The Baton Rouge River Center is in trouble. And it's not even open yet.
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The expanded exCentroplex is still too small to be competitive. And that is according to analysis done in 1997, before the 9/11 terrorist attacks and a recession forced convention meccas like Atlanta, New Orleans and Houston to begin grabbing up smaller events that are the lifeblood of regional venues like Baton Rouge's.
On top of that, downtown Baton Rouge has too few hotel rooms, and it lags in restaurants and entertainment spots.
Then there's the airport, which has few direct flights, making it inconvenient. Plus, it is relatively expensive to fly to, and once visitors land, there's no easy way to get downtown.
The Baton Rouge Area Convention & Visitors Bureau's own consultant, called in to do a marketing update for the River Center, said the city has "limited destination appeal."
The big question now is whether anyone has the plans or the resources to bring big conventions and trade shows to the River Center. It falls to Paul Arrigo and his CVB to come up with an answer.
After the bang, a whimper?
The River Center's debut event, the American Bowling Congress, is expected to be a bonanza. The tournament will bring 60,000 bowlers to Baton Rouge over the first half of 2005. Although the bowling congress will pay no rent and demanded a $600,000 up-front fee--which was split about 50:50 between the city and the casinos, according to the mayor's office--every bowler will pay to sleep, eat, and shop in Baton Rouge, generating a forecast $60 million.
But not everyone is sleeping easy. "It is wonderful to open the River Center with a bang, but will there be anything like this in the coming decade?" wonders J. Jon Fels, CEO of the Fels Hotel Group and a longtime observer of Baton Rouge's tourism industry. "Most likely not. Let's not think, 'We built it, they will come.'"
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And Frank Quigley, the general manager at Argosy Casino, which runs the Sheraton across the street from the River Center, wonders if anyone has considered that the event might not go well at all. "These people are used to staying in places like Reno. If they have a negative experience here, they'll be out there saying, 'Don't go to Baton Rouge.'"
Knoxville, Tenn., provides a cautionary tale. Two years ago, the bowlers were the first booking in that city's expanded convention center. But the facility has struggled since, says Mike Edwards, president of the Chamber Partnership there. He thinks it is a victim of insufficient hotel space, a beleaguered downtown and poor airport access--challenges familiar to Baton Rouge.
The entire convention industry also faces a broader problem--too much space and not enough conventions. Since 1990, the North American convention center industry has added an average of 2 million square feet per year, reaching 81 million in 2004, according to the industry publication Tradeshow Week. But growth in demand has been slipping since the mid-'90s.
Despite the oversupply, conventional wisdom says that if you've got a convention center where business is slow, the answer is adding more space to compete.
So the Los Angeles Convention Center increased its square footage by about 50% in 1993, and Indianapolis added 100,000-plus square feet to its convention center a few years later. Neither has regained pre-expansion attendance levels. Down in New Orleans, the Morial Convention Center is planning to add at least 250,000 square feet.
Thus do the drowning pour water on their own heads.
Quigley worries that while the River Center has potential to help support downtown's rebirth, an unsuccessful facility could drag it back down.
"Over the next few years, if you can't get significant conventions in here, next thing you know they'll say, 'We've got to generate revenue somehow,' and you'll have a flea market or something in there."
Selling it
When KPMG, a convention industry consultant out of Florida, finished its initial analysis for the CVB in 1997, it projected an expanded Centroplex could land 40 conventions and trade shows each year. Here in the real world, CVB marketing Vice President Renee Areng says the River Center has secured only nine such events between now and 2008.
"Things have changed," her boss, Arrigo, admits.
Baton Rouge is in a fierce market. Neighboring states have only two or three mid-size venues. Louisiana has about a dozen, including state-of-the-art facilities in Lafayette, Alexandria and Shreveport. New Orleans alone has six large convention hotels.
But the market is what it is, and the competition maintains huge leads over Baton Rouge. Biloxi's convention center has 42 confirmed convention and trade show bookings through 2008, and Savannah's has 56, according to the managers of those facilities.
"We should have had leadership to get this going much earlier," says Fels. "We should have been actively booking the River Center three years ago, at least. There is lots of catching up to do. Quick."
KPMG did not mince words in a follow-up report earlier this year. It said the CVB needed to "substantially increase the number of conventions/trade shows."
Wilfred Barry, chairman of the CVB board, says, "KPMG told us, 'Here's what you need to do to be competitive.' Were there any surprises? No. We already knew we needed to get more aggressive about marketing for the River Center."
Arrigo says the CVB takes the lead on recruiting conventions, and he believes it is up to the task.
Marketing for the River Center will not be fundamentally different from the CVB's other efforts, Arrigo says. "We attend trade shows of meeting and convention planners to sell them on Baton Rouge," he explains. "It's like any other product--you go to the client and sell them."
Part of the CVB's marketing plan for the River Center is to ask Baton Rougeans who belong to professional groups to bring their conventions here. The idea is to have the city as a whole--not just the CVB--sell Baton Rouge. Arrigo says the CVB remains "very dependent" on that strategy.
As far as Argosy's Quigley is concerned, none of that rises to the level of a "plan."
"I asked to see the marketing plan, and they gave me a lot of dead trees--good information, analysis, third-party surveys and broad-based goals," he says. "But there was no action plan--who's gonna do it, what they're gonna do, when they're gonna do it, and how you're gonna measure it."
Quigley sees it as part of a larger problem: "People only want to hear good news. I'm not saying you have to be negative, but you do have to be realistic: 'Here's where we are. It doesn't matter how we got here, but let's make the best of it.'"
On the hotel issue, for example, the CVB's Web site advertises 8,000 rooms available for conventions at the River Center. Most of them are on College Drive.
"Those aren't convention rooms," Quigley argues. "In Las Vegas you don't mind taking a cab 20 minutes to the convention center, because your hotel has a casino and shows and restaurants. This isn't Vegas."
Even downtown, Quigley says the CVB should not be counting total rooms.
"Our Sheraton is 65% occupied right now," he explains. "The CVB wants me to guarantee them 80% of my rooms. I can't do that. This time next year I'd be 45% occupied. I'd be out of business."
Quigley figures the River Center can count on only about 150 true convention rooms. "That isn't enough just to house the vendors in a major convention that would fill that place."
The big compromise
A declining market and rising competition helped put Baton Rouge in an unenviable situation, but the city also has itself to blame.
KPMG's 1997 marketing and economic impact study for a Centroplex expansion had projected huge benefits. Once the expansion was up and running, local and indirect spending would total $63 million, plus $12 million worth of new jobs and $1.5 million in local taxes. It sounded good, and the city bit.
Market changes quickly rendered KPMG's sunny analysis obsolete, but that did not change the fact that the consultant told Baton Rouge it needed 100,000 square feet of contiguous exhibition space to be competitive.
Nor was that news. Butch Spyridon, who now heads Nashville's convention and visitor's bureau, ran the CVB here from 1985 to 1991. Everyone knew the Centroplex's 28,000-square-foot hall was "ridiculously inadequate," says Spyridon, and he tried to convince the city to expand it to as much as 100,000 square feet.
It didn't happen then. And it's not happening now.
Continued from page 1.
The reasons: money and space. The River Center's $67 million total budget ended up being split about evenly between the city and the state, but the local share was limited by its funding stream--a 1% increase in the hotel occupancy tax.
There was also nowhere to put that large a building--as big as a mid-sized Wal-Mart. KPMG recommended demolishing part of the Centroplex or suspending the exhibit hall over Government Street. But Will Wilton, the River Center's general manager, says those options would have busted the budget.
"Given our constraints, we could build 70,000 square feet," says CVB chairman Barry. "So that's what we did."
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No study ever considered whether a smaller facility could succeed or whether its economic impact would be worth the investment. The River Center just stumbled into smallness.
Money talks
Given the limitations, everyone agrees that the River Center is a handsome, well-designed facility. But marketing it is new territory for the CVB, Arrigo says.
"Until the Sheraton opened, we had no convention product as such," he says. "With the River Center expansion and now the Hilton (the old Capitol House), we actually can market a complete product."
Or, as Fels pointedly puts it, "Now they have no excuse. The question is whether they have learned anything from the past, and do they really know what their market is."
Barry says the CVB recognizes that it must "step it up."
"We need to adopt an aggressive posture," he says, adding that the CVB plans to hire at least one more staffer to help sell the River Center.
What the CVB really needs to make the River Center viable, Barry and Arrigo contend, is more money--another $1 million on top of its current budget of $2.2 million. Barry says the CVB's revenues have been flat for about seven years, and in 2004 KPMG found that peer cities spend about $1 million more than Baton Rouge.
With more money, Arrigo says, the CVB would bolster its convention marketing efforts.
Barry says the CVB also needs to be able to offer incentives. "We want to be able to waive rental fees at the River Center and to buy down hotel room rates. We also want to be able to bid on sports tournaments," which typically require high six-figure fees, or more. "All of that takes cash."
The fact that the CVB is scrambling for money now, Fels says, is symptomatic of poor planning at the top.
"What bothers me is the lack of consideration from the city," he says. "If you spend $30-plus million on such a facility, you should have a pre-opening budget for marketing. Where is such a line item?"
The CVB broached the issue of a budget increase by setting up a task force of civic and tourism industry leaders. Their first idea was increasing the hotel bed tax, which is paid by visitors.
But that was met with skepticism.
"If you're asking for $1 million in new money, the first thing you've got to do is show what you've done with the money you've already gotten," says Quigley, who sits on the task force. "Then I want to know what you're going to do with the new money you get."
Critics also say not enough consideration has been given to what kinds of events Baton Rouge can be successful at, nor which ones will have the most positive impact for Baton Rouge. That kind of information would tell the CVB where to concentrate its resources.
In mid-September, its board decided to hire KPMG yet again, this time to do an eight-week performance audit of marketing efforts.
The goal, says Barry, is to boost the CVB's credibility. "The question is out there: 'Are we spending our money wisely?'" He says the process could also lead to a new strategic plan.
Both mayoral candidates have said they will oppose increasing the hotel tax to increase the CVB's budget.
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Turning inward
If the CVB can't line up conventions and trade shows, there is still a plan to fill the River Center. The big events that CVB targets rarely book less than a year-and-a-half in advance.
For open dates within 18 months, it's the job of the facility manager, SMG, to fill the River Center. Philadelphia-based SMG has managed the facility since 1996, and its contract runs out at the end of this year. Although the agreement has a simple two-year renewal clause, the mayor's office says it is still negotiating with SMG.
As responsibility for booking the River Center shifts from the CVB to SMG, the goals also change. The CVB's loyalty is to the health of Baton Rouge's tourism economy, so it tries to land larger events with spillover effects--hotel room-nights, restaurant meals, entertainment spending.
In contrast, says SMG marketing director Diane Johnson, "I'm strictly selling the facility." While they certainly won't turn away big-ticket events, SMG gladly pursues smaller ones.
"We go after 'drive-in' business that is in our area and may not stay the night," she says. SMG is responsible for the River Center's bottom line and can succeed by packing the facility with consumer shows, local sports events and church banquets, even though these have minimal ripple effect.
SMG also manages Knoxville's convention center, and has dutifully filled it with similar small events. But Edwards, of the Knoxville chamber, says the facility is still waiting in vain for out-of-towners, "and that's who brings in new dollars."
It has long been clear that the River Center's economic impact isn't going to approach KPMG's 1997 projections. But Fels wonders if a lack of planning initiative will bleed the value out of the River Center altogether.
Fels believes only the mayor's office is in a position to help the River Center overcome its challenges.
"It is the city that would benefit, so it is the city that must provide leadership and a well-coordinated effort," he says. "It is not just a question of leaving it to the CVB. This is a multimillion dollar investment. It requires a totally new approach. Now Baton Rouge has the product. Expectations are very high."
Consultants spoke, B.R. didn't listen
City-parish officials expanded the Centroplex's exhibit space by 30%
less than consultants recommended. Here is the beginning, recommended
and final expected square footage for the renamed River Center.
Centroplex ('77) Recommended ('97) River Center ('06)
Exhibit space 28,000 100,000 70,000
Meeting space 10,000 20,000 22,000
Ball room -- 20,000 25,000
Function space 68,000 140,000 117,000
Source: KPMG, BRACVB
The competition in the Southeast and in Louisiana is fierce
In the Southeast U.S. (excluding La.)
Convention centers over 1 million sf: 2
Convention centers 100,000 to 1 million sf: 10
In Louisiana
Convention centers and hotels over 100,000 sf: 3
Convention centers and hotels 50,000 to 100,000 sf: 9
Source: KPMG, various facility management firms
Note: Areas reflect total function space; KPMG calculated River Center's
total function space at 117,000 sf
The cost of construction
The River Center project will cost more than $66 million, all told. The
city-parish will pay almost half of that (all figures are in millions).
Local share State share Total
Phase I (new construction, 2004) $18.6 $18.8 $37.5
Phase II (facility upgrades, 2006) $9.3 $9.4 $18.7
River Road realignment $0.3 $1.9 $2.2
Parking improvements & constr. $2.8 $5.4 $8.1
Total $31.0 $35.5 $66.5
Source: EBR Dept. of Finance
STORY BY HAL COHEN * PHOTOS BY MARIE CONSTANTIN
HAL COHEN covers real estate and legal issues. Reach him at hcohen@businessreport.com.
COPYRIGHT 2004 Louisiana Business, Inc.
COPYRIGHT 2004 Gale Group
