hotel voiced by the Phoenix Community Alliance in 1992 and the “need” established by PriceWaterhouseCoopers in 1999 were never questioned. The repeated reluctance or inability of any private developer to finance such a project was taken not as a measure of risk but as simply a short-term impediment to be overcome. As they had before, the mayor and council relied on the assessment and professionalism of the city’s managerial staff. And the staff reported, “Having confirmed that a privately financed downtown hotel is not feasible through developer input, staff research, and outside consultant advice, staff’s findings support the publicly financed hotel model as the most reasonable and expeditious course to achieve the City’s downtown hospitality objectives.”26
The new city-financed Sheraton hotel was thus reviewed and approved by the City Council in much the same fashion as the Civic Plaza expansion. The city relied on expert consultant advice from Warnick and Company and HVS International in establishing both the future financial performance of the hotel and its place in downtown Phoenix. HVS simply relied on the Ernst & Young estimate of 375,000 total convention attendees post-expansion, and argued that these would produce 289,282 annual added room nights to support the planned hotel, yielding a 63 percent occupancy rate by 2010 with an average rate of $164.90. Warnick, in providing a “vision statement” for the hotel, contended, “All great cities have a great urban hotel, which becomes the focal point for that city‥…The downtown Sheraton Hotel is to be that great urban hotel for the city of Phoenix.”27
The Phoenix Convention Center expansion and the adjacent 1,000-room Sheraton proved to be rather more a house of cards than an economic engine and “focal point for the city.” In its first full year of operation, 2009, the expanded convention center drew 309,729 convention attendees who produced 358,632 room nights of hotel demand. Those were short of the Ernst & Young and HVS estimates, but a respectable showing. But attendance faltered for fiscal 2010, hitting just 229,097, and for fiscal year 2011 (through June 30, 2011) came to just 156,126.
As the center’s attendance slipped back to what the smaller Civic Plaza had been producing in 1995 and 1996, the city-owned Sheraton also stumbled. Occupancy for 2009 was just 49.4 percent, at an average daily rate of $163.90. The 2010 occupancy grew to 52.5 percent, but the rate slipped to $158.34. At the end of 2010, Moody’s Investors Service downgraded the hotel’s bonds. In September 2011, Moody’s placed a “negative outlook” on the bonds of the city-owned Sheraton, noting the rating firm’s “expectation that, over the next 12 to 18 months, the hotel will likely struggle with improving its occupancy levels and average daily rates.”28
In 2012 and into 2013, the hotel reported it could not meet its required debt payment from its operating revenues, and had to draw on a guarantee of other city funds, an action “reflecting financial difficulties.”29
Phoenix had bet big on a massive convention center expansion and city-owned hotel. The initial results did not bear out consultant forecasts or city expectations. Yet Phoenix’s investment in tripling the size of its center proved remarkably effective ammunition for the small group of industry consultants, including PriceWaterhouseCoopers and HVS. They were now in a position to tell any number of other cities that the Phoenix expansion posed a direct competitive threat to them.
Impressive and expensive as the Phoenix Convention Center expansion was, it was by no means unique or unusual. Vancouver, British Columbia, opened a major center expansion just a couple of months after Phoenix, and Daytona Beach, Florida, had opened its own expanded Ocean Center shortly before. Raleigh, North Carolina, opened an entirely new center in September 2008, followed in June 2009 by the new Lancaster County Convention Center in Lancaster, Pennsylvania. The first few months of 2011 saw convention center expansions open in Indianapolis and Philadelphia, with construction under way on new centers in Cleveland and Nashville. During 2011 and 2012 plans were under way for center expansions in Boston, Miami Beach, Detroit, Anaheim, San Antonio, Oklahoma City, San Diego, Los Angeles, San Francisco, and Seattle.
PriceWaterhouseCoopers, having recommended that Phoenix expand in part to keep up with the competition, could report to San Diego officials in December 2007 that “Upon completion of its expansion, exhibit space at the Phoenix Convention Center will exceed that of the SDCC, thereby lowering San Diego’s rank to seventh among the Western centers.”30
For convention center consulting firm Conventions, Sports & Leisure, founded in 1988 by the former heads of Coopers & Lybrand’s convention center practice, the bigger new Phoenix Convention Center also neatly functioned as an argument and foil. The CSL firm could argue, in a November 2010 presentation to Boston convention center managers and supporters, that Phoenix had “nearly tripled the size” of its center, complementing it with a “downtown entertainment complex that consists of the U.S. Airways Center, Chase Field, Symphony Hall, Science Center, etc.”
The firm also pointed to the Phoenix expansion as a competitor for San Antonio’s Henry B. Gonzalez Convention Center in a study in July 2008. CSL reported that the expansion was due to open in late 2008, and that “340,000 estimated room nights have already been booked for 2009.” In an updated study for San Antonio in December 2010, CSL again pointed to the opening of the expanded Phoenix center, and an expansion of Philadelphia’s Pennsylvania Convention Center—also a CSL client—due to open in 2011, noting that the San Antonio center’s “exhibit space continues to rank very low relative to the centers reviewed.” The CSL firm had completed a “market demand analysis” for the New Orleans Morial Convention Center in February 2009 that noted the increased competition from the expanded Phoenix Center. It also described the more than 1.1 million square feet of new center exhibit space being planned in cities such as Boston, Miami Beach, Detroit, San Antonio, Las Vegas, and Anaheim—all also CSL clients, all advised of the growing competition from new and expanded convention centers in other cities, and all advised to add more space or improved facilities.31
The CSL consultants managed to tell a wide array of city clients that they were facing a growing stock of competitive convention center space. The firm also managed to tell some cities an additional tale—that beyond the need for more exhibit space, a new ballroom, or more meeting rooms, they needed a very large new “headquarters hotel.” A series of CSL studies in 2007-2011 presented the need for a thousand-room headquarters hotel adjacent to Kansas City’s convention center. A CSL analysis had argued the case for a 1,200-room hotel to serve the Washington, D.C., Convention Center in 2004. And in studies for Boston and San Diego in 2009 and 2010, CSL could point to both the Phoenix Convention Center expansion and the adjacent Sheraton and recommend that each of those cities expand and add a headquarters hotel.
The argument that growing competition requires more public spending on more convention center space—bigger, newer, enhanced with the latest technology—has helped sustain a massive boom in convention facilities. From just 193 centers with at least 25,000 square feet of exhibit space in 1986, the U.S. convention center count reached 254 by 1996 and 325 in 2010.
As the number of convention centers grew, so did the stock of exhibit hall space. That total, 32.5 million square feet in 1986, hit 49.1 million in 1996 66.8 million square feet in 2006, and 70.5 million in 2011. Thus over two and a half decades, available space in U.S. convention facilities more than doubled. And with new centers under construction in places as diverse as Cleveland, Nashville, and Cedar Rapids, Iowa, the total will inevitably continue to grow.32
The convention center building boom has been remarkable not just for its scale. New and expanded centers cover a wide array of urban and suburban communities, across all geographic regions and city-size categories. Major visitor destination cities have committed substantial public revenues to center development. Chicago’s McCormick Place, with a total of 1.8 million square feet of space in 1986, developed a major addition in the mid-1990s that brought the complex to 2.2 million square feet; another expansion, adding 470,000 square feet, opened in July 2007. Las Vegas doubled the size of its center over these two decades, to 1.94 million square feet in early 2002. And Orlando’s
