Convene - Getting Ready For Growth

W16033
CONVENE: GETTING READY FOR GROWTH1
Susan S. Fleming and Matthew Legge wrote this case solely to provide material for class discussion. The authors do not intend to
illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other
identifying information to protect confidentiality.
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Copyright © 2016, Richard Ivey School of Business Foundation Version: 2016-01-02
Chris Kelly and Ryan Simonetti sat in their Midtown Manhattan office in early 2013 tossing a football
across the room to one another, a long-standing tradition during their many brainstorming sessions. Both
only 30 years old, they ran a rapidly growing, entrepreneurial company that had pioneered a business model
with the potential to revolutionize the local meetings industry and to change how corporations used large
portions of their real estate.
Their company, Convene, sought to redefine the meetings and conferencing industry by enabling Fortune
1000 companies to access tech-enabled, design conscious, hospitality-infused meeting and conference
facilities on a flexible, variable cost basis as an extension of their core real estate portfolios. Their business
model was focused on identifying underutilized internal space in the office portfolios of major corporations,
leasing it from them, and operating the space as a for-profit meeting and conferencing facility. The
corporation would then be a primary user of the facility, but excess capacity would be rented out on the
open market. This allowed the corporation to simultaneously outsource space that would otherwise have
been underutilized internally and access cheaper and higher quality conference facilities and services for
their own meeting needs.
With three successful projects in Manhattan, all undertaken since its start-up in 2009, Convene was poised
to enter a new stage of growth as its leaders sought to expand and evolve the company into a more diverse,
market-leading brand with a presence throughout the United States and, eventually, internationally. The
opportunities were substantial, as Convene was in a US$16 billion2 industry without a market leader. For
Convene to become that leader, Kelly and Simonetti would have to be deft in their strategic decision-
making, including figuring out who in the current market were real competitors and whom they might be
able to turn into clients or partners. Further, they would have to figure out how to meet their plans for rapid
growth in the face of limited resources.
1
Portions of this case have been drawn from, and overlap with, a related case study: Pierre Rigaud, Matt Legge, and Susan
Fleming, “Convene: Pioneers in a Corporate Real Estate Revolution: Convene Takes Manhattan.” Cornell Real Estate Case
Study Series 11 (Ithaca, NY: Cornell University Baker Program in Real Estate, 2013).
2
All currency denominated amounts are in US$ unless otherwise specified.
This document is authorized for use only by Stephen Soler (STEPHEN.SOLER@NYU.EDU). Copying or posting is an infringement of copyright. Please contact
customerservice@harvardbusiness.org or 800-988-0886 for additional copies.
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CHRIS KELLY AND RYAN SIMONETTI
As undergraduate classmates at Villanova University (Villanova) in the early 2000s, Kelly and Simonetti
always envisioned themselves pursuing careers as entrepreneurs in some shape or form. While at Villanova,
their entrepreneurial ventures included an online textbook resale business, ticketed event production, and a
student travel service. Kelly and Simonetti also won the first annual Villanova Start-Up Challenge, a
business plan competition.
After graduating from college the duo initially took separate paths. Kelly moved to Aspen, Colorado and co-
founded evoJets, a global private jet charter brokerage company, while Simonetti moved to New York City to
take a position at Lehman Brothers and later, as a vice-president with Gramercy Capital, a commercial real
estate investment trust. However, before long their career paths would converge, with Kelly joining Simonetti
in New York City to embark on an entrepreneurial adventure that became known as Convene.
THE IDEA
Groundbreaking — that’s the thought that consumed Kelly and Simonetti as they planned the future of
Convene. Their idea was based on two simple propositions: (a) amidst the economic crisis that was ravaging
the United States (and the global economy) in 2009, large corporations would be eager to outsource non-core
functions and to shed fixed cost ownership of underutilized real estate and instead access it on an as-needed
basis; and (b) the existing outsourced offerings within the local meetings industry, in their opinion, were not
fully responsive to the needs of the modern meeting participant, and were lacking a real sense of hospitality.
Kelly and Simonetti believed that Convene would succeed, driven by several important market trends. First
was the increased use of technology, which was enabling companies to transition to implement remote work
models that reduced the quantity of office space required per person. Second was increased interest on the
part of corporations to secure more flexible cost structures. Third, and perhaps most notable, was greater
focus on the part of many corporations on collaboration, something that would become a central theme of
Convene’s business model as it evolved over ensuing years.
Kelly and Simonetti envisioned Convene introducing a level of services and amenities that had never been
offered to such an extensive degree within the local meetings industry. Although various companies, in
various forums, offered many of the services that Convene would offer, none offered them in the same
conveniently packaged manner as Convene and seemingly no one had approached the industry from the
perspective of a hospitality company. Simonetti explained:
For us it was about changing expectations of what people got out of a meeting experience. Chris
and I came into the meetings industry as outsiders, but as hospitality guys we thought that we could
do something unique and game changing. We wanted to raise the bar on what hospitality meant in
the commercial office sector, and to create memorable experiences that would translate into repeat
business. For us, repeat business would be our lifeblood, so that had to be the focus.
Convene’s founders intended to exploit a gap in hotels’ function space offerings. They noted that hotels
specialize in catering to meeting functions of transient guests, often imposing policies such as minimum
overnight stays as part of their conference space packages. In contrast, Convene’s primary focus would be
on packaging and delivering conference services designed to meet the specific needs of the local meeting
attendee, who would not require a sleeping room. There was really no market leader in that space at the
time, and Kelly and Simonetti felt that there was a tremendous opportunity to create an eventual national
(and potentially international) network of executive conference centers in major urban markets.
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Convene would be focused completely on meetings and events, and would offer dedicated expertise in
production, culinary services, technology services, and “experience design.” Kelly and Simonetti also
intended for Convene to claim the lead market position in workplace collaboration, a concept that
traditionally had only been provided as a secondary offering by hotels (offsite) and food service providers
(onsite). But Kelly and Simonetti were determined that Convene would be much more than a services
company. Instead, they would also design, develop, and control their own real estate by entering into long-
term leases for space, with the goal of creating a network of innovative venues: places for groups of people
to participate in informative, creative, and evaluative collaborations. Their corporate motto soon became
“Convene: The place to easily host a better meeting.”
The pool of potential clients and partners for Convene was robust, and their interests were well served by
Convene’s proposed model. The most attractive category of potential clients were large Fortune 1000
companies such as PricewaterhouseCoopers, IBM, and American Express, which were being challenged
by competitive pressures in the economy to maximize capital by removing underutilized assets from their
balance sheets. These companies needed to secure the use of space and services for local meetings that they
could not (or did not want to) accommodate internally; certainly not for a full 365 days per year. Convene
provided such corporations, that typically had underutilized, poorly scheduled internal meeting space, with
flexible extensions of their own corporate real estate portfolios. Due to their purchasing power, credit rating,
and especially their national and international scale, these corporations collectively represented an ideal
core client base for Convene. If Convene could figure out how to better understand the needs and interests
of these clients and devise meaningful portfolios of solutions for them; it would create the opportunity for
Convene to serve such clients all over the world.
Major landlords and developers also stood to benefit from Convene’s value proposition. At the time, there
was a major shift occurring toward “fully-serviced” commercial office buildings that incorporated a level
of amenities (such as facilities management, information technology purchasing and staffing, and culinary
services) that had previously only been found in luxury residential buildings. As office landlords became
more and more competitive with the amenity packages that they offered to tenants, an “amenity war”
resulted that saw these landlords seek increasingly impactful ways to “wow” prospective tenants. By
working with Convene to offer an on-demand, “fully-serviced” meetings facility in their building, landlords
could strengthen their value proposition. Often, landlords would simply “check the box” to satisfy lease
requirements for conference space by building a low-quality space that gave little consideration to how
important technology, audio-visual, culinary, and other hospitality services were to holding an effective
meeting. Kelly and Simonetti believed that it would be the truly “fully-serviced” buildings that would be
most attractive to tenants, and that would justify the highest rents.
Additionally, Convene could offer to be a rent-paying strategic tenant for these landlords — a much more
attractive proposition than that offered by conference centre managers or food service providers. Rather
than allocating otherwise leasable space to amenity uses that provided no revenue, landlords could have
Convene add value both by paying rent for the space, and also by providing an enhanced amenity solution
that could make the building more attractive to office tenants than it otherwise would be.
Hotels represented an interesting case for Convene. Hotels were certainly active competitors in providing
meetings space, and yet their first priority was typically to book overnight stays, which is why locally-
focused meetings were often not attractive to them. In fact, hotel conference centres were often such loss
leaders for overnight stays that hosting local meetings without room-night revenue could be a losing
proposition for them. The hospitality industry was also moving toward more select-service hotel products,
with much more limited meeting space and services; therefore the age of the conference hotel was fading
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in many markets. Accordingly, instead of viewing hotels as competitors, Kelly and Simonettti saw them as
sources of inspiration, as Kelly noted:
We certainly found that when you stay at a hotel as a guest, there’s all sorts of little things —
hundreds of them – that you don’t even notice are happening (at least at well managed hotels). For
us, hospitality became a much different concept than it had been previously when we were just
civilians and weren’t in the business of delivering professional hospitality. When you experience
hotels from that perspective, you start to notice all of the little things that hospitality providers are
doing to try to make you happy, and of course also the things that they’re falling short on. It’s
incredible to see how diligent, consistent, and thoughtful the truly great hotel operators are, and
how much hospitality has to do with not only meeting needs, but also anticipating them. We took
many of those lessons and applied them to a sector that in our opinion really hadn’t adopted true
hospitality before. We hoped that we could earn a similar level of trust and loyalty with our
meetings participants as the great hotel brands had with their guests.
Hotels were also beginning to provide significant business development support for Convene. Due to hotel
operators having little incentive to host local meetings, they often sent that business to Convene as a free referral
service. There was a mutual incentive to develop that kind of a bilateral relationship, because although the
meetings held at Convene facilities did not generate large volumes of sleeping room demand for each individual
meeting, the aggregated sleeping room demand across all of Convene’s meetings was considerable (in a six-
month period Convene generated more than $1 million in sleeping room demand). Convene had started to
develop “hotel partnership” relationships to grow these collaborative relationships further.
Kelly and Simonetti decided at the outset that Convene would not be limited to just a handful of facilities
or merely a lifestyle business. They were thinking big; in the long term, they would seek to develop a large,
multi-city network and expand beyond their initial strategy of repurposing existing internal conference
spaces. However, before they could take on the world, they first had to demonstrate that they could conquer
New York City.
MARKETPLACE AND DEMAND
Kelly and Simonetti had good reason to feel enthusiastic about the market potential for their fledgling
business. According to a study published by the Convention Industry Council (CIC) in 2011, there were
1,790,800 meetings held in the United States in the previous year, of which 71 per cent were for business
or corporate purposes, 15 per cent were related to conferences and conventions, and 14 per cent were for
other purposes. Eighty-five per cent of those meetings were held in lodging facilities, while the rest were
held in purpose-built facilities (7 per cent) and other facilities (8 per cent). There were an estimated 107
million participants in the 1,266,200 meetings held for corporate or business purposes, translating to an
average of 84 people per meeting. Notably for Convene, 44.8 per cent of attendees (over 48 million people)
for corporate or business meetings were local, travelling less than 80 kilometres to attend a meeting and not
staying overnight in paid accommodations.
The marketplace could thus be divided into conference facilities that offered sleeping accommodations and
those that did not. The “non-residential and ancillary centres” accounted for 27.5 per cent of the total venues
in 2011. 3 According to a report prepared by PFK Consulting and the International Association of
Conference Centers, of those non-residential and ancillary centres, 21.4 per cent were corporate centres,
3
PKF Consulting USA LLC, Trends in the Conference Center Industry, International Association of Conference Centers,
2012.
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28.6 per cent were executive centres, 28.6 per cent were university centres, and the remaining 21.4 per cent
were classified as “other.”4 Further, only 64.2 per cent of these centres had a local scope of attendance,
while the remainder were focused on regional, national, or international markets.5
Kelly and Simonetti also delved into operating performance data for competitive meeting spaces in order
to quickly learn what they could expect as a baseline for their own centres. They first sought to understand
the physical profiles and layouts offered by existing meetings facilities. Given that it was typical for meeting
centres to include a variety of room types, including amphitheatres, meeting rooms of various sizes,
breakout rooms, dedicated boardrooms, and dining rooms, the team concluded that they should offer a
multi-dimensional facility to users, rather than a single cavernous meeting space.
Second, they noted that the biggest and most pertinent direct expenditure for meetings in 2011 was planning
and production ($109 billion or 41 per cent of total meeting spending), which included technology services.
Rental expenses for venues accounted for only 4 per cent of total costs, or $11 billion, although it was
sometimes difficult to disaggregate the cost of the space from the cost of the service (often referred to as
“packages” in the industry).6 For Convene, this meant that focusing on services was essential, especially
given that the margins on those services were often considerable.
As far as non-hotel competition was concerned, suburban conference centres (representing 28.6 per cent of
the market) were beginning to lose steam at the time due to the increasingly widespread preference on the
part of companies to stay local, which coincided with a larger re-urbanization trend that was being
experienced especially in major U.S. cities. Urban conference centers (representing 57.1 per cent of the
market) offered prime and flexible space, but often lacked good service providers, and usually were not
tailored for small-scale meetings; they preferred the more profitable large-scale meetings and high volume,
rather than focusing on delivering an exceptional level of service. In other words, these facilities, and the
service providers that operated them, really did not provide a high degree of hospitality or individual
attention because they were more focused on moving large volumes of people though cavernous spaces,
with the unintended result that meeting attendees sometimes felt like herded cattle. Food-service providers
were numerous, but the industry was dominated by a handful of giants. In Kelly and Simonetti’s opinion,
these providers were efficient and reliable, but they lacked the quality and diversity that Convene preferred
for its food and beverage offerings.
Convene’s research gave them the distinct impression that the local meetings industry was greatly
underserved by conventional outsourced offerings. For example, based on Convene’s observation,
technology and audio-visual offerings at conventional meetings facilities were usually quite primitive.
Accessing free Wi-Fi in common areas, finding a printer or scanner, or using state-of-the-art technology
resources were almost laughable concepts at many meetings venues. Frequently, meetings operators only
made many resources available after customers paid expensive add-on fees (which were often only
4
Corporate Centres are typically planned for the sole use of the parent corporation, with specialized facilities, but often
become open market centres with changing corporate needs. These centers are usually designed to high commercial
standards, and can appear to guests as comparable to executive or even resort conference centers. Executive Conference
Centers are mostly used by corporations, associations, and other organizations that emphasize the quality of
accommodations and services over price. This type of facility was developed primarily to satisfy upper-level management
meetings and educational or training seminars. Facilities usually include state-of-the-art audio/visual equipment and are
staffed with conference coordinators. Recreational amenities are usually limited. They are usually located near urban areas
with concentrations of large corporate facilities. These conference centres are typically owned by higher educational
institutions. College or University Centres cater to college or university affiliated guests, Executive MBA programs, or the
open market.
5
Rigaud, op. cit., p. 6.
6 Convention Industry Council, The Economic Significance of Meetings to the U.S. Economy, PricewaterhouseCoopers LLP,
accessed February 1, 2016, www.conventionindustry.org/Files/2012%20ESS/CIC%20Meetings%20ESS%20Update%

20EXECUTIVE%20SUMMARY-FINAL.pdf.
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disclosed after a contract was signed). There were a number of other obvious shortcomings identified, as
follows: the food and beverage services offered were commonly limited to high-calorie junk food or bland
deli trays; furniture and fixtures were frequently outdated and uncomfortable; meeting planners were often
treated like strangers; there was no place for clients to truly decompress, leading them to “escape” the
facility whenever possible; when meetings ended, attendees were often rushed out of the building so that
staff could clean up and go home; and customers were generally only provided with certain services or
amenities if they demanded them.
Convene decided that there had to be a better model — one infused with hospitality and more genuinely
concerned with the needs of customers. To address this market, the Convene team would first focus on gaining
a better understanding of the unique needs of local meetings and events clients, and then it would iteratively
adapt the facilities and service model to deliver the best possible tailor-made experience. Convene felt that
this genuine commitment to constant improvement, together with a clear understanding of purpose, would
resonate with clients and communicate to them that Convene was a company that cared about the local
meeting attendee. Kelly and Simonetti hoped that as a result, Convene would become the nationally
recognized leader in the local meetings industry — the first company to truly instill professional hospitality
into local meetings in the same way that leading hotels did for their overnight guests.
CONVENE GETS ITS FEET WET
In 2009, Kelly and Simonetti began working on their first deal, one that would become a showcase for
Convene’s business model. They were eager to firmly establish first-mover advantage, by making a
noteworthy entrance into New York City by doing something unique and impactful.
That noteworthy entrance would come through a relationship with Teachers Insurance and Annuity
Association of America — College Retirement Equities Fund (TIAA-CREF), a Fortune 1000 financial firm
whose internal meetings facility at 730 Third Avenue (its New York City headquarters) in Midtown
Manhattan became a perfect example of the value proposition that Convene was seeking to offer its clients
and partners. In November 2009, in an unprecedented cost cutting move, TIAA-CREF relinquished its large
and expensive internal conference centre to the only people interested in leasing it at the time: Convene.
Pursuant to a long-term lease, Convene took over the 17th, 18th, and 27th floors of the building. Convene
developed services and updated all furniture, technology, and equipment to transform the facility into an
independent daytime conference centre — a comfortable and tailored environment dedicated to business
meetings. The 4,177 square-metre site quickly became the preferred offsite meetings destination for the
Fortune 1000 community in New York City. Meanwhile, TIAA-CREF retained the use of the facility for
all of its meeting needs, turning a liability into a cash-flowing real estate asset that remained available as
needed for its own meetings.
BUILDING A SCALABLE SYSTEM
Kelly and Simonetti’s first deal was an opportunity borne of the financial crisis that immediately put
Convene on the map as a company that was suddenly running the largest daytime conference centre
operation in New York City. It also enabled Kelly and Simonetti to tangibly demonstrate the value
proposition that they offered to prospective clients. But immediate success brought with it immediate
challenges; now Kelly and Simonetti actually had to run a business.
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Building a business meant assembling the corporate infrastructure that would enable Kelly and Simonetti
to operate their first facility, and also determine ways to eventually scale their concept into a world-class,
market-leading brand. Scale was always their intention, as noted by Kelly:
From the beginning we knew that we wanted to be a company built for scale. Every decision that
we made — from the vendors that we chose, to the staffing model we devised, to every other small,
medium, and big decision — had to be made remaining conscious of the intention to scale. This
resulted in long-term thinking that produced much different results than seeking immediate
gratification would have.
KIT OF PARTS
To scale, Convene would require plenty of capital to expand to new sites. Convene had been able to secure
initial financing in the form of a $1.2 million convertible note, which helped to finance the renovation of
730 Third Avenue. But the company would need much more capital to add additional units and otherwise
develop a full enterprise to support its growth.
Kelly and Simonetti also realized that there were not many locations such as the 730 Third Avenue site
available, providing turnkey opportunities. Most of their growth would involve taking over space that was
not previously set up as a meeting or conference space. That meant that Convene would need to learn how
to design and develop a proprietary meeting facility model, as well as everything that went into it. To that
end, Kelly and Simonetti assembled what they called their “kit of parts” — adaptable facility prototypes
and specifications for technology, audio-visual, furniture, and fixtures that would enable them to go into
almost any space or building.
Convene could not afford to under-invest in its facilities, especially given the high profile nature of its
prospective clients. Kelly and Simonetti recognized that offering world-class facilities with exceptional
technology and audio-visual equipment, as well as finishes and furnishings, was essential to their success.
Between 2009 and 2012, Convene would invest more than $1 million in information technology alone,
seeing it as a crucial piece of their business model.
Expansion costs for new Convene facilities would soon balloon to an average of over $250 per square-
metre. Convene would also typically have to provide significant capital for security deposits, prepaid rent,
and other lease payments. Security deposits alone often amounted to at least nine months of rent. Convene
was undoubtedly a very capital-intensive business.
STAFFING
Payroll represented the most significant expense for Convene, together with initial capital expenditures and
real estate costs. The enormity of Convene’s payroll expense was derived from the fact that Convene’s staffing
model was uniquely vertically integrated. To ensure effective and efficient operations, Convene provided all
of its own services and hired all of its own employees, effectively outsourcing nothing. It was an expensive
decision, but one that would distinguish Convene from its competitors, who often outsourced many aspects
of their operations, with indirect accountability and inconsistent quality. Kelly and Simonetti decided that
Convene’s “Four Pillars” would be culinary, technology, space, and design thinking. Therefore, keeping all of
those elements in-house was fundamental to their business model.
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All staffing and operations that were not site-specific — sales, accounting, finance, marketing, technology,
planning, consulting, real estate, and ownership — were hosted at Convene’s corporate office. Kelly and
Simonetti immediately established a corporate office staff that would enable them to quickly scale. Initial
hires included 10 salespeople, three accounting and finance professionals, one marketing manager, and one
technology specialist, in addition to the two Convene principals. Convene’s corporate office staff would
grow as the complexity of its business increased. They were always investing in corporate payroll as a
prerequisite to growth, rather than as a response to it. Kelly and Simonetti would soon hire a full executive
management team to position them for future growth — an expensive team of industry veterans with the
ability to serve an enterprise many times the company’s current size, which made growth even more
necessary to justify the massive cost.
Onsite operations, meanwhile, were to be run by the vice president of operations, who would work directly
with site-specific general managers and department heads to oversee four areas: culinary, conference
production, service and operations, and technology. Each site would be self-sufficient, but resources would
support other locations as needed, based on fluctuations in business volume. The vice president of operations
would float between all locations and the corporate office, as would the director of technology.
Revenues
The meeting industry’s seasonality created one of the biggest challenges for Convene, which was to maintain
steady cash flow over the course of the year. During high times (such as March and April or September and
October), Convene might run out of available space, but it would have too much supply during slow periods.
Seasonality could also occur from week to week. There was often no rhyme or reason for it. Sometimes
facilities were sold-out all five days of the week; other weeks, they might be occupied only one day. This
challenge was made greater by the year-round nature of many expenses. Convene had steady fixed costs and
payroll to meet for the numerous full-time employees, which resulted in fluctuating cash flows from month
to month. Kelly and Simonetti would have to find a less erratic revenue model for the company.
Sales and Marketing
At 730 Third Avenue, Kelly and Simonetti knew that they would enjoy a certain amount of business by TIAA-
CREF as their “anchor” client. Their plan to retain use of the space for various events each year was an integral
aspect of their deal with Convene. But crucial to Convene’s business plan was also attracting other companies
to use the space when TIAA-CREF did not need it. This would become even more important in buildings
where Convene took over space that was not an existing conference centre, or that did not have a client like
TIAA-CREF providing significant within-the-building demand. In fact, by 2013 only about 7 per cent of the
demand across Convene’s portfolio came from businesses within their buildings.
It would take a carefully executed sales strategy to communicate to prospective clients what Convene
offered. The Fortune 1000 community was a very particular client demographic with very particular tastes
and needs. And those tastes and needs were not homogeneous — a financial services firm had a very
different profile than a cosmetics company, for example. Understanding their client demographic across all
industries and building deep relationships with them would be essential. The solution would have to be
internal. Convene would have to build a robust sales and marketing platform that would identify and close
sales opportunities in an industry where they sold space and services on a day-by-day basis. Much like the
hotel industry, it was an arduous and risky proposition. But unlike the hotel industry, Convene would have
little in-bound sales activity and would not have platforms like Expedia pushing demand to them — they
would have to do it on their own.
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EXPANDING THEIR MANHATTAN FOOTPRINT
With the success of the TIAA-CREF facility and a revenue-generating business model, Convene proceeded
to grow rapidly. In 2010, the company opened a second facility at 810 Seventh Avenue in Midtown
Manhattan, signing a long-term lease for 2,100 square metres of space that had once been used as a
conference centre for the financial consulting firm KPMG. Most recently, it had been operated by a failed
daytime conference centre that had defaulted on its lease.
Rather than renovate the existing conference facility, as it had done with its showcase site at 730 Third Avenue,
Convene decided to completely demolish and redeveloped the 810 Seventh Avenue space. This was a much
more expensive proposition, from a capital expenditure perspective, than the relatively turnkey takeover at
730 Third Avenue. However, it proved to be a wise decision. The new site provided Convene with the
opportunity to build a facility that was responsive to both its clients’ preferences and Convene’s operational
needs, based on the experience that Kelly and Simonetti had gained at the TIAA-CREF site. This resulted in
a best-in-class facility that proved to be more effective, efficient, and profitable than its prefab predecessor.
In mid-2012, Convene executed on a third project — 32 Old Slip — which established a presence for
Convene in Downtown Manhattan’s financial district, only two blocks away from Wall Street. Convene
leased 3,700 square-metres of space from Beacon Capital on a long-term lease, coterminous with its other
Manhattan facilities, and upgraded the space for a targeted opening at the beginning of 2013. The space had
previously been Goldman Sachs’ training centre. Kelly explained the strategy:
It was important for us to establish a presence in Downtown Manhattan. It may seem at first glance
like a small move, but it allowed us to cater to a whole new array of clients and expose our brand
much more prominently across the entire Manhattan market.
REFINEMENT
Despite its early successes, Convene certainly did not rest on its laurels. As the company matured, it placed
great emphasis on becoming “one per cent better every day.” That meant constantly iterating the physical
environment and the services that Convene delivered to clients. Every aspect of the meeting experience
would have to be conceived through the interconnected perspectives of meeting planners, the meeting
attendees, and Convene’s own service team.
For example, Convene constantly worked on improving its technology offerings. It introduced items such
as printers and scanners into every room and offered free Wi-Fi everywhere. Convene’s technology
resources offered features that most Fortune 500 companies would not have found even in their own offices,
such as broadcasting, the ability to simulcast, dedicated bandwidth, and audience response systems that
helped make meetings even more engaging. Convene’s goal was not to merely offer what customers
demanded. It stayed ahead of the curve and introduced customers to the latest and best products available.
Convene sought to reinvent the way that conference technology was integrated and used in meetings. Each
room in a Convene facility was outfitted with an all-inclusive technology package. In Convene’s focus
groups, many people expressed frustration at petty fees for technology resources at competitive facilities
such as hotels. In response, Convene offered meeting packages that included all of the technology that could
reasonably be expected or needed.
In addition to fostering collaboration through technology, Convene also promoted individual work,
recognizing that meeting attendees were not exempt from their day-to-day responsibilities. Business
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centres, full Wi-Fi coverage, convenient access to power outlets, and private work stations allowed
attendees to work as easily and comfortably as in their own offices. Kelly and Simonetti wanted to foster
the same kind of flexible work environment that many top hotels had created in their lobbies, where guests
could just as easily draft an email or make a video call via Wi-Fi, as check in as a guest.
For its culinary services, Convene diligently studied the science of serving large groups of people,
particularly in a business context. The team quickly learned that nutrition was integral in supporting
productivity. Considering every palate and preference, Convene created fresh, seasonal meals in its on-site
kitchens to support an enjoyable and healthful experience for its clients. Unlike the high-calorie, generic
menus offered by many other meetings service providers, Convene engineered its culinary offerings by
tasking its Executive Chef and its Vice-President of Strategy and Research to tackle, and ultimately reverse-
engineer, the top problems that meeting planners dealt with during meal times.
Through observation and interviews, Convene discovered that allergies, dietary restrictions, and special
food preferences were almost always communicated at the last minute. As part of its commitment to make
planner’s lives less difficult, Convene challenged itself to deliver a menu that would be, by default “special
order proof.” Countless tastings later, all food allergies and dietary restrictions were anticipated.
Additionally, all of its dishes were designed to hold well even if a meeting ran exceedingly long. Having
observed that food was frequently enjoyed while standing, in conversation, Convene made a concerted
effort to provide bite-sized portions that were easy and elegant to eat.
Convene also created a concept called “Nourish,” which was essentially a café within its facility model.
Nourish served as a forum for relaxation, socialization, and refreshment. It soon became wildly popular
with customers, as Simonetti discovered:
We found that far from rushing out of the facility when a meeting was over, people wanted to stay
and hang out at Nourish. It became like a neighborhood haunt for them. They would sip a
cappuccino, talk with their colleagues, and relax after a long day of sessions. It was like we had
created our own variation of the neighborhood cafe.
THE FUTURE
In just three years, Convene’s Manhattan facilities had served 64 per cent of New York City’s Fortune 500
companies. In 2012 alone, Convene had organized 900 meetings and had welcomed a total of 50,000
attendees. Convene had also shown a steady and substantial increase in revenue year after year. In 2010, it
had $5 million in total revenue and slightly negative earnings before interest, taxes, depreciation, and
amortization (EBITDA). In 2011, it reached more than $11.2 million in total revenue and $1.5 million in
EBITDA, representing a margin of 12 per cent. In 2012, it generated $14.9 million in total revenue, with a
margin of 18 per cent. Convene was enjoying fantastic success. Kelly and Simonetti were even included in
the Inc. 30 Under 30 list in 2011, an honour that Kelly also garnered separately for co-founding evoJets.
As Kelly and Simonetti contemplated what the future might hold for Convene, they recalled their original
goals for the company, which included providing a differentiated, hospitality-driven offering in the local
meetings industry. However, they had always considered taking control of internal meeting spaces from
large corporations as a limited and somewhat temporary play, borne out of the unique dynamics created by
the financial crisis. In their minds, far greater opportunities lay in developing a brand based on their stated
Vision and Purpose:
Page 11 9B16M014
At Convene, we are inspired and guided by our understanding and respect for how space and service
can positively influence collaboration and work. We strive to refine and align every aspect of our
operation to deliver a more enjoyable and productive user experience.
Kelly and Simonetti believed Convene would be able to establish a wider network of executive meeting
centres, move into strategic partnerships with other key stakeholders in the meetings industry, and as a
result create a nationally (and eventually internationally) recognized brand.
Convene’s growth trajectory had been carefully planned by Kelly and Simonetti from the start, but they
also left the company open to considerable adaptation, as noted by Kelly:
When Ryan and I created our partnership we mapped out different goals for the immediate, near
and long term, and also our dream ones. Knowing where we were going was important to us, but
ensuring that our business model was adaptable was even more important because it gave us the
ability to pursue greater opportunities than our first stage of growth allowed for.
In early 2013, with their first three facilities performing well, Kelly and Simonetti had Convene in a
strategic position to pursue its next stage of growth. Already, Convene was becoming a victim of its own
success, routinely turning down up to 55 per cent of meeting requests due to lack of availability in its three
spaces. They knew that they had to grow to serve their clients in a bigger way. They revisited their long-
term plan for Convene and set out an ambitious long-term vision for the company.
More than anything, they wanted Convene to become a brand, one that would become for meetings what
Kleenex had become for facial tissue — a synonym. They believed that having a strong brand would motivate
landlords and developers to integrate Convene’s services into commercial buildings. Just as Whole Foods had
become a “trophy tenant” for mixed-use and residential developments, and contributed to those developments’
real estate value, Convene saw itself occupying the bottom stack of major commercial office buildings and
complexes and providing the same kind of impact. Convene planned to seek out developers who would
include them in their buildings right from the development stage. The plan was to expand geographically, first
into major cities using their current business model, and then into Tier 2 and Tier 3 cities and suburban
markets, using variants of their business model tailored to those specific markets.
In early 2013, because they had focused on the local meetings industry so specifically and had developed such
a unique and novel product, Convene was in the odd and fortunate position of having no apparent direct
competition. However, Kelly and Simonetti knew that the favourable climate wouldn’t last forever. It was crucial
for them to identify and monitor the various indirect and future competitors that might mimic their business
model or otherwise erode their market share. Although Convene did not have any direct competition to speak
of, because nobody else was so laser-focused on local meetings, there were a number of indirect competitors
who posed potential threats. Businesses with existing expertise in food and beverage services, conference
planning, and information technology could identify opportunities and improve on Convene’s model.
Convene’s ability to differentiate from these indirect competitors was largely attributable to the company
being a hybrid of a number of them. In Kelly and Simonetti’s assessment, hotels may have been seen as
good providers of service and conference centres as good providers of business meeting space, but neither
one could provide them in perfect synthesis on its own, as Convene did.
Page 12 9B16M014
WHERE DO WE GO FROM HERE?
As Kelly and Simonetti contemplated the rapid growth they wanted to achieve and the tremendous
opportunity open to them, they were alternatively excited and contemplative. They had accomplished a
great deal in just three short years, evidenced by the three successful sites they were operating, their expert
team of almost 100 people, and the consistently positive feedback from current clients. They had done
something that nobody would have expected from industry novices. They essentially redefined what
hospitality meant within the local meetings industry. Looking at the walls of their corporate office, which
were covered with photos documenting their entrepreneurial adventure to date, the duo imagined what
Convene would look like in another three years.
But Convene’s success was not without challenges, competitive threats, and restrictions. Kelly and Simonetti
had grand ambitions for how quickly and extensively they could grow the company. However, as they began
planning their next capital raise, they started to realize that there would be — at least for the foreseeable future
— a wide gap between the size of their growth ambitions and the capital available to pay for it. Because
Convene was still a relatively small company that generated relatively modest revenues, it would not be in a
position in the near term to secure the kind of growth capital necessary to grow as quickly as they planned,
based on their existing model. Further, because of the large amount of capital required to build each new
Convene facility, they expected to spend the $15 million they were hoping to raise in their next financing
round very quickly. It would only finance four or five conference centres, at best.
Additionally, real estate costs were becoming progressively more problematic for Convene. In many
markets, including New York City and San Francisco, Convene simply could not achieve adequate profit
margins given how expensive rental costs were for space. Convene generally looked for gross rental rates
in the range of $400 to $500 per square metre. However, in many markets, rental rates were approaching
$800 per square metre for office space and several thousand dollars per square-metre for retail space. (In
some cases, Convene opted for aggregations of office and retail space.) Convene’s fully in-sourced staffing
model also posed a challenge — they could only justify building a facility if it was adequately sized
physically and economically to support their minimum staffing model. This generally meant that they
couldn’t justify developing spaces of less than 1,500 square-metres.
Over time, their expensive expansion standards and operating costs began to present a nagging concern for
Kelly and Simonetti: With only so much capital available each year, just how quickly could Convene really
grow? Would the capital intensiveness of their current model stymie the rapid growth that they so
desperately wanted (and needed) to achieve in order to establish a nationally recognized brand?
Kelly and Simonetti wondered whether Convene needed to adapt its business model to be less capital
intensive. If so, how should it be adapted? It seemed they would have to find ways to avoid or shift the
capital costs for new projects to other parties, such as clients, partners, or other not yet identified players in
the market. This would not be an easy task. The question was, where and with whom should they start?

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CONVENE: GETTING READY FOR GROWTH1

Copyright © 2016, Richard Ivey School of Business Foundation Version: 2016-01-02

CHRIS KELLY AND RYAN SIMONETTI

MARKETPLACE AND DEMAND

accessed February 1, 2016, www.conventionindustry.org/Files/2012%20ESS/CIC%20Meetings%20ESS%20Update%

CONVENE GETS ITS FEET WET

BUILDING A SCALABLE SYSTEM

Sales and Marketing

EXPANDING THEIR MANHATTAN FOOTPRINT

WHERE DO WE GO FROM HERE?

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