Meeting Mentor Magazine

December 2018

Cover Story

Get Set for Tougher Negotiations
As Hotels Push up Rates

Strong hotel performance in 2012 and positive projections beyond are set to challenge meeting professionals in their future rate negotiations.

• In projecting annual occupancy gains through 2015, PKF-Hospitality Research pointed to six straight quarters of increases in average daily rate (ADR) and lodging demand that continues to greatly exceed supply. It predicted ADR room rate increases in excess of 4 percent per year through 2014, and strongest growth in occupancy at upper-tier properties.

“This potentially puts meeting planners at a disadvantage, since those properties have the most significant meeting spaces,” noted Robert Mandelbaum, director of research information services, PKF –HR. With such larger, more expensive properties last to enter the hotel pipeline, existing upper-tier hotels can more aggressively push up rates.

PKF-HR also noted new records in metro-level lodging demand in 30 of the 50 markets covered in its Hotel Horizons forecasts. As a result, negotiation leverage is more likely to swing to hotel sales managers. “They will want meeting professionals to remember how hotels discounted [for their groups] during the recession,” he suggested. “This is where long-term relationships come into play…and flexibility in dates and locations.”

STR is seeing group demand at least at the level of 2011, which was above 2007 numbers, cited Jan Freitag, senior vice president. “But we’re not seeing phenomenal growth.” Meanwhile, room rates have increased “rather strongly” — about 6 percent — on the corporate transient side, but only 2 percent for groups. “Arguably, a lot of group room rates [for this year] were negotiated in 2009 and 2010, when hotels were not operating from a position of strength,” he acknowledged.

The theory going forward: With limited new supply, demand will continue to grow and occupancy will increase, giving hotels “pricing power,” Freitag said. With upper-upscale and upscale hotels selling 7 of 10 rooms every night and booking windows shrinking, he suggested, “hotels can look for more profitable pieces of business.”

And the pendulum may be swinging on the prevalence of fee-based services at hotels. Rather than a la carte pricing that nickel-and-dimed attendees, Freitag believes meeting planners will be going back to all-inclusive rates that cover wireless, fitness, breakfast.

• The U.S.exhibition industry moved into 2012 on the upswing, beating its forecast for last year by 15 percent, according to the Center for Exhibition Industry Research. Relatively strong growth of 2.7 percent in 2011 outperformed real GDP growth by 1 percentage point. All four metrics improved — net square footage up 2.7 percent; number of exhibitors up 2.3 percent; number of attendees up 3.4 percent; and real revenues up 3.4 percent. Government and business process-related exhibitions — including machinery, communication and information technology, and transportation — showed the strongest growth.

U.S.-initiated business travel spend in first quarter of 2012 grew 4.5 percent, a somewhat slower pace than 2011’s 7.6 percent growth to more than $250 billion, reported the Global Business Travel Association. International outbound travel in 2012 is expected to slow to 3 percent growth, after a strong rise of 8.5 percent last year. GBTA projects that business travel will reach its pre-recession levels by the middle of 2012.

• Also on the international front, total number of meeting participants managed by members of the International Association of Professional Congress Organisers (IAPCO) during 2011 increased from just under 2.25 million to 2.28 million. Yet per-event attendance size continued to fall, from 486 participants per event in 2006 to 345 in 2011. However, the economic impact of the 6,621 meetings IAPCO members organized continued to grow. With a benchmark of €1,620 spend per participant, the meetings contributed 3.71 billion euros to local economies. — Maxine Golding


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About ConferenceDirect
ConferenceDirect is a global meetings solutions company offering site selection/contract negotiation, conference management, housing & registration services, mobile app technology and strategic meetings management solutions. It provides expertise to 2,500 corporations and associations through our 325 Associates globally. www.conferencedirect.com

About MeetingMentor
MeetingMentor, the leading publication for senior meeting planners, is circulated to the clients, prospects and sales associates of ConferenceDirect, which books more than 3.87 million room nights. www.meetingmentormag.com

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