How South Florida can revive a flagging convention sector

This article appeared in the South Florida Business Journal April 4, 2014: Link to original article

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South Florida Business Journal

South Florida hosts a few of the most popular conventions in the world, yet it still lags as a top convention draw – losing millions in related revenue compared to other U.S. metropolitan areas.

It’s an issue that the region’s three major convention centers have been trying to address, as conventions are key economic drivers due to the ancillary revenue generated by attendees at hotels, eateries and other establishments. So South Florida convention centers are scrambling to upgrade and add hotels to help boost the sluggish industry and allow the region to become a player among metro areas benefiting from that business.

The upgrades could work toward attracting more conventions to the area, while also keeping events like the crowd-drawing Art Basel and professional associations in South Florida, experts say. By doing so, South Florida will be able to retain and grow its million-plus convention visitors, who now add well over $2 billion to the local economy, according to the region’s convention and visitors bureaus.

Although CVB officials say South Florida can never compete with top-tier convention cities such as Orlando or Las Vegas, the region still strives to upgrade its facilities to attract more of the medium-size convention market.

Luring conventions pays off big for cities because all those attendees shop, eat out and visit entertainment venues, said Eric Eden, VP of marketing at McLean, Va.-based Cvent (NYSE: CVT), which arranged about $6.5 billion in meetings in 2013 through its website.

“[It’s about] cycles of investment when destination hotels and cities around the country invest, and it draws more meeting planners [conventions] to them,” he said.

Convention and meeting business grew in South Florida last year, but not as fast as the nation’s leading markets, he said. The most popular destination cities are those that invest heavily in convention space and adjacent hotels – and there’s plenty of that going on from coast to coast, Eden said. He cited Washington’s $950 million CityCenter, with a convention center hotel, and frequent hotel construction in Orlando as projects that lure significant numbers of conventions and trade shows.

Despite its favorable weather, Miami may never have the convention space to rival premier centers like Orlando, Las Vegas, Chicago and Los Angeles, but the right investments could put it on par with cities such as Philadelphia, San Diego, San Francisco and New York, said Dan Cormany, assistant professor at Florida International University’s Chaplin School of Hospitality & Tourism Management and head of its meetings and event management program. Investing in convention centers provides a much better return than sports facilities because conventions generate year-round business and attract many revenue-generating out-of-town visitors, he said.

“Broward is a nice facility, but it’s limited by its size,” Cormany said. “The Miami Beach Convention Center is dated. We’re losing conventions that won’t come back here because we don’t have competitive facilities.”

Here’s a look at where South Florida stands, in terms of convention venues and efforts aimed at boosting its position among the nation’s thriving convention destinations.

MIAMI: Hotel key to growing convention industry

The local convention business could get a big shot in the arm from MDM Group’s plan to build a large Marriott Marquis hotel and convention center on the Miami Worldcenter site downtown. The developer hired architects Nichols Brosch Wurst Wolfe & Associates to design it. Principal Bruce Brosch said the design calls for 1,800 guest rooms, three levels of indoor convention space totaling 200,000 square feet and 60,000 square feet of outdoor event space. Guests could simply walk downstairs to attend the convention.

The total complex would be over 2 million square feet and 50 stories tall. Brosch said his firm is currently pricing the project’s cost with a contractor, and is cautiously optimistic it will meet MDM’s budget. Should that be the case, construction could start near the end of 2014 or early 2015, and take at least two and a half years, he said.

Brosch said the convention center would target regional conventions, and not the largest events, because that’s where most of the business is.

“Miami is a world-class city and it really needs a convention center,” he said. “It’s never really had one.”

The new convention center would benefit from public transit, as Metrorail connects to Miami International Airport and a future All Aboard Florida station will link to Orlando.

“We see it as being a northern city like Washington, D.C., with great mass transit where people can hop on the train to the convention center for their business, head back to the airport and leave without ever touching a car,” Brosch said.

Across the street, 1 million square feet of retail and restaurants are planned at Miami Worldcenter.

In 2011, the Miami Downtown Development Authority commissioned a study on a possible convention center. It determined there was demand for a 250,000- to 500,000-square-foot facility, and that it would complement, rather than compete with, Miami Beach, DDA Executive Director Alyce Robertson said.

“There’s a different kind of vibe in downtown than there is in Miami Beach for what kind of traveler would use the convention center,” she said. “Downtown is [for] more of a business traveler than a [leisure] traveler. It’s the kind of client who would go to a business conference versus one who would go to a vacation event like a boat show.”

During his State of the County speech in February, Miami-Dade County Mayor Carlos Gimenez voiced his support for a downtown convention center.

FIU’s Dan Cormany said South Florida needs more hotels with at least 100,000 square feet of meeting space to compete with popular convention cities. Six hotels have over 100,000 square feet of meeting space, but no more than 50,000 square feet in a single room. The largest room at the Marriott Marquis convention hotel would be 100,000 square feet.

“Eighty-five percent of trade shows happen in hotels, [and] we don’t have the large hotels that can accommodate some of these shows in house,” he said.

DDA Deputy Director Javier Betancourt said a downtown convention center would bring more hotel, retail and restaurant traffic, and could lure influential visitors who discover Miami as a great place to invest. While most conventions in the U.S. focus on the national market, downtown Miami has the potential to serve as a new market for international conventions, especially Latin American events, Betancourt said.

The plethora of large hotels and convenient public transit would make downtown Miami an attractive convention destination, especially for the international market, officials said.

“It would make Miami very attractive for meeting planners if that type of investment was made downtown,” Cvent’s Eric Eden said. “Somebody has to pay for transportation if you aren’t connected to a network. It adds up to a big cost at major events.”

Mike Kovensky, InterContinental Miami’s director of sales and marketing, said there’s no need for an additional convention center across Biscayne Bay, especially one with a built-in hotel. He’s also concerned that a downtown Miami convention center, if sized too small, would compete with the meeting space at existing hotels in the area.

But Betancourt said a downtown convention center hotel likely wouldn’t be large enough to house all the guests for major conventions, plus some people have brand allegiances to other hotels, so many local hotels would benefit from more convention business, Betancourt said.

“It would bring in new business and enlarge the pie,” he said.

MIAMI BEACH: Costly room rates pose challenge

Miami Beach is a destination city for tourists, but not a top-tier convention city because it lacks the meeting space and hotel rooms needed for the largest conventions, said Richard P. Curran, VP of Miami-based Expo Convention Contractors, which sets up displays for conventions and trade shows. The Miami Beach Convention Center is its biggest customer.

Some of the largest conventions require 1 million square feet of floor space, and no venue in South Florida, including the MBCC, has that, he said. Even if a convention packs the house with 10,000 visitors, there’s not enough adjacent hotel space, he said. The Greater Miami Convention and Visitors Bureau does a great job helping large groups book rooms in multiple hotels, but they’re less desirable because they’re too far from the venue, he added.

“It [takes] Miami Beach out of the running for someone used to being in Chicago or Orlando,” Curran said.

The convention center, which annually welcomes about 40 events, including the Cardiovascular Research Foundation, aims to attract medium-size, upscale meetings and conventions, said Ita Moriarty, senior VP for convention sales with the GMCVB.

The CVB hopes that upcoming renovations to the MBCC will bring in new customers from mid-range corporations and other financial groups.

Miami Beach had plans to invest $1.2 billion to upgrade the convention center and add a retail and hotel component to the property, but the project was waylaid when voters approved a change in the city’s charter requiring the project to pass a public referendum. The city scrapped its previous plans and issued a scaled-back bid for a $500 million renovation, and will look to build a convention center hotel outside the property. Both projects will seek separate bids.

The addition of a new hotel specific to the convention center could help address Miami Beach’s expensive hotel rates, which pose an obstacle for conventions. While hotels in cities like Las Vegas and Orlando offer deeply discounted group rates during the week, Miami Beach hotels focus on high-rate transient business, so many aren’t willing to drop rates for group business.

“If I’m an association meeting planner, I’m looking for a place that won’t be cost-prohibitive to the people I’m trying to attract,” FIU’s Dan Cormany said.

Another problem is that the MBCC, built in 1957 and last expanded in the ’80s, lacks the modern features and functionality of newer venues in competing cities, he added. Also, a convention center hotel isn’t planned, which could hurt the site even after its proposed renovation and expansion.

Cormany said a convention center hotel with competitive rates – even one that isn’t upscale – would attract more meetings. He cited many two-star convention center hotels nationwide that are packed because of their locations.

An investment in a larger, upgraded MBCC would benefit hotels in the area, but a competing convention center hotel could hurt nearby properties, InterContinental Miami’s Mike Kovensky said.

“As much as Miami’s growing for convention-related business, a convention center hotel would take business away from some hotels that could experience overflow business from conventions,” he said. “That hotel will compete with us when there are no meetings at the convention center.”

BROWARD: More space needed to draw conventions

If a convention manager is looking for a center close to an airport, there’s no beating the Greater Fort Lauderdale/Broward County Convention Center, which is 2 miles from Fort Lauderdale-Hollywood International Airport.

But the 21-year-old center is on Port Everglades property, requiring a security check that results in long delays that makes it quite inconvenient for convention attendees. There are about 3,335 hotel rooms within 1 mile of the center, but FIU’s Dan Cormany said there needs to be more hotels nearby to attract bigger conventions.

That’s why the center is looking to add a large convention center hotel and expand its square footage by 70,000. The hotel would cost about $225 million, and the expansion about $85 million.

“With the new additions, we would increase our convention business by over 30 percent,” said Nicki Grossman, president and CEO of the Greater Fort Lauderdale Convention and Visitors Bureau. “It would allow us to recapture some of our lost group business, which has outgrown our building. It would also make us competitive for new meeting and convention business.”

Still, the county isn’t looking to compete with Orlando or even Miami, she added.

“With our existing hotel room inventory and other amenities in Broward County, we have the ability to grow group business and continue to develop our leisure visitor base,” Grossman said. “We are expanding into more international markets, adding numbers in the weddings market, the LGBT traveler, family visitors, as well as increasing visitor numbers from diverse domestic minority markets.”

PALM BEACH: New hotel could boost business

The Palm Beach County Convention Center, opened in 2004, has been largely overlooked by national convention groups, but that could change once its 400-room hotel is completed. That should allow it to compete with mid-tier convention centers in northern cities, as well as those held at local venues like the Greater Fort Lauderdale Convention Center, Westin Diplomat Resort & Spa and Fontainebleau Miami Beach, Expo Convention Contractors’ Richard P. Curran said.

“If someone has a 100,000- to 200,000-square-foot event, Palm Beach is a great place to visit that sells as a destination – and if they can house your entire group and exhibition space, that is huge,” he said.

Palm Beach County attracts about 15 to 20 conventions each year, bringing up to 1,200 attendees per event and about $5.5 million to the economy annually, according to Discover Palm Beach, the county’s CVB. The convention center attracts groups in the education, engineering, fashion and medical research industries.

The Hilton West Palm Beach convention center hotel is slated to open in fall 2015. New York-based Related Cos. and Miami-based Related Group are working on the $100 million project, which is next to the convention center at 650 Okeechobee Blvd. Amenities will include event space with conference rooms and ballrooms, a fitness center, restaurant bar and a pool.

The hotel will help attract more overnight visitors and multi-day meetings, which boosts local spending, said Jorge Pesquera, president and CEO of Discover Palm Beach. The hotel is expected to bring 36,000 new customers and generate about $30 million a year, he added.

“The Palm Beaches are on track to become one of the premier convention destinations for second-tier cities because of growing room inventory, the upcoming Hilton convention center hotel, and a whole host of other attractions and amenities,” he said.

THE FUTURE: Adding rooms could turn the tide

As experts ponder what can be done to boost the region’s convention business, the future of South Florida’s convention sector hinges on the votes of Miami Beach residents, and Broward and Palm Beach counties’ efforts to spur affordable hotel rates. And while the region may never compete with other convention-flush metros, it could become more than just a tourist destination by attracting more conventiongoers – and the billions of dollars for local coffers that come with luring that demographic.

“You don’t have to even look outside of Florida to see how investing in conventions works,” Cvent’s Eric Eden said. “Orlando invests a lot, and that’s why they are the No. 1 meeting destination [in the nation].”

BY THE NUMBERS

Top spaces across the U.S.

3.2 million square feet

Total space at Chicago’s McCormick Place

2.6 million square feet

Exhibit space at McCormick Place

600,000 square feet

Meeting space at McCormick Place

105,999 square feet

Largest ballroom at Orlando’s Orange County Convention Center

298

Meeting rooms at the Las Vegas Convention Center

Source: Convention centers

Email Brian Bandell at bbandell@bizjournals.com and Shaun Bevan at sbevan@bizjournals.com.

Brian Bandell covers banking, finance, health care and education. Get the latest banking industry news here.