by By the M&C Staff | December 01, 2008
illoUncertainty dominates the outlook for meetings in 2009, as planners and suppliers brace for the ripple effects of a recession and search for strategies to survive tough economic times. "Things are so unstable at the present time," says Ty Helms, senior vice president, revenue, for Chicago-based Hyatt Hotels Corp., adding, "I think we may have a way to go before we hit bottom here."

The cost of meetings is expected to rise next year, outpacing any increase in planners' budgets, consultants say. Business travel forecasts generally predict higher airfare, hotel and car rental rates for 2009, but the increases will be smaller than those in recent years due, in part, to decreased demand for air travel and hotels. Many forecasts predict that average domestic airfares will increase between 7 to 12 percent next year and hotels will raise rates by as much as 3 to 8 percent in major cities, despite an expected drop in occupancy nationwide.

But others, including American Express Business Travel and Egencia, predict that domestic economy airfare and midscale hotel room rates actually could decline next year in certain markets. Overall, American Express still expects the average overall cost per trip for business travelers to increase, by less than 2 percent within North America, in 2009.

On the hotel front, PKF Hospitality Research, PricewaterhouseCoopers and Smith Travel Research all expect occupancy to slide, with estimates of decline ranging anywhere from 3.5 to 4.4 percent. If occupancy slips even more, hotel rates will follow, says Kathy Pruett, senior director, consulting, for Advito, a consulting unit of travel management company BCD Travel.

But dropping occupancy might not translate automatically to deals for planners. "Everything dropped after 9/11, and we gave away the farm," says David Scypinski, senior vice president, industry relations, for Starwood Hotels & Resorts Worldwide, on discounts and package deals that Starwood created to generate more meetings business. "We are trying not to be ridiculous about the deal. We saw what it did in the years when things got better. We are more sophisticated now, so we will be dealing carefully."

Still, PKF, PricewaterhouseCoopers and STR all predict declining revenue per available room (Rev­PAR) for 2009, by 4.3 percent, 5.8 percent and 2.5 percent, respectively, below 2008 levels. At the same time, major cities that have been affected the least by airline capacity cuts still will see growth in the hotel sector, according to the American Express forecast.

Meeting Professionals International's latest quarterly Business Barometer survey, sent to planners and suppliers before the stock market sustained significant losses in October, charts rising worries about 2009. While most of the 250 respondents remained optimistic that the level of meetings business would increase over the next six months, the percentage of respondents expecting meetings business to decline by 5 percent or more increased, continuing a year-long trend. In addi­tion, more people reported a drop in attendance (34 percent) for recent 2008 meetings, compared with a year ago, than they did in the first-quarter survey. According to MPI's Barometer, large majorities believe that "travel cost trends" will have a negative impact on the business (73 percent), as will "airline flight schedules" (70 percent).

Furthermore, the Center for Exhibition Industry Research's latest Index report, with data from the first half of 2008, showed the first consecutive quarters of decline in the trade show industry (vs. the same period a year ago) since 2002.

"Next year, it will take a lot more work to maintain what we've done this year," says Amy Ledoux, vice president of meetings and expositions for Washington, D.C.-based ASAE & The Center for Association Leadership. Planners will have to work smarter and make more of an effort strategizing how best to spend precious dollars, she notes.

Uncertainty extends even to the impact industry trends will have on planners and how planners should react. Take, for instance, the trend of larger corporate groups booking meetings with shorter lead times. According to Tim Brooks, founder of Chicago-based Meeting Trader, a web-based revenue management and budgeting tool for hotels and meeting planners, that's good news for planners when it comes to getting deals from hotels desperate to fill rooms. "If you can book 60 days or nearer to the event, then, as always, you will get an exceptional deal at any hotel that still has space," he wrote in a white paper titled "Buying and Selling Meetings and Groups in an Economic Downturn."

But others aren't so sure. Advito, a consulting unit of travel management company BCD Travel in Atlanta, says the trend of short-term bookings robs planners of negotiating leverage.