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Convention Center Still Struggling

Attendance is up, so where's the economic gravy train?

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Despite the economic doldrums, overall traffic at Richmond's $170 million convention center has been on a tear of late, up to a record 341,442 attendees for fiscal 2009. So where's that economic gravy train?

Good question. While officials at the Greater Richmond Convention Center have done an admirable job of filling up the 700,000-square-foot facility during the recession, a peek at the center's financials offers a more sober perspective.

The convention center is hardly fulfilling the attendance and financial projections that industry consultants promised more than 10 years ago. While overall traffic counts rise, the moneymaking events — conventions and trade shows that generate out-of-town conventioneers who stay at hotels and fill up restaurants — brought 103,743 people in fiscal 2009.

One study by KPMG Peat Marwick in 1995 projected that the convention center would generate twice that number — 208,000 convention and trade show attendees — within two to three years of opening. In 1994, the older, much smaller convention center generated 138,000 convention and trade show attendees, according to the study.

“That convention center was not built as a place to accommodate banquets,” says Heywood T. Sanders, professor of public administration at the University of Texas at San Antonio, who specializes in the economics of convention centers. “The bottom line here is very clear: That center is not doing anywhere near the business that it was forecast to do.”

Michael Meyers, general manager of the convention center, says the KPMG study is invalid. The projections against which the center should be measured were compiled in 1999 by C.H. Johnson Consulting Inc., he says. It projected the new center would net 30 conventions and 25 trade shows within two to three years of opening. In fiscal 2009, the center drew 34 conventions and seven trade shows.

Those kinds of events are important because they generate the lion's share of the economic impact, best measured in hotel traffic. The Johnson study forecasted an increase of 140,000 room nights during the first three years after the expanded center opened (the KPMG study forecasted 416,000 new room nights). That became the justification for increasing hotel and lodging taxes on area hotels to pay the center's $170 million debt load. In fiscal 2009, for example, hotels in Richmond and the surrounding counties generated $10.9 million in taxes to pay the center's annual debt payment.

There's no official count of convention-generated hotel rooms. But overall, hotels within a one-mile radius of the convention center, the ones most likely to see the benefits of convention traffic, saw a cumulative increase of 48,033 hotel room nights from 2003 to 2006 — not 140,000 — according to Smith Travel Research.
Within that same one-mile radius, total hotel room nights in 2008 were back down to 426,938, a 0.2-percent increase over 2003 when downtown hotels reported 425,843 room nights.

Richmond should be careful not to think that the convention center is succeeding as promised, Sanders says, warning against local governments' subsidizing of failed projects. (City taxpayers subsidize the convention center's operating budget to the tune of $2 million a year.)

In other cities with struggling convention centers, the trend is toward building new government-run hotels as a complement. “When that convention center performs as the Richmond center has,” he says, “the response is almost invariably we need more public investment.”

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