Lessons For Anaheim In LA Convention Center Expansion

LA convention center

Entertainment giant AEG is proposing a $1.2 billion expansion of the LA Convention Center and the JW Marriott Hotel. Proponents say the facility is already relatively uncompetitive as a first tier convention destination, and is falling behind cities such as Anaheim that have completed their own convention center expansions.

The $500 million convention center expansion would add 350,000 square feet – primarily meeting room space – to give the LA Convention Center more than 1.2 million square feet of space.

A second JW Marriott Hotel tower with 850 rooms and a 51,000 square foot ballroom would also be built for $700 million.

“Sponsors of large-scale events such as pharmaceutical and medical industry conventions steer clear of Los Angeles because its meeting facilities are inadequate, according to convention officials,” reported the Los Angeles Times.

The difficulty of competing with cities like Anaheim that are home to superior convention facilities is a driving factor in the LA expansion proposal.  As the LAT article notes:

“The Anaheim Convention Center added 200,000 square feet last year to join only a handful of U.S. cities that can boast at least 1 million square feet of exhibit space. That’s the equivalent of 17 football fields.”

The addition of a second 4-Diamond JW Marriott tower is an integral part of this expansion proposal because the presence of 4-Diamond hotels is necessary to making LA a more competitive convention destination.

This is directly relevant to the political debate over the Anaheim Resort unions initiative to impose an $18 minimum wage on targeted Resort businesses. Anaheim recent convention center expansion and use of TOT rebates to attract 4-Diamond hotel construction were both part of larger strategy to maintain the city’s status as a top tier convention destination while enhancing its ability to attract bigger, more lucrative conventions and shows.

It’s been working. The expansion is completed. Larger shows are being booked, and five 4-diamond hotel projects – the two GardenWalk hotels, the two Wincome Group hotel projects and the new Disneyland Resort hotel project – have been approved.

The Resort unions’ $18 minimum wage initiative is a dagger aimed at the heart of the expansion strategy. It if qualifies and passes, the GardenWalk developers have made clear they’ll cancel the second 4-Diamond hotel. The same goes for the Wincome luxury hotel projects, and likely the Disney hotel project.

That would knock the legs out from under an economic development strategy into which many years and resources have been invested, and unilaterally sacrifice much of Anaheim’s competitive edge just as LA is undertaking a major convention center and hotel expansion.

Economies aren’t static things. The Resort unions coalition and its political acolytes seem to think their $18 wage proposal simply re-directs some revenue from the Eternal Magic Corporate Profit Machine, and business development plans simply chug along, unaffected.

The reality is that using government to dictate wages and retroactively change the terms of agreements between developers and the city increases costs and injects greater uncertainty. Those are factors that tend to drive capital investment elsewhere in search of more reliable partners and a greater certainty of return.

Something to consider as the debate over the Resort unions’ misguided $18 wage proposal continues.

7 comments

  1. Joseph Haggarty

    Just to clarify: the hotel projects are unlikely to be cancelled as much as moved over the city line, to Garden Grove. So that city will get the financial benefits. (Which is the hidden goal of those powerful figures in the city with financial interests in the Garden Grove hotel industry.)

    • Please be more specific as to “who” on the City Council or otherwise, are vested in the hotel industry in Garden Grove? Inquiring minds would like to know.

      • Sick of Politics

        Tait’s engineering firm hasn’t worked on the 4 star hotels in GG… including those who received large incentives… so they’re bad for anaheim in his opinion but good for GG and his pocket book..

  2. Waive/lowere union dues and workers will have more money

  3. It makes no sense at all that major hotels will not be built because of a small increase in the minimum wage. The minimum is increasing in all of California to $15 per hour, so a further increase from billionaires of another $3.00 per hour is minor.

    If these hotels are in such precarious financial shape that this increase makes them infeasible, then they should not be built in the first place.

    • It’s not just $3. It’s all the other increases that go along with it. Add the domino effect since one group is getting an increase, others will too. And the broad language could easily apply to small businesses as well who cannot absorb that cost. Much more at stake here.
      Don’t forget the city says good bye to the TOT from the hotel. So how do you plan on paying for pensions, parks, PD, fire and services Rick?

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