Chances are you haven’t given much thought to the relationship between the government agency that runs San Diego’s Convention Center and the private group that markets the city as a tourist destination.
One group operates a building dedicated to visitors; the other tries to bring visitors to town. You’re forgiven for thinking they’d be complementary players in the city’s tourism effort.
They’re engaged in a years-long struggle over who handles certain responsibilities. Attempts to expand the Convention Center only made things worse.
The Tourism Authority is a private nonprofit group run by tourism-related entities that markets San Diego as a destination mostly through the roughly $25 million it collects each year on a tax it charges hotel guests.
The San Diego Convention Center Corporation is a city-owned nonprofit that runs the day-to-day operations of the Convention Center.
We Stand Up for You. Will You Stand Up for Us?
"Private control over Convention Center’s booking will allow (the Tourism Authority) to direct smaller events to hotels, instead of the center. Hotels would reap those profits."
Isn't that business and revenue that could be going to the convention center, but isn't? The convention center already isn't generating enough revenue to cover maintenance expenses, so hotels siphoning off potential convention center business would have the effect of increasing the cost for deferred maintenance to the convention center to the city and its taxpayers.
Andy: The "beef" runs even deeper right now as it relates to the expansion and the fight for control. It's a bit complicated, so please bear with me.
The Marriott is close to finishing a major expansion that has created lots of new convention space, so it will soon be able to discount or give away that space as an incentive to conventioneers to book their rooms, food, booze, etc. right there. It's next door to the existing convention center, which makes it an even better location and gives it a competitive edge over more-distant hotels, but it also puts the Marriott in competition with the convention center. The convention center is disadvantaged because it cannot give away its space and has nothing else to mark up and sell in exchange for giving away free space as an incentive. What we're left with is the marketplace -- read: Marriott -- both disproving the claim that the convention center expansion "must be contiguous," while simultaneously driving down the price that the convention center can fetch for its space (via more space supply).
Then you've got the JMI hotel option, which involves creating a non-contiguous nearby expansion on the other side of Harbor Drive, and would also create a relatively large space for conventioneer use. If that goes forward, the marketplace will again be providing more non-contiguous convention space and putting downward pressure on convention center pricing. But even if it doesn't, we've got the Marriott providing a lot of the new space that the proposed contiguous expansion would have provided.
Is this additional market-provided space a bad thing? It's not bad from an environmental or a taxpayer-funded-expansion standpoint. It doesn't involve expanding the existing convention center's footprint on the waterfront, and it's being financed by private money; those are both good things. It might decrease net revenues to the convention center due to lower pricing; how much I do not know.
Addressing the "beef": The problem is that the market-provided new space -- whether it's the Marriott/JMI or it's just the Marriott -- is bad news for the hoteliers who aren't as close to the existing convention center and/or cannot expand to provide significant new space on their own sites -- which is to say, almost all of them. They're the ones who've been pushing for a contiguous expansion to boost the visitors coming here and staying in hotels -- under the false flag of needing to attract larger conventions under one roof -- and they're the ones who dominate the SDTA and the Tourism Marketing District boards.
The people who run the convention center -- people who are not quite as close (but are still relatively close) to hoteliers -- are the only ones managing a public asset. They're feeling pressure from the SDTA/TMD hoteliers to expand, but thanks to the Marriott (and maybe someday thanks to JMI) the convention center board sees less pressure to provide more space in order to achieve a high level of year-round occupancy. I'm told that the convention center is operating close to capacity -- or it could be operating there with a little hotelier cooperation (see below) -- but is unlikely to see any significant increase in demand for mega-conventions needing more contiguous space. In other words, there's not enough demand for new large same-site convention space to justify a contiguous (and expensive) expansion.
However, there is the potential to increase the number of small and mid-size conventions in San Diego. Such conventions could be accommodated in a larger contiguous facility, but that creates problems with overlapping set-ups and tear-downs because there's only so much logistical space for big rigs etc. Such conventions are accommodated more easily by multiple smaller, non-contiguous facilities because then you don't have the set-up and tear-down conflicts. They can be accommodated by the existing convention center, the Marriott, and potentially the JMI option. But if you're a hotelier who wants to see more convention space NOT tied to a hotel -- because you're not capable of being such a hotel yourself and thus don't get those profits for yourself -- you're going to oppose any non-contiguous proposal, whether that's in the form of your competitors remodeling their hotels to provide give-away convention space or through a joint-use facility with the Chargers. The problem is there's not much you can do to stop your competitors from remodeling their own spaces, and opposing their efforts would make you the anti-Christ in their minds (trust me on this one). So the only realistic option is to vehemently resist the joint-use plan and advocate for preservation of the downtown neighborhoods and community character (you see the hypocrisy here, I'm sure).
How else do hoteliers who don't want to see such competition prevent it or minimize its impact on their profits? They get control of the convention center and discount the rates it charges in exchange for commitments by conventioneers to book at their hotels. This, of course, is bad for taxpayers because we're on the hook for the convention center's bond payments, deferred maintenance, current ops, etc., but the hoteliers don't give a damn about that; they care about their own private bottom lines. The convention center will be their loss leader, and you and I will pay for it.
And how the SDTA/TMD hoteliers get control over the convention center after years of praising its management? They gotta portray the management as no longer doing a good job. And can the hoteliers do that when you're not the management? They take steps to make the data look bad.
Remember that the conventioneers need rooms for the convention-goers. So the SDTA/TMD hoteliers who want to show the existing management not doing a good job refuse to make their rooms available. That's what's happening now. The SDTA/TMD hoteliers, who from a moral standpoint are supposed to be the city's/taxpayers' partners in the convention business, are holding back rooms so that the management won't be as successful as they have been. If the SDTA/TMD hoteliers can get control of the convention center, they can use their new managerial positions to manipulate the data so that it "proves" a need for a contiguous expansion paid for by the city's taxpayers. And if the convention center provides a large-enough contiguous space, that will create an economic disincentive against future renovations to create on-site space at individual hotels. Crisis -- read: free competition in the marketplace -- averted!
It's basically a hotelier-perverted tragedy of the commons in which the collective doesn't trust its members enough not to screw the rest of the collective. The faux free-market lovers are actually afraid of their colleagues and are trying to manipulate the marketplace, on the public's dime, to create disincentives for competitors and to shore up their own bottom lines.
(Full disclosure: (1) I don't know for sure that the convention center is running close to capacity or could be with a little SDTA/TMD cooperation. I don't know for sure that the SDTA/TMD hoteliers are holding back rooms. In both instances I'm parroting what I've heard from people who are likely to know the facts, and I encourage any who cares to confirm what I've been told with people in a position to know. (2) I don't work for JMI. I have taken no position on the merits of the JMI proposal because no details have been shared with me. I have said publicly that I appreciate JMI's willingness to propose alternatives (admittedly superficial) for discussion purposes without repeating the same it's-gotta-be-contiguous drivel.)
@Cory Briggs Very well stated. Basically a truism is that when large private business interests take control over a public asset such as the convention center or any similar asset paid for by the city tax payers they tend to use it for their own benefit at the tax payers expense. This is especially true in San Diego. Of course this is what the Chargers have been doing with the stadium. This is one reason both of these structures have a huge amount of deferred maintenance. Then these business powers want a complete new structure that they can again further exploit at the tax payers expense. To top it all off the voters in San Diego are simply ignorant of this situation or just don't care about it. Keep in mind that San Diego only has two significant industries which dominate the economics of this second largest city in the largest state of this country. That is of course the defense/military and tourism. Both of these industries are run by non-local involvement. They use San Diego because the people who actually live here and are responsible for its financial well being are seemingly apathetic or just plain too stupid to care.
As a city we place too much emphasis on the very low paying tourism jobs. For most of our history these jobs are just part of our low paying immigrant situation in Southern California urban areas. In the long run exploitation of this type of labor just comes back and costs the tax payers who indeed subsidize the industries that exploit them. This particular convention center mess is a perfect example.
Thanks Cory for taking the time to explain the other side of this mess.
"More business at hotels means more tax dollars into city coffers, the hoteliers contend. In essence, hoteliers argue what’s good for the hotel industry is good for the city."
By that logic, Qualcomm Stadium is also good for the city. But in both cases you have to ask whether the benefit justifies the cost. Be sure to factor in the opportunity cost of the capital and the land.