Expert says Nashville likely to lose in convention center arms race

Sunday, May 31, 2009 at 8:05pm

In a debate-style forum which ranged from informative to contentious, the nation’s leading expert on the public convention center business and the president of Nashville’s convention and visitors bureau went toe-to-toe at the Steve and Judy Turner Recital Hall on Vanderbilt’s campus on Sunday.

University of Texas at San Antonio professor Dr. Heywood Sanders argued that convention business is such a small fraction of the Nashville tourism industry that the proposed $635 million that would be used for Music City Center would be better spent elsewhere.

Sanders pointed out that Nashville sees nearly 11 million tourists come through annually, but the latest projections for Music City Center show it would only bring in between 200,000 and 300,000 hotel room nights per year, according to the request for proposal issued by Metro last year.

Sanders argued that the nation is engaged in a sort of convention center arms race, with cities competing with each other to build more and more convention space. Since 1999, space has increased nationally by 36 percent, but demand has remained flat, Sanders said.

That leads cities to offer huge discounts to attract convention business, which then undermines the downtown hotel industry.

“It’s the same reality we see when car dealers have too many cars and department stores have merchandise that’s not moving — there’s a sale,” Sanders said. “That increasingly means convention centers are offerin sales and events are going to where the deals are.”

Butch Spyridon, the president of the Nashville Convention and Visitors Bureau, argued that the Nashville convention business is thriving and competing well against other destination cities like Toronto and Orlando.

Spyridon pointed out that the current downtown convention center paid off its bonds on time and was funded by the visitors, who generated the revenues to pay back the debt issued more than 20 years ago. Spyridon did not mention that Metro provides the center an annual operating subsidy of just over $1 million, which comes out of the general fund.

Despite working to sell a new convention center, which hasn’t even received the green light yet, Spyridon pointed out more than 200,000 room nights are already booked for Music City Center.

“Nashville is not basing our proposal simply on academic studies and consultants,” Spyridon argued. “We’re basing it on our own experience and success.”

The open forum got testy at various points as Spyridon and Sanders sparred over the value of convention center business to the tourism engine that generated $4 billion for Nashville.

Sanders said he hoped Nashville’s convention center project worked, but pointed out other cities with new centers have not seen the success they hoped.

Boston, for instance, has achieved less than half the room nights predicted by the feasibility study used to support developing a new center, he said. The feasibility study was done by Johnson Consulting, which conducted the same study for the Music City Center project.

At-large Councilwoman Megan Barry, who spearheaded the forum, said it accomplished what its sponsors envisioned.

“It was absolutely what I wanted,” Barry said. “It was two advocates who came with passionate ideas about where they stand, giving their opinions to the citizens of Nashville, who can then make up their own minds about where they want to stand.”

Metro Council will vote for a bill on third reading concerning the land acquisition phase of the project at its Tuesday meeting.

 

40 Comments on this post:

By: payitforward on 5/31/09 at 7:16

Colonel Sanders has been a long time naysayer of convention centers and has used 'fuzzy math' for years. Take a look at this link: http://www.allbusiness.com/services/business-services-miscellaneous-business/4225658-1.html

It's time for the MCC to move forward and remind this professor why he's a professor and not a businessman.

By: JeffF on 5/31/09 at 7:23

I hope that the council people are told before the third vote on the acquisition anchor that the plan will have to be indefinitely put off due to the condition of the bond markets. I sure would hate to have them be used to buy land that cannot be used and will not generate property or sales taxes. That would be dishonest of the mayor and supporters to play games with preliminary council actions that were strangely ordered to begin with.

Don't worry supporters, MDHA will continue to pay ridiculous amounts of money to the washed up journalists at McNeeley Piggott & Fox for all their "grassrooting". MDHA never runs out of money due to their OBE (off-budget enterprise) status.

By: JeffF on 5/31/09 at 7:25

funny you would mention business people since real business people do not need government money to buy their toys and pay their operation. These are not business people, these are just meeting planners who could not get hired by private enterprise.

By: idgaf on 6/1/09 at 1:46

You can't argue with facts (unless you are to benifit and have no morals).

Before the recession which will be long lasting the way barry is spending money there were only 2 facilities in the whole country that were makeing money Vegas and Orlando both which are better destination cities then Nashville.

Vegas has had 400 cancellations this year so who knows if they will be losing money too.

A billion dollars is a lot of bucks for a city this size.

By: Anna3 on 6/1/09 at 5:49

Payit(With my money) forward....is either the alter - ego of Butch Spyridon or Ralph Schultz.(Nashville Chamber Exec Dir.)...who else would ignore all of the information and attack the messenger who presented facts that get in their way? If Butch Spyridon, Ralph Schultz, and Mayor Karl Dean believe in this so much...would they go so far as to say that if it DOES NOT reach their projected booking revenues in the first THREE YEARS...or a profit in the FIRST FIVE YEARS, that they would be willing to resign their positions? I think not...because they know that their own internal studies show losses for the first 23 years in the life of this Center. What a fleecing of the taxpayers, children, elderly, poor, and working folks of Nashville. Shame on you Karl Dean! We need a new leader whom will not throw away a BILLION DOLLARS in a recession in a cavalier way.

By: nvestnbna on 6/1/09 at 6:16

I think it would be helpful for them to run the debate on Channel 3 so folks that missed it can form an opinion. I thought the contrast in personalities was revealing.

Debt service on the center and hotel will probably run in the $70m per year if they can get it , is this really the best use of our city's resources?

If we look at our current center, with its loading docks on Broadway (an area Spyriden claims to have revitalized), a virtually dead Commerce Street, a loading dock across from the entrance to the Ryman, are the MCC and their 'visionaries' really the urban energizers they claim they are? Latest news? The Police Central Precinct may be the center's first tenant - Outstanding!!!!

By: producer2 on 6/1/09 at 6:36

The 300,000 figure was not disputed by Sanders. That translates to 900,000 room nights annually which is almost double what the city currently books. Sanders did not provide any new information and in fact continues to paint only one picture that ALL Centers are doomed. that is like saying ALL auto makers are doomed when in fact we know that many are weathering this downturn just fine and have bright futures. When presented with economic data that was confirmed by at least two independent outside sources (one was a UT economist) Sanders only reply was that the economist was wrong and implied he knew more about economics than the professor at UT. Sanders was paid a fee and expenses to be here, yet he makes claims that he is unbiased in his approach. You can't have it both ways. There will be nothing gained by the same few of us rehashing all the talking points we have discussed over the past months. I for one am not going to spend my day going over the same things. If someone wants to bring something new to the table I would be happy to discuss otherwise have a nice warm Nashvlle Monday...

By: JeffF on 6/1/09 at 8:08

Have you noticed the automakers doing the "weathering" are the ones that did not receive billions in government money? Wonder if there is a lesson to be learned there?

Don't use other industries for inspiration Producer. Even the struggling and dying auto manufacturers have more of a positive impact on society than a successful hotel/motel industry. Dr. Fox will back me up on that. At least the auto industry pays benefits and employs almost all of its workers full-time, two things the tourism industry is unwilling or incapable of doing (even with cities building their sandboxes for them.)

By: producer2 on 6/1/09 at 8:40

It is an analogy, nothing more. No deep seeded meaning needed, thanks

By: girliegirl on 6/1/09 at 9:00

Ok, so we have a choice to have a convention in LAS VEGAS ( ding ding ding) and Nashville..... and you seriously think that people would opt for Nashville instead? Crackheads~ (Thank you for the giggles though)

By: producer2 on 6/1/09 at 9:02

ok, your budget is xxx and Vegas costs xxxxxxx, but Nashville will work. Thanks for the giggles though!

By: JeffF on 6/1/09 at 9:10

But Nashville is a brand and within a days drive of everyone girlie. Funny how it is a driving market yet we tax the people coming in by airplane. Pick an argument and stick with it CC proponents. Are we unfairly charging the wrong people for this?

I have a wonderful idea. We should tax hotel/motel gross receipts instead of having a room tax. That way the room rates will not be so deceptive to the visitors and we can better gauge how truly supportive this wonderful, well-meaning industry is of this center. Do the same thing with the rental car agencies, tax gross receipts instead of having add-on taxes to a rental. We will be famous as being the city that treats ALL its visitors fairly. Tax the industry that will be the only beneficiaries instead of the visitors. Yes they will pass it along in higher rates but at least everyone can see what that amount is.

We will have plenty of time to implement this taxing change once the center is back burnered because those mean old bond buyers think this is a high-risk venture. Curse all those dozens of other centers in other brand name cities who failed to live up to expectations and consultant promises.

By: JeffF on 6/1/09 at 9:13

Actually Las Vegas average room rates and tourism taxes are lower than Nashville's now. Plus airfare is cheaper even though is isn't a day's drive from most everyone. Must suck to be a Nashville hotel owner having to compete with Las Vegas on activities and price and amenities. We must help them by building a convention center that a very small percentage of visitors will ever use.

How are those ticket sales for the CMT music fest?

By: girliegirl on 6/1/09 at 9:39

And if you gamble while you're there, your rooms and food are free.... duh...

By: producer2 on 6/1/09 at 10:05

try the costs associated with actually having a meeting folks, like labor costs, drayage, etc. Things that actually matter to meeting planners, but I guess since you have no clue about these things, the cost of the buffett is how you pick your cities!

By: pandabear on 6/1/09 at 10:40

producer:
Good grief, just whose payroll are you on ?!?

a 36 % increase in space nationally in a flat market during the
worst recession since the Great Depression ?

Now, isn't that a perfect time to throw $635 million to the wind ?

The people saying "YES!" to this are the people selling
real estate to the incredibly stupid people at Metro
(...eg. sell it now and buy it back later to 10+ times the price
we previously sold it at...)
and the builders, who stand to make TONS of money,
'cause they all know the final cost will be over $1 Billion dollars.

The unlimited greed and egos driving this
blatantly arrogant grab for the taxpayers money is astonishing.

By: producer2 on 6/1/09 at 10:44

what taxpayer money are you reffering to?

By: pandabear on 6/1/09 at 10:51

Jeff:
He's got to use something for an analogy 'cause there's nothing
in a related industry that even comes close to working.

That being said, using the struggling auto industry as a 'shining' example shows
just how desperately ignorant he is.
They are actually doing worse than the construction industry !

Here's an idea:

Let's put it to a vote and let the people decide.

By: producer2 on 6/1/09 at 10:55

your vote comes tomorrow. Want to wager on the outcome?

By: producer2 on 6/1/09 at 10:56

and you still did not answer my question. What taxpayer money are you reffering to?

By: pandabear on 6/1/09 at 10:57

The taxpayer money that will be used to build this thing.

You don't think your snowstorm of "bonds will pay for this",
etc. cuts it do you. That's a bunch of lies for they easily led.

By: pandabear on 6/1/09 at 11:02

Yeah, here's my wager:

I wager that you're after your own interests and that
they don't comply with the best interests of the Nashville taxpayer.

How much you want to put up ?

By: producer2 on 6/1/09 at 11:39

How about you just answer the questions posed without changing them. The taxpayer money used to build this thing is not an answer.....

By: producer2 on 6/1/09 at 11:41

By the way I got my "how to be pompous and condescending" lesson from Heywood Sanders yesterday, he was really good at it....

By: JeffF on 6/1/09 at 1:04

my tax money for the car I am renting for all of next week is going to pay for this. There, that answers that, now address some real issues.

Of course what meeting planner would have to worry about those costs. Las Vegas is one of many, many centers giving away services for free.

Nashville labor is probably cheaper but that just proves my point about this industry not carrying its load in the economy. Nashville tourism labor is cheap because this industry underpays and underbenefits on a massive scale. Tourism and meetings rates last in the state in average pay and benefits and is still a good 25% away from the next lowest industry (retail). At least retail allows the government to keep the sales taxes collected. A good portion of tourism attempts to recapture the taxes collected for its own purposes (facilities and promotion).

I say we put money into educating the workforce to a point where they know not to work in this poor excuse of an industry. Right now the high-school dropouts and mentally/language challenged are being harvested by employers in this industry. Think about it, those servers you see at convention centers, what are the chances they have a full-time job with benefits? Same goes with maids, room service attendants, valets, and desk clerks at hotels? This industry pays a very few people well and indentures a far greater number to poverty wages. Teach up Nashvillians to a point where they are too valuable for the tourism plantations.

By: producer2 on 6/1/09 at 1:50

With retail purchases YOU are paying the taxes. At least with Tourism it brings you 11 million people a year from outside the city to pay more taxes that you get to keep a large % of. That translates to $4 billion dollars a year that goes into local establishments and $100 million a year in tax money. So I guess your idea would be to do away with all that extra cash brought into the city? Does the tourism industry get any of the money soent on retail back or does it all go to Metro? do they get any spent on food at restaurants or liqour or seat taxes or admission taxes or any of that? NO just hotels and a couple f bucks on your poor rental car. See how much your taxes are without the industry you so loathe...

Your insulting drivel about the labor force and your totally unecessary depiction of handicapped people is not worth a response. You should actually be ashamed that you make comments like that.

By: gratefulted on 6/1/09 at 2:06

Was this debate advertised? Was it open to the public?

By: pandabear on 6/1/09 at 2:12

producer:
Glad to see you so insulted.

The taxpayer is paying for this cc one way or the other.

Any other statement is a lie.

Why don't YOU stay on subject ?

As usual, the hot air you "produce" is enough to start a ballon business...

By: producer2 on 6/1/09 at 2:12

yes it was, heavily advertised in print and on TV.

By: pandabear on 6/1/09 at 2:14

gratefulted:

Forget it. producer's won't answer a straight question.

He's a plant for Karl Deano and the convention center.

By: producer2 on 6/1/09 at 2:15

Pandabear,
do you actually read any of the posts? I am not insulted, JeffF made insulting remarks about handicapped people.

By: WayneJ on 6/1/09 at 2:33

If this is such a good idea why isn't Wilson County doing it?

Check out this possible scenario.

1 - Nashville builds this money pit.
2 - It loses $$$$'s and the tax increase to bail Metro out soon follows.
3 - Tax increase drives new and existing business out of Metro to Wilson County and its large industrial parks with available freight railroad served industrial sites.
4 - Residents leave Metro to follow the jobs to Wilson County.
5 - Music City Star finally gets its passengers - riding to work from Nashville to Wilson County.
6 - Wilson County prospers and grows to the point that Dover Downs builds a convention center next to their racetrack in Gladeville, making Gladeville a world class city soon annexed by either Lebanon or Mount Juliet, depending on whomever gets there first.
7 - Dover Downs elects to reinforce this success by moving one of their Sprint Cup races from Dover to the newly renamed Gladeville Intl Speedway.

By: Time for Truth on 6/1/09 at 3:08

Wayne, interesting comment as Mt. Juliet's Providence benefits from all the stores leaving another Metro colossal blunder (albeit a passive one), the Hickory Hollow development area.

I guess the leading authority on the convention center arms race doesn't know what he's talking about because he disagrees with our local meeting planners and tourism cheerleaders. And the consulting firm that says MCC will be viable, based on a curve that defies the actual direction of the industry as a whole, is right because we paid them to say MCC would be viable.

$4.00 a day per car on my last rentals is going to MCC. I'm tired of hearing we won't pay anything. And what happens when Discovery, Hall of Fame, etc etc etc give up their subsidy for the giant sucking pig? And when the MCC fails to come close to projections as has happened everywhere else? I have a guess as to where the money will come from. Look in the mirror, everyone!

By: Woodman on 6/1/09 at 3:08

Dear producer2,

Sanders wasn't paid a fee.
The figure from MDHA was 200,000 to 300,000 annual HOTEL ROOM NIGHTS, not a total of 900,000.
Do you really know how many there are now?
Read economist Fox's report.
It actually agrees with Sanders
The promise is both the hotel and center will be paid for by visitors.
Not now. There's not enough revenue.
Maybe not ever.
You (and Butch) missed on the San Antonio hotel.
And your math is seriously sloppy, and wrong now.
The folks who are paying you need to adjust your salary.
And they may need to adjust Butch as well.

By: dnewton on 6/1/09 at 3:12

Producer2:

Are you referring to Dr. Fox as the UT Economist? This guy was also telling Knoxville to get into the Convention game for the same reasons. The result of that was a wheel tax after the city got tired of looking for money to keep it afloat. A wheel tax, by the way is not a tax paid for by the users.

If Dr. Fox ever saw a bad deal out there on anything that was called economic development, I have never seen the paperwork. He is the one telling the governor that it is a good idea to spend $557 million in incentives to get VW! I seriously think you failed to mention his name for the same reason no one takes seriously all UFO claimed on the Art Bell Show.

By: Time for Truth on 6/1/09 at 3:31

anna, Dean won't need to take the pledge. He will be out of office, or may even elect not to run, after this thing goes ahead and Pandora's box opens. The best thing that could happen to his political career is him failing to put this thing over the goal line.

Both sides can yell 'fuzzy math' with some conviction as the tourism crowd knows it is pulling a fast one and the rest of us don't know all the numbers yet. What we DO know:

The MCC will cost AT LEAST 635 million dollars.

The MCC will have an operating budget well in excess of the current center.

Jobs provided by the MCC will largely be either temporary, low wage, or both (see prod's comment on labor costs used to argue another point).

The proposed footprint of the MCC ALREADY includes some potential problems such as the bus terminal and NES substation. Other issues may follow.

Tourism tax funding for such worthy venues as Discovery Science Center, the Hall of Fame and many others will ALL be diverted to the MCC. The current center gets about 400 thousand from this funding stream plus a million from the taxpayers to operate. This diversion will create a 13 million plus spending gap for those venues and services.

The convention industry is on a downward curve and already was before the current recession. Conventions as a vehicle for business meetings are on the way to becoming outdmoded. Surviving conventions will be heavily recruited resulting in bidding wars.

Unlike the current convention center, the MCC is proposed for a location off the beaten track from major tourist venues.

We are suffering a budget shortfall at the expense of our schools, police and other services and infrastructure. Building the MCC is the equivalent of buying less food and renting a less comfortable residence so you can run out and buy a Hummer (the vehicle, folks!).

Wake up, Nashville!

By: JeffF on 6/1/09 at 3:39

You know I am looking at the industry statistics and hospitality pulls in an amount not even 5% of that mysterious $4 billion figure you used Producer. In fact the industry census figures shows hospitality as the 10th largest private employer in Davidson, not the second. You and your ilk wouldn't be guilty of including money and jobs from not hospitatlity ventures would you. That would be dishonest.

Hospitality brings in a paltry $100 million in tax money while generating $4 billion dollars in revenue. That is a fascinating statistic. Particular for the tax to revenue percentage (2.5%) but also seeing how that $100 million will not come close to paying the full freight of this center and its operating losses. But by now we all know that that money will come from somewhere else. $100 million? You sure you do not want to lie a little bigger so it can't be used against you?

Professor Sanders was correct, recapture from this industry is almost impossible since even they do not even have a figure of their real economic impact and because their taxes pays for their own stuff leaving us to pay everything else.

I would feel guilty and couldn't sleep if I paid mentally handicapped people and immigrant labor what the hotel/motel industry pays them. But I guess they buy Ambien wholesale. By choosing to deflect I will mark down that my portrayal of tourism's employment practice was accurate.

Is there a educated researcher that you do agree with produce? You pointed out just last week that not even tens to Sander. Wrong again journalism major. Really did they not require you to take any math, statistics, economics or accounting in school? Your reasoning is becoming a stain on the church-based higher education system. Wouldn't surprise me to hear something about how we should strive to be more like New Jersey come from your keyboard.

By: George52 on 6/1/09 at 3:58

What about turning the entire downtown area into a pedestrian friendly car free zone served by smart, efficient, multi-modal public transit options - buses, street cars, trolleys, horse and buggys, paddle boats, bicycle rickshaws, etc., making it the ultimate Music City destination?

By: dnewton on 6/1/09 at 4:14

Even my math is a little fuzzy because it involves predicting the future. What is missing on this whole debate is the discussion of risk. Human beings are adverse to loss but it seems that they have little adversity to other people's loss. I have never seen a discussion of the worst case versus best case scenario that involved involved a lot more than intuition.

By: nvestnbna on 6/2/09 at 6:17

Well the debate will be aired today - Hooray!!

Metro Channel 3 will air the Convention Center Forum tomorrow, Tuesday, June 2 at 12:30 PM, 4:00 PM and 10:30 PM.
Check here for future playbacks as they are scheduled: http://www.nashville.gov/metro3/