News for the Hospitality Executive
Trends in the Conference Center Industry; New Supply
of Conference Centers Greatly Restricted
|By Dave Arnold, December 2008
These are challenging times we live in! The economic news that have evolved during the year has left a feeling of uncertainty over an otherwise generally healthy conference center industry. Market inconsistencies seem to have never been more pronounced, from the difficulties facing centers in the New York market, which had a significant portion of their market derived from financial services firms, to the strength of centers in the “oil patch” where the economy is booming. Overall, most centers seem to be holding their own but are starting to see meetings being postponed or cancelled due to corporate fear of deeper economic problems. In addition, the problem of attrition is surfacing for the meetings that are being held.
Fortunately for existing center operators, new supply of conference centers is being greatly restricted due to the tight financial markets. This only serves to make existing centers more valuable, even though capitalization rates on asset transactions are rising. As a practical matter, new development in the near term will be largely focused on academic or government subsidized projects as that type of economic boost will be necessary to achieve the required capital to move a project forward.
To gain a better understanding of the economics of operating a conference center, the following paragraphs summarize the highlights of the 2008 edition of PKF Consulting’s Trends in the Conference Center report. The report is produced in cooperation with the International Association of Conference Centers.
RevPORTrue To The Concept
The industry’s response to the current difficult headwinds once again
will require discipline, courage and commitment to the concept. Should
a true recession result from the current stress in the financial system
(and the media’s unending assertion of disaster), we must do all we can
to avoid the pitfalls we hopefully learned from other slowdowns; namely,
cutting rates, lowering service levels and deferring capex. Management
and owners have the challenge of not overreacting for the long term benefit
of the asset. Hopefully, the positive forces at work will counter
the negative and we will maintain an overall balance to the market.
Dave Arnold is C.E.O. East of PKF Consulting and is located in the firm’s Philadelphia office. He also serves as an industry advisor to the I.A.C.C. Board of Directors. To purchase a copy of 2008 Trends in the Conference Center Industry report, please visit www.pkfc.com/store. This article was published in the November issue of Lodging.
|Also See:||Meeting Planners Resigned To A Seller’s Market / PKF Hospitality Research Survey of Meeting Planners / Robert Mandelbaum / January 2008|