Uncertain Times Mean Uncertain Plans
Economic uncertainty is near an all-time high. If the economic tide rises and lifts the trade show industry, some convention and exhibition facilities will need more space. If the economy continues to sputter, the echo in some convention centers might get louder. When the last edition of Trade Show Executive’s Pardon Our Dust report ran in April, economic indicators at that time still looked good. TSE’s Trending and Spending column reported the U.S. gross domestic product had risen, the country’s retail sales had jumped, various domestic housing indices were positive and job growth was still occurring, marking three consecutive months.
Looking forward, The Conference Board’s gauge of future economic activity in February had been at its highest level since 2008. TSE’s Forecast for the year predicted 3.2% growth in net square feet of exhibit space, 2.8% growth in number of exhibiting companies, 3.2% growth in professional attendance and 6.0% growth in revenue.
However, TSE’s Chief Economist Frank Chow urged caution, as did many of TSE’s 15-member Exposition Forecasting Board who are experts in the fields of economics and trade shows. They cited the many factors to watch: escalating energy prices, unexpected disasters, a potentially still-volatile housing market and political uncertainty. The year 2011 had started out strong but recovery slowed with Japan’s earthquake, tsunami and nuclear disasters as well as shifting political and economic conditions.
As it turns out, 2012 may end similarly. Though the year started strong, the same factors slowing 2011’s progress have been present this year. Gas and oil prices have continued to fluctuate, and jumped once again due to a natural disaster (Hurricane Isaac). Politics, particularly domestic, have been equally unforeseeable. Business laws, regulations and taxes continue to change, and the near dead-heat between Democratic President Barack Obama and Republican Candidate Mitt Romney leading up to the 2012 U.S. presidential election has put many companies in a wait-and-see mode.
TSE’s current Forecast still predicts growth: 3.7% in net square feet, 3.5% in number of exhibitors, 3.7% in attendance and 5.0% in revenue. But what does it mean for 2013?
The ambiguous future has some convention and exhibition facilities idling in a pre-expansion gear. There are no centers scheduled for completion on the construction calendar past 2015.
Unless a hallmark show exerts a fight or flight response when demanding an expansion (e.g., Comic-Con in San Diego or the North American International Auto Show in Detroit) or a long-term need (e.g. Jacob K. Javits Convention Center in New York), managers of convention centers will find it extremely difficult to justify an expansion or new build. Dissent can come from many groups, including citizens, politicians and the business community. As a result, some projects have stalled. Whether they remain in limbo or move forward remains to be seen.
The actual number of projects on TSE’s list of proposed centers has not changed much since April. However, the venues on the list have changed as several projects previously tracked have been scrapped and new projects have entered the planning stages.
No movement has been made on the Renaissance Colorado Springs North since TSE’s last construction report. The project is still 80% complete.
The proposed Gaylord Mesa in Arizona may meet the same fate as its counterpart in Aurora, CO, in light of the latest earnings report released by Gaylord Entertainment Company, which indicates the company will not continue to invest in construction of new properties. The Gaylord Colorado Resort and Conference Center project was abandoned when Gaylord transferred the management of its four largest properties to Marriott International; the Mesa project, which is currently on hold, looks to follow.
However, the voters of Mesa had approved incentives, and the still-supportive community would like to see another developer step in. Other centers have received similar endorsements. The San Diego Convention Center received the vote of the lodging community in April to contribute funds to its expansion project.
Other proposals with enthusiastic backing have seen support dissipate quickly. The proposed Queens Convention Center, announced with much furor by Governor Andrew M. Cuomo, has already died.
The lack of competition for financing seemed a good thing for the slowly progressing New York State Convention Center in Albany, but state funding has not yet been secured, even as the Albany Convention Center Authority has been purchasing land.
Other centers have opted for smaller, easier-to-fund-and-complete projects. The Albuquerque Convention Center is undergoing renovations that include a new exterior, ballroom remodeling and other renovations. Suburban Collection Showplace in Novi, MI is adding an attached hotel that will offer 10,000 square feet of additional meeting space.
A few centers have their fates linked to the outcome of other decisions, such as the expansion of the Los Angeles Convention Center. The project’s green light is tied to the city of Los Angeles securing an NFL team that will occupy the proposed new stadium which is part of the project.
Football in Los Angeles has had its own ups and downs, and a decision to go forward requires a leap of faith by all parties. The same could be said for stalled convention center projects that have no guarantee of a busy schedule. But with so much at stake and the many uncertainties, few want to take that step.
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