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Chris Jones
 

Las Vegas Conventions: Officials Unfazed by Report

17 January 2005

prominent Washington think tank is warning U.S. municipalities to be leery of building new or larger convention halls because of recent and projected reductions in the nation's trade show industry.

The results of Brookings Institution's yearlong study, which are being released today, come less than a week after local leaders unveiled a $400 million plan to expand and upgrade the Las Vegas Convention Center.

Regardless of others' concerns, that building's operators are firmly convinced Las Vegas's booming trade show industry will continue to grow, and that its trade show and meeting venues must do the same.

"Other communities have recognized the value of tourism and conventions. That's why there's so much competition today," said Rossi Ralenkotter, president and chief executive officer of the Las Vegas Convention and Visitors Authority, which owns and operates the Las Vegas Convention Center. "But the demand for shows, coupled with (demand) for Las Vegas, has been there ... and we believe that's going to continue."

Others aren't as certain. In a comprehensive study, Brookings researchers examined how numerous public agencies have looked to convention halls and adjacent hotels to bolster their respective economies. Such communities, including Las Vegas, should avoid "increasingly questionable convention center investments," said the report, titled "Space Available: The Realities of Convention Centers as Economic Development Strategy."

Over the past decade, public capital spending on convention centers has doubled to $2.4 billion per year, while available U.S. convention space has grown by 50 percent since 1990, the report said. But contrary to widespread industry data, Brookings' research shows the number of events to fill that space has dwindled, resulting in unprofitable convention hall boondoggles in Seattle, St. Louis and San Jose, Calif., among numerous cities cited.

The Brookings report said that after peaking at 5.1 million attendees in 1996, actual attendance at the 200 largest U.S. trade shows has decreased steadily since the mid-1990s. Even traditional powerhouses -- Chicago's McCormick Place, New York City's Javits Convention Center, New Orleans' Morial Convention Center and the Georgia World Congress Center in Atlanta -- have reported "significant recent loss in convention activity, even as they expanded their convention centers," Brookings found.

"It's really meant to be a reality check to these cities," Jennifer Vey, a Brookings senior research analyst, said. "Before committing hundreds of millions of dollars to convention centers and hotels, local leaders really need to understand that these facilities will not save their downtown."

Brookings' report was somewhat favorable to Las Vegas and Orlando, Fla., which it described as the industry's "emergent national powers." Still, even those cities could be at risk, it said.

"Las Vegas and some of these other convention centers that have traditionally done well are still going to be facing steeper competition because so many other places are building and expanding centers," Vey said.

Despite Brookings' findings, Las Vegas' convention industry is enjoying solid growth.

Actual year-end visitor numbers won't be available until mid-February, but Ralenkotter said the city set a record with more than 37 million annual visitors in 2004. Nearly 5.73 million of them came here for a convention as of November, the most current data available. That's a 3.7 percent gain in local convention attendance from the first 11 months of 2003.

Local business travelers' spending also increased substantially last year. Through November, their nongaming economic impact was nearly $6.9 billion, up 7.4 percent from the same period of 2003.

That won't be enough to support announced growth. With nearly 20,000 new guest rooms set to open over the next five years, Ralenkotter said more convention visitors are needed to maintain citywide occupancy levels of 85 percent or better. By 2009, he hopes Las Vegas will average at least 8.6 million annual convention attendees, regardless of which local venues house their gatherings.

The Las Vegas Convention Center's budget is supported by room taxes paid by local visitors, but Ralenkotter said building revenues on their own typically meet its operating expenses, excluding long-term debt reduction.

"But that's not our mission," he added. "We're here to fill (hotel) rooms."

Consultant Craig Skiem last week cited improvements at other U.S. convention venues when outlining plans to expand the Las Vegas Convention Center. He said the venue could lose customers unless it modernizes.

"As buildings are trying to find market share, they have continued to enhance their amenities ... and have created facilities that are highly competitive," said Skiem, whose Minneapolis-based advisory firm, Conventions, Sports & Leisure International, developed its recommendations after interviewing more than 200 current or potential Las Vegas Convention Center users.

The Las Vegas Convention Center's greatest need, Skiem said, is more meeting rooms; expanded walkways, or "circulation space"; and general session space -- the finished ballroom-style areas that abound at convention areas inside The Venetian, Mandalay Bay, Paris Las Vegas and MGM Grand, among others.

Considering Las Vegas' mix of hotels and multiple convention venues, 24-hour food and entertainment, available air service and other infrastructure, Ralenkotter said it's inaccurate to lump this city's convention industry with most of its competitors. He's less concerned about how increased competition could affect other markets, as long as Las Vegas gets its share.

One of Washington's oldest think tanks, Brookings is an independent, nonpartisan research organization focused on economics, governance, and foreign and metropolitan policy. Other topics recently studied by its nearly 350 scholars, research assistants and staff include Social Security reform, Palestinian politics and European views of the United States after the reelection of President Bush.

Brookings' board members include executives from private-sector business giants such as AT&T Corp., Goldman Sachs and Citizens Financial Group, and academics from Harvard, Stanford and Yale universities. Its best-known Nevadan is Brian Greenspun, president of the Las Vegas Sun newspaper.

At the suggestion of Heywood Sanders, a public administration professor at the University of Texas at San Antonio, Brookings' staff last winter began studying the convention building boom, Vey said. Sanders later authored the 35-page paper, which is available online at no cost at www.brookings.edu.

"We're very much interested in economic development and competitive city strategies," Vey said in explaining why Brookings pursued the topic. The paper was also reviewed by experts outside of Brookings prior to publication, she added.