CHARLOTTE, N.C. -- When Charlotte lands a convention, the Charlotte Regional Visitors Authority touts how many dollars visitors are expected to leave behind, with the results often in the millions or tens of millions.
The numbers have been impressive, but they were often wrong, an Observer analysis shows. For five years, the CRVA often inflated the impact of its events, sometimes contradicting earlier claims.
In July 2010, Charlotte hosted Church of God in Christ’s International Auxiliaries In Ministry Convention – an event the CRVA first said would produce $6 million in visitor spending.
Earlier this year, the CRVA reversed itself, and said the event produced nearly $19 million in new spending.
The 2010 National Rifle Association Convention? First pegged at $10.3 million, the CRVA later revised that estimate to an eye-popping $68 million.
In two weeks, Charlotte will host the Democratic National Convention – its biggest event ever. Hotels, caterers and transportation companies are expecting a windfall, and the CRVA has estimated direct spending will range from $75 million to $134 million.
Economists have mixed views on the final economic impact of political conventions. Some argue the gains are large and long-lasting, while others say the new spending displaces economic activity that would have happened anyway.
The CRVA’s track record on estimating economic impact is unreliable.
Under previous chief executive Tim Newman, the CRVA used questionable methodology and made the most optimistic – sometimes erroneous – projections, as was the case with attendance estimates for he NASCAR Hall of Fame.
For that project, the CRVA said first-year attendance would be 800,000. Only 270,000 showed up.
Return on tax dollars
The CRVA’s questionable estimates of visitor spending also make it difficult to determine whether tax dollars spent on the Charlotte Convention Center are providing the best return.
The Convention Center is funded in part by a tax on hotel rooms, paid largely by visitors. Most of the center’s funding, though, from a 1 percent tax on prepared food and beverages, a restaurant and bar tax paid for mostly by Charlotte-area residents who dine out.
For comparison, the roughly $30 million spent each year on the Convention Center dwarfs what the city spends building new sidewalks, about $7.5 million. It’s also far greater than the roughly $7 million a year the city spends on affordable housing. In the past five years, the city has spent $1.4 million on “Business Investment Grants,” which are incentives for companies that relocate or expand in Charlotte.
By state law, the two hospitality taxes must be funneled to the Convention Center or “tourism promotion.”
Visitors spend less than CRVA says
The CRVA told the Observer that conventions and trade shows at the Convention Center generated $127 million in visitor spending in fiscal year 2011.
An examination of the authority’s methodology, as well as interviews with convention attendees, suggests the actual amount was about half of that.
And if less money is spent, the benefits – in jobs supported and tax revenue generated – decline as well.
In recent weeks, and in response to Observer questions, new CRVA chief executive Tom Murray studied the spending formula more closely. Kimberly Meesters, who became the CRVA spokesperson this spring, said Murray believes there are problems with the 2011 estimate. Now the CRVA is using a more conservative formula.
“We plan to take a much more disciplined approach in the future,” Meesters said.
Starting in 2007, the CRVA’s measuring stick for visitor spending was a 2005 study from Destination Marketing Association International, which promotes the travel industry.
That DMAI survey said that, on average, a convention attendee would spend $290 a day – about half on lodging, 30 percent on food and the rest on transportation and shopping. The convention hosts would spend $24 per attendee on food and drinks, according to the report.
The CRVA multiplied that $314 by the number of convention attendees and also by the number of convention days.
Those are presumptions that don’t always ring true. In reality, some people attend a four-day convention for a day or two, while others share hotel rooms. Other attendees are day-trippers and never stay in a hotel.
That is especially true for the so-called SMERF market, which stands for social, military, educational, religious and fraternal market. Most of Charlotte’s biggest events are SMERF conventions, such as the Shriners and the NRA.
Because Charlotte is considered a second-tier destination, it’s more difficult to attract the lucrative professional meetings and trade shows, where attendees are on expense accounts.
“Fraternal organizations like us, and the Moose and the American Legion, will have a lot of folks on fixed incomes,” said Vanessa Kane, the manager of meetings and events for the Veterans of Foreign Wars, which is bringing its 2016 convention to Charlotte. “You will get four ladies sharing a room. You will see couples sharing a room.”
Such room-sharing was evident during July’s Shriners Imperial Session in Charlotte, a large SMERF meeting. When the CRVA booked the convention, it said 50,000 people would attend, using 20,000 hotel rooms.
“50,000 people? Who said that? That’s absurd,” said Jack English, the director of the Shriners Charlotte conference. “I would say it was about 10,000 people.”
The CRVA later said the group used 13,000 hotel rooms instead of 20,000. It said the 50,000 attendance number came from the group.
The CRVA projected the Shriners would spend $24.7 million. A more conservative estimate would be between $6 million and $10 million.
In July 2011, the religious group Gideons International met for six days at the Charlotte Convention Center. The CRVA said the group had 4,000 attendees, used 7,189 hotel rooms and spent $7.54 million in Charlotte.
In reality, the group said 3,185 people attended and it used only 5,581 hotel rooms. That’s 20 percent fewer people attending.
Interviews with Gideons attendees suggest the actual spending was far less – perhaps as little as $2.5 million.
Most people were husbands and wives who split the hotel room cost. No one the Observer interviewed reported spending close to $300 a day, which is the CRVA estimate.
The typical outlay per person was about $160 a day – half of a hotel room and about $50 to $75 a day on food and other expenses. Some people had to pay parking fees, while others took a cab from the airport.
Many drove from nearby locations and stayed one or two nights.
“Our main cost is food,” said Rick Skelley, who drove to Charlotte from Ohio. “My wife and I are probably spending $100 a day for the both of us on meals.”
Betty Schlepel and her husband stayed five nights at the Westin, but said they didn’t spend much money outside of eating three meals in restaurants.
Asked if the couple together spent $100 combined on food, Schlepel said: “We’re more thrifty than that.”
Evelyn Carlisle of San Antonio spent $80 at a Wal-Mart on food plus a microwave so she and her husband could eat in their room.
“We’re only eating Nutrisystem,” she said.
With 3,185 people attending the conference, the convention used fewer than 5,600 room nights for the entire six days of the convention – less than 1,000 rooms per night.
When making its spending estimates, the CRVA essentially assumed attendees all had their own hotel rooms for the entire convention, totaling 24,000 hotel room nights.
The College of Charleston last year studied the economic impact of Charleston’s convention center. Its survey of convention attendees found that each person spent $168 a day – far less than the CRVA’s $314 estimate.
“$314 sounds very high to me,” said Bing Pan, a College of Charleston associate professor and head of research in the office of tourism analysis.
The CRVA doesn’t do its own surveys of convention spending.
However, in some cases, attendees do spend more than $300 a day, especially during trade shows in which companies entertain potential customers.
At the World of Asphalt trade show in March, John Palmer of Toronto said he and a business associate would spend $4,000 in Charlotte over the four-day event. Attendance was even larger than originally projected, with 6,500 people instead 6,000, as the CRVA first estimated.
“We do a lot of entertaining,” Palmer said.
But such multi-day trade shows – with big-spending sales people – are a small portion of the Convention Center’s business.
CRVA defended impact figures
In interviews with the Observer last year, former CRVA research director Mike Applegate defended the authority’s economic impact calculations. If anything, the CRVA estimates are conservative, he said.
“All we’re doing here is using a tried and true number from 2005,” Applegate said. “It’s applicable for all convention attendees.”
Mike Butts, the director of Visit Charlotte, which is responsible for attracting conventions and tourists, said this spring that the CRVA tries to be conservative.
“Our general philosophy is that it doesn’t matter if it’s $14 million or $17 million – it’s a big number,” Butts said.
Other cities and consultants tally visitor spending differently.
Boston, a leading convention city, uses a more conservative formula to calculate direct spending, based in part on visitor surveys. The Massachusetts Convention Center Authority mostly focuses on how many hotel rooms are used rather than attendance and convention lengths.
For instance, Boston hosts the five-day Yankee Dental Congress, which has 28,000 attendees. The convention center authority estimates the group brings in roughly $13 million in direct spending.
Under the 2005 formula, the CRVA would have shown roughly $44 million in direct spending for the same convention.
A consultant making economic impact projections for a new convention center in Nashville differentiated between visitors who stay overnight and day-trippers, who were estimated to spend $57 a day.
And last fall, after numerous Observer questions about CRVA methodology, the CRVA began using a new formula recently released by DMAI.
It shows convention visitors spend far less than previously projected, refuting five years of earlier data.
Since the revised formula was released, the CRVA has said it has booked 27 Convention Center events, and projects those visitors will spend $40.6 million in Charlotte.
If the CRVA had used its former, inflated methodology, the number would have been $75.5 million.
In an email to the Observer, Meesters said “there may be inconsistent data from previous years but we are making a concerted effort to improve it moving forward.”