Copy of a letter and Appendix to the Director
of the Millennium Exhibition Unit of the Millennium Commission
from Deloitte Touche Consulting Group
We are pleased to set out details of our appraisal
of the Millennium Exhibition Business Plan in line with your terms
of reference detailed in your letter of 8 May 1997.
In order to undertake this appraisal we have
reviewed the business plan and held discussions with certain key
individuals from Millennium Central (MCL). Our work has been particularly
constrained as we have not had sight of the creative content proposed
for the exhibition. As there is so little information available
on content and as this is the main business driver, our review
is consequently limited. We have also made comments on the quality
of business plans and the general state of readiness based on
the limited information provided. Whilst our work has been undertaken
conscientiously and to our best endeavours, the review has, at
your request, not involved substantive new work or detailed scrutiny
of all of MCL's background material and as such we can in no way
underwrite, guarantee or otherwise endorse our findings.
You have asked us to review four specific areas
of the business plan as follows:
1. the estimated operating costs, covering
all the projected revenue consequences of running the exhibition
the site and the structures;
2. forecast ticket income; having regard
to exhibition content demand factors, marketing, pricing policies,
ticketing technology, and site related throughput constraints;
3. forecast income from private sector sponsorshipin
cash and in kind;
4. forecast income from other sources, (catering,
retail, hospitality, media and merchandising.
In relation to the above four points you have
stated that the appraisal will be required to satisfy the commissioners
that MCL's proposals are likely to be deliverable to timetable
and within the maximum level of grant already agreed. We have
summarised our findings in the form of a matrix at Appendix 1
with an executive summary set out below.
Content & Revenues
This scheme is totally driven by the content
of the exhibition and is dependent on creating a significant "WOW'
factor. As we have not been able to see details of the content
and have received only a vague indication of the basic conceptan
audience based show set in a 10,000 seat auditorium within the
dome and with timed ticket admissionwe have had to make
one overriding assumption, that the content of the exhibition
will be of such a high standard that it satisfies the build-up
of press and public expectation. However, given that the content
is so critical to all of the revenue streams, including sponsorship
we have identified the potential risk to revenue should the high
quality of show content not be achieved (appendices 1 & 2).
On the basis of the limited information made
available we believe that the estimate of 12 million visitors
is at upper end expectations. The dwell time of 5 hours is at
the lower end of our expectations for a traditional exhibition
or expo but may be appropriate for an audience based show format.
However there is a risk that with an audience based format with
undeveloped content, the estimate of an average ticket price of
£17.50 maybe too high.
In the absence of sight of detailed demand management
plans our provisional view is that it may prove difficult to achieve
the target of 12 million visitors given the restriction of two
admission sessions a day for 140 days plus one session a day for
the remaining days. We would therefore regard the target as the
very upper limit at this stage.
In terms of costs, MCL have provided us with
a detailed breakdown of staff costs which represents over 57 per
cent of the total operating costs. Included within this cost is
a significant sum (approximately £8.9 million) for contingencies.
Whilst we lack details on Drum Show labour costs, the sum allocated
together with the contingencies appear to be adequate.
We express concerns regarding the readiness
of the exhibition. Whilst we understand that a great deal of effort
has been focused on the physical structures, we believe this may
have been to the detriment of some of the "soft" issues
such as pricing policy, demand management, marketing, sponsorship
strategy and ticketing technology. We would have expected that
some of these activities would have been initiated and some completed.
Again, we have identified the potential risk to revenue should
these activities fail to be implemented adequately or on time.
We believe that it may be almost too late for
the project to be delivered on time but with a significantly strengthened
management resource and a very clear focus on the most pressing
activities, the added momentum may enable the project to be brought
back on timescale.
Additional Contingent Sum
Overall we have calculated that in the worst
case scenario, the additional net risk could be in excess of £122
million (appendix 2) but we have seen very little evidence of
risk sharing or risk shedding strategies which would spread this
liability amongst private sector partners.
We have noticed that the latest submission of
the business plan has now moved a long way from the scheme originally
proposed in December 1995 including:
fundamental change from exhibition
based event to an audience based event;
changes to the national programme
which from the limited papers we have seen, no longer give a clear
link to the Exhibition;
no transport inclusive ticket available;
undeveloped proposals for the use
of the site as a landmark venue during millennium year.
At the same time as all of these changes have
been made to the scheme, there have only been limited revisions
to the scheme costing. We are therefore concerned that if the
scheme were being proposed in this format for the first time,
the basis on which the scheme is costed and evaluated is likely
to be significantly different. For example, as the project is
now an audience based scheme supported by a limited exhibition,
this has physical implications for the site structures. As such
the Commission will need to consider whether the Dome structure
delivers value for money for this project.