Where do politicians get the crazy idea that the world needs yet another convention center? From the experts, of course.

I have written a letter to the county commissioners on my opposition to the expansion -- I may publish that at a later time.

This is a Forbes Article that I find useful when considering the expansion of the County Convention Center.

The Answer Is Always Yes
Victoria Murphy, 02.28.05

Where do politicians get the crazy idea that the world needs yet another convention center? From the experts, of course.

Portland, Ore.'s trade show business was thriving back in 1997, when the city hatched plans to double the size of its Oregon Convention Center to 368,000 square feet, the largest in the Northwest.

Today, $116 million in bricks, mortar and carpeting later, Portland's trade hall is struggling. It lost $5.5 million last year on $15.3 million in revenue. Occupancy since the expansion has fallen from 71% to 43%. The Wood Technology Showcase, a Portland event for 34 years and one that expansion boosters cited as needing the enlarged venue, has been postponed because of lagging attendance. The same run-down buildings and third-rate restaurants that always surrounded the center, like Burgerville and a deli that sells sushi and Beanie Babies, are still there.

"We haven't set our sights on being profitable," says Oregon Convention Center's executive director, Jeffrey Blosser. "These are challenging times in our industry."

Challenging? The business is a mess, plagued by a taxpayer-funded burst of expansion and a continuing dearth of customers. Over the last decade cities' annual capital spending on centers has doubled to $2.4 billion, according to a study by the Brookings Institution. The projects are frequently backed by expensive feasibility studies from consultants that rarely give a thumbs-down. Forty-four new or expanded halls are in the works, in hot spots such as Las Vegas and not-so-hot spots like Albany, N.Y. Seven million square feet will be built in the next few years, adding to the 64 million square feet now standing.

Unmentioned at ribbon-cutting ceremonies is that the space will be impossible to fill. The biggest 200 shows, a rolling list measured by Tradeshow Week, are using the same amount of space they did in 1992. Attendance has fallen at most centers, even those with new space such as in Indianapolis, Chicago and Atlanta. The thriving destinations, Orlando, Fla. and Las Vegas (which just announced a $400 million expansion), are stealing smaller shows away from other cities, stuffing in several at a time. The smaller trade halls are discounting, even giving space away.

A common excuse of the convention center builders is that Sept. 11 cut travel. But trade show attendance peaked in the mid-1990s. Something more fundamental is going on: Shows in general are far less relevant. Consolidation in industries like manufacturing, retail and technology has left a smaller pool of exhibitors. And far more trade now gets done in China, which is rapidly adding shows and square footage of its own.

Newell Rubbermaid pulled out of the International Home & Housewares Show in Chicago in 2001 to target retailers more directly. It opened a sales office near Wal-Mart in Bentonville, Ark. Since 2001 the Nike Swoosh hasn't appeared on booths at any of the big retail shows like Magic Marketplace or the Super Show. Oracle no longer spends big bucks on trade show booths.

So why is the concrete getting poured in Jackson, Miss., Peoria, Ill. and Spokane, Wash.? Politicians, playing local hero, are incapable of finding reasons not to build. Even when voters reject new taxes, as in Portland, Pittsburgh and Columbus, Ohio, new space goes up anyway, backed by hotel taxes or bond issues.

Portland's story is particularly telling. Prior to the 1998 city election Portland's visitors association estimated the center had missed out on $17 million in convention business over six months because the center was too small. The regional tricounty government proposed an $82 million general obligation bond to pay for the expansion, but taxpayers overwhelmingly nixed it. So Multnomah County floated a separate bond backed by higher taxes on hotel rooms and car rentals, allowing the expansion to proceed. In the meantime new, rival centers were going up all along the West Coast.

The expansion was completed in 2003, with eco-friendly touches like an outdoor "rain garden." City fathers boasted of landing the 2005 National Square Dance Convention and its 10,000 high-steppers.

The euphoria was short-lived. Apart from big auto and gardening shows, last year's schedule was packed with what the industry dubs "smerfs," which stands for social, military, educational, religious and fraternal groups. These visitors typically pack four travelers in a hotel room and don't have corporate credit cards to blow on expensive meals.

By the end of 2004 the center's finances were in bad shape. To get 34 decent-size shows, the center had to indirectly waive rental fees for the organizers of 10 of them. The building would have lost $15,000 a day if not for $6 million in tax subsidies. Hotels are 60% occupied, as fewer than 30% of convention-goers last year came from outside Portland.

The fix, says center director Blosser, is a new 600-room convention hotel, backed by the city. "We lose a lot of shows because we don't have a big hotel. But it doesn't pencil out for a private company; a hotel here would need help," he says. Blosser commissioned Strategic Advisory Group, an Atlanta consultancy that specializes in convention center and hotel studies, to assess the idea. SAG says the new hotel will bring in annual spending of $116,000 per room.

Maybe Blosser should run those numbers past the folks in St. Louis. In 2003 St. Louis followed a $270 million convention expansion with a 1,081-room, $265 million adjacent hotel, paid for with public and private money. Hospitality Consulting Services projected 800,000 room-nights per year citywide with the addition of the Renaissance hotel. Instead St. Louis is getting only 400,000. A nearby McDonald's closed shop. The neighborhood remains lackluster, punctuated by a store peddling gold chains and a discount sneaker outlet.

In August Moody's downgraded the city's $50 million hotel bonds even deeper into junk. The development group will likely have to drain the $5.7 million left in its reserve fund to service the debt and come up with additional money from stakeholders like Kimberly-Clark. "The assumptions that go into feasibility studies are the problem," says Anne Van Praagh of Moody's. "The outside firms have no financial stake in the business."

Robert Canton, director of PricewaterhouseCoopers' convention and tourism practice, offers this defense: "We don't recommend to build or not to build. We're just being asked if there is a potential demand."

The answer is almost always yes. Out of 75 potential projects reviewed by the firm that Oregon hired, only 4 were deemed completely unfit. SAG partner Jeffrey Sachs says that is evidence of his shop's "objectivity." "You lose clients if you shoot down projects. They've already made up their minds by the time they come to us," he says.

Where do the experts get their rosy predictions? "We have to make a lot of assumptions. This industry isn't tracked very well," says Sachs. The most oft-cited data come from Tradeshow Week, which is owned by Reed Elsevier, a British company that also produces 430 trade shows. Its primary measure of the industry's health is its annual list of the 200 best-attended shows, making for a convenient survivor bias, and based solely on data from show managers who have an interest in masking serious declines.

Advisers' conclusions often fly in the face of logic. Consulting firm Convention, Sports & Leisure was hired by Cincinnati in 1999 to ask meeting planners what they thought of the city as a show destination. Only 39% answered positively, trailing perceptions of Kansas City (60%), Boston (56%) and Nashville (62%). CSL subtly encouraged construction by suggesting the city could improve its image. Cincinnati is under way with a $160 million expansion. A study for Minneapolis done by Coopers & Lybrand in 1994 went so far as to suggest that obvious obstacles to success like frigid temperatures and location could be overcome by "specific marketing efforts."

The slump is good news only for show managers. The Quilts Market show is getting space at Kansas City's soon-to- be-expanded center for no cost, and hotels are paying for the show setup. "I definitely had the upper hand in negotiating," says Quilts Market opera