Surging Second-Tier Cities

Group business has rebounded in a big way over the past several months, with demand not only catching up to the transient side but, in some cases, surpassing it. For planners, that means higher rates and fewer available dates, especially in the largest U.S. cities.

Those conditions, in part, have driven business to second-tier cities, as planners seek out better availability and lower rates. Here's a look at why five standout destinations are enjoying a burst of success that promises to continue for the long term.


Tucson, Ariz.
The number of eRFPs for meetings in the Tucson area has increased dramatically year-over-year, with Cvent reporting a 25 percent rise and Lanyon's Smart Events Cloud revealing a jump of nearly 39 percent. "We've seen consistent growth for the past three years," says Graeme Hughes, director of sales for Visit Tucson, "and we've seen an increase in corporate meetings."

For Tucson's January-to-March peak season this year, the destination recorded a 9 percent year-over-year increase in overall occupancy and 10.4 percent higher RevPAR than last year. Group business tends to comprise 30 to 40 percent of Tucson's occupancy.

As of October 2014, the Tucson Convention Center has been managed by SMG and seen $8.8 million in renovations, including new seats, updated concession stands, and new sound and video systems.

Many groups that choose Tucson are drawn to its half-dozen resorts, accounting for about 2,700 guest rooms, along with meeting and event space. Major renovations have been undertaken or are planned at many of these properties. Last year, the 487-room Westin La Paloma Resort and Spa debuted a $38 million renovation, and the JW Marriott Starr Pass Resort & Spa updated all if its 575 guest rooms in summer 2013. This summer, the Loews Ventana Canyon Resort will renovate its public spaces and all 398 guest rooms, and the 428-room Hilton El Conquistador will follow suit next spring.

Desert air. "Air service is an improving story for our destination," says Hughes, who says his DMO has been working with the airport authority to add more service to the northeast corridor. "A regular departure from New York would do wonders in terms of opening up that market."

Taking note of the area's leisure appeal, Visit Tucson has been more actively promoting its outdoor adventure allure to planners. Activities such as mountain biking, hiking and birding are now more commonly making their way into meeting activities, Hughes says.

It's also gotten easier for planners to incorporate off-site activities, restaurants and nightlife into the agenda. Last summer the city launched Destination Downtown, which features a new light-rail system that connects three different retail/entertainment districts.


Detroit
Few cities have been as much in dire need of a turnaround as Detroit was a few years ago. "We'd gone through the negativity of our mayor being indicted, and eventually getting convicted and going to prison," notes Bill Bohde, senior vice president of sales and marketing for the Detroit Metro Convention and Visitors Bureau, "and then we rolled into bankruptcy. It was just one thing after another."

 

Even beyond the headlines, there was much work to be done to make  the Motor City a welcoming place for groups, starting with the convention center. As Bohde puts it, "Cobo Center was not in very good condition five years ago, and I'm being kind."

The center, however, now serves as a signpost of Detroit's dramatic reinvention. The city brought in SMG to manage Cobo and committed $279 million to renovate it. Although the project isn't yet complete, the quality of both the facilities and service has skyrocketed, says Bohde.

As of last month, Cvent was reporting a 48 percent year-over-year growth in the volume of requests for proposal in Detroit, and STR reported impressive year-over-year growth in the group segment (e.g., occupancy was up by 7.2 percent and average daily rate had climbed by 4.6 percent).

"In 2011, Detroit hosted four major citywide conventions," says Bohde. "In 2015, we're going to host 15." That includes the American Society of Association Executives' annual meeting this August. Group booking pace is up by 128 percent for the next six or seven years over the previous few years, Bohde notes.

Downtown renaissance. Significant updates to downtown Detroit have been a major factor in luring groups. The area is home not only to Cobo Center but also to 12 large hotels and the city's theater district, and when the new Red Wings arena is complete, the city will have three major sports franchise venues within a two-block radius. In addition, 71 new restaurants have opened up in downtown and midtown Detroit over the past year.

"It's all contributing to the vibrancy of the city," says Bohde, who adds that many visitors come expecting to see a boarded-up city, not a thriving scene with hip young chefs opening new restaurants. "We've come a long, long way since 2009."

Air access. Detroit Metropolitan Airport has been highly ranked in J.D. Powers' customer-service surveys in recent years, and it hosts enough traffic to make Detroit easily accessible. In addition to being a key Delta Airlines hub, the facility serves 24 countries daily. This month, Virgin Atlantic is launching direct daily flights to London Heathrow. While many second-tier cities are losing airlift, Detroit is gaining it.

Auto independence. Traditionally, Detroit's business has ebbed and flowed along with the automotive industry's. But this is no longer your traditional Detroit: Bohde estimates that just four of this year's 15 large conventions are tied to the cars in some fashion.

Still, the auto industry's recent successes have brought more meetings here, aside from those major conventions, adds Bohde, and he hopes the city won't struggle quite so much if the car business hits another slowdown. "We're a little bit more of a diverse destination now," he says.

Tampa Bay, Fla.
As of May, Tampa Bay was enjoying an 18-month streak of rate, occupancy and RevPAR growth, the last down month having registered back in the fall of 2013. STR's year-to-date numbers for group business reveal that meetings are a big contributing factor in the surge: Group occupancy is up by 7.9 percent year-over-year; average daily rate for groups rose by 5 percent, and group RevPAR is up by 13.4 percent.

"We've enjoyed double-digit RevPAR growth in the county for 12 of the last 18 months," notes Alex Kaptzan, vice president of convention sales for Visit Tampa Bay. "Last year was a record breaker, and thus far the first quarter of '15 has broken those records."

 

Last year was especially good for Tampa Bay's convention center business, with 58 conventions -- the most since 2003. Driving success have been state and national associations, fraternal and government gatherings, segments that provided more stability during the economic downturn than corporate meetings in the financial or health-care sectors. Plus, last year short-term business was strikingly good, says Kaptzan, with four citywides booking within the year. "Now we're finally starting to see some conventions book into the historical three- to five-year window. We're starting to see 2020 and 2021 meet or exceed our group pace targets."

Promising developments. A major project is gathering steam at the southern end of downtown Tampa Bay, within a block of the convention center. Jeffrey Vinik, owner of the National Hockey League's Tampa Bay Lightning, is leading a $1 billion project to build a residential/retail/corporate district similar to L.A. Live in Los Angeles. The development would include a high-end 400-450-room convention hotel with a good deal of its own exhibit space, enhancing the convention appeal of the city for larger groups.

A slew of new lodging options have already opened in Tampa Bay, including last summer's conversion of the old federal courthouse into the 130-room Le Méridien Tampa. The property, in the downtown arts district, offers 4,000 square feet of meetings space. Another newcomer, the 137-room Epicurean Hotel, is a partnership between Marriott's Autograph Collection and Bern's Steak House, a local fixture on the culinary scene. The hotel is in the fashionable Hyde Park neighborhood and offers a culinary classroom, a rooftop lounge, a high-end bistro and Bern's, which accommodates up to 60 people.


Louisville, Ky.
The city best known for horses, bourbon, baseball bats and college hoops has been doing pretty well for itself on the conventions front. Louisville is projecting a record-breaking year in 2015, with 664,157 convention room nights -- an increase of more than 55 percent in the past decade. Cvent reports an increase of 49 percent in eRFP volume for the last year alone.

Planners have a choice of two convention facilities. The downtown Kentucky International Convention Center soon will be expanded to 350,000 square feet of exhibition space. Adjacent to Louisville International Airport is the Kentucky Exposition Center, one of the nation's largest such venues, with 1.2 million square feet of exhibition space.

The city expects to open more than 1,700 new hotel rooms by the end of March 2018, culminating with the 600-room Omni Hotel, the cornerstone of a massive $289 million development in downtown Louisville. Rising 30 stories, the Omni will offer two restaurants, a lobby lounge, a lobby art gallery, a rooftop café, a spa and fitness center, a swimming pool, a grocery store and 70,000 square feet of meeting space.

The city's trendy NuLu district is a draw not only for arts and restaurants, but unique meeting venues. Among them is the LEED Gold-certified Green Building, an adapted reuse of a century-old dry-goods building. Along with several versatile event spaces, it features a 40-foot-high lobby, extensive natural lighting, solar power, geothermal wells, and more.

Whiskey business. The importance of bourbon to the city and region can't be overstated. "Ninety percent of the world's bourbon comes from this region," says Katrina Gallagher, a spokesperson for the Louisville Convention and Visitors Bureau, "and a third comes from Louisville. If you want to know what bourbon is supposed to taste like, you have to come here."

Of course, bourbon is a cultural attraction as much as a beverage. The major distillers all offer tours and venues for events. The new Evan Williams Bourbon Experience has become a popular draw for corporate off-sites downtown. Several rooms can be rented for events, including the Speakeasy, which hosts up to 120 people for a cocktail reception or 50 for a dinner. A handful of similar bourbon-based venues are expected to open over the next three years.

 Run for the Roses. The home of the Kentucky Derby can offer a taste of the most famous of horse races throughout the year. When Churchill Downs isn't hosting the race itself (as it has since 1875), it hosts other races, offers tours and supports the adjoining Derby Museum. The landmark venue has a number of spaces for special events.


Milwaukee
Wisconsin's largest city enjoyed a banner year in 2014. "We actualized more than 203,000 convention room nights in 2014," notes Marco Bloemendaal, senior vice president of sales for Visit Milwaukee. "And they represented nearly $148.5 million in economic impact, which is one of the stronger convention years we've seen in quite some time."

Downtown Milwaukee experienced record occupancy last year, at 69.5 percent, and demand was up by a solid 5.5 percent over the year before.

 

What's key to the city's future meetings outlook, notes Bloemendaal, is a gradual lengthening of booking lead times. "We're seeing our national association clients source out a little further than what we've seen in the last four years," he says. "We're seeing leads for 2019, '20, '21 and '22 pop up. We're still seeing a lot of short-term demand -- that hasn't gone away. But I see this as kind of a transition period."

Walkable and growing. Milwaukee touts a compact and convenient convention area downtown, with  new developments on the way. Wisconsin Center, with nearly 189,000 square feet of exhibit space, is connected to about 1,400 hotel rooms via skybridge; plans call for another 160 rooms to debut in spring 2016 on the skybridge route when a SpringHill Suites (details to come) opens for business in a converted office building.

Also scheduled to open next spring is a 158-room boutique hotel from Kimpton, which will be in the historic Third Ward district, a colorful up-and-coming art and fashion neighborhood just a short walk from downtown.

And for foodies, "We have 150 restaurants that are within a half-mile of the convention center," notes Bloemendaal. "Of those, 110 are independently owned. For convention attendees looking for a unique experience, we can offer those F&B options, something they won't be able to find in their own cities."