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| by David Arnold and Dana Ramus, November 2003
PKF Consulting, in conjunction with the International Association of Conference Centers (IACC), has recently completed the 2003 edition of Trends in the Conference Center Industry � North America. This 78-page report presents a wide variety of operating and financial statistics, as well as commentary on current critical issues. The conference center industry is holding up rather well, despite the on-going problems with recession, air travel and lingering "war effect." The best conference center performers for 2002 were those properties that benefited from the insulating effect of demand from a small number of large users. These include most university centers, corporate centers, and those open market centers with one or more contracted corporate customers. Although certain industry segments, like technology, are generating much lower volumes than in the recent past, other segments, like pharmaceuticals, are still healthy. Compared to their hotel counterparts, this specialized sub-segment of the lodging industry has generated higher revenues and operating income on both a per available and per occupied room basis. In this era of specialization, purpose-designed-and-operated conference centers appear to have an established clientele. Revenue Various types of conference centers are more adept at generating higher
total revenues per occupied room. As expected, resort conference centers
generate the most revenue per occupied room, primarily attributed to their
recreational amenities and higher percentage of double occupancy (33.7%),as
many conference attendees bring their spouses to resort environments and
because resort conference centers accommodate a greater percentage of leisure
travelers. Corporate owned conference centers generate the lowest revenue
per occupied room, as their primary function tends to be the support of
corporate training and conference needs. However, many corporate conference
centers do actively solicit external business to defray operating costs
when not used by their corporate owner.
Executive conference centers were able to maintain, and even slightly increase, their per occupied room revenues, while their full service hotel counterparts experienced a decrease of 4.4 percent. Resort conference centers followed the resort hotel trend of revenue declines.
Unlike hotels, where occupancy and average rate are the primary performance
measurements, conference centers are more aptly evaluated on the basis
of their total revenue stream. Average room rates are an internal function
of an allocation of the Complete Meeting Package (CMP) Rate, with many
conference centers also attracting a number of day meeting attendees. Whereas
conference center occupancy rates are typically lower than those for hotels,
the revenue generated per guest tends to be higher and operating profits
are more efficient. This is due to conference center operators working
in a more closed system than their hotel counterparts, which allows conference
center operators to more effectively anticipate their staffing and food
purchases. The following charts illustrate how executive and resort conference
centers fared in both 2001 and 2002, compared to full-service and resort
hotels.
Executive conference centers, which generate 51 percent more revenue per available room than hotels, essentially maintained their 2001 revenues in 2002. In contrast, full-service hotel revenues declined 5.3 percent. Resort conference centers revenue for 2002 declined 7.4 percent, significantly more than the resort hotel�s 5.6 percent decline, but still managed to achieve 31 percent more revenue per available room than did hotels. Operating Profits In terms of operating profits per available room, resort conference
centers are the most profitable, primarily due to their revenues from recreational
amenities and associated events. Executive conference centers are the next
most profitable, followed by corporate and college/university centers,
respectively. All conference centers suffered a decline in operating profits
in 2002 compared to 2001, with the exception of corporately owned centers,
which actually experienced profit growth. The decline in profits can be
attributed primarily to increased fixed expenditures such as insurance
rates, which have increased significantly.
In terms of operating margins on a percentage basis, conference centers lag behind hotels. Thankfully, however, owners do not bank percentages, and its dollars that count. In summary, given all the economic woes, travel decreases, and rising expenses, conference centers have outperformed the other hotel types in general. Meetings and conferences continue to be held, despite technological advances and travel concerns. The conference centers� formula for success is the ability of this segment to provide a distraction-free business environment conducive to the serious business need of Corporate America. To purchase a copy of the 2003 edition of Trends in the Conference Center Industry � North America, please visit the PKF Consulting website at www.pkfonline.com or call (215) 563-5300. * * * Dave Arnold is an Executive Vice President of PKF Consulting and is located in the firm�s Philadelphia office. He also serves as Financial Consultant to the IACC Board Of Directors. Dana Ramus is a Vice President in the PKF Consulting Philadelphia office and has conducted numerous operational and financial studies on individual conference centers. |
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| Contact:
Mark Woodworth
Robert Mandelbaum
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| Also See: | Conference Centers Hotels Outperforming Rest of Hotel Industry / PKF Consulting Study / Aug 2003 |
| Conference Centers Adapt to Changing Environment / David Arnold / PKF / Sept 2001 | |
| Operating Profits for the Average U.S. Hotel Dropped 9.6% in 2002, This After a 19.4% Decline In 2001 / PKF Consulting - HRG Annual Hotel Trends Report / April 2003 | |
| Hotel Benchmarking Revisited; Bottom-Line Comparisons Among Similar Properties Are the 'Bottom Line' / May 2003 |
