It’s wasn’t exactly a surprise, but the news broke Tuesday night — via WHAS-11 — that the downtown convention center will close for two years to accommodate a $180 million renovation, which will increase its total square footage by a third.
The closure begins next year and the convention center is slated to reopen in summer 2018, tying in nicely with timeline for the the 30-story Omni tower down the street, which is expected to be completed by March 31, 2018. The two have been paired before in other cities, most notably Nashville, where in 2010, city government committed $623 million in public money to building the Music City Center and another $245 million to its signature Omni hotel. In that case, the city maintained an aging downtown convention center to continue hosting events in the urban core while the new, 19-acre facility was being built.
In Louisville, where the combined public outlay of the convention center and Omni projects is $319 million, keeping another downtown convention center open is not an option. Despite plans to relocate certain events to the KFC Yum! Center and the Kentucky Exposition Center at the fairgrounds, the city — which has become increasingly hawkish in pushing its tourism efforts in the past several years — will be without its downtown space to hold conventions and other large gatherings.
The question of whether this will slow momentum at a key time, when downtown Louisville is about to add 1,000 new hotel rooms, remains an open one. But the economic impact will likely be significant.
Last year, events at the convention center drew more than 225,000 attendees and created nearly $36 million in new spending from tourists and exhibitors, according to a study by Versailles, Ky.-based Certec Inc. for the Kentucky State Fair Board and released in January. While that pales in comparison to the direct tourist and exhibitor spending generated by events at the expo center, the overall economic impact of events at the two facilities in 2014 was more than $482 million, according to the study. About 44 percent of that, or $211 million, was from tourists’ and exhibitors’ direct spending.
Officials at the fair board and the Louisville Convention and Visitors Bureau didn’t directly address a question from IL about the economic impact of the two-year closure. However, extrapolating from the methods used in the study, the overall economic impact — in lost spending, jobs and wages downtown — of the closure over two years would be nearly $163 million. That doesn’t account for events that would be relocated; the CVB and fair board did not elaborate on what events might be moved where, although WHAS-11 reported that some of the 18 planned bookings at the facility over those two years would be moved to different venues, while others would be pushed off to later years.
“We are looking forward to the expansion and renovation of the Kentucky International Convention Center,” said Cleo Battle, executive vice president of the Louisville Convention and Visitors Bureau. “While this will close the facility for two years, it will open the city to 22 to 25 percent more business upon the reopening in 2018. Two very large groups have already booked due to this expansion, and we are working with more that our excited about the growth.”
It stands to reason that the expanded, renovated convention center would make the payback math work faster. The fair board estimates total direct spending at the convention center will increase to $53.3 million when it reopens in 2018, according to an analysis by Convention, Sports and Leisure International. If that holds, it would take about 10 years to cover the cost of the losses during closure; that’s in addition to the $180 million in funds underwriting the expansion. Under the financing plan, $56 million in state bonds for the project would be repaid through the general fund; nearly $42 million would be paid through a 1 percent increase in the hotel room tax; and the rest would be paid by the convention agency through refinancing of existing debt and annual direct payments.
Officials have argued the upgrades are necessary for Louisville to remain competitive in the convention business. In the past three months, the CVB has announced two new bookings for conventions at the renovated downtown center: Sweet Adelines International, which it says will bring more than 10,000 attendees and $7 million in economic impact; and the National Association for College Admission, which it expects will bring more than 6,000 attendees and an economic impact of $5.8 million.
That’s clearly not enough. In a news release last month announcing the renovation timeline, Mayor Greg Fischer said the city is “aggressively looking to book other groups” for the expanded downtown center.
Forecasting the economic impact of convention centers is a notoriously dubious endeavor. In Nashville, for example, revenues for Music City Center — and associated room nights at the Omni and other hotels — have failed to meet expectations, leading to a debt downgrade and eroding public confidence in the projects. The story is similar in Washington, D.C., where a publicly subsidized convention center-hotel combo has also fallen short of projections.
Of course, we won’t know for some time whether Louisville’s projections hold. But what’s clear now is that the closure-expansion combo is essentially eating revenues, while taxpayers and tourists float the difference now and into the foreseeable future.