Happy 20th birthday, TBO.com! Here is the logo at launch in 1994.
Tuesday, Sep 23, 2014

Will Clearwater aquarium expansion float?


Published:   |   Updated: March 16, 2014 at 08:25 AM

CLEARWATER — An economic study forecasting a steady stream of more than 1 million visitors a year gives a measure of confidence to supporters of Clearwater Marine Aquarium’s $160 million downtown expansion plan.

The aquarium can draw on more than 5 million residents within a two-hour drive and 12 million overnight tourists, a good number of whom stay a short trolley ride away on the region’s most popular beaches, the recently released feasibility study emphasized.

Even after the novelty wears off from the Dolphin Tale movie franchise — based on the facility’s dolphin star, Winter — consultants at AECOM still project a stable profit margin for the aquarium for a decade.

Tampa got the same kind of assurances in years leading up to The Florida Aquarium’s construction. In the early 1990s, consultants at accounting firm Coopers & Lybrand said The Florida Aquarium would draw about 1.8 million people in its first year at Channelside.

The reality was less than half of what they predicted, leaving the highly leveraged attraction drowning in debt that still is being paid off with significant help from the city of Tampa.

There are meaningful differences between the two plans. For example, Clearwater already has an aquarium that’s known to millions through a popular family film, and the tiny marine center has drawn more than a half-million people each year since Winter hit the big screen in 2011.

David Yates, Clearwater Marine Aquarium’s CEO, knows how poorly past projects built upon optimistic figures have done, but this time he says there are good reasons to trust the number crunchers.

“I can without a doubt state categorically that AECOM took the conservative approach at every juncture,” Yates said. “We believe we can do even better, obviously.”

In 1991, excitement grew about an aquarium on downtown Tampa’s waterfront that might incite a wave of development in the then-vacant Channelside district.

It had worked in other cities, including Baltimore, as well as New Orleans, where the Aquarium of the Americas turned a $4.5  million surplus its first year.

Coopers & Lybrand made its sunny forecast for Tampa’s aquarium based on the number of people living nearby, tourists and the success of similar aquariums around the country.

❖ ❖ ❖

Since opening in 1995, the Tampa aquarium has never brought in half of its projected annual attendance.

The planned $50 million in construction debt quickly climbed to $84  million. The city of Tampa assumed that debt in 1996 and also has supported the aquarium through the years with an annual subsidy.

How could one of the biggest consulting firms in the country get the numbers so wrong?

The main error was basing Tampa’s visitor numbers on aquariums in larger metropolitan markets that were big tourist draws or had much larger populations, another consultant reported after the poor opening.

Some guests complained the Tampa exhibits featuring fish in their natural Florida habitat were boring and that there was little reason for a repeat visit.

The miscalculation sunk the aquarium’s plan to pay for its own debt, which executives at the time said had never been done with other projects.

Through the years, aquarium management has worked to reduce that burden and raise money for improvements, such as a new stingray petting tank, giving people reasons to come back.

Last year, the aquarium reached a record 700,000 visitors.

Aquarium President Thom Stork wrote in an email: “If I’ve learned anything from my many years in this industry, it’s that even the most exciting exhibits have a shelf life and that people will continue to need to see something new in order to keep coming back.”

❖ ❖ ❖

Many feasibility studies start with a long list of caveats.

A disclaimer at the beginning of a 21-page executive summary for Clearwater Marine Aquarium’s feasibility study reads: “AECOM makes no warranty or representation that any of the projected values or results contained in this document will actually be achieved.”

The studies have become standard in raising capital for big convention centers and tourist attractions, but many miss the mark, said Heywood Sanders, a professor of public administration at the University of Texas at San Antonio.

At least that’s the case for numerous multimillion-dollar convention center building and construction projects Sanders has tracked in his research.

Cities and counties that get on board with these big ideas tend to look past problems toward the promise of economic development, Sanders said.

“That’s a dynamic we’ve seen play out with some great regularity in the convention center business as well as a number of cities that have gotten into the hotel business,” he said.

Maling Ebrahimpour, dean of the University of South Florida St. Petersburg’s College of Business, said economic forecasts are useful to help decision-making, but there’s plenty that can throw them off.

❖ ❖ ❖

Factors that could skew predictions include insufficient historical data, inaccurate assumptions, unexpected economic and natural disasters and bias that can come from paying a consultant, he said.

An unpaid study for the aquarium that Ebrahimpour and his colleagues conducted in 2012 used available ticket sales data and analyzed other attractions based on popular films to predict about 800,000 visitors for the Clearwater Marine Aquarium in 2013.

Actual attendance was lower than expected. One of the reasons cited was periodic closings toward the end of the year to film Dolphin Tale 2.

❖ ❖ ❖

Several highlights on the resume of Clearwater Marine Aquarium’s consultant, AECOM, bolster its credibility.

The Los Angeles-based company advised Anheuser-Busch in its development of Busch Gardens and helped SeaWorld plan construction of its Orlando park based on attendance estimates.

Importantly for the Clearwater aquarium, AECOM conducted a feasibility study for Atlanta’s Georgia Aquarium, which opened in 2005 and drew 3.6 million visitors that year with strong attendance since.

AECOM’s attendance predictions for Clearwater marine Aquarium aren’t extravagant. While aquarium officials and the USF St. Petersburg study have said famous dolphin Winter and her cohort could bring in more than 2 million people, AECOM anticipates about 1.2 million in the opening year, with a stable 1.1 million in the next decade.

That’s about the average for eight comparable aquariums that ranged from a high of 1.9 million in 2012 at the esteemed Monterey Bay Aquarium in California to 600,000 at the Virginia Aquarium and Marine Science Center, which was less than CMA’s attendance that year.

It’s also less than what The Florida Aquarium originally was expected to get, and CMA is already a well-known brand with an attendance track record at its Island Estates rescue center, a former wastewater-treatment plant that has evolved into a tourist attraction.

Aquarium CEO Yates said: “What’s brought people to us to a large extent is the media, and that’s something other aquariums don’t have.”

The study says enthusiasm for Winter and Hope, her co-star in the upcoming sequel, is expected to peak within two years after the new attraction opens, before leveling off or declining, but attendance should remain stable.

After it’s captured that initial attention, the aquarium is working on concepts for a television show and other media that will begin to introduce a whole family of marine animals, each with a story to bring kids back, Yates said.

As for the aquarium’s ability to capture a residential and tourism market comparable to New Orleans or Seattle, its proximity to USA Today’s “Best Beach Town in America” puts it in a strong spot, Yates said.

❖ ❖ ❖

Perhaps the biggest question the study doesn’t answer, though, concerns a factor that has plagued Tampa all these years — debt.

In its predictions of a stable $5.6 million operating profit, AECOM’s study doesn’t factor in the estimated $160 million in construction costs for the new downtown center, nor the $7.5 million owed to replace City Hall.

Some of those numbers aren’t fixed yet as aquarium officials begin looking for big donors, grants and other funding sources such as tax increment financing to reduce borrowing.

Aquarium officials are also studying ways to decrease the total project cost, possibly by tens of millions of dollars, but initial bank financing estimates ranged from $60  million to $80 million.

Yates says any borrowing will be from revenue-backed sources that won’t compromise the aquarium’s financial stability.

Tampa backed the bonds used in the construction of the The Florida Aquarium, and the city assumed the multimillion-dollar debt when profits fell short.

❖ ❖ ❖

Downtown Clearwater resident Tom Petersen, who has campaigned against the aquarium, thinks the CMA study raises more questions than it answers.

For one thing, the comparison cities in AECOM’s study aren’t located close to another major aquarium, he said.

The study does note that The Florida Aquarium’s attendance appeared unaffected by CMA’s recent post-Dolphin Tale spike.

Petersen is also dissatisfied with the aquarium’s decision to release a summary rather than the full feasibility study.

“The summary is not a study. It is a document which provides selected information and none of the underlying data that are needed to effectively evaluate the study and the proposed CMA expansion,” Petersen wrote in an email.

Yates has said the full study contains confidential information for his organization, but the summary has all the key data.

A majority of Clearwater voters last fall permitted the city to enter a lease for the City Hall property before the study was completed.

That vote bucked a city trend of rejecting these kinds of big development plans.

In fact, The Florida Aquarium was first pitched in Clearwater in 1985 by accountant William Crown III, but city leaders refused its support due to worries about traffic.

In contrast to Tampa, Clearwater isn’t backing the funds for the 200,000-square-foot marine center and wouldn’t be responsible to take ownership if the aquarium fails.

If fundraising efforts fall through before the lease deadline in 2015, city council can still pull the plug.

“We still have to go out and raise the money. This project is not a lock,” Yates said.

 

jboatwright@tampatrib.com

(727) 215-1277(727) 215-1277

Subscribe to The St. Petersburg Tribune

Comments