Monday, Mayor Wharton opened the possibility that Peabody Place might be a good opportunity for increasing Memphis’ convention space on the cheap, without throwing more good money after bad (like we did in 2002) at the Cook Convention Center.
Peabody Place has been vacant for the better part of four years, though it didn’t officially close down until 2011. The lack of activity at the site is a sad reminder of just how isolated downtown is for the vast majority of Memphians, despite the huge population growth in the past 15 years or so.
Who could have imagined…in 2001 when it opened, that people’s buying habits would change so swiftly, or that the folks who by and large moved downtown would be on the bleeding edge of that change. The mall wasn’t a bad idea for its time, but it couldn’t withstand the 1-2 punch of a deep and wide recession, along with changes in the way people buy things.
Since its closing there have been rumors that the building would be re-developed by Belz Enterprises into a combination of suites and convention space. But with demand for downtown hotel rooms flat, and a local convention business that’s anything but robust, no solid plans have been announced.
There’s no question the site SHOULD be developed into something. The question is what?
Mayor Wharton thinks the answer is…a convention center.
Is that a good idea? Lets start from what the city wants/needs first and work backwards.
What the City Wants/Needs
There are several schools of thought as to what the city’s convention business needs. Spend a little time in the Cook Convention Center and your first instinct will be…a modern convention center.
But that modern space need not be something along the lines of the $650 million dollar Music City Center in Nashville. In fact, we don’t have the hotel space downtown, or just about anywhere else to utilize a space that big. Increasing the number of rooms in the downtown area will take some time, and a track record of low vacancy rates isn’t helping. Last time I looked, occupancy downtown was around 60% which is a little below the national average, but the Average Daily Rate (ADR) was only about 74% of the national average. So until there’s a consistently a higher occupancy rate, causing an increase in the ADR, developers aren’t exactly going to flock to downtown Memphis.
What we have here is the classic “chicken/egg” scenario that is more frequently used as a rationale for inaction in this city than any other place I’ve lived.
Truth is, hotels aren’t going to flock to downtown unless there’s a good bunch of somethings (attractions) that are going to inspire confidence…and ladies and gentlemen, the Cook ain’t it.
But all is not lost. Any of the three options under discussion: revamping the Cook, building a new Convention Center, or turing Peabody Place into a convention space could crack the egg and pluck the chicken. But if the goal is increasing hotel capacity, the Peabody Place proposal has some competitive disadvantages for developers.
Stacking the deck, public-private partnership style
I’m not one of those that’s 100% against the idea of a public-private partnership as a general statement. They can sometimes work out. The public gets what they need (an amenity or service) and the private business gets what they long for (a revenue center).
That said, if the idea of expanding the amount of convention space is part of a long-term plan to also increase tourism in the city, and, in the process, increase the number of rooms, occupancy rates, and ADR, then building your space on land that is controlled by a large hotel operator may not be what you want to do.
The problem is, it creates a competitive advantage for the hotel. Since they’re right there and they can bundle services, it means other hotels are left in the lurch.
I’m not a hotel developer, but I wouldn’t want to go up against that.
And the Peabody has a history of using its current competitive advantage as a blunt object.
If you want to do a meeting at the current Peabody facilities, and use an outside vendor for A/V and all sorts of other things, the Peabody will try to add a 10% surcharge. They have an in-house vendor…A/V powerhouse PSAV.
I’m not dogging on PSAV. They’re a fine company, and I’ve worked with them (as a client-side production coordinator) on several occasions.
But there are local A/V vendors as well, and if the public is going to lend its dollars to a venture such as this, local companies that hire local people should have a fair shake…without the threat of additional cost to their clients.
The 300: Myths of Many Small Meetings
Another area of concern is the space itself.
My memory if the inside of Peabody Place is a bit hazy, but the ceiling is mostly glass, and there’s a huge atrium area, that’s uneven, and concrete, which means it will have to be leveled.
These aren’t deal breakers, but there are structural concerns that have to be dealt with for a Convention space, that a atrium centered mall doesn’t have to worry about.
More and more conventions are increasing production…even for small events, which means how much weight a structure can hold, and how large of a distance between the beams is really important. Again, this is not “unfixable” but something to consider before you get too excited.
Then there’s this quote from Mayor Wharton about some kind of “niche market” he envisions:
Most of your traffic when it comes to conventions and meetings they’re not the 15 to 20 thousand people, its the 300, 400, 500…that would be a niche market for us…
Now it’s true, the 10k+ convention market is small and competitive. Its also true that most conferences are less than 1000 people. But there are some real problems with Mayor Wharton’s premise.
First, no one plans to focus on the small market. They make contingencies…like air walls, and other separations, much like the Grand Ballroom at the Cook, which I’ve seen used for as few as 150 to as many as 1500+ people.
Second, any space should represent growth from the Cook. Peabody place is 300,000 sq. ft. The Cook is 350,000. There’s no question that adding Peabody would add much needed space, but it doesn’t build on what we lack. If anything it would merely add to what we’re already not utilizing.
Finally, Peabody Place is land locked. There’s no room to grow in the future to accomodate new meetings, and the growing size of meetings that we currently host.
The AutoZone meeting that happens each year uses every usable square inch of the Cook…and then some. Adding space for more 300-500 person meetings isn’t going to help that convention, or others like it that have outgrown Memphis in the past several years, at all.
Its simpler than this
As I wrote back in October, any work to expand our convention business in the city should focus on bringing spaces together that can work in tandem.
There’s no shame in building something in the 600,000 sq. ft. range, or even expanding the Cook to that size (so long as it includes more ways to get into the exhibit halls without an elevator).
And if we did build a new building in that 600k range, we should make sure we have the space to expand…just in case.
Because, at the end of the day, we need to work to bring more hotel rooms to Memphis so we can compete for other things, like an NBA All-Star game, or a political convention or whatever the next opportunity holds.
As for Peabody Place, if Belz wants to re-develop it into something like Mayor Wharton’s vision, they should go for it. Its not like they weren’t thinking about it already.
The reality is, there’s a reason Belz Enterprises hasn’t already turned Peabody Place into the very thing Mayor Wharton is proposing…and that’s because its just not feasible for them at this time…and that doesn’t make it look any more attractive as a public project either.