Too Much Reliance On Conventions

January 28, 2005
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GRAND RAPIDS — Talk about bad timing.

Just when the Convention and Arena Authority can revel in the fact that the four-year-long effort to build the new $212 million DeVos Place convention center has reached a joyous conclusion, The Brookings Institution puts a damper on the party by releasing a report that says the convention business is in the crapper and is likely to remain there for years to come.

The national study from the Washington, D.C.-based think tank looked at the business from 1990-2003 and reported the industry was already headed downhill before the 2001 terrorists attacks, events that convention insiders have cited as starting the industry’s spiral.

Despite a faltering convention business, cities still spent, and went into debt, for new and expanded facilities and hotels. Across the country, city officials doubled their expenditures from $1.2 billion in 1993 to an average of $2.4 billion annually in 2001, 2002 and 2003. All that capital investment swelled the nation’s exhibit space by half again, as it went from 40.4 million square feet in 1990 to 60.9 million in 2003.

The report added that as many as 40 cities, including Grand Rapids, were either planning or building another 5 million square feet of exhibit space with the hope of creating new jobs and adding new tax revenue. But the think tank offered a different outcome.

“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 generated into local economies,” read the report.

One of the many cities the report profiled is one that local convention officials are keenly aware of: Denver. Grand Rapids was a finalist last year with Denver and two other cities for the U.S. Green Building Council convention, a large meeting that would have brought 8,000 delegates who would spent an estimated $1.7 million here.

But the Mile High City won the convention by offering its meeting space to the group for free, although the Brookings report showed that Denver’s annual convention and tradeshow attendance had plunged from 250,000 in 1998 to 150,000 in 2003 — a dive of 40 percent in just five years.

Despite that freefall, Denver officials opened their newly expanded convention center in December. The city spent $310 million to double the building’s size to 2.2 million square feet, with an exhibit space the size of a dozen football fields or 584,000 square feet.

The building is large enough to hold all 550,000 residents of DenverCounty, if each stands in a two-by-two-foot-square of space. The city also is putting up a new 1,100-room hotel that opens in December across from the convention center.

The Brookings report said another convention competitor, Indianapolis, was on a fairly lengthy losing streak. The city made downtown investments that totaled $4.4 billion from 1974 to 2000 to attract convention-goers and tourists, and grew its downtown hotel-room inventory from 2,064 in 1986 to 5,130 in 2003. But the city’s tradeshow attendance has gone in the opposite direction, from 608,467 in 1996 to 402,525 in 2003, a fall of 33 percent.

Even longtime successful convention locations like Chicago’s

McCormick Place
have hit the skids. The building hosted 1.14 million convention-goers in 1996. Brookings, though, reported that number nosedived by almost a third to 767,207 in 2003.

The local Convention and Visitors Bureau commissioned its own study last year to get a better handle on business for

DeVos Place
in the coming years. The report, done by the Strategic Advisory Group (SAG) of Duluth, Ga., presented its findings in room nights and not in attendees.

The result showed that the city can expect total convention-booked room nights to grow by 13 percent to 70 percent from its most recent number of 46,000, now that the city has twice the meeting and exhibit space it had in the old GrandCenter

“Using the methodology that we used, it’s somewhere between 50,000 and 75,000 room nights a year — upon stabilization, and that means three, four, or five years down the road — should be able to be generated by the CVB compared to their current 46,000,” said Tony Peterman, a partner at SAG, in October.

Also down the road, in 2008, Alticor Inc. plans to open its new $70 million hotel at

Pearl Street
and
Campau Square
to meet the expected increased demand from conventions. The design of the hotel is to be unveiled in a few weeks and it is expected to have 340 rooms.

DeVos Place
, which celebrates the end of construction this week, has been projected to lose $1.39 million this year. The building lost $1.19 million during the last fiscal year.

The Brookings report laid the blame for cities over-spending on convention facilities on those who promote the convention business, charging them with hiding the reality that the industry had been in decline before many of the public dollars were committed. As for the cities, the report concluded officials believed too strongly that bigger convention facilities would lead to larger economic gains.

“The bottom line: With events and attendance sagging in even the hottest destination spots, few centers are even able to cover basic operating costs,” read the report, “and local economic impacts have fallen far short of expectations.”    

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