The Enduring Recovery of Group Demand

meetings

After a year of growth in 2014, as well as a projected strong 2015, group demand has been on the rise for nearly half a decade. For the fourth straight year, PKF Hospitality Research (PKF-HR), a CBRE company, observed an increase in the number of events organized by meeting planners in 2014. Not only did a greater percentage of meeting planners report an increase in the number of events planned from 2013 to 2014, but a growing number of event organizers also noted increased attendance at each meeting. According to the planners surveyed, growth in the number of meetings and event attendance should continue throughout 2015.

Each year, PKF-HR asks meeting planners to answer questions about the events they are organizing as part of a survey sponsored by ConventionSouth magazine. In October 2014, 95 meeting planners provided their insights. Although the meeting planners surveyed were located throughout the United States, the survey questions were primarily focused on the southeast region of the country. Their experiences during 2014, as well as their expectations for the future, are highlighted below.

Increasing Expenditures
While increases in the number of meetings and attendance are great news for hoteliers, another welcome fact gleaned from these surveys is that meeting planner budgets appear to be on the rise. Fifty-five percent of those surveyed reported an increase in meeting expenditures from 2013 to 2014.

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The primary reason cited for these increases was the rising cost of conducting a meeting (64 percent of planners) rather than an organization investing in more meetings (20 percent). The greatest increases in expenditures were identified for food and beverage (39 percent), programming (47 percent), and guest rooms (37 percent).

Going forward, 71 percent of meeting planners believe it will be more expensive to conduct meetings in 2015 than it was in 2014. Forty percent of planners say providing attendees with a great meeting experience that doesn’t exceed their budget is their biggest challenge.

Struggle to Control Costs
Unfortunately for the meeting planners, strong lodging industry fundamentals have swung the pendulum of negotiating leverage toward hotel management. PKF-HR forecasts occupancies in excess of 70 percent through 2018 in the chain-scales that most groups desire. Accordingly, luxury, upper-upscale, and upscale hotel managers have become more aggressive in regard to group room rates and less willing to offer discounts and concessions for other group meeting services.

Only 25 percent of the planners in our survey reported that hoteliers were more willing to concede room rates in 2014 than they were in 2013. Hotel managers were also inflexible regarding food and beverage prices, with only 9 percent of planners stating that hoteliers were more willing to make concessions for food and beverages. Conversely, 59 percent of planners reported a greater incidence of concessions for Internet access.

Fewer Rooms, Higher Rates
With hotels in many U.S. cities experiencing high occupancy levels, an increasing number of planners are finding it more difficult to book rooms at their preferred hotels. Twenty-one percent of planners stated that it is more difficult to find available rooms for their attendees in 2015 than it was in 2014, which is nearly double the 11 percent reported in last year’s survey. In addition, 51 percent of respondents believe that the majority of hotel room rates are too high.

The increased difficulty in finding available and affordable hotel rooms has led meeting planners to become more flexible as to the location of their meetings. The percentage of meeting planners that held meetings within first-tier destinations decreased from 50 percent in 2013 to 39 percent in 2014. Conversely, the percentage that held meetings at second-tier destinations increased from 39 percent to 49 percent.

Meeting planners are also finding the need to book rooms farther in advance of events. Twenty-six percent of the 2014 survey participants see their booking windows getting longer, compared to 19 percent in last year’s survey.

Bright Future
Meeting planners, in general, continue to have a positive outlook regarding the future of the meetings industry. Similar to last year’s survey, 93 percent of planners expect the health of the meetings industry in the next 18 months to be as good as, or better than, it is today. For hotel managers, the increased demand for rooms from meeting planners should result in continued high occupancy levels, rising group room rates, and increasing revenues from other meeting services.

Robert Mandelbaum and Gary McDade work in the Atlanta office of PKF Hospitality Research, a CBRE company (www.pkfc.com). Special thanks to Marlane Bundock, managing editor of ConventionSouth, for sponsoring the survey.