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Conventional Wisdom

A business forecast for the San Diego Convention Center shows that event-related hotel bookings have increased since the it’s in-house staff took over marketing the under-utilized facility in the summer.

According to a projection last week by Fred Sainz, the vice president of public affairs for the Convention Center Corp., 625,262 nightly hotel-room rentals have been booked for conventions in 2005 vs. 612,588 in 2004.

The hotel-room-night goal for the upcoming year is 700,000; for this year the bar was set at 650,000. However, studies have shown that roughly 30 percent to 35 percent of conventioneers stay at hotels outside the official room block.

Taking that into account, there could be as many as 812,841 room nights booked in 2005, compared with 796,358 in 2004, according to the report.

The report also shows the 58 conventions scheduled for 2005 are expected to generate an economic impact of $1.06 billion, or 11.6 percent more than $955.3 million during the current year.

While the average daily hotel-room rate that conventioneers will pay is expected to increase by 2 percent to $205.56 in 2005, revenue from taxes is expected to be up 11.6 percent to $22.9 million. On average, the nightly hotel-room rate throughout the county currently stands at $115.

“By the end of November, the convention center’s sales team had booked 342,585 room-nights for future years, toward a goal of 850,000,” Sainz said. “That compares with 252,857 by the (San Diego Convention & Visitors Bureau) sales team at the same point last year.”

Convention attendance is up nationwide because of a growing economy and increased air travel during the past year or so. But Sainz also said that the center’s sales team , hired from ConVis after a cash-strapped City Hall shifted the marketing task to the convention center to shave funding costs , has an easier time closing deals than it did before.

“The decision-making process is much more efficient because it used to involve two parties,” Sainz said. “ConVis would get a lead on a convention and then come to the center to get the block and then give that information to the client, and there was a lot of back and forth and it took longer to conclude.

“But now that we’re in charge of everything, there’s one single point of contact, so things move more quickly.”

Ed Netzhammer, the general manager of the 511-room Omni San Diego Hotel, which opened in April, said its convention-related business would be better next year, though he didn’t have an exact figure.

“We expect very strong gains, both in the fourth quarter of 2004 and 2005,” he said. “When a piece of business hits 2,500 rooms or more, we know they’re going to use us, so we can see from the pre-sales the convention center did that we are in for a lot more business in 2005.”

Ray Warren, the general manager of the 1,362-room San Diego Marriott Hotel & Marina, said its bookings from conventions for 2005 are on par with 2004.

“But you have convention attendance going up and the groups that are coming are spending more money,” he added.

While San Diego is considered a top-tier convention city, there are some “challenges” to overcome, Sainz said.

Several convention centers in the city’s “competitive set” have expanded in recent years or plan to, including ones in Dallas, Denver, Las Vegas, New Orleans, Orlando, Phoenix, San Antonio, San Francisco and Seattle, he said.

Last week, the Colorado Convention Center in Denver opened its 584,000-square-foot facility, which was expanded from 300,000 square feet.

“By 2007, our national competitors will have almost doubled their exhibit space,” he stated in the report. “Our West Coast competitors will be a staggering 85.2 percent larger than they were in 2000.”

In the meantime, the San Diego Convention Center has the lowest city subsidy among its chief competitors, which prevents it from substantially discounting rates and offering rent-free space as the others do to lure business, Sainz said.

“It’s not gloom and doom, though,” he added. “No other city has all the advantages that San Diego has, a fantastic facility and great hotels and a destination that everyone wants.”

Having the 1,200-room Hilton San Diego Convention Center Hotel built within the next few years, as it’s proposed, will also help bring in more large groups, he said. But one of the chief tasks facing convention center executives is to “educate” the City Council on the need to increase the agency’s subsidy or risk losing business, he added.

“We’re at a fundamental fork in the road here,” Sainz said. “Other cities have centers larger than ours and have clearly identified (rent-free space) as a very productive loss leader.”

Mike McDowell, the executive vice president of the San Diego Lodging Industry Association, which spearheaded a campaign that helped to defeat a proposed 2.5 percent hike in the city’s transient occupancy tax to 13 percent, agrees.

“The income a center gets for renting space is small compared to what a city gets from the (transient occupancy tax) revenue and economic impact of a large citywide convention,” McDowell said.

To boost business at the 2.6 million-square-foot waterfront facility, which opened in 1989, and was nearly doubled in size in 2001, its sales team launched a campaign in early November to lure corporate meetings to fill in some gaps in future convention bookings, Sainz said.

Since corporations put their plans in place closer to the events than large trade and professional associations, which ordinarily book several years in advance, the idea is to snag some additional deals in the near term, Sainz said.

However, it’s too early to gauge the results of that effort, he added.

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