Philly labor costs a top reason for lost convention business, report says

The price of union labor at the Convention Center has cost Philadelphia's hotel industry 400,000 nights of business between 2007 and 2009, according to a new report that takes a broad look at the center's operations, management, marketing, and business plans.

Labor costs were the single biggest reason for the lost business at the center during those years, the report said, with three dozen groups deciding to take their thousands of conventioneers somewhere other than Philadelphia.

The finding bolsters an argument by Ahmeenah Young, Convention Center president and chief executive, and her supporters that the building's existing labor structure undermines an ability to stay competitive even as the center readies to double in size with the completion in March of a $786 million expansion.

The state-ordered report made no outright recommendation about reducing the number of labor unions used to set up and break down convention and trade-show exhibits. It did, however, point out that no other facility has as many unions, with some engaging three or four at most.

To be sure, the report found that the building's union workforce is not the sole source of problems facing the Convention Center.

Among other challenges highlighted: The building's 83-person staff lacks experienced hospitality professionals in several areas; can do more to work cooperatively with labor union representatives; and has vacancies in key positions such as chief financial officer, chief technology officer, and national sales manager.

"Filling vacancies in key areas prior to expansion with qualified personnel who have convention/hospitality experience is critical," wrote report author Susan Sieger of Crossroads Consulting Services, based in Tampa, Fla. Sieger did not return a call Thursday.

Perhaps more notably, the report found that the Convention Center has bigger operating losses than comparable facilities that compete for business with Philadelphia. (Most convention centers are not moneymakers in and of themselves; they foster revenue by luring out-of-town, tax-generating conventioneers to hotels, restaurants, and shops.)

At the same time, the report pointed out that Philadelphia's operating losses are expected to balloon in fiscal 2012, the first full year for the expanded building, with total expenses estimated to climb to $35.6 million, from $24 million in fiscal 2010. Total revenue is projected to be $12 million; it was $8.4 million in 2010.