Scottsdale City Council has approved a $200,000 payment to an outside third-party marketing enterprise in an effort to expand the value of Westworld and attract more key events year-round to the newly renovated facility.
The Dec. 10 municipal blessing -- approved by a 4 to 3 vote -- comes on the precipice of the expected Jan. 12 unveiling of the upgraded Tony Nelssen Equestrian Center, which came with a $42.8 million price tag in 2012.
Westworld of Scottsdale is at 16601 N. Pima Road.
The upgrade, which is to be paid through the issuance and sale of municipal bonds over the next 20 years, comes with an annual debt-service payment of about $2.5 million, according to Bryan Dygert, Westworld general manager.
The expansion involved enclosing the Equidome at the site in addition to adding 40,000 square feet of space, bringing a grand total of climate-controlled space to 300,000 square feet, city officials contend.
The expanded Equidome will become the new home to the Barrett-Jackson Collector Car Auction, which begins Sunday, Jan. 12, and will eventually replace the temporary tent structure where the auction is already held.
City officials say the western-themed venue is a success -- hosting more than 70 equestrian events with 247 days of use annually and attracting about 220,000 attendees. But to fully take advantage of the million-dollar upgrades, official say a third-party marketing company is now needed.
The performance-based contract coined, the “Westworld Food and Alcohol License and Marketing Agreement” is a joint effort between the city of Scottsdale and the National Western Capital Corp., which is owned and operated by Scottsdale developer Fred Unger.
Mr. Unger has, since 1996, held the food and beverage agreement at Monterra at Westworld, a 20,000-square foot hacienda-style event center on 360 acres at the base of the McDowell Mountains.
Under one agreement, National Western Capital Corp. will now facilitate all food, alcohol and marketing needs through its identified vendors while working in conjunction with city staff and the Scottsdale Convention and Visitor’s Bureau.
Scottsdale City Council members Bob Littlefield, Guy Phillips and Mayor Jim Lane voted against the contract.
Hurdles at Westworld
“I don’t know what the problem is,” said Mr. Dygert in a Dec. 17 phone interview to discuss issues facing Westworld. “It (the contract) enables Westworld to aggressively or progressively market to large events we are going to want to bring here or create here.”
Mr. Dygert says Westworld is already successful, but debt-service payments to the tune of $2.5 million annually brings pressure to create a full-year venue -- not a seasonal one.
“The reason we need help in marketing is that we have timelines that need to be met and that is about debt service,” he said. “We need bookings to increase new revenues that we can use to pay off bond debt.”
According to Mr. Dygert, debt service payments begin in 2014.
“Westworld, up to this point, has been seasonal,” he said. “The goal is to capitalize on the dormant time. Now our ability to do events all year long puts us in a position to really do that. Does that put us in a strategic position? Yes, it does.”
Rachel Pearson, Scottsdale Convention and Visitor’s Bureau spokeswoman, says the newly approved contract brings a new dynamic to marketing efforts at Westworld.
“With Westworld, we have seen the facility host some world-class events. This new contract hopefully provides Westworld with the opportunity to bring in more events of that caliber,” she said in a Dec. 16 phone interview.
Up to now, Arizona’s summers have limited Westworld’s marketability, Ms. Pearson points out.
“Westworld is really a wonderful venue when the weather is great,” she said. “We have seen from a tourism standpoint that events can be a huge driver for new visitors and repeat visitor. It can bring some new opportunities for us.”
‘More heads in the beds’
“Fundamentally, the reason why we are here, is we need marketing for all of Westworld all of the year,” said Paul Katsenes, Scottsdale executive director of community and economic development at the Dec. 10 public hearing.
Mr. Katsenes says the new contract is “performance-based.”
He called the now-approved contract “a six-month progress of revision and refinement” where National Western Capital Corp. is to be paid $200,000 if it hits its annual revenue goals spanning from $3.2 to $5.2 million in $800,000 installments over the next four fiscal cycles.
“These revenue targets are obligations of the contract,” he told council. “If they hit targets they get paid $200,000 from ‘13-’14 to ‘16-’17 where a 4 percent escalation exists. In addition, if marks are hit, $200,000 in ‘17-’18 plus a 4 percent escalation.”
The growth threshold is between 10 to 15 percent annually, according to Mr. Katsenes.
“The existing business is $3.2 million,” he pointed out.
Mr. Unger says the bottom line is getting “more heads in beds.”
“This is a very, very capable organization and I am very happy to be partnered with them,” he said at the public hearing of both Scottsdale municipal and tourism staff. “I know we will continue to use our synergy to benefit Westworld.”
Scottsdale resident John Washington, who opposed the contract, says it appears the deal is too much too fast.
“We are not all CPAs and it is very hard to understand all of the things that are going on in this contract,” he said at the public hearing, pointing out the contract within contracts that may fly in the face of established procurement standards at the city.
“I think we are trying to kill too many birds with one stone here,” he said. “How many different agreements are rolled up in this contract.”
When Mr. Washington asked how many on the council had read the contract in its entirety when it was filed by city staff 24 hours prior to the vote, no hands were raised.
“This is ripe for abuse,” he said. “This is the kind of thing the procurement code specifically anticipates and encourages us not to do,” he said of council-approved revisions to the municipal code in 2012. “I hope that we will ask some questions in terms of the legality of this.”
Scottsdale Councilman Bob Littlefield calls into question the need for an outside marketing firm.
“I think we should really be asking the basic question of why are we doing this at all,” he said prior to the Dec. 10 vote.
“I never felt that we needed to hire a marketing firm, in fact we had that discussion multiple times up here, I believe we have the people in-house to do that.”
Councilman Littlfield says the contract seems to have sidestepped what he believes to be the appropriate manner to go about a contract of this stature.
“We really shouldn’t be bypassing good financial and purchasing processes,” he said. “There is a real forest and tree problem here. We are missing the real point.”