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Begging for Bookings : Taxpayers Are Likely to Pay the Price if New Convention Center Flops

TIMES STAFF WRITER

The gleaming expansion of the Los Angeles Convention Center will formally open its doors in mid-November to a convention of amusement park operators--and an economic climate significantly more hostile than when it was approved in 1986.

For a city now starving for good publicity, tourists and cash, the expanded center is a $500-million gamble that Los Angeles can regain its footing as a tourist Mecca and become a major contender for the easy money that large conventions bring with them--money that goes into businesses’ and the city’s pockets, without asking for schools and garbage collections and sewer improvements in return.

But without a healthy rebound in the economy, the best of circumstances and significantly increased convention bookings, the city of Los Angeles--already slipping into the muck of deficit financing--could be handed the bills for millions more in subsidies to the center and huge expansion-debt payments, long before the center is able to pay its way.

“Is it going to work? Over time, it will,” said Saul F. Leonard, president of a Century City hospitality consulting firm bearing his name. “Initially, it won’t do as well as people estimated. . . . But the way you have to look at it is not whether the project makes sense--because it did at one time--but how to make the best of what we have today.”

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The new center is the city’s best and most expensive hope to revitalize its flagging tourism business, second only to the service business in importance to the region’s economy. It is both elegant and functional, an eloquent statement of the city’s commitment to form and substance.

But the slow--some say dismal--rate of bookings is evidence that good design alone cannot overcome the city’s deficiencies as a convention host.

Even though the center’s unflagging supporters say the convention center will be successful within five years, there are nagging worries: no convention center hotel and not enough of other hotel rooms near enough to the center; an unattractive location close to a downtown not considered attractive to tourists; the city’s tarnished national image following the riots; unrelenting competition from other convention centers, and a slowdown in the growth of the convention business.

Officials at the Los Angeles Convention and Visitors Bureau, the quasi-official agency charged with bringing conventions to the city, acknowledge that bookings have been hard to come by.

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“It’s fair to characterize the center as the worst pre-booked convention center . . . in the country,” said Michael Collins, senior vice president of the bureau. “You can’t suddenly say we want to change and then do that in a year.”

Going after large conventions, or any conventions, is indeed an about-face for the center. In the past, the center concentrated on bringing in trade and consumer shows. It was largely self-sustaining and, in many years, even turned a profit.

Critics say the city had been lulled into complacency by the profits and was failing to recognize that its economic interests would be better served by a convention center that actually attracted conventions.

The consumer shows generated revenues through high rents, parking fees and other services--but it was primarily Southern California money just being redistributed.

Show attendees don’t fill hotels, restaurants and cabs and perhaps extend the trip a day or two for sight-seeing, as out-of-town convention-goers do.

So far, only 18 conventions are slated for the expanded center’s first 12 months of operation, and for the following decade, only 41 other conventions are booked.

Within the tourism business--where livelihoods depend on positive images--there is a strong sentiment that the Los Angeles center will eventually claim its share of West Coast convention business.

“Having a feel for how decisions are made in this industry, I can promise that building will be successful” said Steven Hacker, president of the International Assn. of Exposition Management, a group of meeting, show and convention planners currently based in Indianapolis. “There’s just no diminishing the importance or appeal of Los Angeles as a meeting and trade show destination,” he added.

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By the fiscal 1997-98 year, center and city officials say, the center will be at optimal use, playing host to perhaps 35 major conventions that year and generating more than $140 million in business for the city’s hotels, restaurants, retail shops and other tourist-related businesses.

But it will also cost the city. To lure conventions, the center will discount rental rates and other fees and give up notions of being profitable. The city is directly supporting this “loss-leader” policy with a $4 million subsidy to the center and another $3 million to the visitors bureau to help offset these costs.

Just as Los Angeles was late in entering the competition for major conventions, it also may be behind the curve on financing policies. Funding is “a major issue reshaping this industry,” Hacker said.

In the 1970s and ‘80s, many cities were willing to support convention centers with tax dollars “in the expectation that those facilities would bring big meetings to town, fill hotels and restaurants and such,” he said. Now, “cities don’t have any money and are cutting back on police and fire departments. . . . Today, it is rare to have a city willing to operate a convention facility as a loss-leader,” Hacker said.

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Jack Kyser, chief economist at the Economic Development Corp. of Los Angeles County, said that while this spinoff business is important, “maybe the loss-leader concept won’t work quite as well as it once did. The whole (question) is how competitive this center will be, up against the charm of San Francisco, the glitz of Las Vegas, the wholesome family appeal of Anaheim and Disneyland and the bay-side setting of San Diego’s center.”

And while all are financing expansions--Anaheim’s newest exhibit space opened at the beginning of the year--none is facing as huge a debt burden as Los Angeles.

So far, the center’s share of the city’s hotel--or “bed"--taxes has been enough to cover expansion debts, with money to spare. But this year may be the last time in a long while that it works so smoothly.

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Next year, the center’s payments to retire various expansion-related bond issues will jump to $32 million, from $12 million this year; and the year after that, the debt payment could go as high as $45 million. Revenues from bed taxes would have to increase nearly threefold in three years to cover the larger debt payments. Bed taxes can increase through higher hotel occupancy rates, hikes in room rates or by the addition of hotels.

Not even the most optimistic of city and center officials are predicting such rapid gains. Indeed, in the past two years, the bed-tax collections have fallen; city officials expect no gains this year.

If there is a shortfall, the center can dip into a $45-million savings account to help cover annual debt payments. If it runs through that, the city would have to dip into its general fund to pay the tab.

At the City Administrative Office, which oversees municipal facilities, senior analyst Terry Luera calls that “a worst-case scenario” and says the city expects revenues at the center to rise 10% a year for the next five years. Yet it is unclear how the center, even with such increases, will be able to cover its debt payment tab during those years from its own revenues and its share of the bed tax.

Prospects for a major convention center hotel--always envisioned as part of the expansion--have grown dimmer by the month. Last November, a task force said the city would have to ante up at least $113 million to attract a developer to such a project--a number that officials privately say has grown higher and less feasible in light of the city’s budget deficits and the discouragingly low occupancy rates at downtown hotels this year.

Still, such a hotel is seen as vital to the convention center’s success. City, convention and bureau officials say the new center will bring in enough visitors to attract a developer to the project.

Already, bureau officials concede they have lost 25 bookings because of inadequate numbers of nearby hotel rooms.

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Yet critics say convention planners will be judging the center--with or without a hotel--not as an island but as part of the city. The one-way street patterns leading to the center’s location, bounded by Figueroa, 11th Street, the Harbor Freeway and now Pico Boulevard, can befuddle even veteran Angelenos. Many outsiders and locals think the area is unsafe. And once they’ve left the convention center, attendees will find little downtown night life and no easy way to get to the city’s varied and disjointed attractions.

“I’ve seen it from the freeway, and it looks new and flashy,” said Charles Lockwood, a Los Angeles author who has written seven books about cities and architecture--including three about Los Angeles. But a stumbling block is “how it will relate to the downtown urban fabric and how comfortable convention-goers will be in downtown,” he said.

“Are they just going to drive there in cars and buses and drive back, from hotels in Santa Monica?” Lockwood continued. “Have we built this wonderfully efficient island in the middle of our city that will serve convention needs but have a minimal impact on downtown revitalization and usability? . . . That’s my fear.”

Lockwood says the city needs, among other improvements, a trolley line to link the center, downtown and places such as Little Tokyo and Olvera Street.

Bruce Baltin, director of the Los Angeles office of PKF Consulting, which focuses on the hotel and hospitality business, said he believes that tourists’ needs were ignored when the downtown was being built and only now, in a time of slowed development, is the city attempting to fit activities into the existing landscape.

Yet many in the tourism industry have faith that the new convention center will succeed.

Consultant Leonard said it will take time. “Hopefully, we will have no more earthquakes and no more riots, and weather will be wonderful here and terrible in the rest of country.

“Obviously, things don’t work that well, but you have to be optimistic,” he said.

Hacker of the International Assn. of Exposition Management said he is staking his reputation on the center’s success. He has already booked it for his group’s 1996 convention.

The Expanded Convention Center

Space

Meeting and exhibit hall space before expansion: 373,000 square feet

After expansion: 805,000 square feet

What was done

New: south exhibit hall and meeting rooms, south and west lobby pavilions, concourse hall and meeting rooms, a 300-seat theater, two restaurants, kitchen, show offices and executive conference center.

Remodeled: west halls and lobby, meeting rooms and food service areas.

Expansion Project

Total project cost: $500 million

Construction dates: July, 1989, through Fall, 1993

Tidbits

The project required:

* Steel--enough to build a monorail from New York City to Philadelphia (34 million pounds)

* Glass--enough to build a crystal replica of the Washington Monument (171,500 square feet)

* Concrete--enough to build an 8-foot high, 6-inch thick wall from Los Angeles to Las Vegas (150,000 cubic yards)

* Pipe--laid end-to-end, it could stretch from the convention center to Ensenada, Mexico (1.3 million feet)

* Electrical wire--enough to stretch from Los Angeles to Alberta, Canada. (8.2 million feet)

* Copper telecommunications wire--enough to go from Los Angeles to London and back (10,500 miles)

Source: Los Angeles Convention and Visitors Bureau


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