Meetings Industry Forecast 2017

What's next for hotels, airlines, trade shows, incentives and more

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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.

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.

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

AIRLINES: MODEST INCREASES, MORE CAPACITY

Global group airfares should see modest increases this year of about 1.4 to 4.3 percent, according to American Express Meetings & Events. Meeting fares for travel within regions, however, are expected to be flat or actually decrease in 2017, a marked change from last year's rather steep hikes.

Capacity increases around the globe are keeping airfare in check. "We are seeing growth in capacity and volume that we haven't seen in the past four or five years," notes the Amex M&E 2017 Forecast. And in some parts of the world the increases are significant, not only keeping fares reasonable but also opening up new destinations for international meetings.

Both Asia and Southeast Asia should see capacity increases exceeding 5 percent in 2017, according to the Amex forecast. Mexico also is looking at 5 percent capacity growth, up from 2.5 percent last year, due in large part to a government program to get more Mexicans traveling by air. Elsewhere in the Americas, increases between 2.8 and 3.2 percent are expected.

According to Amex surveys, planners' reliance on group fares is still very much dependent on geography. In Central and South America, for instance, 60 percent of respondents said group airfare prices significantly influence their destination choices. Additionally, more than 50 percent of survey respondents negotiate meeting fares for more than half of the events they plan. 

In North America, however, only 21 percent indicated that group fares significantly influence choice of destination. Similarly, in all regions outside of Central and South America, most planners rely on group fares for fewer than a quarter of their meetings.

General airfare projections, as published by the Global Business Travel Association and Carlson Wagonlit Travel in the 2017 Global Travel Price Outlook, are similar to the group-fare predictions. That forecast calls for a 2.5 percent rise in airfares globally, with a 3.7 percent hike in North America and just 0.5 percent higher fares in Western Europe. Eastern Europe, however, is expected to see fare increases of as much as 4 percent, while both the Asia Pacific and Latin America/Caribbean regions could see decreases.

Differentiation and ancillary fees

Airlines will continue to find opportunities for service differentiation and additional fees in the coming year, based on recent announcements. United's new Polaris business-class service goes into effect at the beginning of this month, while Delta will introduce Delta Premium in 2017 -- premium economy-class seating with more space, better service and additional amenities. American Airlines intends to launch its ultra-elite Concierge Key loyalty level toward the end of 2017. -- M.J.S.

INCENTIVES: GROWTH DESPITE SOME TRAVEL FEARS

The outlook for incentive programs remains upbeat for 2017 -- even in light of obstacles like increased terrorism, the spread of the Zika virus and pending government regulations -- according to the latest industry research and interviews with experts in the field.

One of the main indicators, the SITE Foundation's 2017 SITE Index survey, revealed that nearly two thirds (60 percent) of the 599 incentive buyers and sellers who participated said their firms plan to increase the number of people eligible to win trips for 2017 incentive programs, while 49 percent of those polled expect to increase their travel budgets. 

Industry pros agree that incentive business will continue to be strong, though budgets will either remain flat or increase slightly over 2016 numbers. 

The most current forecast from the Incentive Research Foundation, which at press time had preliminary results available for its 2017 Trends Study, shows that incentive travel costs are increasing faster than budgets. The findings of the completed research will be revealed at Northstar Travel Group's Incentive Live event in Las Vegas on Jan. 19, 2017. 

Fears of terror and disease

Terrorism is definitely top of mind for incentive professionals. Almost 80 percent of buyers who responded in the SITE Index survey say terrorism is having a negative impact on their ability to plan and implement incentive travel programs. 

Clients of incentive firm Aimia continue to travel overseas, though unrest in destinations such as Turkey and Egypt have led incentive travelers to consider trips to other destinations, says Bonnie Boisner, the company's vice president of event management. She also cites the spread of the Zika virus as another disruptor to destinations and programs. 

"From an awareness standpoint, the impact of Zika has been overwhelming," says Boisner. "It has caused a scare in the industry, just like any other natural, economic or world crisis. We are not seeing a significant rush to cancel programs due to Zika, but some attendees have opted out of programs in Zika-infested areas." 

Boisner adds that Aimia's clients continue to travel to affected areas, though some groups are considering new non-Zika destinations as well.

Federal involvement

Government oversight also will impact programs in the financial and insurance sectors. According to IRF president Melissa Van Dyke, planners say regulations, such as the U.S. Department of Labor's "Conflict of Interest rule" (see M&C's New Rules for Incentives) are making it more difficult to design reward and recognition programs. 

Van Dyke adds that more than two- thirds of planners say it is difficult to stay informed about all of the federal, state and industry regulations that impact programs.

For more on trends affecting incentive programs, see M&C's Incentives: 3 Trends to Watch. - Lisa A. Grimaldi