Unconventional convention centers

Convention centers are primarily meant to be revenue generators for municipalities and towns with the monies coming from a number of direct sources such as taxes besides the millions brought in via spending on hotels, restaurants, theaters, taxis etc. In most instances, these enormous structures do exactly what they are set out to do once they are built. But it is the erecting of the centers that, more often than not, poses the most problems. These range from the threshold issue of funds for construction to design, size and location. Unfortunately, all too often, jurisdictions view a convention center, either a new one or an expansion, as a sure-fire way to bring in tourist dollars.

Ironically convention center votaries start by taxing today’s tourists who usually have little use for the edifice complex that lurks large among most politicos and bureaucrats. The constituency most affected by a tax on guests is, of course, the hotel industry. That, however, seldom is obvious to the mandarins who decide to sock it to the outsiders who inhabit hotel rooms with the frequent, if patently unfounded, rationale that they don’t vote and won’t care about what appears to be an epsilon increase in the tax.

The notion of convention centers, conventional and unconventional as magnets for economic growth has seldom been challenged – a notable exception being a Brookings study a couple of years ago entitled “Space Available: The Realities of Convention Centers as Economic Development Strategy“. The study came to some startling conclusions. For starters, it noted that “The overall convention marketplace is declining in a manner that suggests that a recovery or turnaround is unlikely to yield much increased business for any given community, contrary to repeated industry projections”. Also included was a searing indictment of over-zealous bureaucrats and politicians – “Localities, sometimes with state assistance, have continued a type of arms race with competing cities to host these events, investing massive amounts of capital in new convention center construction and expansion of existing facilities”. Back in 2005 it was estimated that “nationwide, 44 new or expanded convention centers are now in planning or construction” and it went on to note that “despite dedicated taxes to pay off the public bonds issued to build convention centers, many (convention centers)—including Washington, D.C and St. Louis—operate at a loss”.

None of the foregoing seems to have tempered the desire of communities around the country for embarking on more convention center projects. The latest in the fray is the home of country music – Nashville. As the Tennessean notes that “Our new mayor and the Metro Council seem determined to build a new convention center, but they plan to further burden one of our greatest assets — our tourists — with the bill!” The article also rightly points out that “the last thing these tourists will see is that itemized hotel bill that breaks down the taxes; a nice little “gotcha” from our friendly Metro government. What a great memory to leave them with as they board their planes and automobiles and reflect back on their time in Nashville”. Nevertheless, despite the well-reasoned and well-meaning words of the Tennessean, elected officials around the country are unlikely to see any merit in the argument that taxing tourists indiscriminately is exactly the wrong way to finance convention centers. That budgets for building them are almost always susceptible to a range of externalities from cost-overruns to a decline in tax collected during a downturn does little to dim that zeal to shake-down the unsuspecting tourist.

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Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.

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