Forecast 2014

Meetings get back to business

Meeting Trends for 2014
The following are among next year's trends, according to the forecasters.

More local and regional meetings.
Due to budget challenges, as well as compliance and travel time, planners will tend to hold more meetings within their own regions and/or facilities, according to the American Express Global Business Travel Forecast 2014.

Increased focus on SMM.
Strategic meetings management will continue to be a major objective of many organizations in the coming year, says CWT M&E, and will continue to spread beyond the U.S. and U.K. Companies should start with manageable SMM program pieces, suggests CWT's forecast, such as centralized sourcing of meeting venues, contract review and implementation of technology.

Continued supply strain.
With demand continuing to outpace supply in most parts of the world, planners can't afford to wait until the last minute to book venues. "Decide on a venue bid quickly," advises the Advito 2014 Industry Forecast, "or risk losing the space." CWT M&E suggests booking at least 45 days in advance for smaller meetings, to get the best availability and price. That lead time should increase for larger meetings, or for those with unique requirements. - M.J.S.

The coming year should be a solid one overall for meetings industry suppliers, say the experts, as the demand for venues continues to outpace the fairly limited supply growth in most areas. Cost increases for sleeping rooms, meeting space, food and beverage, and more should be moderate in most regions, according to the M&E Supplement for Carlson Wagonlit Travel's 2014 Travel Price Forecast.

Just how these generally higher costs will affect the size of meetings and events varies according to region, per forecasts from both CWT and American Express Meetings & Events.

In North America, where the cost per attendee is expected to rise by between 4 and 5.5 percent, group size is likewise predicted to go up by 1 to 1.5 percent. "We're expecting people will inch back on the scope of their events," says CWT M&E vice president Tony Wagner, "while increasing the number of attendees." Companies will look to maximize their return with more cost-efficient meetings that reach more people.

American Express Meetings & Events likewise expects the number of attendees per event to go up, though at the slightly slower pace of 0.6 percent, and the number of meetings held by each organization to go up by 1.5 percent. Particularly telling, however, is that Amex expects overall meetings spend in the region to remain completely flat. That means companies will rely more on fine-tuning their meeting strategies, notes Amex M&E vice president and general manager Issa Jouaneh, "to achieve meeting objectives, increase efficiency and control costs." That should lead to a bump in the demand for local and regional meetings, which planners dubbed a key trend in 2014, according to Amex.

Per-attendee cost increases are expected to be highest in Latin America, finds CWT, where a 4 to 7 percent hike is predicted. Amex calls for the number of meetings held in the Central and South American region to remain flat.

CWT forecasts a 3 to 5 percent increase in group size for the fast-growing Asia Pacific region, despite a 4 to 5 percent rise in the cost per attendee, per day. Yet American Express predicts that cost controls will play a more significant factor, resulting in a 2.4 percent decline in the number of attendees per meeting, a 1.2 percent drop in the number of meetings and a 3.6 percent decrease in meetings spend per organization.

Meetings budgets in much of Europe are being scaled back, notes CWT, which predicts that group size will fall by as much as 3 percent next year, despite costs remaining relatively flat (a 0 to 1 percent increase). The Amex forecast calls for drops of 1.8 percent in both number of attendees and overall spend per organization. - M.J.S.

HOTELS: GROUP DEMAND, ROOM RATES, OCCUPANCY KEEP TRENDING UP

"We continue to believe what we have been saying consistently since 2011," declares R. Mark Woodworth, president of PKF Hospitality Research, "that the year 2014 will be a great year for the U.S. lodging industry."

How great? In terms of revenue per available room, PKF-HR foresees a 5.9 percent uptick for 2013, followed by a 7.2 percent RevPAR gain next year and additional 8.1 percent growth in 2015. Compare that to the Smith Travel Research long-term annual average RevPAR increase of 2.9 percent. "If you look at the factors that historically have derailed the good times for hotel profit growth," Woodworth said in September, "very few, if any, exist today."

Rates will climb…a bit. Woodworth's consultancy is forecasting a 1.9 percent rise in occupancy for 2014, as well as an average daily rate hike of 5.2 percent. Planners should note, however, that the surge in average room rates will not necessarily have too great an effect on their negotiating leverage for 2014. The fact is, notes PKF-HR's fall 2013 forecast, that group demand has been slow to recover, and therefore negotiating leverage hasn't shifted completely in the hotels' favor.

Smith Travel Research, which predicts a 4.6 percent rise in average daily rate and a 6 percent increase in RevPAR for 2014, also has pointed to slow group-demand growth as a mitigating factor to this point. But preliminary signs show that group demand might be picking up.

For example, reservation-system provider TravelClick found, in its October North American Hospitality Review, that the 2014 group outlook is improving considerably. "Group sales over the past month are outpacing the same period last year by almost 50 percent," notes executive vice president of business intelligence Tim Hart. Based on bookings as of October 2013, the first quarter of 2014 is seeing a 10.7 percent year-over-year increase in occupancy and a 3.4 percent growth in rate.

Corporate pricing will vary widely. In terms of negotiated corporate hotel rates, Advito, the consulting arm of BCD Travel, is forecasting a global average increase of 2 to 3 percent -- not including Latin America and Africa, which should experience the steepest demand increases and probably will see larger rate increases.

Rate increases could vary widely within regions as well, with top cities like New York City; Chicago; San Francisco; and Sydney, Australia, likely experiencing rises far above their regional averages. The CWT forecast also notes major discrepancies among countries within given regions: In Asia Pacific, for instance, CWT forecasts rate increases of 5 to 9 percent for Indonesia and, due to an excess of new supply, rate drops of 1 to 5.9 percent in India. In Latin America, CWT calls for gains of 0.2 to 2.3 percent in Mexico; 2.5 to 8.2 percent in Brazil; and, due to inflation, 9.8 to 15.9 percent in Venezuela.

Some groups will scale down. When it comes to hotel selection, notes the CWT M&E forecast, planners in North America, Europe, the Middle East and Africa are likely to continue to use upscale and luxury properties. Pharmaceutical companies, however, are more likely to avoid the highest level of properties for compliance reasons, something CWT's Tony Wagner says is becoming more of a factor for all of his clients.

Planners in the Latin America and Asia Pacific regions, on the other hand, have become more flexible in their hotel selections, notes CWT, and are more willing to use midscale properties with meeting space. - M.J.S.

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AIRLINES: BRACING FOR A REALLY BIG MERGER
The biggest news concerning the U.S. airline industry has been the recent deal to merge American Airlines and US Airways, resulting in the world's largest carrier.

Advito analysts speculate that the successful fusing of American/US Airways could push up fares in the long run. However, for 2014, they expect relatively week demand will lead to minimal fare hikes. Advito predicts that regional business fares and intercontinental economy fares will remain flat, with intercontinental business fares inching up by 1 percent and regional economy fares growing by 2 percent.

American Express Global Business Travel, on the other hand, forecasts noticeable North American fare hikes only for long-haul business-class tickets, which could go up by 3 to 6 percent. Short-haul economy fares are expected to either remain flat or go up by a maximum of 3 percent, while long-haul economy fares could go down by as much as 4 percent. Short-haul business-class fares could fall by 8 to 13 percent, according to Amex, due to heightened competition from low-cost carriers, challenging unemployment levels and tightening corporate travel policies.

As is the case with hotel rates, say forecasters, airline price changes are likely to vary significantly among countries in most regions. For instance, in Latin America, fares could be noticeably higher in Argentina, Brazil, Chile and Venezuela. For the region overall, however, Amex forecasts a 2 to 5 percent rise only in long-haul business-class fares. In other categories, average prices might even drop in 2014. Fares will be highly dependent on the country of origin.

Ancillary fees and fuel surcharges now account for a significant percentage of airfare costs, points out CWT. For that reason, anyone responsible for purchasing fares must have a firm grip on the total spend in order to effectively negotiate.

Incorporating group fares into a strategic meetings management program is a strategy American Express sees as an important trend for the coming year. Such rates are likely to become more critical in the planning process, notes the Amex forecast. - M.J.S.

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Go to the Video
Melissa Van Dyke of the IRF talks about what's in store for incentives in 2014 and beyond. Click here to watch.

INCENTIVES: ALL VITAL SIGNS FOR REWARDS ARE UP

The outlook for 2014 incentive programs is more upbeat than it was a year ago. "Budgets are stabilizing and, in some cases, increasing," says Melissa Van Dyke, president of the St. Louis-based Incentive Research Foundation.

This latest wave of optimism dates from the IRF's spring 2013 pulse study of industry trends, which showed a 13-point increase (56 percent in 2013 vs. 43 percent in 2012) in respondents who characterized the economy as having a "positive impact" on their ability to plan and implement incentive programs.
A more recent study, released in October by the Incentive Federation, the umbrella organization for incentive associations, reveals a robust industry. The research found that 74 percent of U.S. businesses use non-cash incentives and spend $76.9 billion annually on same; of that figure, $22.6 billion is spent per year on incentive travel programs.

Among trends to expect in 2014:
Technology will remain key. Wi-Fi connections are the single most important feature for planners and groups, according to a study conducted by the IRF. Respondents viewed Wi-Fi as the new "basic utility," and they think it should be free.

The study also found that incentive planners use mobile event apps to distribute program schedules and for maintaining contact with attendees. Planners increasingly are using texting and websites to create engagement and disseminate information.

Meetings will play a lesser role in programs. For several years, adding meetings to incentive agendas was de rigueur. But an industry survey conducted by the IRF reveals that less than half (48 percent) of all incentive trips today include a business meeting.

Just one-third of respondents said that adding a meeting to their trip would make the experience better for them and their organization, while 20 percent believed the combination would be bad for both the company and the reward earners.

Travel will continue to rebound. Following a several-year hiatus, firms are again looking to motivate participants with enticing destinations, with China, Bali, Eastern Europe, France, French Polynesia and Italy hot for 2014.

Sunny destinations like Hawaii remain popular, but resort programs increasingly are cutting group activities to one day from two to allow more unstructured time, notes Mike May, president of Irving, Texas-based meeting and incentive firm Spear One. - LISA A. GRIMALDITRADE SHOWS: COPING WITH THE LOSS OF FEDERAL ATTENDEES
Trade show industry officials once again are "cautiously optimistic" for 2014, as the U.S. economy continues its slow growth. "Historically, the exhibition industry trails GDP, so if it's in a slump, our industry tends to be in a slump as well," notes Doug Ducate, the outgoing president and CEO of the Center for Exhibition Industry Research. Analysts expect to see a 2.1 percent growth in overall industry metrics (attendance, revenue, square feet sold and number of exhibitors) next year and as much as a 3.2 percent increase in 2015, a good deal stronger than the estimated 1.1 percent growth in 2013.

Among other significant trends affecting the world of trade shows:
Government will continue to have a negative effect. One major concern continues to be a lack of federal participation in trade shows due to sequester-driven budget cuts and travel restrictions. "Planners are having to be realistic about their government's support and attendance," says David DuBois, president and CEO of the International Association of Exhibitions and Events. "It  puts a lot of additional pressure on show organizers to find additional revenues."

Two sectors expected to be hit the hardest, according to DuBois, are government meetings and education-related shows, which often tie to the government in many ways. Analysts are forecasting education exhibitions to be down "anywhere from 2 to 5 percent," says DuBois, who adds, "My advice for show organizers across all industries is to be more aggressive on the sales and marketing side to help augment their top-line revenues."

Selling is shifting. One trend Ducate has noticed is the adoption of relationship selling. "Organizers are getting more involved in understanding what their exhibiting companies' objectives are and how to fulfill them," he says. "Exhibitors are going to go where they get their return, and organizers are realizing that they have to help exhibitors be successful." (For more on helping exhibitors succeed, see M&C's November feature, "Boosting Exhibitor Loyalty.")

Supply is outpacing demand. New and expanded convention centers, like Music City Center in Nashville and the Cleveland Convention Center, which opened this past May and June, respectively, are offering brand-new facilities with the latest features for show organizers. The month it opened, Music City Center already had booked a total of 123 meetings representing more than one million room nights.

The amount of investment going into convention centers "certainly indicates a lot of confidence in the long-term future of our industry," says Ducate, referencing proposals for facility expansions in Los Angeles, San Francisco, Anaheim and San Diego in California alone, not to mention the recently completed expansion in San Jose and major renovations in Long Beach.

 However, new space also is making it harder for older facilities without the ability to upgrade to compete for the same business. Look for such centers to start shifting their marketing strategy toward "a more regional market or local market" and to start repurposing space to generate additional revenue, notes Ducate.

In August, for example, 180,000 square feet of unused exhibit space at the Reno-Sparks Convention Center in Nevada was converted into a permanent film studio. Ducate says that planners should expect to see more of the same in the near future. - MICHAEL C. LOWE

CONFERENCE CENTERS: SLOW GROWTH FOR A GOOD PRODUCT

For the second year in a row, owners of conference centers are celebrating modest growth. The results are very similar to 2012, when conference centers saw a 7 percent increase in occupancy and a 5 percent growth in rates, per the 2013 Trends in the Conference Center Industry report from PKF.

The modest uptick can be attributed to a 2 percent growth in group business. "I do have a concern that there might have been a permanent step-down of overall group demand on account of the recession," says Dave Arnold, CEO East for PKF Consulting. "I think a lot of companies questioned the effectiveness of some of their meetings. When they didn't hold them for discretionary reasons, it was hard to get them back into the culture."

Following are some other trends affecting this segment of the meetings industry:
U.S. leads the way. Within IACC, U.S. properties are showing the strongest signs of growth, along with Sweden, which, according to Mark Cooper, CEO of the International Association of Conference Centers, has its own micro-economic climate. "In Denmark, France, the U.K. and Spain, it's not getting worse, but there's no tangible sign of improvement," says Cooper. "People wonder when the good news out of America will have an effect outside the region."

Centers need to change their message. "They need to get out the word that they're serious, responsible meeting venues," says Arnold. "Just switch the conversation from anything related to pricing to offering the most effective facilities, taking the competitive advantage one step further."

Planners should shop for bargains. The value proposition from conference centers remains strong. Notes Arnold, "If I'm a group and I want the best bang for my meeting dollar, I'm definitely going to think conference center first, and then suburban hotel and urban hotel last." - SARAH J.F. BRALEY