“There are cycles in the industry where in heavy growth periods, cities run up construction of space, and then the inevitable down cycle hits,” Kaatz said. “Then, with a rebound, you see the reverse phenomenon with demand growing dramatically — and supply is stagnant.”
With that logic, Kaatz argues Oklahoma City might be the smart exception in building a new convention center at a time when other cities are pulling back similar expansions. While the headlines are filled with worries about a “fiscal cliff” and a potential economic downturn ahead, Kaatz is projecting annual increases of about 3 percent in the convention business.
Demand, he said, will go up again.
“There is relatively little in terms of development going on right now,” Kaatz said. “So supply is being dampened. … There will be winners and losers; there always are.”
Such optimism is dismissed by Sanders, who, unlike Kaatz, believes the industry is not going to see a return to growth experienced in the 1990s due to a fundamental change in how businesses use online communications and virtual conferences.
“If you compare what they said to Oklahoma City to what they give to other cities, the reports are structured very similarly, and they sometimes have in places the exact same language,” Sanders said. “They are very upbeat, things are looking great, there might have been a lapse, but things were great before — when they weren't at all.”
More answers needed?
Douglas L. Ducate, president and chief executive of the Dallas-based Center for Exhibition Industry Research, joins Sanders in painting a gloomy picture of the convention business over the past decade. But he advises that the industrywide numbers don't tell the whole story — and cautions that Oklahoma City should be more concerned about selecting what segments of the business are most viable.
Ducate notes that housing and construction trade shows experienced a far more serious plunge compared to the overall average while health care conferences dropped only slightly during the recent downturn.
“What is the market, what is the justification for building a new convention center in Oklahoma City?” Ducate asked. “Is it that you can't handle the events you have? Are you outgrowing it? And what potential growth are you seeing and in what areas? Who will you be running up against? Will you be competing with Dallas or Tulsa? Dallas and Tulsa don't compete with each other very much.”
Ducate advised that the large national trade shows are breaking up into smaller pieces, and that the nature of the convention industry has changed dramatically since the 1970s when every city dreamed of exhibitors attracting thousands to see a wide array of goods and displays.
Today's planners, he added, are more likely to seek out more meeting rooms.
Cox Center replacement needed
Mike Carrier, president of the Oklahoma City Convention and Visitors Bureau, said Oklahoma City's need for a new convention center is unaltered by the turmoil in the national market.
The Cox Convention Center is more than 40 years old and will hit its 50th anniversary shortly after a new convention center is expected to open in 2019. An expansion as part of the original MAPS program in 1998 simply made the Cox Center a functional convention center, Carrier said, whereas before it was an outdated arena surrounded by even more obsolete rooms that were virtually unusable. The Cox Center, he noted, cannot accommodate one convention starting on the same day another one ends, and it doesn't have enough space to accommodate existing and potential customers.
“We need to build a building that is right for Oklahoma City,” Carrier said. “We don't need to be worrying about what's right for Boston, Chicago or Atlanta.”
First and foremost, Carrier said, Oklahoma City needs a new convention center to just keep the business it already attracts.
“A lot of the businesses we have need things we don't have in our convention center,” Carrier said. “There also are national shows looking for good education space, to be the primary group in house when here, that need more space and better space than what we have today. They don't need mega centers like Chicago, Boston or Denver and don't want to pay the prices they pay in those cities.”
Carrier said he also believes the fragmentation of larger conventions and trade shows might create more demand for space in smaller markets. Oklahoma City, he said, might not be able to compete with Denver for large conferences, but might be able to grab smaller customers from similarly-sized cities.
Shadid, meanwhile, wants to see the city launch its own needs assessment study. Shadid notes that in addition to dramatically different market conditions, the Convention Sports & Leisure report cited other variables — lack of airport connections, weather and national perception of the city as a boring destination — that won't be addressed by building a new $250 million convention center.
Ducate is not surprised when he hears of any city second-guessing a convention center expansion in today's economy. He said in some cities, civic leaders are quietly contemplating whether to exit the business all together.
“Right now, it's clearly a buyer's market,” Ducate said. “What we're beginning to see is some cities are getting out of the competitive race, they don't want to compete because of the cost to retrofit or build new. And therein lies the question — the public decision to be made is do they still want to try to compete in this market? And if so, there are things they need to do.”
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At a glance
Recommendations from the report
What Convention Sports & Leisure recommended:
• 200,000 square feet of prime exhibit space expandable to 300,000 square feet
• 50,000 square feet of meeting space expandable to 75,000 square feet
• 35,000 square feet of ballroom space expandable to 50,000 square feet
• A 650-room conference hotel with 50,000 square feet of meeting and ballroom space
• Populous hired to design a convention center
• The Alliance for Economic Development of Oklahoma City is negotiating an acquisition of the former Fred Jones Ford Dealership block south of the Myriad Gardens for a new convention center
• A request for proposals is being prepared to seek a consultant for development of a conference hotel