Conventional Wisdom

Municipal money pits

The 516,000-square-foot Boston Convention & Exhibition Center cost almost $1 billion to build—and will likely end up a bust.

Consultants had predicted the new center, scheduled to open in late 2004, would host 38 conventions in its first year. That number was expected to climb to about 50 events annually, drawing more business for hotels, restaurants, taxis, and shops.

But with the center's opening just two years away, only 18 shows are booked through 2013, with just three scheduled before 2006. It appears the economic fruit promised by Massachusetts politicians of every stripe is dying on the vine.

"Boston is building a convention center with no demand," says Charles Chieppo of Boston's Pioneer Institute, a free market think tank. The center will be competing for clients with Washington, Baltimore, and Philadelphia, among other cities. "The market for convention hall space is disappearing at the same time its supply nationally is exploding," Chieppo notes. Because of advances in technology such as Web conferencing, he says, businesses are sending fewer employees to trade shows.

Granted, the September 11 attacks and a mild recession have affected Boston's bookings. But numerous cities across America have recently built convention centers, and almost all of them are performing below expectations.

The Charlotte Convention Center in North Carolina, which opened in 1995, has produced one-third the number of predicted hotel nights—fewer than the center it replaced, says Chieppo. Consultants predicted that the 1996 doubling of the size of the Baltimore Convention Center would generate 50 percent more hotel stays; so far, it has produced about the same number. Similar weak outcomes have been seen in Minneapolis, St. Louis, Los Angeles, Houston, Sacramento, and elsewhere.

So why do consultants consistently overestimate convention center usage? Chieppo calls the decision for a government agency to build a convention center "a politically unstoppable situation." Any proposed convention center, he says, is a "free subsidy to the hospitality and tourism industries, and the big labor that wants them to build it." As a result, studies that are commissioned to determine whether a center should be built "always say, 'Build it.'"