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by Michael J. Shapiro | December 01, 2016
Trade Shows: Stats Keep Trending Up

Growth in today's business-to-business exhibition industry slowed in the second quarter this year, according to the most recent analysis from the Center for Exhibition Industry Research. The CEIR Total Index -- which uses a weighted average of net square footage, exhibitors, attendees and real revenues to measure the industry's overall performance -- was still up, but only by 1.6 percent year-over-year. That's the lowest quarterly growth in two years, but at the same time it's the 24th consecutive quarter of year-over-year growth. 

The organization specified in September that the slower growth was merely a temporary setback, and that remains the outlook. "We anticipate the last half of this year to show improvement," said Brian Casey, CEM, president and CEO of CEIR. "For the last six quarters, the exhibition industry has outperformed the economy in terms of GDP."

The weak oil and gas sector has been one of the primary drags on industry growth, according to Casey. "We remain confident that in 2017 and 2018 we'll see steady growth," he adds. "We do have an economy that's growing, and the exhibition space follows that pretty closely."

A survey of 233 event executives also revealed optimism for the coming year. According to the 2016 Exhibition & Convention Executive Forum Pulse, the majority (59 percent) expected profitability to increase in 2017, while 59 percent of those executives expected the jump to be in the 5 to 10 percent range. - M.J.S.

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As we near the close of a year in which we learned that truly anything can happen, meeting professionals might reasonably wonder how we could begin to guess what 2017 has in store. For that we have turned to the industry experts, consulted their forecasts and their analyses, and consolidated their perspectives here.

The future might not be crystal clear, but at least you'll have an idea about what to expect around the next bend.

First and foremost, following several years of some formidable challenges, the times might be changing: Look for a buyer's market to emerge in North America this coming year, predicts Carlson Wagonlit Travel's 2017 Meetings & Events Forecast. Hotel supply growth is expected to exceed demand growth for the first time in eight years. "By being flexible with timing and destinations," says CWT Meetings & Events vice president and global head Cindy Fisher, "planners can take full advantage of the current market to optimize their meetings and events and produce better results." Supply surges in places like New York City, Houston and Los Angeles, for instance, could lead to deals.

While CWT foresees modest increases in both group size and per-attendee cost for meetings in North America (see chart below), corporate meeting budgets aren't expected to change, according to American Express Meeting & Events' 2017 Global Meetings Forecast. We might see increases of less than 1 percent (0.8) in meeting spend in both North America and Europe, according to Amex, with very slight decrease (-0.1 percent) in Asia Pacific. Spend could be just a touch higher in Central and South America, but only by a 1.1 percent rise. Given the flat budgets, that increased negotiating leverage will help in North America.

That said, the members polled for Meeting Professionals International's Fall 2016 Meetings Outlook are not wringing their hands over budget concerns: More than half (57 percent) of respondents predict they will experience a favorable budget/spend ratio for 2017, and one-quarter expect a flat budget/spend relationship. (See more results here.)

Read on for more in-depth coverage of what's in store for hotels, airlines, trade shows and incentives in the coming year.

 

HOTELS: SURGING SUPPLY TO OUTPACE DEMAND

Lodging analysts have collectively downgraded their hotel forecasts to reflect softer growth expectations in North America. "Soft" is, of course, a relative term, being that hotel demand is still at record levels. 

But planners will note that the leverage is swinging to some degree back in their direction. Much of that is due to the fact that supply growth should outpace demand for the first time since 2009. Lodging data provider STR forecasts that supply will have caught up with demand by year-end 2016 (with both increasing by 1.6 percent); for 2017, STR foresees a substantial supply growth increase of 2 percent vs. 1.5 percent for demand. Forecasts from CBRE Hotels (formerly PKF Hospitality Research) and PricewaterhouseCoopers project smaller differences between the two (see chart at right), but analysts all agree that the supply-demand dynamic will flip in the coming year.

That should alleviate a bit of stress for planners, as the new supply will be enough to reverse the stunning occupancy growth of recent years. Occupancy is projected to be down by as much as half a percent in 2017, according to the latest forecasts. 

Rate projections also are much softer than previously forecasted. "As supply eventually outpaces demand, rate will determine the level of RevPAR [revenue per available room] growth the industry experiences for the next several years," notes Amanda Hite, STR's president and CEO. "Given the continued lack of pricing power being displayed, we expect performance to weaken a bit for the final quarter of 2016, then decelerate more in 2017 as hoteliers become less confident in pushing rate."

Keep in mind, though, that next year's hotel metrics are being compared to this year's record numbers. "Demand is still growing to all-time highs, and RevPAR will continue to reach record levels," adds Hite.

Group expectations

While general hotel forecasts encompass transient business and leisure travel as well as group, experts expect meeting planners will see similar increases  but have a slightly easier time of booking space than in recent years. "We expect group demand to grow," notes Jan Freitag, STR's senior vice president, lodging insights, "but more slowly, and to be flat in certain markets."

The group hotel rates forecasted by American Express Meetings & Events are similar to the general ADR predictions, calling for a 3 percent year-over-year increase in North America. The expected group rate increases are lower elsewhere, just 1.8 percent in Europe and only 1.2 percent in Asia Pacific. Only Central/South America reveals a higher expected increase, at 3.7 percent; note, however, that this figure can vary considerably by country.

What mergers will mean

Hotel mergers have been happening at a fast and furious pace, and analysts expect the trend to continue. Marriott, AccorHotels, IHG, HNA Tourism Group and others are all growing through acquisitions, and as a result will be able to streamline processes and wield more leverage in the market. Any price impact on room rates probably won't be seen until 2018, however, notes CWT Meetings & Events in its forecast. 

Meeting planners and corporate customers should be working to optimize their supplier agreements with those hotel companies now, advises American Express M&E in its forecast, to strengthen their negotiation leverage for future years.

Continued F&B increases

Already sky-high food and beverage costs will continue to climb, predicts CWT Meetings & Events. Among the many driving factors are increased production prices, environmental effects on imports and exports, and marked rise in attendees' special dietary requests -- from gluten-free to vegan, all of which cost more to prepare.

Potential election effects

A U.S. presidential election typically doesn't produce long-term effects on hotel performance, but isolationist campaign rhetoric and the unexpected result do raise some questions. 

"It could happen that global uncertainty with the U.S. economy weakens the dollar and makes travel here easier, or at least cheaper," suggests STR's Freitag. "Or the new president and the U.S. could get a bad reputation, and this would curtail travel to the U.S. This happened after the Iraq war under George W. Bush." 

Whether either scenario will play out has yet to be seen. In any case, due to various factors, the latest, post-election forecast updates reveal downgraded projections for the coming year. CBRE's expected average daily rate increase, for instance, fell from 4.1 percent to 3.3 percent. -- M.J.S