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Chris Jones

The Future of Las Vegas: Meeting the Future

13 February 2006

The Las Vegas Convention Center has for decades drawn visitors at a rhythmic clip, producing cash so steadily it's easy to forget how hard the place actually works.

But in its 47th year, the heart of Southern Nevada's convention industry is showing its age.

Should conditions worsen, experts here and elsewhere say the community could lose its lucrative and long-standing position as the nation's top trade-show host.

To prevent slippage in a sector that pumped more than $7.5 billion into the economy last year alone, the Las Vegas Convention and Visitors Authority's 14-member board will on Tuesday consider a bold intervention.

The plan is costly, calling for room taxes and increased leasing rates to cover $737 million in new debt, or roughly $1.4 billion in bond payments over 30 years with interest added.

It's also inconvenient, requiring five or more years of on site construction that will interrupt upcoming events, regardless of careful scheduling.

But most important, proponents say, Tuesday's proposal is necessary to preserve the long-term usefulness of Las Vegas' oldest and largest trade-show venue.

"We're collectively competing against the Chicagos, New Yorks and Orlandos out there who are trying to take business away," Rossi Ralenkotter, the convention authority's president and chief executive officer, said last week. "It's a highly competitive marketplace, and we need to make sure that our facility remains competitive for the next 50 years, just as the destination continues to reinvent itself."

Competitive Concerns

When the convention center opened on April 29, 1959, it had slightly more than 110,000 square feet of space, including a spaceship-shaped rotunda just east of Paradise Road.

In ensuing decades, nine separate expansions increased the center's size to approximately 3.2 million square feet, third-largest largest in the nation behind Chicago's McCormick Place and the Orange County Convention Center in Orlando, Fla.

Despite the enhancements, the center is riddled with problems caused by so many separate additions.

During focus groups last year, frequent customers often cited a lack of meeting rooms and congested corridors; users also want a modern facade and decor that better represent the city's vibrant image.

Newer, healthier centers in other cities -- and in some cases, venues tied to Las Vegas hotel-casinos -- are growing to host more business. And thanks to posh new spaces and 21st century amenities, centers in Chicago, Orlando and Atlanta have narrowed the competitive gap.

Dennis Slater is president of the Association of Equipment Manufacturers, a Milwaukee-based trade group that has staged the ConExpo-Con/Agg construction equipment show at the Las Vegas Convention Center every third year since 1987. He's among those calling for change.

"Our show has grown from 900,000 square feet to nearly 2 million," Slater said. "(Without the upgrade) it would make it more difficult for us to do the show there. ... Down the line, if there continues to be problems, we'll have to look at other options."

Norwalk, Conn.-based Reed Exhibitions stages nine major local trade shows annually, including Global Gaming Expo and the National Hardware Show at Las Vegas Convention Center.

Hugh Sinnock, Reed's regional operations director, also participated in the focus groups. He's said he's uncertain whether shows would leave town should the status quo remain. But he added that he's positive a refurbished convention center would attract new business to the city.

"(Las Vegas) has a favorable labor situation and the hotel rooms, pluses we all know about," Sinnock said. "By making (the center) even better for people, it's just one more plus that no one's going to be able to compete with."

Research sponsored by the authority showed attendance will fall by 10 percent to 15 percent by 2020 unless the center upgrades. Those drops could come faster if the place is branded "out of date" among industry insiders.

"Even just the slippage of one or two conventions can have a major impact," Ralenkotter said.

With the improvements, expected attendance would grow by 308,000 per year, or 1.9 million total attendees, by 2020, research shows

ConvExx, a Henderson-based exhibition production and management company, annually stages the Specialty Equipment Market Association trade show. The event is one of the city's largest, routinely drawing more than 100,000 car lovers to the Las Vegas Convention Center each fall.

ConvExx Chairman Chuck Schwartz disputes claims that Las Vegas will lose business unless the center is upgraded, saying, "It's the city that makes a show."

Nevertheless, Schwartz supports plans to improve the venue because changes would allow show producers to offer more ancillary events with their trade shows, thereby increasing the appeal of those shows.

"Right now it's a second-rate presence. When it's reconfigured, it will be first-class," Schwartz said.

Proposed upgrades include:

.New general session space totaling 105,000 square feet near the front of the center's existing main entrance. The lack of such space -- essentially a stylized ballroom used for keynote speeches and other high-end special events -- puts the venue at a competitive disadvantage, sources said.

.The South Hall, a $181 million expansion that opened just four years ago, would receive 150,000 square feet of new or renovated meeting room space, a sought-after amenity now in short supply at the center.

Most of the space would be on the second level covering an open stretch of Desert Inn Road.

.An enclosed 500,000-square-foot, two-story concourse would link the North, Central and South halls on the center's west side. It would replace today's outdoor pathways, and give the center a "statement-making exterior appearance," Ralenkotter said.

A pedestrian bridge would connect the South Hall's easternmost end with the Central Hall, improving back-of-the-house access.

"Right now you really have three separate buildings. ... The lack of adequate lobby space is a problem, but it won't be any more," Sinnock said. "You're going to feel like you've arrived at a real building."

.Roadways and drop-off areas would be upgraded to improve traffic flow and add 3,200 parking spaces on varying sides of the complex. A permanent corridor would connect the new main concourse with an existing Las Vegas Monorail station.

.Documents also clarify plans for three parcels on Sierra Vista Drive, land the authority bought last year in separate transactions totaling more than $28.1 million.

An apartment complex directly east of Marriott's Renaissance Las Vegas hotel would be cleared for a parking garage and multistory administrative building. At 97,000 square feet, the tower would include executive offices and a customer support center for trade show organizers.

.Designs also call for a 30,000-square-foot Metropolitan Police Department substation at the northwest corner of Swenson Street and Sierra Vista. That project, to be financed by the authority, would bolster police efforts at the convention center and Strip, and also in a troubled neighborhood west of Maryland Parkway that's often dubbed "Crack Alley."

The station may also be expanded to house Clark County Fire Department units.

Construction could begin later this year or in the first quarter of 2007. Work is expected to continue in phases through the end of 2011, depending upon event schedules.

Ralenkotter said the work will take longer than normal so booked shows can occur with minimal disruptions. He said he does not expect to turn away business during the upgrade.

Public or Private

Las Vegas is the only U.S. city with three convention centers of more than 1 million square feet, including the privately held Mandalay Bay Convention Center and Sands Expo and Convention Center adjacent to The Venetian.

In recent years, some have questioned whether the Las Vegas Convention Center should expand, particularly if construction costs are financed by hotel guests who paid to stay at would-be competitors such as Mandalay Bay or The Venetian.

The parent company of the Sands Expo, the city's second-largest convention venue, sued the authority in 1999 to protest its use of room-tax revenue for the South Hall expansion.

The authority countersued, though the dispute was settled out of court in early 2001.

This time, however, representatives of several competing venues say they'll support the Las Vegas Convention Center's upgrade because they believe it benefits the community.

Keith Smith, the board's vice chairman, is president and chief operating officer of Boyd Gaming Corp. The Las Vegas-based casino company last month said it will build a nearly 1 million-square-foot meeting and convention center at Echelon Place, a pending $4 billion redevelopment of the Stardust site.

That center would be a mile or so away from the Las Vegas Convention Center, but Smith expects no competitive concerns.

"As the town has grown and elevated, the convention center has not kept up," Smith said. "We're a world-class destination, but it's not world class. It needs to be."

Board member and MGM Mirage executive Chuck Bowling, whose company's holdings include large trade show and meeting venues at Mandalay Bay, MGM Mirage and Bellagio, supported Smith's position.

"It's time. ... We've got to take the next step," said Bowling, a Mandalay Bay executive vice president. "With Chicago, Orlando, Atlanta and other places upgrading their facilities, if we're going to continue to grow ... we've got to have the core facility for the city to be at the top of its game."

Like Smith, Bowling downplayed competitive concerns between local venues. He said the historic balance between sites keeps numerous venues busy and attracts customers to resorts throughout the valley.

"Whether it's with MGM Mirage, Harrah's, Boyd or anyone else, (Las Vegas) is going to have something to offer a customer," Bowling said. "We'd rather lose (business) to a competitor in the city than lose it to another city."

Board member Kara Kelley said it's critical that the authority avoids spending tax dollars to increase competition with the private sector. Based on her early review, she said she's confident the proposed expansion achieves that goal.

"There appears to be a real need to refurbish what we have," said Kelley, who is president and chief executive officer of the Las Vegas Chamber of Commerce.

"We're not talking about adding another million square feet; these are improvements needed to simply stay viable."

Sands Expo President Richard Heller did not return calls related to this story.

Show Me The Money

Talk of upgrading the convention center went public in January 2005 during a monthly convention authority board meeting at Cashman Center.

Ralenkotter unveiled an ambitious vision statement calling for Las Vegas to host 43 million annual visitors by 2009, up nearly 15 percent from 2004's then-record 37.4 million. (Early indicators show 38.5 million guests arrived last year.)

Conventions, meetings and trade shows must increasingly drive growth, Ralenkotter said 13 months ago. He added then that he hoped one in five local visitors would soon list business as their trip's primary purpose.

Throughout the year, Ralenkotter said improvements to the center would cost approximately $400 million.

By December, he'd upped the likely bill to $450 million to $500 million -- a significant increase, but still far below the $737 million budget the board will consider Tuesday.

The revised cost was driven by rising construction expenses, and a clearer idea of the specific changes customers hope to see at the center, Ralenkotter explained last week.

He also said the project will pay for itself. A Tuesday presentation will suggest the authority will over the next 30 years generate $3 in new direct revenue or local economic impact for every $1 it spends on the upgrade.

Proponents also hope to recoup approximately $14 million in construction fees from concession holders such as Aramark Corp. or Smart City Holdings, which may invest more cash in exchange for new revenue opportunities such as restaurant space or expanded communication services.

Plans also call for lease rates at the center to jump from 25 cents per square foot to 29 cents effective July 1, 2009; rates would rise another 5 cents three years later.

Parking fees would rise from $5 per day to $10 effective July 1.

Clark County hotel and motel guests pay a 9 percent room tax, 3 percent of which goes toward local schools, roadway and rural tourism initiatives. Ralenkotter warned those areas could suffer should the convention center lose its drawing power.

"We can't just walk away from such a tremendous asset," he said.

If board members agree Tuesday, he won't have to.