A shrinking new reality for convention centers

The Democratic National Convention has come and gone. Pope Francis passed through, trailing the World Meeting of Families in his wake. While much of the central action of these events took place away from the Pennsylvania Convention Center, in both instances the space was packed to bursting with forums, conclaves and various other types of gatherings. Miracle of miracles – or, in the case of Pope-a-palooza, a typical occurrence – everything went off without a hitch. There have been no complaints, thus far, of overcharging or labor strife.

This blissful state of affairs is a far cry from three years ago, when City & State PA columnist Tom Ferrick called the Pennsylvania Convention Center “a dud. With a capital D-U-D.” At that time, two years after the completion of a $780 million publicly funded expansion project that effectively doubled the size of the facility, the city’s ability to attract meaningful convention business seemed in peril. When the expansion was proposed, it was projected to grow the business by about a third. But as Ferrick reported in 2013, major conventioneers were instead abandoning the city.

The poor performance of the Pennsylvania Convention Center was blamed squarely on the building trades members who set up, take down and maintain the ever-shifting programming within the center’s 679,000 square feet of exhibition space. At the time, there were six unions working within the institution, but it was the Carpenters – whose then-president, Ed Coryell Sr., sat on the board of the Pennsylvania Convention Center – who took the heat for being difficult to work with and expensive to hire.

In the years following, the Carpenters were definitively booted from the center, with much of their work taken over by the International Alliance of Theatrical Stage Employees (IATSE). Then, three weeks before the DNC, which would make extensive use of the site, City & State PA discovered that top IATSE executives were involved in an overbilling scheme. The labor coalition that staffs the convention center moved quickly to punish those responsible – no one wanted anything remotely similar to 2013 again.

“No matter how minor or how severe, we’re definitely committed to policing ourselves to the max,” John Dougherty, business agent of IBEW Local 98, said three weeks before the DNC. “We’re guaranteeing the transparency and cost effectiveness, and none of the past nonsense. We worked real hard to make this the No. 1 hospitality destination in America. We’re killing it production-wise at the DNC.”

Dougherty’s opinion was echoed by John J. McNichol, president and CEO of the Pennsylvania Convention Center. “We have great labor harmony now,” says McNichol. “The place is really firing on all cylinders.”

But the Pennsylvania Convention Center still doesn’t seem to be living up to what was promised when the public was convinced to spend hundreds of millions of dollars
expanding it.

For Heywood Sanders, a nationally recognized expert on convention centers, the problem was never just the Carpenters or high labor costs more broadly. The bigger issue is a bit like what Atlantic City’s casinos are facing today: There’s too much competition elsewhere. In 2000 there was 52.1 million square feet of convention space in the United States; today, that number is 71.2 million square feet. There simply aren’t enough shows to go around.

“Almost every time questions have arisen about the performance of the Philadelphia center, the argument is made that unions are the problem,” says Sanders, the author of “Convention Center Follies: Politics, Power, and Public Investment in American Cities,” and a professor of public administration at the University of Texas at San Antonio. “The overall nature of the market right now is that convention center space in this country is seriously overbuilt. The result is that every seriously sized center is seeing performance issues. The idea that the problems are because of unions, in light of that larger market context, just doesn’t wash for me.”

To illustrate the extent of the exhibition space glut, consider that in Pennsylvania alone there is the David Lawrence Convention Center in Pittsburgh (313,000 square feet), the Bayfront Convention Center in Erie (145,000 square feet) and the Lancaster County Convention Center in Lancaster (90,000 square feet). However, the Pennsylvania Convention  Center, which features more exhibition space than the previous three combined, is more likely to be classed with other behemoths like the Jacob K. Javits Center in Manhattan, the Las Vegas Convention Center, or McCormick Place in Chicago.

But as convention center saturation sets in, all of these heavy hitters have suffered, whether they experienced labor strife akin to Philadelphia (like McCormick Place) or not. In 2000, the Javits Center saw 1.25 million convention and trade show attendees. By 2015, that number dropped to 672,300, despite an expansion and renovation. Meanwhile, room nights, which are the most reliable metric for convention center success, fell as well – from 668,000 in 2003 to 478,000 in 2014.

In Las Vegas, the king of convention cities, similar pressures are being felt. In 2002, the Las Vegas Convention Center underwent an immense expansion, doubling in size to 3.2 million square feet. This huge project did nothing to expand the number of out-of-town visitors, though. In 2001, the convention hall saw 1.29 million visitors, already a slight dip from 1999. Last year, despite the center’s increase in size, its attendance was still under 1.3 million.

The Pennsylvania Convention Center can be grouped with these other big-league institutions in terms of size, the ability to lure big shows – and disappointing attendance numbers. In 2003, when the expansion project was under consideration, the consultant group Conventions, Sports & Leisure International projected that when completed, the super-sized convention center would attract 1.49 million non-local attendees a year. The group estimated the pre-expansion attendance levels at an average of 976,000 between 2000 and 2002. Both those figures were probably inflated, but nonetheless the numbers in the last few post-expansion years are vastly smaller. According to the Philadelphia Convention & Visitors Bureau (PCVB), in 2015, when the pope visited, the center hosted only 297,792 attendees. But that year was arguably still in the shadow of the labor troubles. By the end of 2016, the number of attendees is expected to grow to 377,268.

The convention center isn’t living up to expectations in room nights either. The 2003 report estimated that the expansion would generate 786,000 room nights for the local hotel industry. It also showed a yearly average of 503,000 room nights between 2000 and 2002. But in 2015, there were only 312,563 room nights that the PCVB directly tied to the convention center, although that number is expected to grow to as much as 390,000 in 2016.

In both cases – attendance and room nights – not only are the best-case scenario 2016 projections lower than the projections of the boosterish consultants hyping the $780 million expansion, they’re also lower than the attendance rates and room nights that Conventions, Sports & Leisure International reported before the convention center was expanded. A 2013 report on the local hotel industry by PCVB and the Philadelphia Industrial Development Corporation confirms this, showing declining convention-related room nights since 2002. Convention-related hotel nights haven’t surpassed 500,000 since that year. Indeed, the rosiest projection for this year – 390,000 room nights generated – is still less than the number for 2014, the year of peak labor troubles, when 397,051 room nights were generated.

From the perspective of Julie Coker Graham, president and CEO of PCVB, the reasons for these numbers are manifold. In particular, she notes that the numbers of hotel rooms weren’t up to the task of accommodating traffic from the expanded convention center. But the competition is certainly a factor, too. 

“The increased inventory across the nation is definitely going to have an impact on your performance,” says Graham. “You are also handicapped with a union perception and reputation so when you add that kind of inventory, everyone has to be on their game everything has to be operating on all cylinders including the amount of
inventory hotels.”

Graham expects to reach the goals of the early 2000s. “Barring any unforeseen issues, we look very strong after 2019,” she says. “After 2019, we have the ability to generate over 700,000 PCC-related room nights.”

There can be no doubt that the Carpenters union was a thorn in the side of conventioneers, management and their counterparts in the labor movement. As the Inquirer and Ferrick noted at the time, there were specific big conventioneers – like the American Academy of Neurology – that were actively avoiding the city as a result of their experiences.

Now many of these conventioneers are on their way back. Immediately after the DNC, the American Association for Clinical Chemistry started setting up shop for a five-day conference. The latest infraction on the part of a couple IATSE executives seems like small beer in comparison with the endemic labor troubles of earlier years. But it appears that these are all micro-level problems and that the Pennsylvania Convention Center is haunted by a macro-level problem that affects the whole industry.

The Pennsylvania Convention Center is clearly a priority for Pennsylvania’s elites. The board of the institution includes some of the most powerful people in the state, from Democratic attorney general candidate Josh Shapiro to the head of the Philadelphia Laborers union Ryan Boyer to Drew Crompton, the right-hand man of Republican state senate president Joseph Scarnati. Everyone City & State PA talked with seemed happy with the way the center is trending, although they acknowledge that the industry is tougher than ever these days.

“From what it sounds like from the stats, there’s more cities competing for conventions,” said Crompton. “It takes a lot of work to be on the list of competitors. It’s not as fierce as being the host city of the Olympics, but it’s incredibly competitive. Some states subsidize more so than we do. It’s like the film tax credit in Pennsylvania. Other states have it, too.”

Like the film tax credit, convention centers have become an arms race of state-sponsored incentives that are bringing in diminishing returns. But even though that oversaturation is a problem, it’s still a huge repository of work where union members can make decent wages and get benefit contributions. In an economy where such boons are increasingly hard to get, that’s nothing to sneeze at. The question is whether the public money expended during the expansion was worth it. ■