Backers of Seattle's convention center say it needs a $766 million expansion to lure more free-spending conventioneers downtown. But the Washington State Convention & Trade Center's track record — and the struggles of convention centers elsewhere — raise questions about the wisdom of expansion.
Never mind the lousy economy. Backers of Seattle’s convention center say the time is right for a $766 million expansion to lure more free-spending conventioneers downtown.
Despite the state’s $5 billion deficit, they’re asking the Legislature to give a quick go-ahead to the project, which would double the exhibit space at the Washington State Convention & Trade Center (WSCTC). A coalition of downtown business interests and Seattle Mayor Greg Nickels are solidly behind the idea.
At first glance, their case seems compelling. Seattle’s Convention and Visitors Bureau estimates the city has lost $1.7 billion in potential visitor spending since 2004 because the convention center was booked or too small.
And the expansion would be paid for entirely out of an existing tax on hotel rooms in King County — money already dedicated to the center — so it wouldn’t add to the state’s budget worries.
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But the convention center’s track record — and the struggles of convention centers elsewhere — raises questions about the wisdom of expansion. Consider:
• Attendance at WSCTC events has actually declined slightly since before the last major expansion in 2001. In the three years before construction on that project began, the convention center averaged 440,000 visitors a year, according to WSCTC annual reports. Between 2005 and 2007 (the last year for which statistics are available), it averaged 430,000. The same trend holds true for out-of-state convention-goers — the WSCTC’s main target.
• Convention space nationally has nearly doubled since 1989, a glut that has left cities struggling to fill their cavernous new buildings. To attract meetings, some are resorting to deep discounts or cash incentives. The latest expansion plan was hatched after the state Legislature, in a little-noticed move last year, snatched up a $65 million surplus that had accumulated in the convention center’s accounts. The money was shifted to general state spending and a low-income-housing fund, over the objections of convention-center officials.
If the expansion is OK’d, future hotel taxes would be mostly locked up to pay for it, removing the temptation for lawmakers to spend it on other priorities.
An “arms race”
Since it opened in 1988, the state-owned convention center has been credited with helping to anchor downtown Seattle’s retail and hotel core. Built across Interstate 5, the center doubled its exhibit space in 2001 with an expansion across Pike Street.
The WSCTC’s primary goal is to attract national conventions that draw out-of-state visitors to downtown Seattle hotels, restaurants and retail stores. This year, the center will host gatherings of plastic surgeons, midwives, historians and electrical engineers, among others. In between those national events, the center books hundreds of local meetings and banquets.
Seattle’s proposal comes amid what one expert calls an “arms race” among convention centers across the country.
A 2005 report for the Brookings Institution found that while convention centers in the U.S. had expanded steadily over the previous decade, demand for space had plummeted.
The report’s author, Heywood Sanders, a professor of public administration at the University of Texas at San Antonio, said the problem has only continued since his paper’s publication.
There are 71 new or expanded convention centers under development in the U.S., the industry magazine Tradeshow Week reported in September.
“You are in an environment where lots of your competitors are busily expanding,” Sanders said. “In some ways the easy answer is expand.”
But cities frequently find that expansions don’t deliver as much business as promised, according to Sanders.
“If your goal is to get any incremental increase in convention business that you can, maybe expansion can do that,” he said. “But if you expect that expansion can get you a lot of new business, the record shows that is not going to happen.”
Some are practically begging for events.
Cincinnati’s Duke Energy Convention Center, which underwent a big expansion in 2006, now advertises free convention-center rent plus hotel discounts for large groups willing to book there.
Five years ago, Washington, D.C., built a new $850 million convention center double the size of its predecessor. The new center has failed to generate the economic boom officials had predicted, according to The Washington Post.
In Portland, disappointment with the performance of the Oregon Convention Center, which expanded in 2003, has led to a push for a publicly-financed hotel next door — another national trend as cities try to prop up struggling convention centers. (Portland could not find any private developers willing to take the risk.)
Completion date in 2014
WSCTC president John Christison acknowledged some cities have made “dumb business decisions.”
“What’s happened is … there was this horrendous growth spurt in our industry where it seemed like everybody got on board and everybody wanted to play a game of ‘my dog’s bigger than your dog,’ ” said Christison. “There was an awful lot of inventory that got built in the U.S. that shouldn’t have.”
But Christison and other WSCTC boosters say Seattle is different.
Even with the proposed expansion, which would double the WSCTC’s exhibit space to about 400,000 square feet, Seattle’s convention center would remain small compared with competitors such as Denver, San Francisco and Anaheim.
And Seattle is a more desirable destination than many cities that have built huge convention centers, said Tom Norwalk, president of the Seattle’s Convention and Visitors Bureau, which markets the WSCTC. National groups find conventions in Seattle draw comparatively high attendance. “Their members want to be here,” he said.
With the added space, the WSCTC could host simultaneous midsized national conventions, plus compete for larger ones, said Christison. It would also allow the convention center to keep annual Microsoft meetings in danger of outgrowing the current building, he said.
“Our market is telling us there is enough business to do this,” said Christison.
However, Christison did not dispute figures in the WSCTC’s annual reports, which show total attendance in recent years slightly below what it was 10 years ago, before construction began on the last expansion.
The same holds true for the most coveted visitors — out-of-state convention-goers who bring new money to the Washington economy.
The number of out-of-state conventioneers in the last few years has averaged about 180,000 annually — slightly lower than the numbers reported by the WSCTC a decade ago.
Seattle has done better with local meetings and banquets. The convention center hosted 559 local events in 2007, up from about 300 a year before the expansion.
Nevertheless, convention- center backers say an expansion would pay off. The project, to be completed by 2014, would consist of a new stand-alone building built over what is now King County Metro’s Convention Place Station.
Because the convention center is funded almost entirely by a hotel tax in Seattle, it is not a burden on the state general fund. So any additional tourist spending it generates is regarded by WSCTC officials as a profit. In fact, they estimate the convention center has added $370 million to state coffers since it opened.
Report due soon
The latest expansion plan emerged publicly only last month with a few details sketched in a 20-page PowerPoint presentation for a legislative task force. A feasibility study has been commissioned with a report due soon, WSCTC officials say.
Convention-center officials say they’d already been informally discussing expansion before the Legislature removed the $65 million from the convention center’s accounts.
But records of WSCTC board meetings last year show no planning for an expansion until after the Legislature’s action.
Christison acknowledged the “swipe” of the hotel taxes hastened expansion talk. “It did grab our attention. Was there some motive to move a little faster? Yes.”
The Legislature’s move displeased convention-center backers, including local hoteliers. They believe the 7 percent Seattle hotel tax (2.8 percent in the rest of King County), should remain dedicated to the convention center, which helps fill downtown hotels and shops.
“It’s been a little disconcerting to us that those surpluses have been diverted to things like the general fund in Olympia,” said David Thyer, vice president of R.C. Hedreen Company, which built a 400-room hotel as part of the last convention center expansion and is considering a 1,200-room hotel near the proposed new expansion.
Christison said the Legislature’s action, while unwelcome, “wasn’t the driver behind this thing. It is really the opportunity and market demand.”
The expansion could bring 25 to 30 additional national conventions a year to Seattle, he said.
However, Sanders, the University of Texas professor, advises cities to scrutinize the convention business more closely, with an eye to other pressing needs. “These are public dollars, whether they are coming from visitors or not, so what are you getting for the public dollars? What is the investment yielding and is it worthwhile?”
It’s too soon to tell whether the Legislature will go along with the plans this year. But some political leaders have signaled they’re open to the idea.
King County Executive Ron Sims said the crummy economy shouldn’t stop lawmakers from betting on the future.
“The economy is never bad permanently and this won’t be either,” he said. “I think it’s an incredibly good investment.”
While she has not formally endorsed the project, Gov. Christine Gregoire appears sympathetic to the notion that the convention center’s hotel tax should remain dedicated to the WSCTC.
“It’s their money; it’s not the state’s money,” she told The Seattle Times editorial board last month.
Jim Brunner: 206-515-5628