MostlyTrue

Statement: “San Diego’s Convention Center is fully booked,” Jim Desmond, mayor of San Marcos and a member of the Airport Authority, wrote in an Oct. 13 letter to Voice of San Diego.

Determination: Mostly True

Analysis: San Diego leaders have been on a years-long quest to expand the Convention Center.

Expansion boosters have said the current space is too small and a larger footprint is necessary to keep it competitive over the long haul.

San Marcos Mayor Jim Desmond, who serves on the San Diego County Regional Airport Authority Board, seized on a common argument among expansion backers in an Oct. 13 letter to Voice of San Diego.


We Stand Up for You. Will You Stand Up for Us?

“San Diego’s Convention Center is fully booked,” Desmond wrote.

That’s mostly true. For a number of good reasons, convention centers rarely, if ever, achieve 100 percent booking and San Diego’s Convention Center firmly fits into the industry standard for a fully booked site.

Convention spaces can remain open for a couple days between bookings because of the time it takes to set up and tear down complex events. It’s common for one convention to leave one day and then for another to start a couple days later so organizers can take advantage of available space and prep time.

That’s why a Convention Center can be considered fully booked even when a passerby might spot open exhibit halls or meeting rooms on a random weekday.

Industry experts say the standard for a fully booked convention center is around 70 percent occupancy.

Here’s how PricewaterhouseCoopers, one of the experts I spoke with, summed it up in a recent report:

It has been recognized industry-wide that the “practical” maximum exhibit hall occupancy rate is approximately 70 percent and the “efficient” range is considered to be approximately 50 to 60 percent. Occupancy levels less than 50 percent generally suggest the existence of marketable opportunities or open dates, while an occupancy rate above 60 percent increases the potential for lost business or “turn-aways.” 

Here’s how the San Diego Convention Center has performed in the last seven fiscal years. These numbers are in percentages.

And this is a month-by-month look at how the Convention Center performed over the last year, also in percentages.

So booking data from the San Diego Convention Center Corp. shows the space has reached occupancy rates as high as 80 percent in the early summer months. Overall last year, the facility reported a 65 percent occupancy rate. This supports Desmond’s argument, even though the occupancy is never 100 percent.

How the Convention Center gets to its occupancy numbers also matters, especially as boosters make their case that an expansion would be a boon to the city’s bottom line.

It turns out that the Convention Center sometimes discounts its rates, which could affect how much taxpayers have to subsidize center operations.

San Diego’s independent budget analyst noted in a May review that the Convention Center planned to offer $5.1 million in rent discounts this year to attract certain conventions and trade shows. This number isn’t easy to pull every year but we know the Convention Center reduced rents in 2009 too. Center employees say those incentives ensure San Diego’s Convention Center can compete with other facilities.

We dub a claim mostly true when a statement is accurate but there is an important nuance to consider.

This ruling applies to Desmond’s claim that the Convention Center is fully booked. Its occupancy rates are close to 70 percent, the number many in the industry have decided equates with the need to turn away potential convention visitors.

At the same time, the Convention Center’s decision to offer discounts – and its argument that they’re needed to ensure the facility can compete with others across the nation – indicate there’s far more to the story about center performance than just the occupancy rate. The center cuts its rates to increase occupancy.

If you disagree with our determination or analysis, please express your thoughts in the comments section of this blog post. Explain your reasoning.

    This article relates to: Convention Center, Fact Check, News, Share, Tourism Economy

    Written by Lisa Halverstadt

    Lisa writes about San Diego city and county governments. She welcomes story tips and questions. Contact her directly at lisa@vosd.org or 619.325.0528.

    31 comments
    Mike
    Mike subscriber

    Wikpedia has an entry for US convention centers by size:

    http://en.wikipedia.org/wiki/List_of_convention_centers_in_the_United_States#By_size

    San Diego is 6th on that list.  The convention center expansion project's website shows that it plans to expand by ~57% in capacity.  If you do the simple math using these figures you'll see that 57% won't even put San Diego anywhere near 1st on the list.  We'll be about 5th or maybe 4th at best.

    So why bother?  Why spend all this money just to be 4th best?  As the expansion proponents have always claimed, they need to get bigger to keep Comic-Con here.  But we all know Comic-Con is wildly popular and has been growing every year.  So if we're not the biggest convention center in the US then what would keep Comic-Con from moving to Chicago or Orlando in a few years?  Or at least threaten to move in order to negotiate a good price with San Diego?  By spending all this money and expanding a mere 57%, we're just delaying the inevitable (slightly) -- the day when Comic-Con threatens us to move again in order to get a better deal.

    Look at the wikipedia list.  We're already No. 6.  Does it really make sense for us to expand?  Which professional association or media group can really fill up a space as big as our current convention center?  We're already big enough to handle 99.99% of all potential events.  The Geneva Auto Show sure as hell isn't going to move here just because we have the space, and neither will Cannes. The Republican Convention took place last time in Tampa (way smaller than San Diego).  So why go the extra step just to cater to Comic-Con when the reality is we won't even be big enough to compete with all the massive centers above us?  If space is truly Comic-Con's first priority, then it is surely going to move with or without this expansion.  There's no need to spend $600M+ tax dollars just to delay the inevitable for a few more years.

    Steve Weathers
    Steve Weathers subscriber

    @Mike  Examine the list again and you will see that we are not 6th in terms of exhibition space.  You will also note that there are two privately owned centers, Sands and Mandalay Bay, that are connected to hotels.  If your group is large enough, books enough hotel rooms, and has a good attendee spending history you can get their rental fees greatly lowered and even, free.  A publicly owned facility is no different as filling hotels rooms directly brings money to the city's coffers through the room tax.  Expending some of that tax money to support the facility is just good return on investment.  The majority of the TOT in San Diego goes to the general fund which benefits all.  Comic-Con is the "poster child" of large conventions.  It's more well known in San Diego than say, the Hematology or Clinical Oncology meeting so it gets used as an example more often.  The expansion isn't about Comic-Con, it's about being able to land the several meetings that want to come here but can't because of our size.  And on the other occasions where we don't have a mega meeting we can book two or even three at the same time because of the flexibility.  San Diego is blessed because we have the amenities that make people want to come here giving our center an advantage over so many others.  We have three headquarter qualified hotels, Marriott, Hilton and Grand Hyatt, that no other city has and that is a big advantage.  The expansion is a good and necessary project for the city and port.

    Mike
    Mike subscriber

    Steve, that sounds nice and all when there are no numbers to support the argument. Please enlighten the public on how much return the city has been receiving from its current event bookings without padding the numbers with wild comic-con style guesstimates. Please also show us a list of events that would book here after expansion but absolutely cannot right now due to space constraints. The O&H conference you mentioned is holding theirs this year in SF, next year in Philly, and next year in Chicago. So are we to believe that a $600M expansion just to attract a conference that rotates cities is a good return on investment? How often are we going to get them? Once every 5 years? 10 years?

    You noticed that SD is not ranked #6 based on exhibition space only. So that means once we expand, we will be way lower than 4th on that measure and comic-con will still have plenty of cities it can threaten to move to. You did not dispute that Comic-Con will inevitably move with or without this expansion. Unless we see a list of other events that we can get behind, we still believe that expanding the convention center is a bad idea.

    Steven Croft
    Steven Croft subscriber

    The center does not even break even as it is. A huge backlog of maintenance costs are waiting to be taken care of that have no funding.  making it bigger at taxpayer expense and continuing discounting rates to give it an unfair  advantage that brings in customers but doesn't even cover costs . It sounds like a business plan developed by China to monopolize the market. Other rental spaces that are privately owned business have to make a profit to stay in business the convention center should have to follow the same rules or lease the space to someone who can operate it correctly.

    Could you imagine the uproar if a government agency built a hotel and rented the rooms at a loss to attract business away from private hotels. After taking away a majority of the other hotels customers at a loss they continued expanding using taxpayer money with the intension of continued discounted rates that will not cover costs.

    Janet Shelton
    Janet Shelton subscriber

    This seems like just another example of the old adage that figures don't lie, but liars figure.  I think the Voice needs to dig deeper into the numbers.


    Chris Brewster
    Chris Brewster subscribermember

    Thank you very much for conducting this review. I appreciate it. I have to question the numbers though.

    Apparently the review depends almost entirely on self-reporting of occupancy and self-assessment by the Convention Center, which is advocating expansion, but it doesn’t appear to me to withstand scrutiny based on the Convention Center’s reported capacity and their upcoming calendar of events.

    Regarding capacity, the Convention Center’s capacity maps indicate that the lowest level of capacity is banquet style seating and they can accommodate a total of around 29,000 this way (25,410 on the ground floor, 840 on the mezzanine (not including the terrace), and 2,800 on the upper level). They indicate they can accommodate about 3.5 times this number (100,000) in reception layout, so I have used the most conservative capacity numbers I could find.

    Now looking at their calendar of events for July 2015 (their biggest month with reported 80% occupancy), they list a “community event” with 900 people from July 1 – July 4 (I presume this is an example of discounted). Then the facility is entirely vacant until July 20 – 23 when there is a trade show with an attendance of 14,500. Then nothing until July 26 – 28 when there is a trade show with attendance of 1,600 people and finally a private event from July 27 – 29 with 2,200 people. That is three days with 14,500 attendance, three days with a maximum attendance of 3,800, four days with 900 people, and a total of 21 days completely vacant. How does this come close to 80% of capacity? By my reckoning that would be more like 10% occupancy.

    Since July is quite a way out from now, let’s use February 2015 as an example instead. In that month they assert an average 70% occupancy. They report that the largest event will be two days with 12,500 people. Next largest is a three day private event with 6,500 attendees and a one day event with 6,000. All of the other dates are events with 4,500 or fewer attendees (or none).  This in a facility with conservatively listed seating for 29,000 people? This appears to be around 13% capacity for the month.

    Based on the above, I question the determination and the Convention Center assertions.

    Geoff Page
    Geoff Page subscribermember

    The article stated: This ruling applies to Desmond’s claim that the Convention Center is fully booked. Its occupancy rates are close to 70 percent, the number many in the industry have decided equates with the need to turn away potential convention visitors.


    So, where is the information about how much business the Convention Center has had to turn away?

    Mike
    Mike subscriber

    Based on these numbers, the convention center can afford to increase their rent somewhat for certain events in order to lower their occupancy rate.  For the next 2-3 years, they can use this planned down time and increased rent revenue to fix all the maintenance & repair items that have been back-logged for so long.  With a better and nicer convention center, they can attract more events and maintain a higher rent for future years.  The current practice of maximizing occupancy rate, reducing rent, is a futile and short-sighted race to the bottom.  This is not a sustainable long-term strategy.  By the way, making the convention center bigger just to keep one client when there are plenty other clients still waiting in line is not a good strategy either.

    David Crossley
    David Crossley subscriber

    @Mike  --If they raise their rents, conventions will just go elsewhere, as rents are being reduced all over the country--including the largest convention San Diego has.  Comic Con has had their rent reduced by over half the last few years.  In 2010, they paid $300,760 in rent.  They now pay $150,000, and continue at that amount until 2016.

    Mike
    Mike subscriber

    @David CrossleyIf Comic-Con's negotiators are so good that they can keep paying us such low rents, does it really make sense for San Diego to spend a ton of money to cater to these guys?  Maybe money will be better spent trying to attract conventions who actually pay market rent for their events.

    David Crossley
    David Crossley subscriber

    @Mike @David Crossley  --True.  Also, according to (I believe) the NY Times, the average Comic Con visitor spends very little while they are here, versus convention visitors for many other conventions who spend considerably more per person per night.

    Jennifer Reiswig
    Jennifer Reiswig subscribermember

    Can you clarify what "occupancy" means? Looking at the calendar, in the next month there are 16 shows, with the biggest being 11,000 people. 11 of the 16 are under 3000 people. Is the convention center considered to be "fully booked" if it is occupied by 3000 people? You could fit most of those shows at a large convention-type hotel. 

    Chris Brewster
    Chris Brewster subscribermember

    Ms. Reiswig: Thank you for pointing this out. I tried to do a detailed analysis and posted it above. The fundamental problem here is we are relying on self-reporting of occupancy rates by the Convention Center. They don't seem to withstand scrutiny.

    Derek Hofmann
    Derek Hofmann subscribermember

    If the convention center's occupancy rates are so high that they "need to turn away potential convention visitors" as this article claims, then they aren't charging convention visitors enough. They should fix that instead of using it as an excuse to ask taxpayers for money to expand the convention center.

    Mark Giffin
    Mark Giffin subscribermember

    @Derek Hofmann 

    I get the same thing. Their pricing discounts are too steep unless of course they are trying to inflate attendance figures.

    they wouldn't do that would they.

    Bill Bradshaw
    Bill Bradshaw subscribermember

    OK, let’s agree that the convention center is “fully occupied”.  How much net revenue flows into the city treasury as a result?  I.e., when you take the rents and subtract maintenance and debt service, how much do the taxpayers make on the thing.  Hold it, don’t include estimated income from increased hotel occupancy that generates TOT, from restaurants that generate sales tax, or from theaters or other things convention center promoters toss into the numbers, all of which are simply WAGs (wild ass guesses).  I’ll guarantee you the number is negative.

    Now, explain to me how an expanded convention center with crushingly larger debt service on top of the debt not yet paid off is going to make this negative number into a positive one.

    In my youth, there was a car salesman, named “Mad Man Muntz” if my memory serves me correctly, who had a pitch on how he lost money on each sale but made it up on the volume.  If he’s still alive, he ought to sue the convention authority for stealing his pitch.

    Chris Brewster
    Chris Brewster subscribermember

    Mr. Bradshaw: I agree that the most elusive aspect of all this is the facts. I had hoped VOSD might dig into them, but I am worried they were bamboozled.

    Chris Brewster
    Chris Brewster subscribermember

    Mr. Bradshaw: I agree with your points, except that as Ms. Reiswig and I point out in comments above, the Convention Center's reporting of being occupied seems to be highly questionable. I don't think their numbers withstand scrutiny.

    Bill Bradshaw
    Bill Bradshaw subscribermember

    @Chris Brewster 
    Mr. Brewster, I believe you, Ms. Reiswig and I are coming at the same issue from different perspectives.  We all want to see whether there is any justification, based on current performance, to enlarge the thing.  I don’t believe any of us sees it.  The Convention Center Authority, if they have any competence, ought to be able to show the public a clear set of numbers that make their case.  

    They haven’t, but there are so many special interests that would benefit from the mere construction of a larger facility that it may not make any difference.  When Petco Park was being sold to the public by then-mayor Susan Golding, she created this “virtual” bunch of hotel rooms, 2500 I believe, that would magically materialize as private developers rushed to build hotels near the ballpark and, voila, the construction would generate new TOT sufficient to make the payments on ballpark bonds.  

    It didn’t happen that way, of course.  What happened was that a lot of construction occurred but it was mostly condos (on land deeded to John Moores at fire sale prices), and they are at best a break-even for the city in terms of revenue generated vs. service demands that impact the general fund.  Net result?  Eleven mil annually right out of the general fund for ballpark debt service.  If the public isn’t careful, we could have a similar situation with an expanded convention center.  

    steve peace
    steve peace subscriber

    @Bill Bradshaw @Chris Brewster

    Mr. Bradshaw,

    With all due respect your information concerning Petco is incorrect. Mr. Moores GUARANTEED the city's receipt of the projected TOT revenues in the Padre lease. In any year in which the TOT generated by the two hotels (Omni and Solomar) is short of the projected TOT the Padres must make up the difference. TOT revenues have, in fact, substantially exceeded this guarantee in recent years. There is a great deal of misinformation regarding the Petco project that is periodically repeated. I would be happy to sit down and discuss any questions you have. Feel free to contact me at speace@kteonline.com.

    steve peace
    steve peace subscriber

    @Bill Bradshaw @Chris Brewster Mr Bradshaw:

    Your information concerning Petco is incorrect. The Padre Lease GUARANTEES the City the revenue from the projected hotel rooms. In any year in which the TOT from the Omni and the Solomar are inadequate to meet that obligation the Padres must make up the difference. Those two hotels, built a promised, as part of the initial ballpark project have in fact met that obligation in all but one or two years. The City annually audits the Padre lease and would simply assess the Padres in any year in which the TOT runs short. There is a great deal of totally inaccurate information concerning  Petco. If you are interested in sitting down and discussing the finances, the projected and actual collateral development and the documented yield to the city I would be happy to do so. Feel free to give me a call.


    David Crossley
    David Crossley subscriber

    @steve peace @Bill Bradshaw @Chris Brewster  --Perhaps the revenue is short of the original projected TOT $$ since Moores lobbied the city to reduce the number of hotel rooms to be built in the area around the ballpark--and was granted that relief by the city.  Please explain why the city must pay down the ballpark bonds with general fund revenues.

    steve peace
    steve peace subscriber

    @David Crossley @steve peace @Bill Bradshaw @Chris Brewster

    Mr. Moores never sought, nor was he ever granted any relief from any of the obligations committed to in the Petco agreement. Mr. Bradshaw's information is simply incorrect. The City has received every penny it bargained for. While it is politically popular to circulate these campfire stories, it does not make them true. In rough terms, the Padres paid for half of the cost of Petco -- and they still carry that private debt on their books (the highest private debt in baseball when I last looked).  In addition, Mr. Moores assumed, and in fact paid for, any and all cost overruns, including those caused by time delays caused by specious and unsuccessful lawsuits. This left a fixed amount for the City to finance and totally protected the city from any liability for unknown costs. This fixed debt payment is the public debt to which Mr. Bradshaw refers. In addition to the private debt paid for by the Padres, the team pays rent to the City on a 30 year lease. In addition to the rent payment from the Padres, the City obligated Mr. Moores to jumpstart the collateral development around the park and enforced this obligation by making the Padres liable for any TOT shortfall in any year for the entire 30 year term of the lease. There was, I believe, a year or two in which this provision kicked in and the Padres were required to write a check to the City. But, TOT revenues have in recent years exceeded the guarantee. In addition, of course there has been over a billion dollars in development in East Village, far surpassing the most optimistic estimates. All of these developments produce tax revenue in addition to the TOT the has been produced from both the two hotels built by JMIR and others. Mr. Bradshaw raises legitimate issues concerning the convention center expansion proposal.  But, he diminishes his point when he passes on urban myths about the Petco finances. I am certain he does so with the best of intentions and I do not fault him for simply repeating often cited, but entirely inaccurate, factoids. 

    steve peace
    steve peace subscriber

    @David Crossley @steve peace @Bill Bradshaw @Chris Brewster

    Sorry David, I should also respond to your specific question as to why the City makes these payments from the General Fund. All TOT revenues, property tax revenues etc. go into the general fund.  I cant speak to how the City discloses or "trails" those funds or what decisions they have made or might make from time to time with respect to either special funds or redevelopment funds. But, the bonds are a general fund obligation of the City. 

    steve peace
    steve peace subscriber

    @David Crossley @steve peace @Bill Bradshaw @Chris Brewster

    It is safe to say that the City receives significantly more revenue from East Village TOT, property tax and the Padre lease than it pays in ballpark bond payments. That was always the plan. I do not know if Mayor Golding ever said that the only revenue paying the bonds would be TOT. It may very well be that the hotels built as a result of the surge created by Petco produce enough TOT to cover the entire payment. I do not know. What I do know is that one of the few things this City has done right in the past twenty years is the Petco agreement. There was a time when the Park was delayed and the market dipped that folks--in particular Mr. Moores who had assumed both the private debt obligation and liability for cost over runs-- could wonder whether or not this would work. But, by now the facts are the facts. Moores took a huge and unlimited risk. The City risked that portion (if any) of the bond payment not covered by the 30 year Padre lease and the TOT guarantee. I have not researched what that specific number is. But it would be fairly easy to figure out. Simply ask the City for the Padre annual lease payment and add that to the dollar amount of TOT that is guaranteed in the Padre lease. David, at the time this agreement was entered into I was in the Legislature and publicly argued that the Padres should stay in Mission Valley. I'm still not convinced that -- from a team perspective -- that the Padres would not be better off in Mission Valley. Petco is beautiful, but I was born and raised here and always thought that Mission Valley was a better family environment for baseball and I think downtown is a stretch for a lot of baseball fans. Having grown up playing ball down the bayfront in National City I also knew the ball would not carry in night games and I like offense. But, its pretty clear that I was wrong and Susan Golding was right from the city's perspective. You could never replicate the revenue generated for the city around Petco if it had been built in Mission Valley. The site simply cannot handle that kind of density. Sometimes in life you just have to look past the blinders that we all tend to put up when we put so much energy into a particular viewpoint. There is simply no credible way to argue that the Petco agreement has not been honored in every respect. Now, you can argue that there might have been another way to stimulate the massive revenue generating development that has occurred downtown. You can even argue that "all this development would have happened anyway". But, in a town in which we have screwed up the pension system, built airport terminals on the wrong side of the runway, failed to keep up with basic infrastructure, and continue to squander of our precious bayfront ... why can't we just take some pleasure in one thing we did right?

    David Crossley
    David Crossley subscriber

    @steve peace @David Crossley @Bill Bradshaw @Chris Brewster  --And without the ballpark, that TOT money could be used for other, more important things than helping to pay off a ballpark bond.  However, I do agree with you on one point--the Padres should have stayed in Mission Valley.  It could have been built in the land where Lowes and IKEA now sit.  The land was available at the time, but the Padres wouldn't commit to it.  Conveniently, that land was used for the stores above, and the Padres decided that downtown was where they wanted to be.  But Moores wasn't interested, and along with Larry Lucchino, wanted the club downtown, basically for the $$ that could be made not so much for the city, but for the club (with the ability to develop all of that area around Petco Park.  Moores has made untold millions from development, and then hundreds of millions more after he sold the club.  By the way, are you still affiliated with John Moores?

    steve peace
    steve peace subscriber

    @David Crossley @steve peace @Bill Bradshaw @Chris Brewster

    Yes I am still working with JMI. It was not ether Mr. Luchino or Mr. Moores who "insisted" on downtown. It was the City. Susan Golding appointed Pat Shea to head the ballpark committee and that committee drove the process. When the team looked at alternatives, the downtown site they liked was the old Lane Field site. But, the Committee and the Mayor were focused on using the Padres need for a ballpark to renew the most troubled portion of downtown.  And, as I said Ms. Golding and Mr. Shea turned out to be right. John Moores is not a real estate developer. He is a technology guy. When the city required the East village development as part of the ballpark deal Moores had to acquire a development company to even be able to do it. I will extend to you the same offer I extended to Mr. Bradshaw. I am happy to sit down with you and answer any question you care to ask. You are under no obligation to like anyone, but your criticism should be based on facts. I have skipped past a number of inaccurate assertions made in the chain above because I understand that many of these things have been repeated for many years and folks honestly believe them to be true. I am always available for a friendly cup of coffee and a spirited argument.

    steve peace
    steve peace subscriber

    @David Crossley @steve peace @Bill Bradshaw @Chris Brewster

    I should also reply to your assertion about new revenues that could be applied to other purposes. You leap to the assumption that there would be any new revenues without the ballpark. As I said this is a legitimate assertion, but that is all it is. We can never know what would have happen on the path not chose. But, what we know FOR CERTAIN is that, in the case, the path chosen produced results MORE robust than those predicted and that ALL of the promises made were kept.