Convention center feasibility studies: "The answer is always yes"

The latest issue of Forbes explains why cities keep building more convention space when the convention industry is shrinking. After one story of failure after another, we read this:

"The assumptions that go into feasibility studies are the problem," says Anne Van Praagh of Moody's. "The outside firms have no financial stake in the business."

Robert Canton, director of PricewaterhouseCoopers' convention and tourism practice, offers this defense: "We don't recommend to build or not to build. We're just being asked if there is a potential demand."

The answer is almost always yes. Out of 75 potential projects reviewed by the firm that Oregon hired, only 4 were deemed completely unfit. SAG partner Jeffrey Sachs says that is evidence of his shop's "objectivity." "You lose clients if you shoot down projects. They've already made up their minds by the time they come to us," he says.

Where do the experts get their rosy predictions? "We have to make a lot of assumptions. This industry isn't tracked very well," says Sachs. The most oft-cited data come from Tradeshow Week, which is owned by Reed Elsevier, a British company that also produces 430 trade shows. Its primary measure of the industry's health is its annual list of the 200 best-attended shows, making for a convenient survivor bias, and based solely on data from show managers who have an interest in masking serious declines.

Advisers' conclusions often fly in the face of logic. Consulting firm Convention, Sports & Leisure was hired by Cincinnati in 1999 to ask meeting planners what they thought of the city as a show destination. Only 39% answered positively, trailing perceptions of Kansas City (60%), Boston (56%) and Nashville (62%). CSL subtly encouraged construction by suggesting the city could improve its image. Cincinnati is under way with a $160 million expansion. A study for Minneapolis done by Coopers & Lybrand in 1994 went so far as to suggest that obvious obstacles to success like frigid temperatures and location could be overcome by "specific marketing efforts."

Read it, and, if your city is silly enough to dump more money into this dying industry, weep.