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Is a conference center worth the expense?

Job creation, increased sales and taxes have backers saying ‘yes’
A representation of the size of what a conference, arts and civic center might look like if built in downtown Durango. Local business leaders have been working for decades to kick-start efforts to build a conference center in Durango.

In the end, building a conference center requires a leap of faith and acceptance of a certain amount of risk. A group of Durango business and economic leaders want to make the leap.

Rod Barker, president and CEO of the Strater Hotel, said to some degree Durangoans must have faith that sales to local businesses, job creation and the tax revenue generated by meetings and events more than offsets subsidies most conference centers require for maintenance and operations.

Barker, who was behind Durango’s first effort to build a conference center decades ago, is among those who formed the Durango Arts/Cultural Working Group in 2016 to work on the latest effort to develop a conference center and establish an operating structure for the center to maximize its chances of success.

The current effort is looking at a combined conference, performing arts and civic center aimed at providing the most flexible space possible to maximize occupancy and tax revenues from attendees who will be spending money in downtown restaurants, shops and hotels. It’s the latest in an array of proposals to build a center in Durango that date to the 1980s.

Preliminary estimates by the working group are that a facility with a 450-seat theater, 3,000 square feet of event and meeting space, a 6,000-square-foot lobby and a kitchen would cost between $34 million and $47 million.

The group estimates such a facility would generate $21 million to $31 million annually in economic activity and increase local tax revenues by $1 million annually.

To cut operational costs, conference centers in Mountain Village and Grand Junction both have turned to outside management to operate their facilities. Those moves came after both found in-house management costly, creating unsustainable deficits.

Montrose has kept management of its conference center in-house. Montrose’s center is paid for out of the city’s general fund, a $550,821 expense that brought in $129,900 in revenue in 2017. It is a price the town is willing to bear to gain entry to the $325 billion nationwide business of hosting conferences, events and meetings.

The Montrose Pavilion Event Center provides more than 33,000 square feet for events, including 7,000 square feet of meeting and ballroom space, 4,000 square feet of gallery space, a 2,200-square-foot outdoor courtyard, 10,000 square feet of outdoor commons space, a 602-seat auditorium and full-service kitchen facilities.
Montrose

The Montrose Pavilion Event Center, built in 1990, provides more than 33,000 square feet for events.

Pavilion Manager Kara McKenna said 90 percent of its business comes from local events. The nearest hotel is a mile away, and that has limited the center’s appeal to regional and national events.

“We’ve lost some of our bigger bids for conferences because we don’t have a hotel nearby,” she said.

The lack of a convenient hotel has limited Montrose’s ability to provide the kind of economic impact Durango’s conference center planners are looking for by attracting outside groups.

Another issue, at least from the perspective of Durango’s center proponents, is that the Montrose Pavilion is 1 mile from downtown.

Location of a conference center is key for the Durango Arts/Cultural Working Group, which has identified the parking lot next to McDonald’s, an easy walk to downtown hotels, as key to making its proposal work financially. Wherever a Durango center may end up, proponents agree it must be within walking distance of downtown hotels, restaurants and shopping.

The physical blueprint of the Montrose center is similar to what Durango’s conference center dreamers envision.

The Montrose Pavilion offers 7,000 square feet of meeting and ballroom space, 4,000 square feet of gallery space, a 2,200-square-foot outdoor courtyard, 10,000 square feet of outdoor commons space, a 602-seat auditorium and full-service kitchen facilities.

Durango would look to make its space flexible, able to be used both for meetings and for performing arts events.

One attribute the Montrose center has that would be lacking in Durango: It is only 5 miles from the Montrose Regional Airport.

The Telluride Conference Center at Mountain Village includes 16,000 square feet of meeting space, 15,000 square feet of plaza space, a 7,012-square-foot ballroom that can be divided into three sections, an additional 7,500 square feet of meeting space in the Hotel Madeline and access to The Peaks Resort & Spa.
Telluride

Tony Kalyk, general manager of the Telluride Conference Center at Mountain Village, said his operation benefits from a unique attribute difficult to replicate elsewhere.

“It definitely helps to have a good base of CEOs and decision-makers who are familiar with your area,” he said.

Telluride’s conference center recently held a medical conference that Kalyk said was driven by a doctor who visits frequently and was key to bringing in the medical conference.

“It’s just finding your marketing niche and going after them with a concerted sales effort. You need to be laser-focused on who you are trying to attract,” he said.

The center features 16,000 square feet of meeting space, 15,000 square feet of plaza space, a 7,012-square-foot ballroom that can be divided into three sections, an additional 7,500 square feet of meeting space in the Madeline Hotel and access to the The Peaks Resort & Spa.

Telluride Conference Center at Mountain Village came under private management in 2009, Kalyk said, when the town of Mountain Village was looking for options to cut its cost of operation.

The private contractor for Telluride’s center has changed over the years, with Telluride Ski and Golf Club now running operations.

Two Rivers Convention Center in Grand Junction has 23,000 square feet in convention space, three ballrooms each of at least 5,800 square feet, six smaller meeting rooms that can be custom configured, a kitchen and access to the 1,096-seat historic Avalon Theatre.
Grand Junction

Maria Rainsdon, general manager of the Two Rivers Convention Center in Grand Junction, said operations of the facility, which includes the management of the Avalon Theatre, were outsourced to a private company in 2017.

“It was not in the wheelhouse of the city to provide in-house the management of operations, including food and beverage. The city was seeing subsidies it was not happy with – as much as $500,000 a year,” she said.

Two Rivers has 23,000 square feet in convention space, three ballrooms of at least 5,800 square feet, six smaller meeting rooms that can be custom configured, a kitchen and access to the 1,096-seat historic Avalon Theatre.

The contract to run the convention center and the historic theater was won by Pinnacle Venue Service, which was recently purchased by Oak View Group Facilities.

Under an agreement with the city of Grand Junction, Oak View does not get paid a management fee unless it keeps the deficit to operate the conference center and the historic theater to less than $250,000 a year.

In 2017, the city paid the private operators, then Pinnacle, $100,000 for keeping the operating deficit for the facility at $70,000.

The ultimate goal of the arrangement is to operate the complex at break-even, in which case Oak View would collect $162,500 from the city of Grand Junction, Rainsdon said.

“Typically, the majority of these operations run at a deficit,” she said. “It’s important to remember they exist for the economic benefit they bring in to a community. They are an economic engine.

“And it’s beyond financial. When the governor comes to visit, it’s nice to have a proper facility and not an echoey high school gym.”

Also, Rainsdon said the community benefits by having facilities for locals – school groups, fundraising galas, weddings and class reunions.

Durango plans

If Durango goes forward with efforts to develop a conference center, the Durango Arts/Cultural Working Group is looking at forming a 501(c)(3) nonprofit organization that would oversee design, development and eventual operation of a center.

Barker said one idea would be for a nonprofit overseeing Durango’s conference center to contract out eventual operations to a private, for-profit organization with limits set on any subsidy for its operation.

“It’s important that the center be run by the right people,” Barker said. “The people who run the center should succeed or fail based on the success or failure of the center.”

A private entity typically is more nimble and able to move quickly to fix money-draining problems than an in-house operation run by a governmental or quasi-governmental entity, he said.

Whatever the eventual management structure, a Durango conference center, Barker concedes, will also likely require a subsidy.

The competitive, nationwide bidding for conferences, trade shows, business meetings and other events keeps rents for such events too low to cover operations and maintenance.

The payoff for accepting the subsidizing of a conference center would be a more robust economy generating increased sales and lodgers taxes by event attendees.

For Barker, a trade-off of a couple hundred thousand dollars would be worth it if events generated tens of millions of dollars in increased sales, created jobs and boosted tax revenues.

Hotel executives, he said, are generally in agreement that Durango can raise its lodgers tax to support a conference center if it is built within walking distance of downtown hotels, so all would benefit.

Frank Lockwood, executive director of the Durango Area Tourism Office, said preliminary discussions are underway with the city to increase the lodgers tax from 2 percent to 6 percent. The increase would boost lodgers tax revenue from $1 million annually to $6 million.

While lodge owners support the increase, he said, that support is contingent on amending language in the tax to narrow the scope of how the city can spend revenue.

Hoteliers, he said, want assurance a certain percentage of the lodgers tax will be devoted solely for tourism promotion and future costs associated with design, development and eventual operation of a combined conference, civic and performing arts center.

Barker is confident a conference center will eventually be built in Durango.

“The question is when,” he said. “It’s like many things in business; you can’t determine if something will pay off 100 percent right away. You have to take a risk. Government can do it, too. It was a risk to build the rec center.”

parmijo@durangoherald.com

Oct 15, 2021
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