News for the Hospitality Executive
In Orange County, California, the
Flash Point for the AIG Effect, Hotels Bear
Brunt of Meetings Drop; Convention Attendance Steadier
|By Sandi Cain
Orange County Business Journal Staff
April 16, 2009
Orange County was the flash point for the AIG effect now plaguing the corporate meetings industry. But the local fallout so far has been mixed.
Hotels in all parts of the county have seen corporate meetings canceled or put off, while major conventions by and large have held their own.
In Anaheim, five large corporate groups that had booked meetings at several hotels have canceled since October, according to Mindy Abel, vice president of convention sales for the Anaheim/Orange County Visitor & Convention Bureau. Eight or 10 smaller groups that were set to meet within single hotels also canceled, she said.
For most companies, the cancellations likely are a way to cut costs by nixing any travel expenses that aren’t absolutely essential. For some, fallout from American International Group Inc.’s September meeting in Dana Point is a factor. “The corporate market is acting conservatively, (and is) very aware of the perception of the events that it hosts or participates in,” she said.
AIG, the troubled insurer now majority owned by the government, held a $440,000 incentive meeting for independent brokers at the St. Regis Monarch Beach Resort & Spa last fall, after the company first received federal money.
Some saw the meeting as critical for AIG, noting it was for outside brokers who steer business to the insurer. But the public furor over what some saw as excess still hasn’t cooled.
“We’ve seen more cancellations this year than we did in 2001,” said Blaise Bartell, vice president of operations for San Diego-based JC Resorts, which owns the Surf & Sand in Laguna Beach. He’s also a spokesman for The Oceanfront, a consortium of OC coastal resorts.
Individual resorts typically don’t disclose occupancy rates, but layoffs and special promotions at several indicate occupancy far below normal in the first quarter.
St. Regis occupancy dropped 15 percentage points after the AIG incident, according to a spokesman.
In January, occupancy rates at Huntington Beach hotels were 22.5% lower than a year earlier, according to the Los Angeles office of PKF Consulting Corp. In Newport Beach, occupancy was down 15.8%.
Corporate meetings cancel or trade down,” Bartell said. “There’s a backlash in selecting properties with resort in their names or that have resort-like amenities that could lead to scrutiny.”
In some markets, hotel owners have removed the word “resort” from their group contracts. At least one company is considering removing the word from its name.
Conventions have been steadier.
In Anaheim, first-quarter conventions and trade shows, which account for about a third of Anaheim’s annual convention business, did fairly well. Those in the healthiest industries have fared the best.
“Some shows are lagging in attendance while others have raised the bar,” said Charles Ahlers, president of the Anaheim/Orange County Visitor & Convention Bureau.
The NAMM Show—Anaheim’s largest convention and the first big show of the year—drew about 85,000 people in January, down roughly 4% from its record-setting 2008 attendance of more than 89,000. The group, which represents makers of musical instruments, signed on for three more years in Anaheim with an option for 2014 and 2015.
Medical Design & Manufacturing West and its five related shows saw an increase in attendance of about 3%. The combined conventions brought about 46,000 people to OC.
Preliminary returns from Natural Products Expo West held in early March indicate attendance ticked up roughly 6% to 53,000.
Ahlers said he’s hopeful that the city’s conventions will remain on track for the balance of the year. The schedule for 2010 still looks promising, he said. “Anaheim is sort of a neutral zone—it’s not (seen as) a resort or Las Vegas,” he said.
Even with conventioneers, Anaheim hotel occupancy rates were soft for the first two months of this year. January occupancy fell to 57.7% from 65.5% a year earlier, according to PKF.
A weekly report from Hendersonville, Tenn.-based Smith Travel Research for the last week of February showed OC hotels at 63% occupancy, off 13% from a week earlier.
“Group numbers are eroding,” said Steve Pufpaf, director of sales and marketing for the Anaheim Marriott. “It has a significant impact on revenue.”
One possible reason for the erosion is the huge drive-in market that many conventions rely on in Southern California. With budgets tight, more convention goers may be opting to commute rather than stay in area hotels.
Groups and hotels are working together to help groups reach attendance goals and fill their contracted number of hotel rooms, Pufpaf said.
Other markets are faring worse.
Las Vegas lost 340 meetings in January and February. The city, which has a roughly 10% unemployment rate, put its convention center expansion on hold and raised its hotel room tax by 3% to raise money.
San Diego saw an 18% drop in occupancy in January, in part because of more rooms in hotels that opened last fall. A cancellation at Hotel del Coronado reportedly cost that hotel $500,000. The Lodge at Torrey Pines also reported a major cancellation.
San Francisco’s full hotel rooms fell by 18% in January. The city filled 993,000 hotel room nights in 2008, its strongest convention year since 2003. Officials said hotel room nights may drop by 25% by next year based on current trends.
In Los Angeles, Michael Krouse, senior vice president of sales for LA Inc., the Los Angeles Convention & Visitor Bureau, said there’s been a “significant drop in bookings” for meetings, but conventions still are holding steady. Hotel occupancy in January was off by 14% in Los Angeles.
Competition has heated up with hoteliers and convention bureaus beefing up their efforts to bring in business.
In Los Angeles, the convention bureau’s Krouse
tried to leverage March’s presidential visit with an e-mail to 46,000 meeting
Some efforts to land business are cut-throat. At least three OC hoteliers reported groups that canceled and moved to Las Vegas after that city offered to pay any cancellation fees involved with the move.
It’s too early to say things are turning around, but there are signs that meetings business will rebound.
Several coastal hotels reported increases in inquiries for group business in the second half of this year and for 2010.
“The lead volume is strong but it takes (clients) a long time to commit,” said Michael Mustafa, director of sales and marketing at the St. Regis. “There’s business out there.”
At Laguna Cliffs Marriott, director of sales and marketing Jim Samuels has seen an uptick in visits from East Coast meeting planners looking for OC locations. “The Marriott name helps,” he said, because Marriott hotels typically aren’t considered resorts.
Independent planner Kathryn Jurgensen of Premier
Meetings in Irvine said her business has picked up as companies eliminate
their own meetings departments. “Meetings are happening,” she said.
|Also See:||AIG Effect - Companies Cutting, Scaling Back Meetings to Appear Financially Responsible in Hard Times / Sandi Cain / January 2009|
|The Meetings and Conventions Industry Bracing for a Downturn, But So Far Anaheim, Orange County's Convention Hub, Is Holding Its Own / Sandi Cain / January 2009|
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