Wednesday, June 08, 2005

While Rome Burns...

Today’s Plain_Dealer_reported that more money is being dedicated to researching taxpayer tolerance for a new or expanded convention center. What disturbs us is that Cleveland leaders have given incredible levels of consideration to potential convention center concepts and have done so at the expense of more pressing fundamental problems such as widespread poverty, under-performing schools and eroding infrastructure. Recently published research by a University of Texas at San Antonio professor makes a compelling case as to why our leadership might be misspending our most precious resource – our collective focus.

Prof. Heywood Sanders contends that the convention center market is oversaturated with offerings and that the diminishing demand promises it can’t catch up anytime soon. “Over the past decade alone, public capital spending on convention centers has doubled to $2.4 billion annually, increasing convention space by over 50% since 1990. Nationwide, 44 new or expanded convention centers are now in planning or construction,” according to Sanders' research, which was published in January by the Brookings Institute.

Simple economics say that most, if not all convention centers will suffer in this environment. Sanders points to Boston as an example, which opened a new $800 million convention center last summer and hosted about six events, which were attended by 65k in 2004, far short of projections. Consequently, surrounding hotel room night projections were merely a third of the estimates made in the feasibility study that sold the project to taxpayers. Worse yet, Washington, D.C. and St. Louis are operating at such substantial losses that they are unable to adequately pay down bonds secured by taxpayers. This means other government services or worse yet public schools will suffer at the expense of serving convention center debt.

There are only two cities experiencing favorable trends, Orlando and Las Vegas. However, Sanders points out that Las Vegas has seen attendance dips in recent years, due in part to the emergence of privately owned convention centers like Mandalay Bay and the Sands. Bookings in Orlando have returned following a steep decline in 2001, yet these are still below 2000 levels when measured by attendance.

Our aggravation would be diminished if Cleveland’s leaders had the wherewithal to actually put forward a business case as to why and how much investment in a convention center is needed to achieve a desired return on investment. This would entail a business plan that identifies which markets or trade shows they wish to attract, a description of the market and its size, as well as the investment size necessary to compete. A private convention center, such as Mandalay Bay or the Sands, had to do so to justify investment in Las Vegas, which probably explains why each was prepared to compete and contribute to the erosion of business at the nearby taxpayer-funded facility.

First and foremost, we would like to know how a new or expanded convention center serves the fundamental challenges in our region before anyone asks for investment.


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