News for the Hospitality Executive
Conference Center Recovery Mirrors The Overall Lodging Industry
By: Dave Arnold
December 19, 2011
In 2009, all segments of the lodging industry struggled. However, the combined impact of the economic recession and the demonizing of corporate meetings, resulted in an even more dramatic fall off in performance for conference centers.
Now, as the U.S. lodging industry has turned the corner and proceeded up the recovery slope of the business cycle, the fortunes of U.S. conference centers have improved as well. Unit-level profit growth was a modest 5.4 percent in 2010, but certainly welcome after the 43.5 percent decline in net operating income posted in 2009.
Since the majority of conference center guests stay as part of a package plan, total conference center revenue is typically measured on a dollar-per-occupied-room basis (POR). In 2010, the centers in the Trends® survey sample reported a slight 0.8 percent increase in total revenue POR. The gain in RevPOR was primarily driven by a 2.8 percent increase in occupancy that offset a 1.6 percent decline in average daily room rates.
Because of the relative stability of educational institutions during the economic recession, College/University conference centers enjoyed the greatest gain in revenue measured on a POR basis (+4.6 percent). On the other end of the spectrum, Resort centers still appear to be suffering from the stigma attached to “lavish meetings”. Total revenue POR at these facilities declined 2.3 percent.
Along with discounting, conference centers targeted transient guests to combat the relatively slowly recovering meetings market and fill their guest rooms. In 2010, conference demand accounted for 68.5 percent of the rooms occupied at the centers in our survey meaning that conference centers had to rely on transient business to fill over one-third of its rooms.
For the conferences that were taking place at the IACC centers, it is a positive sign that the meetings became more national in scope. After placing a greater reliance on locally generated meetings in 2009, the conference centers in our survey saw a very strong 6.6 percent increase in the number of national conferences held at their properties in 2010. Training and continuing education continue to be the primary purposes for meetings held at conference centers.
After cutting costs in 2009, conference center operators continued their thriftiness in 2010. Facing just a 2.7 increase in total revenue per-available-room, property managers were able to limit the rise in total operating expenses to just 2.1 percent. In fact, managers at Executive and Resort conference centers did a better job at controlling costs during 2010 compared to their colleagues at full-service and resort transient hotels.
With revenues growing greater than expenses, the net operating income (NOI) for the average center in our survey grew by 5.4 percent from 2009 to 2010. Leading the way in profit growth were Corporate centers with an increase in NOI of 10.1 percent. Lagging were Resort centers who achieved just a 0.8 percent increase on the bottom line.
What’s Happening In 2011
Conference center managers expect occupancy levels to continue to lead the recovery in 2011. On average, the managers in the survey budgeted for a 6.2 percent increase in occupancy during the year. Executive center managers are most optimistic expecting a 9.8 percent rise in occupancy.
On the other hand, management’s expectations for CMP rate movement are for an increase of just 2.6 percent. After a relatively strong year in 2010, College/University center operators believe they have the greatest opportunity to push conference package rates (+ 4.2 percent).
It is hoped that the strong cost controls implemented in 2010 carried over into 2011, thus converting most of the new revenue into profits.
About the Author
Dave Arnold is C.E.O. East of PKF Consulting USA 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 the 2011 Trends® in the Conference Center Industry report, please visit www.pkfc.com/store. This article was published in the November 2011 issue of Lodging.
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