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Convention Center Not Living Up to Lofty Goals

The Washington Convention Center, carrying an $850 million price tag, was the largest publicly financed building project in the District.
The Washington Convention Center, carrying an $850 million price tag, was the largest publicly financed building project in the District. (By Robert A. Reeder -- The Washington Post)
By Dana Hedgpeth
Washington Post Staff Writer
Monday, February 19, 2007

Nearly four years ago, city officials opened the $850 million Washington Convention Center with a string of superlatives. The largest publicly financed project ever built in the city, they said, would attract more than a million visitors a year, fill hotels and set off an economic boom.

Instead, convention attendance is dropping, the surrounding neighborhood is yet to be transformed by the promised new development, and conventioneers are filling fewer hotel rooms than expected.

The number of hotel rooms booked is especially significant because it is the most accurate measure of performance, and last year hotel convention bookings missed projections by 13 percent. Bookings are likely to fall short of projections by 24 percent this year and 29 percent next year.

To pay for the center, the city raised its tax rate for all hotel rooms and restaurant meals. It is hard to measure how much of the promised $1.4 billion boost to the local economy has occurred, and convention center supporters no longer cite the regional economic impact figure because they admit it is nearly impossible to track.

One underlying reason for the record so far: When making their predictions, officials figured Washington's hotels would give conventioneers discounts, making the city an attractive venue for associations of dentists, insurance agents and engineers. But hotels are so filled with tourists, lobbyists and businesspeople who are paying top rates that hotels have little reason to offer the discounts that convention planners seek.

The city's solution is to increase its investment, pressing ahead with plans to build a $550 million hotel next to the convention center, financed in part with a $135 million tax subsidy from the city, which convention center officials expect to be repaid with tax revenue generated by the project. The rest will be privately financed.

"We've got to do better," said William A. Hanbury, president and chief executive of the Washington, D.C., Convention & Tourism Corp. "The convention center and the hotel community all realize we need to do a better job of selling D.C. as a convention center destination. With a hotel, we'll be better able to sell the city."

A headquarters hotel, Hanbury said, will give him more rooms dedicated to convention-goers. But critics of the idea that convention centers provide significant economic benefits argue that a hotel will not reverse the trends and is simply throwing good money after bad.

"The center was promised to bring out-of-towners who stayed in hotels and spent money," said Heywood Sanders of the University of Texas at San Antonio, who studies the performance of convention centers and is a longtime critic of such publicly financed projects. "They routinely overpromise, and they never do what they're supposed to do. The question is how badly they perform. Putting in a hotel is no guarantee that it will improve the center's performance."

Washington's convention center was expected to attract visitors with money to spend, not to make money itself. But the loss is now expected to be wider than originally projected -- $22 million this year, compared with the initial projection of $10 million. Two big reasons were increased costs for power bills because of general increased utility rates and higher security expenses. Upkeep is costly: $180,000 a year to clean the glass and windows, $35,000 to repair wood doors and panels, $10,000 to replace carpet, and as much as $150,000 to fix paint and drywall damaged from moving equipment in and out.

Most convention centers lose money or barely break even. In Washington, the center is subsidized by a dedicated tax passed in 1994: 4.5 percent of the city's hotel tax and 1 percent of the restaurant tax goes to paying off the bonds issued to help pay for the center. The center got about $80 million last year from the dedicated tax revenue, which goes to financing its $36 million in annual debt service and other expenses.

The convention center hosted roughly 100 events in 2006. A Washington Post analysis of its performance focused on large conventions and trade shows and excluded one-day meetings, public events such as the car show, and parties booked at the facility.

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