Group CEE

  19. Economic impact during construction phase (2 years) Total estimated construction cost U$ 29.3 ml.Jobs created during construction 771 per year Total taxes (per year) U$ 2.8 ml.Consisting of : Indirect taxes U$ 1.9 ml.Labour taxes U$ 0.7 ml.Corporate taxes U$ 0.2 ml. Travel, Leisure & Tourism Group CEE

  20. Economic impact during operational phase (fifth year) Travel, Leisure & Tourism Group CEE

  21. Share of direct economic impact(based on conservative scenario) Travel, Leisure & Tourism Group CEE

  22. Financing by the public sector(Optimistic scenario excluding construction) Travel, Leisure & Tourism Group CEE

  23. Wider benefits (non measurable benefits) • Delivery of social and cultural benefits to the community • Small, Medium and Micro Enterprises development • Facilitation of the interchange of knowledge, technology and know-how • Promoting Budapest and Hungary’s image • Promotion of tourism through word-of-mouth recommenda-tions and repeat visits by delegates and their families • Promotion of Hungary as a tourism destination • Potentially favourable impression on foreign investor perception Travel, Leisure & Tourism Group CEE

  24. Q & A Travel, Leisure & Tourism Group CEE

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