Why this convention center expert is calling LA's expansion plan a disaster

When Mayor Karen Bass held a press conference at the Los Angeles Convention Center last week commemorating the approval of its $2.6 billion expansion, she framed it as key to downtown's revitalization. “This project is more than just a building," she said, "it is about revitalizing the heart of our city and bringing good-paying jobs and tourism straight to downtown." The following day, this is how the Central City Association announced the downtown revitalization plan designed to complement the expansion: "With the newly passed Convention Center Expansion and Modernization project, now is the time to act, so that when the ribbon is cut, we can exceed visitor and spending projections."

While criticisms of the convention center vote mostly focused on its fiscal impacts — as the Los Angeles Times noted, we just finished paying off the totally '90s expansion and now we're on the hook for at least three more decades of debt — the costs are only part of the problem. Those visitor and spending projections being touted by city administrative staff, tourism officials, and downtown boosters are based on decade-old assumptions, according to Heywood Sanders, a professor emeritus of public administration at the University of Texas at San Antonio, and the author of Convention Center Follies: Politics, Power, and Public Investment in American Cities. And although this investment is being sold as an economic engine for the city, as Sanders wrote in a scathing analysis over at Field of Schemes (another newsletter I would highly recommend for Torched readers!), "the likelihood of any significant increase in the city’s convention business is effectively nil."

Even though I'd followed this development since the Farmers Field days, I was taken aback by that statement. I knew I had to call up Sanders to ask more questions about our very peculiar situation. He didn't hold back. Here's our conversation about where the convention industry is headed, how LA became known for giving its space away for free, and why the city's leaders aren't coming to terms with reality.

Torched: "There are boondoggles, there are big boondoggles, and then there are public development disasters," you wrote. Why is what LA just approved a disaster?

Heywood Sanders: It's a disaster on a number of counts. The first thing that I mentioned in the piece is the cost of this. The CAO's office puts the cost at a bit over $2.6 billion, and that's the construction cost. That doesn't include the full debt service cost over 30 years. When the city first started seriously considering this expansion project around 2015, the CAO's office put the price at $470 million. Over the ensuing decade, that number has kept growing systematically, even as some dimensions of the project have been shrinking. As the cost grows, the long-term fiscal implications, which I think have finally surfaced in the latest round, become really enormous. The cost of this is going to require a level of debt service out of the city's general fund, and that is to say the same dollars that fund basic public services: police, firefighters, public works, and the like. It's going to cost over $100 million, every year, to pay the debt service on this.

On top of that, there's every indication — and we will get into that in more detail — that the revenues that the CAO's staff have estimated are very unlikely to occur for a number of reasons, which means the fiscal implications are far more serious, indeed dire, than I think the council and the mayor and ultimately the public have been led to believe. And finally, there's every indication — given the current environment in terms of the administration's tariff policy, their impact on construction costs, and what we have seen happen to date with the cost estimates for this project — that $2.6 billion is not the last cost figure. So you're paying an enormous amount of money, and then the natural question ought to be asked in this particular case, which doesn't seem to be asked pretty much at all, is, what are you getting for this kind of money?

And what are we actually getting?

The convention business is an enormously competitive one. There are lots and lots of cities around the country that assert the same fundamental logic that you and the public have heard with respect to this convention center: all we have to do is build a bigger, newer, nicer one, and we will inevitably see a substantial increase in our convention business. We'll be flooded by new out-of-town visitors, awash with dollars to spend locally, that will, in turn, fill up hotel rooms, take seats in local restaurants, create new jobs, and, with that spending, end up revitalizing the environment surrounding the city.

This is the "downtown revitalization" we keep hearing about.

Yes. We hear these forecasts and estimates of the future from a tiny handful of consulting firms, one of which advised the city, beginning, in this case, in 2014. But, of course, they are busy telling lots of other cities precisely the same thing. So, in fact, this particular firm, CSL International, has been telling cities that all you have to do is build an expansion to your existing convention center, and you will see a whopping increase in business. The fundamental thing about this business, and it is a business, and again, a highly competitive one, is that there is nothing you can do to stop your competitors from doing exactly what you're doing.

I keep calling it an arms race, do you think that's an accurate way to describe it?

In a fundamental way, absolutely. But we can then talk about exactly how the business looks and how various cities have actually performed. What I do is try to systematically track the attendance. And here, let me make a distinction for you and anyone who's interested: convention centers can accommodate lots of things in terms of events. They can hold high school graduations. They can hold banquets. They can hold what are called local public shows. And in LA's case, that's something like the LA Auto Show, for example, or a home or garden show or a boat show. In LA's case, they can also hold film shooting, so there are a lot of movies in which the LA Convention Center features prominently. Those kinds of events are distinguished by two things. First, they principally attract local folks. By and large, it's an LA event. And also, they typically pay to rent the convention center. So if you want to make some money by renting the convention center, that's a good thing to do. Those events are also ticketed, so people are paying a ticket to walk through the door for the auto show. Typically, that can generate the convention center some revenue.

Conventions and trade shows, on the other hand, are the events that rotate from one year to the next and go to different locations. Those are the things that attract out-of-towners. So if the American Heart Association decides to have its annual event in LA, or the American College of Chest Physicians, or the American Academy of Ophthalmology, those folks are coming in from out of town, typically some distance. They will stay multiple nights in local hotels and spend money in local stores and downtown area restaurants. And so it is argued their spending will create economic impact, and these new dollars going into the community will get spent and respent. And that's the vehicle that creates jobs, that's the thing that local tourism and convention promotional bodies — in your case, the LA Tourism & Convention Board — wants to attract.

It's so desirable, in fact, and the competition is so tough, that, by and large, every major city that competes for rotating national and international conventions and trade shows has to offer deals. And by that I mean they have to provide some financial incentives to the meeting planners and organizers to get them to come to a particular city, because all of their competitors are offering the same thing. And in LA's case, LA has for about the last 30 years, offered deals — very generous deals.

Would you say we have sort of a reputation?

LA has a reputation for free rent deals. And it's pretty well documented. It is the norm for the convention center, for an event that has a so-called rack rental rate, or standard rate, of $500,000 or $800,000 or $1 million or more, to make the rent a token $1,000.

[Gasps] And there's no reason to think this won't continue.

We know that the convention center has continued its discount policy fully enshrined and documented in writing, and, in fact, they've made it even more generous. During COVID, the convention center senior staff recognized that organizations were not likely to get the same attendance and room night generation that they had in the past, and so the center basically chose to alter the discount policy to waive the requirement that you meet a specific number of hotel rooms.

So what new conventions will we actually get? What can we try to lure here?

We can look at that in two ways. There's barely any good national data on convention and trade show attendance in the aggregate for the country as a whole. I try to track the attendance at the nation's four largest convention centers: Chicago, that's McCormick Place; in Orlando, the Orange County Convention Center; the Las Vegas Convention Center; and in Atlanta, the Georgia World Congress Center. So we can look at those individually or collectively. We let me start with the biggest, if that's okay, which is Chicago's McCormick Place, which is at about 2.6 million square feet of exhibit hall space, which is functionally — since some of the LA space is not as usable as in other centers — three to four times the size of LA.

Also not anywhere close to what we're building in this expansion.

No, and you will not be able to get close. So in 1996 McCormick Place had 1.28 million convention and trade show attendees. It did a major expansion, added a whole new hall, added big hotels. By 2003 it got to 1.56 million attendees. The last pre-COVID year of 2019, it did 825,000.

[Laughs nervously]

Thank you. You have to write that down. Because last year it did 794,002.

But where are they going? You would think LA would have lost some conventions to these other centers, but these numbers...

Well, you did lose a bunch of big trade shows to Las Vegas. Las Vegas is close, and offers Las Vegas amenities, including lots of hotel rooms on the Strip, which is adjacent to the convention center. And Las Vegas expanded their center in 2002, pretty much doubling its size from 1 million square feet of exhibit hall space to slightly under 2 million, and they have since, recently, just completed yet another expansion. But let's do some Las Vegas numbers. In 1996, Las Vegas had 1.14 million attendees. Ready?

Well, I mean, no, I'm not ready for this...

Its biggest year, prior to the 2008 recession, was 2006, when it had 1.7 million. The 2019 number was 1.3 million. Last year was 1.1 million. Las Vegas — with double its size — last year, had essentially the same attendance it had in 1996.

And that's also the last year that LA was maybe somewhat competitive.

Yes, the LA center was last expanded in 1993 and at that point it was supposed to see a really serious increase in its business. So for LA's case, the best and most consistent numbers over time are the hotel room nights, which is a metric to track those overnight, long-staying convention visitors. In 1994, the center had 268,000 of those attendees. And then a peak — and the numbers have been reported slightly differently over time, but the best number I have — of 375,000 attendees in 2000. The argument back then was that the problem with the LA Convention Center was where it was built.

In the armpit of two freeways, on the edge of downtown.

Conveniently located for Angeleno highway access, but not in the heart of downtown, where the big hotels have been historically. There weren't any hotels next door. And so the argument was that what the center needed was a great, big hotel. After trying for some years, it was clear that no developer would build a big hotel there without significant public subsidies. Finally, Phil Anschutz and his AEG firm that also owned and developed Staples-now-Crypto.com Arena, committed to building a 1,000-room dual-branded Marriott and Ritz Carlton hotel as part of the LA Live entertainment complex next door — deeply, deeply subsidized by the city.

And the argument at the time — and they had consultant studies for this, too — was that would lead to a whopping increase in convention business. And, in fact, the estimate then, from the PKF consulting firm that is now CBRE, was that the new hotel contracts would boost the center's business by 250,000 additional annual room nights. So let's run down how the center's been doing. The JW Marriott Ritz Hotel opened in 2010. In 2012 the center got to 290,500 room nights. And although the numbers slightly vary, it looks like for 2019, the last pre-COVID year, the center got to about 240,000 hotel room nights. The most recent number, for 2024, is 209,000.

Holy moly.

Basically, the center is doing less than it did in 1994.

[Bangs head on desk] And just to underline the point, it's not like the actual conventions themselves have moved to other cities, and we might not get them back, but just the culture of these big entities having conventions is gone.

For lots and lots of events, attendance has been systematically shrinking, particularly in the wake of COVID. And so even if you get an event — even if you discount your way to successfully attracting an event — the result of that, in terms of how many people turn up and how much they stay and spend has gotten dramatically smaller. You have a classic local example. One of the big — and seriously discounted in rent terms — events in the LACC has been the Electronics Entertainment Expo, or E3.

Been there many times, but not anymore.

The Electronics Entertainment Association decided to stop holding conventions. A couple of months ago, the American Dental Association announced that its 2026 convention will be its last convention.

Because fewer and fewer people are coming.

Yes, it's not worth it for them anymore. Let me give you some numbers again. In 1995, the American Dental Association convention was held in Las Vegas. It had 55,412 attendees. When they went to Las Vegas in 2006 they had 40,200. When they came back to Las Vegas in 2011 they had 27,000. And their last convention in 2024 in New Orleans, saw 8,010.

You just keep delivering bad news. I think you're done saying something, and then it gets worse.

It's the reality. The really concerning issue here for me, and I hope for folks who read or hear what you have to say, is that this information is not part of the public discussion. There is a market reality. It's not a new market reality, although it is particularly concerning right now. But this is a business that has been in long-term decline, in which the competitive situation has gotten even more serious. And that information has simply not been part of the discourse that I have seen, either in the reports from the city's administrative staff or the discussions within the city council. It's always been: we build it and more people will come. The last set of numbers from the CAO's office appears to indicate that the city will pretty much double its convention business with this expansion.

And that's just not true.

It seems utterly implausible. If it does, it would be the notable exception around the country.

And we should note, too, that this is an expansion plan that's 10 years old, and it's actually a downgraded version of that plan that we're approving. And now we're spending more for it.

Yes. And one interesting thing is that when this project started, in the wake of the 2015 white paper and the CSL study, it was supposed to be done as a public-private partnership with AEG. Their presence is particularly important because they own a stake of the arena, and since they own the closest major hotel, they're the folks who were in the best position to profit from this. And when the deal was was put together, AEG committed to building a new hotel tower of about 850 rooms. They have since totally pulled out of that commitment. They've effectively pulled out of the expansion deal! What's that telling folks? If people who own the hotel next door don't see that it makes any sense to provide any more hotel rooms?

I mean, there's an argument to be made that the AEG deal is a bad deal. They operate and also get a cut of the convention center. Should we get out of that deal and try to just run it ourselves and pack it with these local shows? The city said they had 100 local shows interested since they announced the expansion. I don't know if that's true or not, but shouldn't we try to just make it our own civic space?

LA is a big place with lots of local events. Local events will pay to use the center. Unfortunately, they won't fill up hotel rooms, and they won't pack local restaurants and they won't deliver the kind of — well, I have to put this in quotation marks — "downtown revitalization" that Mayor Bass and the downtown boosters and development interests are seeking.

And this week they did announce a whole new plan for downtown revitalization. The Central City Association, one of the main boosters of downtown, has what's being called an "urgent recovery plan," putting more police on sidewalks, doing more homeless encampment sweeps, fixing streetlights, and cleaning up graffiti, timed to these projections of more visitors and spending.

Alissa, I want to point out one big piece of the reality of the LACC that I haven't seen any public discussion of. We've talked about performance in terms of hotel room nights over time, and we've talked about its performance relative to other centers, but what we haven't talked about, and manifestly, the CAO's office has not talked about, is its performance in relative terms.

This is like horror story time. Halloween is coming.

As if to underline disaster, yes. The best numbers I can get from the city's Department of Tourism is that in 2024 they did about 209,000 room nights, and in 2025 they anticipate about 214,000. So I took a look at the city's 2023 year-end tourism report. I haven't found the 2024 report yet.

Bracing.

What they noted was that, citywide, there was a hotel occupancy rate of just under 72 percent and an average daily rate of $198. They also say there were 30.2 million room nights sold. So what percentage of 30.2 million is 209,000?

Very small.

It is indeed, less than 1 percent of the hotel room demand in Los Angeles on an annual basis.

[Emits a series of very loud squawks]

Your laughter is fully apropos. It is, for all practical purposes, a round-off error in local hotel demand. So the city is proposing to spend $2.6 billion to maybe, under the best of circumstances, increase less than 1 percent of its hotel demand.

So there's just no world in which the investment ever recoups itself in any way.

LA has been giving that center away for years. It has been, for two decades, trying to subsidize new hotels in the South Park area.

Right, and not just the Marriott in LA Live — hotels like the Moxy across the street got public subsidies and even special deals to share their hotel tax money.

Exactly. I mean, this has become subsidy heaven. The center is subsidized. Rent is subsidized. You give away cash to meeting planners to get them to come, and if they come once, you can't necessarily get them to come back.

Councilmember Katy Yaroslavsky put out a newsletter that was talking about what can be done now, and she's recommending an economic development corporation, which LA does not have. It's not going to solve this exact problem, but could it help us manage our public facilities in a better way?

The reality is it's a market phenomenon. You can do all you want in supply terms, LA can triple the size of its convention center and make it absolutely beautiful. But that doesn't mean anyone will come, because the organizations that put these events on have lots and lots of choices, particularly in California and Southern California. San Diego's expansion has been held up for almost a decade by a set of legal challenges. But I anticipate at some point San Diego will expand. Anaheim expanded its convention center just a few years ago with all of the same promises, armed with a pair of consultant studies that said they'd get more business. Just before COVID, San Francisco completed an expansion of its Moscone Center. Then there's Las Vegas. I mean, it's an enormously competitive region. San Diego and Anaheim, in particular, are relatively close with a lot of hotels.

And literally Disneyland across the street. You can't beat that.

That's the appeal. It may not work for everybody, but it does for some groups and some attendees. And that's the point — you can't stop them from going there.

I guess the big question is, does LA need a convention center at all?

There are civic reasons for having a public venue that is flexible and adaptable for a variety of purposes. Some of those are to hold public meetings. Some of those are to host local events and local public shows. There have been disasters where convention centers have served as refuges. During COVID, convention centers were repurposed as public health facilities, places to offer mass vaccinations. Having some flexible, multipurpose public space makes sense.

But if you think that somehow a bigger convention center is key to downtown revitalization, or is going to do wonders for local job creation, or economic development? The answer is, you've got to be kidding. It just doesn't make sense. 🔥