Conventions still sluggish

By Kelly Yamanouchi
Advertiser Staff Writer

Even if general tourism rebounds significantly, business from major conventions could continue to lag for several years. Advertiser library photo Annual convention numbers Expenses $26.5 million — debt service $12.4 million — operating expenses $5.6 million — promotion $1 million — major repair work $2.5 million — reserves for unanticipated expenses Total: $48 million Revenues $9 million — operating revenue $30 million — hotel room tax revenue $27 million — other tax revenue $326 million — convention-related visitor expenditures Total: $382 million Estimates based on 12-month fiscal and calendar year figures Source: Hawai'i Tourism Authority

With such daunting numbers on the balance sheet, convention center marketers are struggling to attract enough events to keep millions in rent, tax revenue and visitor dollars coming in.

About 34 major meetings are scheduled at the center this year, including those for the International Association of Dental Research in March, and the American Psychological Association and National Association of Letter Carriers in July, according to the convention center's latest schedule.

All told, the 2004 events are expected to bring in about 107,715 delegates and generate about $326 million in visitor spending and roughly $27 million in tax revenue, not including hotel room taxes.

The number of 2004 meetings is fewer than the 40 events held at the center last year that brought in about 132,696 delegates and $361 million in visitor spending, including nearly $31 million in tax revenue.

Center officials, however, are confident the year will end profitably, particularly since several events last year were late bookings confirmed just months in advance.

If the late-booking trend continues this year, " '04 is going to be fine," said Joe Davis, convention center general manager.

The center will still fall short of the large, citywide conventions that are booked years in advance. Last year's largest conventions included a meeting of the American Association of Orthodontists that drew about 17,000 to the Islands.

SMG, the state's convention center marketing firm, hopes to fill in the 2004 spaces in the calender with smaller meetings. But some state officials say they are worried about future years.

"When we don't have the business in the convention center, it hurts O'ahu big time," said Marsha Wienert, Gov. Linda Lingle's tourism liaison. "The question is, can they fill in the pukas with the kind of business we need?"

Bob Yarnall Jr. of Pennsylvania was in town earlier this month for the American Farm Bureau Federation's annual meeting, the first convention he has attended in Hawai'i.

"This is probably one of the better convention centers we've been at," Yarnall said. "The location, the proximity to all the different things, it's just great."

At the same time, Yarnall wasn't looking forward to the trip home. "We'll be on an almost 12-hour flight on the way back," he said.

The long distances to and from Honolulu is a frequent complaint about Hawai'i conventions, and that hasn't been helped by continuing sluggishness in business travel.

Conditions may be about to improve. Domestic business travel, which declined about 3.7 percent in 2003 nationwide from year-ago levels, is projected to increase by 4.2 percent in 2004, according to the Travel Industry Association.

But because most large meetings are booked years in advance, the convention business won't reflect the recovering economy as quickly as will the tourism trade.

Even as the economy improves, the convention calendar may stay light on major events. Years 2005 and 2006 in particular are "a huge concern for all of us," Wienert said. "It's going to be a big struggle."

Only 18 events are scheduled for 2005, 15 for 2006, 13 for 2007 and 4 for 2008 — all far below the center's capacity.

"We would like to get to a point where we have 45 events a year," said Lloyd Unebasami, Hawai'i Tourism Authority chief administrative officer.

"We've got some soft spots in there," Davis acknowledged. The SMG staff for the convention center, part of a Philadelphia-based company, took over marketing of the center in 2003 from the Hawai'i Visitors and Convention Bureau.

Before the $350 million convention center opened in 1998, consultants projected the facility would host 30 events in the first year and grow to 60 events by 2008. Expectations were later lowered.

The state is spending about $48 million this fiscal year on the convention center, including $5.6 million to promote it, about $26.5 million to cover debt service on bonds sold to pay for construction, roughly $12 million for center operating expenses and $4 million for nonoperating expenses.

Operating revenues are expected to total $9 million. State officials also apply a portion of the hotel room tax revenues against the debt service due on the bonds sold to build the convention center. The convention center business contributes about $30 million of the $183 million in hotel room tax revenues each fiscal year, according to the Hawai'i Tourism Authority.

The authority also points to convention-related visitor spending of about $326 million in evaluating the center's performance, as well as an estimated $27 million in other tax revenue generated by meeting participants and their families.

"There are very few convention centers throughout the United States that, when you plug in the debt service for the building, would operate at a profit," said Rex Johnson executive director of the tourism authority.

"Really what you want the convention center for is to bring the people to generate all the external revenue," he said.

SMG's marketing contract runs through June 30, 2006, and the center's financial fortunes in the remaining years could play a role in any renewal of the agreement.

For now, tourism officials are heartened by Hawai'i's improving visitor arrival numbers. "This is going to be one of our better years," Unebasami said.

What no one can say for certain, however, is when that will translate into better days for the Hawai'i Convention Center.

Reach Kelly Yamanouchi at 535-2470, or at kyamanouchi@honoluluadvertiser.com.