Critics question cost of expanding Austin Convention Center

Rendering of an expanded Austin Convention Center
Rendering of an expanded Austin Convention Center

AUSTIN (KXAN) -- The Austin Convention Center. A hub meant to harness visitor spending and boost the local economy. But industry leaders say they're actually missing out on a lot of money because the center is too small. The Austin Convention and Visitors Bureau say last year alone, 130 groups decided to not hold their events in Austin because of a lack of room or availability at the center. It meant the city lost out on a $481 million economic impact.

That's why those leaders are pushing for an expansion that could cost anywhere from $200-$600 million. KXAN Investigates ran the numbers and found out why critics say that money could be put to better use.

The Texas Water Conference, which organizers say has grown to be the largest regional water conference in the country, has been held in Austin for years, but attendees say the tight space is noticeable.

"We have two booths here. We would take four if we could get 'em” Robert Reeves, president of PumpWrxs & Controls, LLC said.

The executive director of the Texas American Water Works Association Mike Howe, who helped organize the conference, says the benefits of having an event in Austin are clear. "It's a draw. And people love coming to Austin, it's a destination city," said Howe.

But critics question whether the push for a major convention center holds water. Its leaders think so.

"We have had seven consecutive years of growth,” Austin Convention Center Director Mark Tester said. "Of 10 events that look and bid in Austin and the Austin Convention Center, five of them cannot come because either we are unavailable or we're too small." ACVB did not want to release the names of events the city missed out on for fear of jeopardizing the opportunity to bid on the conventions again.

Two decades ago, 47 conventions and trade shows were held at the Austin Convention Center. These are the events known to bring in out-of-town visitors. At the time, C.H. Johnson Consulting projected with a convention center expansion, those events would nearly double to 98 in 10 years.

They didn’t.

KXAN discovered since that 1997 report and eventual expansion in 2002, the number of events has actually dropped—to 43 conventions and trade shows last year.

The same consultant projected the center would draw 329,000 people for convention and trade shows by 2005. The estimated attendance for conventions and trade shows grew to 328,761 last year. KXAN questioned the number provided when you consider the consultant's 2015 long range master plan anticipates convention and trade show attendance will be just 303,633 eight years after the largest expansion proposed.

Officials with the convention center responded saying, "We have analyzed our event detail and identified certain shows that we classified as conventions/trade shows in 2016 that were not classified in that category in 2013."

Tester says the number that really matters is the amount of money the center is bringing to Austin's economy. “We’re looking for total economic impact,” Tester said. “Not necessarily how many attendees will be coming in.”

Charlie Johnson of C.H. Johnson Consulting says the disconnect in projections is mainly because there isn't a standardization in the industry. That being said, Johnson said, "Austin’s building is doing fine, Austin’s hotels are doing fine, you have a well-managed building. No matter what anybody says, the convention center is doing as much—or more—than any other building out there for a like-sized city. You’re that attractive.”

But as the convention center pushes for an expanded center, it’s pointing to an increase in attendance to accommodate extra bodies. KXAN examined overall attendance numbers (including conventions, trade and consumer shows, meetings and seminars, banquets events, concerts, etc.) for the last seven years, and found them to be about the same.

Austin Convention Center Attendance

  • FY 2009: 451,393
  • FY 2010: 328,643
  • FY 2011: 410,048
  • FY 2012: 458,091
  • FY 2013: 449,464
  • FY 2014: 463,342
  • FY 2015: 454,388
  • FY 2016: 497,156

The 1997 consultant’s report projected that with the 2002 expansion, by 2005, the convention center would host 478 events and bring in 813,000 attendees. Yet the 2015 report predicts for this next expansion, even if the city goes ahead with the largest option, the convention center will only bring in 215 events and have an attendance of 702,768.

Heywood Sanders is a professor at the University of Texas San Antonio and author of Convention Center Follies. He’s studied industry trends and convention center projections across the country, including Austin.

"All we're saying now is, let's hold the city, the folks who made that decision accountable for how it's doing. For me, this is far from astonishing,” Sanders said of Austin’s 1997 consultant report projections with metrics the convention center has yet to hit. “I've seen this happen over and over and over again."

Referencing data from the Center for Exhibition Industry Research, Sanders says the nationwide number of events has stayed about the same for the last two decade. And yet convention centers continue to expand.

“Everybody is doing this. Everybody's doing it. And almost invariably they're doing it armed with a consultant study that says you're going to succeed,” Sanders told KXAN. "What is it that leads you to think that somehow against all of these other market trends, against all of this competition, you're going to be the place that succeeds and reach those consultant forecasts?"

"The demand is there. The hotel community is there. The airport is there. All of the other amenities are there. It's just we need a bigger new building to accommodate that demand,” Tester said in response to Sanders' claims.

The key point Tester wants to make is that we are now at 64 percent occupancy, and there is really no capacity for additional growth since practical maximum capacity is 65 percent. A percentage noted in the consultant’s 2015 long-range master plan.

Austin Convention Center size
Austin Convention Center size

Divvying Up the Hotel Occupancy Tax

When Austin City Council Member Ellen Troxclair reviewed the projected event and attendance numbers versus what came true, she said the discrepancy was "pretty eye-opening,"

“The decisions we make are only as good as the information we’re provided,” Troxclair said. “It’s a projection, so you can’t always depend on it 100 percent. But when you see such a big discrepancy, it certainly, I think, reinforces my thinking that we need to dive into this a little deeper before we move forward with making a decision about a convention center expansion.”

In the last 20 years, the city of Austin has given the convention center close to $600 million from the Hotel Occupancy Tax, which covers operations and capital improvement project costs. That's the tax the city gets when visitors stay at hotels. The bulk of it, about 85 percent of the city’s portion, goes to the Austin Convention Center and Austin Convention and Visitor’s Bureau. Thing is, a mere 2 percent of visitors are actually coming to Austin for events the center holds.

Troxclair pushed for the creation of Visitor Impact Task Force to look at other ways the Hotel Occupancy Tax can be spent. She said she intends to make sure the task force is provided with the information before they come to any final recommendations about how the city should be spending hotel occupancy taxes. The task force has requested an extension until the end of May to provide recommendations to council.

The convention center says it's important to remember the Hotel Occupancy Tax, which would pay for an expansion, is from visitors. Critics like Troxclair wonder if the dollars that could be used in other ways to attract visitors, such as reinvesting that money into popular city parks.

The other 15 percent of the city's Hotel Occupancy Tax is dedicated to the cultural arts. This year, that money is benefiting more than 200 museums, arts, film, music, dance and theater groups, including the Zach Theatre, Long Center, and Austin Creative Alliance.

When considering different options, the convention center pointed to one that calls for raising the hotel occupancy tax by 2 percent.

“That option would allow more money to be given to the cultural arts, would allow us to do some area improvements that would allow this area to be even more exciting and electric for both the community and our visitors,” Tester said.

Troxclair says if it comes down to it, council members will have to consider whether that option creates a catch-22. “If you say that you’re going to depend on new revenue from increasing taxes on visitors to pay for a convention center, well maybe Austin isn’t such an attractive place to visit after all if it’s too expensive,” she said.

Another argument Sanders brought up is the inclusion of South by Southwest in convention attendance numbers.

"It doesn't say anything about the capacity of that center to compete for national events,” Sanders said. "At the very least, if you try to assess the center's performance based on this huge chunk of SXSW business, you need a really big asterisk."

That “huge chunk” accounted for 150,000 people last year. The second highest attendance number at the Austin Convention Center for a single convention in 2016 was 100,000 less, at 15,000.

Tester acknowledged, “It is a big event for us and yeah, it really would affect our numbers if it wasn't in the convention center."

Troxclair says including SXSW numbers is fair, but worries what would happen if SXSW were to leave Austin. “If SXSW for some reason did choose to go to another city, and we had just invested in an expanded convention center, we would really be left on the hook," said Troxclair.

While the Visitor Impact Task Force examines ways the Hotel Occupancy Tax can be spent, state representatives have filed two bills that could come into play. One would allow Austin to increase the percentage of the hotel tax that goes to the arts. Another broadens the definition of "venue" to include arts spaces, music venues, parks and preservation.

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