The Great Convention Center Bailout

With convention attendance down 40 million people from a decade earlier, why are cities pouring money into building and expanding facilities?

Chicago’s McCormick Place, the nation’s largest convention facility, opened its new addition, the $882 million West Building, to great fanfare in 2007. Unfortunately, the expansion did little to boost attendance, which tumbled to 812,337 that year, a far cry from its 2003 peak of 1.5 million attendees.

The convention business is not what it once was. Nationwide, conventions and meetings drew 86 million attendees in 2010, down from 126 million a decade earlier. Yet cities continue to pour money into building, expanding and subsidizing the centers, believing they are a surefire way to boost economic development. Convention space has increased to 70 million square feet, up from 40 million 20 years ago. The result has been a gigantic surplus of large meeting facilities -- far more supply than demand.

It’s no surprise then that cities compete so fiercely for business. The nation’s largest convention centers in Chicago, Las Vegas, Orlando and Atlanta offer hefty discounts and deals to attract trade shows that were once the domain of so-called second-tier centers. In September, the Massachusetts Convention Center Authority (MCCA) cried foul when Atlanta offered free rent to a trade group that the MCCA hoped to bring to Boston, which, by the way, is planning to double its convention center’s size.

Convention centers are not cheap to build or run. The Charlotte, N.C., Convention Center, which recently hosted the Democratic National Convention, costs taxpayers “as much as $30 million annually for construction debt, operating losses and incentives,” according to The Charlotte Observer

Heywood Sanders, a professor of public administration at the University of Texas at San Antonio and an expert on government-funded convention centers, says the lukewarm economy is partly to blame for the suffering convention business. So too is the “boosterism” by locally elected officials. “A lot of the over-building is a result of local business leaders who see the centers as a bulwark against declining property values in cities,” he says. Throw in consultants who often play up the impact of a convention center, says Sanders, and the result is an overbuilt market.

Instead of cutting back or even shutting down convention centers, however, some cities are going all in by expanding into the hospitality business. The hope is that a new hotel near a convention center will draw more business.

Perhaps the bigger question is what to do with these big empty spaces? At the moment, cities are only making them bigger. That’s because no one wants to be the first to pull the plug on a convention center, says Sanders. “Cities and states will always find a way to keep them open.” As an example, Sanders cites Detroit’s Cobo Center, which is undergoing renovations. “Even with things so bad in that city, government has found a way to keep the convention center moving along nicely.”

Brian Peteritas is a GOVERNING contributor.