Vision of a sustainable WestWorld operation emerges at Scottsdale City Hall

WestWorld of Scottsdale, 16601 N. Pima Road, is a 386-acre event center. (Independent Newsmedia/ Arianna Grainey)

A formal evaluation of business practices, leadership and approach to management at WestWorld of Scottsdale is beginning to percolate in an effort to find a sustainable approach for the community’s crown jewel event center.

The event center, which is at 16601 N. Pima Road, is home to keystone events showcasing the affluent cache of Scottsdale including Barrett-Jackson — The World’s Greatest Collector Car Auctions, The Arabian Horse Show and the Bentley Scottsdale Polo Championships: Horses and Horsepower amongst other events.

Over the past several years tourism officials, event organizers and municipal chieftains have come to the conclusion keystone events bring hundreds of millions of dollars into the community year after year — an assertion they claim is consistently bolstered by numerous economic studies.

An overview of WestWorld Scottsdale, 16601 N. Pima Road, that articulates the wide open spaces at the tourism event hub. (Photo courtesy of the city of Scottsdale)

The year 2019 is no different and throughout 2018 Crossroads Consulting provided an extensive business report on the ins and outs of the event center, which was delivered to Scottsdale City Council in September 2018.

While the event center is a driver in the city’s economic engine, WestWorld itself is not profitable.

WestWorld of Scottsdale is a 386-acre event center campus atop municipal, state and federal land-use designations, which city leaders say, play a significant role in revenue and operational possibilities.

Within the WestWorld acreage stands the Tony Nelssen Equestrian Center, which includes a 3,400-seat, climate- controlled equidome offering 120,000 square feet of event space. Also, what event promoters call, the “north” and “ south” halls offer 117,000and 37,000-square-feet of event space respectively.

Furthermore, WestWorld features the Monterra Catering Facility that can accommodate up to 1,000 people, existing equestrian arenas, 20-acres of open space and a 120,000-square-foot temporary tent oftentimes used for keystone events.

In all, WestWorld has 936 permanent horse stalls and 398 permanent recreational vehicle spaces. Meanwhile, the City of Scottsdale continues to pay debt service on municipal property corporation bonds that total just over $54 million for the construction and expansion of WestWorld that took place a handful of years ago.

In 1982 Scottsdale entered into a cost-sharing and land use agreement with the Federal Bureau of Reclamation to develop the equestrian- related facility.

Debt service payments are:

  • In fiscal year 2014-15 the total debt service payment was $3,794,278.
  • In fiscal year 2015-16 the total debt service payment was $3,797,802.
  • In fiscal year 2016-17 the total debt service payment was budgeted at $3,811,082.
  • In fiscal year 2017-18 the total debt service payment is expected to be $3,793,591.
  • In fiscal year 2018-19 the total debt service payment is $3,796,012.

For Scottsdale Councilwoman Linda Milhaven, she ponders, “How do we expand our tourism season and who can help us to do that?”

Linda Milhaven

“The big say about WestWorld is about parking. If we can figure out how to get some portion of ticket pro ceeds to pay for the parking that in itself is huge,” she said.

“We are subsidizing WestWorld to the tune of $2 (million) to $4 million. If we do this right, I think we can make enough to make West-World break even and maybe even make a little and put it back in our tourism fund.”

She says, Scottsdale City Council — and their hired hands — can do a better job of appearing close to a return on taxpayer investment.”

The brass tax

WestWorld operations continue to be unsustainable, according to City Manager Jim Thompson.

In fiscal year 2015-16 West-World recorded $4,422,499 in operating revenue but accumulated annual operating expenses during the same period of time that totals $6,202,145, which represents a $1,779,646 shortfall, a statement of operations shows.

This fiscal year, West-World of Scottsdale has a total General Fund budget of 5,037,671 but will realize a total expense of 7,815,018 due to utility costs.

City Manager Jim Thompson (File photo)

“We have debt issued on a portion of the building and that has limitations because of the type of debt that it is,” Mr. Thompson said during a February public hearing at City Hall, 3939 N. Drinkwater Blvd. “When you start to layer the various levels, what we consider challenges and/ or opportunities depending how you look at it, is it does limit what you can do as every event that you host there has to be open to the entire public.”

But new strategies could be emerging, Mr. Thompson says.

“Even though they may have to pay to attend the event, you cannot have private events and that is for the good portion of the building, which rests on federal ground,” he explained. “But once you detached then it’s a whole discussion.”

Today, WestWorld employs 20 full-time employees and 22 part-time employees, which according to Crossroads Consulting accounts for 29.11 full-time equivalent positions.

But expenses continue to exceed operations, Mr. Thompson explains.

“The challenge we have is the master plan we have is over a decade old and I think our greatest concern is to attack the business side of the equation,” he said. “We know that we have a beautiful facility. We can do an update to the master plan, but I would like to move in a different direction with a focus on operations of and engage the users to understand what they think needs to be done to grow their events.”

From a new development fund, more parking spaces and an market equalization of food and beverage sales appear to be immediate actions opined by Mr. Thompson.

“One of things we have run into in almost all cases is you will see everywhere we are behind the market on food,” Mr. Thompson said pointing out a typical break point is vendors pay 38 percent in fees across the board. “The individuals we have doing catering — everyone loves the catering — but the problem is our contractual arrangements and fees are not within market conditions. When we sit at 10 percent on the food we are substantially behind the market, which is normally 38 percent across the board in the market.”

Better business negotiations and a formal parking proposal seems to be major points of fact for city leaders, but also municipal leaders are trying to develop more recreational options for the everyday residents who call Scottsdale home.

“There are some opportunities for recreation programs,” Mr. Thompson pointed out. “The goal is to get the community more involved.”

Members of Scottsdale City Council believe today the future of the event center will likely not be profitable, but an active effort toward sustainability is under way. (Independent Newsmedia/Terrance Thornton)

First-blush recommendations

City Manager Jim Thompson has offered the following as first steps toward creating a sustainable business model for WestWorld of Scottsdale. Those recommendations are:

  • City staff has anticipated an increase in rates for stall rentals and RV hook-ups. Although a dollar figure was not offered, city leaders contend the rates will be below market.
  • The creation of a WestWorld Event Development Fund utilizing Tourism Development Funds to encourage creation, development and attraction of new events.
  • If approved, city staff anticipates using that fund for WestWorld to produce or co-produce events during available events.
  • Events, shows and competitions will be prioritized.
  • City staff will propose an ordinance allowing the city manager to execute multiple-year contracts subject to certain terms and conditions.

A long-standing endeavor

Formed in 2015, the Scottsdale WestWorld Subcommittee today consists of Vice Mayor Guy Phillips and Councilwoman Virginia Korte, while Ms. Milhaven is charged with providing recommendations to the larger governing body regarding WestWorld operations.

Scottsdale Councilwoman Kathy Littlefield agrees the time is now to address West-World operational shortcomings.

Scottsdale City Councilwoman Kathy Littlefield at a recent public hearing at City Hall. (Independent Newsmedia/Arianna Grainey)

“I think the need to update WestWorld has been building for quite some time,” she said.  “I’ve also been unhappy with the way our contracts were negotiated and fees calculated. In my view it is past time to revisit all these things. WestWorld is an unique, one-of-a-kind event center for the entire Southwest with enormous potential for economic development. We need to insure that it is run as such.”

What was first envisaged as an equestrian destination has now evolved to a tourist attraction — and an undisputed economic driver.

“We wanted the best of the shows across the country, perhaps even the world, to hold their events in Scottsdale. I think over the years, we have achieved at least most of that dream,” she said.

“Later the purpose of WestWorld has expanded to include many other kinds of events and shows such as the Barrett-Jackson car auction, which was held there recently. As we have expanded the kinds of shows and events we want to attract to West-World, the use of the facility has increased and the economic value to our community has grown.”

But although in this case, Ms. Littlefield agrees bigger is better, she also cautions the municipal operations needs to be ready and able to handle the various tourist attractions.

“We need to match our on-going desires for West- World with the ability of the facility to handle them,” she said. “We also need to realize that increased use of the facility will also increase the impact on our surrounding communities and consider how to mitigate any negative impacts.”

Ms. Littlefield contends the recipe for success is a sustainable business model in-tune with market conditions.

“We need a mindset which focuses on running West-World like a business, with an eye to the competition across the country, the fees and contract terms that are ‘usual’ for this kind of facility, and to find the answers we need to replace the parking requirements we will need as the stand we currently use for parking is developed,” she said.

“All of these issues are being addressed now; some were directly answered in the study, which was recently completed for West-World.”

Scottsdale Councilwoman Linda Milhaven and Suzanne Klapp at the local dais. (Independent Newsmedia/Arianna Grainey)

Scottsdale Councilwoman Suzanne Klapp says myriad contracts administered throughout WestWorld operations ought to be streamlined.

“Food sales is all part of that and, we do have a variety of contracts administered through WestWorld,” she said.

“That is where the complication lies. Some of them are newer contracts and handled through our current ordinance. If we can look at from a holistic perspective we have a better opportunity to get the right contracts.”

Ms. Klapp points out the emergence of a formal business plan helmed by the City Manager’s Office is nearly one year in the making.

“More than a year ago we talked about developing a plan,” she said of her time on the advisory board. “We now have a plan that tells us some things, some first-step recommendations.”

Although original expectations spoke to both a sustainable — and profitable — business model at West-World of Scottsdale, Ms. Klapp admits reality has set in.

“The only place that my expectations were too high is that it would be profitable,” she said. “The best-case scenarios we are looking at is basically breaking even. We need to re-evaluate our expectations.”

Ms. Littlefield points out while WestWorld operations may not be a profit center for local coffers — the ancillary benefits move the economic needle.

“A great many of West-World’s events brings additional value to Scottsdale outside of the ‘big tent.’ Wealthy visitors come to our city, stay in our beautiful hotels, eat in our restaurants, and shop in our highend galleries and stores. I believe this additive value more than makes up for any direct cash loss WestWorld may have. And, that doesn’t even take into account the increase to our reputation as the city to go to where things are happening and there is always a lot to do.”

A view of an arena at WestWorld of Scottsdale where the National Cutting Horse Association will host events in both 2017 and 2018. (Photo Courtesy of the city of Scottsdale)

Independent Newsmedia Arizona Managing Editor Terrance Thornton can be contacted at tthornton@newszap.com

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