May 01, 1998
Meetings & Conventions: Affordable Cities - May 1998 Current Issue
May 1998
Affordable Citie

As rates skyrocket in the first tier, where can you meet now?


Welcome to the age of "anything goes" site selection. With hotel rates averaging $191 in New York City in 1997 - and other major convention cities not far behind - many planners are simply closed out of the traditional first-tier choices. So, they're looking elsewhere - often with great satisfaction.

Many are finding refuge in second- and third-tier cities, suburbs and even in small towns. Some are meeting at airports, while others are making tracks for the border. Still another faction is hanging tough to get the rates and dates they want in high-demand locations.

"Things are changing so fast right now that there's no tried-and-true formula anymore for finding good rates," says Michael Burns, director of account management for Conferon, a meeting planning company based in Twinsburg, Ohio. "You can't assume all first-tier locations are the same. You need to look at more places and keep an open mind."

For planners willing to venture beyond downtown areas in the most popular convention cities, which frequently carry the double whammy of also attracting strong transient business, decent rates and space can be found in a surprising variety of locations. For instance, hotel and convention center development trends are changing the face of many second- and third-tier cities and making serious meeting destinations out of suburban and airport locations. At the same time, current economic factors are turning Canada and Hawaii into value-priced options for meetings, even at upscale hotels and resorts.

Second-Tier Solutions
Traditionally eager to win the business that major convention cities no longer seem to want, second-tier cities are sporting new and improved meeting facilities. But with hotel rates still on the rise in almost every U.S. city, are second-tier locations still bargains?

The answer is "yes." "Second-tier cities are getting more business, but the price difference between first- and second-tier cities remains," says planner Sherri Cook, president of Sherri Cook & Associates in Plano, Texas.

If anything, the rate difference between the most expensive convention cities and almost everywhere else seems to be widening, according to a survey by PKF Consulting that compared 1996 and 1997 hotel rates in 42 U.S. cities. For example, the rates in New York City, Boston and San Francisco rose more than $15 per room night last year, compared to an average increase across all markets of $7.

In some cases, the rate differences between first- and second-tier cities was stark: In 1997, room rates averaged $191 in New York City and $163 in Boston, versus $73 in San Antonio and $88 in St. Louis. In smaller cities, the gap was even more pronounced: Average hotel rates in El Paso, Texas, and Little Rock, Ark., were only about $50.

Cook, who rules out cities only if air service is too limited, finds that improved hotels and convention facilities are making second- and even third-tier cities better choices than ever. "Some places will surprise you with what they offer," says Cook, who recently booked a regional meeting in Shreveport, La. "We got very affordable rates at a new, all-suite casino hotel comparable in quality to a luxury resort in Las Vegas or Scottsdale, Ariz."

Frustrated by big-city rates and indifference, independent planner Linda Nelson, president of Plan Ahead in Cupertino, Calif., has taken her quest for affordable alternatives to Tucson, Ariz., and Greenville, N.C. "I've had lots of luck in these places, with plenty of hotels eager to bid for even a small meeting," she says. "I've also been surprised by how much there is to see and do in some of these locations. Too often as planners, we put blinders on and automatically think of only the high-profile destinations."

Planners who want to deliver the climate, flavor and recreational amenities of a certain region should compare rates and availability within an area. In fact, PKF reveals some marked differences between room rates in nearby cities. For instance, sleeping rooms averaged $72 in Albuquerque, N.M., in 1997, compared to $130 in Santa Fe, N.M., just 50 miles away.

For Zev Lewis, director of meetings for the American Association for Geriatric Psychiatry in Bethesda, Md., comparison shopping for a Florida meeting meant choosing Tampa over Orlando. "Tampa might not have been quite the draw for attendance that Orlando is, but we still had great weather and plenty of things to do," says Lewis. "Plus, we saved money, and the CVB really worked hard to please us."

But service in smaller cities can be less than polished, Nelson warns. "Sometimes, you have to educate the hotels about meeting requirements."

Planners also may have to more heavily market the location to potential attendees, adds Cook. "Some of these cities are really great, but people don't know about them. You have to step up promotion about the attractions they have."

Moving to the 'burbs
"Don't rule out a first-tier city without checking the entire metro region," stresses David Moulder, director of convention services for Coopers & Lybrand in Dallas. "Ask the CVB about the outlying hotels and meeting facilities. Don't settle for a location where airlift could be a problem."

Both Moulder and Robert Mandelbaum, director of research for PKF Consulting in Atlanta, note that many new properties have been developed in outlying areas. "Suburban and airport areas are emerging as full-fledged convention destinations," says Mandelbaum, citing Rosemont, Ill., and Hartsfield International Airport, outside of Atlanta. Both areas have sizeable convention centers supported by a large hotel inventory. Moulder notes that many suburban cities are requesting feasibility studies for convention centers.

"Most high-tech firms are based in the suburbs," says Pat Berg, president of Conference Resources in San Carlos, Calif. Berg's recent meeting sites have included Elmhurst, N.Y., outside of New York City, and Kissimmee, Fla., near Orlando. "These attendees are used to a casual dress code. A suburban setting fits their corporate culture."

Airport areas can work, too, says Gary Rosenberg, executive vice president of Rosenberg & Risinger, Inc., in Los Angeles, a meeting planning company specializing in association business. "L.A. and Orange County hotels didn't want to book the year 2000, hoping to fill up with more lucrative corporate business," says Rosenberg. He finally found a welcome mat at the Hilton & Towers Los Angeles Airport. "We're not making any compromises on quality - it's a beautiful hotel in a very convenient place, and it's close to the beaches and major attractions."

Go Canada
Thanks to a favorable exchange rate, meeting values can be found north of the border. Marilyn Maury, meetings manager for the American Institute of Biological Sciences in Sterling, Va., took her annual convention to Montreal last year and plans to return with 4,000 delegates in 2004. "Montreal is putting forth an all-out effort to attract meetings business, and the service we got from the CVB was tremendous," she says.

Similarly, Lauren Kramer-Whelan, director of meeting services for the Society of Nuclear Medicine in Reston, Va., has booked annual conventions in Toronto in 1998, 2001 and 2005. "About one-third of our attendees are international, and we need a location that will be a good draw and have good airlift," she says. "With Toronto, we're getting a first-tier location at a second-tier price."

Hawaiian Surprises
With the current Asian economic crisis eroding Hawaii's strong tourism base among Japanese visitors, increasing room availability promises to make the state more affordable. "Now is a great time for meeting planners to negotiate group rates," says hotel consultant Ernest Watari, chairman of PKF Hawaii, based in Honolulu. "There is an oversupply of hotel rooms, especially in Waikiki, where upscale hotels are heavily dependent on Japanese business."

PKF Hawaii's most recent hotel survey shows that, for the first time in 15 years, the January 1998 occupancy rate in Waikiki fell below 80 percent. And while PKF figures show January rack rates averaging a robust $148 statewide, another recent PKF study found that many hotels throughout Hawaii are offering deep discounts off their published rates. "It's not unusual to get a 50 percent discount off rack rates," says Watari.

THEY'VE GOT SPACE, BUT AT WHAT PRICE? The good news: Hotel development has increased and room occupancies are opening up in many areas. The bad news: rates keep rising anyway.

In a survey of 42 U.S. cities, PKF Consulting in Atlanta found that 22 experienced declining occupancies in 1997. Despite this, room rates climbed, usually above the consumer price index. Nationwide, hotel occupancies averaged 73.6 percent in 1997, close to the 73.4 percent total in 1996. The average room rate, however, increased from $98.23 in 1996 to $105.76 in 1997.

Is relief in sight? Cities like Salt Lake City, Utah; Portland, Ore.; San Antonio, Texas; and Sacramento, Calif., will have new convention hotels up in a few years, boosting supply and - ideally - easing rates.


DON'T GO COASTAL Don't go near the water if you want good hotel rates. Room rates tend to be higher in coastal cities. PKF Consulting's 1997 survery of 42 U.S. cities reveals that the six most expensive cities are on or near water: Boston ($163); New York City ($191); Philadelphia ($126); San Fransisco ($134); Washington, D.C. ($128); and Miami ($124).

Conversely, some of the lowest hotel rates are in the South: Little Rock, Ark. ($48); El Paso, Texas ($52); Baton Rouge ($59); and Knoxville, Tenn. ($68).


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