Convention rates called competitive despite hike

Tuesday, Nov. 20, 2001 | 10:53 a.m.

Trade show industry experts say Las Vegas still represents a highly competitive convention venue despite plans to raise rates for floor space at the Las Vegas Convention Center by 25 percent early next year.

"Las Vegas' rates are still way on the low end of the scale," said Michael Hughes, director of research services for Tradeshow Week, a trade publication covering the convention and meetings industry.

The Las Vegas Convention and Visitors Authority board of directors voted last week to increase the price of exhibiting at the Las Vegas Convention Center and Cashman Center from 20 cents a square foot to 25 cents a square foot.

The increase in revenue will offset rising operating costs as well as generate additional income to retire revenue bonds for the construction of the $150 million south hall expansion that opens in January.

LVCVA administrators recommended phasing the increase in over three years, but the board voted to make the new rate effective Jan. 1. Officials said show producers were aware of a rate increase would be coming, but didn't know the full increase would take effect right away.

That could result in some show producers signing long-term deals at the lower present rate before the increase takes effect. But even with the increase, Hughes thinks the Las Vegas Convention Center is well-positioned to be competitive.

"Even at 25 cents, they're still the low-cost leader," Hughes said. "They're working more like Wal-Mart than Macy's or Bloomingdale's."

Hughes said Las Vegas is well enough positioned in offering entertainment, accommodations, good weather and massive high-quality exhibit space that it shouldn't have to worry about competitors moving to steal business away. But some may try to strike a lucrative deal to attract a show.

"Sometimes a city will bend over backward to win a bid (for a show)," Hughes said. "You'll find that the published rates will be modified to get business in the door."

Tom Smith, vice president of facilities for the LVCVA, said he expects some shows to contact the LVCVA to lock in lower rates in the next month and a half, but there probably won't be a rush of sales calls by his office in the mean time.

Hughes said the LVCVA is justified in raising rates because it will offer new product -- the two-story, 1.3 million-square-foot expansion south of Desert Inn Road that will be connected to the convention center with a corridor of meeting rooms over the street.

Hughes said most government-backed convention centers in the country are starting to develop rates that pay for facility maintenance.

"Most convention centers operate as loss leaders," Hughes said. "They have rates that are attractive to drive volume," but they make most of their money with food-service contracts, catering, communication system leases and other amenities.

"Slowly but surely, convention center are starting to shoot for a small profit," he said.

Some do that with low rental rates and separate arrangements for moving displays in and out of the building.

Convention centers around the country have different philosophies about how to best raise money. Chicago, for example, just charges a flat 37.5 cents a square foot for exhibit space and that covers moving in and moving out. New Orleans charges 33.75 cents a square foot and a flat fee of $4,500 for moving expenses.

Orlando, Fla., has a rate that's lower than Las Vegas' -- 16.25 cents a square foot. But it charges 12 cents a square foot for move-in and move-out days, which potentially makes its total rent rates greater than Las Vegas'.

Las Vegas charges half price rent for moving days, but only charges for one day of moving in and one day moving out.