Southern California has balmy weather and, seemingly, balmy leadership. For one thing, both Los Angeles and San Diego want to expand convention centers in the teeth of a grossly overbuilt market and slumping convention attendance. Both are considering use of a football stadium as convention space, when evidence shows that has limited appeal to convention planners and attendees.
Los Angeles is close to approving the construction of a $1.2 billion retractable-roof stadium that will be used as a convention site in conjunction with the existing center. The San Diego Chargers want a fat subsidy to build a similar stadium that would serve as a convention site. The stadium would be several blocks away from the existing convention center; repeatedly, studies have shown that attendees don’t want to shuffle or even shuttle between distant sites. San Diego downtown leadership prefers to expand the current center — but wants a stadium to be built as well.
Both Los Angeles and San Diego are in desperate financial shape. Promoters claim that the L.A. stadium and center will be paid for with private funds. That remains to be seen. There are no such promises in San Diego. A retractable-roof stadium would require a public subsidy of $700 million to $800 million or more. The convention center expansion will cost $500 million or more.
In Los Angeles, the company financing the project, Anschutz Entertainment Group, is using dubious assumptions. The state Legislative Analyst’s Office notes that the company assumes the stadium would regularly host National Football League playoff games, the Pro Bowl, Super Bowl, Pac-12 championship, National Collegiate Athletic Association basketball tournaments, and the like. The City of Los Angeles and the Legislative Analyst’s Office say such expectations are far too optimistic. Also, Anschutz is assuming that a reconfigured convention center will be extremely successful in attracting new events. But the City doubts that will happen because of intense competition.
Would an expanded convention center pay off for either Los Angeles or San Diego? Charles Chieppo, Harvard researcher writing for Governing.com, a publication for leaders of state and local government, cites figures from the publication Tradeshow Week. In the past 20 years, the national supply of convention exhibit space zoomed by more than 70 percent. But from 2000 to 2010, attendance at conventions and trade and consumer shows decreased from 126 million to 86 million. Ergo: huge supply, dwindling demand. In 2010, Tradeshow Week went out of business. ’Nuf said.
As a result of the overbuilding and attendance decline, “People are offering incentives right and left, as is San Diego,” says Heywood Sanders, professor at the University of Texas at San Antonio and the national authority on convention centers. “It’s really tough with the overbuilding plus the recession and companies cutting back on travel.” Convention centers have no option except to slash prices.
Las Vegas is generally considered the first or second most successful convention destination. “There are lots of new casinos, a regularly expanding center, and — ahem — other visitor amenities,” says Sanders. In 2007, the center had 1.55 million attendees. By last year, that had dropped 25 percent.
Visitors to the convention center in Washington, D.C., accounted for 376,000 room nights in 2008 — the deepest part of the Great Recession. By last year, when the economy was growing, albeit slowly, convention-related room nights were down by more than 100,000.
What about Los Angeles? Its convention center “has been losing business — indeed, hemorrhaging,” says Sanders. In 1998, total room nights resulting from attendance at the convention center were 353,325. By 2002, the number was down to 205,824, and by last year, all the way down to 137,187. These are data compiled by LA Inc., a nonprofit whose mission is to promote Los Angeles tourism, and PKF Consulting, a firm that works for the hospitality industry.
“We are at a competitive disadvantage,” the president of LA Inc. recently told the Los Angeles Times. “We drastically need more hotel rooms downtown.” He said that Anaheim, San Diego, and San Francisco have three to six times as many hotel rooms immediately around their convention centers.
Last year, a two-hotel hybrid was completed in the L.A. convention district. It has 879 JW Marriott and 123 Ritz-Carlton rooms, plus condos. But that’s still not enough. “The argument for years was that ‘we need a hotel.’ It would be the magic missing ingredient that would propel convention business in Los Angeles,” says Sanders. “It’s not at all clear that it has. There is some suspicion that [Anschutz Entertainment Group’s] whole effort to get the stadium built and the convention center expanded is to pump business into that hotel and entertainment complex [L.A. Live, partly financed by Anschutz].”
Sanders notes that centers in Las Vegas, Orlando, Atlanta, and Chicago experienced business declines after completing expansions.
The San Diego Convention Center claims that its activities accounted for 709,298 hotel room nights and $1.27 billion in economic impact last year, but Sanders has always cocked an eyebrow at San Diego’s numbers, believing the center overstates out-of-town visitors by including too many locals from such events as Comic-Con.
With the industry overbuilt and business declining, does San Diego need an expanded convention center? “An expansion is justified locally by the argument that it will inevitably bring more events and more attendees, but it is a gamble — a bet on what will happen in a very indefinite future,” says Sanders. “Other cities are building [convention centers] and expanding. Is San Diego going to be the place that will succeed? That is an open question. The consultants who say it will have told other cities they will succeed, and repeatedly they have not.”
The San Diego power structure, including Mayor Jerry Sanders, does not want the proposed Chargers stadium to serve as a convention center expansion. The consulting firm pushing for expansion of the current center says that a noncontiguous building, unless it is directly across the street, results in two completely different venues. No major corporations or trade and consumer shows would book both venues at the same time. Even San Francisco’s Moscone Center and Moscone West, which are right across the street from each other, confuse some attendees.