Wednesday, January 26, 2005

Convention Center - What You Need To Know

Some facts you probably aren't getting from your normal media outlets. This report was recently released by the Brookings Institute saying convention centers are a really bad investment for cities. The report was dismissed by Mayor Jennings and other politicians in Albany. So when not studying the impact of convention centers on urban economies and populations what do the people at the Brookings Institute work on? How about these topics? Smart Growth and New Urbanism and Ten Steps to Vacant Land Reform. These people study how to make cities better. Meanwhile, Mayor Jennings is betting on a report by some paid consultants who only make money if people want to keep building convention centers. More on that later. To the facts.

The Bloomberg View

An article was recently written about the Brookings report on convention centers by Joe Mysak, financial writer at Bloomberg.com. Here are some highlights.

"If you are a city official, editorial writer, or taxpayer, you should read this report."

""Space Available'' is a damning piece of work, full of facts and figures you should keep at hand next time someone suggests that your municipality should build or expand a convention center."

""Space Available'' should be required reading in every municipality that wants to bond its way to economic development."

As a taxpayer whose municipality is planning to bond its way to economic development, I think you might want to read the article.

Visit http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_mysak&sid=amCHwCDBaTHc

The Strategic Advisory Group (SAG)

Mayor Jennings dismisses the Brookings Institute Report and claims that the 4 year-old Strategic Advisory Group report proves that theAlbany Convention Center is a good idea. If you read the Brookings Institute Report in full (and I recommend you do) you will see that two of the biggest money losing Convention Centers are in St. Louis and Washington, DC. If you check out the Strategic Advisory Group's list of clients, you will see that they recommended both convention center locations. These people are consultants. They get paid if people keep building convention centers. It is in their best interest to keep the industry moving forward even if it is in a downward spiral. Are they paying the taxes to support these money losers in St. Louisor D.C? I realize that not all convention centers make money (only2 or 3 in the country do). But there is a limit to how much they can lose without having a large negative impact on their city.

In their May 2004 update of the 2001 report, SAG estimates that new space will be added to the market at a rate of 2.2% a year from 2004 through 2008. This despite increases of space of 7.1% in 2002 and6.3% in 2003 and all the new planned centers across the country. Where is the basis for this projection?

The SAG May 2004 update report uses the new Rhode Island convention center as a success story (pg. 11). However, they provide no numbers on how the convention center is doing financially or the impact the center has had on local hotel bookings.

The SAG report fails to mention the recent troubles with the new Boston convention center (see below).

The "unique" approach of the SAG report is to interview regional meeting planners. Mayor Jennings has said this is why he puts faithin the SAG report over the rigorous analysis of the Brookings report(WROW Radio Show, Jan 21). The 2004 SAG update claims to have spoken to 25 regional meeting planners. The format of the data they present is highly suspect and would never be acceptable in a typical business plan. They provide "examples of the questions that were discussed and a general consensus of the answers provided". You would be laughed out of any business plan presentation, venture capital pitch, or basic marketing meeting if you presented data in this fashion. It has NO significant value. No one in the private sector would gamble $185 million based on this.

The "Unique" Argument

Mayor Jennings says that Albany is unique and thus immune to the reality of the convention center industry collapse. Ironically there are Mayors across the country making that very sameargument. Anchorage, Alaska. Jackson, Mississippi. Lancaster,PA. Raleigh, NC. Vancouver, Washington. Indianapolis, Indiana. Baton Rouge, LA. Santa Cruz, NM. Erie, PA. Omaha, NE and more. Wehave a convention center industry that is in decline and overbuilt andwhat do we do? Build more! The great Space Race. Just some of the articles from around the country:

Raleigh, NC
Santa Cruz, NM
Indianappolis, IN
Vancouver, WA
Erie, PA
Jackson, MS
Lancaster, PA

And more are out there.




Boston's Mistake

Here are some quotes from the 2001 testimony of Charles Chieppo, House State Administration and Long-Term Debt Committees, discussing the planned convention center in Boston (they went ahead and built itanyway).

"Building this convention center is the functional equivalent of spending a billion dollars on a printing press in 2001. This market isnot coming back."

"The cities that are still making it in this industry--and you can count them on one hand--have a recipe that includes year-round warm weather, resort or destination locations, lots of inexpensive hotel rooms within walking distance, and abundant airline access." (Doesn't sound like Albany, does it?)

This testimony was coming at roughly the same time that the Strategic Advisory Group said Albany was a great place in the Northeast to have a new convention center. In Boston they didn't consider the facts or listen to Mr. Chieppo. And guess what happened?

"The new Boston Convention & Exhibition Center opened earlier this year with only four conventions booked for 2004 and officials therehave admitted the feasibility study justifying the center hadproblems."

They already made their big mistake based on a flawed study from consultants who ignored the economic realities of this market. I suggest we learn from it!

Want more information about the Boston situation? It's all here.

Omaha

Same story in Omaha. Omaha's Qwest Center opened in 2003. It has yet to recruit anywhere near the 28 or more conventions annually that were projected in an early feasibility study. That study was used as part of the justification for a convention center.

Still feeling good about this "transformational project"? Really? Then you must be a politician or in line to get the business to build the convention center or a consultant that will get paid to update this report again next year. Or you must like paying higher taxes.