The Illinois legislature`s last-minute decision to fund a $1 billion expansion and upgrade of McCormick Place drew cheers from many in Chicago`s hospitality industry, but others look on the project with skepticism or dissatisfaction.
The expansion is expected to generate added income for hotels, restaurants, transport companies and other businesses, but less than it would have if a proposed domed stadium had not been cut out of the package.
Operators in some of the industries singled out to be taxed to pay for the project wonder if they will reap the promised benefits.
The McCormick Place proposal includes a 1 million-square-foot additional exhibit hall, 300,000 square feet of new meeting space and a glass-enclosed concourse spanning Lake Shore Drive and linking the new buildings to the old. The plan also would reroute the northbound lanes of Lake Shore Drive between McCormick Place and the Field Museum.
Show managers who have watched plans for previous McCormick Place buildings get scaled down because of escalating costs say they have learned to hold their applause until they see what they actually get.
The Radiological Society of North America, based in Oak Brook, is
”pleased” that the expansion has received the go-ahead. But it will continue to look at possible alternate sites for future meetings, said Merle Hedland, director of scientific meetings for the society.
The group`s annual scientific meeting and exposition attracted 50,000 to the city for six days last November. It has contracted to hold the meetings at McCormick Place until 1997. Last year`s meeting added $40 million to Chicago`s economy, according to an estimate by the Chicago Convention and Tourism Bureau.
”Right now Chicago and Las Vegas are the only places big enough to handle us,” said Hedland. ”But by the time our agreement with Chicago comes up, Atlanta, New Orleans and Orlando will fit us. And by the year 2005, Dallas should fit us as well.”
Each of those cities is expanding and upgrading its exposition center, he noted.
Meanwhile, Hedland, like other meeting planners and the people responsible for selling space in McCormick Place, must play a guessing game about when the expansion will be ready for use.
”Depending on how soon they get their money, we think construction will start in `92,” said Hedland.
”We heard the building will be completed in late `95,” he said. ”but I wouldn`t plan to use the new building in `95. We have to plan a year in advance. Unless we can be assured that it will be completed in time, and that the final product will be much finer than what`s there now, we will take the conservative route and not plan to use the new building until `96. It`s easy to talk about construction, but less easy to complete it.”
The society has ”been working with the designers” to help insure that the new building and a retrofit of existing buildings will fulfill users`
hopes, but even this ”input” is no guarantee, said Hedland.
”Wishing doesn`t necessarily make it happen,” he said. ”The East Building rooms and sound systems are not as they were originally planned. Things look good on paper, but when you start getting cost overruns or delays, the kinds of things we`re interested in are likely to be the first to be cut out. We were using meeting rooms that were almost an insult to the people we represent. We needed higher ceilings, movable walls, better audiovisual capabilities.
”We went into the North Building to get more and better meeting rooms. That building is different from the way it was originally designed. When it came up over budget, the meeting rooms got smaller and fewer, and there was not all the lighting and sound equipment that was needed to make it work.”
The Metropolitan Pier and Exposition Authority, which operates McCormick Place and Navy Pier, has not established firm ”time lines” for the expansion, said John Devona, senior director of marketing planning for the authority.
”Most of our clients are fully cognizant of the process by which exhibition space comes on line,” he said. He added that James Reilly, McCormick Place chief operating officer, ”has made it clear that we`re going to be cautious in commitment of space because we don`t want to promise space earlier than it would become available.”
Such caution might avoid complications such as those resulting when the north annex, which opened in 1986, was completed a year behind schedule and more than $75 million over budget. Critics of that project say many of the problems stemmed from an ill-advised rush to complete the hall in time for the spring Consumer Electronics Show.
Despite uncertainties, the Chicago Convention and Tourism Bureau, which performs worldwide marketing for McCormick Place and other Chicago venues, is already pushing the expansion to potential customers.
”We`re targeting groups that have to make decisions about where to meet in 1996 or 1997,” said Patla. ”We`re looking at many shows that we were previously unable to sell because of limited space, or not having the backup hotel rooms in the city. We`re playing by ear for a while. We can`t tell them exactly how many meeting rooms we`ll have (at McCormick Place).”
The project, which Gov. Jim Edgar has said he will approve, is expected to be funded with a 2.5 percent tax on Chicago hotel rooms, a 6 percent tax on auto rentals in Cook County and a 1 percent tax on restaurants in the downtown area and at O`Hare International and Midway Airports. There also will be a $1-a-person fee on taxi and limo rides to and from the airports and a 75- cent fee for airport bus riders.
The taxes go into effect July 1, 1992. They are expected to generate $53 million a year to retire $937 million in bonds issued to finance the project. Many hoteliers and others affected by the taxes have grudgingly assented. Robert Small, president and chief executive of the Fairmont Hotels chain, said the money had to be found somehow to save the city`s economy.
”The other cities are competing harder now and building bigger meeting facilities,” he said. ”Chicago can`t afford to be complacent, as it has in the past.”
But the effect of the new taxes on the competitiveness of Chicago`s travel-related businesses has raised questions.
The ”general consensus” has been that such taxes are a ”free good” to an area, according to Stephen Hiemstra and Joseph Ismail, researchers at Purdue University. It is commonly thought, they explain, that such taxes cause little harm to the lodging industry because they are paid largely by businesses, or by people on vacation who have relatively high incomes.
”Even better, the taxes are (thought to be) imposed on people who are away from home and have no vote in either the decision to tax or the use of the funds,” they wrote of a study they carried out for the American Hotel & Motel Association.
Other recent studies reviewed by Heimstra and Ismail have indicated that the harm taxes do to a city`s hospitality industry may be ”sizable,” and at some pount it becomes difficult for businesses to raise prices and pass the taxes on to customers.
One study showed that an 8 percent room tax caused about three fewer rooms to be rented per day for the average hotel of about 100 rooms.
Failure to include a domed stadium, meanwhile, leaves some groups out in the cold.
Alcoholics Anonymous, for instance, cannot schedule its once-every-five-yea rs national convention in Chicago because no facility can accommodate its 50,000 attendees. Last year`s meeting was in the Seattle Kingdome; 1995`s will be in the Los Angeles Convention Center.
If the Illinois legislature reconsiders a domed stadium for Chicago, though, ”we would be interested in putting in a bid for the year 2000,” said an AA staffer.
