Brookings Study Critical of Facility Expansions

Convention centers are wasting city funding, says critic of industry

By Rachelle Crum -- Tradeshow Week, 1/31/2005

There are so many reports on the state of the convention and exhibition business that few take notice as they come and go. But when an industry study attracts the attention of more than a dozen national press outlets, including the New York Times and USA Today, many start reading it word for word.

In "Space Available: The Realities of Convention Centers as Economic Development Strategy," published this month by the Metropolitan Policy Program of the Brookings Institution, author Heywood Sanders criticizes convention center expansions, stating that many centers aren't able to attract enough shows to fill their calendars in the first place.

"The overall convention marketplace is declining in a manner that suggests that a recovery or turnaround is unlikely to yield much increased business for any given community," wrote Sanders, a public policy professor at the University of Texas at San Antonio, who has commented on urban renewal and the tradeshow industry for more than two decades.

Sanders conducted his research to "give local leaders pause as they consider calls for ever more public investment into the convention business, while weighing simultaneously where else scarce public funds could be spent to boost the urban economy," according to the report, one of over a dozen MPP Competitive Cities studies.

"There is only a limited relationship between exhibition space and show attendance," Sanders told Tradeshow Week. "If we look at the attendance yields historically at convention centers that have expanded, having more space doesn't yield you more attendees. This is a pretty widespread phenomenon."

Sanders said many people liken the trend of constructing or expanding convention centers in hopes of attracting shows to "building the church for Easter Sunday," he said.

Many industry executives agree that supply and demand for exhibition space is currently out of whack — as the industry recovers from the events of Sept. 11, the SARS outbreak and the tech bust. However, most call the study overly pessimistic and say they are confident that continual construction and expansion of convention centers is essential.

There have been gripes about the glut of exhibit space for years, especially in smaller U.S. cities; however, several large and midsize metropolises — such as New York, Las Vegas, Philadelphia and Indianapolis — turn business away as they race to keep up with exhibition space demand.

Sanders states in the 36-page report that — among other cities — New York has seen a "significant loss in recent convention activity."

However, the city's Jacob K. Javits Convention Center reports that it has had to avert tradeshows for years due to its lack of space. Managers of the facility's existing shows have had long waiting lists of exhibitors, because their shows' growth has been stunted by the facility's size.

In December, the Javits' long-awaited $1.4 billion expansion was approved and, within hours of its go-ahead, show managers were fighting for choice future dates.

New York is "a perfect example of a destination where demand has remained high," said Robert Canton of PricewaterhouseCoopers' convention and tourism practice.

Canton, who wrote an analysis supporting the Javits expansion, said Sanders' study is flawed by its countless blanket statements about expansions. "You have to really understand each individual market," Canton said.

Furthermore, he said, major convention centers that responded to PWC's 20-year-old occupancy survey indicated that demand for exhibit space increased 7 percent between 2003 and 2004.

Sanders disagrees — slightly. "It's not clear that the (Javits) expansion would yield any addition tradeshow attendance beyond what was there in the 1990s," he said. However, Sanders added, the likelihood that the expansion's projected additional attendance will show up is "of course, open to question."

PWC's feasibility study projected that an expanded Javits Center would attract an incremental attendance of approximately 419,000 visitors per year.

The Las Vegas Convention Center is one facility that may never have enough space. The massive center was one of three venues for the Jan. 6–9 Intl. CES, which spanned over 1.5 million net square feet.

The Las Vegas Convention & Visitors Authority in January unveiled a $400 million expansion and renovation of the LVCC. Although the project will only add about 40,000 sq. ft. of exhibit space, the reward from retaining popular shows like Intl. CES is priceless.

Shows like this "do, in fact, bring dollars into the community that otherwise wouldn't be there," said Canton.

This year, Intl. CES generated $167.4 million in non-gaming economic impact and broke attendance records, with an estimated 142,585 attendees.

Another January show, THE INTL. BUILDERS' SHOW, made Orlando city officials grateful for their continual investments in the 2 million-plus sq. ft. Orange County Convention Center. The show was the OCCC's largest show ever — at more than 1.5 million gross sq. ft. with 105,000 attendees.

Nevertheless, Sanders claims in his report: "Las Vegas and Orlando too have been hard hit by the recent change in the industry, with major new expansions yielding almost nothing in terms of increased business."

However, Sanders told TSW, Orlando is "really quite promising. I would say that the OCCC will do well," but, he added, "some folks may go to Orlando and choose not to come back."

Besides, Las Vegas and Orlando will always be the powerhouses of the industry, Sanders said. "A city like Las Vegas or a community like Orange County (Fla.) have revenue bases that year in and year out will generate so much money that they can out-market, out-advertise and out build almost anyone else," he said.

Also, according to Sanders' report, "The biggest convention centers in the nation — Chicago, Atlanta and Orlando — are not expanding in order to serve the relative handful of very large events."

Like New York, Indianapolis claims it has lost several shows that have outgrown its convention center. The Performance Racing Industry Trade Show, No. 65 on the most recent TSW 200, called the Indiana Convention Center & RCA Dome home for seven years until 2004. The 308,000-plus sq. ft. show will move to the OCCC this year. However, show manager Karin Davidson has said that she would return the show to the country's racing capital after the ICC adds 250,000 sq. ft. of exhibit space by 2010.

Another TSW 200 show, CEDIA Expo (Custom Electronic Design & Installation Assn.), has also outgrown the facility and will move to Denver's Colorado Convention Center following its Sept. 7–11 show at the ICC.

No need for Indianapolis to worry, Sanders said. Although his study reports that there aren't enough shows to go around, he said, "For each event that actually leaves, it's entirely possible for a center to replace an event. In this environment where a large number of centers are offering discounts, events are likely to hopscotch."

Frank Poe, Dallas Convention Center director, said convention centers do more than just generate revenue — they host gatherings like citizen meetings and consumer shows. "Cities primarily want these (centers) for economic return, civic pride and quality of life," he said.

As proof, Poe pointed to tiny Gardendale, Ala., which built a civic center as a social outlet for residents, especially senior citizens, even though "they knew that the return in dollars and cents wouldn't be there."

As well, said Canton, public funds spent on expansions typically must be reinvested to promote tourism. "It's not like these dollars are available for schools or filling potholes," he said.

Sanders said a community should "build a center it could be proud of." However, he added, if a community expects to garner continual significant business, then that "is not very sensible" and it "is not likely to advantage your community. Build it for your community and right-size it for your community," Sanders said.

In national press reports of his study, Sanders said, he noticed city officials shrugging off his pleas to cease expansions, saying, "But we're different." What that suggests, he said, "is that a great many cities will continue building."