Meeting Mentor Magazine

December 2018

Cover Story

Forecasts Declare: Seller’s Market
Won’t Turn in 2016

Despite evidence that economic cycles turn at approximate seven-year intervals — where we are since the Great Recession hit — optimism about the hotel business is high as 2016 approaches. Even with a continuing seller’s market, the forecasts are also good for meetings. That is, as long as no catastrophic events take place.

That’s the way this article began before Friday’s horrendous terrorist attacks in Paris. It will take time to assess the impact of these and other recent terrorist actions on travel, hospitality and meetings — and whether future threats are real. Until then, here’s a picture of U.S. forecasts for 2016.

Dates, rates, space. In mid-September, STR’s DestinationMAP revealed that access to a destination, facilities and costs surpassed all other considerations when selecting a future meeting location. Unfortunately, meeting the criteria of dates, rates and space in 2016 won’t be any easier than in 2015. “If you’re looking to book in the quarter for the quarter, you will pay rack rates,” said Jan Freitag, senior vice president, STR. But “one person’s tough environment is another’s opportunity.” To make a deal, the smart meeting planner has to offer “a lot of flexibility.”

“It’s going to be another record-breaking year for the lodging industry,” cited Robert Mandelbaum, director of research information services, PKF-HR, a CBRE company. The upper upscale segment — where most big-box convention hotels are found — will achieve 74.1% occupancy and an average daily rate increase of 6.2% next year. Meanwhile, properties in the construction pipeline are primarily selective service (without meeting space). “It’s not until 2017, 2018, 2019, when we’ll see above average increases in supply, but still below peak levels of construction activity seen in 2008-2009 and 1999-2000.”

What about that seven-year economic cycle? Mandelbaum noted that the historical factors that cause a downturn — oversupply, energy shortages, too-high asset prices — are not there. Indeed, added Freitag, “if the industry behaves as it should, we would see new supply slow growth, occupancy come down, ADRs soften, banks and investors not build anymore, and the cycle would ease out to a soft landing.” That’s not the picture STR, PKF-HR and others are seeing.

Global meeting growth. American Express Meetings & Events’ annual forecast points to 2016 growth across nearly every indicator and all regions of the globe. Positive economic trends and global expansion of many corporations are driving the need for more training and internal meetings. Hotels are at capacity in key cities, requiring organizations to book farther in advance. Here are some predictions by both meeting professionals and suppliers, according to the forecast:
• More and larger meetings.
• Somewhat larger budgets.
• Growth of managed meeting travel and meeting programs, and compliance policies.
• Outsourcing of meeting management and planning to third parties.
• Increased cost per attendee.
• Continuing rise in group room rates, with decrease in group hotel space availability.
• Competition for hotel rooms from increasing transient business and leisure travel.
• Wider scope of meeting planning activities, yet not enough time allowed to complete them.

Group vs. business travel spend. Group trip volume will grow 3.3% in 2016, and group business travel spending will rise 2.7% (compared to 3.2% this year), cited the Global Business Travel Association in the GBTA Foundation’s BTI Outlook Q3 report. In 2014, spending on group business travel ($126.5 billion) surpassed individual business travel for the first time since GBTA started tracking this in 2008.

Meanwhile, the 3.7% increase in business travel spend projected for 2016, while higher than this year’s 3.1%, anticipates a softening from the global oil price collapse, economic weakness in key areas around the globe, and more selectivity by U.S. companies in authorizing business travel abroad. The projection also takes into account lower average U.S. airfares and higher ancillary air travel fees.

Corporate rates. Meetings aren’t the only ones contending with room rate increases. The Tisch Center for Hospitality and Tourism at New York University projects the largest increase in corporate and contract rate negotiations than in the past three decades — a national average of 6.5 to 7.5% next year. A big contributor: The unbundling of some services and amenities, such as Internet access and use of fitness centers. (Corporate and contract rates represent almost 20 percent of occupied U.S. room nights and almost 30 percent of U.S. lodging industry revenue, according to the center.) — 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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