Word came recently that a $2 billion expansion of the Javits Convention Center may not be good enough, and that only a $4 billion expansion will do. Per the New York Times “the Spitzer administration quickly concluded that the existing plan would have little economic effect and would provide only a modest amount of new exhibit space, while underestimating the potential costs by $1 billion. But even as the Spitzer administration’s review was under way, construction costs in the city were rising rapidly; city officials said delays were costing $17 million a month.” It has probably been about a decade since I was asked to write a memo on the convention business and NYC’s role in it while at a former job, but I suspect that what I found then continues to be true today. The biggest impediment New York City has in attracting virtually all conventions, and tourists in general, is the number, availability and cost of hotel rooms. At the time, New York City had fewer hotel rooms than Chicago, a city half the size. Last year New York City accounted for 2.7% of total national employment, but just 2.1% of total accommodations (hotel, motel, etc.) employment.
I’m writing this post at the request of my wife, whose organization just brought people in from out of town for a meeting. One mid-priced hotel wanted $1,000 per night for two nights. A Holiday Inn Express wanted $350 per night in Lower Manhattan. “No one wants to come to New York anymore” she tells me, meaning more out of town trips away from family for her and other New York City workers. The cost of coming here busts business budgets. And these objections are among people traveling on the cuff. How can the city expect to attract tourists at those prices?
One of the lodging types New York City lacks, compared with most other places, is lower-priced hotels located outside the CBD but accessible to it by mass transit. While working at City Planning, for example, I suggested trying to attract moderate priced chains such as Hampton Inn and Courtyard by Marriott to a site near the Staten Island Ferry, for use by tourists. We got the Staten Island Yankees instead. More recently developer Sam Chang’s McSam Hotel, LLC organizations has been building new lower-cost hotels throughout the outer boroughs (Note that the entrepreneurial solution comes from someone entering from outside the city — NY State breeds state capitalists and monopolists?. Developers, however, are constrained by zoning rules created in response to fears that new outer borough lodging would quickly devolve into homeless housing or “hot sheet” motels. These rules limit hotels and motels to industrial areas, which often have little foot traffic and lack other amenities, and to busy streets characterized by auto dealerships, repair shops, and car washes. For example, rather than being built on busy 4th or 5th Avenue in Brooklyn, a series of hotels will be built on industrial side streets – away from the subway, restaurants, and people. Those from out of town may not feel comfortable in isolated locations. For reasons that escape me, hotels are not even allowed in the C7 entertainment district in Coney Island.
In the absence of available and affordable hotel rooms, travelers have been forced into gray market accommodations. One issue City Planning decided to duck, before deciding to duck all of them, is the status of residences in residential districts used as transient accommodations. Many of these are openly listed, and can be found be searching the internet for “New York City Bed and Breakfast” or similar. It isn’t just rooms in one-family homes that are rented out by the night. So are rent regulated apartments — by tenants gaming the system by leasing rooms or entire apartments they ought to be occupying, and by landlords who ought to be renting those apartments to tenants. Co-ops and condos are used as transient lodging as well. Needless to say, the owners (or renters) of these establishments do not pay all the sales taxes the city tacks on to a hotel stay.
Getting back to the Javits Center, per the Times “The issue for New York comes down to a return on investment. New York is the most underserved North American city in terms of exhibition space…Despite a leaky roof and a faulty air-conditioning system, the Javits center is one of the busiest convention halls in the country.” So perhaps an expansion is warranted. Still, in the rest of the country convention space, second to gambling as an economic development scheme, is overbuilt, so the city would be adding to a glutted market with high cost space — in a facility notorious for gouging anyone choosing to hold a convention there.
Back in the 1990s, I was told the Javits needed to be expanded because it was too small to accommodate the largest shows, but the only example was the consumer electronics association show, which ran up to 2 million square feet and is typically held in Las Vegas, with its cheap and abundant hotel rooms and exhibition space. A few years ago, after the tech bust, it was down to 1.2 million square feet, but now it is up to 1.8 million square feet. But the 2008 show will be divided among three venues: the Las Vegas Convention Center, Sands Expo and Convention Center/The Venetian, and the Las Vegas Hilton. It isn’t all in one place there, either.
I can’t help but fear the Javits expansion is turning into a fiscal disaster that will make the formerly proposed Jets stadium look cheap. So rather than add to a monopoly facility with a sketchy reputation, why not build, for a fraction of the cost, a brand new convention center somewhere else? Somewhere like Long Island City near the Flushing Line, which will also be extended to the existing Javits Center, making it easy to move between two facilities? The new Convention Center would be run by an entirely separate entity. To get a massive show like the consumer electronics show, the two venues (and perhaps more) could cooperate, but otherwise they would compete. And lots of hotel rooms could be added adjacent to each convention facility. After all, it is the hotel rooms that New York City needs most.