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Convention Centers  – Is New Space Outpacing Event Growth?

Trade Show Executive
,
February 2, 2005
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By Maria Lenhart, Contributing Editor

Torrance, CA - If you build it, they will come. For years this has been a mantra put forth by dozens of feasibility studies conducted for cities seeking to build new convention facilities or expand those they already have.

            Challenging this conventional wisdom is a new report issued by the Brookings Institution entitled, Space Available: The Realities of Convention Centers Economic Development Strategy by Heywood Sanders, professor of public administration at the University of Texas at San Antonio. Sanders, a long-time critic of convention center development, concludes that the nationwide building boom of convention centers is far outpacing the number of events to fill them.

Among the report’s main assertions:

  • The overall convention marketplace is declining in a manner that suggests that a recovery or turnaround is unlikely to yield much business for any given community, contrary to repeated industry projections. Moreover, this decline began prior to the disruptions of 9/11 and is exacerbated by advances in communications technology.
  • Even the most popular convention cities, including Las Vegas, Orlando, Boston and San Francisco, are finding that their latest convention center expansions are falling short of expectations.
  • Second-tier cities, especially those without strong visitor appeal, are finding a highly competitive environment for even the state and regional business that is their bread and butter.

 

Feasibility Studies Tend to Encourage Expansion Despite Lack of Demand

            In an interview with Trade Show Executive magazine, Sanders said an underlying problem is that too many cities have been encouraged by feasibility studies to expand their convention space. “The reality is that business is often far less that what is projected,” he says. “Sometimes it’s just 10 to 20 %. The city never gets the room nights expected. The reality is that most convention centers are losing business. There is huge competition from other cities.”

           

Does the Report Paint Too Bleak a Picture?

While industry executives acknowledge that competition for convention and trade show business is keen right now, they also say that Sanders’ report paints far too bleak a picture. Robert Canton, director of sports, convention & tourism for PricewaterhouseCoopers in Tampa, says he has been consulting within this industry since the mid-1980’s. “For at least the past 20 years, cities have recognized the value of meetings and conventions and have wanted to be competitive in this area,” he says. “As in any competition, you will have winners and losers. Sanders says they are all losers and this is not true.”

            Doug Ducate, president and CEO of the Center for Exhibition Industry Research, says he believes the number of convention center expansions that have proved successful outnumber the failures by at least two to one. “In some cases, you even have cities such as Orlando, Las Vegas and New Orleans that are on their fourth or fifth expansion,” he says. “They wouldn’t be doing more expansions if the previous ones hadn’t worked.”

            Ducate also takes issues with Sanders’ assertion that there are not enough events to absorb the new convention space. “It’s a fact that only 38 percent of all the exhibitions in the U.S. are held in convention centers,” he said. “So there is obviously room for increases in occupancy even if there is not an increase in events.”

New Generation of Convention Centers Are Adding Hotel Quality Meeting Space

            Ducate believes that the new generation of convention center expansions, which are often adding not just exhibit space but hotel-quality meeting rooms and ballrooms, are well positioned to capture more of this untapped business. “For example, McCormick Place, which is building a 100,000 square feet ballroom, is going after more upscale business, the kind that would otherwise go to hotels,” he said.

            John Kaatz, a convention center consultant for Conventions, Sports & Leisure in Minneapolis, agrees, noting that more cities are placing less emphasis on making their convention centers better rather than bigger. “The focus has shifted away from expansion more towards improvement,” he says. “And every industry has to re-invest --- just in order to stay current.”

            While convention centers with enlarged and upgraded meeting space have an obvious appeal for large corporate meetings and professional associations, they are also increasingly important to the trade show industry, according to Ken McAvoy, senior vice president of Reed Exhibitions. “The upgrading of centers is very important because the educational  element of trade shows is really growing,” he says. “People want more than the show. We need space for seminars, new product demonstrations. The quality of the meeting space matters.”

            With an eye on attracting new business, the recently approved expansion of New York City’s Jacob K. Javits Convention Center will increase the facility’s meeting space twelve fold and include a ballroom. “We’re not just expanding, we’re turning Javits into a modern center,” says Cristyne Nicholas, present of NYC&Company, the city’s convention and visitors bureau. “It will make us much more able to compete for more lucrative convention business and let us keep the business we already have.”

Pent Up Demand in New York

            While Sanders is skeptical about the Javits expansion, commenting that New York is facing mounting competition right within the Northeast where cities such as Boston and Washington, DC have recently unveiled new convention centers, Nicholas is confident about the project’s success. “If we did nothing, then I’d be worried,” she says. “We have the pent-up demand. We turn away so much business that about $1.5 million a day is being lost. Demand for New York greatly exceeds supply.”

            Chris Bowers, CEO of the Chicago Convention and Tourism Bureau, is similarly optimistic about the $850 million expansion currently underway at McCormick Place which will add 470,000 square feet of exhibit space and 240,000 square feet of meeting space upon completion in early 2008. According to Bowers, the new building’s relatively high ratio of meeting space to exhibit space and such features as a ballroom and rooftop terrace are expected to appeal strongly to the medical and corporate market.

           

The Need to Remain Competitive

“Our customers have told us they want more meeting space and more technology and that’s what we’re giving them,” he says. “We have to remain competitive. We can’t just sit back.”

            Despite heightened competition from other cities, mostly notably Las Vegas and Orlando, Bowers says 2004 was a strong year for McCormick Place and the future looks brighter still. “The shows that were in Chicago last year experienced an average 6% increase in attendance over previous years,” he says. “At the same time, our hotel bookings for 2005 are ahead of 2004, while 2006 will be the first year to catch up with 2000 levels.”

            Along with having the right kind of modern facility, industry experts also say a city’s overall visitor appeal is an increasingly important ingredient when it comes to filling convention calendars. “There’s always been a gap between cities that are attractive destinations and those that are working on it, but the gap is growing wider,” says Canton. “Orlando, Chicago and Las Vegas are competing for events that they might have not pursued before. Now they are pursuing and succeeding in attracting smaller national conventions and trade shows as well as more state and regional business in addition to the big events. This is really impacting some second tier cities.”

There’s More to It Than Just Exhibit Space 

            According to McAvoy, the popularity of certain cities among attendees is a bigger factor than ever in determining where shows are booked. “Building the space is the first step, but it’s no longer just enough,” he says. “Attendees want entertainment, dining, reasonable hotel rates and airfares, and decent traffic flow. Cities such as Orlando and Las Vegas have grown to give them all that.”

            Ducate agrees, adding that cities cannot expect a new convention center to succeed in the midst of a decaying or lackluster environment. “The downtown area has to be vibrant already and the city has to be a popular leisure destination,” he says. “The success of San Diego, San Francisco and Anaheim doesn’t mean that all cities will be successful.”  

Reach Chris Bowers, CEO of the Chicago Convention and Tourism Bureau at (312) 567-8500 or cbowers@choosechicago.com; Robert Canton, director of sports, convention & tourism for PricewaterhouseCoopers, at (813) 218-2917 or robert.canton@us.pwc.com; Doug Ducate, president & CEO of the Center for Exhibition Industry Research, at (312) 673-4826 or dducate@ceir.org; John Kaatz, consultant with Convention, Sports & Leisure, at (763) 553-9700 or jkaatz@cslintl.com; Ken McAvoy, senior vice president of Reed Expositions, at (203) 840-4800 or kmcavoy@reedexpo.com; Cristyne Nicholas, president of NYC&Company, at (212) 484-1265 or cristyne@nycvisit.com; Heywood Sanders, professor of public administration at the University of Texas at San Antonio, at (210) 458-2538; hsanders@utsa.edu

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