If the last two years were a study in contraction and desperation, 2011 is off to a promising start, with leading economic and hospitality industry analysts—along with a little optimism from your average front-line meeting planners—predicting an upturn in business that will result in well-attended and better-funded meetings.
Although the National Bureau of Economic Research in late September delivered the rather poorly received news that the Great Recession ended in June 2009, a stubborn unemployment rate begs to differ—and that’s exactly how most of us in the real world gauge levels of economic severity.
Just to take a walk down memory lane—while knocking on wood, of course, because we’re not out of the neighborhood yet—we’ve waded through a lot in the last two years: the collapse of the housing bubble…bank bailouts and government intervention—the nefarious TARP!...massive layoffs…hotel loan defaults…hotel development delayed or abandoned…the AIG Effect. Cue the screeching violins!
For the hospitality industry, a major turning point occurred in August, when consortium Smith Travel Research took the rather unusual step of revising its Hotel Horizons economic forecast of U.S. lodging markets.
Like a shaft of light suddenly beaming through the cracks of a hurricane-blasted roof, a new dawn was perhaps coming. Occupancy: up 4.4 percent. Average daily rate (ADR): flat. Revenue per available room (RevPAR): up 4.3 percent. And for 2011 the forecast was for sun: occupancy up 1.4 percent, ADR up 3.9 percent and RevPAR up 5.3 percent.
Both supply and demand seem to be creeping upward, which for all intents and purposes would lead one to invoke the overused free-market aphorism "a rising tide lifts all boats." And by divining the results of the most recent Meetings Market Trends Survey, conducted last October, that tide is coming in.
Ask the Expert
Positive, or at least encouraging, news keeps coming in, and also paints a picture of how far we’ve come from the bottom of the downturn. Two surveys came out just days before this publication went to press.
MPI’s FutureWatch study, which is available for download free to MPI members via its website, includes input from more than 450 meeting professionals and predicts an 8 percent increase in the number of meetings planned for 2011 and a 5 percent increase in the average spend. The study also details the emergence and adoption of technology such as virtual events and social media.
Another report issued shortly before press time was "PhoCusWright’s Groups and Meetings: Driving Success in Business Travel’s Most Complex Segment." Long both in title and information, the Sherman, Conn.-based travel industry consultancy’s report surveyed more than 600 meeting buyers and details many aspects of business travel spend, with the skinny being that both prices and demand are going up in 2011 after the U.S. corporate groups and meetings market was hit by a massive decline in aggregate travel spend in 2009.
"We saw a pretty dramatic decline in 2009, upwards of 29 percent, and 2010 had tepid growth. We estimated 4 percent growth overall," says Douglas Quinby, senior director of research for PhoCusWright. "We’re seeing in 2011 and 2012 things starting to level off a bit and get back to kind of a more reasonable rate of growth—about 8 percent in 2011 and 12 percent in 2012."
Plummeting revenue forced a hotel industry already walloped by severe financing challenges to dramatically cut rates, a hole that they will be digging themselves out of for the next two or three years.
"2009, in particular, was just a complete collapse in ADR, driven by the collapse of demand in the corporate arena and corporate meetings," he says. "We saw a little bit of rate recovery in 2010 and more in 2011, but it’s definitely been a buyer’s market, and we’re really not seeing a shift until the back half of 2011 or 2012. In 2010, a lot of those rates were contracted at a time when hotels were really suffering, but we’re starting to see that turn around. 2011 and 2012 are starting to look a little better for hotels.
"All of the metrics that you look at are pointing upward," Quinby continues, "the number of meetings, the size of meetings, meetings spend, spend per attendee."
Quinby also pointed out some macro trends PhoCusWright sees as impacting the meetings industry in the near future.
"We are definitely seeing a trend toward centralization and strategic meetings management programs," he says. "It’s still very fragmented and we’re still in a young stage of strategic procurement and expense management programs, but there is a growing trend around those two dynamics. As meetings management moves away from group or individual departments to centralized planning and procurement, you’re going to see more downward pressure on costs, so that will provide a bit of a counterweight to the recovery."
Quinby says that virtual meetings are growing in popularity, with the PhoCusWright study estimating that 7 percent of meeting attendees were displaced by virtual meetings in 2010.
"Virtual meetings are not simply a threat or simply a cost-containment solution," Quinby says. "Virtual meetings technology is also an opportunity to expand the reach of the meeting and bring in attendees that otherwise were unable to attend the meeting.
"We found that one out of five meetings held last year had some sort of virtual capability," he continues. "It will reshape the meetings industry and what constitutes a meeting in the first place."
Four Indications of Recovery
Responses from the nearly 700 meeting planners Meetings Focus polled corresponded to the other major surveys, pointing to expectations of an increase in meetings budgets, meetings attendance, the number of meetings and prices.
While meeting planners still overwhelmingly listed the economy as the biggest threat to the meetings industry—66.4 percent in this year’s survey—the intensity is starting to lessen, with 4.5 percent less this year selecting it as their top concern (7.9% less association planners selected it; 7.4% less corporate planners; 0.7% more government planners; 2.5% more independent planners).
Other threats, in order of magnitude, include virtual meetings (13.9% of total); the perceived value of the profession (9.1% of total); and airline issues (6.3% of total). Fuel prices, which many economists think may rise dramatically in the next year, didn’t even register as a threat.
The primary takeaways from this year’s survey involve responses in four key areas, however, that could point to a recovery.
Budgets
While meeting budgets took it on the chin during last year’s survey, the 2010 results point to more money being available in 2011.
When asked how they expected their meetings and events budget to change in the next fiscal year, 10.7 percent of all planners expected a bump of up to 10 percent (10.6% association; 12.5% corporate; 7.9% government; 8.7% independent), 1.4 percent foresaw an increase of more than 10 percent (1.4% association; 3.1% corporate; 0% government; 2.5% independent) and 52.5% believed their budget would stay flat when compared to 2009 levels (56.4% association; 47.7% corporate; 44.7% government; 56.5% independent).
The rate of change concerning budget changes from the 2009 survey compared to the 2010 survey was also compelling, with 17.3 percent less of all planners saying their budget would decrease this year (26.5% less association; 14.7% less corporate; 14.9% less independent; government planners were relatively flat this year).
Attendance
The numbers of attendees participating in meetings and conventions is also on the uptick, as 9.1 percent more meeting planners said their attendance grew in the previous year (10% more association; 11.1% more corporate; 7% more independent; government numbers were flat). Interestingly, 6.7 percent more corporate planners said their attendance increased more than 10% than in the previous survey.
Oddly enough, the challenge of declining attendance weighed heavily on 34.5 percent of association planners this year, but this number did decrease 9.5 percent from the previous year’s survey.
Number of Meetings
It seems that pent-up demand is translating into a need to meet, as the planners that responded reversed a downward trend in the number of meetings they expect to hold in the year following the survey.
The number of respondents that indicated they expect to hold more meetings in 2011 as compared to 2010 jumped 9.3 percent overall compared to last year’s survey (12.5% association; 7.5% corporate; 5% government; 10.6% independent). Leading the upsurge in year-to-year responses were planners who said they believed the number of meetings they will hold could increase more than 10 percent, with 7.4 percent overall listing this response (11.1% association; 5.7% corporate; 7.8% government; 6.3% independent).
Prices
The belief that prices will shoot up surged in this year’s survey, with double-digit increases across the board in the number of planners who listed it as what they thought would be their biggest challenge this year (17% more association; 18.5% more corporate; 10% more government; 15.1% more independent).
Videoconferencing & Perception
With all of the nervousness about virtual meetings—most of the major recent industry surveys mention the technology, with many commenting on planner anxiety surrounding it—respondents to the Meetings Market Trends Survey seem to be boarding the bandwidth bandwagon, with some solid trends emerging.
When asked if they videoconference, 40.1 percent of all planners replied in the affirmative, with government planners leading the way (60.5%), followed by corporate planners (45.5%), independents (39.6%) and association planners (30.4%).
Those who answered yes were then asked what percentage of their meetings had been replaced by videoconferencing, and a paltry 0.6 percent replied that the technology had replaced all of their meetings. On the flipside, 65.1 percent of all planners who answered yes said that the technology is not replacing any meetings at all, but instead is being used to augment existing meetings.
Another hot-button issue, perception concerns derailing choices for destinations and facilities, seems to be relevant but a bit on the wane, with 3.8 percent less planners this year saying it affects their choice of destinations (7% less association; 0.1% less corporate; 11.2 percent less government; 3.7% less independent). Asked as a simple yes or no, however, 61.1 percent answered yes (58.4% association; 61.4%corporate; 86.8 percent government; 58.1% independent).
Perception issues affecting the choice of facilities has not receded as much, however, with a mere 1 percent less of planners saying possible perception troubles impacts their choice of facilities. Asked as a simple yes or no, however, 60.1 percent answered yes (54.4% association; 62.9% corporate; 86.5% government; 56.3% independent). MFT
The 2011 Meetings Market Trends Survey is a proprietary Meetings Focus online study that was distributed to 35,886 Meetings Focus subscribers. As incentive to complete the survey, respondents were offered a chance to win a $200 Visa gift card. Conducted in October 2010, the survey generated 679 complete responses.
2011 Meetings Market Trends Survey
