Sin City Goes Conventional

Attending a trade show anytime soon? Pack some sunscreen and money for slot machines, because it’s a good bet you’re going to Las Vegas.

With three of the nation’s 10 largest convention centers, the gaming mecca has become a juggernaut in the trade show and convention business.

It’s sucking business away from meeting centers in Dallas, San Francisco, Atlanta, Chicago and beyond. Stiff competition between the city’s three 1-million-square-foot-plus centers -- combined with a slow economy and a convention space building boom elsewhere -- is helping to drive down prices for meetings nationally, as much as 10% to 20% by some estimates.

Los Angeles convention officials recently offered more than $100,000 in discounts to two shows -- a big nursing convention and a tech conference. But both ultimately picked Las Vegas, said Michael Collins, executive vice president of the Los Angeles Convention and Visitor’s Bureau.

Similar stories can be heard across the nation.

“Other cities are just scratching their heads,” said Mark Theis, a vice president with the San Francisco Convention and Visitors Bureau.

Some of the nation’s largest trade shows are held in Las Vegas. They include the annual tech confab Comdex, which even in recent down years still draws more than 100,000 attendees, and the Consumer Electronics Show, a showcase of everything from high-definition televisions to video-game consoles to camera phones.

The city’s roster of big shows is only increasing. The National Assn. of Home Builders brought 92,000 attendees to the city this year after meeting last year in Atlanta. And after 26 years in Dallas, the Promotional Products Assn. International in Irving, Texas, moved its annual confab to the Mandalay Bay Convention Center this year.

“We wanted a less expensive city,” said Steve Slagle, president of the trade group.

Las Vegas has easy airport access and is served by big discount airlines, including Southwest Airlines and JetBlue Airways, that keep fares relatively low. Indeed, air fares to Las Vegas have declined in recent months, according to the city’s tourism office.

Slagle figures the average room rate paid by convention-goers was $40 less per night than what they would have paid for an equivalent hotel in Dallas. Those staying at the Luxor Casino & Hotel, adjacent to the Mandalay Bay center, paid $89.

“The only hotel that we had in Dallas under $100 was a third-tier hotel far from the city center,” Slagle said.

Lower attendance at some of Las Vegas’ biggest shows have eased the scramble to find rooms. Room rates during the giant Comdex show this year, for example, “have gone down significantly due to more supply and less demand,” said Chris Meyer, director of convention sales of the visitors authority.

The Las Vegas effect is apparent in numbers published annually by Tradeshow Week, the industry’s trade journal. In 1990, Las Vegas accounted for 14.9% of the space rented by the nation’s top 200 trade shows. It was a distant second to Chicago, with an 18.8% market share.

By last year, Las Vegas had grown its share to 26.1%, almost double its closest competitor, Chicago. And that was before the 1-million square-foot Mandalay Bay Convention Center opened in January. The city’s other big centers include the 1.1-million square-foot Sands Expo and Convention Center and the 2-million square foot Las Vegas Convention Center.

The other big winner during this period is Orlando, which has a 9% share, up from just 1% in 1990.

The success of Las Vegas and Orlando reflects a migration of trade shows and conventions to Sun Belt climes supported by the infrastructure of large tourist destinations.

Both are expected to grow market share, but the dominance of Las Vegas will become even more dramatic, analysts say.

By capitalizing on its ample convention space, hotel rooms at nearly all price levels, weather, active nightlife and easy airport access, the city will steal as much as 4 to 6 percentage points more in market share of big conventions from its top competitors over the next several years, according to an analysis by David Anders of Merrill Lynch.

The goal, said Manny Cortez, general manager of the Las Vegas Convention & Visitors Authority, is to grow the number of people coming to Las Vegas for a convention from its current 14% of the city’s 36 million tourists to as much as 25%.

Cortez said the convention business is critical to the city’s long-term economic health. Analysts who follow major publicly traded casino companies say convention visitors helped sustain Las Vegas during a tourism slump over the past two years, helping to replace the decline in tourists from Asia and elsewhere.

Once seen primarily as a gambling destination, the city has greatly broadened its appeal to tourists and convention goers. Fine restaurants by famous chefs such as Bradley Ogden of the Lark Creek Inn in Larkspur, Calif. -- who recently opened an establishment at Caesars Palace -- have supplemented inexpensive buffet lines.

Entertainment expanded beyond the ubiquitous topless dancer reviews to offerings such as three different Cirque du Soleil productions at various MGM Mirage resorts, comedians such as Rita Rudner at New York-New York Hotel & Casino and the “Mamma Mia” Broadway musical at Mandalay Bay.

Shopping also exploded. The Forum Shops at Caesars Palace has become one of the nation’s most successful retail establishments.

All of this has changed the complexion of Las Vegas. Though gambling remains critical, resorts there now derive less than half their revenue from gaming.

Las Vegas tourism officials are relentless in letting the world know how the city is changing. They spend $138 million annually marketing its tourism and convention business, said Doug Ducate, chief executive of the Center for Exhibition Industry Research.

The next closest city is Orlando, with a budget which is more than $100 million less. Most of the top-tier convention cities spend $10 million to $15 million on marketing annually, Ducate said.

But it is more than marketing that will help Las Vegas increase its convention visitor census, Cortez said. No other city can match its infrastructure of meeting space and hotel rooms, he said -- a notion that others in the industry are starting to agree with.

“Las Vegas can put a convention in just one of its centers that we would have to spread across three buildings and a dozen hotels,” said San Francisco’s Theis.

It is even worse for Los Angeles, which, at best, can offer about 3,800 hotel rooms within “shuttle” proximity of its convention center, said Collins, the Los Angeles tourism official.

“Just the Mandalay Bay has 3,000 rooms connected to their center and they have more exhibit space than our $500-million facility,” Collins said. “You can walk back to your room in the middle of the day to make phone calls and do some work. And in the evening you can walk to a show, all without leaving the building.”

That doesn’t even take into account the 4,400 rooms at the Luxor, the 4,000 rooms at the Excalibur and the 1,125 rooms under construction at Mandalay Bay. All three hotels -- connected by a short tram route -- are owned by the Mandalay Resort Group.

The number of rooms adjacent to the Las Vegas convention centers give operators there a huge advantage over other cities, said Heywood Sanders, a professor and convention industry expert at the University of Texas in San Antonio.

Companies such as the Mandalay Resort Group or the Venetian, which owns the Sands, make an internal estimate of the potential profitability of a prospective convention or meeting, Sanders said. And then they can use multiple levers to attract the group -- adjusting the rates for renting convention floor space or the room rates charged to attendees -- based on how badly they want the business.

“They can make up a substantial chunk of that with food and beverage sales and with something that really can’t be done anywhere else: gambling revenue,” Sanders said.

Meeting planners are learning how to use Las Vegas to their advantage even when they eventually settle on another location, said Jim Kissinger, vice president of convention sales for the Anaheim/Orange County Visitor & Convention Bureau.

They get bids from one of the centers in the city and use competitive pricing to exact concessions out of other cities, Kissinger said.

“Our clients claim they are getting substantial deals out of Las Vegas, especially Mandalay Bay,” he said.

Las Vegas’ Cortez said Mandalay Bay will provide convention floor space virtually rent free to win a client, and he believes the Sands is doing the same. The Las Vegas Convention Center is run as a quasi-governmental agency and has less latitude in adjusting its prices, Cortez added.

It’s not that other cities are standing still. North American cities added 4.8 million square feet in new exhibit space last year, a 7.1% increase that brought the total to 72.4 million square feet, according to Merrill Lynch. That was the largest increase in a decade.

The building continues, with Philadelphia, Washington, Houston and Toronto all involved in projects that will bring them closer to the 1-million-square-feet mark that gives a venue a capacity to compete for the bigger and most economically lucrative shows.

Yet with the number of trade shows leveling, or even declining by most estimates, there is little demand for new convention floor space, experts say.

“The competition has never been as fierce,” Theis said. “And it is going to get worse as less meetings take place and there is more convention space than ever before.”

They all will be competing for a piece of the pie Las Vegas doesn’t snap up.

“We don’t believe that these cities will take significant business from Las Vegas given its comprehensive infrastructure and unique recreation and entertainment options,” Merrill Lynch’s Anders said.

Still, the convention business is so competitive that Las Vegas won’t be immune from the price pressures and other trends that plague the industry. Sanders said that the Mandalay Bay center only opened in January and it is still too early to tell if one city can actually be home to three profitable mega-exhibit halls.

“We could see an increasing competition level of intra-Las Vegas competition,” Sanders said.

Jessie Allen, general manager of the Orlando/Orange County Convention & Visitors Bureau, agrees. “When there are multiple venues within a single destination it becomes as much about competition between the three as it does about competition between cities,” Allen said.

And there are still many clients who are not enamored with Las Vegas marketing itself as an adult-oriented playground. “They either don’t like the atmosphere or they are worried that the gambling will be too much of a distraction,” said Kissinger.

Moreover, cities finding themselves with nearly empty convention centers that they have plowed hundreds of millions of dollars into are likely to become even more aggressive in courting business.

The Columbia, S.C., convention center doesn’t open until next year, yet its advertising materials already state: “Call today for discounted rates.”

Boston went a step farther in snagging the giant Macworld convention for 2004 from New York City. During the first two years of the event, Macworld will get the use of the $800-million Boston convention center at no charge. Additionally, Macworld planners will get free use of desirable city sites, such as the courtyard at the main public library, for VIP events.

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Why not to gamble on Vegas

Top 10 reasons that could be used to dissuade meeting planners from picking Las Vegas for their convention or trade show:

*--* 10. Keynote speaker will hit the Megabucks jackpot on her way to the conference and head for Cancun instead. 9. Attendees will confuse New York-New York Hotel & Casino for the real thing and worry about blackouts. 8. Street solicitors handing out cards for naked in-room lap dancers will tick off female conference goers. 7. Comdex already has the city booked. 6. Street solicitors handing out cards for naked in-room lap dancers will distract male conference goers. 5. Plastic surgeons convention will have to hide Siegfried & Roy. 4. Conventioneers will spend cab money on airport slot machines. 3. Bugsy Siegel memorial plaque at the Flamingo will inspire attendees to steal office supplies. 2. First-class restaurants have replaced cheap buffets, driving up expense reports. 1. Despite what they tell you, Elvis won’t be making an appearance.

*--*

-Jerry Hirsch

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Trade show dominance

Las Vegas had nearly twice the share of its nearest competitor last year in the market for renting out space for the country’s top 200 trade shows. And its market share is growing as it steals business from other cities. The shares for Los Angeles and San Diego were too small to be measured.

*--* City 2000 2002 Las Vegas 22.4% 26.1% Chicago 16.0 13.5 Orlando, Fla. 6.1 9.0 New York 6.5 6.4 Atlanta 6.6 6.2 Anaheim 3.2 4.2 New Orleans 6.2 3.8 Dallas 5.5 3.7 Louisville, Ky. 3.7 3.6 San Francisco 3.5 3.0

*--*

Source: Tradeshow Week

Los Angeles Times