Return to Virginia Business - January 2003

by Karl Rhodes

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When the owners of the venerable Homestead resort in Hot Springs undertook a 20,000-square-foot expansion in 2001, they wanted more than an extra ballroom. They needed one well-appointed enough to handle luxurious banquets but flexible enough to handle high-end trade shows. The existing ballroom’s 15-foot ceiling was too low to handle some trade shows, so, when The Homestead built a second ballroom, it boosted the ceiling to 25 feet.

The payoff was immediate. Just as the expansion was being completed, meeting planners for Centocor, a pharmaceutical subsidiary of Johnson & Johnson, came looking for the perfect place to stage its traveling trade show. The ballroom’s ceiling had to be at least 22 feet high to accommodate Centocor’s stage, and The Homestead had three feet to spare. “It gives us the capacity to host 1,000 people for dinner in one room,” says Jeff Ford, vice president of sales. “More importantly, it gives us the opportunity to entertain a couple of 200-room groups at the same time.”

The Homestead’s expansion is typical of Virginia’s quest for bigger and more flexible meeting space. Since 1995, the commonwealth’s hotels and convention centers have added 500,000 square feet, and another 700,000 square feet is expected to hit the market in the next three to four years.

This unprecedented expansion comes at a time when many organizations are cutting back on conference expenditures to bolster their bottom lines, and Virginia may be uniquely positioned to meet the demand for lower-cost conventions. The commonwealth is within a day’s drive of two-thirds of the nation’s population. This geographic advantage plus Virginia’s rich history and natural beauty have largely sustained its $13 billion hospitality industry while those in other states have faltered.

In The Homestead’s case, the four-star resort was just putting the finishing touches on its new conference center when terrorists struck on Sept. 11. The timing may have seemed unfortunate, but Ford is glad the resort expanded when it did. “By having this new expansion in a downturn, we have been able to get more than our share of business,” he says. “It has allowed us to attract more business and larger business.”

That’s the hope of convention officials in Richmond, Hampton and Virginia Beach, where major new facilities are coming on line. Richmond’s new convention center will be the largest in Virginia when it opens later this month. The center has 180,000 square feet of exhibition space plus 76,000 square feet of meeting space, including a ballroom that can accommodate 2,100 people for a banquet.

The new facility will handle conventions with up to 10,000 participants, says Cleo Battle, vice president of sales and services for the Richmond Convention and Visitors Bureau. And that flexibility will put the city on the national meeting map, he predicts. “National associations like to move their meetings around to all the states where they have local chapters,” Battle says. Up until now, Virginia didn’t have sufficient facilities to accommodate many of those meetings.

So far, the Richmond Convention Center has booked 19 conventions for this year — two more than the city’s consultants forecasted during the planning process. “Three or four of those conventions will be national in scope,” Battle says. “They wouldn’t be coming here without this new facility.”

Now that the convention center is nearly finished, Battle says the next hurdle for Richmond will be to attract two or three major conference hotels within walking distance of the new center. Already, the Richmond Marriott provides 401 guest rooms, and there are plans to build another hotel across the street. Even so, that’s not enough, says Howard Feiertag, a meeting market expert in Virginia Tech’s Department of Hospitality and Tourism. Richmond will need several major conference hotels in close proximity to the new center, he says. “How are you going to get convention participants from the hotels to the convention center? Are you going to run shuttles? Is it safe to walk?”

Virginia Beach has the opposite problem. It has the conference hotels, and it is adept at shuttling convention participants to and from its Pavilion Convention Center, but the Pavilion is small and not very flexible. That’s why the city is about to break ground on the Virginia Beach Convention Center, a $193.5 million facility that ultimately will replace the existing center. “Normally it takes five to 10 years to get one of these expansions done,” says Jim Ricketts, director of the city’s Department of Convention and Visitor Development. “In our case, it has taken 18 years, and I have the memos to prove it.”

The new convention center will feature a 143,000-square-foot exhibit hall, a 32,000-square-foot ballroom and 30,000 square feet of additional meeting space. The facility will help Virginia Beach attract larger conventions, and the exhibit hall will be divisible into four sections that can operate independently, allowing the city to host two or three major conventions at the same time. Each section will have its own loading dock and areas for registration and mingling before meetings and banquets.

Ricketts envies Richmond’s head start, but he says the two cities generally don’t compete for the same conventions because Richmond is a downtown destination and Virginia Beach is a resort area. Greater statewide competition is a factor, he admits, “but the bigger issue is how do we elevate Virginia as a convention state? Right now Virginia ranks close to the bottom.”

The new convention centers are long overdue, says Sallye Grant-DiVenuti, director of the Hampton Conventions and Visitors Bureau. She acknowledges that Hampton will be competing with Richmond and Virginia Beach, but she agrees with Ricketts’ contention that each market offers something different.

Hampton is trying to create a campus of hotels, restaurants, shopping and entertainment — all within walking distance of the new Hampton Roads Convention Center, says Grant-DiVenuti. “We’re designing it specifically for the meeting market and the SMERF market.” SMERF stands for social, military, education, religious and fraternal organizations. The convention center alone will cost $100 million, and it will feature 100,000 square feet of flexible exhibit space, a 28,000-square-foot ballroom and more than 25,000 square feet of additional meeting space. Hampton plans to break ground early this year on land adjacent to the Hampton Coliseum. There are several existing hotels nearby, and a new Embassy Suites Hotel will be built immediately adjacent to the center.

One nagging question, however, is whether Virginia is overbuilding new convention space. Three big convention centers are hitting the market in the next three years. Officials in all three cities say their feasibility studies indicated strong demand for their facilities, even with the assumption that all three new convention centers would come to fruition.

Even so, Feiertag, the meetings expert at Virginia Tech, says consultants are famous for telling public officials what they want to hear. He says private-sector conference construction is a better gauge of industry expectations, and the private sector also is building significant amounts of meeting space in Virginia.

Several large conference hotels have opened in Virginia in the past few years including the Virginia Crossings Resort in Richmond and the Renaissance Hotel and Conference Center in Portsmouth. Each of these hotels offers about 25,000 square feet of meeting space. In addition to Hampton’s proposed Embassy Suites Hotel, a new Hilton conference hotel is being developed in downtown Suffolk.

Private investors have put even more money into expansions and renovations of existing conference hotels in Virginia. In Williamsburg, for example, several major hotels have created a world-renowned meeting market without the benefit of a public-funded convention center. There the driving force has been the Colonial Williamsburg Foundation, the nonprofit organization that John D. Rockefeller founded to restore Virginia’s Colonial capital to its 18th century appearance.

In early 2001, the foundation’s hotel company opened The Woodlands Conference Center in the building that previously housed its Cascades restaurant. The center provides 13,000 square feet of conference space adjacent to the new Woodlands Hotel & Suites. Colonial Williamsburg has invested $35 million in the hotel and conference center plus $25 million to refurbish the elegant Williamsburg Inn.
Next on the agenda is a complete renovation of The Williamsburg Lodge, including its 30,000 square feet of meeting space. Construction is scheduled to begin early next year, and cost estimates range from $30 million to $60 million, says Gary Brown, vice president of sales and conference operations. Built in 1939, The Williamsburg Lodge enjoys a loyal following among its conference customers, but Brown says enhancing Colonial Williamsburg’s meeting facilities will create fresh demand. “We’ve far exceeded projections at the Woodlands,” he notes, “and the restoration of the Lodge will be the economic engine for the hotel company in the coming years.”

So, who has the largest conference center in Virginia? The Homestead? The Hotel Roanoke? The Cavalier? The Norfolk Waterside Marriott?

The answer is none of the above. It’s The National Conference Center near Leesburg. This massive meeting facility has 250,000 square feet of conference space and 951 guest rooms in one complex that totals 1.2 million square feet. Formerly known as the Xerox Document University, The National Conference Center didn’t appear on most meeting planners’ radar screens until this year. Xerox sold the complex to Oxford Lodging Advisory & Investment Group in July of 2000, and the Chicago-based investors spent 18 months and $30 million renovating the facility, says General Manager Bruce McIntosh. “Xerox is still our primary client, and this is still their primary training center,” McIntosh says, “but they have installed me to turn a corporate expense into a viable business.” Oxford leases part of the complex back to Xerox for research, development and training space, but Aramark, the facility’s management company, is aggressively marketing the conference center to the rest of the corporate world.
Already the facility has entertained many clients with world-famous monograms such as AOL, IBM and the IMF. “Business has been wonderful in comparison to the rest of the industry,” McIntosh says. Occupancy increased 12 percent last year, but McIntosh still has plenty of rooms to fill. “It’s like having five, 200-room conference centers,” he says.

The complex is overflowing with meeting space, but it’s divided up into 250 separate rooms — none bigger than 4,000 square feet. So Oxford plans to build a ballroom that’s large enough to host a banquet for 1,000 people. If all goes well, the new ballroom could be open by the end of next year.

Adding to the fast-growing supply of meeting space, several other corporate conference centers have opened their doors to the general public in recent years. They include Berry Hill Center in South Boston and Upper Brandon Plantation in Prince George County. Upper Brandon was the private conference center for Richmond’s James River Corp. After James River merged with Chicago’s Fort Howard Corp., the company sold the property to a prominent group of Richmond investors that included former James River Chairman Brenton Halsey and former AMF Chairman Bill Goodwin. They opened the center to other groups in 1999, and last year they started promoting the facility more aggressively. With less than 2,000 square feet of meeting space and only 31 guest rooms, Upper Brandon is no threat to Virginia’s major conference hotels, but it represents another serious competitor in the small-meeting market. “The exclusivity factor really sells the place,” says General Manager John M. Moore Jr. “We only accommodate one group at a time, so the whole place is yours.”

While deep-pocketed players such as Halsey and Goodwin enter the corporate retreat market, nonprofit groups are targeting meetings that don’t require overnight accommodations. One such group is Lewis Ginter Botanical Garden in Richmond, which recently expanded its meeting space to 10,500 square feet — as much as a midsize conference hotel. The botanical garden had accommodated small meetings for many years, but for larger gatherings, the garden’s managers had to go somewhere else.

It didn’t seem to make sense, recalls Frank Robinson, the botanical garden’s executive director. “Here we were building these beautiful gardens, and we were holding symposia about landscape design and architecture downtown inside a hotel ballroom.” So in addition to building larger conference facilities for its own needs, the botanical garden decided to provide enough space to attract other meetings to its unique venue. Most of the new space opened in September, and it has been a big hit with the horticultural crowd — the Virginia Daffodil Society, the Virginia Orchid Society, the Virginia Native Plant Society, the list goes on and on. More importantly, the new space attracts other types of meetings with participants who have never been to the garden.

Hosting conferences “complicates our life a bit, but it does two things for us,” Robinson says. “It generates income, and it’s a marketing tool to get people to come to the garden who wouldn’t normally visit us. ... It transforms the public perception of the garden.”

The list of other nonprofit organizations pursuing similar strategies includes museums, churches, parks — even speedways. Richmond International Raceway offers pace car rides to executives who hold meetings in its corporate hospitality suite overlooking the finish line.
“We’re all still on the same racetrack, but we’re moving up from Chevys to Cadillacs,” says Hampton’s Grant-DiVenuti. She brushes aside concerns that Virginia may be overbuilding its convention and conference space. “We’re starving for product,” she says. “Virginia is totally underserved in the meeting market. There’s so much pent up demand that we all should do very well.”

She may be right, says Virginia Tech’s Feiertag. Demand is down nationally, but “conventions are moving to secondary and tertiary cities,” he says. “People don’t want to fly on big planes into big cities right now,” so national associations are looking for new convention locations that will boost attendance and reduce costs. “That’s what it’s all about,” he explains, “30 percent to 40 percent of associations’ budgets come from their national conventions.” And on the expense side, costs for set-up crews, caterers and entertainers are much lower in smaller cities.

One exception to the expansion trend appears to be Roanoke. Growth there has been “fairly flat,” says Debora Wright, director of marketing for the Roanoke Valley Convention and Visitors Bureau. “We’re putting more heads in beds, but we’re not seeing the high-end conferences whose participants tend to spend more money.”

Roanoke has compensated by attracting more sports tournaments and religious meetings, and the Roanoke Civic Center is building a new 46,000-square-foot exhibit hall to accommodate more trade shows. But Wright has reservations about constructing huge new convention centers in a struggling economy. “I wish them well,” she says. “And I hope they know something that we don’t.”

The commonwealth’s economy will benefit from the industry’s new-found size and flexibility, but it’s difficult to predict how Virginia’s three new convention centers will perform individually. Richmond has a head start, but Virginia Beach is better equipped to handle large numbers of visitors. Hampton may create the best pedestrian environment, but it will be sandwiched between two seasoned competitors. With all this new competition and flexibility, the hands-down winners should be meeting planners who are looking for low-cost alternatives to big-city convention destinations.

No one knows how much meeting space the commonwealth can absorb in just a few years, but there’s little doubt that Virginia is raising the ceiling to give its convention and conference industry more room to grow.

Return to Virginia Business - January 2003