Thursday, August 30, 2012

Through the Lens of Experienced Hindsight

In 1960, downtown Durham was still relatively bustling and held 68% of the community’s 562 lodging guest rooms, but studies were already being done to determine how to revitalize that neighborhood.

A little more than a decade later, downtown’s proportion of Durham’s guest rooms had slipped to 41% and then to 21% by the late 1970s when a study was launched to determine the feasibility of building a downtown civic/convention center to help Durham draw its share of the 10% of visitors nationwide who historically have traveled for that purpose. 2.4% of which meet in convention centers.

I’m very familiar with studies and facilities of that period including those studies conducted several years before and several years after that Durham study, to support construction of similar facilities in two similarly-sized communities during the early stages of my now-concluded, 40-year career in community-destination marketing.

“Build it and they will come” was even more epidemic back then than it is now. Economists were just beginning to stress the distinction that visitor-centric economic development is fueled by driving increased visitor demand through effective community marketing as compared to traditional supply-side, facility-driven industrial or economic development, affectionately termed  “smoke-stack chasing” back then.

Fortunately, construction of a convention center in Durham was delayed for decade following the 1977 study to enable sufficient time for a spirited community conversation.

During this delay, an effort was also mounted to get the horse in front of the cart by setting the wheels in motion to charter a community-destination marketing agency (DMO) to spearhead the attraction of Durham’s full potential from visitors segments of all types including the 10% attending conventions and meetings.

It was during the end of this period that I was recruited to jumpstart that organization and to which I devoted the final 21 years of my career as an destination marketing exec before retiring several years ago.

I use the term “fortunately” to describe the decade-long delay because the late 1970’s proposal appears to have relied, as many did back then, on earlier models that in hindsight of my experience were already becoming outdated and had not anticipated the explosive changes in tourism in general and competition for tourism as well as in Durham which was then undergoing a 172% net-expansion of guest room supply, many supporting what would become more than ten major convention hotels and not a one downtown, which by then hosted only 13% of the total.

Unfortunately, when it was decided, a decade after the 1977 study, to move ahead with the convention center project, the crucial but inconvenient step of updating the earlier feasibility analysis was omitted or likely nixed by impatient list-checking.

It was also unfortunate because DCVB was not quite yet operational and available to curate information to better inform that decision with real-time data about the actual marketplace and fresh eyes dilated to the incredible changes occurring at the time both in Durham and in tourism in general.

So constrained and with the benefit of the lens of hindsight, it could be said that Durham set about in the late 1980s to build a convention center, based on an already obsolete, early 1970s model, with far too few proximate guest rooms and shoe-horned, at the insistence of downtown developers and sycophants, into a third the size needed back then or especially even now in order to fit on a parcel much too small to either be extended outward or with walls that would  support additional floors to expand upwards.

The Durham facility was essentially stillborn in 1989 into a community with little resemblance to the one in which the 1977 study had anticipated that Durham would reap less than 90,000 convention/meeting delegate room-nights by 1990.

No one had foreseen or could detect at the time just how rapidly Durham was changing or maybe the blindness was created by only using a downtown lens.  The projections were off by more than 120%

As the now 23-year old convention center opened,  DCVB’s community-wide destination marketing was leaping into full swing, and by 1990 the community was already hosting nearly 200,000 annual meeting/event delegate room nights and soon to achieve fair market share potential for that relatively small segment of tourism.

Through aggressive, though under-funded, place-based destination marketing since then, Durham’s visitor related economic development has exploded, now generating over 7 million visitors a year, while protecting and fostering the community’s unique sense of place.

Today, several shovel-ready lodging properties under development with more in the pipeline, including two downtown, will mean this neighborhood will host 7% of Durham’s lodging guest rooms by 2015 including the adaptive reuse of an historic bank tower into a very cool 21C museum hotel across a plaza from the convention center and another in the Brightleaf District.

My gut tells me that at least two others could soon evolve and that downtown will ultimately host 9% of Durham’s overall guest room inventory, a long ways from the 68% it had 50 years ago but more on par with the proportions in other communities.

The additional downtown guest rooms have the potential to lower one of the barriers to optimizing the convention center, although  based on “gap” analysis using long and short term capital costs as well as annual operating costs and balancing them with economic impact prompted throughout the community and not just within the facility, the center has always held its own compared with other cultural facilities here.

Durham dodged a bullet by not getting caught up in the incredibly expensive and foolish, ego-fueled “arms race” among communities intent on building ever more mega-convention centers over the past two decades which are far larger than what can ever be truly warranted and during a time when the tourism segment they are meant to serve is undergoing huge changes.

There isn’t much else Durham can do or needs to do to otherwise remedy the effectiveness of its convention center or lower the remaining and even higher barriers inherent from how it came to be.  Under the circumstances the facility performs better than what could be expected.

It isn’t clear that starting over one day will be cost-beneficial since the community already performs so well in that segment and there is so much more potential in other tourism segments.

If and when Durham does consider a new convention center or any other cultural facility, hopefully lessons learned from this example will help, bring to mind that:

1) Destination marketing must be fueled in amounts consistent with driving the demand needed to justify any new or expanded facilities, not just on behalf of those  proposed but to mitigate the impact on existing facilities.

2) Never rely on outdated feasibility studies to address a constantly evolving marketplace.

3) Be extremely wary of developers who hijack cultural facilities and always deploy arms-length consultants and a system of peer reviews.

4) When evaluating the externalities or impacts of any facility, look beyond operating gaps/income and audience overlap to the potential erosion of and churn created by competition for sponsorship and underwriting.

It is imperative that communities learn from their mistakes, even when they only become apparent after decades of hindsight.  To that end, hopefully this post mortem is useful.

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