Industry Update
Opinion Article17 January 2005

Convention Centers: Is the Industry Overbuilt?

By Hans Detlefsen, Managing Director of HVS Global Hospitality Services

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Introduction

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Across the United States and Canada, city officials and economic development decision-makers are wrestling with the question of whether to develop new or expanded convention center assets in their communities. Many existing exhibition facilities are not operating at or near full capacity. As supply continues to grow, the utilization rate of exhibit space in the United States and Canada has declined during recent years. Public policy makers, private developers, and concerned citizens wonder: Is the industry overbuilt?

As the industry matures, however, the more appropriate question becomes one of competitive advantage. That is, can a new convention center compete? This article argues that the convention center industry is now mature, characterized by aggressive competition. Facilities compete for limited business and only those with the best competitive positions will succeed.

Industry Overview

Over the past three decades, the meeting and convention industry has evolved dramatically from a budding industry to a mature one that has become an important driver of the national economy. The Convention Industry Council estimates industry expenditures grew to approximately $103 billion in 2003. The convention center industry is entering a new stage of the industry’s lifecycle. Rapid growth in the supply of exhibit space has allowed rapid growth in the industry, as groups that formerly had no appropriate exhibition venue available now have many facilities competing for their business.

As an established industry, continued evolution and growth will come not from latent demand sources, as occurred during the last few decades. Rather, industry growth will depend on new demand, which is affected by numerous factors such as the cost of travel, the importance of face-to-face interaction in certain industries, improvements in facility design, resources available to promote events, and overall growth trends in the national economy.

For the purposes of this article, the distinguishing characteristic of a mature industry is that competitive advantage is the key to a facility’s success. In other mature industries, such as shopping malls and movie theaters, new developments are successful only if they have important advantages over their competitors. These advantages are often related to facility design, location strategy, marketing efforts, and technology. As in these other mature industries,

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Related Document

Convention Centers: Is the Industry Overbuilt? | by Hans Detlefsen | HVS International

Across the United States and Canada, city officials and economic development decision-makers are wrestling with the question of whether to develop new or expanded convention center assets in their communities. Many existing exhibition facilities are not operating at or near full capacity. As supply continues to grow, the utilization rate of exhibit space in the United States and Canada has declined during recent years. Public policy makers, private developers, and concerned citizens wonder: Is the industry overbuilt?
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Hans Detlefsen

Hans Detlefsen, MPP, MAI, is Managing Director of HVS Global Hospitality Services in Chicago, which is dedicated to objective and independent hotel appraisals and consulting. His clients include major hotel corporations, investment banks, lenders, equity investors, owners, operators, tourism agencies, nonprofit organizations, state and local governments, and private developers.

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