Convention center comparisons prove problematic

One of the oft repeated arguments against tax support or other funding support for the Fort Smith Convention Center is that two privately-owned convention centers in Rogers and Springdale are doing well without taxpayer support.

Indeed, Springfield, Mo.-based John Q Hammons Hotels & Resorts has been successful operating convention space in Northwest Arkansas. The company’s first Northwest Arkansas foray into the business was convention center space attached to the Springdale Holiday Inn. That was followed several years later by a larger convention center added to the Embassy Suites hotel in the booming Pinnacle Hills area of Rogers.

The Fort Smith Convention Center, although attached to the Holiday Inn City Center, is not part of an overall hotel operation. It was expanded in the late 1990s as part of a $55 million effort that also expanded the city’s library system and made improvements to the riverfront area in and near Harry E. Kelley Park. The $55 million was generated by a voter-approved 1/2 cent sales tax that expired when the bonds were paid.

Also, the convention center bonds and operations were partially funded by a state tourism turnback program designed to help communities build convention centers for the purpose of recruiting more tourists and business travelers to Arkansas. However, the turnback program had an expiration date.

The Fort Smith Board of Directors continues a more than 10-year search to plug an annual deficit predicted to occur when state turnback money dried up. The state turnback program ended for Fort Smith in June 2010 from which the city received about $1.8 million a year. In 2010, the city received only $888,723. A fund balance will allow the city to cover the convention center shortfall for most of 2011.

An ad hoc convention center committee formed by the city board met several times in Spring 2010 and reviewed many funding options, including a 1% hospitality tax, finding cuts in the city’s roughly $40 million operating budget, reallocating a portion of the city’s 1% street tax, re-instituting a business license fee and finding a 3rd party operator. That group eventually endorsed a 1% prepared food tax.

Scott Beall, director of sales and marketing at the Embassy Suites in Rogers, didn’t offer an opinion on the debate about private and public sector convention center operations. However, he does say comparing the Fort Smith Convention Center with the private Hammons’ operations in Rogers and Springdale is flawed.

“Our center was built to sell sleeping rooms,” Beall said of the convention center attached to the 400-room Embassy Suites. “It would absolutely not make money if it stood alone. If we did a profit and loss for just the center, it would not make a profit.”

Beall said the convention center space is sometimes given away if it results in enough “room nights being sold” and associated food and beverage sales.

“Frankly, we just look at that as extra hotel meeting space. … It’s really just an extension of the hotel. It’s a convention center, but not in the traditional sense, because we can sell it at a premium to a boat show, or give it away to a group that has 500 room nights,” Beall explained.

Christy Marks, Beall’s counterpart at the Springdale Holiday Inn, agreed with Beall’s assessment, saying the convention center is not a stand-alone business.

“It’s the Hammons concept. He built convention centers to support hotels. And we need that convention center to fill the hotel,” Marks said.

Beall took the point further by saying Rogers needs to have a restaurant tax like other Arkansas cities that more aggressively compete for tourists and business travelers. Rogers’ Convention & Visitors Bureau is funded with a 2% hotel tax.

“Rogers is really way behind cities like Hot Springs and Bentonville and others that do have a restaurant tax,” Beall said. “If we had that restaurant tax, we would have a lot more marketing and incentive dollars to bring more events to the town.”