In a national hotel sector still struggling to take root again, an almost guaranteed way to see RevPAR increase is welcomed by any owner or investor. One trick? Expand the local convention center.
A new study by Jones Lang LaSalle of 15 major cities, including Dallas, San Diego, Atlanta and Phoenix, shows that the expansion of a convention center leads to local hotel RevPAR rising 1.6 percent annually over five years. Andrea Grigg, senior vice president for JLL Hotels, says the hotels in the cities studied saw a $79 million premium over the five following years. The increases compare with cities without center expansions, where RevPAR increased on average 0.4 percent each year.
“The convention center is likely the biggest revenue generator for hotels in a market, but there’s many more industries that also benefit,” Grigg says. “When more attendees come in, you’ve got more spending in restaurants, on rental cars and other ancillary expenses. It’s a definite win for the entire city.”
Greg Hartmann, Jones Lang LaSalle Hotels executive vice president, says the study, “FocusOn: Convention Centers Impact on Hotel Markets,” can act as a bellwether to the hospitality industry for promoting convention center expansions in cities across the country. He agrees that a known expansion plan has a way of inducing meeting planners. “Before and during a renovation, we’ve seen convention attendance typically drop, as planners in the know will wait to the expansion is complete,” Hartmann says. “They don’t want to get in there before all the new features are installed.”
The needle can also move for a new center in a city that didn’t have one before, but city leaders need to do extensive studies to decide the best locations and whether there are enough rooms and infrastructure to take on meeting attendees, Hartmann says. Greene County, Ohio recently saw the conclusion of a feasibility study by HVS Consulting and Valuation Services, which recommended placing a new convention center in Beavercreek, where office parks serve the nearby Wright-Patterson Air Force Base. “You can’t just drop a center into a market,” Hartmann says.
Even colder weather cities, which typically have trouble competing with warm weather climates where conventioneers want to go, are investing in expansion. The Detroit Regional Convention Facility Authority is now completing a roughly $300 million expansion of the 2.4-million-sq.-ft. Cobo Center, with an opening date in 2015. Among the changes include a repositioning of the entrance at Cobo, which is along the Detroit River but doesn’t overlook the water, to be more pedestrian friendly. However, it’s not clear that the improvements will boost hotel stays in Detroit, which have suffered during the downturn.
Grigg says with the expansions studied, many gave listening to convention attendees as the number one reason for performing the work. “The meeting planners talk, they know the benefits and drawbacks of every market, and they communicate what they want and don’t want. Hotel managers also are listening in, and the smart owners should be ready to push for the work if they understand there’s a need,” she says.