|By Kyle Stock, The Post and Courier, Charleston, S.C.|
Knight Ridder/Tribune Business News
Apr. 17, 2005 - A convention or big group meeting is the tourism equivalent of landing a trophy fish.
It pays off for the whole boat -- restaurants, hotels, attractions, retailers -- and it can very quickly redeem an entire season of so-so results.
But it's getting harder for group sales directors to bring home something to brag about. There are a lot more lines in the water than ever before, and according to some tallies, there's less to catch. Scores of expensive convention centers around the country are adrift and trying to pick up anything they can. In the meeting industry now, everything is a keeper.
"An individual city may absolutely be making the right decision by building a convention center, but collectively, when you add them all together, it just doesn't make sense," said Steve Litvin, a College of Charleston hospitality professor. "The economics of these things are going to continue to get tougher and tougher."
As indisputable as Litvin's point may be, what also is certain is that conventions are great business. They inject millions of dollars into a community in just a few days and showcase the hosting destination to thousands of potential vacationers. The problem is that a lot of places wised up to big meetings at the same time and rushed to build convention centers. Meanwhile, a lot of existing centers upped the ante, expanding and improving their facilities in an attempt to hang on to market share. Today, the result is a glut of massive, well-appointed boxes hungry for booths and crowds.
Between 1989 and 2004, there was a 70 percent increase in convention space in the United States, according to Tradeshow Week magazine. That boom included the Charleston Area Convention Center Complex, which opened its 200,000-square-feet center in August 1999; a 330,000-square-foot center in Savannah that opened in spring 2000; and a Columbia facility, 142,500 square feet, that hit the market in September.
The number of convention-goers, meanwhile, has faltered in recent years and hasn't come close to keeping pace with construction. Attendance at the country's 200 biggest business gatherings peaked in 1996 at 5.1 million and had dropped about 20 percent by 2003. During those years, many of the country's biggest and most popular convention centers watched attendance plummet by 50 percent.
Rather than worry too much about keeping up with the Joneses, officials at the $56 million Charleston Area Convention Center complex maintain they don't track attendance. They said their best estimates show that about 1 million people a year come to the facility's meeting space, coliseum and performing arts center.
"New centers concern me, but we market to our strengths," said Dave Holscher, executive director of the North Charleston facility. "We've increased the number of hotel rooms within walking distance. The airline situation has improved with (the arrival to the area of) Independence Air, and we've still got the backdrop of Charleston."
Ed Riggs, director of sales for the center, said the appeal of the Holy City's historic downtown, restaurants and beaches helps to insulate the convention center's operations from some of the forces shaping the national market.
"We just have to work harder for the same market share," he said. "It is what it is, and we have to deal with it."
Riggs said his biggest challenge is getting enough money to market the facility effectively. It takes cold, hard cash to make Charleston stand out against Charlotte and big convention cities such as New Orleans and Orlando.
Debate over the wisdom of building convention centers has grown heated this year since Heywood Sanders, a University of Texas public policy professor, penned a study in January likening the industry to an arms race between nations.
Sanders' report said convention data is largely unreliable and politicians who push to build big meeting facilities usually look through rose-colored glasses. The professor contended that the overly optimistic projections are fueled by consultants who are reluctant to tell their clients that construction is a bad idea.
"The grand promises of convention center investment are unlikely to be realized, the strategy doomed to failure," Sanders wrote. "A recovery or turnaround is unlikely to yield much increased business for any given community."
The report, which was published by the Brookings Institution, a Washington, D.C., think-tank, immediately came under fire from a score of trade groups.
But there are a lot of industry analysts, such as Litvin, who agree with Sanders' assessment. Litvin said most destinations don't research the national market sufficiently before making convention investments. They don't realize that their business could be affected greatly by new construction thousands of miles away.
Fennell Holdings, a Charleston-based hotel company, recently broke ground on a new 142-room Holiday Inn near the North Charleston convention center that it plans to open by 2006. Scott Fennell, the company's chief operating officer, is concerned about a glut in the meeting-space market, but like Riggs, he puts his faith in Charleston.
"We are optimistic. I guess we have to be," Fennell said. "We've just got to make sure we stay aggressive in selling the center."
Fennell's biggest worry is competing facilities "lowballing," slashing prices to win meetings. "Then we've got a problem," he said.
There's some evidence that such discounting is happening already, and more convention centers are relying on local groups and meetings that pay less. The Myrtle Beach convention center, for example, is busy, according to general manager Paul Edwards. But a city-financed hotel nearby has faltered since it opened in January 2003. Edwards said his sales staff is attempting to draw more high-end, national groups to bolster those results. The city of Columbia backed out of plans to finance a convention center hotel about a year ago.
Officials at the North Charleston facility said the center has been a big win for the local economy since it opened in 1999.
In its first five years of operation, the center and coliseum have lost about $3 million.
However, Holscher said North Charleston tax revenue on convention-related business, including hotel rooms, restaurants and retailers, has been double the facility's losses. According to estimates made by the Charleston Metro Chamber of Commerce, the facility generated $865,312 in taxes last year and 64,398 room-nights at area hotels.
There are other positives to consider, including signs that the meeting industry is picking up steam. The Travel Industry Association of America said business travel grew by 4 percent in 2004 and predicted it will rise by a similar amount this year.
But whether individual facilities will see similar increases in their business is questionable. If hospitality pundits such as Sanders and Litvin are correct, things are going to get worse before they get better for big-box meeting facilities.
There are about 430 convention centers in the country. And there are about 40 new or expanding convention centers in the works, including a 150,000-square-foot facility scheduled to open in Raleigh sometime in 2007 and seven others in the Southeast.
Some say technology, more than competition, will sound the death knell for a lot of big-meeting facilities. As corporate travel budgets were slashed in the late 1990s, a lot of companies turned to virtual meetings and teleconferencing. Whether cyberspace will ever fully replace a face-to-face is doubtful, but virtual meetings aren't going away.
"The day is going to come when the younger generation is more comfortable doing meetings on a computer," Litvin said. "These convention centers may eventually make wonderful office spaces."
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