Report Shows High Costs In San Diego Hurt Convention Business

On one of the hottest September days in downtown San Diego, buses, taxis and pedestrians clogged the entrance to the San Diego Convention Center. The National Safety Council was in town, its convention expected to draw 14,000 people.

It’s the largest gathering of workplace safety professionals in the country. Council spokeswoman Kathy Lane said that’s why the group chose San Diego.

“There’s really only a handful of convention centers in the United States that we're even able to go to because we’re such a large show,” Lane said.

That’s why city leaders have argued the Convention Center needs to be even bigger. An expansion was in the works until a judge last month ruled its funding plan was illegal because it was not put before voters.

Now, officials are scrambling to keep the expansion plan alive. Without it, they say, San Diego’s convention business is at risk because large conventions will go elsewhere. That’s what a mayor’s task force said back in 2009.

But a new report shows a lack of space isn’t the biggest problem — it’s the expense of coming to San Diego.

The idea of expanding first popped up in 2009, when then-Mayor Jerry Sanders said conventions were outgrowing the existing facility.

"The center has reached maximum occupancy and a lack of available space is the No. 1 reason clients are not able to bring their business to our city," he said in a video message released in February of that year.

The argument was that the city suffers millions in lost tax revenues. And city leaders, including City Council President Todd Gloria, are still saying that.

“We are currently in a position of turning away a year’s worth of business from San Diego. These are conventions and events that want to be here, but we can’t accommodate them because our facility isn’t large enough," Gloria said recently on KPBS Midday Edition.

That argument was made in other big cities to justify expensive expansions of their convention centers. But reporters elsewhere, including in Washington, D.C., and Nashville, Tennessee, found that the economic benefits didn’t match the hype.

Heywood Sanders (no relation to the former mayor) is the go-to critic nationally on convention center expansions. He said he hears Todd Gloria’s argument a lot.

"They are often portrayed as 'can’t-miss ways to enhance the local economy,'" he said in a phone interview.

But Sanders, a University of Texas at San Antonio professor, contends in his new book, “Convention Center Follies,” that expansion supporters often exaggerate the economic impact. Based on his review, some of the country’s biggest convention centers, like the one in Orlando, Florida, didn't get the economic boost that was promised.

"In that market environment, can a modestly sized expansion in San Diego absolutely, positively yield an increase in business? And the answer to that is 'no.' May there be a slight increase? Yeah, it's possible, although it doesn’t seem terribly likely," he said.

Linda Perine, leader of the Democratic Woman's Club of San Diego, echoed the professor's concerns this month. The idea that "people are lined up at the city borders" for an expanded convention center is a false premise, Perine said.

But San Diego Convention Center spokesman Steven Johnson disagrees.

“There are clients who can’t come back because San Diego doesn’t offer enough space,” he said.

Johnson provided letters supporting an expansion from the American Society of Hematology, the National Association of Realtors and the Society of Neuroscience.

Christy Richards with the Realtors association, which has scheduled conventions here in 2015 and 2021, said a lack of an expansion wouldn't definitely turn the group away from San Diego, but would force it to reevaluate as its attendance continues to grow.

"It would mean that the commitment of future years would be in question," she said.

Martha Liggett with the American Society of Hematology said the group, which returns in 2016, is already nearing the facility's capacity.

"We're already squeezed when we're there," she said.

Johnson said convention planners are concerned now that a judge threw out the expansion’s tourist-tax funding mechanism in August, putting the project's future in limbo.

“They’re nervous because they’re booking their event five to seven years out, and they have to make decisions now about their future events," he said.

A City Council committee on Monday will hear a report about why planners of 57 conventions decided not to hold their events in San Diego on dates from this year through 2026. But just two cited a lack of Convention Center space, according to the report prepared by the San Diego Tourism Authority. In fact, one convention group decided to go elsewhere because it wanted a smaller facility.

The biggest reason groups declined to bring their conventions here? Cost. San Diego’s relatively expensive hotel rooms and relatively high fees charged by the Convention Center were the most common reasons cited. San Diego lost 16 conventions, the report says, due to high costs; six of those went to Phoenix.

Losing conventions to cheaper deals elsewhere happens when too many cities expand their convention centers. Heywood Sanders provided a copy of a recent industry-funded report that shows there’s an oversupply of convention center space.

“When that happens, the market behaves like any market with too much supply chasing too little demand does: People start offering discounts and incentives, and they put their convention center on sale," the University of Texas professor said.

But Convention Center spokesman Johnson said the second most cited reason for lost business highlights San Diego’s need for an expansion. Twelve conventions were lost because dates were already booked. With more space, Johnson said, two events could go on at the same time.

"San Diego has really become one of the top five destinations in the nation for conventions and meetings. The question is, do we want to build on that success?”

After more than five years and $10 million, convention leaders and city officials are betting on it.