Austin needs a convention center expansion, because some other cities have bigger ones

The Austin American-Statesman reports that Austin needs to expand its convention center, adding 200,000 square feet of exhibit space and more meeting and ballroom space, at a cost estimated between $400 million and $600 million. The “long-range master plan” presented to the city council offers as evidence of the “convention center’s success” a chart of the growth in citywide hotel tax collections. No mention of how hotel demand has boomed because of the city’s success as a tech center. No mention of the role of big events like South by Southwest in bringing visitors. And just two numbers on the actual performance of the convention center — two “estimated [hotel] room nights of ACC events” — from 2009 and 2015.

The major argument from a local technical assistance panel of the Urban Land Institute is that “with 247,050 square feet of exhibition space, the Convention Center is well below the average of 518,000 square feet of Convention Center exhibit space offered by many peer cities” — and less than half the space of centers in San Antonio, Houston, and Denver. Which is, of course, the case for almost every other city with a center smaller than the two million square feet or more in Chicago, Orlando, and Las Vegas.

And what if Austin doesn’t expand? Then there will be “competitiveness in convention market at risk” and “lost jobs.”

Note to Austin councilmembers and staff, who have again hired C. H. Johnson Consulting to advise them on the expansion: When Johnson Consulting produced the July 1997 “Strategic Plan for Austin’s Convention Center Industry” on the previous expansion, the firm forecast “an expanded Center will generate approximately 332,600 room nights in Austin.” Last year’s room night total from the center: 261,178.


16 comments on “Austin needs a convention center expansion, because some other cities have bigger ones

  1. In my best George C. Scott voice:

    “Mr. President! We cannot allow a convention center gap!”

    If the total taxation revenue from each hotel room stay (theoretically) created by the convention center is $15 (which would surprise me, most are about a third of that), the total revenue realized would be $3.92m.

    And to “protect” this revenue stream, the city ‘needs’ to spend $400-600m?. Even at modest municipal borrowing rates (not the significantly higher bond issue payments), covering this debt would cost in the neighbourhood of $15m per year.

    That’s a net loss of $11m to the general fund that could have been used to improve schools, infrastructure or other public services.

  2. Austin is a destination for a variety entertainment and work reasons. While the convention center may generate 261K nights it does not tell us how many rooms would be empty without it. There are undoubtedly people who do not visit or are unable to visit when there are conventions using rooms.

  3. This is the line that kills me the most:

    And, as city officials have previously mentioned, “eminent domain would remain an option,” Tester said, “but we look forward to peaceful negotiations hopefully.”

    So the city is openly saying that it wants to shut down tax paying businesses in order to expand a convention center to…increase tax paying businesses? Sure, one could make the argument that major infrastructure projects (highways, railways, airports) often displace and push out businesses and houses due to their expansion, but this takes the cake for shooting oneself in the foot. My old city of Columbia SC got into alot of trouble for attempting to build its own hotel in the prime entertainment district, ostensibly to “increase tourism business”…for other hotels and restaurants they were going to compete against.

  4. I have mixed feelings on convention centers. Yes there are fewer and fewer conventions these days. However, we just opened one in Cleveland and as a result we’ve had a number of new hotels get built and occupancy is up significantly. The old facility wasn’t drawing and we had organizations tell us they would never come back if we didn’t get something new. Austin maybe different because it has other draws.

  5. Similar to many topics, the question isn’t whether these kinds of projects move the needle of “economic activity” it is whether the results achieve justify the spending–and whether another policy choice might have achieved the same results at lower cost.

    However, for most “civic leaders” the only options are those that result in something shiny and new.

  6. Aquib,

    I agree that convention centers are often a more mixed bag than pro sports teams, as they often manage to fill up more frequently throughout the year, and by definition bring in outside business people. I guess the question is, what drives convention center business? Is it the size, or is it the corporate headquarters and businesses that dominate a city? For example, no doubt San Francisco will always get the tech conferences because it is such a tech hub, or web retail stuff to Seattle due to Amazon, etc. Austin clearly has a tech base, but at the same time a lot of the tourism draws of Austin are not convention center related or even especially hotel related ( I imagine most SXSW people use airbnb), so will the convention demand go to them versus San Francisco?

    The other big problem with large convention center complexes is they effectively create a “dead zone” in the downtown core, where all activity is taking inside, as opposed to outside. People are going to go with the indoor vendor, especially if the convention center is so large that walking to an outside restaurant is a chore. All that does again is shift the business to the inside, not necessarily growing it.

  7. Sean – I think it just depends on the overall plan the city has for the area and what kind of conventions they draw. You have the corporate conventions, you have religious conventions, you have more entertainment oriented ones. When you look at basically any place other then Vegas you look at things like how accessible the location is for most of the attendees, cost of hotels, the facility itself, the nature of the event, entertainment options if its a multi day thing. .

  8. Elliott, I can ask Neil to add (and Box) before Schemes!

    Sean, let me chime in with some info and numbers. SF is a great visitor destination, but their Moscone Convention Center has run into the same problem as everywhere else–people just aren’t coming.
    In fiscal year 1999, Moscone had more than 790,000 convention and tradeshow attendees. Last year the total was 486,524. So guess what they’re doing?
    Expanding!
    And in Seattle, the Washington State Center saw almost 184,000 out-of-state attendees in 1997, before their last expansion.
    Last year the number was 126,029.
    So, they too are expanding.
    Even good visitor destination cities, with booming economies, are seeing the results of center overbuilding.
    And that’s the problem Cleveland also faces Aquib.

  9. Yeah I think the overall trend suggests a decline in convention traffic across the board, and that convention centers are fighting for a bigger or atleast equal slice of the pie by constantly throwing amenities out there.

    Aquib, I think the point you make about accessibility and ease also raises some question about public infrastructure; is there a functional mass transit system? Is traffic a nightmare? Is crime out of control? I think this raises the question again if it is explicitly the convention center, or is it large infrastructure priorities that drive business/personal/convention center business? There is a split I think, and my own opinion is weighted towards the other infrastructure.

  10. Sean – Accessibility also includes how easy is it to get to the city. If its easy to fly in and out of the city or if a lot of your potential attendees are within driving distance you have a better shot of winning the convention. It also depends on what type of convention. If its an industry convention a city with a large presence in that industry would win. If its a religious organization then they would want to be in a city where there are a lot of people of that faith and/or a city that is more tolerant. Like an Islamic organization would not want to have its convention in Tennessee. If its entertainment oriented you want to be in a place where you have a lot of fans.
    After going through that criteria you probably have a few cities on your short list then it comes down to facility itself, hotels, price, availability on desired dates, etc.

  11. I should probably let Heywood answer this one, but: Aqib, my sense from reading Heywood’s book is that there are really only two significant criteria for people deciding where to hold conventions:

    1) Is Disneyland, Bourbon Street, or the Strip nearby?

    2) How much of a discount are they offering?

  12. Well I’ve seen a hotel occupancy zoom rates in Cleveland with several new hotels coming online in the last couple of years since the new center opened. We clearly don’t meet criteria #1 and its not like we’ve had a bunch of Fortune 500 companies moving here so there really hasn’t been any other catalyst for that development otherwise.

  13. Aquib, I’m not so sure that hotel occupancy has zoomed in Cleveland. The PD reported in January 2015 “Hotel occupancy in the Cleveland area dipped last year – the first full year of operation of the new Cleveland Convention Center – in part because so many new hotels opened in the city.” Things look a little better this year, in part because of the NCAA regionals.
    And the new hotel developments? Developers are betting on the future, not necessarily the now. And the big new Hilton under construction next door to the convention center is fully publicly-owned and financed, with $231 million in bonds backed by the county.
    The county’s numbers on the hotel room nights generated by the new convention center (as of 12/14) show about 90,000 in 2014 and about 65,000 in 2015.
    It’s a far cry from the 300,000 annual attendees at medical conventions, each staying in Cleveland 2 or 3 nights, that were promised when the MedMart deal was done.

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