Near the intersection of Red River and Cesar Chavez, a large construction project is underway. A $370 million luxury hotel is being built there, the Fairmont Austin. A year ago, this construction site was a parking lot, rented out as a venue during South by Southwest.
Iggy Azalea and Charlie XCXperformed there in 2014 at the MTVuWoodie Awards. The next year, and this year, the Woodie Awards were pushed out of downtown to the other side of Lady Bird Lake, in the parking lot of the Austin-American Statesman.
As development fills downtown lots and prices for Austin real estate rise, how is this affecting event booking during South by Southwest?
"We’ve seen everything from $2,500 for a simple half-day buyout of a bar space on West 6th to $20,000-per-day base venue rental with additional food and beverage guarantee, gratuity, et cetera," says Jude Galligan, a realtor who runs DowntownAustinBlog.org. He gets everyone from advertising agencies to Silicon Valley startups asking him to play matchmaker with event spaces.
“Man, some can be completely unreasonable, and others kind of just go with the flow," he says. "A lot of these people are shocked at the rents that people are asking."
He says the South by Southwest premium on rental space is anywhere from two to five times more than normal. Others who work in real estate downtown have said it can be as high as ten times.
"I think we have kind of plateaued as to what venue operators can expect," Galligan says. "I can point you now to three downtown operators who would actually be very interested in setting up a venue space."
There may be fewer empty lots, but there are a lot more small spaces to rent.
“If you look at South by over the last 10 years, Rainey street wasn’t in existence 10 years ago," South by Southwest special projects manager Brad Spies says. "East Austin was not how it is now, so there’s been a lot more supply of bars and music venues and restaurants and spaces. The demand, I would say has kept up, and then some.”
It seems Austin has grown right along with South by Southwest. But who can afford the high prices? McDonalds can; so can Pepsi, Samsung, and Spotify. But what do they get out of it?
To find out, I went to an event hosted by Deloitte Digital, a creative digital consulting firm that is part of Deloitte, a multinational company that earned more than $35 billion in revenue last year.
The event was at the Palm Door on 6th Street. Not only did they have performances by Baio - a side project by Vampire Weekend’s bassist - and the Grammy nominated artist RAC, but they also built a futuristic-looking musical instrument they called the ARC — a large white circle people could stand around in the darkened room and touch glowing geometric shapes to make music come out of speakers that surround it.
"We didn't care about the cost, we thought about the experience," Deloitte Digital's Chief Transformation Officer Rob Frazzini said.
There was more digital art, a spray painted mural, free appetizers and drink tickets were being handed out at the door. Admission was free.
“Certainly it is about branding, and it’s about setting this new tone," Frazinni said. "We believe we’re a new breed of organization, and it’s certainly important to show the market that."
"We also think that our clients coming through, it helps them visualize and pushes them to places they haven’t thought of before, and that also has a return," he said. "But also, there’s an amazing amount of talent at South by Southwest, and we are constantly looking to add to talent.”
What better way to seem like a cool place to work than throw a big party with hip musicians and futuristic conceptual instruments? Great, if you’re one of the world’s largest digital consulting firms. But what if you’re not?
“There’s a gentrification of the event as well," Spies of SXSW says. "I mean prices are going up for all sorts of services, and to rent a venue, whether it’s for three hours or for nine days, rising prices limits who can come in and who can afford to be there.”
South by Southwest music pays for the venue rental so their “presenters” — often small record labels or media outlets — can curate the musicians. Those presenters aren’t making a lot of money, but they are getting exposure.
“We want the little guys to come in and have a spot and show what they’re doing that’s new and different," Spies says.
But if you’re outside the South by Southwest umbrella, you have to pay those costs yourself. You might do what a lot of people are doing and move further away from downtown.
The DJ collective Peligrosa, for example, is holding a five-day event further east down 6th Street near Comal. Then again – the alternative is to just hold your event next week, when all the crowds have left town and a fraction of the people are around to see it.
