By partner-contributor: Richard A. Mullen is a meeting planner from Virginia Beach who enjoys blogging about the industry he’s in.

Most conference centers do not generate healthy profits – in fact, their rate of return is way below reasonable, if at all they are making any money. Today, only local governments fund conference centers and they do this only for a couple of reasons – to draw in crowds and enhance the tourism and local business. Conference properties require a large investment and they aren’t profitable and that is the only reason why private companies do not set up convention centers; only the public sector is active in building and redoing these centers.

Conventions can spell big business for surrounding hotels and shops. Hotel room bookings, restaurants, catering, shopping and many other industries rely on conventions to boost their sales. That said, everything boils down to the following factors:

The Number Of Visitors At Conventions

There’s a recession going on and many businesses are taking their conferences online. Also, the number of conventions is dropping. The Obama administration’s tight grip on finances has also reduced government conferences. This is having a cascading effect on the hotel economy and spelling doom for many convention centers, and therefore, many hotels have started offering massive discounts in the off-season to lure customers.

Spending Power of Participants

A lot depends on the type of convention and the participants’ income levels. A well-attended conference on “How to Save Money and Plan For The Future” will not generate high income for surrounding hotels and shops, while a “How To make It Big In Life” type of conference held in Vegas can generate truckloads of cash for hotel owners and local businesses.

The Competition’s Fierceness

A lot of things depend on the competition. If there are 100s of competitors out to outdo one another, then a hotel may end up spending more money on marketing than it earns from the convention’s participants. If such is the case, then it makes sense for hotels to rework on their brand and create a cult following instead of throwing 1,000s of dollars down the marketing chute. There’s no sense in marketing blindly by running with the herd.

The Brand Power

Some hotels get word of mouth publicity because they create an awesome ambience and provide professional services, mouthwatering food and comfortable facilities that are talked about for a long time after the conference has ended. Such hotels attract tourists like magnets. In fact, whenever there’s a convention in town, the rush becomes overwhelming at such hotels. Therefore, an average hotel with brand power will hook more customers than a swanky hotel without any brand equity. This is why it makes sense to work on building the brand.

The Pricing

Times are tough, and in tough times things become desperate. So, with every other thing being equal, pricing plays a major role. If a swanky hotel prices its services very high, it will price itself out of the market. Convention center participants will simply latch on to a cheaper alternative.

These factors can provide a rough estimate of how much a hotel can make out of participants at conference centers.