Travel costs are almost certain to increase at a faster pace in 2014, posing budgetary challenges for many organizations, according to analysts and meeting planning firms that handle both corporate and association business. However, they also say that strategic negotiating, along with flexibility on location and dates, will enable planners to overcome most obstacles.
Rising Costs
Perhaps contributing most to the challenge is the fact that hotel rates are continuing to rebound from their recessionary lows of a few years ago. In 2014, average daily rate (ADR) at U.S. hotels is expected to grow by 5.4 percent, while occupancy is anticipated to grow by 1.9 percent, according to a recent forecast from PKF Hospitality Consulting, using figures from Smith Travel Research.
“Measured in real terms, ADR has been growing roughly two percentage points ahead of inflation in recent years,” says Mark Woodworth, president of PKF Hospitality Research.
Increasing rates vary widely by location, with Boston, San Francisco, Miami, Honolulu, Los Angeles, Pittsburgh, Indianapolis and Portland, Ore., among the most robust markets, according to PKF. Conversely, Kansas City; San Diego; Tucson, Ariz.; Salt Lake City; Albuquerque, N.M.; Philadelphia; and Washington, D.C., are forecast to achieve ADR growth that is less than the inflation rate during the year ahead.
Similarly, the CWT 2014 Travel Price Forecast predicts rising costs across the board—for airfares, hotels, ground transportation and other event components. These costs are putting the squeeze on many organizations, says Tony Wagner, vice president-the Americas, for CWT Meetings & Events.
“You’re not seeing budgets keeping up with rising costs,” he says. “It puts pressure on planners and budget holders. How do you operate effectively in a seller’s market?”
Nola Conway, president of Global Destinations Marketing, is facing a similar challenge.
“Budgets are pretty much staying the same,” she says. “But despite rising hotel rates, clients are expecting us to produce the same program that we did last year.”PageBreak
Flexibility Pays
The major solution to a budget crunch is to be flexible, according to Wagner.
“Our message to clients is flexibility on both dates and locations,” he says. “Before you lock things in with your senior leaders, don’t say we have to have the meeting during this week or in this city.”
He notes that significant money was recently saved when a corporate client agreed to move its dates slightly for a meeting last June in an East Coast city.
“June is not usually a big peak time, but market demand is high right now,” he says. “Moving the dates by a few days really opened up some opportunities. If the client had stuck to the dates in the three cities we were considering, it would have blown their budget.”
Flexibility on dates may even be a more important factor than location, according to Blue Janis, national sales manager for Experient, who negotiates contracts for both corporations and associations.
“The value you get is not dependent as much on geographic location as it is on filling need dates,” he says. “For example, Chicago is a hugely popular place, but they have need dates.”
Lead Time
Value opportunities also increase with longer lead time, Wagner says, adding that a rebounding industry is resulting in a lengthening of booking windows.
“We’re seeing a slight increase in lead times, partly because larger meetings are coming back and they require more lead time,” he says. “Plus, space is at a premium and many organizations are recognizing that they have to plan ahead to get what they want.”
At the same time, an uncertain economic and political climate has some corporations hesitant to make long-term decisions about meetings, no matter how beneficial it is to book further out, Janis says.
“While there’s a feeling that the economy is getting better, there’s also some anxiety about what’s going on,” he says. “Corporations are still booking short term. The people controlling the money are hesitant to really let loose.”
Janis encourages these groups to take advantage of any leeway they have in selecting dates. He also helps steer them away from certain dates in locations where they might be competing with a citywide or other major event.
“Even smaller groups of 600 delegates or so need to book further out than they did,” he says. PageBreak
Location, Location...
While second- and third-tier cities still generally offer lower costs than major business hubs, both Janis and Wagner say that even these markets are posing budgetary challenges these days.
“Space can be a premium in second-tier cities because of a lack of new supply coming onto the market,” Wagner says. “You also need to look at the total package—does the airlift into the city work for your attendees? If so, a second-tier city could work fine.”
In deciding over a major commercial hub or a less expensive suburban or airport location, cost is just one of many factors to consider, says MaryAnne Bobrow, whose Bobrow & Associates primarily handles association meetings.
“The right location depends on your particular audience,” she says. “If a group is price sensitive, I don’t look at a downtown area. However, if I have a group who loves McCormick Place, I’m not going to choose a suburb.”
Multiple Meetings
Steering as much business as possible to a limited number of suppliers is also a good tactic, one that more organizations are employing these days by having a strategic meetings management program in place, according to Wagner.
“Booking a series of meetings, rather than a single meeting, will give you more clout with suppliers and therefore more breathing room in your budget,” he says. “We’re seeing incremental savings being driven by taking a strategic approach to how meetings are sourced.”
Look Beyond Rate
When negotiating with hotels, the hotel rate is only one of many things to consider, Janis advises. Among the concessions he routinely asks for are one complimentary room for every 35 booked, special amenities for VIPs, complimentary meeting space, discounts for the meeting staff, a rebate to the master bill, and discounts on audiovisual and food and beverage.
“Another important concession is to get free Internet access in the guest rooms—it’s becoming more commonplace,” Janis says.
When it comes to associations, negotiating a realistic room block is essential in order to avoid the risk of costly attrition charges, he adds.
“You have to look at what the group picked up last year, along with any increase or decreases in membership as well as the popularity of the meeting location,” he says. “At the same time, I always negotiate the food and beverage minimum as well. If there is a drop in attendance, it’s not just the room block that is affected, so is food and beverage.”
Maria Lenhart thinks the best budget is an unlimited one.
