Meetings Industry Forecast 2018

Forecast 2018 opener

As we near the end of a calendar year marked by uncertainty, how might we prepare for what's in store in the year ahead? Despite deep concerns about the globe's evolving geopolitical landscape, analysts and industry insiders are largely optimistic about the state of things. The meetings and events industry is "thriving," in the words of Issa Jouaneh, the senior vice president and general manager of American Express Meetings & Events.

In the 2018 Global Meetings and Events Forecast from American Express M&E, Jouaneh points to positive sentiment in most meetings sectors, including plans for growth and increasing investment activity. It's clear that meetings have the attention of upper management, marketing executives and the C-suite, thanks largely to advances in data capture and analytics, which lend greater insight into the bottom-line advantages of a well-managed meetings program.

Strategy is an increasingly crucial aspect of the meeting professional's job description, a point the Professional Convention Management Association will focus on in the coming year with a more formal rollout of its "business events strategist" initiative, which the organization terms the "next level" of meeting planning.

That strategy will be key for planners, who, per the Amex M&E forecast, will be working with budgets that are flat or just 1 percent higher than last year's. The buyer's market some predicted for the hotel segment didn't come to pass, and, with the vast majority of new hotel supply not including meeting space, availability and pricing in the group segment will remain challenging for planners in the world's most popular destinations.

The consensus of forecasters: Hotel rates, airfares and overall costs per attendee are expected to rise in 2018.

Questions of border security and travel restrictions have been top of mind for the past year, and meetings might begin to see the effects of related policies in 2018, perhaps in challenges for international attendees or hotel staffing. However, "While we expect that restrictions on freedom of movement would have an impact on our industry," says Jouaneh in the Amex forecast, "we do not expect that they would have a measurable impact on the overall levels of investment and activity."

Read on for further details and prognostications about the business of hotels, airlines, trade shows and incentives for 2018 and beyond.

HOTELS: High Demand, Record Occupancies to Drive Rates
A year ago, there was a lot of talk that hotel supply growth would outpace demand growth -- and likely shift some negotiating leverage to planners. In hindsight, there was too much talk.

Last year's forecast from CBRE Hotels Americas Research actually predicted flat demand growth for 2017, with supply growth overtaking it slightly next year. But even that was a bit premature. "The reality is this," says senior managing director R. Mark Woodworth, CBRE's head of lodging research. "We're well on our way to setting a new all-time-high record in terms of occupancy level this year."

Lodging demand has exceeded expectations in the first three quarters of 2017, according to lodging-data provider STR, and that includes the immediate effects of hurricanes such as Harvey and Irma, which actually drove up occupancy in affected areas in Houston and Florida, respectively. On a macro level, even as supply increases continue to catch up to demand, the effect on occupancy could happen very slowly.

"Occupancies are likely to be flat next year," Woodworth says, "and we probably won't see a year-over-year decline until 2019, if then. We could stay at record occupancy levels for at least the next three or four years." He adds, "There's no threat of overbuilding at the national level. We're at a high level, and we will persist at the peak."

The reason for hotelier optimism, explains Woodworth, is that even in a mediocre economic environment in the U.S. -- and considering, too, the success of alternative lodging options like Airbnb -- people are continuing to travel, and in record numbers. For planners, that means space and rooms might continue to be an issue, depending on location and timing. Average group hotel rates are likely to rise in every region, according to American Express Meetings and Events. The steepest climb is expected in North America, at 3.5 percent over 2017 rates, but even globally Amex is calling for a 2.8 percent increase in average group rates. As compression in big urban areas has pushed some planners to smaller cities, those venues are seeing higher occupancy, too, and rates are likely to rise as a result, according to the Amex forecast.

Buyers looking for relief, though, should note that average daily rate is not rising as significantly as one would expect during an era of record occupancy levels. Analysts theorize a number of factors could be responsible, says Woodworth: The option of sharing-economy lodging means hoteliers can't raise rates as high as they once could in times of peak demand, continued global political and economic uncertainty affects group bookings more so than transient demand, and groups are shortening their booking windows.

There's also the possibility, adds Woodworth, that reported average daily rates are actually lower than what guests are paying. "There's growing evidence that the consumer price, via OTAs and third parties, is much higher than what the hotel is receiving" -- and subsequently reporting, he notes.

Interestingly, group rates are rising at a greater clip than transient rates, according to STR, despite lagging group demand. When looking at year-to-date figures for September 2017, group ADR went up by 2.2 percent year-over-year, while group demand actually fell by 1.3 percent. By comparison, transient demand grew by 3 percent for the same period, but transient ADR only went up by 1.3 percent.

Whether or not group rates begin to reflect the lagging demand isn't something STR includes in its forecast; but the group ADR increases predicted by American Express M&E could play out despite the lag, as new supply isn't expected to significantly affect groups. According to STR, 83 percent of the rooms in the U.S. hotel pipeline are in segments below luxury and upper upscale. STR considers those two categories at the top of the chain-scale ladder most likely to have meeting space, and therefore be most relevant to group business.

That new supply could drive planners to consider lower chain-scale options among their room blocks, to keep rates down. 

AIRLINES: Fares, Capacity Continue to Climb

When anticipating airfare costs, aim high. That much is suggested by American Express Meetings & Events' August 2017 Group Air Expert Survey. Group fares in North America could rise by as much as 4.7 percent in 2018, the forecast cautions, followed by another 5.6 percent in 2019. Hikes in Central and South America aren't too far below those, with increases of 4.3 percent and 4.9 percent anticipated for 2018 and 2019, respectively.

Airlines continue to pay more attention to group travel. We've seen new meetings programs rolled out from the likes of Delta Air Lines, for example. And, according to the Amex forecast, meetings industry preferences are influencing airlines' routing.

"The trend among meeting planners to find new destinations encourages us to add new routes, with new access to new destinations around the world," notes Air Canada's national manager of group sales, Stefano Mastrontonio, in the Amex forecast. "We're partnering with destinations to build awareness and grow those destinations. We're also using current trends to become more strategic about how we price and make flights available, so that we can capture business well in advance."

More than one third (37 percent) of respondents to the Amex group air survey said airfares have some influence over their destination choice, but that varies considerably by geographical region. More than half of respondents in Central and South America said fares are a significant factor, for example, but more than a quarter of North American planners said airfares are irrelevant to their destination choices.

Similar global discrepancies play out in terms of just how useful group fares are to planners. North America had the highest percentage of respondents (about 34 percent) who indicated that none of their meetings involve group air management.

Planners should anticipate airfare hikes regardless of their dependence on group fares. According to the CWT 2018 Meetings & Events Forecast, fares are expected to rise by 3.5 percent across the globe next year, driven in part by expected increases in the price of oil. Capacity should rise along with that, with CWT predicting global increases of 7 percent this year and an additional 6 percent in 2018.

The unbundling of services for air travel -- where passengers pay extra for everything from an assigned seat to a meal and beyond -- has introduced a number of challenges not only for corporate travel management and accounting, but for overall attendee meeting experiences. "Poor experiences en route to a meeting can cause an attendee to have a negative association with the meeting overall," the Amex group air survey points out. Faced with little control over such experiences, planners might need to get increasingly creative in an effort to combat ancillary fees.

Among a roster of strategies geared to make the arrival experience as pleasant for passengers as possible, the Professional Convention Management Association collaborated with officials at Visit Austin and Austin Bergstrom International Airport to set up a registration and hospitality desk next to baggage claim for its Convening Leaders conference held in January in the Texas city. Attendees were able to pick up their badges while listening to live music and enjoying a local cocktail before leaving the airport.

Such a welcome can at least help to ameliorate the potentially upsetting flight experiences attendees could experience while en route -- and it's indicative of a burgeoning trend to ease the burden of unpredictable travel on all passengers. 

TRADE SHOWS: All key Metrics Look Solid for Growth

The trade-show outlook remains strong. The Center for Exhibition Industry Research is forecasting moderate growth by way of its Total Index, which it expects will increase by 2.4 percent in 2017. The Total Index is the organization's objective measure of the overall strength of the exhibition industry. It takes into account metrics such as net square feet of exhibit space sold, professional attendance, number of exhibiting companies and total gross revenue. The organization's chief economist, Allen Shaw, presented the forecast at the CEIR Predict conference in September at the Ritz-Carlton in Washington, D.C.

According to Shaw, the Total Index outperformed the nation's GDP growth in the second quarter, and he predicted continued growth through the end of 2017, meeting the 2.4 percent increase called for in CEIR's initial forecast for the year. As the economy strengthens, Shaw noted, Total Index growth is poised to rise by another 2.5 to 3 percent in both 2018 and 2019.

Show revenue, in particular, should see some healthy increases in the near future. Accounting for inflation, CEIR expects revenue to grow by a healthy 3 percent this year, followed by an additional 3.6 percent increase in 2018 and a solid 4 percent in 2019.

Trade-show executives are optimistic, too, according to the ECEF Pulse 2017, released in May by Exhibit Surveys and Lippman Connects at the Exhibition and Convention Executives Forum, held at the JW Marriott in Washington, D.C. The annual report compiled responses from more than 200 top players in the industry this year.

Of note, says ECEF producer Sam Lippman, is the fact that executives foresee a steeper increase in profits than in years past. Nearly six in 10 (59 percent) survey respondents expect to see a profit increase from their next show. While that figure is the same as last year's, the expected increase is markedly higher than in past years. An impressive 11 percent expect the profit growth of their next event to exceed 15 percent -- compared to 7 percent who had such expectations last year and just 4 percent the year before.

More good news: Nearly half of all respondents (46 percent) say they are planning to launch a new event sometime over the next 36 months. Of those, 41 percent intend to launch a U.S.-based exhibition -- a whopping 11 percentage points higher than those with such plans a year ago.

To fuel their successes, the study found, those polled are thinking strategically. "Executives are investing in new technologies to increase their marketing efficiency and provide greater ROI to exhibitors, sponsors and attendees," Lippman points out. "And they are adding these technologies quickly -- now or in the next year or two. Plus, they are focused on attendee acquisition."

In addition to an emphasis on wrangling and leveraging data, show execs are experimenting with different formats to increase that ROI. (Read more about that here.)

INCENTIVES: Spending Will Increase, While Worries Persist

Signs point to a relatively optimistic outlook for incentive programs in 2018. Per a leading indicator, the 2018 SITE Index (a survey of 572 incentive professionals from 72 countries), more than half of planners predict their incentive travel budgets will grow. The index also showed the average spend per person will increase from $3,000 to $4,000 next year. Another positive sign: Half of respondents expect a rise in the number of people who qualify for travel rewards.

Although budgets are expanding, 80 percent of planners aim to cut costs. To do this, they plan to eliminate program elements such as room gifts or select less costly destinations to "ensure the overall incentive experience remains truly extraordinary," notes Padraic Gilligan, vice president, research and education, for the SITE Foundation.

The threat of terrorism remains the greatest worry for incentive planners. Other stress factors are major political elections (and related concerns about changing national policies) and the tightening of borders between nations.

Both the SITE study and recent research from the Incentive Research Foundation point to companies making greater investments in technology -- program apps, personalized digital communications and data-tracking tools -- as important parts of program design.

Almost one-third of respondents to the Incentive Research Foundation 2018 Outlook Survey reported an increase in individual travel rewards. According to IRF president Melissa Van Dyke, the rise "is partly due to some organizations not yet sure what the regulatory environment will mean to group trips; but more importantly, it's part of a push toward personalization."

Nearly two-thirds of the mostly U.S.-based respondents to IRF's survey said it's hard to keep up with laws that affect programs. The so-called fiduciary rule (see "New Rule for Financial/Insurance Meetings") is in limbo, as the Trump Administration has proposed a delay in full implementation until July 2019.

-- Lisa A. Grimaldi