Just before the Democratic National Convention, The Charlotte Observer ran a series of articles on the city's success -- or lack thereof -- in attracting conventions. Along the way, the newspaper also provided some excellent insights into the convention center business.
Charlotte's current convention center opened in 1995. It was billed as a game-changer, able to attract lots of events that would bring hordes of free-spending conventioneers on expense accounts to the city. The reality has been rather different.
Projections used to convince the city to build the facility estimated that it would attract 528,000 hotel room-nights a year in visitors. It never has come close to that figure -- The Charlotte Observer estimates the actual number was more like 142,000 room-nights during fiscal 2011, or about 2.7 percent of all hotel stays in Mecklenburg County.
The convention center market is awash with capacity, making it hard to attract shows. The Charlotte Convention Center achieved only a 35 percent utilization rate in 2011. Many events don't draw a lot of big spenders. And even then, big discounts are necessary to bring the events to the Queen City.
This has not kept officials at the Charlotte Regional Visitors Authority from proclaiming the convention center a success. Though they admit the facility itself loses money, they still claim the convention business, including the hotel/motel taxes that fund it, is good overall for the city.
"The wonderful secret is that ... every $1 in tourism tax [yields] $1.10 in general fund tax," said CRVA head Tom Murray.
The newspaper, however, found that claim incorrect as it ignores debt service on the convention center, which still runs over $20 million a year. In fact, it concluded that "the city of Charlotte, Mecklenburg County, and the state may make as little as 35 cents for every dollar they spend on the convention business."
The CRVA also grossly overestimates the impact of the events that do come to the city. The authority traditionally has applied a simple formula to determine the economic impact of conventions: multiply the number the number of attendees by the number of days of the event by an assumed $314 amount that each conventioneer spends daily.
Charlotte attracts a high percentage of SMERFs. Those aren't small blue cartoon characters but rather events that are more likely to attract blue-haired old ladies than industry movers and shakers. In industry parlance, SMERF stands for social, military, educational, religious, and fraternal. SMERF events are what convention centers book when they can't get trade shows.
Unlike those attending industry events, SMERF attendees generally pay their own way. They often share rooms, don't stay for an entire convention, and certainly don't eat at a nice restaurant every night. Some are even day-trippers, coming for a day and going home at night. All of which makes the CRVA's $314 daily figure, or anything close to it, absurd.
The CRVA, for example, estimated the economic impact of a Shriners convention in Charlotte at $24.7 million. The Observer figures $6 million to $10 million is more realistic.
Promoters of projects often exaggerate the benefits and understate the costs of what they're pushing. It's essential for local government officials and citizens to scrutinize the numbers closely and make sure they are realistic.
Charlotte, like many cities, has a civic culture that does this poorly. We may soon get a chance to see whether the Queen City's residents and leaders have learned a lesson from their convention center's struggles: The CRVA wants to subsidize the construction of a big new hotel near the convention center. That, you see, is supposed to fix the city's inability to attract trade shows. ...
Michael Lowrey is an associate editor of Carolina Journal.