Denver’s newly expanded Colorado Convention Center is opening amid
a national glut of meeting and exhibition space that has forced
other cities to slash rental rates or operate half-empty.
More than a dozen convention center expansions have occurred in the
Midwest and West since Denver voters five years ago approved bonds
for the expansion, with a price tag that now exceeds $310 million.
Salt Lake City, San Antonio, Seattle, Dallas, Las Vegas, San Diego,
Houston, San Francisco and Minneapolis already have finished
expansions. Meanwhile, Phoenix; Chicago; Kansas City, Mo.; Los
Angeles and New Orleans are among the cities with expansions
underway.
“We are talking lots and lots of centers,” said Heywood Sanders,
a public policy professor at the University of Texas at San
Antonio, who is one of the harshest critics of using convention
centers as economic development tools. “Business is down. Everyone
is scrambling in an overbuilt market for whatever modest scraps
they can pick up.”
Tourism officials in Denver made the argument in the late 1990s,
and maintain today, that the Colorado Convention Center had to
increase in size to compete for business.
“We were having a lot of groups tell us they had outgrown our
building,” said Richard Scharf, president and chief executive of
the Denver Metro Convention & Visitors Bureau. “So, the question
is, do you let that business go somewhere else, or do you grow?”
The convention center has grown, doubling its space to more than
2.2 million square feet – enough to hold roughly a dozen
average-sized Wal-Mart Supercenters.
The convention bureau has booked 165 convention events through
2017, which is estimated to bring $1.4 billion in spending to the
metro area.
Fighting for business
While convention space has doubled in the past 10 years, the U.S.
convention and tourism industries are fighting for business. Last
year, the amount of exhibition space grew 6.6 percent while the
space rented dropped 5.3 percent, Sanders said.
The use of the convention center in New Orleans has been cut almost
in half since 1998, according to media reports.
A 500-room Sheraton hotel built in Sacramento, Calif., to attract
conventioneers was projected to draw 60,000 overnight hotel stays,
but has drawn about one-third of that, according to Sanders.
Other cities with convention centers that have reportedly performed
below expectations include Boston, Los Angeles, Houston and Tampa,
Fla. Taxpayer-backed hotels in St. Louis, Houston and Austin,
Texas, also have struggled.
Will Denver face the same challenges?
Sanders says the city will face them because the growth in
convention business hasn’t matched the increase in space and
competition.
“It will get some new business that is currently going other
places,” he said of the Colorado Convention Center.
“The likelihood is it will not generate a substantial increase in
business,” he said.
Scharf, the convention bureau chief, said, “Some cities are going
to lose, and some are going to win. I think we are going to be a
winner at the cost of other facilities.”
One industry observer said Denver may have an edge because Colorado
is a central meeting point for those in the Midwest or on the
coasts.
“You can compete for more of those better, bigger events,” said
Dave Weil, a senior director for Chicago-based SmithBucklin, one
of the largest association management and professional services
companies.
One sign of the intense competition is that Denver has joined other
convention cities in resorting to early-bird rental rates.
Now, those looking to book space can get it at 22 cents per net
square foot – a 25 percent discount – if 35,000 square feet or more
is rented, said John Adams, general manger of SMG, the Colorado
Convention Center’s property manager.
While rental rates play a role in a convention’s decision on a
location, it’s not a deal-breaker. Convention space across the
country is “plus or minus 10 cents of each other” per square
foot, Adams said.
Transportation, recreation, dining, night life and cultural/sports
attractions play major roles in convention decision-making, he
said.
Hotel trend a boost
Convention “headquarters” hotels are the latest trend in
attracting events and boosting attendance.
Minneapolis is proposing to build a 1,200-room hotel near its
convention center, which doubled in size in 2002.
“Previously, in cities like Minneapolis and Denver, a shuttle
system might have been acceptable to bus conventioneers around; but
it isn’t any longer,” said Greg Ortale, president of the Greater
Minneapolis Convention & Visitors Association.
Large headquarters hotels allow conventiongoers to attend meetings,
play and sleep in the heart of a city.
Ortale said Denver’s decision to build the Hyatt adjacent to the
convention center “will pay off huge. If they had not built the
hotel, they would have taken a greater risk.”
One risk mitigated is that the convention center expansion and
hotel are not being built with public funds, like many of its
competitors elsewhere.
The convention center is being financed with excise-tax bonds,
which are paid back through the city’s hotel tax, a prepared-food
and beverage tax and taxes on car rentals.
The hotel bonds, meanwhile, amount to $354.8 million.
The Hyatt is projected to take in $17.2 million in room rent its
first year and more than $30 million annually, starting in 2009.
“I can say safely that there has never been a concern or an issue
that would prompt anyone to think that the (convention center and
hotel) bonds (would) ever go into default,” Scharf said.
There is a huge reserve fund on the hotel and a $2 million
emergency reserve on the original convention center construction,
he said.
Denver Post staff writer Julie Dunn contributed to this report.
Staff writer Macario Juarez Jr. can be reached at 303-820-1260 or
mjuarez@denverpost.com
