Sunday, May 01, 2011

Jacoby On Convention Center Follies

Jeff Jacoby has a story on Townhall's website you won't read about in the Indianapolis news media describing the follies behind the "build and they will come" mentality of cities across America on never-ending efforts to build larger and larger convention centers. The most telling fact his story reveals is how attendance at convention trade shows peaked in 2000 and has been falling since, while available convention center space in American cities has grown from 40 million square feet to over 70 million square feet since 1990. Focusing on Boston's failed convention center expansion, Jacoby writes:

Ten years later to the month -- how's that for prescient? -- the Boston Globe reported on its front page that Massachusetts officials want to double the size of the Boston Convention & Exhibition Center, already the largest building of its kind in New England. The story noted that the convention center had never lived up to the exuberant promises made by its promoters. For example, a state-commissioned feasibility study had estimated that by 2009 the convention center would be doing enough business to generate 670,000 hotel room nights per year. In fact, the real figure turned out to be less than half, or about 313,000 room nights.

To a disinterested observer, it might seem obvious that Boston is no different from so many other cities competing for conventions and trade shows in a national market glutted with space. Over the past two decades, the amount of square footage available for exhibitions nationwide has soared nearly 75 percent, growing from 40.4 million square feet in 1990 to more than 70 million square feet today. Cities everywhere have been enlarging their convention centers. San Diego, Phoenix, Denver, Atlanta, Orlando, Chicago, Las Vegas, Philadelphia -- all of them have either recently finished or are planning an expansion, all of them at taxpayer expense, and all of them justified with the same argument being made once again in Boston: If only we had more capacity, we could attract bigger shows, lure more visitors, stimulate more business, generate more growth.

But while the supply of convention space has been going through the roof, the demand for that space hasn't come close to keeping up. According to the industry publication TradeShow Week, attendance at conventions and trade or consumer shows plummeted from 126 million in 2000 to just 86 million in 2010. (TradeShow Week ceased publication last year.) The market is hopelessly overbuilt. Earnings are weak. In some cities, convention halls are literally giving space away. It doesn't take an economic savant to recognize that in such an environment, it is folly to keep building.

Unfortunately, economic sense vanishes when politicians and their tourism-industry friends -- and the consultants they hire to cheer themselves on -- start clamoring for yet another money-losing new facility to be subsidized with still more public dollars.
The Indiana Convention Center in Indianapolis, originally built in 1972, has grown through several expansion efforts from 123,000 square feet of convention hall space to more than 566,000. Nearly half of that convention space was made possible by the latest expansion, 254,000 square feet, that was opened for business in January, 2011. If you throw in Lucas Oil Stadium and other available meeting room space, the available space for conventions grows to 1.2 million. According to the ICVA folks, the convention center will need to generate at least 800,000 hotel room night bookings annually to utilitize the expanded convention and hotel capcity for Indianapolis. The ICVA claims it booked 650,000 room nights in 2010, well above its 2009 goal of 500,000. It's interesting that Indianapolis is claiming much higher room night bookings than Boston, which reported 313,000 room nights in 2009. It makes you wonder if the ICVA's numbers are bogus, or they include room night bookings unrelated to conventions.

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