Making Room

After building robust convention facilities, cities are struggling to add headquarters hotels

Reba Pittman Walker and Bill Hanbury

“We wish wecould have broken ground much sooner, but wemust have a hotel thatbenefits the city.”

-- Reba Pittman Walker, general manager/CEOof the Washington Convention Center Authority,pictured with Bill Hanbury, president/CEO ofthe Washington, D.C., Convention & Tourism Corp.

Bill Hanbury is patient. He has been waiting six long years for a headquarters hotel to support the new Washington (D.C.) Convention Center. Now, it looks like he will have to wait at least another year, while the final excruciating details of a $550 million project are hammered out. “We’ve lost business and opportunities because this hotel has not been built,” says Hanbury, president and CEO of the Washington, D.C., Convention & Tourism Corp. “Many groups have decided to take us off their radar until they see a shovel in the ground. I estimate $200 million worth of convention business has taken a pass on us over the years.”

Still, Hanbury remains an optimist. Washington, D.C., he says, can stand with any of the country’s top-tier convention destinations -- Las Vegas, Orlando, Chicago -- despite its lack of a headquarters hotel. He rattles off new hotel development projects, museum openings and various attractions. He points to the city’s 80 percent-range hotel occupancy average, its healthy convention business and the $5 billion in visitor spending it pulled in for 2005 (the latest year tracked). And yet...

It’s the emerging players waiting in the wings -- cities like Philadelphia and Indianapolis that have green-lighted impressive convention center square-footage expansions and equally hefty new hotel-room product -- that keep him up at night, Hanbury admits. “This is an incredibly competitive marketplace,” he notes. “It’s economic cannibalism out there.”

Hurry up and wait

Washington, D.C.’s experience is hardly an anomaly. The convention center industry is fraught with cities wrangling and waiting for headquarters hotels, even as they celebrate the opening of multimillion-dollar convention facilities and expansions. Portland, which enlarged the Oregon Convention Center in 2003, is still waiting. So is Palm Beach, Fla., whose $84 million facility opened in 2004. And in Virginia Beach, where the $207 million Virginia Beach Convention Center finally opened in May, the negotiations for a companion property continue.

The reality is that a convention center, no matter where or how state-of-the-art, is at an immediate disadvantage if it does not have a supporting headquarters hotel. It’s a fact recited over and over by industry insiders. Yet, centers are continuing to be built without them.

FLOCK OF CRANES
Several new convention centers are slated to come online in the next four years, and a number of established players are expanding.

New Builds

* Branson (Mo.) Convention Center
50,000 square feet of exhibit space;
290-room Hilton hotel
Opening: 2007
www.bransonconvention.com

* Capital City Convention Center
Jackson, Miss.
90,000 square feet of exhibit space
Opening: 2008
www.visitjackson.com

* Raleigh (N.C.) Convention & Conference Center
150,000 square feet of exhibit space;
400-room Marriott hotel
Completion: 2008
www.raleighconvention.com

Expansions

* Indiana Convention Center
Indianapolis
245,000 square feet of added exhibit space and a 1,000-room hotel
Completion: 2010
www.iccrd.com

* Jacob K. Javits Convention Center
New York City
340,000 square feet of added exhibit space
Completion: 2010
www.javitscenter.com

* Kansas City (Mo.) Convention Center
46,000-square foot ballroom and 126,000 square feet of added meeting space
Completion: 2007
www.kcconvention.com

* McCormick Place West
Chicago
470,000 square feet of added exhibit space
Completion: 2008
www.mccormickplace.com

* Mississippi Coast Coliseum & Convention Center
Gulfport, Miss.
200,000 square feet of added exhibit space
Completion: 2009
www.gulfcoast.org

* Pennsylvania Convention Center
Philadelphia
400,000 square feet of added exhibit space
Completion: 2008
www.paconvention.com

* Phoenix Civic Plaza/Phoenix Convention Center
574,000 square feet of added exhibit space and a 1,000-room Sheraton hotel
Completion: 2009
www.phoenixconventioncenter.com

* Tulsa (Okla.) Convention Center
56,000 square feet of added meeting space
Completion: 2008
www.visittulsa.com

Complex financing

“What most people don’t understand is the complexity of these deals. There are so many parties involved, and everyone is trying to make sure that due diligence is done,” says Reba Pittman Walker, CEO and general manager of the Washington Convention Center Authority.

Indeed, juggling the needs and demands of so many pocketbooks at the planning stages boggles the mind. The WCC headquarters hotel will be financed in part by $134 mil-lion from the WCCA, which already has spent $30 million to purchase part of the land, and will include a 1,400-room hotel adjoining the existing WCC, to be run by Marriott International. Other features include a 75,000-square-foot underground expansion of the existing center, which will have a grand ballroom and meeting rooms. The rest of the price tag, in addition to the $70 million in land the city contributed, will be privately financed.

“Everyone understands the need for the hotel,” says Pittman Walker. “But this size project requires us to move through the negotiation process deliberately and carefully. Clearly, we wish we could have broken ground much sooner, but we must have a hotel that benefits the city.”

In Portland, where talk of a headquarters hotel can be traced back to 1992, feasibility studies continue even as the competition from other cities heats up. It can be frustrating, says Brian McCartin, executive vice president of convention and tourism sales for the Portland Oregon Visitors Association. “We have spent three or four years trying to figure out how to fund the project,” he says. “We will lose business to places like Salt Lake City and Denver, because without a headquarters hotel, we cannot maximize the potential of our convention center and Portland as a destination.”

Even as Jim Ricketts, director of the Virginia Beach Convention and Visitors Bureau, celebrates the opening of the city’s new convention center, which already has exceeded its projected pre-bookings, he can think of only one thing: “Having a headquarters hotel has become a significant competitive issue for us. It is now a ‘must do’ project.”

According to Ricketts, by summer’s end, the Virginia Beach City Council will decide on two unsolicited proposals already on the table, or send out an informal request for interested developers, rather than initiate a formal request for proposal process, which is too time-consuming. Either way, he says, it will be early 2008 before a decision is made.

Lost business

In an industry where success is determined largely by projections -- exhibit space and room nights contracted as much as a dozen years in advance -- lost business potential is a major blow. That’s because most convention centers are built largely on public funding, which means they have a responsibility to their communities to drive as much business as they can through their doors and into local hotels, restaurants and shops.

In a catch-22, some advocates have a hard time making the case for a headquarters hotel precisely because their cities are booming. Such is the case in Portland, Ore., which in fiscal year 2005-2006 saw the number of citywide group bookings for the Oregon Convention Center increase by 9.7 percent. But Portland has had as much business turn the city down as it has attracted. In 2006 alone, 52 organizations that were seriously considering Portland for their annual convention ended up passing. “And in every instance, the meeting planner told us our convention center package was just not strong enough without a headquarters hotel,” says Brian McCartin.

Jim Ricketts says the new Virginia Beach Convention Center has lost 95 conventions in the past three years, while it was being built. Perhaps the most painful loss was a meeting of the American Pharmacists Association for members of the joint armed forces, to take place in 2008. “I really hated to lose that one,” Ricketts says. “We are a huge military community. It would have been a wonderful experience.” A letter from the association explaining why they could not come spelled out their need for “a headquarters hotel with a minimum of 800 rooms near the convention center,” and the group wound up meeting in Louisville, Ky.

Reba Pittman Walker, head of the WCCA, is confident the nation’s capital will have such a property soon. “We are optimistic,” she says. “We are so close to getting everything resolved. I am looking forward to a shovel going in the ground in fall or winter of 2008 and an opening in 2011.”