Convention Wisdom

January 11, 2012

For two decades, American cities have used public dollars to build convention center space beyond what demand warranted.  The result has been a gigantic nationwide surplus of empty meeting facilities, struggling convention centers and vacant hotel rooms.  Given the glut, you'd think that cities would stop.  Instead, many are spending hundreds of millions of dollars to expand convention centers and open yet more dazzling hotels, arguing that whatever convention business remains will flow to the places with the fanciest amenities.  If this dubious rationale proves wrong and the facilities fail, the only result will be that taxpayers will wind up on the hook, as usual, says Steven Malagna, a senior fellow at the Manhattan Institute.

  • In 2010, conventions and meetings drew just 86 million attendees, down from 126 million 10 years earlier.
  • Simultaneously, available convention space has steadily increased to 70 million square feet, up from 40 million 20 years ago.

Boston, among several other cities, has had truly disastrous policies that endorsed massive spending on these projects, only to see minimal return.

  • The city shelled out $230 million to renovate its convention center in the late 1980s.
  • When this produced virtually no economic bounce, Boston concluded that it needed a new $800 million center.
  • It was projected that the new center would help the city rent some 670,000 extra hotel rooms a year by 2009, but the city fell far short, renting only slightly more than 300,000 rooms in that year.
  • Boston city officials have responded to the poor decision making represented in this chain of events by proposing a brand new center that would cost $2 billion.

Baltimore has followed a similar pattern, paying $300 million to build a city-owned convention hotel, which opened in 2008.  The hotel lost $11 million last year and has barely been able to pay its employees or its debt service.  In response to this turn of events, Baltimore is now considering a massive $900 million public-private expansion.

Municipal governments must look to market indicators, which have said explicitly for years that the demand for convention space is dropping.  Then, lawmakers must respond to this insight by not wasting additional taxpayer dollars to grasp for a larger slice of a disappearing sector.

Source: Steven Malagna, "Convention Wisdom," City Journal, Winter 2012.

For text:

http://www.city-journal.org/2012/22_1_snd-convention-centers.html

 

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