Built It… And They Will Come?

Convention Center: Economic Generator Or Politicians’ Palace

 It makes perfect sense. Miami Beach. Arguably the Americas’ most glamorous city. Perfect weather. Beautiful beaches, beautiful beaches and beautiful architecture. An arts scene that is almost as interesting in reality as it is in promotional material from local tourism-generating institutions. Not to mention, easy access to sex and drugs – attractions less favored by those tourism officials but nevertheless key factors in attracting certain tourists.

And tourists do indeed, come here, in droves. Sure, maybe not in the summer, when the retina-scorching sun makes the sun oppressive; and a time tourism officials seem to have given up on trying to promote. But, still, they come throughout each year.

So given the tropical splendor and other benefits of the North American Riviera, it is only logical that a renovated convention center, an attached convention center hotel (even if it isn’t waterfront) and the possibility of a casino to boot necessarily translate into a renewed convention business, leading to economic prosperity for the entire city, improved business in retail, improved funding of city needs and a revitalized heart of Miami Beach. After all, that’s the tale that’s been told by city officials and other advocates of the planned re-visioning of the Miami Beach Convention Center since the long process began several years ago.

But are those promises based on reality or just conventional wisdom – something that is often neither conventional nor wise? Have such high-minded, big-dollar plans worked out in other cities that lack the legacy of Las Vegas, Chicago and other famed convention destinations? Or have conflict- and politics-laden plans in other cities turned out to be nothing more than opportunities for politicians to build palaces to their own magnificence? After all, spend some time around a League of Cities meeting and you see what elected officials most like to brag about – infrastructure; whether beneficial to the public or not. Locals might immediately think of a stadium. Or two. Or three.

Prof. Heywood Sanders

SunPost decided to have a look this week at the logic behind the whole concept that a new convention center and the city’s third public-benefitting convention center hotel will result in prosperity for all. For the effort we sought out Prof. Heywood Sanders, professor of public administration at the University of Texas at San Antonio and an expert on convention centers frequently quotes in national media. Sanders is also soon to see a published a book that he says answers – in 400 pages – why cities around the U.S. continue to invest public money in new/renovated/expanded convention centers and hotels associated with convention centers. After all, conventions aren’t expanding in number of participants much if at all. Meanwhile in a little over a decade, available convention space nationally has increased by 36 percent and growing each and every year. And even that’s before considering the improvements that the Miami Beach City Commission wants so badly to add that at least some members are willing to try to strip away public input to make happen.

“As long as you keep a narrow context and look at consultants’ reports that say ‘if you do this, this will be the economic impact because more people will come and there will be more spending’ then it does make sense on the surface,” Sanders told SunPost this week. “But to do that means you avoid asking the bigger question. Such as, “we have $500 million sitting around – what’s the best way to get more tourists” then you may arrive at a very different answer. If you ask a narrow question, you get a narrow answer.

“If you do that math that the City of Miami Beach is using – not my math or someone else’s – then they came up with a prediction of an 87 percent increase in the convention business based on non-local attendee days,” Sanders added. “Is it plausible that Miami Beach will see an 87 percent increase in convention center attendance? No, of course not.”

Not So Distinct After All

Many in Miami Beach believe the city is so unique that it simply can’t be compared with other cities. Of course, political and civic leaders in cities like Boston, San Antonio, Tulsa, Oklahoma City and San Diego, among others, likely feel the same way. But the cities do have something in common – a consultant specializing in convention centers called CSL, for Convention, Sports and Leisure. This consultant, who has been engaged many times with Miami Beach for over a decade, was also consultant in those other cited cities. CSL is one of a tiny handful of consultants who specialize in convention centers. And, while Beach political leaders might consider the city unlike any others, the advice given by CSL to Miami Beach is roughly the same as was given in other cities, and mirrors the advice that the handful of specialty firms in this field advise pretty much every municipality that brings them in.

“Miami Beach was not given any specialized advice – it is extremely common,” Sanders said.

In a nutshell, the few consultants in this field advise that increasing exhibit space and/or adding a convention center hotel and/or adding a “ballroom” will inevitably result in greater convention attendance, thus increasing non-local stays in town and thus increasing business for everyone from the municipality to hoteliers to shop keepers and entertainment venues. But, for the most part, one or more of those recommendations is all but guaranteed if history is any prognosticator. And then, two things tend to happen, based again on history. One, either the same consultant will leverage plans it assists one city with to offer similar advice to a neighboring competitive city. One of the arguments being made to Fort Lauderdale officials right now by a different specialist consultant, is that the city needs to expand its convention center because Miami Beach is planning to improve its facility.

Secondly, the plan rarely if ever works – at least not as planned. No spin in the world can alter the fact that the convention industry is sliding and that even cities with long histories of being convention meccas such as Las Vegas and Orlando aren’t reaping any real reward from their efforts. And Miami Beach, by no means, is a convention mecca.

But one doesn’t have to just take the word of one of the nation’s foremost experts on convention centers or even statistics. The words of the convention industry’s own leadership speak volumes.

“The third challenge concerns the business model for sustaining convention centers. Clearly the original ‘loss leader model is no longer acceptable, yet in the current buyer’s market, unrealistic concessions are being made to book business,” wrote Greg Ortale, 2013 chair of CEIR, the Center for Exhibition Industry Research – basically the industry’s own public relations wing – in the most recent CEIR Index Report.

“ That practice cannot continue over time and still provide the quality facilities all buyers require today,” Ortale continued. “The current excess supply is more likely to come into balance through a reduction in inventory than an increase in demand as destinations (note: emphasis added) accept that they no longer can keep investing in a facility if they cannot market it at a fair price. As those destinations withdraw from the competition for the national business, the supply of acceptable facilities will likely drive site selection. Organizers need to work with destinations to establish a more balanced business model that is advantageous for both sides.”

Ortale effectively seems to be advising against having unrealistic expectations and furthermore appears to claim that only reducing available convention space will result in existing facilities doing more brisk business. He also explicitly points out that young people are not drawn to conventions the way earlier generations are.

So both an academic expert and the primary convention industry association seem fully aware that the industry is not growing and not going to achieve success by adding new or merely renovated convention space.

But no matter how many cities have been “advised” to add, expand, reconfigure or renovate their convention centers and/or add the industry sacred cows of convention center hotels and “ballrooms,” it just doesn’t seem to ever work out – at least not for taxpayers who generally foot the bill and rarely receive a return on their investment. Of the convention center expansions that Sanders cited, only one seemed to show a tiny increase in attendance – and that center’s size was doubled in advance of the business increase. The numbers still do not add up well, even in that case, for the public.

Still, Miami Beach officials feel the city is so completely unique that, even if it received the same general advice and predictions for its plan as did tiny Tulsa, Oklahoma, the plan will inevitably work and all of a sudden people will be willing to come to a convention in a city where a mixed drink costs $20 and only madmen would risk renting a car and trying to park in a city of predatory towing companies and city enforcement officers.

Commissioner Michael Gongora, one of only three commission members to even reply to a short question list on the topic for this article, said that increasing competition is exactly why Miami Beach has pursued this project.

“That is precisely what is making the meeting business so competitive,” Gongora said of increasing stock and decreasing demand. “In the ‘battle of the fittest,’ I do not think bigger will win, I think Miami Beach will win because our city has a proven track record as a world-class destination. People want to meet and visit in Miami Beach. We just need to provide a convention center on par with our world-class destination.”

Gongora said that the state of the convention industry was something the commission was made aware of and considered throughout the entire process.

“This issue was discussed each time this and prior commissions commissioned third-party expert studies regarding what we needed to do as a City to keep our convention center competitive,” Gongora said. “It was also raised by the community during the several public forums held to discuss this latest RFQ. I paid close attention to these voices and asked for their views to be analyzed and rebutted. Our City’s consultant, both proponents, the hotel association the Convention Bureau, our city manager, City staff and prominent business leaders all concurred that we should move forward with this project. Their position was supported by industry analysis, third-party reports commissioned by prior commissions and by industry experts.  In the end, this debate is for the voters to decide. That is why I insisted this matter be placed to voters on a public referendum.”

Both Gongora and Mayor Matti Bower believe Miami Beach is such a desired destination it will trump and pesky numbers reflecting poorly on the industry’s prognosis.

“[It will work] the same way Miami Beach has always flourished — by offering the most unique, diverse, exciting and vibrant resort destination in the world,” Gongora said. “No one thought South Beach would be an international success 30 years ago, where are those naysayers now?”

Bower had a similar sentiment.

“Other Cities are not Miami Beach,” Bower told SunPost. “We are a unique destination, offering stunning beaches, world-class cultural, dining and nightlife venues and an unparalleled collection of historic and cutting edge architecture all within the confines of a walkable, urban environment.”

Of course, Las Vegas and Orlando might make similar claims – and their convention businesses dwarf those of Miami Beach. In fact so do their visitor numbers overall.

And yet those cities’ convention numbers haven’t met expectations either – expectations generated by a small number of consultants such as CSL.

SunPost requested clarification from the City of Miami Beach about its relationship with CSL. City Attorney Jose Smith was on vacation and unavailable for comment. His office did not respond to any questions about CSL.

A Bird’s Eye View

Prof. Sanders has no connection to Miami Beach, no investments or a second home here. His observations of Miami Beach’s convention center plan process is academic – it’s his area of expertise, after all. Still, though, he said he had contact with two city commissioners. On both occasions, he was approached by the commissioner.

“I don’t insert myself in situations,” Sanders said.

Sanders said he had a very brief conversation with Gongora. “We spoke briefly, then he said lunch was being delivered to his office and that was it,” Sanders said.

The convention center expert also said he had one conversation with Commissioner Jonah Wolfson. That exchange clearly had a strong effect on Wolfson, the commission’s populist maverick and a fierce opponent of taxpayer funding of a convention center project.

“I had an hour-long conversation with Prof. Sanders a long time ago,” Wolfson told SunPost. “He reinforced my instinctive reaction to this deal. Sanders gave me some more confidence that I am right on this issue. Before and after my conversation with him, I’ve reminded my colleagues that there are two significant economical reasons this is a bad deal.     First, convention centers don’t support or help an economy so much so as to necessitate a billion dollar leverage. Our beach sand, nightlife and cuisine are what bring people here. We are not a convention town.  To spend a billion to try to make us one is bad economics. Second, even if you think convention centers are good deals, the price point for the hotels that are being built are too high to bring in business. To illustrate this point, just look to the main reason for building the hotel three years ago: the industry complained there were no reasonably priced hotels that could be blocked. And if we had such hotels, we could bring new conventions. And towns like Orlando, etc., have room rates significantly lower than ours, which can rise to near $400 to $500 a night. But now that the teams have proposed a hotel with $385 to $450 a night rates, the commission has changed its primary reason for the hotel construction to be able to maintain this mega deals momentum. Now, it is just a geographical issue. People need a hotel near the convention center and won’t care how much they pay a night. Hogwash. Better yet, I call bullshit. The hotel won’t generate new business that would justify a billion dollar leverage.   Won’t do it.”

Wolfson said he had mentioned to some colleagues the examples of Las Vegas and Orlando investing heavily in their convention centers and seeing no real advantage – well, to the public that is. “Yes. I looked at that, mentioned that, and Matti and Gongora didn’t care. They are on a warpath to pour concrete on our heads.”

Wolfson also said he pointed out the diminishing convention industry and it paralleling a massive increase in available convention space. “More information the commission wiped their figurative you-know-whats with,” Wolfson said.

The commissioner, who is leading an effort for a full referendum on the convention center project, believes there is nothing so unique about Miami Beach to lead him to believe it will buck the national trend. Instead, he said, the public will end up footing the bill for the elaborate scheme.

Plus, added Wolfson, it isn’t as if Miami Beach is having trouble attracting tourists, even in a still-sluggish economy.

“Things are better than they’ve ever been from a tourism standpoint,” Wolfson said. “March was the best month in the history of our city. What’s the problem we’re trying to fix? I understand it needs a facelift / renovation. But a billion dollar rebuild and hotel?  Not necessary. They are selling our quality of life so that a handful of people can make an enormous amount of money.”

And The Beneficiary Is   

So, if municipal coffers aren’t benefitting from expanded/improved convention centers, convention center hotels and the oft-requested “ballrooms,” and thus the taxpayers aren’t benefitting much either, why do so many cities – advised by the small aforementioned group of specialty consultants – who is benefitting and how does the process continue to perpetuate?

Sander wouldn’t venture a guess when it comes to the situation in Miami Beach.

“Ask ‘who wants this,’” Sanders suggested. “What’s the nature of the political structure? I couldn’t give you an answer to that about Miami Beach. I don’t know. I have looked at similar plans in other places and it has typically been driven by local businesses and development interests that see this as a way to leverage major development.

“In some cases, its local hotel owners who often support projects like this – as a way to get more business, which makes sense,” Sanders added.

But in Miami Beach itself, Sanders wouldn’t venture a guess.

Others have had less a problem with speculating on who will actually benefit from the improved convention center. Among those often cited are the developers themselves – particularly since the commission snubbed its own administrative recommendations and voted to negotiate with a particularly politically-connected development group. Other hoteliers have been accused in media of meddling in the process. Many Lincoln Road property owners came out in support of the eventual winning bidder for master developer, so business interests seem aligned with the project. Most recently, rumors have circulated widely online that the project is actually designed to eventually be home to one of the casinos expected to be permitted to open in Florida in the not-too-distant future.

Those, however, remain merely rumors. In the meantime, the City is moving ahead to negotiate with winning bidder, South Beach ACE, based first on a scaled-back proposal wisely advocated by City Manager Jimmy Morales but likely to end up far grander in scale if history is a sign of things to come.

As to the question of who benefits from this project, there is no clear answer yet, except perhaps for the developers. But the first thing one learns in criminal investigation is to look at who benefits from a crime to determine the likely suspect.

Not that the City of Miami Beach’s plans for the Miami Beach Convention Center are criminal. Perhaps the collective wisdom of the commission is greater than that of experts in the field; perhaps they are right, and Miami Beach could become a true convention mecca with the billion dollar-plus about to be sunk into it.

But that argument falls flat with those who have been in Miami Beach long enough to remember the city already involved public assets in hotels that were supposed to serve the convention center and jettison the local convention business into the nation’s upper echelon. It didn’t happen.

“Plenty of people will benefit from this,” said one source with longtime connections inside city hall. “But not the public. That’s not the way things work here.”

About Michael W Sasser

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