Lobbying Affiliate: MML&K Government Solutions

Convention Facilities | Construction Will Keep Visitor Cash Flow Strong

April 7, 2017
Susan Gosselin
The Lane Report

Heads in hotel beds, crowds in shops and restaurants, lines at tourist destinations, and jobs, jobs, jobs. Such is the currency of the convention trade. And with business on the grow, key convention centers in Kentucky are expanding to grow with it.

In the past five years, convention centers in Louisville and Lexington have announced expansion projects worth over $430 million. And the growth doesn’t appear to be slowing. Eric Summe, president and CEO of meetNKY, said it is considering a similar expansion of its Northern Kentucky Convention Center in Covington.

“Convention groups translate to visitor expenditures. It’s just that simple,” Summe said, noting that “300 to 400 people coming and staying for a week in your town can spend up to $500,000. Tourism is the third-largest employer in this state. And to stay competitive, you have to stay current. It’s a matter of growth, of course, but it’s also a matter of not falling behind.”

Louisville’s 2018 transformation

Downtown Louisville is packed with construction projects, and many of them have to do with supporting the convention industry. The Omni Hotel, a new 612-room luxury hotel set to open in 2018, will bring 70,000 s.f. of meeting space plus a speakeasy, bowling alley, spa, rooftop swimming pool and a 20,000-s.f. fresh market and grocery. The downtown Marriott and Hyatt Regency hotels, long-time bastions of the local convention hotel scene, have just finished multimillion-dollar renovations, as well. Combine that with the expansion of the local restaurant scene and new downtown Ohio River bridges and you could say Louisville has developed a “virtuous circle” of businesses that can drive business to each other.

“When it’s all done, we will double downtown’s hotel room space from 3,000 to 6,000, and that will be a game changer for us,” said Jason Rittenberry, president and CEO of Kentucky Venues, the organization that oversees the Louisville Convention Center and the Kentucky Exposition Center at the Fairgrounds.

“Thankfully, the mayor’s office and the Convention and Visitors Bureau took a comprehensive point of view of these expansions. You couldn’t expand the convention center without also expanding downtown hotel rooms, and vice versa. It’s an economic ecosystem, and you have to develop it all together for it to work,” Rittenberry said. “We’re going to see it all come together in Louisville in spring/summer 2018.”

The main player in the expansion, of course, is the Kentucky International Convention Center, which is undergoing a $207 million expansion that will be completed in 2018. It will add a minimum of 50,000 s.f. of exhibit space, which will bring its total exhibit space up to 200,000 s.f. A new 40,000 s.f. ballroom will be created, without expanding the walls of the building. On the whole, officials predict the new improvements will increase the economic impact of the convention center dramatically.

According to Rittenberry, the new expansion will allow the convention center to bid for events of up to 10,000 people – enabling it to compete directly with Louisville’s larger rivals, such as Nashville, Indianapolis and Columbus, Ohio, all of which have state-of-the-art convention and meeting facilities.

“The space will have all the upscale amenities event planners are looking for, like internet broadcast abilities and Wi-Fi, digital monitors and wayfinding, larger lobby size, and pre/post-event reception spaces, which keeps them from having to move conference social events off site. It will be beautiful, modern and an investment that can take us through for years to come,” Rittenberry said.

The $207 million investment for the facility comes from a bond issue, he said, which will be paid back by increasing the Louisville-area room tax.

The downtown Kentucky International Convention Center, however, is only part of the convention picture in Louisville. The Kentucky Fair and Exposition Center boasts 1.2 million s.f. of convention space, and a large outdoor presence for events and parking. It, too, is being targeted for improvement. An effort is underway to find a developer to bring in an on-site hotel with at least 500 rooms, so people at Kentucky Fair and Exposition Center events won’t have far to travel to get to their accommodations, Rittenberry said.

“The Kentucky Fair and Exposition Center is a very different event market than the one we have for the downtown convention center, but they are both equally important. The Fair and Exposition Center tends to attract large-scale events that need the outdoor, flexible space, like sports shows, outdoor farm machinery shows and the like,” he said.

Between the two centers, Louisville can now compete on the vast majority of event request for proposals (RFPs) being circulated.

“Louisville is a hot city. Bourbon is fueling that, our restaurant scene, and horse racing, of course,” Rittenberry said. “The Convention and Visitor’s Bureau has done a phenomenal job of marketing our city, driving business to us and keeping us full. I can’t wait to see what they’ll be able to do once all our new resources are available to us,” he said.

Northern Kentucky eyes expansion

The Northern Kentucky Convention Center currently holds an enviable location on the banks of the Ohio River in Covington, Ky., within sight of Cincinnati’s visually energetic skyline. While that puts it in position to benefit from the amenities of their entire region, leaders at the center say that its current size is cramping their opportunities.

“We’re in a position now that if we don’t find a way to expand, we will start sliding backwards,” said Summe, who directs the recently rebranded meetNKY organization. “We have regular, repeat clients who are telling us that they can’t come back because we no longer have the space and facilities they need.”

The site is currently 204,000 total s.f., with 110,000 s.f. of meeting, exhibition and social function space.

They don’t hope to have the assets necessary to compete with larger venues like Indianapolis or Las Vegas, Summe said. But to regularly win business against competitor cities such as Kansas City and Richmond, Va., they need more space. They tried before in 2004 when a consultant helped create a plan for expansion of the current facility. That effort failed due to being hemmed in by other large developments that couldn’t be annexed. But Summe said he is feeling better about their prospects this time around.

In September 2016, the Internal Revenue Service announced it will downsize and close an 1,800-employee operation in a sprawling building that borders the current Convention Center. It puts a highly desirable 23-acre site into play sometime in 2019.

“That changes the conversation, because it opens up acres of land we could possibly utilize,” Summe said. Officials at the center are working to secure approval of a new 1 percentage-point tax hike that could start a building fund.

“Fortunately, our current room tax is just 11.3 percent, much lower than Lexington at 16 percent and Louisville, at over 17 percent. So we have room to raise it,” he said.

If approval is achieved, Summe estimates a study and facility design would take around a year; if that goes well, construction would take a minimum of another two years.

“We have a wonderful, heritage destination here with lots of activities available. All we have to do is stay competitive and keep current,” he said.

Lexington getting expansion underway

In 2014, an ambitious plan to expand the Lexington Center was put on hold, but in 2016 needed government approvals were finally granted for a remodeling and expansion of the center that will double Lexington’s meeting capacity. The $250 million expansion will include a new contiguous 100,000-s.f. exhibit hall, a new 22,500-s.f. ballroom and an additional 30,000 s.f. of meeting space. The expansion also will include a new catwalk to Rupp Arena, making it a seamless venue addition for convention business, as well.

The project was made possible by a combination of city and state tax-backed bonds for $250 million, and a hotel tax increase of 2.5 percentage points, making Lexington’s rate 9.5 percent. Bill Owen, president and CEO of Lexington Center Corp., noted that the center is city owned. Consequently, because the state is putting up $60 million for the project, it will receive proceeds from 0.5 percent of the hotel tax until the commonwealth is repaid. The bulk of the rest of the tax revenue will go to the city to pay off the $190-$200 million in bonds they offered.

Construction is set to begin on the project this spring, with construction stretching until 2021.

“It was a pretty simple decision, really,” Owen said. “Lexington Center currently has an economic impact in our region of $40 million a year. If we make the renovations and expand our space, then the economic impact of this facility would be near $60 million. If we do nothing, and leave the facility the way it is, that economic impact would erode to $30 million. That’s a $30 million spread, year after year. You can’t ignore that. It’s simply what you have to do to stay competitive.”

The making of the decision, however, had been a long time coming. Owen noted that a major study in 1986 as well as one done by PriceWaterhouseCooper in 1997 both predicted Lexington would need 100,000 s.f. of meeting space to remain marketable.

“Right now, Lexington Center can only respond to 65 percent of the available (event) RFPs,” Owen said. “Once we finish this expansion, we’ll be able to respond to 85 percent of them. It gives us a much bigger pool of event planners to work with.”

Even with the expansion, he said, mid-sized events will continue to be Lexington’s sweet spot. But events that come to Lexington will enjoy a certain exclusivity and personal attention they wouldn’t get in more crowded convention cities.

He predicted Kentucky’s unique culture and business amenities will continue to make it a prime destination for convention goers.

“Lexington, and indeed, Kentucky in general, is the sort of place that people like to come to,” Owen said. “Eighty percent of the country lives within a one-day drive of here. Lexington has more direct flights, 19, than any other city of its size.  We have the (Kentucky) Bourbon Trail and so many things to do. Lexington’s downtown is safe, walkable and boasts a Hyatt, Hilton and 21C. Drive 15 minutes in any direction, and you’ll have a world-class landscape to enjoy. It’s a favorable destination, and a favorable impression of our state that we can leave. Now, we just have to get the word out to meeting planners to include Kentucky as a new destination possibility.”

See more at: http://www.lanereport.com/75682/2017/04/convention-facilities-construction-will-keep-visitor-cash-flow-strong/

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