Meetings Industry Forecast 2012

In canvassing the experts who keep a close watch on the various business segments that make up the meetings industry, M&C found that their voices all sang a similar song: Overall, 2011 was pretty good, and 2012 should prove to be a little bit better.

While hotel rates will continue on their upward trajectory, this partially reflects an increase in group demand, a trend that portends a greater number of meetings and attendees. Other indicators show that incentive programs are growing again, and the trade show industry, which saw some modest growth in 2011, is geared to rise further in 2012.

Yet, this generally upbeat view is tempered by some real concerns. Most notable among them is the fear that a double-dip recession, still a threat thanks to continuing economic malaise at home and outright financial crises abroad, will wipe out whatever gains have been made. In addition, with few new hotel rooms entering the market, it will become more of a seller's market. Planners not only will need to book earlier to get rooms and function space, they'll also have to figure out new ways to leverage their buying power. Airlift will continue to cost more, as well, for what will seem like an ever-tighter number of seats, thanks to the airlines' reluctance to expand capacity.

The following pages offer a more in-depth look at what insiders say awaits meeting planners in the new year.

Hotels: Rates Climb, Lead Times Lengthen 

Economic uncertainty has caused some hotel-industry analysts to soften projections just a bit for the coming year, but overall, hotel business is expected to continue its upswing.

"It is tough not to be optimistic regarding the future of U.S. hotels," notes R. Mark Woodworth, president of Atlanta-based PKF Hospitality Research, in September's PKF forecast. "By year-end 2012, all but one of the 50 markets in our Hotel Horizons universe are forecast to exceed their previous peak levels of demand."

In PKF's estimation, that demand should lead to an average daily rate hike of about 4.7 percent in 2012 -- softer than previously expected, but still surpassing 2011 rate growth by more than 1 percentage point.

Travel management giants American Express and Carlson Wagonlit Travel both expect similar U.S. rate hikes for their business-travel clients, although they do acknowledge that pricing likely will vary considerably according to region and metropolitan area. Amex is calling for a rate gain of 2.5 to 6.5 percent among North American mid-range properties, and 1.5 to 5.5 percent in the upper range. Projections from Carlson Wagonlit's 2012 Global Travel Forecast narrow down the North American average to a 2.4 to 3.1 percent increase for the first half of the year, with a slightly higher year-over-year hike of 2.6 to 3.4 percent for the second six months.

International rates will skyrocket. For international destinations, pundits expect major rate hikes in Latin America -- although, again, that will vary considerably by country. Carlson Wagonlit Travel foresees major increases across Latin America of 9 to 11.8 percent for the first half of 2012, and from 10.1 to 12.2 percent for the second half. Brazil leads the way with forecasted rate increases of 24 percent for the first half and a hefty 34 percent rise expected for the latter half of 2012.

Groups rates will lag, at first. PKF's September report noted that while corporate negotiated rates already were beginning to rise, meeting planners still were using leverage to mitigate price increases. That leverage likely will wane, however, as meeting demand rises and hotel supply remains relatively flat. Because of those factors, CWT is forecasting a 5.5 to 6.5 percent increase in cost per attendee, per day, for the coming year.

"For 2012, supply and demand are in our favor," notes Tammy Routh, vice president of global sales for Marriott International. "Supply in terms of new-build hotels has basically stopped, especially in the United States. So the hotel industry is in a good place to be able to drive rates." Indeed, Marriott experienced double-digit increases in business travel demand this year, says Routh, and expects increases in the high single digits in 2012. "That will drive group rates as well," she adds.

Expect longer lead times. Because availability is again at a premium, planners should book early. "Waiting is what you've been able to do for the past couple of years," acknowledges Routh, "and that's not going to work anymore if you really want certain cities or certain types of hotels."

CWT's Solutions Group echoes Routh's advice in its forecast, noting that hotels in many of the top business markets will be sold out on peak nights throughout next year. The availability challenge will only become more intense as group size increases, too -- by about 1 to 4 percent for all types of meetings, according to projections outlined in the report.

The upshot: "Corporate planners will need to extend their booking windows to secure available space and to have better negotiating power with suppliers," warns CWT's forecast.

CWT advises planners to align contracting in the coming year, working with the same property or chain for multiple meetings in order to leverage their buying power. With the increased focus on strategic meetings management, this type of negotiation likely will become more commonplace, as will companies leveraging their business-travel spend to negotiate meeting space and group rates.

"We are seeing a definite trend with corporations when they're preparing their business-travel requests for proposal," notes Marriott's Routh, "where they indicate that if we want to get their group business, we'll have to be a part of their preferred business travel program. And for smaller meetings, they're requesting that we honor that transient preferred rate. For small and midsize meetings, that makes perfect sense." She adds that large events still are negotiated on a case-by-case basis. – MichaeL J. Shapiro

Airlines: Fares increase, Capacity Tightens
For the most part, the airline industry has been enjoying the fruits of stronger demand, carefully managed capacity and ancillary fees. Every major carrier except for American Airlines has been reporting quarterly profits. United Airlines led the way in third-quarter 2011 with a $773 million net profit, while American suffered a $162 million loss.

Better bottom lines will equal higher fares. Of note, says industry analyst Robert Herbst of Airline Financials, is that both United and Del­ta Air Lines are seeing financial success from their recent mergers, giving both significant airfare-pricing power. Planners will see this most noticeably in markets where these carriers have a significant presence -- and the number of such markets has only grown since United teamed up with Continental and Delta acquired Northwest.

Healthy financials naturally follow industry consolidation, points out Herbst. "Combined revenues from just United and Delta now total more than the rest of the entire U.S. airline industry," he notes. "United's revenue alone is more than the total of Southwest, US Airways, Alaska and JetBlue."

U.S. capacity might shrink. While air travel demand hasn't slowed, according to Carlson Wagonlit Travel's 2012 Global Forecast, there remains plenty of nervousness over the sluggish economy. CWT expects many North America-based airlines to scale back capacity growth plans for the coming year, leading to fuller planes and growing fares.

CWT projects domestic economy fares to go up by 3.6 to 5.2 percent in the U.S. next year, with business- and first-class fares actually dropping slightly for domestic travel, from -0.1 percent down to -5 percent. Increases are expected for international travel, from 6.1 to 7.3 percent in economy and 3.6 to 4.8 percent in business and first class.

For its part, American Express expects the largest North American fare increases to occur in business and first class, to take advantage of business travelers seeking opportunities, particularly in emerging markets. Amex projects North America short-haul business fares will jump by 5 to 7 percent, and long-haul fares to climb by 3 to 5 percent.

Growth will continue internationally. Strong demand likely will continue in the Asia Pacific region, according to American Express, as "companies within the region and across the world send travelers there to capitalize on its economic expansion," notes Christa Degnan Manning, director of Experts Insights research at Amex, in the forecast. Long-haul fares in particular are expected to increase significantly: 5 to 9 percent in economy and 6 to 10 percent in business class. Amex projects short-haul fares in the Asia Pacific region to go up by 1 to 5 percent in economy and 2 to 6 percent in business class.

Latin America, led by economic successes in Argentina, Brazil, Chile, Colombia and Mexico, also should see increased business-travel demand, notes CWT's Global Forecast, both from within the region and from foreign investors. CWT expects overall airfares on Latin America-based airlines to climb by nearly 6 percent; Colombian fares will undergo price hikes of about 8 to 11.4 percent.   

Booking ahead will save $$. Egencia Travel Solutions calculates advance-purchase savings in its 2012 Global Corporate Travel Forecast, and the potential dollars saved can be significant. For example, booking tickets 22 days in advance or more next year could translate to savings of as much as 28 percent to Toronto, 27 percent to Houston and 24 percent to Dallas. Within Europe, advance booking can reduce business-class fares by as much as 47 percent to Frankfurt, Germany, or 44 percent to Paris. – MichaeL J. Shapiro

Incentives: Budgets, Agendas Hold Steady
A slow and steady upward trend continues to describe the outlook for the incentive sector of the meetings industry. Many of the incentive professionals M&C spoke with point to a stabilization in the market, as companies reintroduce or bolster their programs to build their businesses.

At Maritz Travel, newly appointed CEO Dave Peckinpaugh said that despite some "surprises," such as the tsunami in Japan, that affected some of the company's business, "We are seeing double-digit growth this year and expect the same gains in 2012. Even the economy's sluggishness and the uncertainty of the European markets are not having an affect on our clients' programs."

But, as Peckinpaugh and other experts point out, the bar for recovery has been adjusted. "The 'new normal' is the right way to characterize the recovery of the incentive market," says Chris Gabaldon, chief sales and marketing officer for the Ritz-Carlton Hotel Co. "No one expects the froth that existed in the market in 2007 to return." He adds that it is much more realistic for the industry instead to look back to 2005 and 2006, when companies were focused on business growth, investing in employees, retaining talent, development and motivation.

Among formal forecasts for 2012, the most recent poll conducted by the Incentive Research Foundation reveals that 38 percent of respondents expect no change to incentive program budgets; more than half anticipated no change in the type of destinations they will use, and 26 percent expected to switch from international to domestic destinations.

Additional findings show that 28 percent of those polled expect to reduce the total number of days/nights of their programs, while one quarter predicted no change in program duration, and 29 percent of respondents have considered switching from group travel programs to individual travel rewards.

Among various de­velopments on the forefront for 2012 and beyond, experts point to the following.

Look for a convergence of incentive and meeting planner roles. According to some ear­ly findings from a joint study by the Site International Foundation and the MPI Foundation, 37 percent of the 199 meeting and incentive planners contacted by the organizations say they are now planning other events (either meetings or incentives) in addition to their primary roles. Of that group, two-thirds predict there will be more role convergence in the coming year.

When asked if the next year would see a change in the inclusion of business meetings and similarly "serious" components in incentive programs, 62 percent of those surveyed said they expect that trend to increase.

DMCs will play an expanded role. The Site Index: Focus on Destination Management Companies, released in early 2011, revealed that many DMCs are now acting as one-stop shops by booking air transportation and hotels, organizing meeting logistics and providing on-site staff, in addition to their local destination services. As a result, many DMCs find themselves in direct competition with third-party meeting and incentive planners, a group that traditionally hired or recommended them to clients in the past.

This trend will continue to grow, accord­ing to the various in­centive firms and DMCs M&C spoke with during Site's annual conference, which was held this past October in Las Vegas. – Lisa A. Grimaldi

Trade show officials are moder­ately optimistic as they look forward to 2012, after seeing encouraging figures from the second quarter of this year. According to the Center for Exhibition Industry Research Index, the industry experienced an overall increase of 1 percent year-over-year, with net square feet of exhibit space sold up 2.8 percent, number of exhibitors up .5 percent and number of attendees up 1 percent.

The only indicator showing a miniscule decline was revenue, which decreased .2 percent -- still a relatively welcome number compared with the 8.3 percent drop in 2010.

"It's no surprise that revenue is lagging, because it always does after a recession," says Steven Hacker, president of the International Association of Exhibitions and Events. "The important thing is that the trending line is moving in the right direction and by next year, I think we'll reach positive metrics in all four categories we measure."

Growth will continue. According to predictions, the trade show industry will see a boost of around 3 percent in 2012, says Doug Ducate, president and CEO of CEIR. "We're anticipating that things will stabilize and we'll have a good year," he notes. Still, both Hacker and Ducate are reluctant to celebrate any victories. "Planners should approach next year very conservatively," Ducate says. "They should continue to set realistic goals and keep the targets in mind that will help them measure their own progress.

"The future of the exhibition industry still appears to be quite bright," Ducate adds, "and research indicates that young professionals are still interested in maintaining the face-to-face experience. But we approach next year with cautious optimism." – Michael C. Lowe

Conference Centers: Key Markets Rebound
When it comes to the conference center segment of the meetings industry, "2012 looks like a pretty strong rebound for the second year in a row," says Dave Arnold, CEO East of PKF Consulting USA. Overall revenue per available room will be up 8 percent for 2011 for conference centers and group-related hotels, he notes, and he expects RevPAR to jump another 7.2 percent for 2012.

Bargains will be found inland. Facilities near urban areas, especially on both coasts, are doing well, says Arnold, so the conference center bargains tend to be in mid-America destinations.

Helping the East Coast in particular  is a rise in pharmaceutical and financial-services meetings, which Arnold attributes partially to a catch-up going on with leadership training, management development and other traditional center activities. Also helping conference venues is the lack of new inventory: Nobody is building new centers at present, other than the occasional university facility.

The Complete Meeting Package will remain strong. While there has been talk about breaking down the CMP, where the room rate also reflects the cost of meeting space, F&B and more, into a piece-by-piece deal, that urge has subsided, says Arnold. He reports that 70 to 80 percent of current center business follows the CMP model.

Lead times will stay tight. Planners will continue to book events within about a month at centers. However, says Arnold, more approvals are being required for certain corporate meetings, which might lengthen the time needed to seal a deal.  – Sarah J.F. Braley