By Kristi Casey Sanders
The $2 billion in business New Orleans estimates it lost between September 2005 and March 2006, when its convention center was closed, made 2006 a bittersweet year. “We only saw 30 to 40 percent of the business we had booked for 2006 [return],” says Sabrina Written, communications director of the Ernest N. Morial Convention Center.
The American Library Association show in June proved the city was ready to handle citywide conventions, and Written says, pacing reports for bookings matched pre-Katrina levels by October. “We have 65 new and confirmed events on the books and another 131 tentative events. It’s not the long-term demand that’s an issue, it’s the short term.”
Many groups originally scheduled for late 2005 and 2006 meetings chose to switch dates and keep New Orleans in its meetings rotation, for 2009 or 2011, leaving holes in convention calendar, many of which could not be filled with short-term corporate business. And problems other than reconstruction or media coverage made attracting and retaining groups difficult. Escalating housing costs left many hotels and restaurants short-staffed when workers couldn’t afford to move back to the city. Some hotels still are running at limited service or sharing amenities with nearby properties.
Microsoft Corp. recently cancelled its Tech-Ed 2007 convention, citing concerns about air service, particularly for its international attendees. Since then, Delta added nonstop service between New Orleans and Los Angeles, and other airlines are considering increasing the size of planes used during peak convention months. But the airport still lacks many of the seats and service it had pre-Katrina.
“Airlines say it’s a supply and demand factor, but unless the airlift is there, you can’t continue to build your destination with business travel,” Written says. In response, local committees have formed to figure out ways the public and private sectors can address and correct airlift, business, safety, neighborhood beautification, and other issues potential clients may have questions about.
Deirdre Ross, the director of the American Library Association’s conference services, says the city put together five or six task forces to address all the concerns her group had and to make sure all needs were met. “There were no complaints,” she says. “Our meeting rooms were set up on time; the food functions ran smoothly. The restaurants are open. There’s nightlife. People were extremely happy.”
During the city’s reconstruction, the convention center shelved its Phase Four expansion plans, although some design elements were incorporated into the center’s recent renovation. “Before we can proceed, we have to look at the costs associated with the materials and labor,” Written says. “I don’t feel now like the labor market is there to build Phase Four by the time it needs to be built, and what would that do to costs?” Instead, the convention and visitor’s bureau and the convention center staff are focused on rebuilding their footing in the national marketplace.
According to a report by PricewaterhouseCoopers, convention center demand in 2006 topped numbers from what the industry considered record-breaking years (1999 and 2000), in some cases by upwards of 70 percent. Occupancy rates for many convention centers are back to pre-9/11 numbers.
Rob Canton, director of PricewaterhouseCoopers Hospitality and Leisure Practice, explains, “An efficient range of operation is anywhere between 50 and 60 percent. Seventy percent is practical maximum occupancy.” The Ernest N. Morial Convention Center’s projected 2007 occupancy rates are at 56 percent. Not bad, considering many of the largest U.S. convention centers are running at 44 percent occupancy.
Written says there still is room for growth. “Before Katrina, we were at 60 percent occupancy.” Seventy-five percent of the center’s pre-Katrina 2007 business was retained; retention numbers for 2008 are at 95 percent. If the center hits practical maximum occupancy, the Phase Four expansion project likely will be revived.
Canton says the postponement may not be wise in light of the surge in demand he predicts will continue for the next several years. “If there is demand in New Orleans, then limiting growth will be a detriment. If it’s not going to New Orleans, it’s going to go somewhere else.”
Written feels the smartest thing, however, is to wait. “We’ve recently upgraded both ballrooms completely … because that’s where most corporate functions are held. We’re looking at spending two years studying the market patterns of meetings and conventions, from a construction standpoint. If the demand is still there, we may need to make adjustments to the scope and materials used. Convention centers evolve and change continually. What the specs were in 2000 or 2001 may not be the direction to take in 2007.”