San Diego Chargers Stadium: Debating Measure C

Essentially, there are two different schools of thought regarding the potential economic impact of the Measure C, the San Diego Chargers plan for a downtown stadium and convention center.

One thought argues that the biggest benefit to San Diego argues that the ability to host the largest conventions possible is the best way to move forward. The other thought argues that having twin facilities with the ability to host smaller and medium sized conventions simultaneously.

I'll be the first to admit that I'm not qualified to determine in any realistic way which side is right or wrong. With that in mind, let's get into the meat of the arguments.

The Participants

Jeffrey Siniard

Measure C Debate Participants

Representing the study commissioned by the Chargers (on left).

• Rob Hunden, President and CEO of Hunden Strategic Partners.
• David O'Neal, Chairman of Conventional Wisdom Corporation.

Representing the study commissioned by the San Diego Tourism Marketing District (on the right).

• Tom Hazinski, Managing Director of HVS Convention, Sportsd, & Entertainment Facilities Consulting.
• Joe Terzi, President & CEO of the San Diego Tourism Authority.

The Arguments for Measure C.

Click for a copy of the Hunden Report.

• The key takeaways from their report is that the new facility would create an additional 225,000 Annual Room Nights, generating an additional $12.5 million in annual TOT revenue.
• O'Neal said SD is a top tier convention destination, and that the existing Convention Center is actually already at capacity at 70%, given the booking schedules of conventions (i.e. overlapping dates, holidays).
• The new facility would include a 65,000 square foot ballroom (which would be one of the largest in the country), as well as 81,000 sq ft. of meeting space. When you include the playing surface, there would be a total of 225,000 sq. ft. of convention space.
• This option can be delivered to market sooner than any other option, and can reach market without disrupting any events at the existing facility.
• Their contention was that the HVS study was designed from the outset to provide negative results. They indicated the methodology was built around the assumptions/preferences of the existing SD tourism industry. Presents an us vs. them dynamic. Contiguous is a great option to pursue over time.
• Chargers proposal indicates that the facilities should be run together to prevent a "competition" situation between the facilities.
• Over time, most convention business is short-term (i.e. not planned years in advance), when combined with more small and medium sized conventions, makes it easier to fill gaps in the convention center schedule. Further, they indicated short term business is better - generates more revenue due to higher hotel rates.
• More people want to come San Diego, but there simply isn't enough convention space. Separate facilities are preferred because different conventions can "own their space" without worrying about others.

The Arguments against Measure C

Click for a copy of the HVS Report.

• The key takeaways from their report is that the new facility would create an additional 90,000 Annual Room Nights, generating an additional $3.4 million in annual TOT revenue.
• Mr. Hazinski indicated the SD tourism industry was very careful not to influence the people conducting the study.
• Return on investment - over 32 life span of project, stadium cost is closer to $3.4 billion, while only $3.4 million annually in tax revenue is generated by the project. Therefore, the convention element does so little to help the project that it almost might as well be just a stadium.
• Says exhibitors don't like the Chargers' plan because it's too far from hotels. Don't want unconditioned space. Want space where banners and other things can be hanged, which can't be done from the stadium floor.
• Their claim is that proposed space only useful to 29% of exhibitors, and only 6% could use the football field space.
• The NFL schedule causes problems because most event days for large groups are 9 days, which doesn't fit during the NFL schedule, even if known well in advance.
• Explaining the difference between the 225,000 room nights in the Chargers study to the 90,000 room nights SD tourism study - indicated that the Chargers got better numbers by conflating spousal attendance and overestimating average attendees per nights.
• They indicated the Chargers study is flawed because it looked at markets outside San Diego instead of looking at studies based on San Diego itself.

Additional Notes

When Terzi was asked about how a contiguous Convention Center expansion could come to pass by Voice of San Diego's Scott Lewis, Terzi replied "I'm an optimistic guy."

Mr. Hazinski said more than once that he felt Measure C was a 'false choice," in that voters should not be voting yes on Measure C in order to prevent the team from moving to Los Angeles.

Mr. Hunden said the NFL has been very supportive of other facilities in other cities booking events years in advance. He said the NFL would be willing to pledge no Monday or Thursday night games between mid-September and mid-November in order to facilitate advance convention booking, although he also indicated this was a verbal assurance from the NFL and not an in-writing/formal guarantee.

Mr. Hunden also indicated they intentionally they want to talk to existing groups who already have their places secure in SD. Talked to groups who have been trying to get into SD which haven't been able to due to lack of space in existing facility, but could fit in the space proposed by the Chargers.

Mr. O'Neal indicated the stadium will not be air conditioned, rather, it would be cooled using a process called thermal mass, which works by dissipating heat into the air. The upshot is that it significantly reduces cooling and heating costs. The downside, according to Mr. Hazinski, is that conventions don't want to use space which isn't actively temperature controlled.

Conclusions

As the debate points above indicate, there are two fundamentally opposed ideas for how the reports approached their research. As a result, you get two wildly different estimates for the potential return on investment.

As I indicated above, I'm not an expert in the convention business and thusly I'm not qualified to determine which side is more accurate, or which side used the more appropriate methodology.

As always, I hope you will all read the reports and decide for yourselves.