EmailEmail
PrintPrint
Promised convention center boom hasn't come
Sunday, September 28, 2008

For years, promoters of the new $373 million David L. Lawrence Convention Center championed the project as the key to attracting larger shows and boosting tourism.

But nearly five years after its full opening, the center, three times the size of its predecessor, appears to be struggling to fulfill that promise, even as its operating losses grow larger.

In only one year -- 2004 -- has overall attendance been higher than the 454,318 people drawn in 2000, the last full year of the old center. Last year, attendance dropped to its lowest point -- 331,325 -- since the new building opened. It's projected to increase to 381,746 this year.

Some other quick facts:

• Despite its pioneering "green" design and state-of-the-art amenities, the center has yet to draw more events than the 278 held in 2000. The closest it came was in 2004, with 272 events. Last year, there were 209.

• Major events have increased from 17 in 2000 to 39 last year. Yet the 2007 number is only one more than in 1997 and 13 fewer than 1999 for major shows at the old center. Forty-one are expected this year.

• Major event attendance peaked at 200,542 in 2006, thanks to an estimated 100,000 visitors drawn to town by the Major League Baseball All-Star game, but fell to 97,970 last year. It is expected to rebound slightly to 111,000 in 2008.

• Convention attendance hit 115,640 people in 2004 but has dropped every year since, down to 42,763 last year.

For some, the numbers don't add up.

"Obviously that doesn't bode well. The numbers don't reflect the tremendous public commitment of dollars that we have earmarked for both the convention center itself as well as for the promotional agency [Visit Pittsburgh]. Something different has to happen," said state Sen. Jim Ferlo, D-Highland Park.

Heywood Sanders, a professor at the University of Texas San Antonio who has spent years studying convention centers, said Pittsburgh is in good company. Many of the cities that have expanded their centers are not getting the expected results, he said.

"If you're in the hotel business and one more room night was sold you're not going to complain. Maybe it helps spur a new restaurant or retail. That's not bad. But if you're asking me, are they getting what they said they would get and what was promised, the answer is no. They're getting a fraction of what they were supposed to get," he said.

It's impact that counts

But officials at the city-Allegheny County Sports & Exhibition Authority, the building's owner, and Visit Pittsburgh, the agency chiefly responsible for booking major conventions, said neither attendance nor the number of events is a true barometer of the center's success.

They said the real tests are direct spending by visitors and the number of hotel nights booked and that on both counts the center is doing its job.

"To merely look at the number of events or the number of people isn't what we are judging ourselves on. It is the economic impact," said Craig T. Davis, vice president of sales and marketing for Visit Pittsburgh.

Direct spending increased from $89.9 million in 2004 to $108.8 million in 2006, according to calculations by Visit Pittsburgh, but fell to $77.4 million last year. Major event room nights rose from 108,000 in 2004 to 113,462 in 2006, before also falling last year to 96,395. In 2000, the last year of the old center, direct spending was $51.8 million and total room nights were 53,735, the agency said.

Both Mr. Davis and Mark Leahy, the convention center's general manager, said the drop last year was related directly to the collapse of a section of the loading dock floor, which shut down the building for little more than a month and forced the relocation of 17 events. Those events, they said, were not counted in the spending figures.

Visit Pittsburgh estimates direct spending will rebound to $115 million in 2008, which would be the best year so far in the new center, while room nights will jump to 135,000.

Mr. Leahy said one reason the number of events has declined is that officials are not booking as many small meetings as the old center did. He said he's pleased with the center's performance so far.

"I say that because it was built as an investment in an industry, the hospitality industry, for the purposes of bringing out-of-towners, bringing out-of-community dollars to this community, and it's increasing every year."

He acknowledged that overall attendance is either dropping or flat. But that, he added, is because Visit Pittsburgh and convention center manager SMG are being "selective" about the shows they book.

"Volume is not the answer. Quality of the group is the answer," he said.

Yet, while the number of room nights has been increasing, the totals still ranked below the national average of similar-sized centers in 2005, 2006, and 2007, according to a PricewaterhouseCoopers survey. In 2005, for instance, the national average was 196,000 rooms generated, while the Pittsburgh total was 110,488.

Mr. Davis argued that the exhibit hall category isn't a good measure because Pittsburgh gets lumped with larger cities. But even when compared against similar-sized markets in the "destination" category, the convention center lagged behind the national average in 2005 and 2007.

And while increased direct spending against declining or flat attendance would imply that visitors are spending more or staying longer, at least one calculation seems to throw that into question.

Comparing major event attendance between 2004 and 2007 against major event room nights yielded a ratio of less than one room night per attendee.

"If folks are staying three nights then that ratio should be a lot bigger," Dr. Sanders said.

But Mr. Davis countered that major event attendance includes locals who don't stay in hotel rooms, skewing the results. In addition, some people stay at hotels not among those that are part of the visiting group's official contract. In such cases, there would be no way of counting them.

Oversupply nationwide

Nonetheless, some find the attendance numbers troubling.

John DeSantis, who chaired the users committee that reviewed plans for the new center, said the drop in convention attendance represents "a real problem."

"There's no doubt in my mind that we could be doing better," he said. "And with the facility we built, we should be doing better."

Mr. DeSantis, executive director of the Pittsburgh Home and Garden Show, doesn't put much stock in the direct spending estimates calculated annually by Visit Pittsburgh. He said such computations are based on "some secret formula only Colonel Sanders knows."

"It is a completely plucked out of the air number and always has been," he said.

But Mr. Davis said the estimates are based on a standard formula used throughout the industry that includes the number of days a convention is in town and spending on meals based, in this case, on Pittsburgh prices.

Dr. Sanders, the Texas professor, said the drop in attendance reflects a fundamental problem in the industry: Too much space, not enough demand.

With so many cities having built or building new convention centers -- one of the latest is Philadelphia with a planned $800 million expansion -- groups have their pick of destinations, usually at sharply discounted prices.

"You've gotten an enormously increased level of competition and that means you're likely to get less business than you had hoped for and less business than your consultants forecast, in some cases a lot less business than consultants forecast," he said.

State Auditor General Jack Wagner, a former state senator who was one of the biggest boosters of a new convention center, said the attendance numbers are disappointing.

Both he and Visit Pittsburgh officials believe one big reason the center hasn't done better is the failure to build the proposed headquarters hotel that was to be attached to it.

"It's almost like building a home and not having a front porch on it or bedrooms associated with it," Mr. Wagner said.

The SEA recently ended negotiations with Cleveland developer Forest City Enterprises, which was selected in 2003 to build a 500-room convention center hotel at a cost of $104 million.

After being delayed for years by funding shortfalls, Forest City wanted to cut the number of rooms to about 300 to meet the $104 million budget, which includes a $34 million subsidy provided through state gambling revenues.

Now the SEA is preparing a new request for proposals in hopes of attracting a developer to build a hotel with 500 rooms.

Joseph McGrath, Visit Pittsburgh president and chief executive officer, said the city loses 80,000 hotel room nights a year because of the lack of the hotel. He said attendance won't grow until it is built.

"The numbers are going to stay the same if we don't finish the job," he said.

But Mr. Ferlo described complaints about the lack of a hotel as a "crutch we continue to use." He called on Mayor Luke Ravenstahl and county Executive Dan Onorato to evaluate the operations and effectiveness of the convention center management and Visit Pittsburgh.

"I don't think [Visit Pittsburgh] is held accountable and I don't think it's being scrutinized [as far as] what do we get for the dollars spent," he said.

While there may be debate as to whether the new center is meeting expectations, local officials insist it was a wise investment, boosting exhibit space from 131,000 square feet to 313,400 and providing a cutting-edge Rafael Vinoly designed building that they say has improved Pittsburgh's image and kept it more than competitive with other cities.

Mr. Leahy said that 55 of 72 larger events booked this year in the building would not have fit in the old center. In addition, total square footage used by events at the center has increased every year, from 6 million square feet in 2004 to 7.5 million this year.

"If we had the old center, we would have no business whatsoever," Mr. McGrath said.

Mark Belko can be reached at mbelko@post-gazette.com or 412-263-1262.
First published on September 28, 2008 at 12:00 am
Featured Homes
Featured Rentals