|By Leon Stafford, The Atlanta Journal-Constitution|
Knight Ridder/Tribune Business News
May 1, 2005 - When the Georgia World Congress Center opened its $282 million expansion two years ago, it was supposed to be a gold mine for the city's convention business.
But because of intense competition created by too much convention space nationwide, the city is now having to compensate some groups to rent the space.
Big conventions increasingly are asking for incentives, including cash, to hold their meetings here. And if Atlanta won't pony up, another city is waiting in the wings.
That was made abundantly clear last month when the National Association of Home Builders -- Atlanta's biggest convention -- canceled shows planned for 2007 and 2008. The city offered the group $2 million to keep its 100,000-plus members coming here, but NAHB leaders later decided a more realistic number would have been $10 million.
Even smaller shows, like the U.S. Poultry & Egg Association, have been able to flex their muscle. That group, which has been meeting in Atlanta since 1957, threatened to go to New Orleans until the GWCC offered it $75,000 if it agreed to stay.
"As more (convention centers) have opened, the competition has gotten tougher," said Carey Rountree, executive vice president of the Atlanta Convention & Visitors Bureau, which books conventions for the city. "We entered a new era about five years ago with all the growth, and we've had to respond to that."
Atlanta is among dozens of cities that have enlarged their convention centers or built new ones in recent years, hoping to grab more convention business, which mushroomed during the 1990s.
Today the convention center business is a textbook case of supply and demand. The Georgia World Congress Center competes with its big rivals -- in Las Vegas, Chicago, Orlando and New Orleans -- for the monster shows. And it goes up against smaller venues in trying to win more modest shows that could help plug holes left when huge conventions leave town.
A report by the Brookings Institute, a Washington-based think tank, argues that the predicament is the convention industry's own fault.
The rationale for creating more space was flawed, it says.
"Part of what happened is that every one of these centers had a consultant that said business is growing steadily and will continue to grow steadily," said Heywood Sanders, public administration professor at the University of Texas at San Antonio, who wrote the Brookings report.
"What you have is a misunderstanding of the market analysis. Each city thought it could out-expand its competitor."
As the demand for incentives grows, metro Atlanta, which hosted more than 3,000 groups last year, may have a tough time keeping up.
The visitors bureau, which is financed through hotel taxes and private contributions, has a budget of nearly $15 million. The Las Vegas Convention and Visitors Authority, by comparison, has a budget more than 12 times as large.
The Atlanta bureau offered incentives to the top 20 conventions that came here last year, paying for everything from banners hung from downtown streetlights to language interpreters.
The bureau used $200,000 of its money and nearly $300,000 from corporate donors, said Gregory Pierce, the visitors bureau's chief financial officer.
In an effort to make the home builders deal work, the bureau went to hotels for cash. The Georgia World Congress Center lowered its rent.
Still, the home builders packed up. The group -- which as in other conventions makes money by reselling convention floor space to exhibitors -- said it could earn more by going to the larger Orlando convention center in 2007. It probably will move on to Las Vegas in 2008.
The Congress Center opened its 420,000-square-foot expansion in 2003, just as many rivals unveiled their own enlarged exhibit spaces.
The sprawling downtown complex -- fourth-largest in the nation -- created a "value-added" program to drive business, said Congress Center Executive Director Dan Graveline.
New customers, who generally pay $1.60 per square foot to rent space, were offered a 15 percent discount or given ballrooms or meeting rooms at no extra charge. These days, about 30 percent of all shows at the center get such incentives.
Giving away space is tough for the Congress Center, which barely made a profit last fiscal year, ending just $225,788 in the black. And it faces other potential pitfalls, Graveline said.
"We don't like to discount because we think there needs to be integrity in the rate," he said. "We want to be able to tell that next customer that we treated them as well as the one before."
He described the deal with the home builders as "a classic example of negotiating with a gun to your head. And that's not a knock on the home builders. We put the gun to our heads."
Visitors bureau President Spurgeon Richardson said it was important to keep incentives in check.
"You don't just offer cash," he said. "That's the last avenue we want to go down."
And the deal-making continues. On a recent Friday, thousands of students from all over the world were at the Georgia World Congress Center for the FIRST Robotics Competition, an annual contest of the best and brightest young engineers.
The teenagers tinkered with and polished robots at a frenetic pace in hopes of putting together a winning design.
In a small Congress Center meeting room a few hundred yards away, the students were the topic of conversation. But it wasn't about the genius on display.
The visitors bureau, the Congress Center and hospitality industry players asked representatives from some of Atlanta's biggest corporations and philanthropies -- Coca-Cola, Southern Co., the Arthur Blank Foundation -- for corporate help to keep FIRST Robotics in Atlanta. They didn't mention specifics on how much support they needed.
About 30,000 people attended this year's robotics event.
When all the convention-related spending is tallied, the event is projected to have brought $20.4 million to the city.
The group returns to Atlanta in 2006 but has not chosen where to go afterward.
Atlanta badly wants it to remain, but the city has competition from Detroit and Indianapolis, Richardson said.
The hospitality community's pitch to potential donors was soft, sidestepping the trickle-down spending shows bring: Atlanta and Georgia are science capitals, a natural fit for the robotics competition.
The city's demographics align with the group's goal of improving minority representation in the sciences.
"We think Atlanta is sort of that microcosm, the view of what the world is and how it will be," said Ann Cramer, director of corporate community relations and public affairs for IBM, who acted as a liaison between the robotics group and the hospitality community. "That is why it is so important for us to demonstrate as a community that we want FIRST to stay in Atlanta for the long term."
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