Case Studies

Convention centers in other big cities drain public resources

“The overall convention marketplace is declining in a manner that suggests that a recovery or turnaround is unlikely to yield much increased business for any given community, contrary to repeated industry projections. This decline is exacerbated by advances in communications technology. Nonetheless, localities, sometimes with state assistance, have continued a type of arms race with competing cities to host these events, investing massive amounts of capital in new convention center construction and expansion of existing facilities.”

— “Space Available: The Realities of Convention Centers as Economic Development Strategy,”
The Brookings Institute, 2005.

WASHINGTON DC
 CONVENTION CENTER

A Convention Center to debunk the convention wisdom of Convention Centers. WaPo’s Steven Pearlstein wrote in 2014: “Using the standard CIC playbook, proponents commissioned a consultants’ report predicting that the new center would generate thousands of additional jobs and hundreds of millions of dollars a year in economic benefits, with the entire cost passed on to out-of-towners through a 4.5 percent add-on to the existing hotel tax and a 1 percent add-on to the restaurant and car rental tax. In other words, for Washingtonians, a proverbial free lunch.

“As things turned out, rather than the 750,000 room nights a year that the consultants projected, the number has averaged about 500,000. As the accompanying chart indicates, the peak came in 2005 — at 590,000 — and then only because Hurricane Katrina forced groups to move their gatherings out of New Orleans. At the trough of the recent recession, the number fell to about 300,000.

“Washington’s experience was hardly unique, as Heywood Sanders, a professor at the University of Texas at San Antonio lays out in a new book, Convention Center Follies. U.S. cities invested tens of billions of dollars, expanding convention center capacity by 30 percent since 2000, while the demand for the space has barely budged.”

DALLAS CONVENTION CENTER

Dallas Magazine’s feature story from 2015, “The Convention Center That Ate Dallas: What if we put more money directly into the arts instead?” is a must-read for anyone wanting to know the ills of the Convention industry. From the article:

“Late last year, after Philip Jones, the DCVB’s president, tossed out a plan to have taxpayers pay for a $300 million addition to the convention center, I took a look into the finances and found that it lost $37 million per year before debt service and $54 million after interest expense — amounts that were virtually identical to its losses prior to the opening of the half-billion-dollar city-owned Omni Convention Center Hotel in 2010 (one of the primary justifications for building the hotel was that it would drive more business to the convention center and stop its losses).”
Throughout his piece, journalist Wylie H Dallas discloses how falsely Convention Center projects project their ROIs: “…didn’t [Philip Jones, the DCVB’s president] tell the Economic Development Committee on August 17 that the number was $662 million? And isn’t $662 million less than $700 million? Which number is correct, the number in the city’s financial report or the number in the city council briefing?”

WASHINGTON STATE
 CONVENTION CENTER

As with many Convention Centers, the one Seattle bought came with many promises for the community, including funding for the arts and public housing. However, as the costs for that project, now well over $1.6 billion, the project has taken unexpected tolls on the Seattle community, as the Urbanist reported:

“The WSCC has been pushing for the tax increase since at least the 2016-2017 legislative session, after the project budget was increased from $1.4 billion to $1.6 billion. Another project budget increase of $100 million came earlier this year, and much of that latest increase was tied to the agreement with the Community Package Coalition, which would provide lump sum payments to community groups for projects such as Freeway Park improvements, a study to lid I-5, and payments for affordable housing (the largest piece of the package)…

[But while] those staying in a hotel or motel after losing permanent housing are not counted in most statistics related to homelessness, King County’s 2017 Count Us In survey identified 5% of respondents previously lived in hotels or motels immediately prior to experiencing homelessness. Additionally, according to data collected by the Washington State Office of the Superintendant of Public Instruction (OSPI), over 500 homeless students in King County school districts relied on shelter in hotels or motels at some point during the year, due to lack of alternate housing. These small, older motels, which are not always the best housing option available, often serve as a last resort before living on the street. The increased tax base hits a portion of the population that doesn’t neatly fall into the ‘out of town’ revenue sources that the lodging tax is supposed to tap.”

SAN DIEGO 
CONVENTION CENTER

In the words of the San Diego Reader, “There are two particularly noisome kinds of welfare for the superrich: subsidization of pro sports facilities and subsidization of hotels. Leave it to San Diego to combine the two so taxpayers may have to cast only one vote in November to bestow big bucks on both kinds of billionaires.”

Because the truth about convention center finances is often hidden, you may not know about the hotel/convention center taxpayer fleece job. First, the construction of large hotels is often subsidized — say 15 percent of the cost.

Then, year after year, convention centers are huge drains on local governments. Heywood Sanders, who accurately predicted the vast overbuilding of American centers back in 2005 for the Brookings Institution and in 2014 wrote an exhaustive book on the topic, Convention Center Follies, says, “Only a tiny handful of convention centers in the U.S. actually make an operating profit” — that is, bring in enough income to cover expenses. Fewer than 5 percent of U.S. centers have income topping expenses.