Democratic conventioneers get all the hype, but trade show economics suggest Chicago would be better off to think small by Jennifer Halperin Later this summer, 115,000 people will converge in Chicago packing hotels, restaurants, taxicabs and merchants' stores for a convention that will yield the city an expected $175 million in spending and tax revenues. But this gathering won't enjoy a city host committee staffed with a dozen full-time employees and more than 5,000 volunteers. Its not prompting host committee "vice chairs" to chip in $100,000 each to welcome the guests. It's not garnering headlines or prompting retrospectives among Chicago's media. This is the International Manufacturing Technology Show, which meets every two years in Chicago for eight days. The much-heralded Democratic National Committee's August meeting, by contrast, will bring an estimated 37,500 people to the Windy City fewer than one-third the visitors expected to check out the latest in manufacturing gizmos. In fact, 15 trade shows scheduled to meet in Chicago this year surpass the political convention's expected attendance and economic value, based on the Chicago Convention and Tourism Bureau's formula for visitor spending. All the fuss that's been made over the Democratic gathering has prompted some to question whether the hoopla has been misdirected: Maybe Chicago, and Illinois as a whole, could get a better economic payoff by improving lucrative convention business at large rather than focusing so much attention on this year's political convention. Competition for these customers is tightening, particularly among Sun Belt cities that can market their good weather along with their meeting facilities. "The Democrats' convention is a one-time shot," says Chris Mahaffey, executive director of the Chicago Society of Association Executives. "It doesn't generate any long-term economic benefits. Some people say that all the media attention is going to be important to Chicago, but I say, "Big deal.' I think we've seen from the World Cup that a lot of media here doesn't necessarily mean a lot in the long run. We should pay more attention to the shows that come back year after year." Mahaffey points out, for example, that while Chicago newspapers have been brimming with stories about the Democratic convention, the Schaumburg-based American Hardware Manufacturers Association had to take out full-page ads in the Chicago Tribune and Crains Chicago Business to draw attention to the economic impact generated by its trade show at McCormick Place last summer. The ads said attendees and exhibitors spent $81 million in the city last year, citing Chicago convention bureau figures. A study commissioned by the Regional Economics Applications Laboratory, a joint venture between the Federal Reserve Bank of Chicago and the University of Illinois, estimated the Democratic convention will pump $122 million into the local economy a figure partly based or the impact of the 1992 Democratic convention held in New York City, with allowances made for inflation and price differences between the two cities. Stacey Reineking of the convention bureau said this amount was "considerably higher" than her agency's own estimate, but deferred to the host committee's use of the higher figure "for political reasons." The convention 32 ¦ August 1996 Illinois Issues
bureau's formula for 1996 assumes trade show visitors will spend an average $1,511 per stay in Chicago, which would amount to nearly $57 million in spending by delegates, media representatives and other visitors to the political convention. But even the larger number pales in comparison to the estimated $377 million spent in the city during July by convention and trade show visitors. Much of that money was spent by the nearly 95,000 visitors to the National Sporting Goods Association convention, but the remaining three-fifths came from people attending about 60 other conventions and trade shows booked throughout the city many of which catered to 1,000 or fewer attendees. A recent study by the Institute for Metropolitan Affairs at Roosevelt University in Chicago suggests the city is facing increasing competition from other cities for these profitable small- and medium-sized shows. With the average trade show yielding $15 million the equivalent of total ticket revenues from a season of Chicago Bears games the city can't afford to let other cities gain an upper hand, say the report's authors. "Chicago's once unchallenged position as industry leader will be severely tested by dozens of well-financed competitors," the report says. "Competitor cities are rapidly expanding their physical plants and sales/marketing staffs ... and are aggressively courting Chicago's trade shows and conventions. According to many industry leaders, other cities are proving to be more 'user friendly,' less costly and more hospitable to meeting delegates." "It's not like we have a floundering industry here now," says Richard Krieg, executive director of the institute. "The largest of the shows will likely continue to come here. Chicago's hold on those is strong, especially with the expansion of McCormick Place and Navy Pier. The real battleground is for the midsized shows, because that's the only growth sector in the trade show industry." The study found that while trade show attendance is projected to increase by about 1 percent a year due almost exclusively to new medium-sized shows the amount of convention and exhibit space in Chicago's competitor cities will have grown by nearly 50 percent between 1989 and 1998. From 1989 to 1991, Chicago captured 10 percent of all new shows that were created. But from 1992 to 1994, the city attracted just 5 percent of the new shows, Krieg says. What's more, no new trade shows requiring more than 300,000 net square feet will be created in the near future. Yet by 1998, 23 competitor cities will have convention and trade show sites that surpass 500,000 net
34 ¦ August 1996 Illinois Issues square feet. While only three cities offered 1 million square feet of trade show space in 1989, 11 will boast that amount by 1998.
To stay competitive in the industry, which has an estimated annual indirect impact of $8.7 billion on the state of Illinois, the report recommends some improvements. Some may be politically dicey, Krieg admits, but their long-term economic impact should be considered: Ease union work-rule restrictions on the trade show floor. Krieg says cities like Charlotte, San Antonio, Atlanta and New Orleans are attracting many midsize and smaller conventions because of their lower labor costs. An ad in the industry magazine EXPO for a New Orleans convention center proclaims: "We're the reason Chicago plays the blues. They can't beat our reasonable work rules, lower labor costs and our expansion to 1.1 million square feet of exhibition space on one level, under one roof. Sorry youse guys." Chicago's labor rates tend to be higher than most other union cities' but not out of range, the report found. In 1995, the national average for general laborers and decorators was $42.87 an hour. In Chicago the rate was $54.80 an hour. Chicago's carpenters and riggers averaged $10 an hour higher than the national average, and the forklift operator's hourly wages were more than $20 higher than the national average. Consider lowering Chicago's 14.9 percent hotel room tax to at least New York City's 13.25 percent. The report says that while no national studies assess the impact of high hotel taxes on trade show and convention attendance, meeting planners who were interviewed consistently cited Chicago's hotel prices and hotel taxes as a problem. Chicago also was found to have the highest combined total visitor tax levies of 50 prime convention cities. Yet it ranks last when it comes to the amount of money allotted to its convention and tourism bureau per square foot of space that it has to sell. Name a full-time transportation coordinator, who would report directly to the mayor, to help develop transportation policy and traffic planning with the city. Chicago's vibrant downtown creates a traffic nightmare for visitors, Krieg says, whereas other cities are trying to make traveling easy for convention-goers. For example, a light-rail system connecting Dallas' entire downtown to its convention center and airport is scheduled for completion next year. San Diego has a trolley that picks people up at area hotels and takes them to the convention center. For $1.50, attendees can take the trolley across the border into Mexico. "These recommendations are really a starting point," says Krieg. "We don't want to see the report sitting on a shelf. But some of these are very thorny political issues, and it's sometimes easy, especially in a city like Chicago, to deep-six these kinds of recommendations. I would caution that you don't want to end up being penny-wise and pound-foolish."
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