Dripped Dry

When the Colorado Convention Center was dedicated on a spring day in 1990, the promises flew as fast and furious as a March snowstorm. Politicians who had spent years campaigning for the new center didn't disguise their delight with the opening of the tenth largest convention center in the United States, a gray-and-pink behemoth that some compared to a bubble-gum carton plopped in the middle of downtown. But for Denver's leaders it was a structure that represented the city's emergence from a bitter recession.

"This building symbolizes our economic turnaround," said then-Denver mayor Federico Pena. "It symbolizes the Denver decade. For over ten years, this building was a dream. Now it's ours."

The convention center's general contractor handed Pena a gold key at the ceremony marking the center's debut. "This is not only a key that represents the transferral of this building to the city and county," Pena told the audience. "It's the key that is going to turn our economy around."

Exuberant civic boosters promised a whirlwind of benefits from the $126 million facility. One consultant estimated convention delegates coming to Denver would spend up to $2 billion by the end of the decade. Visions of new hotel construction and sparkling retail promenades danced before the eyes of people who had spent years trying to convince the city to sign off on the project.

Just one year later, however, Denver's convention dreamship had sprung a leak. Convention attendance and hotel-room bookings lagged behind projections, with Colorado's spanking new convention center snagging only 64,700 delegates in 1991, far short of the 90,142 attendees that a 1984 study predicted a new center would attract. The statistics for hotel-room nights proved even more dismal, with conventiongoers booking a total of 107,925 rooms, just 32 percent of what had been forecast. The center's 300,000 square feet of exhibition space sat empty more than half the time.

Bitter hotel owners were so angry over the center's failure to perform up to expectations that they engineered the ouster of the president of the Denver Metro Convention & Visitor's Bureau. To top it all off, Denver was hit by a national boycott after Colorado voters passed the anti-gay rights Amendment 2 in 1992. Over thirty national groups called off plans to hold their meetings in Denver.

For convention boosters, though, those dark days are now ancient history. The Colorado Convention Center has made a strong comeback in bookings over the past two years. And only six years after the center opened its doors, industry boosters are pushing to double the facility's size--a multi-million-dollar undertaking that already shows signs of becoming a political football that could rival the furor over whether to replace Mile High Stadium.

Backers of the expansion plan say Denver has the opportunity to become one of America's premier convention cities, and they claim the only thing holding it back is the size of the convention center. "Not every city has an airport like we do or an overall physical location with the appeal of Denver and Colorado," says Eugene Dilbeck, the current president of the convention and visitor's bureau. "Denver's not a hard product to sell. It boils down to the convention center and the hotels we have available."

But a growing number of critics say Denver could be asking for trouble. Cities all over the country are expanding their convention centers--facilities that almost always operate at a deficit--in the hope of creating flashy money machines that will save faltering downtowns and make up for lost manufacturing jobs. Visions of happy-go-lucky conventiongoers packing bars and restaurants and opening their wallets with carefree abandon have been enough to convince cities from Philadelphia to Los Angeles to spend hundreds of millions of dollars on new and expanded facilities.

"City after city has promoted themselves into ever larger convention centers," says Heywood Sanders, professor of urban studies at Trinity University in San Antonio. Sanders has been studying the convention-center phenomenon for years, and says he's struck by how cities struggling to fund basic services somehow find the money to build gargantuan convention palaces.

"In an era where we're constantly told government can't afford to do anything, government has invested in convention space around the country," says Sanders. "You're dealing with something that's not driven by market forces. It's a combination of imperialistic convention and visitor's bureau directors and downtown promoters who have come to see convention centers as the most likely salvation for a downtown core. It's the wonder of local boosterism--it never stops."

Denver's own breed of boosters are convinced the city can become one of the most sought-after meeting places in America, but they'll have to convince voters to come along for the ride. And history suggests Denverites have never been as enamored of convention centers as are the local movers and shakers.

Dilbeck brushes aside the suggestion that perhaps Denver doesn't need new convention space. He's convinced that unless the Colorado Convention Center is expanded, Denver will be overlooked by major national conventions. "When our center opened in 1990, it was the tenth largest in the U.S.," he says. "We're now the twenty-ninth largest center in the country. That shows how competing cities have increased their square footage. There's quite a bit of business we can't bid for because they require more space than we have."

Denver's convention center has 300,000 square feet of exhibit space, 100,000 square feet of meeting space and a 35,000-square-foot ballroom. Dilbeck says several large groups that met recently in Denver, including Ace Hardware and the Christian Booksellers Association, have told him they won't come back unless the city can provide a minimum of 400,000 square feet of exhibit space.

Last week the convention and visitor's bureau hired the consulting firm of Coopers & Lybrand to do a $110,000 study analyzing Denver's need for convention space. The bureau has asked the firm to determine how large a center Denver would need in order to become one of the twelve top convention destinations in the country, as well as how many hotel rooms would be required to serve huge gatherings.

Any expansion of the convention center would require a voter-approved bond issue, and the question could make the ballot as soon as November 1997. The bonds issued to build the current convention center are being paid off with a 3 percent tax on hotel rooms, a 2 percent tax on rental cars, and a half-cent levy on prepared-food and beverage purchases. Since those taxes brought in $16.7 million last year and payment on the bonds was just $8.2 million, it may be possible to expand the center without a tax increase. Voters, however, would have something to lose: the $8.5 million surplus that now flows into the city's general fund. If that money were instead devoted to paying off a new series of bonds, the general fund would have to be replenished some other way. And there's no guarantee that tax revenues, now booming thanks to the city's vibrant economy, will remain at current levels.

Dilbeck says the bureau is waiting for the study to be completed this fall before deciding how much money will be required to build the convention center of its dreams.

Under the most likely scenario, Currigan Exhibition Hall, built in 1964 for $11.4 million, would be demolished and replaced with a mirror-image of the convention center that now sits on the other side of Stout Street. In fact, the potential for expanding onto the Currigan site was one of the big selling points for the new center a decade ago. The loss of Currigan would come with an ironic twist: that facility was built after Mayor Thomas Currigan and other civic shamans sold voters on the notion that Denver needed a new convention center to keep up with San Diego and other cities--who, even then, were expanding theirs.

But Dilbeck, who wants 500,000 square feet of exhibition space, isn't swayed by skeptics such as Sanders who say the constant drive to expand can become a vicious cycle. "If you don't expand your center, you become a non-entity in terms of competing for business," he warns. "Our market is changing and it forces us to change the configuration of the kinds of hotel and meeting space we need. If we expand the center, we can reach 95 percent of the trade show, exhibition and convention business in the U.S."

The list of American cities that have expanded their convention centers or are planning to reads like the itinerary for a cross-country Chamber of Commerce junket: Baltimore, Providence, Philadelphia, Columbus, Chicago, Kansas City, Dallas, San Diego and Los Angeles. Cities coast to coast are betting that convention centers can revive depressed urban areas and pump up the local tax base, and the civic building boom has generated an astonishing increase in available meeting space. "In 1969 we had 6.5 million net square feet of convention exhibit space," Sanders notes. "Last year we had 23 million square feet. We're now seeing indications there's an oversupply of space."

In fact, several cities have run into trouble with their new convention centers. Philadelphia's 1.3 million-square-foot convention complex, which opened in 1994, has been a major disappointment. Backers claimed the $522 million center would create 10,000 new jobs and generate profits of $23 million by the year 2000. Instead, only 1,100 full-time jobs have been created and the city is stuck with an annual debt service of $24 million for the next quarter-century. In the meantime, Philadelphia has suffered through one of the worst municipal budget crunches in its history; everything from recreation programs to police protection has been radically slashed.

New convention centers in Providence, Kansas City and Tampa also have performed below expectations. Tampa is so desperate to revive its center that the city is planning to sell $141 million in bonds to fund construction of a huge convention hotel. Los Angeles opened a $500 million expansion of its downtown center in 1993, and has had difficulty filling the 805,000 square feet of meeting and exhibition space. Only fourteen national conventions were booked in Los Angeles this year, while convention superstars like Las Vegas and Chicago boasted more than forty each. One California tourism official called LA's empty goliath "the worst prebooked convention center in the country." Whether or not the facility is actually used, Los Angeles still has to pay $32 million per year in debt service.

But none of this seems to have daunted other cities. The building boom proceeds apace, as cities scramble to stay ahead of their rivals. "This is the urban equivalent of the nuclear arms race," says Marc Levine, a professor at the Center for Economic Development at the University of Wisconsin at Milwaukee. "If Baltimore expands and Milwaukee expands and Chicago expands, what's going to happen is that the cities that are authentic tourist attractions will win the race. The cities that aren't tourist attractions will be stuck with white elephants."

Dilbeck believes Denver has advantages that will allow its convention center expansion to succeed where others have failed. Unlike Los Angeles and Kansas City, Denver has an attractive and thriving downtown. And Denver doesn't have a reputation as a depressed industrial town, like Philadelphia. "When people see lower downtown and the 16th Street Mall, it works to our favor," Dilbeck says.

Levine agrees that a city like Denver will have advantages over competing venues because of its mountain setting and revived downtown. But he questions whether the much-vaunted jobs created by conventions are worth large municipal subsidies. "Denver would have a reasonable chance of succeeding," he says. "The key question is, even if it succeeds, is that the best allocation of resources? There's no evidence these developments create the kind of economic boom their proponents claim. It doesn't create quality jobs for local residents."

Restaurant and hotel jobs are notoriously low-paying, and Levine believes it's a mistake for cities to lavish funds on an industry that doesn't provide decent employment. He points to New Orleans, one of the most successful tourist cities in America, as an example of the drawbacks of an economy based on travel. "New Orleans is a classic success story of tourist-based development," says Levine, "but 30 percent of the residents live in poverty."

Dilbeck, however, bristles at the charge that hospitality-industry jobs aren't worthwhile. "The average salary in the tourism industry matches up to average salaries in other industries," he insists. "You're talking to idealists when you talk to people who only want high-paying jobs. They're all wet behind the ears. The tourist industry is a wonderful one for entry-level employees. It's providing jobs for people without the skills to become computer programmers or engineers."

In the late 1980s, building a new convention center was touted as a way to recharge the depressed Denver economy, which was still suffering from the mid-decade collapse of the oil industry. Many office towers and hotels were half-empty, and civic leaders and downtown boosters were looking for a replacement industry to put some life back into Denver's core. Tourism seemed to fit the bill. Conventiongoers spend freely, pay local taxes, pack their bags and leave. For politicians they're like a dream: tax-paying party animals who never ask for more police patrols or a new elementary school.

But while Denver voters have been generous in funding everything from the performing arts to libraries--not to mention approving the construction of a $3.2 billion airport--they've been considerably more skeptical about the merits of convention facilities. The idealistic Pena charged into office in 1983 with the charismatic slogan "Imagine a great city," but soon discovered that a new convention center was a hot-button topic that could frustrate even the most resolute builder of cities.

Creating a new convention center became a major priority for Pena. But the young and inexperienced mayor found himself in the midst of a political free-for-all, as vying real estate interests came up with competing proposals. Denverites spent years arguing over where the new center should be. One group backed by developers Mickey Miller and Marvin Davis pushed a site behind Union Station, while another advocated the Golden Triangle just south of Civic Center Plaza. A smaller, less organized group wanted the convention center to be next to Currigan Hall on 14th Street, in a section of downtown that was looking more blighted by the day.

Pena pushed the Union Station site, and at one point it seemed all but certain the convention center would be built there. But questions over financing and the wisdom of locating the convention center away from the downtown core continued to dog the project, and opponents launched a successful petition drive to require a public vote on the proposal. The result was one of the biggest setbacks of Pena's career, as voters rejected the Union Station site 65 percent to 35 percent in 1985.

That's when the Colorado Legislature entered the fray. The state agreed to contribute $36 million to the project, with the proviso that final determination of an appropriate site would be given over to the Urban Land Institute, an independent Washington, D.C.-based research group. (With its contribution, the legislature also ensured that the new center would be named for the state, rather than the city in which it was built.) After studying the competing sites, the Urban Land Institute recommended the location on 14th Street next to Currigan Hall; Pena and other civic boosters endorsed the selection with a sense of relief that the whole controversy had come to a close. In those pre-Amendment 1 days, all it took was a vote by Denver City Council to approve the bond sale, and the deal was done. The job of designing the center fell to Curt Fentress, the Denver architect who would later be brought in on Denver International Airport.

"The impact of this will be very substantial, not just in terms of hotel beds it fills, restaurant business and shopping sales, but the spinoff of ancillary tourism as well," predicted Governor Roy Romer in 1990. The new center came in on time and within budget that spring, and civic leaders gleefully waited for torrents of new business to course through the streets of downtown Denver.

They were soon disappointed. The new center failed to meet projections almost from the moment it opened, and downtown hotels continued to suffer the same low occupancy rates they had hoped would be a thing of the past. In 1991 the center's gleaming environs were occupied less than half the time.

The responsibility for booking national conventions into the center falls with the convention and visitor's bureau, an independent agency whose annual budget is largely funded by a 1.75 percent chunk of the lodger's tax assessed on Denver hotel rooms. And the anger of downtown hoteliers over the convention center's weak performance soon found a target: Roger Smith, the president of the bureau.

Members of the bureau's board of directors, which includes the general managers of most of the major downtown hotels, were convinced Smith was doing a poor job of marketing Denver. They began plotting to remove him. When Smith refused to go quietly, a nasty internal dispute soon found its way onto the front pages of Denver newspapers.

After a public bloodletting that dragged on for months, Smith stepped down in 1993. Meanwhile, Colorado was earning reams of bad publicity after the passage of Amendment 2, and a national boycott of the "hate state" cut further into convention business.

Dilbeck took over as head of the bureau in 1994, and quickly placated the hotel managers on the board. He replaced much of the bureau's sales staff, and is credited with helping to reverse the fortunes of the center. National convention bookings have increased from 30 in 1994 to 41 this year, and the number of convention delegates has gone from 154,350 in 1994 to an estimated 189,074 this year. The center's operating loss has also dropped, from $3 million in 1993 to $1.6 million last year. (Convention centers almost never make money, and Denver's annual subsidy, covered by a payment from the general fund, is small compared to those of other cities.)

The hotel industry is also sitting pretty compared with the grim situation of just a few years ago. Downtown hotels enjoyed an occupancy rate of more than 70 percent last year, and finding a room downtown during the summer can be next to impossible. Room rates are over $100 a night at many Denver hotels. When the expanded Adam's Mark Hotel opens late next year, Denver will also have its first 1,000-room-plus convention headquarters hotel, a longtime goal of city boosters.

Not all that expansion is market-driven, though. The Adam's Mark project, for instance, is being funded with $23 million in subsidies from the Denver Urban Renewal Authority. An earlier proposal to build a 1,000-room hotel near the convention center with $20 million in public funds was shot down in 1990 when downtown hotel managers complained bitterly about subsidies going to a competitor. However, the convention and visitor's bureau succeeded in getting most of the downtown hotels to support funding for the expansion of Adam's Mark, arguing that while having a headquarters hotel would help all the downtown hotels by bringing more convention business to Denver, the Adam's Mark project would only add about 375 new rooms to the market.

Selling the city on an expanded convention center may not be so easy. After a decade of massive public works projects that have changed the face of Denver, many voters are tired of supporting huge new endeavors. The memories of the extravagant promises made in the 1980s are still fresh, and given the explosive growth the metro area has seen in recent years, some voters aren't so sure they even want Denver to be one of America's top convention destinations. That could complicate things for city council, which will have to decide whether to put an expansion proposal on the ballot.

"I think being in the top twelve [destinations] would be great for our hotels and restaurants, but I'm not sure it's the best thing for the general public that would have to pay for the expanded convention center," says Denver city councilman Ted Hackworth. "I hear a lot of excuses and not a lot of good reasons why we should expand."

When convention center proponents estimate the financial impacts of a center, they often use figures based on the notion that each dollar spent by a convention delegate has a multiplier of four. Basically, the multiplier concept goes like this: When a bellboy gets a $1 tip he'll stop by a bar after work and spend the money on a beer, helping the tavern owner to hire a bartender who in turn rents an apartment, circulating the money through the city. But critics say these formulas exaggerate the impact of conventiongoers' spending. "I think city council could be pushed to do this by the multipliers they use," says Hackworth. "It's time to challenge them on those numbers."

Sanders has been following the city's debate over a convention center for years; he's even included Denver in scholarly papers he's written on the convention center phenomenon. "When I first started doing research on this, I started doing case studies on a number of cities," he says. "One of the case studies I looked at was Denver." The fight over where to locate the center, Sanders notes, "was marvelously lengthy, elaborate and nasty."

Sanders hesitates to predict whether Denver will be able to sell its expansion plans to voters. But he says he's been struck by the success convention advocates have had in getting cash-strapped cities to fund ever larger convention halls. "There's no welfare for poor people but the most astonishing welfare for hotels and restaurants," he says. "There are two kinds of convention and visitor's bureau directors: the ones who are convinced they're not doing well because their center is not big enough, and those who think they'd do better if they had a bigger center. And there's always somebody who can build a bigger one.

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Stuart Steers
Contact: Stuart Steers