Convention Boss: Massachusetts Loses Out On $3B In Development If Hynes Sale Delayed

If Massachusetts doesn't move swiftly on a $500M expansion to its largest convention center, Boston could lose out on an additional $2.5B in private real estate development, the state's top convention executive says.

Massachusetts Convention Center Authority Executive Director David Gibbons is pushing the state to approve a sale of the Hynes Convention Center in Back Bay to fund a $500M expansion of the newer Boston Convention Center & Exhibition Center in the Seaport. The plan calls for roughly 200K SF of convention-related space, including a 100K SF exhibit hall, a second ballroom and smaller meeting rooms. But the greater real estate prize in Boston could be what pops up around the BCEC and in place of the Hynes Convention Center. Gibbons said critics who slow down the process could prevent future deals.  “If they slow it down, they will kill $3B worth of development that is participatory, that is inclusive and with a proven track record,” Gibbons said. The plan hit political obstacles at the State House Monday, as Back Bay business groups argued closing the Hynes would be a detriment to the neighborhood economy. Hotelier Richard Friedman claimed the deal would be like driving a stake through the heart of Back Bay, and the Back Bay Association claims it has been left out of negotiations. The convention authority has held 80 public meetings on the planned sale to date and said keeping both convention centers as-is would be a lost economic opportunity at all levels of the real estate food chain. While the BCEC expansion is slated to cost $500M, Gibbons says the other $2.5B would arrive through private development. There is potential for the Hynes to get significantly redeveloped, akin to how Related Cos. demolished the New York Coliseum and replaced it with the Time Warner Center, Gibbons said.  In the Seaport, the MCCA wants a 600-room hotel connected to the expanded BCEC, and planned requests for proposals include an additional hotel across D Street, expansion at the Aloft/Element campus across from the Lawn on D and either an expansion to the Westin Waterfront or a separate boutique hotel. That development all hinges on an expanded convention center with a new front door on D Street. That would bring more foot traffic and business to that stretch of South Boston, which is significantly less developed than areas like Seaport Square. Gibbons wants to see the hotel room count in the immediate vicinity of the BCEC grow to 5,000 in order to retain a variety of conventions at risk of getting too big for Boston, including the Seafood Expo North America. But the convention business, which Gibbons said plans as much as a decade out, won't be patient for long.  “The marketplace doesn’t let you think out loud forever,” Gibbons said Wednesday in an interview. “They move on.” It would cost $269M to keep the Hynes Convention Center, which opened in 1963 and was renovated in 1988, in working condition over the next decade, according to a Simpson Gumpertz & Heger report. The facility’s occupancy rate hovered between the 35% and 45% range this cycle while the BCEC was typically between 50% and 70%, according to the PwC Annual Convention Center Benchmarking Reports.  The Hynes closing and BCEC expansion would actually reduce the city’s total convention space by about 8%, but it enables the South Boston facility to have events overlap and reduce “dead nights” at convention hotels while exhibitions are set up. If built, the BCEC’s expansion will result in 616K SF of exhibit space, enabling Boston to capture 97% of the U.S. convention market, according to the MCCA.  The typical convention in Boston needs between 300K SF and 325K SF, Gibbons said. That means the new BCEC could house two conventions at once. But expansion is also crucial to keeping clients like the Seafood Expo North America. Seafood Expo Global, the world’s largest seafood trade event, is moving its annual convention to Barcelona in 2021 after spending 28 years in Brussels. The move comes after market research and vendor feedback showed the convention needed more space and more hotel rooms. Expanding the BCEC is key to preventing a similar move in Boston, according to the convention authority.  “This plan would mean we can keep them for another 20 to 30 years,” Gibbons said.

While an expanded BCEC may lead to more efficient convention operations, the call for more rooms comes after the Boston hotel sector had the worst quarter of any major U.S. market.  There are currently 2,800 rooms across eight hotels in the Seaport, according to Pinnacle Advisory Group. More than 1,700 hotel rooms are under construction, which would equal a 60% increase in supply. The MCCA plan calls for a 600-room hotel to go up next to the expanded convention area on D Street and be similarly connected like the nearby Westin Waterfront.  Eventually, the convention authority plans to put out proposals for more hotels on D Street and even potential expansions at the Westin and Aloft/Element campus. Despite the weak performance data at the end of 2019, Gibbons said the additional supply may not be enough.  Boston would still have significantly fewer hotel rooms within a half-mile of its main convention center than competing markets, according to CSL International. San Francisco has more than 19,000 rooms around the Moscone Center, while cities like New Orleans, Toronto and Washington, D.C., all have between 8,000 and 9,000.   The data may suggest it isn’t an ideal time to flood Boston with more supply, but Gibbons and other analysts tie the poor performance last quarter to the abnormally strong Q4 the year prior that included the World Series. The city still needs more rooms linked to the convention hall, proponents say, because it has become increasingly difficult to book hotel blocks years in advance. “I have no doubt an expansion is needed and there are more room nights that come with that,” Massachusetts Lodging Association President and CEO Paul Sacco said. “Keep in mind the expanded rooms in that area don’t all have to give room nights to the BCEC.” 

While Seaport hotels may have initially relied on business from the BCEC when it opened in 2004, the neighborhood has since become a corporate hot zone with companies like Amazon, Vertex Pharmaceuticals and PwC, whose visitors typically pay higher rates than a convention's.  Currently, only the Westin Waterfront and Aloft/Element on D Street have contractual blocks with the MCCA, because the three hotels all operate on land owned by the convention agency.  “Once upon a time, when there wasn’t an Innovation District here and just the convention center, hotels in this neighborhood would give us maybe a 60% block,” Gibbons said. “As the growth of corporate demand happens, we go out and look at rooms, and they’ll give us now maybe a 25% or 30% block.”  Beyond hotel construction, Gibbons said the Hynes sale and BCEC expansion present an opportunity in Back Bay to do what other cities did with their own outdated convention halls. Related developed the Time Warner Center in place of the New York Coliseum. Hines ArchStone built CityCenterDC in place of the Washington Convention Center.   “There’s a lot of interest in what the Hynes might be,” Gibbons said. “Could we be smart and work together for once?"