Beach officials: Hotel would lure bigger conventions

VIRGINIA BEACH

The city's $207 million convention center opened in 2005 with high expectations. A consultant predicted the sprawling facility along 19th Street would draw twice as many major conventions and trade shows to the Oceanfront as its predecessor, the Pavilion, fill hotel rooms on the resort strip year-round, and result in millions of dollars in yearly spending.

Six years later, as debate heats up over new plans to build a $109 million, 361-room headquarters hotel with a sizable public investment, the center has surpassed total attendance projections.

But the 500,000-square-foot facility has attracted just over half as many convention and trade show guests as predicted. Those coveted visitors tend to come in larger numbers, stay in town longer and spend more money.

The convention space instead has been filled more frequently by smaller events that typically draw local and regional crowds for consumer shows, meetings and conferences.

And to the surprise of tourism officials, much of its business has been driven by sporting events.

"The center's success should be measured by its overall impact on the community," said Courtney Dyer, convention center manager. "It draws people to the city who wouldn't otherwise come, it fills hotel rooms during our traditional slow season, and the space is there as a resource for local groups.

"I'd say it's doing what it's supposed to do."

Like the Pavilion before it, the convention center has never made money. The city spends about $5.8 million a year to operate it and takes in $3.6 million in user fees, leaving an annual city subsidy of about $2.2 million. (The city further pays $15.1 million a year on debt service for the facility, money that comes from the Tourism Investment Program, which is derived primarily from hotel, restaurant and amusement taxes).

Because of fierce competition with other convention centers, many groups - including the recent national table tennis tournament - rent the convention space at little or no cost. Others are offered discounted meals or free shuttle service to hotels.

"Convention centers on paper rarely make money," said Jim Ricketts, the city's tourism director. "You always have an operational loss."

Revenue generated by convention center visitors more than offset the public investment, city officials say. In addition to user fees, officials estimate convention center users paid $3.4 million in hotel, meals and admissions taxes, for total city revenue of $7 million in the last fiscal year.

The city estimates the center has generated an average of 130,000 hotel room nights a year the past five years. Those visits resulted in an estimated $36.8 million spent by visitors in the city last fiscal year. That's short of the $47.5 million projected in a May 2000 PricewaterhouseCoopers report.

The center has averaged 69,000 visits a year from conventions and trade shows, far fewer than the 120,000 projected in the 2000 study. The estimates reflect the convention industry standard of counting participants once for every day they attend a conference.

Much of the traffic instead has been generated by large sports competitions, including two annual races that account for more than a third of the hotel room nights credited to the center.

Combined, the Shamrock Marathon and the Rock 'n' Roll Half Marathon send 78,000 people through the convention center each year and generate 49,000 hotel room nights, according to city estimates. By comparison, the 18 conventions held at the center in 2010 generated fewer than 30,000 hotel room nights combined, according to city estimates.

Although both races predate the convention center, city officials say it's fair to count them toward the center's impact because both events demand large space for race registration and running expos. Other sporting events draw sizable out-of-town crowds as well, more than making up for the shortage of conventions, Ricketts said.

Recent national championships for cheerleading, field hockey and gymnastics combined to draw 22,000 visitors, according to estimates. The table tennis championships generated nearly 2,000 hotel room nights in the city last week, Dyer said.

A large portion of the center's 490,000 annual visitors are for community events that include weddings, meetings and consumer shows. They are often day-trippers who spend less here than conventioneers. More than a tenth of the center's annual visitors, some 60,000 people, come for high school graduations each spring.

Although city officials contend the center has been successful, they acknowledge the facility isn't drawing as many major conventions as it should. A headquarters hotel could change that, said Al Hutchinson, vice president of convention sales and marketing for the Virginia Beach Convention and Visitors Bureau.

He said the city's plans to build a four-star Hyatt hotel next to the convention center would lure larger groups and bigger spenders. Under a deal proposed with developer Armada Hoffler, the city would put in nearly $67 million in upfront costs, including $19 million in loans the developer would repay.

A divided City Council has scheduled a Jan. 24 vote on the hotel. City officials say the city is losing millions of dollars a year in meeting business without a hotel attached to the convention center.

Visitors bureau officials solicited dozens of letters of support for the hotel from meeting planners and convention industry leaders. Across the board, the message was consistent: If the city hopes to lure national conventions, it needs to build a headquarters hotel.

Peter Pantuso, president of the American Bus Association, told the visitors bureau his group probably wouldn't return to Virginia Beach after bringing more than 3,000 tour bus operators and managers here for its annual weeklong convention in 2008.

"It was challenging because we had members scattered across the city at several hotels," Pantuso said. "Shuttling people around became very cumbersome."

A new hotel would put Virginia Beach back on the bus association's radar, Pantuso said, but wouldn't guarantee its return.

Meeting planner Terri Sweet Ribble of Conference-Direct said the city needs more than a hotel. She visited the convention center and noted the lack of nearby restaurants and entertainment venues.

"It just struck me as really strange that the city would spend that amount of money to build that gorgeous facility without anything to support the business," she said.

The convention center hotel, city officials say, would trigger that development.

Mike Hixenbaugh, (757) 222-5117, mike.hixenbaugh@pilotonline.com

Aaron Applegate, (757) 222-5122,aaron.applegate@pilotonline.com