The Flutter of Butterfly Wings

On the cover of this week's Tradeshow Week you can read about the latest exhibition space coming online in Las Vegas. Boyd Gaming says it will add somewhere around 1 million square feet of meeting and exhibit space to the Las Vegas mix by 2010.

This is on top of the 1.4 million sq. ft. that the Las Vegas Convention & Visitors Authority expects hotels by 2010 to add to the existing 9.4 million sq. ft. And that figure is on top of the 800,000 sq. ft. that Sands officials have said will be part of a forthcoming expansion, and the 500,000 sq. ft. rumored to be headed to Harrah's.

By an interesting coincidence, this announcement comes almost exactly a year to the day after the release of the notorious Brookings Institution report, where public policy professor Heywood Sanders claimed there was an unnecessary glut of exhibition space in the United States.

Well, so much for taking Sanders' counsel seriously.

Granted, Sanders might say, his concerns were not about the big private-sector players in the Tier I cities; he was worried about the smaller-city mayors and council members with stars in their eyes. However, his warnings apparently meant nothing to Las Cruces, N.M.; Tunica, Miss.; or Anchorage Alaska; all small cities that have recently given the go-ahead to convention center projects.

And his warnings certainly meant nothing to Hilton Hotels, which is turning over a new leaf by going into the convention center management business — in Branson, Mo.

One caveat: When it comes to our core readership of show managers, this supposed oversupply of exhibit space, no matter where it is, evokes the old business of the fluttering of a butterfly's wings in Peru ultimately contributing to a hurricane in the Atlantic Ocean.

Regardless of where it is located, more exhibition space is always better for show managers. The greater the competition among venues, the easier it is for managers to get the price they want, wherever they want.

Still, the Boyd Gaming announcement has got me thinking. With all this new exhibition space that could potentially come online in Las Vegas over the next four years, at least three scenarios could play themselves out.

First scenario: There really is a need for this much exhibit space in Las Vegas.

Heaven knows that in its pitch to investors and the media, Boyd Gaming has plenty of research (some of it from TSW) demonstrating that the city's allure keeps growing. Every year, more and more people are visiting Las Vegas, spending more and more money — and not all of it is going into slot machines.

Several times a year, giant tradeshows spread themselves over multiple venues, placing booths in every nook and cranny available and filling almost every hotel room in town. As I write this, Intl. CES has taken over Las Vegas in just such a way. Traffic was so ferocious, TSW Senior Editor Heidi Genoist (who lives in Las Vegas) opted to ride her bike to the show over driving or waiting for a taxi.

What's more, the decisions to build these venues are not being made by small-town politicians hoping their legacy will be a convention center bearing their name. They're being made by private-sector entrepreneurs with billions of dollars given to them by investors who expect them to do their homework.

The key question here, of course, is whether that upward sloping line on the graph will continue to slope upward.

Second scenario: Las Vegas' biggest players, recognizing there are a finite number of square feet available on the Strip, are messing with each other.

There is a history of this that goes back at least as far as the day Sheldon Adelson wondered if he couldn't just build his own convention center for COMDEX. Or am I reading too much into the fact Boyd wants to build 650,000 sq. ft. of exhibit space a block from the Las Vegas Convention Center?

In 2004, 38 TSW 200 shows were held in Las Vegas. Those at the top of the list are venue-bound, and could be looking for overflow space, as CES' expansion to the Sands this year illustrates. At the same time, all but 10 of the 38 shows measured less than 650,000 sq. ft. Think any of those 28 show managers might already be planning to do a little price shopping? Think the idea might have been to make somebody at the Sands or Mandalay Bay sweat a little?

Third scenario: Sanders is right.

Never mind the Bransons and Tunicas and Knoxvilles of the world. What if it does indeed come to pass that five years from now there just isn't the need for 12 million or 13 million sq. ft. of exhibit space along a single five-mile stretch of the Las Vegas Strip? What if there is a tipping point?

As I already said, much of this new venue development is being funded by private-sector dollars — and private-equity money is everywhere today. According to Jordan Edmiston Group Inc., the value of deals in the media and information sector was up 87 percent in 2005 over 2004. The value of deals involving exhibitions and conferences was up 128 percent.

Much of that activity is coming from private-equity funds. And there are countless entrepreneurs on the sideline with cash to spend who can't find a deal. All the available cash has got to go somewhere.

I seem to remember another time when a Federal Reserve chairman coined the phrase "irrational exuberance" and people kept talking about "bubbles" bursting, but don't mind me. If you're a show manager, just keep in the back of your mind that idea about the flutter of butterfly wings creating a hurricane.

And watch the price of exhibit space go down.