Anchorage Daily News

There's a bright spot in Anchorage's dull economy this year.

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Roughly 200,000 people -- ranging from postmasters and sorority women to Secret Service agents guarding the Palin family during a vice presidential political rally -- walked through the doors of the new Dena'ina convention center.

It's become a preferred spot in town for big business luncheons and ground zero for huge events like the Alaska Federation of Natives annual convention, which drew more than 4,000 people last month.

The Dena'ina center recently ended its first full year of operation in the heart of downtown, and its financial performance so far is confounding the skeptics who on talk radio and in letters to the editor four years ago warned that it could be a disaster.

Despite the slow economy -- in Alaska and the Lower 48 -- the Dena'ina racked up millions of dollars more in sales than expected in its first year. It is stealing some meetings away from the city's older and smaller convention center, the Egan, but not enough to hurt their combined operating budget. As the city predicted, the two centers are operating at a $1 million annual loss that is covered as planned by revenue from hotel-room taxes.

At a time when the city government is stuck in a budget crisis, the Dena'ina center isn't. Next year's financial outlook doesn't look too bad, either.

That's not what everyone expected. The $111 million building was controversial for much of the past decade because Anchorage voters worried about footing its bill. After the voters rejected the initial bid to build the center in 2002, city leaders revised their pitch in 2005 -- the center would be funded with hotel-room-tax revenue and its own sales. The two revenue streams would cover construction debt and day-to-day operations, and would do so easily even if the tax receipts grew very slowly. Voters changed their minds and approved the project.

The Dena'ina was finished on time and on budget last fall, just as the global economy was cratering.

NO CANCELLATIONS

Visitors to the center occasionally remark that when they attend business meetings there, the block-sized building seems almost vacant.

It's a valid concern because many new convention centers around the country have fallen into financial trouble because they don't attract enough traffic.

But the new building never was expected to be fully booked in every room, day after day. The Dena'ina met its sales expectations this year despite the slow economy, said Julie Saupe, president of the Anchorage Convention & Visitors Bureau, which oversees the Dena'ina and Egan.

The recession didn't prompt any cancellations by national groups that had booked the Dena'ina for large conventions, she said.

Fitting with the city's rationale for building it, the Dena'ina hosted at least a dozen large conventions and trade shows this year that were too big for the Egan, built in the 1980s, according to SMG Management, a firm that runs both centers.

The recession's main impact on convention sales has been that several meetings at the Dena'ina center netted fewer guests than expected, according to SMG staff.

This year, the Dena'ina hosted about 220,000 people for events ranging from local Chamber of Commerce luncheons to the national Alpha Kappa Alpha conference, which brought more than 1,000 sorority members to the city in July and the 4,000 at the AFN convention. The sorority meeting was one of several Dena'ina events that overflowed into the Egan.

City tourism officials said they are booking future events -- through 2014 -- at about the same rate as they did last year, despite the recession. Dena'ina and Egan will generate a combined $95 million-worth of future meetings this year, Saupe said.

"The ($95 million) sales goal is one that was set last fall, just as we were seeing the first signs of the global recession. Despite these signals, we did not significantly adjust our goal down and I'm pleased that we will meet, or be very close, to meeting the goal," she said.

POPULAR FOOD?

The Dena'ina center is on target to generate $2 million more in sales than the amount projected for this year back in 2005, when the project was put in front of voters.

A big component of the center's higher sales is food and beverage receipts. They were nearly $500,000 more than budgeted, mainly due to an uptick in banquets, such as the Alaska statehood gala that fed roughly 1,800 people.

The Egan's sales declined in the same period: revenue plummeted from $3.3 million last year to $1.8 million this year. A major reason for the decline is that several local organizations -- including the Anchorage Chamber of Commerce -- moved their weekly lunches from the older center to the Dena'ina, Saupe said.

Dena'ina's expenses for this year are expected to be about $1.7 million higher than predicted in 2005, in part because of the citywide increase in heating costs. But unlike the Egan, it generated more money than it cost to operate.

The net operating loss for the two centers, at $1.1 million, is about the same as was predicted in 2005.

One of the conditions stipulated by voters is that both centers' annual operating losses not exceed $1.6 million. If they top that amount, the ACVB must make up the difference out of its own budget.

TAX DECLINE

As required by local voters, the city is paying the construction debt for the $111 million Dena'ina center with revenue from hotel-room taxes. Those taxes also cover operating losses.

But a decline in tourism caused local hotel bookings to plunge this year. City financial officers say the city's room tax revenue could slump by 18 percent.

Although the tourism decline might raise concern about Dena'ina's debt payments, the center seems to be on solid footing. When it financed the construction with revenue bonds, the city projected that room-tax revenue would more than adequately cover the debt, even if revenue grew only 1 percent per year. Instead, room-tax revenue grew by 21 percent from 2006 to 2008. That has allowed the city to build up a large reserve fund that it can use to supplement tax revenue if the economy worsens, Saupe said.

Once Dena'ina's debt is fully paid, whatever money is left in the reserve fund will go back to the city.

OPTIMISM

One Friday afternoon last month, the Dena'ina center's exhibit hall bristled with gleaming, new snowmachines, Chevy SUVs, hockey gear and other outdoor gear.

Bill Holland, of Crowley Petroleum Distribution, walked into the 15,000-square-foot hall to check on his company's booth, where he planned to hawk Crowley's snowmobile engine oil, called Mystic, to local retailers.

The event in the exhibit hall was the second Oxygen and Octane Expo. Last year's expo was the first public trade show held at Dena'ina's exhibit hall. Vendor space sold out last year, and again this year.

Booking the exhibit hall is expensive but worth it, said John Woodbury, an expo organizer. He noted that semi-trucks can drive in and out of the exhibit hall, unloading Skidoos, RVs and other heavy items.

"I can't do that anywhere else in town," he said.

Tim Melican, owner of a local limo service called Magic Bus, also sees the center as a boon for his business.

His fleet of six vehicles has been busier than usual because of events happening simultaneously at Egan and Dena'ina.

"We've done more business than I expected," said Melican.

Find Elizabeth Bluemink online at adn.com/contact/ebluemink or call 257-4317.

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