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If We Build It, Will They Come? Heywood T. Sanders - Department of Urban Administration - Trinity University White Paper No. 1 - February 1997 The Great Space Race When the War Memorial Auditorium opened in 1965 with 130,000 square feet of exhibit space, the competitive world of urban convention centers was far simpler and smaller than today. Boston’s facility was dwarfed by New York’s Coliseum (320,000 square feet), Chicago’s McCormick Place (more than 300,000 square feet), and the new convention hall in Cleveland (440,000 square feet). Still, Boston offered the amenities of a major city and the new hotel rooms of the Sheraton at Prudential Center. Los Angeles still lacked a modern convention facility. San Francisco was largely dependent on the Cow Palace on the city’s outskirts. St. Louis hosted meetings in the vintage 1934 Kiel Auditorium. Atlanta’s civic center would provide only 70,000 square feet of exhibit space. And New Orleans’ Rivergate (100,000 square feet) would only open the following year. Perhaps most interestingly, there were no convention facilities in Orlando, Florida or Anaheim, California. And Las Vegas had only just begun to discover the economic impact of the convention business. Today, even with 600,000 net square feet of exhibition space, a new Boston convention center would be dwarfed by Chicago’s McCormick Place (2.2 million square feet) after its $987 million expansion program largely completed this January. The Atlanta Civic Center now serves as a science museum, with conventions and shows housed in the Georgia World Congress Center (950,000 square feet, plus 100,000 square feet in the adjacent Georgia Dome). New Orleans’ Rivergate has been demolished, and replaced by the Morial Convention Center (soon to total 1.1 million square feet of exhibit space). Las Vegas now boasts both a publicly owned convention center (970,000 square feet of exhibit space) and a private facility, the Sands Convention Center (935,000 square feet). Along with the draw of Disney theme parks, Orlando boasts 730,000 square feet of convention center space and Anaheim, 670,000. Even as the Commonwealth of Massachusetts contemplates and debates spending hundreds of millions in public dollars on a larger convention facility, New Orleans, San Francisco, Anaheim, Orlando, Washington, and Las Vegas are embarking on their own expansion efforts. Revenue Bonds and Dedicated Visitor Taxes In a confidential memorandum to then-Mayor Anthony Celebrezze in 1956, Cleveland’s auditorium commissioner noted the increasing pressure from local hotel owners for a new and expanded convention center. Commissioner Paul Hurd recounted the urge to keep up with competitive cities, noting "that Detroit and Chicago now have large exhibition halls in the planning stage [and] New York and Pittsburgh have completed large exhibit halls." He went on to note the interest of the Cleveland Plain Dealer in boosting a bigger convention center, through a series of newspaper articles that would be "the beginning of a drive to sell the public of the City of Cleveland the idea of providing additional exhibit facilities...showing by comparison the inadequacies of the facilities within Cleveland." But Cleveland’s competitive drive would be somewhat frustrated. The public monies for a convention center expansion had to come from general obligation city bonds that required public approval. In 1957 and again in 1958, Cleveland’s voters said "No" to the $15 million convention center project. It was not until 1960 that a more modest $10 million scheme could secure public approval. The political tale was little different in other cities. In the vast bulk of states where local bond issues required majority voter approval, convention center plans were regularly stalled or reshaped by voter disapproval. Atlanta’s Civic Center was defeated in 1962 before gaining approval in 1963. The Cervantes Convention Center in St. Louis was defeated by the voters in 1971 before winning public support the following year. In city after city, attempts to build new convention facilities in the 1960s and 1970s were stalled or stymied by public opposition. It was not until the late 1970s and 1980s, with the large scale shift to revenue bonds backed by taxes on visitors, that major cities were able to fuel a boom in enormous new convention halls. So in Columbus, Ohio, after seeing convention center proposals that relied on a local sales tax defeated in 1986 and 1987, officials handed the matter over to an independent public agency with the authority to adopt a hotel/motel tax without voter approval. Backed by hotel occupancy taxes, or other visitor-linked public revenues like restaurant taxes and car rental taxes, state and local public authorities have sustained an enormous increase in convention center debt without recourse to the voters. The outcome of this reformation of convention center debt finance is shown in figure 2. The constant dollar volume of new long-term convention and civic center debt was quite modest in the early 1970s, averaging some $530 million per year in constant 1992 dollars. The 1980s saw a transformation. Pressed by the prospect of a loss of tax-exemption for revenue bonds as a result of the 1986 Tax Reform Act, a number of localities accelerated their convention center spending. With a peak in new bond issues of more than $1.7 billion in 1985, the last five years of the 1980s saw new debt averaging more than $810 million per year in constant dollars. And the debt boom for convention center building has continued through the 1990s, with more than $1.25 million in new bonds in each of 1991 and 1992, and more than $975 million in 1996. The result of the fiscal transformation of convention center finance has been an enormous increase in center space across the nation. In 1969, major American convention facilities included some 6.5 million net square feet of exhibit space. By 1980 that figure had almost doubled, to just over 11 million. By 1990 it had reached 17.7 million. The end of 1996 saw of total of approximately 23 million square feet of exhibit space around the country. At a minimum, new debt issues in the last three years suggest at least 2 million new square feet of exhibit space will be provided over the next two years. Figures from Tradeshow Week’s Major Exhibit Hall Directory 1996 indicate that some 2.5 million square feet of exhibit space will be added from late 1996 through early 1997, with another 3.8 million over the following two years. That would bring the total of new space by mid-1999 to more than 6 million square feet of space, or an increase of some 25 percent in three years. The current space boom is fueled by three distinct types of cities and strategies. First, a number of medium-sized locales with only limited previous convention business have built new centers with the aim of attracting visitor dollars and boosting downtown development. New centers have sprung up recently in Providence, Charlotte, Austin, San Jose, Honolulu, and Columbus, each seeking to garner a piece of the national market as well as state and regional meeting markets. Second, a host of other communities with mid-sized centers and an established convention business have embarked on major expansions or new center construction. Thus Louisville is currently doubling the exhibit space of its downtown Commonwealth Convention Center in a project funded by the Commonwealth of Kentucky; San Antonio is doubling the Henry B. Gonzalez Center; San Diego is adding to its waterfront center; and Washington, DC, is building a new center with more than 800,000 square feet of exhibit space. Yet the most impressive space additions will be from a third group, those already expansive centers like Orlando’s Orange County Convention Center and New Orleans’ Morial Convention Center. The New Orleans facility has embarked on a expansion project with a $240 million price tag, covering more than 1.2 million total square feet of space including 401,000 additional square feet of exhibition space, comprising "the largest contiguous convention center on one level in the United States of America with almost 1.1 million square feet of contiguous [exhibit] space...planned for completion in November, 1998." The recent and projected growth in convention center space will likely create a vastly changed marketplace for the convention and trade show business. Even with projected increases in the number and size of convention events, cities are likely to find themselves in an increasingly difficult competitive environment. Anaheim Two years after participating in the 1965 opening of Hynes Auditorium, Arthur Fiedler was on hand with the Orange County Symphony Orchestra to inaugurate the new Anaheim Convention Center. The convention centers in Anaheim and Boston have both grown over the years. The Hynes has been expanded once, while the Anaheim center has been expanded four times. Each of the four expansions to the Anaheim center added almost as much space as the Hynes now has. Today the Anaheim Convention Center (670,000 square feet of exhibit space) neatly dwarfs the Hynes (193,000 square feet); it is in the process of expanding (adding another 100,000 square feet) as part of a plan to double the size of the center over the next 20 years. Convention center expansion in Anaheim has been persistently fueled by the fiscal engine of hotel occupancy taxes, collected from the more than 18,000 hotel rooms that surround Disneyland and fill the city. Anaheim did have to boost its hotel occupancy tax from 13 to 15 percent to finance the latest expansion effort. But the reality of a city with a Disney theme park is that hotel demand is remarkably resilient, even in the face of a high room tax. The Anaheim hotel occupancy rate in 1996 was almost 78 percent. The hundreds of thousands of tourists and park visitors who stay in local hotels automatically pump revenues into convention center expansion, not the general funds of the city. The political and fiscal dynamic operates precisely the same way for the other "big fish"—the communities that already house the biggest convention centers in the country. Locales like Atlanta and Las Vegas, New Orleans and Orlando are able to pour revenues into center expansion like clockwork. And the expansion cycles in these communities are far shorter in time and larger in scope than Boston has managed or is likely to in the future. New Orleans The Rivergate, which opened in 1968 with even less exhibition space than the Hynes, was replaced by the Morial Convention Center (325,000 square feet) in January 1985. In 1991, an expansion project brought exhibit space to a total of 700,000 square feet. And the current expansion effort, scheduled for completion in late 1998, will add another 400,000. Having started out at almost the same place as Boston in the late 1960s, New Orleans will soon boast a convention center with more than five and a half times the space of the Hynes Convention Center. Indeed, the New Orleans facility will start out with 50 percent more space than the proposed new center in Boston. And with the expansion cycle in New Orleans on the order of every six or seven years, by the time a new center is finished in Boston, New Orleans will likely be in the process of expanding yet again. Orlando The pattern of regular substantial expansion is little different in Orlando. Blessed like Anaheim and Las Vegas with a massive supply of hotels and hotel rooms filled with tourists and visitors, Orlando is able to rely on a constant stream of "tourist development tax" revenues from a tax on hotel occupancy. When the Orange County Center first opened in 1983 (150,000 square feet on a single level) it was not much larger than the original Hynes Auditorium. But Orange County officials had planned from the outset for regular growth and expansion. The center was located away from Orlando’s downtown core, on a 115-acre tract that provided substantial room for contiguous growth. The large open site relieved the county of the fiscal burden of land acquisition or site preparation in a developed zone. With abundant, largely free land and a site convenient to Sea World and Universal Studios, Orange County was in a position to pour its considerable fiscal resources into regular expansion efforts. The county issued some $133 million in debt in 1986, just three years after the center’s opening, to fund a doubling of the center’s exhibition space to 350,000 square feet. Four years later, a 1990 bond issue supported the addition of yet more meeting and exhibit space to the center, along with the expansion and improvement of the Citrus Bowl. By 1992, Orange County officials were prepared to move ahead on the "Phase III" expansion, with a price tag in excess of $207 million. The expansion was completed in 1996, bringing the Orange County Center to more than 730,000 square feet of exhibit space. The 1992 bonds also provided the first funding for "Phase IV" of the center’s expansion: with another $165 million in debt backed by tourist taxes, Orange County began the most recent growth spurt in 1994. Due to be completed in January 1998, the latest installment in Orlando’s every three- or four-year expansion cycle will bring the convention center to a total of 1,100,600 square feet, with 49 meeting rooms and 138 breakout rooms. From a modest start in 1983, Orlando and Orange County have been able to expand the convention center by more than seven times. And there is little evidence that their growth boom will slow in future years. The number of hotel rooms in metropolitan Orlando has grown from 76,000 in 1990 to more than 84,000 in 1995 with an occupancy rate of 74 percent and an average daily rate of $67. In Orange County, future center expansions will be sustained by 203 hotels and motels with almost 59,000 rooms. The space boom in Orange County has had a clear impact on the area’s convention business. In 1995 the area hosted 17,951 meetings and trade shows, almost doubling the 9,500 total of 1990. And the total of convention delegates reached 2,667,807—more than twice the 1990 sum of 1.26 million. The growth in Orlando has not gone unnoticed in other major cities. The director of sales for Atlanta’s Georgia World Congress Center recently spoke of "heavy competition" from Orlando: "Quite a few groups are going to Orlando, because of newness and size of the building. We know they are going to be competitors, even more so than New Orleans or Charlotte." The response from Atlanta—predictably, more space. Georgia World Congress Center officials are planning an addition (400,000 to 700,000 square feet of exhibit space) in order "to keep us as close to the front as possible." The feasibility study, authored by David Petersen of Price Waterhouse, argues for the need to expand "to accommodate existing professional and trade show events and meet their growing needs, supply space for additional events, and supply sufficient space to host multiple events simultaneously." When Boston and Massachusetts officials speak of expanding to keep up with and meet the competition, they are speaking of a rapidly moving target. The destination cities with theme parks and resorts, and tens of thousands of hotel rooms, will be able to expand again and again. They offer extensive entertainment and tourist activities, together with rather different climes, abundant airline flights and access, and inexpensive hotel rooms. Yet perhaps most importantly, the pace of convention center expansion in the "big fish" locales raises the central question of whether it is plausible for other communities to compete on the basis of size and space. In 1993, Coopers and Lybrand evaluated a proposed stadium and convention center complex in Boston for the Commonwealth. The Coopers and Lybrand study concluded that a "megaplex or stand alone convention center with between 400,000 to 500,000 square feet of exhibition space would enable the Boston metropolitan area to accommodate the market demand which the area currently is unable to accommodate due to facility constraints." The Coopers study went on to estimate that a stand alone center would generate $751 million in total output, $271 million in earnings and 9,400 retained or created jobs. The prospects for a new Boston convention center have also been studied by Price Waterhouse, in both 1993 and 1995. The conclusion of the 1993 analysis was clear and unambiguous: "Boston has far too little convention/exhibit space to meet the present and projected market demand. A major, well located expansion is virtually assured of attracting large numbers of out-of-town delegates." The Price Waterhouse report went on to evaluate a series of alternative development scenarios, varying in the size and location of a new convention center. The addition of a new facility with 450,000 square was estimated to generate total convention and trade show attendance of 720,000 to 780,000. An even bigger facility, with 650,000 square feet of exhibit space, was projected to generate 840,000 to 920,000 convention and trade show attendees. The 1993 study concluded, "Failure to undertake a major expansion of convention space in Boston would result in large and growing losses to the Commonwealth resulting from lost convention business." The 1995 Price Waterhouse effort sought to compare the prospects of a freestanding convention facility with a stadium/convention center Megaplex. The firm concluded that by itself the center (650,000 square feet of exhibition space) would generate convention and trade show attendance of 575,000 to 625,000 per year. If Price Waterhouse was certain in assuring the Commonwealth in 1995 that more space meant hundreds of thousands of new visitors, it was no less certain in assuring Georgia the following year. The October 1996 Price Waterhouse analysis of the proposed expansion of the Georgia World Congress Center took note of the center’s impressive current size (947,000 square feet of exhibit space) and performance. The report argued that the GWCC "has consistently achieved higher annual professional and trade show occupancy than most U.S. convention centers in gateway cities...." Price Waterhouse concluded "that there is support for an additional 700,000 square feet of exhibition space at GWCC," noting that such growth "may be most beneficial for preparing Atlanta and the GWCC for the next decade." The proposed new space in Atlanta, exceeding the size of the proposed stand-alone center in Boston, would bring the center to 1.65 million square feet of exhibit space. Price Waterhouse estimated it would attract annual convention and trade show attendance of 1.5 to 1.7 million—an increase of some 40 percent over the "no expansion" scenario. Indeed, the new space in Atlanta would generate about 500,000 new convention-goers, just about the same as Boston. Louisville commissioned Economics Research Associates (ERA) to study its needs in 1992. ERA concluded, "With expanded and improved exhibit and meeting facilities at the [Commonwealth Convention Center], Louisville could enhance its market capture of convention and trade show activity that is regional and national in scope," estimating that doubling the exhibition space would result in a 111 percent increase in the number of conventions, a 71 percent increase in the total number of events, and a 90 percent increase in total annual attendance. So the Commonwealth of Kentucky is paying for the expansion of the Louisville center, and building an entirely new center in northern Kentucky. The portents are equally encouraging in San Antonio, which is now doubling its exhibit space from 220,000 to 440,000. There, an analysis by Arthur Andersen concluded that more space was needed to meet the market demand for meetings in the Texas city, and that the expanded center (although far smaller than that proposed for Boston) would generate some 716,000 attendees by 2006. In the words of the Arthur Andersen report, "The expansion would enable HBGCC [Henry B. Gonzalez Convention Center] to attract additional attendees who would spend $8.86 billion," together with a "total employment impact" of "5,950 permanent jobs in the retail, hotel and convention industries when HBGCC stabilizes at its new capacity." The enthusiasm for San Antonio’s prospects as a convention destination was not limited to Arthur Andersen. A panel of experts assembled by the Urban Land Institute, including David C. Petersen, the principal author of the Price Waterhouse studies of Atlanta and Boston, evaluated the city’s circumstances in September 1995. They concluded that "To continue to capitalize on the growth potential in the convention industry, the city must expand and renovate its existing convention center." The group went on to note that "San Antonio, like Boston and San Francisco, attracts conventions of professional associations both with and without major exhibition requirements. Like these cities, San Antonio offers a high concentration of attractions, retail shops, hotel rooms, and restaurants close to its convention center. The attendees at professional association conventions tend to book more room nights and generate more indirect spending than attendees at other conventions (e.g., trade shows)." The report commended this "market niche at the lucrative end of the convention center industry" in contrast to big cities like Chicago and New York that drew trade show attendance with big exhibit halls from "nearby ‘day trippers.’" Just a few years earlier, a similar Urban Land Institute panel—that also included David Petersen of Price Waterhouse—was no less enthusiastic about Denver’s convention future. "The Colorado Convention Center will be the strong economic generator that Denver and the state of Colorado need now, and its development should proceed as a matter of urgency." Of course, with the new 300,000-square-foot Denver center open and operating since 1990, local officials are now promoting the need for expansion, arguing that "Not every city has an airport like we do or an overall physical location with the appeal of Denver and Colorado.... It boils down to the convention center and the hotels we have available." So Denver has hired Coopers and Lybrand to do a study of the need for expanded convention center space in the city. Each of the cities that seeks to build or expand a convention center comes armed with a hefty consultant’s study that contends that more space is the vital ingredient in competing with other major locales. Each study notes the growth of competitors and urges to the need to respond. Each notes the unique appeal and high ranking of the city under study. And every report assumes that annual growth in meeting and convention demand will outstrip any increases in convention center supply. But sometimes the rosy future does not come to pass. Los Angeles In October 1983, the chief administrative officer of Los Angeles contracted with Touche Ross & Company to study the feasibility of expanding the Los Angeles Convention Center. The Touche Ross study, completed in 1984, had been preceded by studies of expansion in 1979 and 1981. Touche Ross concluded that expanding the then-330,000-square-foot center to 610,000 square feet of exhibit space would provide an optimum size for the estimated market. Mayor Tom Bradley then appointed a 21-member Blue Ribbon Committee to determine a financing scheme. The conclusion of the Committee was that the center should be financed with $350 million in revenue bonds backed by an increase in the local hotel occupancy tax. Mayor Bradley enthusiastically endorsed the group’s conclusion: "I am convinced that we can neither abandon nor postpone the expansion of our Convention Center if we want the City to remain competitive in the convention and trade-show business. Conventions and trade shows bring a lot of outside money into our economy, creating jobs and otherwise benefiting all parts of our City." The expansion effort proved larger, more expensive and more difficult than originally planned. The site required the relocation of 1,400 residents and many businesses, and construction costs soared. The ultimate price tag of the expansion came to $500 million, providing some 385,000 new square feet of exhibit space for a total of 715,000. A final phase of the expansion added another 160,000 in November 1996. Based on the Touche Ross study and the Blue Ribbon Committee’s work, center officials made some quite specific forecasts of the anticipated future performance. In 1984-85, the Los Angeles center had attracted a total of 1.475 million attendees and 123 events. That activity level was expected to remain stable through the late 1980s, with the expansion projected to open in 1990. The difficulties the project faced delayed the actual opening date to November 17, 1993. The anticipated attendance the center’s first year of operation was to be 2.32 million, rising quickly over the next three years to more than 3.7 million people and 270 events. Simply put, the expansion was supposed to boost attendance at the Los Angeles Convention Center some two and a half times. In 1993-94, the "most expensive publicly financed building in the
city’s history" hosted 1,177,399 people and 106 events. The following year, it
attracted 1,319,979 attendees and 129 events. As figure 3, The failure of the Los Angeles convention center to meet the forecasts that sustained its construction is bad enough. Indeed, one California tourism official termed it "the worst pre-booked convention center in the country." But the true cost of the failed promises has been a fiscal one. The city of Los Angeles has been obliged to bail out the struggling facility with general revenues. In mid-1996, the Los Angeles City Council learned it would have to pay $21 million to meet the debt service and operating cost shortfall. According to the city’s chief administrative officer, the center has been projected to generate $36 million in annual rent. Instead it produced $19 A NAME="32">million. Another $16 million in hotel tax revenue was expected to support it, but that source generated only about $11 million in 1996. Rather than the 36 to 40 major conventions the facility was expected to handle each year, it handled 11 in 1995 and some 19 in 1996. Faced with taking money that could be used for basic services, the reaction of city politicians was obvious. In the words of one councilmember, "I’m not happy about the planning. I’m not happy about the intervening events. It’s a frustrating situation." City officials place the blame for the center’s abysmal performance on too few hotel rooms, the local economy, and the tarnished image of the city in the wake of the 1992 riots. Convention industry observers note the center’s location somewhat distant from the downtown core at an isolated site without nearby hotels and restaurants. The closest hotel, a 200-room Holiday Inn, is three blocks away. The plan had always been for the expanded center to attract and generate convenient new hotels. But in the absence of a public subsidy, no developer has sought to build nearby. Now there are plans for an adjacent sports arena to house the Los Angeles Lakers, with the expectation that more public investment in an arena will leverage private development and aid the center. The Los Angeles case is a very obvious one. City officials, civic leaders, and the business community expected and assumed that a far bigger center would generate far bigger economic returns. One 1985 estimate was that out-of-town delegate spending would almost triple with the newly enlarged structure. They were wrong. Providence Los Angeles is not the only city to see a new or expanded center produce results somewhat at variance from the consultants’ projections. The new Rhode Island Convention Center opened in Providence in December 1993 at a cost of $115 million. Coopers and Lybrand had projected that the center would house some 30 annual events with a total attendance of more than 200,000. The center’s bookings came to 36 events and 350,000 in attendance for 1995. While actual bookings have exceeded expectations, the larger reality has not. Rather than drawing out-of-state delegates who would stay overnight in hotel rooms, much of the center’s business involved attendees from nearby. According to an account in the Providence Journal-Bulletin in late 1995, They come. They do their business. They go home. They don’t stay in hotels, eat in restaurants, go to shows. That is, they don’t do much for the economy.... The consultants had envisioned that 42,000 delegates would come to Rhode Island and stay for four nights. Instead, just 15,000 delegates will come this year. And they will stay just three nights on average. As a result, the new center is running a deficit, rather than the $3 to $4 million surplus expected. And the sales, hotel, and income taxes anticipated from the center’s development are falling well behind even updated projections. Providence did generate a 16 percent increase in hotel room-nights in 1996. But "the overall numbers are far below projections." Sacramento Sacramento expanded its existing convention center in April 1995, to 150,000 square feet of exhibit space, expecting a flood of new conventions and visitors. It did not work out that way. In the words of a recent story in the Sacramento Bee, The city finds itself in a bind that has entangled many others that leaped into the convention business. Lured by the prospect of more visitor dollars for meals, rooms, shows and trinkets, it spent $80 million to expand the Convention Center, the better to compete with other cities and bolster the city-subsidized Hyatt Hotel. But bookings at the center have fallen short of projections, city officials say, because larger conventions need more nearby hotel rooms than the city can now provide. Sacramento officials thus sought to provide substantial public subsidies to a private hotel developer and lured a union pension fund to consider a $64-million hotel project buoyed with $14 million in city incentives. Yet the deal eventually collapsed in December 1996, when an economic analysis raised doubts about its feasibility. So far there are no plans for a new hotel The convention center news got even worse for Sacramento in January 1997. With a shortfall in hotel tax revenues and an underutilized building, the center has been obliged to reduce its staff. In the words of city manager Bill Edgar, "The convention center isn’t doing too well." Sacramento built a new convention center on the assumption that it would bring new downtown hotels and hotel rooms. When it didn’t, the city sought to subsidize what the private market was unwilling to support. Precisely the same situation has arisen in a number of other cities faced with underperforming convention facilities. Houston Houston’s Albert Thomas Convention Center was built in 1967 (127,000 square feet of exhibit space). By the late 1970s, business leaders began to worry that the city had fallen behind in the convention business. Indeed, the nation’s fifth largest city had dropped to 17th place in terms of convention exhibit space. City leaders moved ahead rapidly commissioning a study by Wilbur Smith and Associates to document the need for and feasibility of a new center. The conclusions of the 1981 study were clear and emphatic. The national convention business was booming, and Houston had to expand to compete: The next two decades are expected to be significant growth periods for the convention industry. In order for Houston to compete effectively with other major cities, the primary requirement will be facilities which are capable of accommodating these large users. [The Albert Thomas Center] cannot provide adequate exhibit space for a single trade show listed in the ‘Top 150 Tradeshows. The solution of the study team was bold, underlined in the original report for emphasis:
The report went on to project that after the center opened in 1985, it should be expanded to 900,000 square feet in 1992 and 1.2 million square feet in 1999. It promised that the new building would "allow Houston to become a leading competitor in the convention, trade show, and major meetings markets," with a "conservative estimate of 700,000 additional annual visitors generated by the center." The promise of the new center was so great that two major private developers offered competing sites and proposals, on the presumption that the public investment would be a major spur to their own multi-block office, retail, and hotel schemes. The nod would eventually go to Texas Eastern Transmission and Cadillac Fairview, with its "Houston Center" proposal and the promise to the city of some eight square blocks of donated land. An extended public debate over the site delayed the project, and when the George R. Brown Center finally opened in September 1987, it had been trimmed to 470,000 square feet of exhibit space to fit a $105 million budget. The gleaming glass and stainless steel structure makes a memorable impression on the east edge of downtown, one made all the more striking by the absence of any development around it. In the words of Price Waterhouse, "The site itself is currently (1985) isolated, with neither commercial nor retail development in the immediate vicinity. Surface parking lots occupy the majority of the city blocks directly adjacent to the facility, and a major highway abuts the [Brown] Center to the east. Virtually all of the structures located within two to three blocks of the Houston Center were in place prior to its development." The Brown Center’s performance has been no less impressive. Of the 700,000 annual visitors predicted in the feasibility study, the Center was attracting about 200,000 per year in the early 1990s. And where the study had projected some 200 convention event days for 1990, the actual total was about 80. Houston officials concluded that the problems and low attendance of the center were the result of a lack of nearby downtown hotel rooms. But the new convention center, a foundation stone in the city’s downtown revitalization efforts, was deemed too important to allow to fail. An editorial in the Houston Chronicle in May 1996 argued that "Houston needs the convention business, and the convention center needs a hotel." City officials sought for more than two years to put together a package of public subsidies for a new hotel, eventually promoting special state legislation allowing city sales and liquor taxes to aid the project. Finally, in November 1996, the city council endorsed a deal with a private developer to back a major share of the cost of a convention hotel, providing a $16 million city loan, a $34 million loan backed by hotel tax rebates, and city tax abatements as part of the $155 million project. It was, at least for the editorial writers of the Chronicle, the least the city could do: "As Houston has a responsibility to the burgeoning vitality of downtown and to the continued competitiveness of its convention industry, City Council should get the hotel piece of this puzzle into place as quickly as sensibly feasible." Other Cities Phoenix has just embraced one of four competing proposals from hotel developers for a new lodging facility near its convention center to boost business, even as the city is faced with a "sharp downturn in convention bookings [that] has downtown’s two biggest hotels scrambling to fill rooms next year [1997]." The new 650-room hotel will involve some $15 to $20 million in public subsidies. Miami Beach has moved ahead on an elaborate subsidy arrangement to produce a new Loews hotel adjacent to its convention center, using a special taxing district, acquiring the land, and putting together a bond package of $50 to $60 million. According to the New York Times, "the new hotel cannot get underway too soon...Though the city-owned [convention] center is one of the nation’s 10 largest, many large organizations refuse to consider renting it." San Antonio is currently considering developer proposals for a 1,000-room hotel next to its expanding center, offering a package of free land, tax abatements, city-built parking, and perhaps even public loan subsidies or publicly built lobby and meeting room space. And Tampa officials, having failed to sell local citizens on a publicly financed and built new hotel next to their underperforming convention center, have returned with a new plan for a more modest public subsidy. But in perhaps the most expansive public hotel development across the country, the Metropolitan Pier and Exposition Authority, owner of Chicago’s vast McCormick Place Convention Center, issued $127 million in bonds in early 1996 to pay for the development of a new 800-room hotel contiguous to the center’s exhibit halls. The new hotel, to be operated by the Hyatt Corporation, will benefit from the tax-exemption of its debt and the fact that it pays no property taxes as well as an elaborate series of financing subsidies, including a $700,000 annual payment from the authority. The growing number of convention centers that are in fiscal difficulty should raise some cautionary flags for any other city contemplating a major building effort. Those flags should be particularly high where a center is proposed on a distant or underdeveloped site with an absence of nearby hotels. Those anticipated new hotels have a way of not happening in today’s development marketplace, even with direct public subsidy. The recent experience of Los Angeles, Sacramento, Tampa, or Houston may not be repeated in Boston. But Boston’s own history of convention center forecasts and results should provide a clear sense of the city’s capacity to compete in the highly competitive national convention marketplace. |
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indicates, the
center is now doing just about the same level of business it did in the late 1970s and
early 1980s before the investment of $500 million in expansion. The building was designed
by architect James Ingo Freed who was responsible for Washington’s Holocaust Museum
and the Jacob Javits Convention Center in New York and has received quite positive
reviews. It is simply delivering a fraction of the benefits that were promised a decade
ago.