P3s are a Viable Tool for Convention Center Development

by Bilzin Sumberg

South Florida has long been a leading destination for conventions and trade shows, and the convention market is extremely competitive.  As other cities have expanded and modernized their convention centers, ours have remained stagnant. It has been noted that the South Florida region no longer effectively competes for the events that bring the highest economic impact to the community.  Fortunately, multiple area convention center projects, including many within the cities of Miami and Ft. Lauderdale are now on the horizon, and together these projects can help to reestablish the South Florida area as the leading convention destination.

For the most part, the convention center business is a zero-sum game because one convention center’s gain is another’s loss.  There are a number of high-impact conventions, and each of those conventions is held, for example, either in Chicago or in Las Vegas each year–not both.  Most conventions can easily be located in any number of convention centers throughout the country or a region, therefore, convention centers must be constantly upgraded in order to remain competitive.  A balmy climate is often a powerful equalizer, but now that San Diego, Las Vegas, Orlando, and other warm-weather cities have newly renovated, top-notch convention centers with integrated hotel facilities, South Florida can no longer rely on its weather alone to bring in high-economic-impact conventions.

Due to the competitive nature of the industry that awards constant upgrades and innovation, it is of little wonder that most cities have turned to Public-Private Partnerships (P3s) for the development and redevelopment of their convention centers. By leveraging private expertise and investment and efficiently allocating risks and rewards between the government and the private partner, P3s permit governments to do more with less money and in less time.  Since the convention market rewards those cities that do more than others, not using a P3 model inherently places a city at a competitive disadvantage.  Generally speaking, if two cities spend the same amount of money on their convention centers, the city that chooses to leverage private investment and know-how through a well-designed P3 will obtain a larger, better-designed, higher-quality, and more efficiently managed facility in less time than the city that chooses to utilize traditional design, construction, finance, operations and maintenance approaches.

It is for that reason that more and more cities are turning to P3s to develop their convention centers and convention center districts, which may include hotels, restaurants, retail and other facilities serving convention-goers.  Closer to home, Palm Beach County recently entered into a P3 deal for the development of a $100 million convention center hotel (which is now a critical component of a competitive convention center) that is slated to open next year, and requires that the government pay only approximately one quarter of the development cost even though it will own the hotel once completed.

Nationwide, virtually all major recent convention center developments have utilized the P3 model with promising results.  The San Francisco convention center completed a major redevelopment in 2012 utilizing a P3 model.  San Juan, Puerto Rico, completed an entire 113-acre convention center district in 2009 utilizing a P3.  And in the last five years, convention center hotels have been developed using Public-Private Partnerships in Washington, DC; Nashville; Dallas; Portland; Pennsylvania; and Texas.

Clearly, P3s are now a proven, successful model for the successful development of competitive convention centers.  In the coming years,  P3s may very well restore South Florida’s status as the leading convention destination in the Country.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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