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Boston Capital

A costly pillow fight

By Steven Syre
Globe Columnist / March 22, 2011

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If you build it, will they come?

The Massachusetts Convention Center Authority wants a new 1,000-room hotel that may require $200 million in public subsidies. The argument: Boston’s big convention center is missing out on too much business because there isn’t enough lodging nearby. A giant “headquarters’’ hotel close to the South Boston complex would begin to solve that problem, backers say.

There are a lot of things wrong with that approach. Most important, it ignores the lessons of recent history and avoids key questions. That’s a bad way to frame what promises to be an important conversation about the future of Boston’s convention operations.

Consider some context: Cities across America spent the better part of two decades, until the economy fell on its face in 2008, building and expanding convention facilities, expecting to lure lots of visitors who would spend piles of money before returning home after a few days. Boston, which had been limited to the relatively small Hynes facility in the Back Bay, joined the action by opening the center in South Boston in 2004.

Convention centers were promoted nationwide as economic engines that could pump money into cities, create jobs, and spur private development. A small group of consultants and financial advisers produced studies with rosy business forecasts supporting proposals in city after city.

Eventually, the country built too many convention facilities. By 2007, there was clearly a glut, and the convention business became a buyer’s market. Then the economy fell on its face, and convention centers were squeezed even harder.

“What has tended to happen is you build it and they don’t come in the numbers the consultants forecast,’’ says Heywood Sanders, a University of Texas professor who tracks the convention market. “The economic boon is not realized to any significant degree, and the development promised typically doesn’t happen.’’

The Boston experience never came close to original expectations. The convention center produced about half the number of hotel room-nights forecast, and it clearly cannibalized a good deal of the economic value that had been generated by shows hosted at the Hynes in past years.

Now the consultants are spreading a new message from city to city. Their strategy: Grow out of your problems. Build bigger and add capacity to win a share of those very large events that went elsewhere in the past.

Philadelphia just doubled the size of its convention center, at a cost of $787 million. Washington’s convention facility is getting a giant new hotel. Conversations about expansion are taking place in other cities, too.

In fact, the new-hotel idea floated in Boston is part of a bigger expansion plan that could double the size of the convention center’s exhibition space and eventually cost as much as $2 billion.

Jim Rooney, executive director of the Massachusetts Convention Center Authority, is a big proponent of the growth plan and a public subsidy for a hotel. “It’s the way that this business is done,’’ he says of the subsidy. “There will not be a major hotel built in Boston without some form of government intervention in the next decade, at least.’’

Rooney concedes forecasts for hotel stays generated by Boston’s convention business were overly optimistic, but he points out that those numbers assumed more rooms would be built. “I can’t sell what I don’t have,’’ he says.

But Rooney is much less interested in talking about hotel rooms today. He says an expanded convention center will allow Boston to host big meetings for the industries that matter most to our economy, such as medical devices, biotech, and financial services. The idea: Reinforce Boston’s image as a hub for those key industries. “That’s the value, not how many people slept in the Westin,’’ he says.

I don’t know if that pitch would have worked at some other point in time, but it’s not going to fly today.

Convention authorities across the country need to face up to the vast oversupply of facilities created over the past two decades and explain why more expansion won’t simply increase financial risks. Just as most cities fell short by expanding years ago, few can succeed by doubling their bets now.

These are the real questions for planners who want us to subsidize hotels and expand Boston’s convention resources.

Steven Syre is a Globe columnist. He can be reached at syre@globe.com.