Ilya Marritz covers business for WNYC.
Governor Andrew Cuomo grabbed headlines during his State of the State address Wednesday when he proposed a massive convention center at the Aqueduct Racetrack in Queens. The planned exhibition center, hotel and expanded casino could replace the Jacob K. Javits Convention Center on Manhattan’s West Side.
WNYC spoke with Haywood Sanders, a professor of public administration at the University of Texas at San Antonio, who studies the economics of convention centers.
What do you make of the proposal?
It’s crazy, crazy, crazy. It’s a great piece of political theatre and gives the governor a chance to grab headlines with a grand announcement. But as a piece of public policy and as a mechanism for economic development it’s effectively unworkable.
The problem is that in proposing the biggest convention center in the country, the governor is seeking to compete with a host of other major convention venues in cities like Chicago and Las Vegas and Orlando where, in the last few years, there has been an enormous decline in convention and tradeshow activity attendance. The phenomenon we now face is a convention center market that is oversupplied and glutted.
How much of that downturn in convention business is attributable to the really bad recession that we’re crawling out of?
Let me give you an example, in the case of Las Vegas, in the wake of the 2000 recession and 9/11, attendance at the Las Vegas convention center barely budged. It dropped, from 2000 to 2003, by a total of 6 percent. In 2009, it dropped by 30 percent and in 2010 it came back very slightly by 3 percent.
We’ve never seen an impact of this sort in major convention centers across the country. And that is a result, not just of the recession but of what everybody in the business recognizes is an over-supplied market. That’s precisely the market in which the governor proposes to compete by adding yet more space.
You seem to be saying that there are bigger trends at work. What are they?
A whole lot of larger phenomena. As firms and public and private organizations of all sorts operate in an uncertain economy, travel to conventions in particular is something that is relatively easy to cut back on. What we’ve seen is a pretty dramatic and long-term decline in attendance.
Now, you add to that some longer-term trends. It’s much easier to get information and communication electronically, through the internet, by social media than it ever used to be. So on one side of the scale, a great deal of ease in information access and communication in virtual forms [and on the other side] a much greater cost and in some cases discomfort in actual physical travel to a convention destination.
What are the unique challenges of running a convention center in New York?
There are a number of phenomena and we ought to put them into two broad categories. The first is a category that has to do specifically with the site and location that Governor Cuomo has proposed. It is not a site in Manhattan. It is not a site surrounded by the kinds of visitor amenities and activities that one would think make for an attractive, desirable convention location. Many of those amenities are in New York, in Manhattan. They’re not at Aqueduct.
Beyond that, there are some peculiarities to the New York City market. Some of those involve the cost of hotel rooms in New York City. Some of those involve the cost of development in New York City. If Genting [operator of the Aquaduct Racetrack that has signed a non-binding letter of intent with the state to possible develop the Convention Center] is in fact going to build its own 3,000 room hotel as a part of this development, it’s going to have to put a lot of money up front. It’s going to have to pay New York City wages to its labor force. And it’s going to be faced with competing against a host of other destinations.
Is it typical for the state or for a municipality to be running convention centers rather than a private company?
Yes. Almost all such centers with a handful of exceptions are publically owned. Some public center owners farm out the actual management and operation of the center to a private firm, but the ownership and the financial responsibility for managing to pay the debt service on the building as well as the operating losses, that’s public function.
If record of these centers is so mixed, why do you think they are attractive to governors and mayors?
For the same reasons we’re seeing this proposal come now. Politically, it makes sense to promise big things. But it also is a vehicle to changing the development prospects of a particular piece of urban turf. The promise of a big convention center makes Genting’s Aqueduct project sound a whole lot more viable as a major private investment. Cities and states often propose these things less with an aim to getting a real business or economic impact, but as a device for changing the shape of urban land and urban development.