Introduction
Whether to come up with new or refurbish existing convention centers in different localities is the question decision-makers are toying around with across the entire country. Several of the existing convention centers are not working at their full potential. As the availability of these centers continues to increase, the rate at which they are being used has continued to reduce in the recent years all across the united state as well as Canada. This is what has led to the apprehension of policy makers, citizens as well as private developers to question whether this industry is overbuilt? (Fenich, 2008).
As the hospitality industry grows, the more relevant question revolves around competitive advantage, which tend to question whether a freshly built convention center can be able to effectively compete with the existing ones? This paper tries to look at the growth of convention centers across the United States amid limited business opportunities in the hospitality industry.
Industry Overview
The convention as well as meeting industry has progressed dynamically from an insignificant one to a well organized and mature one that plays a major role in the national economy. In 2003 alone, the convention industry expenditure shot to a whooping $103 billion according to the estimates provided by the industry council. It’s believed that this industry is mutating a new stage of its lifecycle. The swift growth in the provision of display space has been responsible for the industry’s swift growth. This is evident from the fact that unlike before when groups lacked exhibition arenas, now there are so many centers willing and able to host them, (Fenich, 2008).
The convention centers industry has come of age and established itself due to the fresh demands driven by several aspects such as overhaul of the general design of the facility, the cost of transport, availability of resources for event promotions, the exploitation of face-to-face meetings in some industries as well as the national economy’s general growth trends, (Jaquetta, 2009).
The key to success of any facility in this industry is its competitive advantage; this is one of the hallmarks of a mature industry. Having vital advantages over their rivals is what makes new expansions successful in other mature industries. Technology, marketing efforts, facility design as well as location are some of the aspects that make certain mature industries have advantages over others. Nationally, the availability of convention centers is currently above and beyond the demand for them. This has made it even more difficult for cities to find niches in the market as far as conventions as well as meetings are concerned by merely relying on strategy alone.
To be able to do well in the current market, a convention center ought to have very high standards in order to be able to battle in the ever so competitive even business. The losers as well as the eventual winners are determined by their competitive advantages. For any convention center that is put up to do well, it has to be competitively positioned in terms of design, price, location, amenities, management as well as marketing, otherwise it might not be able to generate enough finances to sustain itself leave alone having an economic impact on its immediate community.
There is no doubt that the industry is mature as indicated by the trends in demand and supply of convention centers. As an industry attains maturity, the steady swell in supply is not necessarily complimented with a similar increase in demand; instead there is a saturation effect that occurs whereby any additional supply can either dilute the demand further or dominate fellow competitors by taking away their existing demand. Any new supply in any mature industry usually doesn’t offer any additional business as there is lack of new demand for it. Therefore, any new convention center should be geared towards competing for the already existing business. The convention center business is currently characterized by this dynamic trend in the entire convention center industry across the country, (Fenich, 2008).
At the moment, supply growth is gradually beginning to exceed demand growth countrywide as indicated by the annual data collected by tradeshow week that handles supply as well as demand of major convention centers across the U.S. as well as Canada. According to the available data, there is sufficient evidence that indicates there has been a gradual decline in demand whereas there has been an increase in supply for the last three years. According to the data available, this kind of trend has not been witnessed in the past thirty-two years in the convention center industry, (Fenich, 2008).
Despite having the industry data, it’s not comprehensive enough to precisely illustrate the present levels of demand and supply in the convention centers industry. Therefore it’s not easy to correctly tell when some convention centers become obsolete. Closed facilities in the past year have been removed from the database by the Tradeshow Week; however, there are buildings that still remain open despite becoming obsolete in terms of having been convention centers. Because of this, there is every possibility to the effect that supply could be overstated. Since the database provided by Tradeshow Week only provides information of most important exhibit halls, there are several other much smaller convention centers that do exist across the country including Canada with as little as 25,000 square feet of space. Therefore this could also lead to the supply being underestimated. Despite all these shortcomings, the Tradeshow Week offers the most current and dependable data on demand as well as supply in the convention centers today.
The Drifts in Supply
In U.S. and Canada, display space is offered by different types of facilities; Trade centers, exposition centers, convention centers as well as fairgrounds are some of the main providers of exhibit space. The main exhibit halls offer space to the tune of 80.5 million square feet of exhibit space in the United States as well as Canada.
Down from 269 to 431, key exhibition centers have increased since 1986 with new facilities coming up according to the Tradeshow week data available. The last two decades have witnessed the available space double with an average growth of 3.4% in the 1980’s. But during the 1990’s the annual growth rate decreased to 3.0%. But since 2000, there has been a resumption of swift growth of convention centers in the industry climbing to a high of 4.9% growth rate in the past five years. However, this trend might slow down to a much slower growth rate of 2.0% in the coming three years annually according to projections based on project construction as well as planning efforts that are in progress currently.
The Extensions/ Expansion and New Construction
Several convention centers are either under construction or plans are underway since the printing of Tradeshow Week’s key Exhibition Hall Directory towards the end of August in 2004. Among the biggest new constructions undertakings in the convention center industry is in Tunica and Mississippi, while the biggest expansion project is being done in New Orleans. Apart from these major locations, there are other smaller additional projects underway though not included in the official data available which eventually will add to the existing number of convention centers. (Fenich, 2008)
Over 1.8 million square feet is expected to be added to the existing exhibit space in about 10 key convention center plans in 1st tier, 2nd tier suburban as well as resort markets. Planned throughout the U.S. as well as Canada are also a number of additional smaller projects. All these planned convention centers both big and small will add to the existing space more than 2.3 million square feet of additional exhibit space. Likewise, an additional 2.0 million square feet of display space is under development and will be officially launched in several major centers in 1st, 2nd tier as well as resort markets, (Jaquetta, 2009).
The Drifts in Demand
The demand in the industry of convention centers is determined by the number of consumer shows, conventions as well as the tradeshows that take place every year. Tradeshow Week has been able to follow these events since 1989 and was able to determine that not less than 5,000 net square feet of display space is used. From this figure they are able to establish the demand trends in the industry. (N. R. Klein field)
Though there are year to year disparities in the annual exhibition events, there was a steady rise from 3,289 in 1989 to 4,779 events in 2004 which reflects into 2.5% growth rate over the last fifteen years in the number of exhibition events. The other measures used to determine the trends in demand in the industry include: attendance, amount of space rented also known as net square feet (NSF) and finally the number of exhibiting firms. Referred to as business to business events, Tradeshow Week usually carries out quarterly surveys to establish trend in these three indicators of demand in major tradeshows. It’s estimated that thirty thousand net square feet are used as exhibit space. Whereas this figures show long term demand trends in the industry, it does not include every event that makes use of display space a convention centers.
When demand is evaluated in decades, it shows that there has been a steady decline in demand since 2000 due to the increase in supply in the past years that has exceeded demand. Therefore demand growth has declined due to the acceleration of the growth in supply, (N. R. Klein field).
The Utilization Factor
As far as convention centers are concerned, one can calculate the utilization factor through expressing the ratio of demand to supply. Just like in hospitality industry, performance is measured by use of occupancy rates. In any convention center, utilization factor determines the percentage of gross exhibit space that is utilized throughout any given year. The gross square feet days involves the entire exhibit space made use of in an event comprising aisles as well as other exhibit space not resold to the exhibitors. Therefore, a simple ration of 2.0 is used to convert between net square feet days and gross square feet days, thus making the event organizers resell half of their venue’s floor space to exhibitors. This is what makes it possible to articulate an industry utilization factor as the ratio of demand to supply based on gross square feet days, (N. R. Klein, 2009).
Conclusion
The present figures of supply and demand depict the convention centers industry as a mature industry. The outpacing of growth in supply of space to its demand will result in passionate competition in the prevailing convention facilities so as to attract high-impact group business. In the long term, this industry will continue to grow; however there are likely to be losers as well as winners as these centers are no standardized and there is lack of accurate data for market share analysis that can precisely project the industry’s full performance potential. Therefore, the performance of this industry will rely on its ability to have competitive advantages to outsmart its peers, (Fenich, 2008).
With new centers coming up, there is every likelihood of them doing better than their much older counterparts if they can position themselves well in terms of location, pricing, market conditions, booking policies, amenities existing tourism infrastructure as well as destination appeal. All these are some of the factor that can give a competitive edge over the already existing centers that might lack one or several of the above mentioned factors that could eventually determine who wins and who loses in this very competitive industry that has the supply outpacing its demand. Therefore, it is most imperative now than ever before to carefully assess the practicability of a convention center or any other public assemblage facility due to its aggressive position in the market today, (N. R. Klein field).
References
Fenich, G. G. (2008). Meeting, Expositions, Events & Convention. New Orleans: Prentice Hall.
Detlefsen and Nina Vetter. Conventional Centers. Web.
Heywood sander. The growth of convention center in the US. Web.
Jaquetta White. Convention centers. Web.
N. R. Klein field. The issues depicting conventional centers. Web.