As seen on Chicago Real Estate Daily -
By Eddie Baeb, Aug. 26, 2009
(Crain’s) — In an effort to bring more big trade shows to Chicago and bolster the city’s beleaguered hotel market, the state of Illinois has created a $10-million fund to provide rebates to conventions at McCormick Place and Navy Pier.
The money will come annually from the state’s general fund and be eligible for trade shows and conventions with attendance of 10,000 or more that aren’t already booked to come here.
The incentives may be used to discount fees charged by the Metropolitan Pier and Exposition Authority, known as McPier, or to subsidize other costs incurred by the shows.
The new fund comes as business travel is slumping because of the prolonged recession and also is an attempt to snare business away from rivals Las Vegas and Orlando, Fla., amid the backlash over banks and other firms that received aid from the federal government throwing lavish corporate outings.
“If you had a meeting in Las Vegas, and you dipped into bailout funds, it doesn’t look good,” says hotel industry consultant Ted Mandigo, president of Elmhurst-based T. R. Mandigo & Co. “This is to take advantage of the perception, and maybe there’s a reality, that Orlando and Las Vegas are on the blacklist for retreats and corporate meetings.”
Surely, few would look askance at a convention scheduled for February in Chicago. But the city has long struggled to compete against Vegas and Orlando because of our weather, the lack of leisure activities and because conventions here are generally more expensive, with rigid union-labor rules that also add cost.
Officials with McPier and the Chicago Convention & Tourism Bureau, which will work together to offer the incentives, say they will gauge the rebate amount to offer each show based on factors such as what time of year the event is held, the length of the event and whether spouses attend.
“This helps make us more competitive,” says McPier CEO Juan Ochoa. “It allows us to offer, essentially, a financial incentive that we would not be able to otherwise. It may make the difference (in attracting a new show).”
This year, 34 shows with more than 10,000 attendees are slated to come here, according to a tourism bureau spokeswoman. Last year, 32 such shows called Chicago home.
The fund could prove to be a major salve for the city’s hotel business, as conventions and business meetings account for half of the reservations at some big downtown properties.
The hotel occupancy rate for Chicago-area hotels is poised to fall to 58.6% this year from 63.8% in 2008, according to Atlanta-based PKF Hospitality Research. Meanwhile, PKF projects that revenue per available room, a key metric that factors in occupancy and room rate, will tumble 15.7% this year.
“If it could bring in some new conventions, they’re sorely needed,” says Marc Gordon, CEO of the Illinois Hotel & Lodging Assn., which lobbied for the legislation. “Vegas is hurting, Orlando is hurting. We have an opportunity to attract some conventions that haven’t been to Chicago before.”
Gov. Pat Quinn signed the new fund into law Tuesday.
The money won’t be doled out to a convention until the show is done and the required attendance is verified. While the money will come from the state’s general fund, the tourism’s bureau vice-president of external relations, Jack Johnson, says a show with 10,000 attendees provides economic benefits and tax dollars that far outweigh the cost.
Bureau and McPier officials aren’t saying whether any particular shows are in their crosshairs, or whether they have a sense how much of the authorized money can be used in a year.
“Hopefully we can use all $10 million,” Mr. Ochoa says. “That would mean we have created thousands of jobs.”