Meetings Industry Forecast 2021

Smaller, more regional meetings are expected to lead a slow recovery as hotels face a prolonged struggle.

In a year that has forced us to stretch the definition of "planning," predicting anything seems fraught with peril. But even amid uncertainty, we must prepare to meet, be it via technology or face-to-face — or, most likely, a combination of the two. Although the outlook is subject to change frequently, surveys and brave prognosticators do paint a picture of what we can expect from the coming year and beyond.

A Slow Start

"Our approach and sentiment have been a reflection of the overall sentiment of our clients and meeting attendees," says Issa Jouaneh, founder of event-planning and consulting company Elevadas, who spent more than a decade heading up American Express Meetings & Events. "While there are no signs of a broad-based recovery or return to 'normal' levels in the Americas and Europe, we are seeing interest in smaller and regional events for Q1 2021, with a consensus that larger meetings and events are targeted for Q2 and Q3 2021." 

While at AMEX M&E, Jouaneh was closely involved with the group's annual meetings-industry forecast. (At press time, American Express had not yet issued a forecast for 2021.) His current experience coincides with the findings of Northstar Meetings Group's Pulse Survey, which has been conducted regularly since March of this year to measure planner sentiment around the globe.

Of the nearly 700 planners who responded to the latest Pulse Survey, conducted in mid-October, the largest number of respondents (29 percent) said that Q3 2021 is the earliest they expect to hold their next in-person events. While a total of 55 percent said they intend to resume holding face-to-face meetings between now and the end of the second quarter of 2021, that number has slipped dramatically — down from 71 percent just one month earlier — as pandemic restrictions have persisted and Covid-19 cases continue to escalate in many parts of the world.

Again echoing Jouaneh's assertion, more than four in 10 Pulse Survey respondents (41 percent) anticipate holding smaller gatherings when Covid-19 restrictions are lifted, and 30 percent expect their in-person audiences to be about the same size.

Higher-End Hotels Hit Hard

For the devastated hospitality industry, those smaller, regional meetings on the horizon will do little to help large meetings hotels get back to the successful clip of the last decade.

"We've tracked three recessions in our data set of 30 years," says Jan Freitag, senior vice president of lodging insights at hotel data provider STR, in an attempt to convey the magnitude of the hospitality industry's struggles. "If you add the worst single month of those last few sessions together, it doesn't even get close to what happened in April of this year. The industry was brutalized — an 80 percent revenue per available room decline — the worst single month we've ever recorded."

As of September, STR was reporting modest occupancy gains thanks to some transient leisure business, and principally for limited-service properties. But the timing and trajectory of an increase in group demand is still a wild card, according to Freitag. "We don't expect meaningful group demand until Labor Day of next year," he says. "There should be some rebound in Q2; there could be a vaccine by then, and in any case people will be clearer on how to keep attendees safe and meet in a responsible way."

Just about every hotel brand and ownership group has issued specific health and safety protocols to protect guests and employees, and many have published additional, meetings-specific guidelines. These new protocols have been prominently touted for the meetings that have already taken place.

Potential attendees will note the extensive efforts and will get tired of waiting to travel and meet, posits Freitag. "People are just going to want to give it a try," he says, "especially as others begin to do so. They'll be ready to hit the road, and to do it in a safe way."

Group demand has not dried up completely, despite the devastation in the hotel world. "In August and September, the U.S. hotel industry sold more than a million group rooms," Freitag says. "That isn't nothing. But who are these people who are meeting?" Based on his conversations with hoteliers, that business is almost entirely from leisure groups. "It's very short-term bookings — car shows, youth sports, hobbyist groups — and very little, if any, corporate business," he says.
Despite a reliance on business travelers who simply aren't there yet, group-business demand will indeed return, analysts insist — and the new distributed workforce could help to drive that. Based on Gallup poll statistics from August, Preciate, a digital business platform, predicts at least 10 percent of U.S. workers will work from home full-time next year, and about 20 percent will work from home at least one day a week. Those numbers are promising for group and business travel, according to CBRE Hotel Research.

"A more remote workforce will demand more opportunities to connect in person with colleagues, clients and others in their network, and conferences and conventions are ripe to benefit from the increased demand," reads a new report from CBRE, titled "When Will Convention and Group Demand Come Back?" An analysis of past research, notes the report, indicates that with wider use of remote-meetings technology comes more actual business travel and the need to meet face-to-face.

Favorable Rates to Continue

Room demand is likely to return before any kind of pricing power, according to STR's Freitag, which should be some relief to planners if not hoteliers. "Average daily rate growth was minimal last year, even with the highest demand on record," he points out. 

"We're suggesting that room demand will return to 2019 levels in mid-2023," Freitag adds. "But ADR and RevPAR probably won't bounce back until 2025. Room demand will bounce back long before pricing."

In their respective forecasts, both STR/Tourism Economics and CBRE Hotel Research expect ADR to plummet by more than 20 percent for 2020 and to then regain just a small chunk of that percentage in 2021. STR is calling for 5.6 percent year-over-year ADR growth in 2021, to $109.56, and CBRE expects a 7.5 percent rebound next year, to $111.89.

In terms of RevPAR, both forecasts expect a drop of more than 52 percent for this year. CBRE predicts a year-over-year rebound of 41.1 percent in 2021, to $58.51, while the STR/Tourism Economics forecast calls for 37.9 percent year-over-year growth in 2021, to $56.95. For comparison: In 2019, according to STR, U.S. hotels reported RevPAR of $86.64.

Now consider this: The 2021 forecasted RevPAR of $56.95 is exactly the same as the RevPAR reported back in 2010. "So in two years, we wiped out a decade of RevPAR growth," Freitag notes. "These are troubling, troubling times, and not everybody is going to make it through. The industry will make it through, of course — people will always want to travel. But on the other side of this, we might see a very, very different lodging environment."


Meeting Space in Short Supply

One thing planners should keep an eye on is the supply of hotels with sufficient meeting space.

According to STR, the number of hotel rooms under construction in the U.S. peaked in April 2020, at 220,000. The firm expects that number to fall over the next three years, as hotels currently being built are completed and few new projects enter the pipeline. 

Of particular interest, says Freitag, is the type of properties that are being built. "Right now, 7 out of 10 rooms in the pipeline are limited service," he says. "They aren't building properties with any significant meeting space. On the other side, you've got these big-box properties that are in a world of pain right now. And you've got a number hotels closing because of it."

As a result, Freitag continues, we might see a lot of ownership changes at meetings properties in the upper-upscale range. "If you're an investor, this is a very interesting time to look at investment in full-service hotels," he says. "2021 could be the year to invest."

Current owners could have a very difficult time paying the bills over the coming year, especially if more government relief isn't provided quickly. Meanwhile, an investor will note that in several years, there is going to be very little new supply of meetings hotels coming online, and therefore very little competition to cater to increasing demand.

"We're not building ballrooms anymore," says Freitag. "That means... five years from now, it will absolutely shift to a seller's market."

Looking to China

The trajectory of China's recovery currently appears strong; the question is just how applicable its experience will be to what happens in the United States.

"We hear about 'pent-up demand,' and while we have not seen evidence of that yet, we are encouraged by the recovery in China," notes Elevada's Jouaneh. "We do think that we will see 'revenge travel' on an international scale, in a similar way we have seen 'revenge shopping' in China."

Revenge shopping, or revenge spending, refers to the intense demand for ultraluxury goods recorded from Chinese shoppers when stores began to open in May and June after that country's lockdown. Sales for Tiffany items, for instance, skyrocketed 90 percent year-over-year for the month of May. 

Many analysts have predicted that a similar rush to travel — for both leisure and business — will provide a significant economic windfall to industry suppliers when people feel it is safe to get out again. While the principal seems sound, any real comparison to China's recovery might prove slippery.

"It's super hard to draw inferences from a country that can lock you down," points out Freitag, noting that powerful states' rights make it hard to call for a blanket shutdown here. "You have this odd hodgepodge of rules and regulations here in the U.S."

When China shut down in February, the ruling was enforced across the country — and hotel occupancy fell to 9 percent. Since then, recovery has been fairly steady, and as of mid-October occupancy was at about 65 percent. 

By contrast, the United States did not enforce a national lockdown — and hotel occupancy bottomed out at 22 percent. While that number has recently climbed back to 50 percent, the recovery has been more gradual. Neither the highs nor the lows have been as dramatic stateside; whether or not demand will become as "pent up" as it is in the stricter scenario is yet to be proven.

Exhibitions and Trade Shows

The larger the event, and the more global the reach, the less visibility organizers have into their timing for recovery. Any rebound for such international shows is more linked to fighting the pandemic with testing, vaccination and treatment.
"Crystal-ball gazing at the virus is hard to do," points out IMEX Group chair and founder Ray Bloom. "Even the scientists don't know the answers. There's really no visibility."

For Bloom's organization, the successful return of its two annual IMEX meetings-industry events — in Frankfurt, Germany, in the spring and Las Vegas in the fall — is dependent on eased travel restrictions. "You're talking about over 150 countries participating on the exhibitor side, plus buyers coming in from all over the world," says Bloom. "Of course that wouldn't be possible unless people are able to fly, and to do so without quarantine — and also feel comfortable flying."

The demand to participate, however, is extremely strong, says Bloom. New research from UFI, the Global Association of the Exhibition Industry, backs that up. Two-thirds of companies that exhibit at business events reported that cancellations have had a detrimental impact on their businesses, and half said that impact was large or very large, according to "Global Recovery Insights 2020, Part 1," a study produced by UFI and Explori and supported by the Society of Independent Show Organizers. More than one-quarter (26 percent) of attendees say the absence of these events has had a very large impact on their businesses.

Meanwhile, exhibition organizers across the globe are maintaining relationships with their constituents via digital events. According to a survey from the Center for Exhibition Industry Research, 73 percent of organizers are likely or very likely to continue offering those virtual solutions in 2021 — and only 6 percent said they are not likely or not at all likely to do so.

The IMEX Group has produced two virtual programs this year, but Bloom doesn't foresee digital or hybrid meetings for his team extending too far into the future. "I do see us being more involved in online content going forward than we would have been prior to the pandemic," he says. "If you look at the content or the educational part outside of the trade show, there's no reason that can't be delivered virtually." 

But the hybrid approach, which Bloom acknowledges will grow in frequency and importance throughout the industry, won't meet his team's needs. "The trade show itself requires meeting face to face," he insists. "We can't replace that with a hybrid meeting, and it isn't a route that interests us."