An oversupply of convention centres

I recently had the pleasure of talking to John Anthony at Stuff about the three large scale convention centres opening in New Zealand over the next three years. My concern is that changes in demand patterns due to the Covid-19 pandemic, as well as increased awareness about carbon emissions, may mean that New Zealand finds itself with an oversupply of convention centres.

The full article is available here, while my comments are pasted below:

Independent economist Benje Patterson​ says there is not enough demand to sustain three large convention centres in the current economic environment. “It’s going to be some time before demand patterns come back in such a way that means that we can fully utilise these resources.” Until then the conventions market may have an oversupply issue, he says.

It is a difficult time for the venues to be opening, not just because they will be competing against each other, but because there is so much uncertainty around what international travel, and in particular, corporate travel, will look like in the future due to public health measures and greater focus on reducing carbon emissions, he says.

Convention centres generally don’t deliver good returns on investment on the asset because there are a limited number of days each year when events are held, he says. “The venues themselves will struggle to make a return.”

But the delegates events attract are hugely valuable to the regions and New Zealand, he says. There can be a “lifetime” value to New Zealand if international delegates make a long term investment in the country, or sign a deal with a local business, he says. “That’s where the really big dividend is for New Zealand.”

He says putting together bids for events is costly and time-consuming, so the venues should work together to ensure they are not competing against each other. Rather than targeting events with the highest immediate yield, they should be strategic and pitch for events that cultivate business relationships in New Zealand’s major industries and sectors where the country is looking to increase productivity, which will result in improved long term benefits for the country, he says. To achieve this the Government may need to play a role in subsidising or contributing to bids, he says.

New Zealand has been lacking centres which catered for large audiences while also integrating things like hospitality and accommodation, he says. The three new centres will address that gap in the market, improving New Zealand’s value offering, he says. If New Zealand does a good job of hosting events it may, over time, develop an international reputation as an attractive conference destination, he says.