Visitors are never enough

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Richard Willsher surveys the prospects for flagship capital projects and finds some hard lessons are being learnt

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The Millennium Dome and Sheffield’s National Centre for Popular Music will stand out in the public mind for a long time as reminders of how spectacularly lottery funding can fail. But there are many other major visitor attractions, especially some of the landmark science and technology centres, whose initial business propositions were based upon excessively optimistic projections. Now they are having to bite the sustainability bullet.

One of the principal reasons that projects, particularly those funded by the Millennium Commission, are facing uncertainty is that they were high-risk to begin with. Paul Jardine of the Edinburgh-based Jura Consultants (which evaluated the Millennium Fund’s capital programme) says: ‘Selection procedures were designed to take a higher level of risk. Some were likely to fail.’ A senior manager of one big Millennium project, who prefers to remain anonymous, says: ‘We were encouraged to be optimistic. The Millennium Commission did not scrutinise our business plans with sufficient accuracy.’ James Alexander, managing director of Locum Destination Consulting, says: ‘People got over excited about the millennium It was a sales-led process that demanded glossy, larger-than-life projects. There was a vicious spiral caused by a series of ill-founded planning and market judgements.’ Alexander’s conclusion is that these have had to be translated into operational realities to try and ensure their survival.

Many of the major projects had a rationale beyond their ticket sales. They were designed with a strong regeneration purpose in mind. Our Dynamic Earth in Edinburgh, the Lowry in Salford, At Bristol and others around the country have achieved a great deal in terms of revitalising the areas in which they were built. Having said that, the failure of a major project such as one of these could reverse the effect on the surrounding locality, leaving its future fraught with risk and disappointment. Stephen Clarke, head of the financial consulting team at DTZ draws the lesson that some of the least successful lottery projects were those that were initially politically motivated rather than founded upon sound operational and commercial bases.

The talk now is of business models and building into them a diversity of income streams. Julia Fawcett, chief executive at the Lowry (£68.9m from three lottery boards), is one of the prime advocates of commercially viable, well-managed visitor attractions. She forged her knowledge and management skills during 10 years of working with theme parks and hotels at Granada. Visitors clearly still remain the key driver to long-term sustainability but Fawcett’s approach is highly detailed and analytical. She initiated a ‘360-degree research programme’ when she joined the Lowry earlier this year, two years after it opened. ‘We wanted to measure our visitor numbers and analyse them in terms of frequency, recentness, socio-economic group and from a number of other angles.’ The result has been a customer relationship management approach to encourage more visitors, more frequent return visits, catering to suit such a pattern of visits and a range of services to match the visitor profile.

Educational visits are a key facet of the visitor make-up at the Lowry and provide a significant slice of income. Corporate hospitality is a further source. The Lowry has entered a property development joint venture with Charterhouse Property Group, which should start producing commercial rental income in September 2003. The mix of income, its quality and diversity are key metrics for long-term sustainability. At the same time Fawcett is realistic about visitor numbers boosted by events or attractions near or around the Lowry. The neighbouring designer shopping mall may increase footfall but it hasn’t necessarily given a significant boost to income. Casual visitors just taking a look are not a basis on which to build financial predictions. Last summer’s Commonwealth Games raised the Lowry’s profile: the triathlon was staged in the Salford Quays area and on that day resulted in 150,000 visitors. But one athletic event does not add up to long-term sustainability. 

Ideal Ingredients

Juliana Delaney, managing director of Heritage Projects, an operations and facility management firm, uses a ‘three-legged stool’ analogy to describe the essentials for a successful visitor attraction. The legs are:

• excellent locations
• brilliant / attractive / marketable story line
• a business plan that is realistic and keeps all operational costs down while investing in marketing the project.

keeps all operational costs down while investing in marketing the project.

For 18 years Heritage Projects has run York’s successful Jorvik viking exhibit. Delaney is scathing about the basis of many of the Millennium funded projects. ‘Most of them,’ she says, ‘required Millennium funding because they couldn’t get funding from anywhere else. They were often poorly located and their chosen subjects were obscure, oblique or unmarketable. Their business plans were often built around huge architectural egos involving iconic buildings with huge operating costs.’ She argues that the UK has far too many visitor attractions – which all too often are poorly run. Several lottery project teams, she says, sought her advice after construction had already begun, as to how they should manage themselves. ‘They came to ask for operational advice too late. Often they did not want to hear the answers. Some did not want to accept that those who had long professional experience of operating visitor attractions could have valuable advice to offer.’ Locum’s James Alexander says that while the grand lottery-funded projects now have an increasingly commercial outlook, it was a very steep learning curve and there is still a lack of skilled venue management competence and talent.

Some, such as Our Dynamic Earth, have managed to move into corporate hospitality. Others had land around or close to them that could be turned to good account – as Newcastle’s International Centre for Life did. But Juliana Delaney says it is almost universal among such attractions that they still ‘wait for their visitors to come to them’ rather than, for example, using the internet to reach a much wider, even global audience. She believes visitor attractions need to learn to lever their content on the web, adding, for instance, distance learning and paid-for content as income producers, and thereby springing the confines of defined catchments. This has been a key issue with the science and technology attractions, which were limited by their catchments and by an attitude of ‘been there, done that’ among their local visitors. A number of sites, such as the International Centre for Life matched or even exceeded visitor projections in their first year, only to find numbers tailing off thereafter, raising a real threat over their medium- to longer-term futures. Several project experts interviewed agreed that while Cornwall’s Eden project has been extremely successful in its early days – among other things in creating its own marketplace – the challenge will be its longer-term sustainability, perhaps after the current nationwide gardening fad has subsided.

In one respect Eden is fortunate. It has few competing local attractions, unlike Yorkshire and Humber, where a laundry list of large and expensive projects is concentrated in a relatively limited geographical area

Given the vast sums of money invested, visitor numbers would not only need to be consistently high to sustain each project but maintaining them calls for high levels of ongoing expenditure. Linda Conlon, director of the International Centre for Life, has seen her annual visitor numbers decline from 245,000 in year one (opening May 2000) to 150,000. She says that other sources of revenue were essential if the project was to prosper. After some rethinking of the original business plan, complementary revenues have been brought on-stream one by one:

• 60,000 sq ft of Life Sciences Village, housing biotechnology companies, 100% let, producing rental income
• 20,000 sq ft night club and pub area, 100% let
• 650,000 sq ft multi-storey car park
• Conferencing and banqueting facility, now open for business.

These four sources produce £1m of essential revenue a year. Science centres among all visitor attractions do not make money on their own. International research has shown that typically they earn 65% to 75% of their operating costs. Consequently the Centre for Life is applying for fresh funding from the Millennium Commission’s exhibition renewal fund, ReDiscover. Conlon says that revenue funding is essential if a refurbishment scheduled for 2010, complete with new exhibits, is to be carried through.

Size matters. Big projects inevitably have big overheads. A science centre with a much less onerous revenue requirement is Dundee’s Sensation. The project cost was a modest £5m – relatively small change as compared with Glasgow’s £75m Science Centre. But then Dundee has a much smaller catchment than Glasgow and faces competition from several other local visitor attractions. Sensation’s chief executive Paul Jennings puts a brave face on it but admits that ‘battening down the cost base’ and trying to grow their market and market share are challenges. He is hopeful of breaking even this year. From a background of leisure and tourism management he has been busy developing tourism and corporate income streams to complement the regular visitor income from educational group visits. It is a tough call in the Dundee catchment, which while being the fourth largest in Scotland is also home to Dundee Contemporary Arts, Dundee Industrial Heritage and the Research Ship Discovery.

While the UK’s visitor numbers remain stagnant, attractions will have to fight ever harder for their share. Tourism is still in recession in the wake of September 11. Against this backdrop the need for all projects to diversify revenue streams is critical. Some have still to prove that they can survive. A government commission into science and technology attractions is still investigating that market, while the Millennium Commission’s recently opened ReDiscover fund has £33m available over the next three years – a drop in the ocean. But as the International Centre for Life’s director Linda Conlon says, ‘These projects are here now. An awful lot of money has been spent [already]. Let’s make them work. What we need is some revenue funding to ensure they are a wonderful resource.’ Locum’s James Alexander puts it more bluntly. ‘The Government needs to get behind some of these schemes rather than let them wither.’ He sees a future where the landscape is ‘punctuated by great projects, magnificent buildings and great visitor attractions’ such as the British Museum’s glass dome, the Sage Music Centre at Gateshead or the Eden Project. But Alexander’s vision relies upon continued public or lottery funding being pumped into these great projects. And that prospect will surely cause Tessa Jowell, the Culture Secretary, a few sleepless nights.