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The Convention Center's Dearth of Bookings

by Joe Sullivan

In the two years since the city committed $162 million to build a new convention center, not a single convention has signed up to use it.

The only two events scheduled for the new facility, the AAU Junior Olympics in 2002 and the American Bowling Congress in 2003, both pre-dated the city's final decision to proceed. "They're coming, so build it," oft proclaimed the president of the Knoxville Sports Corp., Gloria Ray, who lined up the two events. So why aren't any other gatherings scheduled to come once the center opens next year, especially given the three-to-five year lead times on lining up conventions that are typical? And what's being done to get some, especially in light of the high fixed costs of operating the center once it's completed?

Bill Overfelt, the center's general manager, estimates these fixed operating expenses at upwards of $2 million annually before taking into account the $250,000 base fee that Philadelphia-based SMG, which employs Overfelt, is due to get for convention center management. (All of that is leaving aside the $11 million in annual debt service, for which 38 cents of the city's $3.06 property tax rate is already dedicated.)

Responsibility for selling Knoxville as a convention site has rested, up to now, with the Knoxville Convention and Visitors Bureau. Its chief, Mike Carrier, insists the CVB has "quite a few prospects" and is "doing what we can to generate interest and be competitive." Actual bookings can't take place, he claims, until "we finalize booking policies and rental rates with SMG." But Carrier was singing pretty much the same tune last year, and it begs the question why these prerequisites haven't been satisfied long since. It's true that SMG was only formally named the convention center's manager last fall, but it's been working with the Public Building Authority on a consulting basis for more than two years, and its designation was a foregone conclusion.

Overfelt says SMG is now in the process of building its own three-person sales staff that will complement the CVB's efforts. SMG, he says, will concentrate on shorter lead-time events such as trade shows aimed at local consumers that now frequent the city's old convention center (due to be closed when the new one opens). While the $600,000 in annual revenues that such events are already yielding will come in handy, it doesn't take a $162 million new facility to keep them, and they won't accomplish the center's intended purpose of attracting a lot of visitors to Knoxville to spend a lot of tax-generating money on lodging, food and entertainment.

A big hindrance to landing big conventions is Knoxville's downtown hotel muddle precipitated by the city's on again, off again maneuvers to condemn and demolish the 293-room Holiday Inn Select adjacent to the convention center. These maneuvers were part and parcel of the city's designs to clear the way for a new 417-room Marriott that was, in turn, an integral part of Worsham Watkins' grandiose downtown revitalization plan. But when the city aborted its Holiday Inn acquisition plans in December, that slightly shabby relic of the World's Fair era was left standing and knocked the props out from under the financing of a Marriott.

As it stands, the only types of conventions the Holiday Inn is likely to attract are of the bargain basement variety. The hotel's owner, Chattanooga-based wheeler-dealer Franklin Haney, has pledged to spend $4 million to upgrade it to a Crowne Plaza. Carrier says, "The folks at the Holiday Inn tell me they are proceeding, and I'm pleased to see that moving forward."

However, it can be reliably reported that Haney isn't about to proceed with renovations unless and until he can reach a definitive understanding with the city about the hotel's future. If the city blesses his proceeding, he's reportedly prepared to spend not $4 million but $40 million, which is more like what hotel analysts believe it would cost to produce a first class convention center headquarters hotel. On the other hand, if the city doesn't want his presence, then he's looking to sell out.

City officials, for their part, don't trust Haney and would love to get rid of him but aren't prepared to pay his price. So they are busily devising stratagems for driving it down while also rekindling hopes for a new headquarters hotel much closer to the convention center than the Marriott would have been.

These efforts center on acquiring the State Supreme Court site just across Henley Street from the convention center. According to Criminal Appeals Court Judge Gary Wade, "All the judges are together that this space is no longer adequate for us." And they now have their sights set on relocating to the downtown Post Office, which also used to serve as the federal courthouse. If the city could pony up enough to cover the relocation, the move could probably happen quickly. But if state funds are required, they could be a long time coming given the state's fiscal bind.

According to Wade, $4.5 million is needed for Post Office renovation plus the cost of acquiring the building from the U.S. Postal Service, which is looking to sell but at an undetermined price. City acquisition of the Supreme Court site, it's believed in some quarters, would pose enough of a competitive threat to Haney to get him to settle for the $13 million that the city has held out—or something close to that. But then there would be the additional cost of many millions more to acquire yet another hotel site and build yet another public garage to support it.

Moreover, any notion that our bumbling city administration can outmaneuver an adroit Haney is absurd. Unless and until much shrewder envoys enter the negotiating fray, Haney will continue to lead the city on a merry chase. And the longer that chase goes on, the larger the deficits the new convention center is likely to run up.

All of this is not to say the convention center should be expected to operate at a profit, especially in the early going. A certain amount of loss leadership may be acceptable as long as the facility is pulling in lots of conventioneers who're spending lots of money and thus generating lots of sales tax revenue for the city. Ray claims, for example, that the 50,000 bowlers and their companions who'll be descending on Knoxville during the first six months of 2003 will spend $200 million while they're here.

But once bowling balls stop rolling, there are no signs as yet that the convention center will be rolling up anything except losses for the city's taxpayers to absorb.

March 8, 2001 * Vol. 11, No. 10
© 2001 Metro Pulse