As if on cue each year, news reports in Durham, North Carolina will headline that the convention center here ran a deficit as if there shouldn’t be one or that this wasn’t expected when it was built.
A new book I recently finished inspired me to read back through each of three feasibility studies that were conducted between 1972 to 1982 for facilities of this type on behalf of each of the three different mid-sized cities in different parts of the country.
This was the first of my now concluded four decades in visitor-centered economic and cultural development during which I would represent these three cities.
It is a span when studies such as these seemed far better grounded and realistic than many before or since.
Last reported, the annual deficit for the civic/convention center in Durham, where I still live in retirement, was $104,000. That is without netting out tax revenues generated from related visitor activity or even parking revenues.
If they had, it would cover that amount by more than double.
Leading up to construction of the facility, consultants warned the City based on a 1977 survey of convention centers in other cities in North Carolina, to expect a deficit of around $450,000 annually or about $1.8 million in today’s dollars.
The fact is, cultural infrastructure doesn’t “pay” for itself any more than roads or other types of infrastructure. The only difference is that communities very rarely build roads that aren’t needed.
But in-depth research going back nearly a century reveals that local officials across the country have long been pushed by business interests to build stadiums, convention centers, and increasing over the last decade, performing arts centers.
Ostensibly this is for tourism-related purposes but the real motives have been to shore up the values of surrounding private property in downtowns.
From their own public records including private papers, it is clear this has most often been done, to paraphrase their words, as a means of “shoring up” downtown property values or “insulating” them from “erosion” in nearby neighborhoods.
Other ulterior motives were to act as “anchors” to facilitate private loans or as “people generators.”
If a cultural facility is ever reported to be breaking even, it is usually a sign that ancillary revenues are being included while costs related to capital and site preparation are conveniently not.
Feasibility consultants up through the 1970s, called convention centers by the name “civic” centers because they knew that “75% of the days in a year that the civic center is in use is for local meetings, dances, banquets, [expositions] etc.”
Even today scientific surveys of residents show that more experience a civic/convention center in a given year than any other cultural facility.
Eventually renaming them convention centers, this was said to appease a handful of meeting planners seeking ego gratification, but the real reason, along with pressure to increasingly overstate performance, was to rationalize using visitor taxes as a means to avoid public referendums.
Durham dodged a bullet when it waited ten years after that 1977 feasibility study to secure voter approval to build a civic/convention center, but still at the modest size that had been originally recommended.
Consultants could see back then that far more cost/benefit accrued to centers just 9% of the size of today’s behemoths and less than half the size of centers back then.
Even then, before it ever opened, the Durham Civic Center was situated so as to fulfill its role related to surrounding private property values.
Many other cities over the next two decades, would go on a “big game hunting” binge, doubling the amount of similar space across the nation, while convention and meeting tourism began a long, gradual decline. The proportion using these facilities plummeted to just 8%, at tops 15%.
The same thing is happening now with performing arts centers with hundreds of new facilities opening in just the last decade while Americans attending concerts as a percentage of the U.S. population has remained flat at around 22% and even down in areas such as touring Broadway.
But based on the findings of urban policy-making researchers, nearly all of these cultural facilities fulfilled their primary “real estate” purpose before they ever opened, pimping tourism merely as a means to access funding without voter scrutiny.
Though undetected yet due to systemic changes in the convention/meeting/facilities landscape, we know know that convention/civic centers were destined to become unviable by the 1980s.
But based on performance surveys of convention centers in the mid-1970s, it was estimated that, on average, these facilities should expect to harvest up to 45% of the overall convention and meeting attendance in their communities.
The overall nationwide decline in convention and meeting demand was imperceptible and unfathomable in the 1970s, But it would soon begin to show graphs as each dip in demand began to fall slightly lower than the last and each subsequent rise peaked short of the one prior.
It has continued with few exceptions over the past four decades, still undetected by those zooming in on too tight a focus.
Unaware, consultants in the mid-1970s, as they did for Durham, would often predict that a community’s “delegate count would not increase significantly without facilities provided by a civic center.”
This mantra would prove wrong as would a pervasive amnesia about the primary use of these facilities being local.
But what also wasn’t anticipated was the sudden explosion across the country in the number of major convention hotels across the nation (with at least 150 guest rooms and at least 5,000 square feet of meeting space.)
An even bigger surprise was how much more popular they would become nationally than civic/convention centers.
It was inconceivable to consultants in the late 1970s and early 1980s that the proportion of conventions interested in convention/civic centers as a venue would soon plummet rather than skyrocket as predicted.
It is the miscalculation that haunts many cities today where sense of place has been exchanged for things bright and shiny only to find their overall appeal diminished.
Using Durham as an example, forecasts in 1977 for Durham estimated only a slight increase in the number of guest rooms over the next few years and a leveling off during the remainder of the 1980s.
Instead, by the time Durham’s convention center and an adjacent private hotel opened, there were already 10 or more convention hotels across the community vying to harvest conventions and meetings drawn here.
By the time its center opened, Durham was already drawing a third more convention attendees overall than had been projected by the consultant.
With a community destination marketing organization then in place, within three years Durham, community-wide, was drawing more than three times that amount and would soon eclipse its fair market share of that segment of visitors.
But in part because under contract it was held hostage to the priorities of the adjacent hotel, which naturally limited its availability when more lucrative visitors were available, the convention center was harvesting only 8% of Durham’s convention attendees instead of the 46% projected.
Still, as the consultant had forecast in 1977, even the existence of a very modest civic/convention center can often serve a role in a community’s marketing appeal to meeting planners even though the events are ultimately held elsewhere in Durham.
Of course, this is a very expensive way to amplify marketing, but should be credited when considering operating deficits.
One elected official obsessing a decade ago about the center’s operating deficit quipped in a moment of frustration to a group looking at data showing the local tax revenue generated by visitors who attend conventions and meetings:
“Why do we care about meetings held in other parts of town, we need to close that facility’s deficit!”
A more strategic member of the group quickly reminded the group:
That this would be “fiscally cutting off one’s nose to spite one’s face.”
Another added to the chorus of nods around the room, “more like Hara-kiri.”
This would have robbed the city coffers of millions of dollars in revenue from conventions and meetings and undermined scores of businesses just for the sake of avoiding uninformed criticism.
It varies, but the convention/civic center in Durham generally harvests about 25% of Durham’s overall convention attendance. While not the 45% projected in 1977, this is two to three times the proportion held in convention centers nationwide.
By the time I retired five years ago, the percentage of meetings using convention centers nationwide had dropped to between 8% and 15%, depending on the report, with nearly 90% of conventions and meetings now using convention hotels or other types of lodging with meeting facilities.
During the course of my career, the proportion using convention/civic centers fell by more than 80%, by nearly a quarter in the last few years alone while the communities I represented continued to grow and exceed market share for that visitor segment.
So it isn’t likely Durham’s facility can somehow buck that trend.
Another systemic change that has occurred since the late 1970s is the proportion of day-trip to overnight attendees going to conventions and meetings.
Even today, consultants will often project that as many as 75% of attendance at conventions and meetings held in convention/civic centers will be overnight.
But even when daytrip attendees who travel less than 50 miles are excluded (and they shouldn’t be), 41% of attendees are now “local.” Fully a third of the attendance now at major national conventions comes from within each state where the meeting is held.
Overnight delegates aren’t quite half of attendees.
But as I retired in 2009, even in major convention destinations such as New York City, only 39% of the attendees at conventions and trade shows (not exhibitions) held in its 1.8 million square foot convention center were overnight visitors and more than a fifth were local residents.
Overnight delegates attending events in the 700,000 square foot convention center in Washington D.C. represented just 4% of the community’s total.
Even as long ago as 1993, as the newly opened civic center in Durham was finding its legs, consultants for the Georgia World Congress Center in Atlanta, using historical data there, found only 45% of attendees to conventions were overnight visitors.
Still, other cities, including nearby Raleigh and Charlotte, tore down those facilities the Durham consultant found to be too large to be optimal in 1977 and erected new ones five times larger, the former out of envy for the latter according to an editorial there.
As I retired five years ago, the performance of Charlotte’s much larger center was barely measuring up to that much smaller predecessor, harvesting about what the other one did in 1991.
Cities that open huge convention centers such as these also find, if they are looking that is, that as a percentage of overall visitation they are drawing the same as cities with much more modest facilities such as Durham.
Even though it has a 3.2 million square foot (soon to be 3.7) convention center, Las Vegas draws the same proportion of its visitation to attend conventions that Durham does.
Its proportion of visitors attending conventions has been relatively unchanged through three expansions, even though 50-60% of delegates say they were more likely to attend because the convention was held there.
On top of the glacial decline in convention business nationwide, the migration of more and more to hotels and trends to lower proportions of overnight attendees, the massive oversupply of convention center space has caused these cities to shell out subsidies to secure business, adding to its deficits.
But conventions and meetings nationwide now have fallen below 9% of overall visitor person stays while the annual number of visitors being drawn to destinations such as Durham has been increased four-fold since the convention/civic center opened.
Shackled to mega-facilities, other cities are siphoning away marketing dollars that would bring a far greater return if redeployed to other visitor segments.
Durham will soon have 578 lodging guest rooms within walking`` distance of its micro-sized convention/civic center and another 145 nearby, nearly what it had back when the facility was first studied in 1977, but still fewer than what consultants had suggested would be spurred when the facility was built.
But Durham officials should question very seriously any future calls for a new or expanded center. As it did in the 1980s, Durham should buck any effort to do so for ulterior motives such as propping up, insulating or anchoring real estate values.
The facility is doing just fine and outperforming the national average for proportion of convention attendance harvested by a convention center by nearly double.
Judging by market data and the lack of performance by larger facilities in other cities, it is highly unlikely that with more space it would be able to do any better than it is now and there are much less expensive ways to improve visitation.
Instead, officials are better advised to put the effort into better educating news outlets and the general public.
The ultimate return from cultural facilities, like that of other public infrastructure, is found strategically in a vibrant community not some narrow and arbitrary bottom line.
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