Demanding Answers as the Dallas Convention Center Hotel Moves Forward

One person the Morning News hasn't quoted in its editorials is University of Texas-San Antonio professor Dr. Heywood Sanders, a leading researcher analyzing the convention center industry. Sanders testified before a congressional committee on the subject and wrote a research brief for the Brookings Institute in 2005 called "Space Available: The Realities of Convention Centers as Economic Development Strategy," in which he detailed an industry in decline (read the report).

He maintains that none of the three basic arguments coming from proponents of a Dallas Convention Center hotel withstand close scrutiny.

Their first argument is the "keeping up with the Joneses" argument: All the other major convention cities have hotels or are in the process of building them so we better get on board or fall behind. That argument is flawed, says Sanders, because city officials don't analyze what factors contribute to making a hotel a success—things such as a robust downtown that will fill the hotel when conventioneers don't. Their second argument is the "look at all the business we are going to lose if we don't have an attached hotel" argument. Business ebbs and flows, says Sanders, and every convention and visitors bureau will get some business and lose some.

The third argument is that a hotel will become an economic generator for all that it touches. But Sanders counters that the economic development expected from building a hotel simply doesn't happen in most cities. The convention center market needs people to come in large numbers, which isn't the case in many cities. And a hotel has a financial incentive to keep people inside, visiting its shops and restaurants, which cuts against the larger goal of generating new business for others. Just look at the Gaylord Texan Resort and Convention Center in Grapevine, says Sanders, which is "making a hefty profit" because it is able to keep conventioneers inside the hotel, spending their money in Gaylord's restaurants and entertainment venues. "The Gaylord is trying to tell Dallas that there is a market in this area, but it's not in downtown Dallas," Sanders says.

Another problem facing a downtown hotel is the zero-sum-game effect of revitalizing one part of downtown at the expense of another. Sanders points to Victory Park, where the American Airlines Center was built using public financing. Its success came at the expense of revitalizing downtown, says Sanders. "This happens all the time. Folks assume that you can do something like Victory and not have any negative impact on other places."

In his Brookings Institute research brief, Sanders maintained that U.S. exhibit space grew by 51 percent between 1990 and 2003 while demand plummeted.

Chicago, which annually is among the top convention cities and a major rival to Dallas, has poured more than $1.5 billion of taxpayers' money into its McCormick Place Convention Center over the last 25 years. Even with its recent expansion making it the largest exhibition facility in the United States and the addition of an 800-room hotel that opened in 1998, the convention center isn't anywhere close to reaching the attendance figures it hit prior to 2003.

Closer to home in Houston, the Hilton Americas, a 1,200-room hotel attached to the George R. Brown Convention Center opened in December 2003. The city owns the hotel, which was publicly financed by selling more than $300 million in bonds. After the sale, the total debt on the hotel was $482 million. But with little principal paid and changing interest rates, the debt actually increased by $6 million in its 2006 audit, and the hotel's losses continue to grow as it has added to its deficit in every year of its operation. In addition, the 977-room downtown Hyatt Regency went into foreclosure approximately a year after the Hilton Americas opened.