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Boston, Massachusetts Pioneer Institute for Public Policy Research - White Paper No. 9
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E
XECUTIVE
S
UMMARY
An increasing number of American cities are pursuing an economic development strategy aimed
at boosting convention and visitor activities. From Boston to Atlanta, San Antonio to San Francisco, cities
are mounting massive construction projects to provide new or expanded convention center space.
The rhetoric of convention center investment is drawn from feasibility studies, generally
developed by a national accounting or economic research firm. These studies lay out the (invariably
positive) market analysis for more local convention space. On the basis of these studies, public funds are
appropriated and increasingly enormous facilities are constructed. Yet for all their specificity in predicting
outcomes, these studies have only rarely been subject to serious review and examination. This paper,
based on review of more than 30 such studies, takes a hard look at each feasibility study component to
gauge its utility to policymakers and others who rely on these studies to make public investment
decisions.
Throughout the 1990s, forecasts of national convention and tradeshow demand made in
consultants feasibility studies have been consistently optimistic about demand growth and the economic
value of conventions. Although most studies recognized the impact of the Gulf War and recession on the
industry in the early 1990s, they regularly predicted a pattern of steady growth. These forecasts were
essentially naive extrapolations of historical data; there were no underlying models of specific sectors of
demand, or, indeed, of larger factors like changing travel costs, business restructuring, or family time
demands. Thus even 1996 industry projections do not appear particularly reliable after a modest span of
three years.
Close examination of data from Meetings and Conventions, Tradeshow Week, and the Center for
Exhibition Industry Research (CEIR) refutes the assumption of regular annual growth, yet these sources
are commonly cited as evidence for a positive trend. Declaring that overall growth is expected to be
strong, a 1997 study for Boston cited CEIR data, which predicted a total of 4,683 shows nationally by
1999. The actual 1999 figure was just 4,503 shows. The 514 million net square feet of exhibit space used
in 1999 was below the predicted 522 million. And tradeshow attendance for 1999 proved a notable miss,
with the actual figure of 102 million well below the predicted 129 million attendees.
The image of continued substantial growth in space supply is common to all recent feasibility
studies. Supply data are commonly misrepresented and are used exclusively to promote building new
facilities and expanding existing ones.
Two dominant methodologies are employed to estimate market appeal. One relies on surveys of
convention and tradeshow meeting planners about their interest in meeting in a particular city, a kind of
beauty contest in which they are queried as to the likelihood of using new convention space in a specific Convention Center Feasibility Studies
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city. The second approach quantifies a set of factors the consultant deems central to convention center
success, including measures of airline service, the number of local hotel rooms, and size of the
metropolitan area population. (In the second approach, the factors considered vary for different cities and
are clearly chosen to skew the results in favor of increasing exhibit space.)
Estimates of likely new business are an input to the forecasts of attendance, job creation, and
economic impact that are central to selling a new or expanded convention center. Some studies lay out
elaborate calculations and deductions but include at least one component, such as market capture rate,
that simply reflects the consultants judgment or perceptions. Other studies provide a list of factors but
offer no explanation of how they combine to form estimates of future activity. Successive studies of the
same city can also vary markedly.
The logic of calculating the direct spending generated by a convention center is quite reasonable
and straightforwardmultiply estimated attendance by estimated average length of stay by estimated
average daily spending. Yet its validity depends on the strength and accuracy of its components. Studies
often estimate the average length of a visitors stay at four or more days, although available data show an
almost one-to-one relationship between attendance and hotel nights.
Convention center feasibility studies generally stand alone, with little detailed comparative data
on the performance of other centers or cities, and little evidence of the conclusions of the same consultant
to a competing center just down the Interstate or across the state border. Plausible alternatives to adding
space, including serving selective market niches, improving the quality or amenities of convention
centers, or accepting a limited market share rarely, if ever, appear as market alternatives.
In an era in which both politicians and the public follow carefully gathered statistics on urban
crime, student performance on standardized tests, and local property tax rates and values, they have
access to little or no real data on what convention centers deliver for the public investment.
Recommendations
1.

If the analytical marketplace held feasibility studies to a high standard, with regard to both
methodology and forecasting, this would inform the public debate. Establishing a public record of
predictions and actual convention center performance would bring their true economic value to light,
but would take years to inform the decision-making process.
2.

A long-term alternative is to oblige convention centers or sports facilities to finance capital costs out
of their true fiscal impact (taxing the hotel rooms of only convention attendees, for example), rather
than promoting such revenues as a fiscal boon while tapping other, more substantial sources unrelated
to their performance. That would provide a clear market discipline and attach real world
consequences to predictions. Pioneer Institute for Public Policy Research - White Paper No. 9
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3.

A strategy to force capital investments to compete among themselves for political support is to issue
legal debt restrictions, as many states did in the wake of localities overabundant issuance of
speculative debt for railroad construction in the nineteenth century. These typically limited the total
size of local debt and required a majority (often two-thirds) public vote on any debt issue.
4.

In combination with the previous recommendations, a fixed cap on debt and capital spending, such as
the one already in place in Massachusetts, would impose a kind of fiscal and analytical discipline
often lacking in public investment decisions. Regardless of purpose or backing, a project would be
obliged to compete with othersthe convention center against the stadium against the airport. Paired
with an annual limit on the capacity to take on new debt, this would offer some real feedback from
the political marketplace.
Adopting these recommendations would begin to give the public and policymakers the
information necessary to choose the best public project and ensure that investments of hundreds of
millions of dollars bring real economic benefit to the community. F
LAWED
F
ORECASTS
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A C
RITICAL
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OOK AT
C
ONVENTION
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ENTER
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EASIBILITY
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TUDIES
H
EYWOOD
T. S
ANDERS
I
NTRODUCTION
An increasing number of American cities are pursuing an economic development strategy aimed
at boosting convention and visitor activities. From Boston to Atlanta, San Antonio to San Francisco, cities
are mounting massive construction projects to provide new or expanded convention center space. The
national total of convention hall exhibit space has grown as a result, from 40.4 million square feet in 1990
to 50.7 million in 1998, with industry data projecting the addition of some 11 million square feet of space
in the next five years.
1
The boom in convention center development has been sustained by a persistent rhetoric from city
to citymore space means more convention attendees, producing more spending, new jobs, and private
development. Thus in Louisville, former Mayor Jerry Abramson could boast that an expanded
Commonwealth Convention Center would bring with it 15 new conventions, 188,000 more overnight
delegates, and an additional $48 million in direct tourist spending...boosting our travel and tourism
industry.
2
And in Boston, local and state officials could confidently back a new Boston Convention and
Exhibition Center with the promise of some 537,600 new convention attendees by the year 2012, with a
direct economic impact of $436 million, and the generation of some 6,500 new jobs for the city and the
Commonwealth.
3
The rhetoric and promise of convention center investment is built on the foundation of bulky and
number-laden feasibility studies, generally developed by a national accounting or economic research
firm. These studies lay out the (invariably positive) market analysis for more local convention space. Yet
for all the specificity in defining results and outcomes, and the seeming certitude in calculating the need
and demand for convention center space, these feasibility studies have only rarely been subject to serious
review and examination. Their conclusions and forecasts are not routinely re-examined for accuracy and
reliability. And their data, methodology, and substantive conclusions are effectively never subject to
comprehensive or comparative analysis. Yet on the basis of these studies, public funds are appropriated
and increasingly enormous facilities are constructed.

1
Major Exhibit Hall Directory 1998, Tradeshow Week, Los Angeles, 1998, p. 13.