Proposed Convention Ctr. Expansion To Benefit Phoenix
<B>Proposed Convention Ctr. Expansion To Benefit Phoenix</B>
By Amanda Young
The Phoenix convention center could be headed underground. A $500 million plan backed by the city, but not yet approved by residents and involved in a legal battle, would raze the outdated Civic Plaza and replace it with a larger, mostly subterranean convention center.
The Civic Plaza must have bigger shoes to fill in order for Phoenix to compete in the business of luring trade shows, conventions and annual meetings. And with hotel supply in Greater Phoenix outpacing demand, the city is banking on the fact that a larger facility will attract bigger conventions and corporate groups which, in turn, will fill up its large resorts and earn more retail sales for downtown businesses.
Citizens will be asked to authorize the project next spring. If approved, funding will come from the existing City Plaza Fund, made up of hotel and motel taxes, restaurant taxes and construction taxes. The rest would require state assistance. According to city officials, of 16 states with a major convention center, only Arizona lacks state participation.
Phased construction to double the size of the 28-year-old facility (from 221,000 square feet to more than 700,000 square feet) will include an interim hall for an additional $30 million. The expansion project is expected to take three to five years to complete.
As part of the new building, a 500,000-sq.-ft. exhibit hall will be built 40 to 45 feet below ground, said project manager Scott Sumners. Meeting space and a ballroom will be built at street level. The concept will allow more open space on the eight-square block site and make it easier for people to walk through the plaza. "In terms of square footage, about half will be underground and the rest will be ground level," Sumners said. "We want to keep the truck docking and garbage facilities below ground so it's not obtrusive."
According to a study by PricewaterhouseCoopers, conventions and trade shows generate about $5.7 million in annual tax revenue for Phoenix and $23 million for the state. Those figures likely would increase 46 percent under the proposed expansion. According to city officials, without the expansion, fewer bookings would incur a loss of $11.8 million per year in state tax revenue and $2.8 million in Phoenix tax revenue.
Although the city is quick to point out the economic benefit involved with a larger convention center, there is a hitch in the plan. A 700-room, full-service Marriott convention hotel could put a halt on the new Civic Plaza. The hotel faces a lawsuit brought up by the owner of the Crown Plaza hotel. City officials said the convention center will not proceed until the hotel project resumes. "We need the extra rooms in order to justify expansion," Sumners said. "It's like a chicken and egg situation. I'm not sure if the convention center is the chicken or the egg, but hopefully the hotel will be completed."
The opening of another Marriott property in northern Phoenix will be announced in late August. Located 15 miles from downtown, the 950-room hotel should be a draw for large association groups.
"Demand has never been as great as it is today," said Scott White, sales director for the Greater Phoenix Convention and Visitors Bureau, "but supply has been stronger. We're starting to see hotel growth taper off a little" with the addition of limited service properties.
According to a report by Warnick & Co., the supply and demand rates for room occupancy both appear to be headed in the right direction. In 1999, demand grew 5.9 percent, but the rate of growth in rooms increased at the same pace, at 5.8 percent.
Occupancy rates and average daily rates for all of metropolitan Phoenix experienced a slight decline in the past year, with the exception of budget hotels. Occupancy in the upscale and midprice segments held constant, at 75 percent and 71 percent, respectively. The ADR for the midprice segment declined 2.3 percent to $84.84, compared with $86.80 in 1999.
At the economy level, occupancy declined about 2 percent, from 72.8 percent in 1999 to 71 percent year to date. The ADR for economy hotels also trailed behind with a decline of 3.3 percent, from $65 to about $63. Luxury hotels came out with 2.7 percent decline in occupancy, from 79 percent to about 77 percent. However, White at the Phoenix CVB said the luxury segment consistently outperforms the rest.
"The luxury segment has really done the best at maintaining rate and occupancy," he said, "but it's the mid-level properties that are feeling a pinch." Year to date, the overall occupancy rate in Phoenix is about 75 percent with a combined average daily rate of $125. "If you add up all those rooms in the area, 75 percent isn't a bad number," White added.
A band of limited service hotels accounts for the majority of new properties added in the past few years. "The introduction of limited service hotels has made the greatest impact," White said, "because they offer a lot of the same amenities as upscale hotels. Business travelers are starting to catch on to this."
White noted that Phoenix could see a decline in the limited service segment as those hotels get less funding. He also looked forward to the 900-plus room Marriott Desert Ridge, because it will fill a niche for large groups. "We don't have a hotel here with more than 900 rooms," he said. "It should provide a new option for the associations that want to stay in Phoenix. It shouldn't impact the destination negatively. Hopefully, it will create more awareness."
Meanwhile, the CVB earlier this year partnered with Passkey.com Inc., a program that enables meeting planners to book accommodations directly with participating hotels in the Greater Phoenix area by accessing the bureau's Web site, www.phoenixcvb.com.