Convention Center Follies. Heywood T. Sanders
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to the industry, to both the local convention and visitor bureaus that market centers and the convention center managers themselves. In January 2006, a group of CVB heads and center managers assembled in Phoenix to begin to discuss the growing problems in selling center space. By that June, a series of presentations at the annual meeting of the Destination Marketing Association International in Austin noted the “Increased competition in marketplace” and “Price erosion.” Peggy Daidakis, director of the Baltimore Convention Center, described the growing use of “Opportunity Funds,” where “CVB’s are paying a portion of the Center’s rental; picking up transportation costs; covering the costs of ancillary charges,” and Bob Hodge, head of the Austin Convention Center, described how his city was “Pricing [the] Convention Center competitively within our market and allowing for discounts when business warrants.”55
By 2007, discounts, incentives, opportunity funds, and offers of free center rent had become commonplace in the convention center world. Tradeshow Week reported in fall 2007 that fully 60 percent of centers maintained “incentive funds” to lure business. And when the joint study committee of CVB heads and center managers issued its report on center sales and operations in August 2007, the conclusion was quite direct. The report noted “the recognition that supply of available exhibit and meeting space across the nation currently exceeds demand, resulting in a ‘buyers market’” and that “The resulting ‘buyers market’ has exacerbated an already competitive environment, resulting in the need to discount rental rates or increase services that can create a competitive advantage.” That view of a “buyer’s market” and an oversupply of space was not particularly in evidence in the consultant reports.56
At the same time as centers and CVBs were trying to buy business with discounts, the cost and difficulties of travel had grown, making attendance at a convention or tradeshow a more problematic investment for firms and organizations. The changed technology of communication and interaction, from PCs, tablets, and cell phones to virtual meetings and the Internet, had significantly altered communication and information sharing. Even where Indianapolis might lure an event from Kansas City, or Chicago beat out Baltimore for a convention, the number of attendees they would see likely would be far smaller than in years past.
Convention Demand and the Economy after 2008
The path of convention and tradeshow demand after 2000 and 9-11 demonstrates that the industry is far from insulated from larger economic forces. For 2002, Tradeshow Week reported a drop of 6 percent in exhibit space use and a 4.4 percent decline in attendance for the “200” events. The impact of the financial meltdown and recession of 2008 and 2009 has been, by all measures, even more dramatic, albeit not fully evident until 2009 and after.
The annual count of convention and tradeshow events from the Tradeshow Week Data Book provides one measure of the impact of the recession. The event total was 3,742 for 2008 and 3,745 in 2009. As events are commonly planned well in advance, the 2009 count did not immediately reflect any real change on the part of event organizers. Since the Data Book directory is prepared during the year before the events are held, it could not reflect meeting cancellations such as the decision by the American Society of Newspaper Editors to cancel its 2009 convention, made just months before its April date. But the 2010 event volume reflected a significant change, falling to 3,552. That amounted to a decrease of five percent, bringing the convention and tradeshow count to its lowest level since the data were first reported in 1994, clearly below the previous low of 3,648 in 2002.
Event cancellations do not directly affect the annual set of top “200” events. Instead, those events may shrink in size as exhibitors choose to reduce the size of their booths or simply not attend, and they can drop in attendance as firms, organizations, and individuals decide to reduce travel spending and cut back on event attendance. Tradeshow Week reported that in 2008 the “200” showed a 1.6 percent drop in exhibit space use and a 3 percent decrease in attendance.
The full brunt of the recession’s impact on the “200” came in 2009. Exhibit space use dropped 17.8 percent and total attendance 15.8 percent, to a level equal to that of 1989. There would be no “200” listing for 2010 or after—Tradeshow Week ceased publication in April 2010.
The dramatic drops in space use and attendance from 2008 to 2009 far exceeded the greatest fall-off previously seen: a drop in exhibit space use of 6.0 percent and an attendance drop of 4.4 percent, both in 2002. These recent changes can also be seen in the attendance performance of individual events, most accurately for the small set of events that have their attendance figures audited and verified by a third party. Audited attendance for the annual Rental Show in Atlanta in 2009 was 7,007, a drop of 35 percent from the previous year in Las Vegas. The 2009 INTERPHEX pharmaceutical event in New York saw attendance fall by 19.7 percent from the 2008 event in Philadelphia, to 12,343. INTERPHEX attendance slid again in 2010 to 11,739 and 11,100 in 2011. The 2009 Motivation Show for the incentive industry (consistently held at Chicago’s McCormick Place) witnessed a 26.6 percent attendance drop. Attendance dropped again in 2010 by 33.2 percent, to just 6,006—less than half the 2008 total.
The Las Vegas-based Global Gaming Expo, long a growing event, saw attendance fall 5.5 percent from 2008 to 2009, to 24,771. Attendance was again down in 2010, by 2.1 percent, and in 2011, to 23,648. And the annual convention of the American Institute of Architects had a 7.9 percent attendance drop from Boston’s 2008 total of 19,520 to 17,977 the next year in San Francisco. The 2010 meeting in Miami saw attendance fall to 15,574—a 13.4 percent drop. The 2011 event in New Orleans garnered even lower attendance, just 12,366, although the 2012 edition in Washington, D.C., saw attendance increase to 15,214.
Major convention centers have also seen substantial declines in convention and tradeshow attendance. At Chicago’s McCormick Place, attendance dropped 7 percent from 2008 to 2009, despite completion of a major expansion in August 2007. It fell another 4.8 percent in 2010 and 9.6 percent in 2011. The Las Vegas Convention Center saw attendance fall from 1.6 million in 2008 to 1.12 million in 2009, a drop of 30.3 percent. There was a slight rebound of 3 percent in 2010. Orlando’s Orange County Convention Center had a convention and tradeshow attendance drop of 21.8 percent in 2009, to about 780,000. It managed to make up a part of that loss in 2011, seeing attendance of just under one million—still shy of 2007’s 1.08 million.
Atlanta’s Georgia World Congress Center saw fiscal year 2008 (through June 30) convention and tradeshow attendance fall by 21.4 percent in 2009. and another 13.7 percent in 2010. The 2010 convention and tradeshow attendance total of 473,448 was demonstrably smaller than the 601,000 attendees the GWCC had accommodated in 1989. A modest increase brought attendance almost back to the 2009 level, at 539,680.
Other major destination cities also saw dramatic declines in convention center business. New York City’s Javits Center saw its convention and tradeshow attendance fall from 817,100 in 2007 to 708,200 the following year and 633,600 in 2009. The hotel room nights produced by the Walter Washington Convention Center in the nation’s capital fell from 376,296 in fiscal year 2008 to 280,478 in fiscal 2009. The room-night total dropped again in fiscal 2010, to 274,951—a decline of 26.9 percent from fiscal 2008.
Whether for individual major events or for large and historically well-performing convention centers, two conclusions stand out regarding recent change. First, the drops in attendance have been remarkably pervasive, across a broad array of events and centers, including centers that have long dominated the industry. Second, the scale of attendance and hotel room night decline has been substantial, indeed remarkable. Those declines substantially exceed the fall-off in attendance in the years immediately after 9-11. Indeed, for convention centers in cities such as Atlanta and San Francisco, they represent a return to attendance levels seen a decade or two earlier, effectively wiping out the growth of the 1990s. This magnitude of attendee loss suggests a dynamic very different from what was seen after 9-11. For example, the Las Vegas Convention Center witnessed an attendance drop of 3 percent in 2002, followed by a further 6 percent in 2003. The center’s attendance drop of 30 percent from 2008 to 2009 is of an entirely different order of magnitude, an experience paralleled by many other centers.
The full import of the change in convention center attendance will only become clear over future years. But compared to the impact of previous recessions, the change in 2008,