Meetings Forecast Strong Despite
Rising Costs and Sizzling Seller’s Market
With record high demand from transient travelers (at rack rate), the resurgence of group travelers, and rising meeting costs, here’s good advice for meeting planners from Jan Freitag, STR’s senior vice president, and Robert Mandelbaum, director of research information services at PKF-Hospitality Research, a CBRE Company:
• Come to the negotiating table armed with all areas of your group’s meeting spend.
• Know your meeting profile and how well it matches up with the hotel’s.
• Your booking window has to elongate to get into the property of your choice.
• Now is the time to leverage relationships you have with hotel sales managers.
• Negotiate rates upfront for early arrivals or late stays, because demand will make it very hard for hotels to adjust for these at the last moment.
Early first-quarter data for 2015 shows that the sizzling seller’s market continues. With limited new construction and healthy demand growth, upper upscale hotels — the core of the meeting marketplace — will maintain high occupancy and pricing power. That segment “had a very, very healthy 2014, with 73.6% occupancy,” Freitag noted. What that really means: With Sunday occupancy at 50%, these hotels had to sell out Tuesday and Wednesday for business travelers and Friday and Saturday for leisure travelers.
Indeed, hotel occupancy will hit a record high in 2015 and average daily rate (ADR) will remain well above inflation, projects PKF-HR. Consequently, more planners are finding it difficult to book rooms at their preferred hotels — almost twice as many (21%) in PKF-HR’s survey this year than last year (11%). Half believe the majority of hotel room rates are too high.
And that’s not all. Seven of 10 planners surveyed say that costs to put on their meetings will be higher in 2015 than 2014. For 40%, their biggest challenge is to deliver a great meeting experience that doesn’t break the budget. That the greatest increase in expenditures was for programming — and not F&B and guest rooms — may indicate planners have scraped F&B costs to the bone and conceded on room rates, said Mandelbaum.
Despite rising prices, the number of meetings and attendance will grow in 2015, PKF-HR forecasts. That means meeting planners will have to be even more flexible with meeting location and booking windows. According to PKF-HR, the percentage of meeting planners holding events within first-tier destinations fell from 50% in 2013 to 39% in 2014, while 49% of planners held meetings at second-tier destinations, up from 39%.
Metro markets on fire: Nashville, San Francisco, Denver and Boston pose real challenges for meeting planners, said Freitag. Possible market opportunities for meeting groups: Environs outside Washington, D.C. (due to cuts in government travel), New Orleans and Philadelphia, he noted. Greatest increases in supply in 2015: New York, Austin and Pittsburgh, cited PKF-HR.
The exhibitions industry has enjoyed 14 consecutive quarters of positive growth, according to the Center for Exhibition Industry Research, even as many sectors of the CEIR Index in 2014 remained lower compared to 2007 and 2000 levels. Looking ahead, the just-released CEIR 2015 Index Report forecasts the overall index will grow at a “relatively robust rate” of 2.8%, a full percentage point higher than in 2014. A strong but slower pace is projected in 2016 (2.4%) and 2017 (2%) — the fastest sustained growth in the history of the CEIR Index. (The report costs $350 for CEIR members and $450 for non-members at ceir.org, which relies on your support of exhibition industry research and advocacy.)
Another potential impact: International inbound travel. This growing source of attendance for U.S. meetings set a record in 2014 with 75 million visitors (a 7% increase over 2013). Canada and Mexico remain the top inbound markets. But Freitag cautioned that a strong U.S. dollar in 2015 will make inbound travel expensive, “maybe prohibitively so,” and meetings abroad more affordable. On the other hand, Mandelbaum noted that fewer inbound transient travelers could result in lower occupancy and hoteliers easing up on room rates. — Maxine Golding
MORE ARTICLES FROM THIS ISSUE:
- To Make Meetings Successful,
Best Practices Focus on the Details
- Become an Advocate on April 16 —
North American Meetings Industry Day
- Face-to-Face Learning and Collaboration
Improve Government Agency Operations
- Where You Can Meet With ConferenceDirect
- Add a ‘Bolstering Range’
To Your Negotiating Toolkit
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