After strong convention business in Denver in the past two years, 2012 has tourism boosters hoping for a flat performance but bracing for a downturn.
“I think this year we will have the same number of conventions, just not the same size, so they are not going to have quite the same impact,” Visit Denver chief Richard Scharf said.
The number of convention delegates visiting Denver this year is pacing 5 percent behind last year, which was a busy one for Denver conventions, with the city harvesting a record $55.7 million in lodging taxes. But the numbers behind that record tax collection show downtown hotels fighting to regain the boom times of 2007 and 2008.
The city added 863 new hotel rooms in the past two years — at the Embassy Suites, the Four Seasons and the Hilton Garden Inn — so there were more rooms to generate tax dollars. Revenue per room in downtown climbed last year — reaching $108.64, up from $103.69 in 2010 — but is still below pre-recession levels of 2008.
Last year’s surge in big conventions — such as the 12,500-strong Microsoft Global Exchange employee conference in July, which generated $25 million in economic impact — helped drive up demand for downtown rooms and spiked prices, leaving downtown businesses flush. That demand spilled into the metro area as downtown area hotels filled, as shown by increasing occupancy levels at metro Denver hotels in 2011.
And 2010 was the second-best year ever for conventions, with the Colorado Convention Center hosting 75 groups and the city hosting another 423 meetings that drew 371,000 delegates and stirred an economic impact of $653 million. (In 2008, the top year for conventions, the city hosted 379,000 delegates. The recession-addled 2009 drew only 313,000.)
Competition getting stiffer
Short-term corporate business events and business travel are coming back from the 2009 plummet, but slowly. Big association convention business still hasn’t rebounded, and recent criticism of lavish government conventions could curtail large federal shindigs.
Add in the fact that cities such as Phoenix, San Diego, Philadelphia and Indianapolis recently expanded their convention centers — capping a national doubling in public spending on convention centers in the past decade — and the competition for conventions has grown cutthroat.
“We have a lot of new supply and a lot of expansion, yet the meetings market has been pretty much flat for the last 10 years,” Scharf said. “It’s pretty evident we are overbuilt in terms of convention space.”
A few years ago, Denver could entice an association or company to return for another convention in as few as six years. But with all the new convention space and more cities in the mix, Scharf said he’s lucky to get a convention to come back in 12 years.
It’s not just national competition that is challenging downtown hotels that rely on convention business. Three more downtown hotels are scheduled to open in the next year — the Marriott Renaissance, Homewood Suites and the Metro State Hotel and Hospitality Learning Center — adding another 810 rooms to downtown’s supply of 8,400 rooms.
“We are still absorbing new supply, and we’ve got new supply coming,” said Tom Curley, general manager of the Westin Denver Downtown. “We are all chasing a smaller chunk of business to make do.”
While optimistic in the long-term, Curley said slow convention business in the latter half of 2012 is challenging an already behind-pace year. And 2013 looks better, but only compared with 2012, he said.
Gene Tang, the manager at 1515 Restaurant, said 2012 has been “a little more challenging.”
“Those big groups really help. Last year was much busier,” said Tang, who estimates his business is off 10 percent. “Downtown business rely on those big conventions. We are working harder to compensate for the decline.”
Chasing business travelers
Hotels can make a lot of money on those giant conventions that swell downtown to capacity. But when those big events dry up in Denver, a growing number of hotels are left chasing the same corporate market and the business traveler. The competitive edge in that pursuit is lower room rates, which further pinch hotel revenues. An uptick in business travelers, weekend visitors or corporate meetings isn’t enough to cover a decline in sell-out-the-city conventions.
“Our expenses don’t go down. The cost to produce the same product actually increases,” said Greg Leonard, general manager of the Grand Hyatt Denver. “Convention business can be really good; it delivers tax revenue and brings vitality to businesses. But when it gets tight, everyone has to tighten their belts a little.”
Luckily, the smaller gigs this year are lessening the loss of big gatherings. Scharf’s team recently booked smaller corporate events at the Colorado Convention Center for later this year.
“We are getting our fair share, but it’s very competitive,” he said. “But relative to where we were before the recession, we are not there yet.”
Jason Blevins: 303-954-1374 or jblevins@denverpost.com
