Economic Development

ECONOMIC ANALYSIS: Convention centers as economic development

January 31, 2005

It was more than 50 years ago that suburban growth began to explode and central cities haven't been the same since. Businesses have gradually followed new housing and population growth out to the fringes of one urban area after another over the decades, to the detriment of many a downtown.

The trend continues unabated and the central business districts in some large and medium-size cities have yet to recover. Their vibrant, dominant role in economic activity is just a memory, while the vacant lots and blighted buildings that dot their downtowns bear witness to their decay.

Those empty buildings are testimony to what can happen when patterns of growth change in ways we don't anticipate and old investments lose their value.

It's a lesson we should be mindful of today as we contemplate new investments in our downtown infrastructures across Indiana in the form of new or expanded convention centers. Does the growth in business justify the new commitment of public money? Or will new and/or enlarged facilities fall short of their optimistic projections?

That's a question posed by a new study published by the Brookings Institution. Rather than analyze any one city or convention center in particular, the study takes a national perspective. And what it shows is surprising.

There's been something like an arms race happening in the convention center business over the last 10 years. Big players, like New Orleans and Chicago, are getting bigger. Medium-size players, like Indianapolis and Denver, are striving to be big. And new cities, from Sarasota, Fla., to Pittsburgh, are jumping into the game.

Since 2000, 19 cities have built new convention facilities and 34 have expanded existing ones. And there's more on the way. According to Brookings, 44 cities, including Indianapolis and Fort Wayne, have plans under way for new or expanded convention centers. Since 1990, the square footage made available for the nation's top 200 trade shows has increased as much as 40 percent.

Yet, over that same period, overall attendance actually has been declining. How serious is the decline? It turns out to be quite hard to say. One of the frustrating aspects of the convention industry reported by Brookings is the paucity of quality data on such things. But evidence from the 200 largest trade shows indicates a slow decline in attendance that has become more rapid since 9/11.

The performance of individual centers in the wake of expensive new investments, as reported by Brookings, has been disappointing. Despite expansion in hotel capacity, frequently as a result of public subsidy, steady expansion in facilities in Indianapolis have not increased overall attendance, according to the study, which reports it is now down 33 percent from its high-water mark of 1999.

The proper response to this decline, some have argued, is more investment. Without competitive facilities, the logic goes, market share will erode and further declines are assured. And the lack of reliable data to document the size of the overall market makes it hard to dispute the rosy predictions of new business that regularly appear in feasibility studies of new expansions.

But at what point do the demands for new investment become too much? It certainly is not an easy question to answer. There is no arguing that the benefits of a vibrant, healthy downtown are substantial and the spending by those who travel from other regions to attend events here add to the local economic pie.

But if the findings of the Brookings study are any guide, perhaps we should put away the blueprints and the earth movers for a moment and start asking if there is some other way we can make that happen.



Barkey is an economist and director of economic and policy studies at the College of Business, Ball State University. His column appears weekly. He can be reached by e-mail at pbarkey@ibj.com.
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