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Best of Benjamin Spillman

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Benjamin Spillman
 

Las Vegas Convention Center: Authority approves upgrades

9 May 2007

LAS VEGAS, Nevada -- The cost of keeping Las Vegas ahead of the competition just increased by $153 million.

But tourism boosters say paying extra money beats the alternative of a gradual decline in business that could cost the local economy more than $5 billion in lost opportunity without an upgrade.

That's why the Las Vegas Convention and Visitors Authority on Tuesday voted unanimously to approve an $890 million upgrade to the Las Vegas Convention Center, an increase over the previous cost estimate of $737 million.

The upgrades are meant to help Las Vegas maintain its position as the top trade show destination in America. Renovation proponents say over time the investment will return $5.60 to the economy for every dollar spent.

The work, scheduled to be complete by the end of 2011, comes as Southern Nevada's top trade show competitors are pouring hundreds of millions of dollars into renovations of their own. Members of the Las Vegas authority board want to stop them from chipping into the $8.2 billion trade shows and conventions contribute to the local economy.

"To stay on top is tough," said Keith Smith, vice chairman of the authority board and president of Boyd Gaming Corp., which is building the $4.4 billion Echelon on the Strip. "This expansion should keep us on top."

Las Vegas hosted 45 of America's top 200 trade shows in 2006, more shows than the combined total of Orlando, Fla., and Chicago, the next two closest competitors. During the year trade show attendees spent nearly $8.2 billion in Las Vegas, and that doesn't include gambling losses. That's more than the $6.7 billion Strip casinos won from gamblers during the same year.

A trade show guest spends about $1,600 during a Las Vegas visit, more than twice the $750 spent by a typical tourist.

Without improvements to the convention center Las Vegas would lose nearly 9 million trade show visitors to other destinations during the next 30 years, said Jeremy Aguero, principal analyst at Applied Analysis, a Las Vegas-based financial consulting company.

The vote Tuesday to authorize the expansion despite a 21 percent increase in the projected cost followed several presentations by Aguero, an architect and convention authority staff members who explained the changes.

Aguero displayed a chart with a blue line projecting an incremental increase in trade show visitors attributable to the renovation. A red line depicted a gradual visitation decline that would reach 415,000 trade show visitors annually by 2020.

"Following the blue path is better than following the red path," Aguero told the board.

After subtracting costs and adding gains over the life of the proposed expansion, Aguero said the renovation would bring in $5 billion in benefit to the local economy.

But Bill Weidner, president and chief executive officer of Las Vegas Sands Corp., and a longtime critic of the authority, questioned the project's economics. He said too much money is dedicated to public space and other amenities that won't result in a direct return on investment.

"I'm just looking at numbers. It just doesn't make any sense," said Weidner, who contrasted the convention center renovation with the University of Phoenix Stadium in Glendale, Ariz. The stadium opened in 2006 and features a retractable roof, a field that slides outdoors so the grass can get sunlight and seating for as many as 73,000 people. It cost $455 million to build.

"There is no way to justify it," Weidner said of the renovation cost.

Other hotel companies support the expansion. Officials from Wynn Resorts Ltd., Boyd Gaming, MGM Mirage and Harrah's Entertainment who serve on the authority board voted to authorize the plans and cost increase.

Terry Miller, CEO of HNTB Architecture, the company that designed the project, said 60 percent of the increase was due to upgrades to satisfy convention center users and 40 percent was due to rising costs for labor and materials.

"We are changing the backbone of this facility," said Miller, describing the renovation that will include a complete overhaul of the facade and dramatic new public space as it expands gross square footage from 3.2 million to 3.8 million square feet. Since February 2006, when the authority board authorized a $737 million expansion, focus groups of major convention center customers detailed what they believed would be the most useful upgrades.

The people working on the project added the suggestions into the design, which includes a 37 percent increase in available meeting space, 78 percent more restaurant space, 78 percent more taxi space and 67 percent more space for food service.

It also includes a naturally lit lobby and facade that connects the center's myriad halls and presents a modern, uniform exterior. The upgrade will also include technology improvements and more modern interior design, according to plans the board authorized.

"The interior, the light levels are all rather tired," Miller said. "They need to be upgraded."

Other changes, like airport baggage checkpoint escalators that move people directly from a new bus parking area to the interior of the convention center, are designed to make the center easier for trade show visitors to navigate.

Construction is set to begin in 2008 with work on a Metropolitan Police Department Substation at the convention center and continue through 2011, with the major work being complete in 2010. The authority will finance $822 million of the cost and pay the remaining $68 million in cash.

Authority President and CEO Rossi Ralenkotter said keeping trade show guests happy in the future will be critical to maintaining hotel occupancy rates around 90 percent even as Las Vegas resorts add 47,000 rooms to the existing 133,000 room inventory.

"I always look at these trade shows as anchor tenants for a shopping center," said Ralenkotter, who added the authority wants to increase the percentage of Las Vegas visitors who come for trade shows from 15 percent to 20 percent. "These anchor tenants are what you build the shopping center around."