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NATION Plans for convention spaces faulted



Published: Wed, January 19, 2005 @ 12:00 a.m.



A study has disputed industry claims of an increase in attendance.

LOS ANGELES TIMES

With the nation's convention industry in a sharp -- and possibly permanent -- decline, Los Angeles and other cities are in a publicly funded race to attract a dwindling number of trade shows, according to a new study.

More than 40 U.S. cities are planning to erect new convention centers or expand existing ones, the Brookings Institution study, released Monday, found.

The building binge is under way even though there has been a 50 percent jump in the amount of available meeting space since 1990. Meanwhile, attendance at the 200 largest trade shows is at 1993 levels and unlikely to grow, the study found. And many convention centers operate at a loss and routinely resort to offering discounts or free space to attract business.

The findings raise "some serious questions about the wisdom of these investments and the way the political process seems to favor convention centers rather than other types of urban renewal," said the study's author, Heywood Sanders, professor of public administration at the University of Texas, San Antonio.

In an interview, Sanders singled out a plan to build an estimated $300 million hotel next door to the Los Angeles Convention Center. He noted that the city's convention business plummeted 65 percent from 2000 to 2003 before recovering last year.

The convention center's "performance is so miserable," he said, "why reward them with more public funds?"

The Los Angeles City Council hasn't voted yet on a proposal to support the hotel project.

Industry's reaction

Industry experts questioned the study's findings, contending that the convention industry, hard hit by the 9/11 terrorist attacks and the 2001 recession, is in the midst of a recovery. They argued that the most popular convention cities still had room to expand, although they conceded that ambitious projects in marginal cities might not make financial sense.

"You can't make blanket statements about this industry," said Rob Canton, director of the PricewaterhouseCoopers convention and tourism practice in Tampa, Fla.

"There's been a recovery under way in the past two or three years in those destinations that should be in the business. Of course, there has been a lot of overbuilding" in cities that don't have as much appeal to convention planners.

Conventions are irresistible to city officials desperate to create jobs and increase revenue from sales and hotel taxes. Municipalities that are building or expanding meeting facilities include New York, Denver, Palm Springs, Calif., Las Vegas, Hickory, N.C., and Fort Wayne, Ind.

Hickory, a city of 35,000 an hour northwest of Charlotte, is enlarging its convention center for the second time in eight years, even though its roster of trade shows fell from 24 in 2000 to 18 last year.

Steven Rosenblatt, executive manager at the Hickory Metro Convention Center, defended the project, noting that "some of our shows are starting to outgrow us."

Nationally, however, the market for trade shows is unlikely to recover sufficiently to fill all the convention space available, according to the Brookings study.

Weakness in the trade show business was already apparent in the 1990s even before the recession and the terrorist attacks of 2001 began to hurt the industry, Brookings said. Consolidation in certain businesses, better communication technology and the new hassles of travel have made conventions less attractive.

Hard to come by

Solid numbers on the convention business are hard to come by, because there's no standard way to measure performance, the study said. Brookings tracked attendance at the 200 largest trade shows and found that it declined to 4.1 million in 2003 from a high of 5.1 million in 1996.

The study disputed industry claims of an increase in attendance in 2003 and argued that a trend toward ever-larger shows is waning.

At least one Wall Street analyst is seeing the same trend.

"Nationwide what we are seeing is an increase in convention-center space at the same time that the demand for space has declined both in terms of the number of trade shows and in attendance," said Anne Van Praagh, an analyst with Moody's Investors Service, a bond rating agency.

Van Praagh recently downgraded a $98 million bond issue for a hotel near the St. Louis convention center, as occupancy rates predicted in 2000 have not materialized. The bonds, now rated junk by Moody's, may go into default next year, she said.




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