More on why a new convention center is a bad idea
December 07, 2009
As promised, here are some telling excerpts from the Brookings Institution report on why cities should not, at this time, making investing in new convention center space a priority
However, while the supply of exhibit space in the United States has expanded steadily,the demand for convention and tradeshow exhibit space, and the attendees these events and space bring to a city, has actually plummeted.
Many cities have seen their convention attendance fall by 40 percent, 50 percent, and more since the peak years of the late 1990s. The sharp drop has occurred across a range of communities, including a number of the historically most successful convention locales in the nation.
Nonetheless, new public capital spending for convention centers has doubled over the past decade, growing from $1.2 billion in 1993 to an average of $2.4 billion annually from 2001 through 2003. That massive spending has fueled an expansion of center exhibit space from 40.4 million square feet in 1990 to about 60.9 million in 2003, a 51 percent increase over the 13 years. And some 40 cities—including New York, Chicago, Denver, Hartford, Tampa, New Orleans, Detroit, Albany, Raleigh, Phoenix, and Colorado Springs—are planning or building as much as an additional four to five million square feet of space in the hopes of boosting jobs and tax revenue.
***As these examples show, the decision to build or expand a convention center is predicated on the assumption that “if you build it, they will come.”. . . . Unfortunately, the pervasive market information provided to these localities and their decision-makers is fundamentally flawed and inaccurate.
Simply put, the overall convention marketplace has shifted dramatically, in a manner that suggests that a recovery or turnaround is unlikely to yield much increased business for any given community. Less business, in turn, means less revenue to cover facilities’ expenses, and less money injected into local economies.
***Orlando’s Orange County Convention Center, like the Las Vegas Convention Center, has benefited from the combined fiscal benefit of tens of thousands of local hotel rooms— which generate a substantial revenue stream for center expansion and marketing—and the unique leisure and visitor amenities of its location. [Note, not "if you build it they will come," but "they are already coming, which gives you the revenue to build it."
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Some cities have long managed a successful role as visitor destinations as a result of their history, amenities, and distinctiveness. Both Boston and San Francisco are such locales, where a convention center can build on a large base of hotel rooms, restaurants, shopping, arts, and cultural facilities.
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In sum, major destinations like Chicago and New York, Atlanta and New Orleans have seen serious declines in events and attendance in recent years. Those declines have also had a clear impact on centers in Las Vegas and Orlando which have historically gained market share, events, and attendance. Finally, a host of other communities of varying size and regional location have also seen notable changes, in the form of substantial loss of events and attendance. Even those cities that have invested in major center expansions have seen flat business, despite earlier market and feasibility studies that predicted more space would bring substantial increases in events and attendance. . . . The bottom line: With events and attendance sagging in even the hottest destination spots, few centers are even able to cover basic operating costs—and local economic impacts have fallen far short of expectations.
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The declines in events and attendance experienced by convention centers in recent years do not simply reflect a move from one city to a less attractive one, or a dramatic restructuring of a particular event. Rather, they are the product of industry consolidation, particularly in the hardware and home improvement industry, reductions in business travel in the face of increasing cost and difficulty, and alternative means of conveying and gathering information.
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The first of these costs is, in fact,
more costs. The fact is, investment in a new convention center often doesn’t end with the facility itself. Faced with convention centers that are routinely failing to deliver on the promises of their proponents and the forecasts of their feasibility study consultants, many cities wind up, as they say, “throwing good money after bad.” Indeed, weak performance—an underutilized center, falling attendance, an absence of promised private investment nearby—is often the justification for further public investment. A new center is thus often followed by a subsidized or fully publicly-owned hotel, then by a new sports facility such as an arena or stadium (occasionally combined with the convention center), ultimately by an entertainment or retail venue, and perhaps a new cultural center or destination museum.***
With the commitment of such huge sums to convention centers and related facilities
comes a serious second cost—the
opportunity cost of not investing this money in other public goods, even those aimed at downtown revitalization and economic development. The taxes on restaurant meals, car rentals, and general sales taxes that pay for convention centers are legitimate public revenue sources, which could be used for a broad array of local public purposes. The investment of $400 or $600 million in downtown revitalization— including housing, retail, and infrastructure—could provide a substantial development stimulus and inducement to private investment, for example. And in any given city, investments in transportation, industry cluster development, schools, neighborhood development, or any number of other priorities may be likely to yield far more bang for the buck. These projects have greater direct appeal to local residents, and thus offer greater likelihood of success In short, at a time when city finances are obviously stressed, the price of a failed convention and visitor strategy can be measured in terms of all the other investments, services, and fiscal choices that will be never realized as a result.***
Today, as all cities are obliged to compete with dozens of others, the prospects of real economic development and opportunity based on the convention strategy appear nil. Any serious approach to dealing with urban needs and problems in cities like Baltimore and Washington, New Orleans, Atlanta, Milwaukee, St. Louis, Detroit, or even Minneapolis and San Antonio must seek an alternative path based on different kinds of investments.
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What is even more striking, in city after city, is that the new private investment and development that these centers were supposed to spur—and the associated thousands of new visitors—has simply not occurred. Rather, city and convention bureau officials now argue that cities need more space, and more convenience, to lure those promised conventions.
And so underperforming convention centers now must be redeemed by public investment and ownership of big new hotels. When those hotels fail to deliver the promises, then the excuse is that more attractions, or more retail shops, or even more convention center space will be needed to achieve the goal of thousands of new visitors.
There is no doubt that local meeting and event space provides an important public amenity for communities of all sizes. And few would disagree that even large-scale convention centers can be an asset for certain highly competitive cities, and certainly for the industries and visitors they host.
Nationwide, however, it is abundantly clear that a new or ever-bigger convention center cannot in and of itself revitalize or redeem a downtown core. It is also distressingly apparent that convention centers and massive public commitments to visitors and tourism can do little to address the large problems of poverty, decay, population loss, and housing abandonment that plague our older core cities. By understanding these limitations, local leaders will be better positioned to make more informed policy choices and develop more holistic economic development strategies.
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