Are There Too Many Convention Centers?

The question of whether there are just too many convention centers has been debated for several years now. It seems the debate started with an article was published by the Brookings Institution, authored by  Heywood Sanders a professor of Urban Studies at the University of Texas at San Antonio, titled “Space Available: The Realities of Convention Centers as Economic Development Strategy”. In this article Sanders concluded that:

  • The overall convention market is declining in a manner that suggests that a recovery is unlikely to yield much increased business for any given community, contrary to repeated industry projections.
  • Nonetheless, localities have continued a type of arms race with cities competing to host these events, investing massive amounts of capital in new construction and expansion of existing facilities.
  • Faced with increased competition many cities spend more money on additional convention amenities, like publicly financed hotels to serve as convention” headquarters”. Another response has been to offer deep discounts.

Sanders concluded in this article that local leaders should take pause as they consider calls for even more public investment in Convention Centers.

This article sparked a fire storm in the industry back in 2005, and generated substantial response from industry leaders saying that Sanders was miss- guided and was not considering all the facts. The industry claimed that the real problem was the industry was still rebounding from the impact of 9- 11 and that Sanders was just crying ”the sky is falling”. For a while it looked as though the industry might have been right as the convention industry hit record income levels in 2007. Unfortunately that run up hit the wall with the economic recession of 2008, and the industry is still trying to make up for the losses of the last four years.

Now at the onset of 2012 we have a new article published by the Wall Street Journal, authored by Steven Malanga, titled “ Have we got a Convention Center to Sell You!, From Boston to Austin, politicians spend money on fancy white elephants”. In this article Malanga concludes that despite very optimistic projections Convention Centers are not living up to those projections and politicians should be concerned about how they are spending public money.

Not surprisingly the industry is once again “up in arms” about what they view as an assault on their livelihood.

Who is right and who is wrong in this debate? In my humble opinion both sides are failing to see the whole story. The reality is that too many cities have entered the “space race” without the benefit of a sound business case.  Convention centers are built or expanded for a variety of reasons, some as logical as a desire to capture income for the location and some as silly as wanting to show the world that our city is just as ”World Class” as your city. Unfortunately, some cities view convention centers as a piece of civic furniture and the fancier the furniture the bigger the bragging rights. It would be totally unfair, however, to decide that based on examples of bad business decisions, that all convention center investments are ill advised.  Not unlike any other business, before a decision is made to make such an investment, it is important that the location do its homework. Well-designed convention centers in attractive destinations generally do very well in terms of bringing positive economic impact to their cities. Conversely, convention centers which are poorly designed, built in unattractive locations or in locations where there are natural impediments to attracting conventioneers such as lack of reasonable airline connections, lack of quality hotel rooms or lack of non-convention attractions generally do not do well.

It is vitally important that cities which are considering an investment in public assembly facilities such as a convention center or a conference center take a realistic look at what their destination has to offer and what the market demand might be for that destination. It is just as important that the city be repaired to ask really tough questions before you enter into such an investment. An in-depth feasibility analysis should be conducted before any serious consideration is given to an investment in a convention center or conference Center. Cities must be prepared to tell the consultants who do this work that they want to hear not only good news but the negatives as well. Unfortunately, some consultants feel that they need to tell their clients what they want to hear. I believe that consultants must be honest with their clients. Sometimes the kindest thing a consultant can do is tell the client not to make the investment.

If the feasibility analysis shows that there is a reasonable business case for moving forward with the investment in the facility is vitally important that the city ensure that the facility is well-designed, flexible and can meet the needs and desires of their potential clients. Cities should be cautious to engage well experience architects and operational advisors to assure that the facility will meet industry expectations.

If the feasibility analysis shows that there is not a solid business case for moving forward with the investment in the city should be prepared to deal with this reality and find more suitable ways to invest their funds in an effort to improve the economic vitality of their community.

The real question is not whether there are too many convention centers because the answer to that question is unfortunately yes. In those cases where cities have made poor business decisions they will assuredly have to deal with the financial consequences of those will decision for a long time. That having been said if a solid business case can be made that a convention center and or a conference center can be a reliable economic generator for the community then the leaders of the community should not shy away from this opportunity.

The convention industry is a business and any decisions related to investments should be treated as business decisions.

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