Should we pay the Hilton $2million a year to run a convention centre?

convention centre

The Wellington City Council’s announcement of its plan for a convention centre, in partnership with a wealthy US hotel chain, predicts benefits for city businesses. It also lists the annual cost to be paid by ratepayers.

The cost is stated as being $2m a year. But this isn’t as simple it seems. Here’s how the council explains what the cost might be:

… average net cost to the city of $2 million a year over 10 years on our base operating projections (after accounting for profit share and rates income).

So the actual bill to the ratepayers will depend on whether (or not) the convention centre makes a profit, and how much it pays in rates.

The capacity of the proposed convention centre seems to be flexible. It will cope with 1200 convention delegates. It will seat 1450 diners at a banquet. And, says a background note to Friday’s council announcement, it would seat 2500 people in theatre-style seating in its largest space. That’s about 300 more than the Michael Fowler Centre. It’s certainly bigger than Te Papa (600 to 800 people in the Wellington Foyer) and the Amora Hotel (550 for a banquet, 800 for a conference, 1000 for a cocktail party) and Shed 6 (standing room for 1000.)

Has the council done research to show how many conventions with 1200 participants are being held every year in New Zealand? Or how many Wellington events are holding out for a banquet with 1450 guests? A convincing business case is needed – but councillors are being asked to vote on the project on Tuesday, at a closed-door meeting with ratepayers excluded.

The council’s arguments in favour of the convention centre make claims about earnings for the city. But they sound curiously similar to the ones that were brought out last year when Shed 6 was reopened after being converted into a concert and conference space. Here’s what the council’s venues manager Glenys Coughlan said last August:

“Without the new Shed 6 on offer, Wellington’s events industry would have experienced a significant reduction in the capital’s ability to host conferences and other events – an industry worth more than $100 million to the economy.”

That value has apparently rocketed up in less than a year. Here it is again, considerably inflated, in last week’s council announcement:

Wellington is currently the country’s second largest convention destination behind Auckland, making up 15 per cent of the country’s total convention market and earning more than $140 million for the city each year.

A $40m increase, in less than 12 months? And without help from a convention centre which, says Mayor Wade-Brown, is needed because the facilities we have are too small and, in some cases, too old and lacking the flexibility needed for the modern convention market. (Old and inflexible, but they seem to be performing pretty well with such a big increase in less than a year.)

Councillor Coughlan’s view of what should happen (in last week’s announcement) sounds rather like a threat.

“Wellington has two choices – we can do nothing and accept we’ll lose up to $25 million a year of economic benefits from the convention sector, or we can partner with Hilton and have an international convention centre which will see us continue to grow and compete.”

The figures are confusing. It’s not clear whether the council is planning to pay its annual $2m lease to the vastly profitable Hilton empire, which is to manage the new facility opposite Te Papa if it is built, or to the wealthy local developer Mark Dunajtschik, who plans to finance and build the hotel and convention centre and who (as has been pointed out by many) also wants to demolish the landmark heritage Harcourts Building on Lambton Quay, though the council now describes him as having a demonstrated commitment to Wellington.

As we’re not allowed to see or hear the debate, let’s expect much more information from the council after Tuesday’s meeting.

TUESDAY UPDATE: Councillors vote for convention centre

Hilton Worldwide Holdings Inc operates as a holding company, which provides hospitality services through its subsidiaries. It is engaged in the owning, leasing, managing, developing, and franchising hotels, resorts, and timeshare properties. The company operates through three segments: Management and Franchise, Ownership and Timeshare.


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