Committing fiscal suicide?
Now you’ve had two weeks of opinions and statistics to look at regarding the convention center business. I started by recapping Denver’s situation. Five to six years to get up to capacity, but in the meantime they forgot to include a dedicated marketing fund in the business plan. As a result, they’re busy preparing for another tax increase so they have the resources to get the word out.Rich Scharf, president of the Denver Metro Convention and Visitors Bureau doesn’t think it’s all that gloomy. But hey, it’s his job to fill the place, so he’d better be optimistic.Then I talked with Heywood Sanders, professor of public policy at the University of Texas. Known by some as the prophet of doom and gloom where the convention business is concerned, he says the numbers speak for themselves.Convention business has been declining since the mid-1990s, while exhibition space keeps expanding. There’s fierce competition for a declining market as communities attempt to solve their economic woes by building centers that most can’t afford and few can fill. He refers to it as “the catastrophic state of the convention business.” Then what does this all mean to us? I’ve stayed away from this subject for a long time – since I expressed my initial dismay that the site would change since no one nailed down a commitment on the Holy Cross site from Vail Resorts before the election. That’s not a small issue, as I continue to believe that the voters would not have approved this project had they known that contrary to what was promoted during the election process, Vail Resorts would not be our partners. Shame on us and the false message that was perpetrated on us by the conference center cheerleaders.Of course, there was also Keystone, whose million dollar a year losses failed to surface until a few weeks after the election. An oversight? Who knows? But those facts surely would have affected our decision over here. So I’ve kept my mouth shut and my keys silent as I’ve faithfully attended committee meetings for the last year. And I have come to a conclusion, as you knew I would.But first some observations. Small groups abound. Larger groups are in short supply, according to Rich Scharf. Luckily for us, we have ample space for small groups – space that we’re not even filling now in the off-mud-summer-shoulder-spring-fall seasons – whatever you want to call the time when the lifts aren’t running and we need business. Because remember, that’s the time of the year we’re building it for. We don’t have enough rooms or parking to market it for the winter season.Yet oddly enough, at committee meetings we keep exploring what the exhibition space will look like as we break it down for small groups. Huh? As I said, we already have rooms for small groups. The last thing we need to do is build this big space with the intent of breaking it down into small spaces.Then what about the time frame? Is anybody really going to come in May? Would you? Ever try to have lunch? Shopping choices are at a minimum. Like it or not, we just aren’t open in May. Then there’s summer, which convention planners say is tricky. Families vacation in June, July and August, so it’s not prime time to schedule conventions. That leaves us with September and October.Then there’s the question of the hotel. According to Scharf, Denver is adding their hotel because 50 percent of their attendees said they would not be back unless there was a hotel on the premises. While he’s willing to admit “resorts are a different bird,” who knows? Sanders concurs. An attached hotel might not be the salvation, but it’s certainly part of the equation. Are we setting ourselves up for failure before we’re out of the gate? Denver, with 6,400 beds in close proximity, bet the wrong way and now they’re building the hotel in order to fix a defined problem.How about the restaurants? They think they’ll pump revenues from these groups. Well, we’re building quite a sizeable kitchen-catering space. I expect that means somebody intends to feed those folks in the building. Last but not least, marketing. We have set aside no funds to market the place. The VLMD would be hard pressed to fill in the gap. They have narrowed their scope to Denver and Dallas because of budget constraints.But there is an absolute. We are absolutely positive that there will be annual operating deficits – probably forever. The estimates are all over the place and as high as $2 million per year. Yet all we’ve set aside for deficits, including maintenance, etc., is $700,000. Think about it. We have to generate an additional $50 million in sales to generate the $2 million in sales tax necessary to cover the loss – just to stay even. And that’s hardly likely since the entire town of Vail budget for 2005 is $42 million. I don’t know about you, but that math doesn’t work for me. And don’t forget, conference centers all over America are discounting their rates, if not giving their facilities away for free, because of the brutal competition. Can we compete with that? So what happens to these facilities when the “Field of Dreams” theory does not work?According to the professor, “They become very expensive local community centers used for largely non-revenue generating activities.” At the very least they will be in direct competition not only with Donovan Pavillion, but our local hotel and restaurant businesses, as well. So there it is. Those most adamantly in favor seem to give little thought to the larger financial effect on the community. The truth is that many stand to gain financially if it’s built. And yes, it’s true that the voters approved a conference center, albeit by a very small margin. But they didn’t know all of the facts. None of us did. We still don’t. But we know more now. Isn’t it prudent to review our decision? Is financial suicide what the voters really agreed to?We need more current research because things have changed since we approved this project. Professor Sanders is presenting a paper on this very subject to the Brookings Institute in January. The institute is an independent institute that conducts research into contemporary American economics and foreign policy. He told me if I cool my heels, he’ll send me a copy as soon as he’s made his presentation. He’s also agreed to come here personally to address whoever is interested. We’re currently working out those details.There you have it. I have been sitting in these meetings for over a year and have been told to trust the process and everyone connected with it, something I wouldn’t do with my own money. Most of the time has been spent answering questions on the economics of building and financing it. But those aren’t the important questions as I see it. The important questions at this point are: Who will come? How do we get the message out? What happens when they don’t come because unlike Scharf, I don’t think it’s “if” but “when.”So as they say, it’s not over till it’s over. D-Day is still out there, but last week’s announcement to slow down is a relief and a smart move. Before we pull the trigger, maybe we should take the time to reload. Have more debate. Perhaps even go back to the voters. Because I think some part of the community was so anxious to get this issue on the ballot, that we didn’t do sufficient homework. We owe it to ourselves to do it now. This should be our New Year’s resolution.This is the third of a three-part series running Dec. 15, 22 and 29.Do your part: call them and write them. To contact the Town Council, call (970) 479-1860, ext. 8, or e-mail email@example.com. To contact Vail Resorts, call 476-5601 or e-mail firstname.lastname@example.org. For past columns, vaildaily.com-columnists or search:ferry. Kaye Ferry is a longtime observer of Vail government. She writes a weekly column for the Daily.Vail, Colorado