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Many
Virginia cities are building convention centers; are
they worth it?
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link:
Up, up and away
by
Lauren Shepherd
For
Virginia Business
January 2004
As
conventions go, it doesn’t get much better than
the Wal-Mart FLW Tour World Champion-ship of Bass Fishing.
When this Super Bowl of fishing came to Richmond in
September, 30,000-plus delegates and some of the world’s
best anglers visited the area for four days, traveling
to and from the James River — the site for the
competition — dining in local restaurants and
filling four football fields’ worth of exhibit
space at the downtown Greater Richmond Convention Center.
Plus, With ESPN televising daily weigh-ins of the bass
catches, the event gave Richmond national exposure.
“This is a once-a-year event, and obviously everyone
wants them to come to their city,” says Michael
Meyers, general manager of Richmond’s convention
center.
That Richmond was able to land the event supports a
decision by regional leaders years ago to expand the
area’s convention center from 115,000 to more
than 640,000 square feet. And now other cities —
Hampton, Virginia Beach, Suffolk and Staunton —are
throwing their hats in the convention center ring. They’re
building new centers or expanding old ones, spending
millions to convert nondescript buildings into modern
marvels with state-of-the-art art audiovisual and technology
equipment.
Why are so many cities going after convention tourism?
In terms of economic impact, there are few events more
desirable, with convention-goers swooping into town,
spending money and leaving in a few days, all without
creating a heavy burden on services. While many of the
delegates to the Wal-Mart FLW Tour came from the region
and didn’t necessarily need overnight lodging
— as opposed to conventions that draw out-of-towners
— they still spent freely on food, souvenirs and
gasoline.
The growing importance of convention centers as catalysts
for economic growth in smaller and mid-size markets
is a trend several years in the making, say industry
experts. Big cities are at the end of an expansion cycle,
says Ken Stockdell of the Atlanta-based Thompson, Ventulett,
Stainback & Associates Inc., an architecture firm
that specializes in convention centers. Now smaller
cities are updating their facilities to stay afloat
in a competitive market and to bring tourist dollars
into town.
Although Richmond’s new center has only been open
for about a year, city officials say they’re already
seeing some benefits. The center hosted 27 conventions
in 2003, four more than the city projected for the year,
generating an economic impact of about $39 million in
direct spending. John Berry, president of the Greater
Richmond Convention Center and Visitor’s Bureau,
says conventions on average bring in $208 per person
each day. For instance, last April Richmond hosted 18,000
people for a three-day Trinity Motivation convention,
bringing in about $3.7 million a day in delegate spending.
By June of this year, conventions are expected to take
in $15.1 million in tax revenues — more than enough
to pay its annual bond payments.
About half the money from a conventioneer goes to hotels,
Berry says. Occupancy rates in the Richmond area rose
nearly 6 percent in the first nine months of 2003 compared
to the same period in 2002, according to the Virginia
Tourism Commission. Room revenue numbers — which
take into account both occupancy rates and room rates
in the area — also increased, by 8.6 percent over
the same period last year. John Woodward, director of
Richmond’s Department of Economic Development,
attributes much of the increase to the convention center.
“The numbers don’t lie,” he says.
Benefits to the city’s restaurants are less obvious.
There are few high-end restaurants near the center’s
Broad Street location, so convention-goers have to travel
a few blocks to the city’s cobblestone Shockoe
Slip district. Some of the area’s hotels even
provide free van service to and from restaurants and
the convention center to make it easier to dine out.
While many downtown improvements are planned, including
a performing arts center that would be within walking
distance of the convention hall, the area’s current
downtrodden stretch of empty and graffiti-ridden storefronts
on Broad Street has put off some convention-goers. When
area resident Joyce Journey came downtown last fall
to attend the Baptist General Association of Virginia’s
annual conference, the public relations coordinator
was concerned that Broad Street’s appearance would
turn off or frighten the out-of-town delegates. While
praising the center itself, Journey says, “There
were some things that bothered me. I don’t feel
as safe there as I do in other areas.”
There’s no denying that Broad Street’s current
condition is a problem, Meyer says, but coming improvements
to the area should help. The planned performing arts
center, the addition of a new 218-room hotel in the
vacant Miller & Rhoads building and the possibility
of a new airline serving the Richmond market will strengthen
Richmond as a convention site destination, he says.
For many localities, a large portion of the funding
burden for the convention centers falls to taxpayers.
In Hampton, for example, the city broke ground last
summer on a 344,000-square-foot convention center that
will be paid for through a $106.3 million revenue bond,
meaning the money used to finance the project will be
repaid through taxes and revenues generated by the center.
The center is expected to open in May. Richmond’s
center is also funded by public money in the form of
a rise in hotel/motel tax rates in the city, Henrico
County, Hanover County and Chesterfield County from
6 percent to 8 percent to pay for bonds that financed
the project. The state offered another $10 million.
Staunton’s new conference center — projected
to cost $19.3 million — combines public and private
funding. A group of private developers will kick in
about $9.4 million to refurbish the Stonewall Jackson
Hotel into a lodging and conference center. The city
will raise the rest in tax-exempt bonds. Work on the
project is expected to begin early this year. Although
the 11,000-square-foot venue will be smaller than the
other convention centers around the state, Staunton
Economic Development Director Bill Hamilton says the
city will be able to compete for state and local conventions.
“We believe the meeting business sort of rotates
around the state, and we want to be part of it,”
Hamilton says.
Generally, convention centers across the country don’t
turn profits; they attract millions of dollars in spending.
Charlie Johnson, president of Chicago-based C.H. Johnson
Consulting Inc., says an operating deficit is normal
for a convention center, especially one that has recently
opened. “I think it’s reasonable to look
at the operating deficit as an investment,” he
says. For the most part, he believes the economic benefits
to a locality are worth it. In Richmond, Johnson says,
the convention center is expected to produce $77.5 million
in direct economic benefits annually by 2007, although
it will probably operate at a net loss. Since the city
is within driving distance to Washington, D.C, and other
East Coast hubs, the center could take in even more
business than expected and give the area an even bigger
economic boost. Being a drive-to market for a large
portion of the country could increase attendance levels
of those who may not want to fly, says Johnson.
In Virginia Beach, where a new convention center is
scheduled to open in 2005 in front of the city’s
old one, officials are hoping for their own economic
boom. Hilton has already announced a $62 million resort
and conference center on the oceanfront, not far from
the new facility. Once it opens, the thinking goes,
the large ballroom, more than 30,000 square feet, and
other amenities will attract another convention-quality
hotel nearby. The city is sinking a lot of money into
the venture — $202.5 million when all is said
and done — garnered from hotel taxes, cigarette
taxes and food taxes. Already, 22 groups have given
the city verbal commitments on holding their conventions
there when the building opens. “Obviously, the
oceanfront has been the big sell,” says Al Hutchinson,
director of convention sales and services.
With so many centers in the state, can all of them succeed?
Most are looking to compete not in a statewide market,
but in a national one. Richmond might not compete with
Virginia Beach, concedes Woodward, but it could compete
with similar-size facilities in places such as Memphis,
Tenn., Milwaukee and Columbus, Ohio. “It brings
us into competition with a whole new tier of cities,”
he says.
The beach’s Hutchinson takes a similar view. “What
each locality is doing will help all of us,” he
says. A conventioneer, for example, visiting the Virginia
Beach center may return for a vacation to Norfolk after
seeing the area. Or a business may decide to continue
making Virginia its meeting center after a good experience
in one of its cities. There’s enough of a demand
to keep each new convention center full, according to
consultant Johnson. “Virginia’s been under-built
in convention centers, historically,” he says.
Until all the centers are up and running, it’s
too early to tell if the harmony will last or if there’s
truly enough business to make these investments pay
off. In the meantime, cities can take comfort in a recent
study commissioned by San Diego. During 2002, its convention
center, which has played a key role in revitalizing
downtown, generated $363 million in direct delegate
spending and enough in transient occupancy and sales
taxes to pay for the city’s investment in the
center. Maybe if you build it, they will come.
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