by: Robert Mandelbaum, December 2004
During the recent industry recession, convention
hotels have suffered more than any other property type covered in PKF Consulting�s
Trends in the Hotel Industry reports. The typical convention hotel
showed a staggering 40 percent decline in profits during the past three
years. From 2000 to 2003, convention hotel revenue has declined 17.4 percent,
the result of 9.8 percent declines in both occupancy and average daily
room rate. Compounding the negative effects of the decline in revenue
were the relatively minimal cuts in operating expenses. Given the
large complexity, size, and labor requirements of convention hotels, management
at these behemoths were only able to cut their operating costs by 5.2 percent
in response to the declining revenues. The net result was that 40.0
percent profit drop.
For convention hotels, the return of corporate
and association meetings will drive their recovery. In its heyday,
the meetings business accounted for 51 percent of the total room nights
occupied at these hotels. For convention business to begin to boom
again, both corporate budgets and personal pocketbooks must expand to stimulate
increased meeting production and attendee travel.
To get an update on the current status of the
meetings market, PKF Consulting, on behalf of Convention South magazine,
surveyed 100 meeting planners throughout the nation that conduct meetings
in the Southeast region. The mix of the planners was as follows:
-
17% - Corporate
-
57% - Association
-
11% - Independent
-
15% - Other
In total, these planners will have been responsible
for planning 2,813 meetings and 522 exhibitions in 2004.
To better understand the recovery that is occurring
in the meeting�s market, as well as familiarize hotel operators with the
current thinking of meeting planners, we present the following highlights
of our survey.
Number of Events
The majority of planners polled believe that the
number of events they will coordinate in 2005 will be the same as the amount
planned in 2004. However, we have seen an increase in the percentage
of planners anticipating a rise in events coordinated in 2005. The
planners responsible for meetings appear to be more bullish than the planners
that coordinate exhibitions. Chart A shows the expectations of meeting
planners regarding the number of events they will coordinate in 2004 and
2005.
.
Chart A
CHANGE IN NUMBER OF EVENTS
Percent of Meeting Planners
Source: Convention South, The
Hospitality Research Group
.
While a majority planners believe that the number
of their events has stabilized, they are a bit more optimistic with regards
to the attendance at their meetings. Most (44.2 percent) meeting
planners believe that attendance at recent meetings has met their expectations.
However, an increasing number of planners (30.5% in 2004 vs 15.8% in 2003)
have seen meeting attendance exceed their expectations in recent years.
More Money and Time
Two more indicators of the increased confidence
meeting planners have when looking towards the future are the increases
noted for booking lead times and event budgets.
An increasing number of meeting planners are receiving
larger budgets to hold meetings (see Chart B). The percentage of
planners noting an increase in their budgeted per attendee expenditures
grew from 38.1 percent (for their 2004 budgets) to 45.4 percent (for their
2005 budgets). Given the previously noted increases in expected attendance,
combined with the increases in per delegate budgets, it can be assumed
that these corporations and associations believe that meetings are an important
part of their operations and deserve greater investment.
.
Chart B
MEETING BUDGETS
Percent of Meeting Planners
Source: Convention South, The Hospitality Research
Group
.
The increase in booking lead times is another
indication that meeting planners are more assured of coordinating a growing
number of events in the future. Although the growth in lead time
has not been dramatic, the trend has been moving upward each year from
21.6 months in 2002 to 23.4 months in 2004.
Satisfaction
Having had more leverage during negations from
2001 through 2003, meeting planners were in a stronger position to express
their thoughts regarding the service they received at meeting sites.
Given this opportunity to be candid, it is worth noting that the majority
of meeting planners (62.0 percent) have not perceived a change in the quality
level of service they have received. Knowing the cuts in staffing
and amenities that hotels have had to make in the past few years, this
is somewhat encouraging. In addition, more planners (22.8 percent)
believe service levels have improved, as opposed to declining (15.2 percent).
Technology
Hotels have invested a lot of time and money in
technology for guest use. Investments have been made in both guest
room and meeting room technology. Fortunately for hotel owners, this
investment appears to have paid off in the minds of meeting planners.
The majority of respondents (69.2 percent) indicated that they have been
satisfied or very satisfied with the technology at their meeting sites.
Measuring the importance of technology within
a hotel, meeting planners appear to be more concerned with the technology
that is available for use by their attendees in the guest room, as opposed
to the meeting room. For example, high-speed internet connectivity
in the meeting room was rated as very important or essential by just 40.2
percent of the planners. On the other hand, the availability of the
same technology in meeting rooms was rated as very important or essential
by 52.1 percent of the respondents.
Wireless technology (Wi-Fi) has been a hot-button
technology issue for hoteliers in the past years. While this technology
is believed to be of great importance for individual business travelers,
meeting planners do not perceive it to be so vital. Close to eighty
percent of the planners surveyed ranked wireless connectivity in both meeting
rooms and guest room as only somewhat important or unimportant.
IMPORTANCE OF TECHNOLOGY IN MEETING ROOM
Percent Of Respondents
. |
High Speed Internet Connectivity |
Wireless Internet Connectivity |
Video
Conferencing |
Downlink Capability |
LCD Projectors |
Unimportant |
20.7% |
32.3% |
68.8% |
54.3% |
9.7% |
Somewhat Important |
39.1% |
47.3% |
23.7% |
28.7% |
24.7% |
Very Important |
21.7% |
17.2% |
3.2% |
12.8% |
15.1% |
Essential |
18.5% |
3.2% |
4.3% |
4.2% |
50.5% |
.
IMPORTANCE OF TECHNOLOGY IN GUEST ROOM
Percent Of Respondents
. |
High Speed Internet Connectivity |
Wireless Internet Connectivity |
Fax / Copiers |
In-Room Compurters |
In-Room Printers |
Unimportant |
19.2% |
34.1% |
71.3% |
69.9% |
67.0% |
Somewhat Important |
28.7% |
35.2% |
25.5% |
23.7% |
26.6% |
Very Important |
28.7% |
30.7% |
3.2% |
5.4% |
6.4% |
Essential |
23.4% |
0.0% |
0.0% |
1.0% |
0.0% |
Source: Convention South, The
Hospitality Research Group
.
Summary
Barring catastrophic events, we believe that the
meetings market segment should rebound along with the corporate travel
market during the next few years. However, because of the necessary
lead times for most meetings, convention hotels might not recognize the
optimism shown in today�s survey until a few years out.
Other research conducted by PKF Consulting has
found that current market conditions do influence the tenor of current
contract negotiations for future meetings. Therefore, look for the
pendulum of negotiating leverage to begin to sway back towards the hotel
sales manager as occupancies and average room rates grow in the next few
years.
Robert Mandelbaum is the Director of Research
Information Services for the Hospitality Research Group of PKF Consulting.
He is located in the firm�s Atlanta office.
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