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Monday, Jul 15, 2024
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Tourism Sector Sees Cons in Convadium

Joe Terzi

In a sign that battle lines are hardening, tourism and hospitality leaders are warning that plans to hike the city’s hotel taxes, potentially to build a $1.8 billion hybrid downtown San Diego Chargers stadium and convention center, could jeopardize the region’s competitive standing and ability to attract large conventions, costing millions of dollars in economic impact.

“The proposals ignore business reality and the convention center customer’s voice,” said San Diego Tourism Authority CEO Joe Terzi at a recent public forum presented by the Downtown San Diego Partnership and San Diego Regional Chamber of Commerce.

During that and other recent gatherings, tourism and hotel leaders have been ramping up their opposition to two plans possibly heading to the November ballot — one by a citizens group to raise current hotel room taxes from 12.5 percent to 15.5 percent, the other by a San Diego Chargers-backed group that would take taxes to 16.5 percent. The current 12.5 percent hotel room tax consists of a 10.5 percent transient occupancy tax that goes into the city’s general fund and an additional assessment of 2 percent for the Tourism Marketing District.

In terms of argument at least, opposition from tourism and hotel leaders is gradually moving beyond plainly-stated reiterations of support for a contiguous expansion of the existing convention center, made in recent statements by executive board leaders at the Tourism Authority and convention center.

That stance is based on input from organizers of large conventions, some of whom have told local officials and city consultants that they would prefer a contiguous expansion — with three large organizations recently telling center operators they plan to avoid San Diego while expansion plans are in limbo.

Issues likely to be debated in coming months relate to who is the typical convention center customer, what that user needs to conduct business in San Diego, and whether a noncontiguous site like the “convadium” would serve those requirements as effectively as a contiguously-expanded convention center.

Contiguous Vs. Noncontiguous

At the same forum where Terzi spoke, JMI Realty CEO John Kratzer, who supports both of the pending ballot measures, said his own company’s research indicates that the average convention requires around 177,000 square feet of space and could easily be fully accommodated in the facility that the Chargers are proposing.

John Kratzer

In addition, Kratzer said, at least nine of the 12 largest U.S. cities that compete with San Diego — including eight in Western states — currently have noncontiguous configurations for their convention facilities.

“We need to quit making the discussion about contiguous versus noncontiguous,” Kratzer said, adding at another point in the discussion: “You don’t build a convention center to serve a few big conventions a year.”

Since a court struck down a city- and hotelier-approved funding mechanism for the center expansion in 2014, city and convention center officials have not identified a clear alternative financial path to a contiguous expansion. The expansion also still faces a pending environmental-related lawsuit, and much of the site that had been targeted for a center expansion is now being eyed by another developer for a proposed new hotel, under review by the Port of San Diego.

Terzi contended that a contiguous center expansion promises more positive economic benefits for the local region than noncontiguous plans. He cited data from consulting firm Conventions Sports & Leisure (CSL) — which has advised local convention center officials — indicating a center expansion would generate $271 million in economic impact and more than $6 million in TOT annually.

A CSL analysis of a JMI proposal for a combined downtown facility — put forward in concepts by JMI in 2013 but never formally reviewed by local officials — estimated a $105 million economic impact and $2.4 million in annual TOT. Terzi said the Chargers’ proposal, which emulates portions of the JMI concepts, would have “significantly less” economic impact than JMI’s.

Mike McDowell

JMI Realty, founded by former Padres owner John Moores, developed Petco Park and much of the surrounding Ballpark District in East Village. Kratzer said the ballpark project resulted in $1.4 billion of adjacent development of hotels, condos, retail and other elements, and similar results could be seen with the Chargers’ convadium.

Whose Responsibility?

If recent forums are an indication, who benefits and who pays for the convadium — including for future maintenance and repairs — could also be topics of heated discussion in upcoming ballot measure campaigns.

Mike McDowell, CEO of the San Diego Lodging Industry Association, said it’s not clear who would take care of future repairs to elements such as the convadium’s proposed retractable roof, which is being included in the Chargers’ project to accommodate conventions. “You have the issue of ‘where does the stadium end and where does the convention center begin?’ ” McDowell said.

In addition, he’s not convinced that the convadium will provide a steady source of year-round convention-related income for the city. McDowell said the NFL has rights to reserve the stadium with short notice on several dates throughout the NFL season, which could make it difficult to book certain large conventions and events well in advance.

Looking beyond the current obstacles facing a contiguous expansion, Terzi said a future expansion will be made nearly impossible if voters approve the hotel tax hikes currently proposed. If the rate goes to 16.5 percent, that would put San Diego in line with Anaheim and make it one of the more expensive tourist markets in the country.

He said the local region is already seeing rising costs for hotel rooms and airfare, which are making convention planners think twice. In addition, eliminating the current 2 percent Tourism Marketing District Tax, which goes specifically to tourism promotion — as proposed in both of the pending ballot measures — could put the city further behind several competitive markets that have already invested in significant expansions of their convention centers.

Anaheim is also benefiting, for instance, from around $1 billion in improvements in the works at Disneyland, which is getting new Star Wars attractions; and Los Angeles is getting a large influx of new visitors at Universal Studios, which has already invested about $1 billion in new Harry Potter-themed attractions.

Terzi said organizers of at least three large conventions, held previously in San Diego, have told local officials they will not be booking future events until the current center is expanded.

One of those, Lightfair International, whose commercial trade lighting convention has previously generated $72 million in local impact, has decided to hold its 2020 convention in Chicago rather than San Diego. Also set to forego San Diego, Terzi said, are the American Society of Health-System Pharmacists, with an estimated $90 million in local impact from past events; and the American Public Transportation Association, with $51 million in impact.

of year-round convention-related income for the city. McDowell said the NFL has rights to reserve the stadium with short notice on several dates throughout the NFL season, which could make it difficult to book certain large conventions and events well in advance.

Looking beyond the current obstacles facing a contiguous expansion, Terzi said a future expansion will be made nearly impossible if voters approve the hotel tax hikes currently proposed. If the rate goes to 16.5 percent, that would put San Diego in line with Anaheim and make it one of the more expensive tourist markets in the country.

He said the local region is already seeing rising costs for hotel rooms and airfare, which are making convention planners think twice. In addition, eliminating the current 2 percent Tourism Marketing District Tax, which goes specifically to tourism promotion — as proposed in both of the pending ballot measures — could put the city further behind several competitive markets that have already invested in significant expansions of their convention centers.

Anaheim is also benefiting, for instance, from around $1 billion in improvements in the works at Disneyland, which is getting new Star Wars attractions; and Los Angeles is getting a large influx of new visitors at Universal Studios, which has already invested about $1 billion in new Harry Potter-themed attractions.

Terzi said organizers of at least three large conventions, held previously in San Diego, have told local officials they will not be booking future events until the current center is expanded.

One of those, Lightfair International, whose commercial trade lighting convention has previously generated $72 million in local impact, has decided to hold its 2020 convention in Chicago rather than San Diego. Also set to forego San Diego, Terzi said, are the American Society of Health-System Pharmacists, with an estimated $90 million in local impact from past events; and the American Public Transportation Association, with $51 million in impact.

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