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New convention center project seeking to fight industry trends
Across the country, cities have seen new convention center projects and their attached publicly financed hotels come in over-budget.
At the same time, the country’s dark economic climate has taken a bite out of business travel.
Despite this, the predevelopment phase of Nashville’s new Convention Center project races ahead, while overseers issue assurances Music City Center will avoid the landmines found in places like Philadelphia, Charlotte, Dallas, Baltimore and Portland.
In those cities, the price tag for building a new convention center or the attached hotel, which has become a virtual prerequisite for such projects, has risen over time or the business of booking conventions has lagged behind projects.
On the issue of cost, Metro Development and Housing Agency Director Phil Ryan said the process laid out for designing and building Music City Center will help the project stay with its yet-to-be-determined budget. The most recent estimate for the project was $635 million.
As a point of reference, Philadelphia is building a new convention center, which initially came with a $700 million price tag. In August, Pennsylvania Governor Ed Rendell issued doubts about whether the project was still worth it after the estimated cost soared to nearly $790 million.
The design team for the project is Atlanta-based Thompson, Ventulett, Stainback and Associates, the same company in charge of Music City Center. The $90 million increase came before ground was even broken on the convention center.
Ryan said Music City Center was positioned to avoid such pre-construction increases because the project’s design and construction teams are working hand-in-hand on the front end. In Philadelphia, the building contracts were awarded weeks ago, although it bears mentioning the winning bid came in low enough to tentatively put the project back on track.
“That has certainly been one factor we thought about from the very start,” Ryan said. “That’s why we picked the path we have. We’re going to construction management at risk, where we have the designer and construction team on board from day one at the very start.
“So what is getting designed is also getting its cost implications considered at the same time.”
Ryan also told The City Paper an attached convention center hotel was closer to becoming a reality. In Portland, Dallas and Baltimore, convention center hotels have come seen their costs rise steadily.
The reasons for the larger price tags vary from rising energy and building material costs to a change in design plans. In Dallas, the idea of turning a new convention center hotel into an iconic structure has raised the potential cost to $400 million.
Construction costs increased Portland’s convention center hotel to $247 million, an increase of 36 percent of its original cost. In Baltimore, the convention center hotel came in with a taxpayer bill of $301 million.
Filling Music City Center is an issue too
Rising construction costs are not the only trend staring down the convention business. The negative economic climate permeating the country has had an impact on business travel as well. A USA Today story this week highlighted how business travel is one of the first expenses eliminated by companies feeling the pinch.
To that end, Gaylord Entertainment is keeping an eye on the market as it works to finish its detail design plan for its own $400 convention and hotel expansion.
Gaylord CEO Colin Reed described the company’s cautious approach during his second quarter report to shareholders last month.
“So we effectively have this period between now and [the spring] to assess, is there a material change in demand for these markets?” Reed said. “And once we’ve got the detailed design documentation done in February/March of next year, then we will be in the situation of bidding the project… if we’re comfortable that the world hasn’t materially changed here.”
Reed’s comments came before the historic government bailouts of some of the country’s oldest and most-established financial institutions.
Butch Spyridon, the president of Nashville’s Convention and Visitors Bureau, acknowledged the need to keep an eye on the gloomy economic climate. But Spyridon also said booking Music City Center was going well so far.
Without any design plans and with a final Metro Council vote looming, Spyridon has garnered four major bookings for the Music City Center beginning in 2013.
“We started knocking on doors in April,” Spyridon said. “The response is beyond anything I would have expected.”
Spyridon added that the goal was to book 100,000 rooms before the end of the year and have one million rooms booked before the proposed center opens in 2013.
The barometer currently used to measure booking success of the existing Convention Center is that hotel rooms stay booked at about 70 percent, Spyridon said.
That’s better news than cities such as Charlotte, N.C., are receiving.
Late last year, the Charlotte Convention Center’s 2009 outlook was considered to be on the upswing when, after increased funding support from the City Council for event marketing, convention business increased to about half where it was projected to be.
Reaching half the projected hotel bookings was good news, because the convention center was on pace to fill only about a third before the City Council increased the marketing budget by $1 million.
The latest news isn’t all doom and gloom.
San Diego just announced 2008 was its most successful year for convention business ever with an estimated regional economic impact of $1.8 billion, according to the San Diego Union-Tribune.
Financing issues also remain
Meanwhile, financing for the deal is still being finalized by the Metro Department of Finance, which will use expert consultants.
Metro’s previous Director of Finance David Manning wrote a report before he left office, which raised serious questions about the city’s bonding capacity on the deal. Manning’s report studied the tourism taxes earmarked to finance the deal and estimated a bonding capacity of $320 million for the revenue bonds Music City Center seeks to use.
Pointing to the Opryland expansion, Manning’s report questioned the initial $455 million estimate for the project. The Opryland expansion has a price tag of $400, despite not facing the necessity of purchasing land or building surrounding infrastructure, which Music City Center must do.
“The proposed Music City Center is significantly larger than the Gaylord expansion, will likely require more new hotel rooms and has none of the required infrastructure in place,” Manning’s report said. “The MCC project must also purchase 15 acres of [downtown SoBro] real estate.”
If there’s a reason for optimism, though, it’s Nashville’s own strong track record. The current convention center paid off its debt right on time, while operating above its own standard for success the last two decades.
“Honestly I’m not worried, and if anybody would be worried, it would be me,” Spyridon said. “I have absolute confidence. I’m not sitting there with sweaty palms — I’m not losing sleep at night. I’m looking at the numbers every day and I know this is going to work.”
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I agree with Butch Spyridon- the numbers don't lie. A lot of people were concerned about being taxed to pay for the current convention center, and it paid off its debt. The economy will definitely have the ability to bounce back by 2013, when the convention center will open.I hope it is built. Notice how San Diego had a 1.3 billion economic impact. Nashville is expected to have a 700 million impact. Let's get this built Nashville. Thank you Karl Dean for moving forward on the project!
What sense does it make for taxpayers to spend what will be close to a Billion dollars to compete with another taxpayer that has everything in place(Gaylord) who we gave 80 million to to compete against us.We are playing Russian Roulette with ourselves.
"Despite this (all the prehistory suggesting economic failure) the project races ahead". Of course! They want this turkey baked before the taxpayers wake up and try to stop it!Gaylord is wisely stepping back and letting the city take the hit. Do they still get their 80 million dollar bribe?We are trying to be number one in an industry that is turning into "number two".This will be Dean's sour legacy, sadly he'll be out of office and no longer accountable by the time it's done.
San Diego - one of only three publicly owned convention centers operating in the black.Current Nashville Convention Center - Did not pay off its debt on time because it did not cover its own operating expenses. Taxes covered the bond payment of the convention center. Its own standards were set low enough that people would not notice that it still existed on subsidies while selling meeting space at a discounted (not meeting expenses) rate. Was a success only if you change the meaning of success to either "doesn't suck too bad" or "the hotel owners in downtown made money while we lost it."
"37350
There are only two CC is the whole country that are actually paying for themselves, Las Vegas and Orlando for obvious reasons.They are two-fer cities, Go to the convention then extend the stay for a tourist weekend (or two) or for a vacation.The trouble in the airline industry will further effect convention business.
...If there’s a reason for optimism, though, it’s Nashville’s own strong track record. The current convention center paid off its debt right on time, while operating above its own standard for success the last two decades... No one seems to care that the convention center lost money in its operations budget every year. The fact that the losses were planned seems to be a positive thing for some reason. The income was split at least six ways before the train got a piece of the action and then it had to take a tax subsidy to survive. Some people over in Raleigh, N.C. were looking at future bookings of their new convention center and found that the bookings were deeply discounted. They had to pay people to go there before the doors were even opened. This is a smaller convention center but I think that the state has no substantial investment, so it looks a lot like the situation in Metro. Room and show discounts were about $2.3 million dollars. You don't see old Business Man Bredesen rushing in here to get a piece of the action do you? If it is such a great deal, where is the state legislature? http://www.johnlocke.org/press_releases/20080904412.html
This is something Nashville needs to compete in the future. Nashville is a destination city and generates tourist dollars because of our music venues. This is not true with the other cities listed in the list article. We can and will be successful in this venture.
"The economy will definitely have the ability to bounce back by 2013,.."Because we are certain that there will be no other terrorist attacks on the US, that oil prices will go down, that will be no more problems with the financial sector, that the war in Iraq will be over, that there will be no problems with Russia,..... Yep- we're rock solid!
BigPapa- so should we just never attempt to improve as a city because of the possibility of those problems? No!!!
How is being a convention city an improvement?
exactly. This is not a facility that improves the lives of citizens, this is a building designed to promote tourism and make money for a very small number of tourism industry owners (those lucky enough to be in downtown). Please don't confuse infrastructure improvement with tourism development.
hmmm where should i begin-I could begin with BNA. More flights into BNA for the Music City Center and the Opryland Convention Center (each center attracts different conventions). More people at BNA means more $ into BNA, not to mention more $ into the car rental services, shuttles, etc.More people coming into our city for conventions means more people staying in our hotel rooms, and more $ for the city. More people in the city means more people spending $ in our restaurants, shops, etc; not to mention the incentive to develop more restuarants, shops, etc. (maybe they could replace those vacant warehouses around the SOBRO area?)The designers of the Music City Center want to develop attractions for the residents of Nashville (i.e. public parks, retail, etc. which means more residents downtown to spend $$, helping our city). Let's not fail to forget the aesthetics of our downtown. Like it or not, downtown is the core of every city, and a brand new convention center which will have public input on its design and a Convention Center Hotel to be put on an area of land which is now just surface parking lots.... well that is something I definitely want to have happen!This is not a direct correlation, but the Music City Center will make downtown Nashville even more vibrant. More people downtown pushes the need for something this city really needs- better public transportation.Nashville needs better public transportation, whether it be streetcar or light rail. As downtown Nashville gets bigger, as it would with the Music City Center, the possibility of a light rail helping out Nashville grow in a more sustainable way becomes more of a reality (maybe a lightrail connecting downtown to BNA?)JeffF you will agree with me on the public transportation, but IDGAF will not. Nashville will improve with the Music City Center IMO. Idgaf- improvements in the airplane industy are already happening. I suggest you check out ecomagination.com to look at how planes are beginning to save 90 million gallons of fuel a year.
Oh please with the fairy tales.
Not fairy tales, just good business and futuristic thinking. what a concept!
you call it fairy tales, i'll call it common sense. ecomagination.com not a fairy tale. A reality.
Having been around conventioneers most of my time living here, I fail to see how their presence makes a city more 'vibrant'. The ones stuck out at Gaylord never leave the building unless Gaylord's buses take them to a Gaylord-owned destination like the Wild Horse. The ones convening in downtown are pumping dollars into the restaurants downtown but certainly doing nothing to improve quality of life. If you think having a bunch of geezers in funny hats taking up all the tables at your favorite restaurant adds vitality to the city then chances are you own the restaurant.But even conceding that argument, which has some validity at least for tourist-oriented business owners, let's consider the rest of the time. The MCC is setting a huge footprint in an area that would have had a lot of potential as a resident friendly live-work-eat-drink center. When it is half or more empty, which will be often, it will be a large patch of gloom separating the Gulch/Row, Lower Broad and Capitol districts from each other. The Plan of Nashville envisioned this as an area where a pedestrian friendly boulevard ties the city together. Instead a monolithic pile with ample evidence of potential failure and questionable numbers will be built because our city leaders' vision is directed towards their wallets or their posteriors.
we'll agree to disagree Time for Truth. You do make valid points. I would love to see a true residential neighborhood in sobro and a true live, work, play environment. But just because the potential is there does not mean that it was going to happen (there were no valid proposals for this sobro area in the last 5-10 years). People downtown, whether it be residents, tourists, or old geezers in funny hats is better than no one IMO.
Wait a minute. People move downtown to be hip and trendy. How can that happen if so many people downtown are spandex wearing country music fans or Shirners throwing water ballons from the MCC hotel?This will surely drive the hip and trendy to, I don't know - somewhere - Hendersonville?Although maybe a convention center would be a good idea. After all the hip grovies find out that living in the city isn't like a Woody Allen movie or a rerun of "Friends" the abandoned condominium buildings can be turned into hotels.Nashville does not need light rail. We didn't need and nobody wants, the Music City Black Star.How many ways can you all think to waste money?
We have a CC and it is doing quite well so let it be.
DaddyYo, im just going to ignore your comments. Idgaf, it's doing so well that there is a need for a more space. In comes the Music City Center
Daddy Yo, if you have a chip on your shoulder about the Gulch, you should be for the MCC. Sandwiching those condos between whooping conventioneers and the posers on Music Row will certainly kill the trendiness factor-and condo sales. I'll stop by Radius Ten and tell all the hip and trendy people to move to your neighborhood.Is it Woodbine or Upper Antioch (Crieve Hall is already kinda trendy)? From your prior posts it's around there somewhere. Maybe the hip and trendies will displace some of the Asian, Kurdish and Latino gangbangers and illegal aliens.
We are about thirtieth among cities in population, that high only due to our Metro status which includes all of Davidson. We are in the top fifteen in conventions. This is due to Gaylord, a perfectly adequate center and some of the larger airport area hotels getting a piece of the pie.The current Convention Center, as reported here recently, spent a large amount of time as a hole in the ground due to market conditions. Fortunately, it was finished. MCC might not be so lucky. We don't need to overbuild and get stuck with an albatross that will either immediately or eventually bite the taxpayers. Even if we don't build it they will come. NAMM and others who want MCC will still return if it isn't built. In the case of NAMM, this is one of their biggest markets. Sure, larger organizations want a big shiny new place to go to. I'd like a Mustang convertible like Karl Dean has if he gets the taxpayers to buy it for me. The main point is this is a poor use of limited funds, it will do nothing for the citizens of Nashville, and the purpose it is being built for is heading in the direction of Betamax and steam locomotives.