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The reality for the convention centre

convention centre april 2020 [1]

by Gordon Campbell
Reportedly the US stock market is being kept aloft during this deep Covid recession because so much US economic activity is being underwritten by government bailouts, loans and guarantees. Much the same can be said for the Wellington and Christchurch convention centre projects, which are forging ahead as if Covid-19 hasn’t happened, and as if conventioneers will still be merrily winging their way around the planet to large gatherings in packed halls, without a care in the world.

Taxpayers and ratepayers will be picking up the tab and will be socialising all the tens of millions in annual losses likely to be racked up for decades to come by these monuments to the bygone pre-Covid past.

Occasionally, reality does break though. Last week brought news that the APEC 2021 event mooted for Auckland will become a virtual event, with the loss of much of the expected flow-on financial benefits. [2] Some 20,000 people plus spouses had been expected, with related spending in restaurants, on travel, on accommodation etc.

Leave aside the old concerns that if every major city in New Zealand builds itself a convention centre, the competitive rivalry between them will simply cannibalise – rather than grow – the available market, with no overall increase in national wellbeing. Right now, NZ’s budding convention centres are being justified by the jobs that will be created during the construction stage. Given the decades-long servicing and operational costs involved though, these temporary jobs seem like diamond plated ways of creating employment.

So far the fee for breaking the contract and shuttering the Wellington project has not been disclosed. And despite some talk of re-purposing the prime site and convention centre design to fulfil other, more socially valuable uses, it seems too late [3] for this to be feasible.

The design being built includes a very large exhibition area that seems to have pulled off the Russian doll trick of creating a white elephant inside of a white elephant – in that just as Te Papa nearby has been dialling back its involvement in exhibitions from overseas (too costly) this vast exhibition area seems to now have no viable purpose [4], given that it was birthed with the now abandoned film museum [5] in mind. And as Wellington Scoop reported at the time, the Council awarded the convention centre contract to developers Willis Bond without a public tender [6].

Optimists may feel that because convention centres last for decades, the return of normality (revived global air travel, a Covid vaccine) will come in time to recoup at least some of the losses. Again, that’s a major gamble against the odds. We may never have a Covid-19 vaccine in that forty years on, we still have no HIV vaccine. The optimists are also assuming that current fears about long distance travel and large social gatherings will evaporate in time. Along the way, the optimists are also making heroic assumptions that the Covid-19 economic recession will not result in the current rise of virtual conferencing being seen as a permanent option for cost-conscious corporates, thereby further eroding claims of the income–generating potential from these complexes.

Surely Wellington has enough dead and unused public buildings in its city centre already, without erecting more of them.

Finally, what are the conference-wrangling experts banking on happening to their business in the near to medium term? The micro-economics of physical conferencing in future will include tighter force majeure (Act of God) clauses in the conference insurance contracts, much more extensive (and expensive) virtual reality areas and facilities, much more space allocated to social distancing, individually wrapped food and utensils (no more buffets) and the need to have medical staff on site. These developments may all add significant costs to convention centre profit equations.

At a higher level, if the recession – supposedly the worst since the 1930s – leaves enduring effects for the best part of a decade [7], there is no rational reason to expect the business of conferencing to revive ahead of that curve. Judging by this report [8], there is unrealistic optimism about the likely duration of the recovery period:

Tim Peter, an expert in the hospitality industry, pointed to research showing that large company gatherings are expected to be the most vulnerable travel category coming out of the pandemic. “Many companies are cancelling large events through 2021,” he said. “This may never recover. Virtual events may become a new normal for companies…”

Large company gatherings may still be vulnerable beyond that timeframe. Even then, a question-mark will be hovering over whether conferences will be insurable (at affordable premiums) in the post-Covid environment. In sum :

. People won’t return to in-person events until they can be assured of safety.
. “Mask-free” safety for large events probably can’t be assured until late 2021 or beyond.
. Many safety-related and economic travel restrictions will remain in place through next year.
. Some conferences may be in jeopardy until the insurance situation sorts out.
. Youth-oriented events and conferences in countries that have rebounded from the virus will return more quickly. [Theoretically this would give NZ a marketing edge, but only if we agree to scrap the quarantine requirements currently keeping the community safe. Again, this theoretical opportunity looks like being vaccine-dependent.]
. Virtual events will thrive and rapidly evolve but probably won’t offer “normal” opportunities …. until a technological breakthrough makes them more attractive for paying registrants.

In coming weeks, I will aim to look more closely at the cost/benefit situation of our convention centres, in the light of Covid-19 realities. At this point though, reading the business case for the Wellington Convention and Exhibition Centre [9] is like entering a time capsule back to a world that no longer exists.