Atlanta —The National Association of Home Builders, which hosts one of the nation's largest expositions, has pulled its 2007 and 2008 editions out of Atlanta amid a swirl of controversy.
Officially, the cancellation of the International Builders' Show last month was caused by the show's remarkable attendance growth, which outstripped the city's main convention halls and hotels.
But a contributing — and heatedly debated —factor in NAHB leaving Atlanta focused on financial incentives offered by area hotels and the Georgia World Congress Center, the city's main convention facility.
While the incentives were originally an inducement for NAHB to stay, many within the organization came to feel the hotels were planning to recoup their contributions by surreptitiously raising room rates during the trade show dates.
It was a contention quickly denied by the hotels and the city, but the damage was done.
"It created some discussion, and probably some feelings, and may even have precipitated some things," said Wayne Stetson, senior vice president of NAHB's conventions and meetings group.
One longtime NAHB board member went even further.
"The association does not want a kickback from hotels and then add that kickback on to our members," John Cowart, a Norcross, Ga., developer, told The Atlanta Journal-Constitution.
Asked if the NAHB convention would be leaving Atlanta if the incentive package controversy had never come up, Cowart told the newspaper, "I would say they probably would not."
"That's his opinion," countered Mark Woodworth, executive managing director of the Atlanta office of PKF Hospitality Research. "Clearly, whatever consternation this whole misstep caused, the size constraints the home builders were facing was the big issue. NAHB just outgrew Atlanta."
Ultimately, Atlanta's loss of the International Builders' Show is a story of one show's rampant and unexpected growth, and a city's inability to keep pace.
But it may linger in many local minds as a cautionary tale about a series of unfortunate incidents that pushed the group — already looking for an excuse to convene elsewhere — over the edge and out of town.
Insufficient Space
NAHB last brought IBS to Atlanta in 2001 and 2002; the show traditionally runs for two consecutive years in one destination. Atlanta, with the 2007 and 2008 IBS dates looming and desirous of attracting other large events, expanded its Georgia World Congress Center by half, bringing the total to 1.4 million square feet.
That boosted the center to fourth place behind facilities in Chicago, Orlando and Las Vegas.
But NAHB, fueled by a torrid homebuilding industry, was experiencing remarkable show growth —attendance jumped 18 percent when the IBS moved to Las Vegas for 2003, with a similar increase the following year, also in Las Vegas, surpassing the 100,000-attendee mark.
By January 2004, with forecasts of a severe space crunch, the Washington-based association finally informed Atlanta it was considering moving its 2007 and 2008 show dates.
(At about the same time, NAHB said it also anticipated outgrowing New Orleans, scheduled for 2013 and 2014. The association and that city have been working through cancellation terms ever since, with a financial settlement expected as MeetingNews went to press.)
But NAHB delayed its decision to leave Atlanta. One reason may have been a $2 million incentive package brokered by the Atlanta Convention & Visitors Bureau to sweeten the deal.
The initiative was to include $1.3 million contributed by the hotels when the convention was in town in its two years. The Georgia World Congress Center was to add a $700,000 discount of its own.
Also helping delay the decision was an aggressive campaign by local builders, lobbying their national association to keep the IBS in Atlanta.
"Last year it was a valiant effort by the local home-building industry that saved the day," said Ken Bernhardt, Regents professor of marketing at Georgia State University in Atlanta and a longtime Atlanta CVB board member.
"But subsequent to that, the International Builders' Show grew even bigger," Bernhardt said. "We heard a lot of rumblings at NAHB, as it became clearer and clearer they could sell more space than we had available."
Atlanta was preparing to patch together an expo venue consisting of the Georgia World Congress Center and the nearby 102,000-square-foot Georgia Dome, with a huge tent pitched between the two for additional exhibit space.
But the issue of financial incentives came roaring back during a February hotel site inspection and final round of negotiations in Atlanta.
According to Spurgeon Richardson, president and CEO of the Atlanta CVB, the NAHB negotiators wanted to set hotel room rates at the level they were during the previous show in Atlanta, in 2002. That was in addition to the $2 million incentive package.
However, a CVB staffer, apparently on his own initiative, emailed a recommendation to the hotels to "hold firm" on their room rates, and also to keep the email a secret.
NAHB negotiators found out about the email within a day, however, and some viewed it as a call to raise rates. The CVB quickly disavowed the email, and the employee (whose name has not been released) resigned.
"The email was poorly worded and not in good judgment," Richardson said. "But the home builders brought it up the next day, and it got back to the fact that they really didn't want to come to Atlanta."
Gains Outweigh Losses
During the weekend of April 16 and 17 in Atlanta, NAHB's board voted to terminate its commitment to hold the 2007 and 2008 IBS in that city.
The financials are eye-opening:
The loss of IBS will cost Atlanta $240 million in direct spending over the 2007-2008 span.
NAHB will pay a cancellation fee of about $2.7 million.
Offsetting the penalty, NAHB anticipates it will gain $16 million to $20 million in added exhibit-space sales and attendance fees if it relocates to Orlando or Las Vegas for 2007 and 2008.
"That's not a bad return on investment, paying $2.7 million to get $20 million," observed Bernhardt. "I'd be willing to make that investment."
Still, NAHB's Stetson said the association wrestled with the decision.
"Honest to God, we felt terrible about it," he said. "But our loss would have been devastating. Even based on what our annual growth used to be, about 5 percent a year, we would have been short 80,000 to 100,000 square feet of exhibit space in our first year, and our second year we'd have been short by about 150,000 square feet."
There also was a guestroom crunch. Stetson said he was having to put together a room block in Atlanta with 126 hotels, some of them 40 miles away from the expo. A similar show in Las Vegas could be accommodated by about 30 hotels, all downtown.
NAHB is pretty sure where IBS will end up. Stetson said both Orlando (2007) and Las Vegas (2008) were clearing dates and moving smaller groups to accommodate the big trade show.
The International Builders' Show already has signed contracts with Orlando and Las Vegas to rotate between the two cities for all other dates through 2020.
"I hope we can get things settled with Atlanta by the end of May so we can formally cancel our contract, pay the penalty, and move on," Stetson said.
Contact Christopher Hosford at
[email protected].