The Return of the Big Economies

Europe is coming back in a big way.

Ethical Traveling
While the big European economies are making a comeback, planners looking at emerging destinations in developing nations of course still have a wealth of options. While emerging destinations' meeting facilities, activities, and distance remain paramount concerns for planners, one organization is aiming to add another criterion to this list of considerations: a country's ethics. Read more here.

When it comes to site selection, emerging countries have been the focus recently, thanks to recession-induced budget cuts and the search for affordability, not to mention the continued popularity of off-the-beaten path experiences. But with confidence in the global economy rebounding, many experts agree that in the coming years the spotlight will be shining more brightly on larger, more traditional international meetings economies -- and more specifically, on Europe.

"Certainly 2013 was a year where the world's big stock markets had a 'magical' feel about them: They soared upwards, buoyed by serial optimism," says Graeme Barnett, senior exhibition director at EIBTM & Business Travel Market. For 2014, he says, "all the signs from the key market watchers are that the big economies really are strengthening, but this time without a boom."
Europe is especially seeing major growth when it comes to meetings and events. According to the Global Business Travel Association (GBTA), the corporate travel market in five key European regions -- Germany, the U.K., France, Italy, and Spain -- is expected to grow 5.2 percent in 2014 (to $186.5 billion), and 6.5 percent in 2015 (to $198.6 billion). In fact, it is the first time since 2010 that all five of these sectors are expected to see gains in business travel, says Joe Bates, vice president of research for GBTA. 
Additionally, in April, GBTA updated its predictions about international outbound travel spending from the U.S., projecting that it will increase 12.9 percent (to $37.2 billion), up from the original 12.5 percent growth forecasted in the fourth quarter of last year.
Meanwhile, global destination marketing firm Marketing Challenges International (MCIntl) released a report that found that Europe is the primary location for international meetings hosted by North American associations. More than 40 percent of the North American association executives surveyed in the report claim their budgets are larger and attendance is higher at international events compared with the previous two years, and a solid 91 percent said they expect budgets for those events to increase or remain the same for upcoming engagements. 

On top of that, the latest edition of the IBTM Global Meetings Industry Research for the Americas showed that 50 percent of respondents who attended AIBTM (the Americas Incentive, Business Travel & Meetings Exhibition) in Chicago in 2013 confirmed a direct interest in bringing groups to Europe.
"It does look like the recession in Europe is behind us," Bates says. 
Coinciding with this growth is a massive investment in expanding hotel inventory. Marriott International is working towards doubling its presence in Europe by 2015, growing from 40,000 to 80,000 rooms across about 30 properties in the U.K., Ireland, and Eastern Europe. And Starwood Hotels and Resorts Worldwide announced in March that it plans to open more than 60 hotels in Europe by 2020.
 "We are seeing rising demand for development in both established and rapidly growing markets across Europe," says Asad Ahmed, vice president of sales for Starwood Hotels and Resorts' Europe, Africa and Middle East division. "The surge in infrastructure development in markets such as Turkey and Russia and the success of our mid-market brands across the continent have created favorable conditions for the expansion of all of our brands across Europe over the next several years."
Adds Barnett: "With the predictions for growth in the Eurozone, clearly both of these big brands see a strong future for their companies. Such investment can only be a good sign for some stability now in the region."
It's clear that Europe is primed for some major meetings business -- but what does that mean for planners? First and foremost, "there's no better time than now," says Bates. "Now is probably the perfect time for a meeting planner to get everything in place for their event either later this year or next year, because as business travel continues to improve in each of these countries, we're going to see a firmer price level."
In other words, as the European economy and business travel industry gain steam, and hotel occupancy rates continue to climb, planners are likely to encounter higher room rates and a tougher negotiating position. Starwood's Ahmed says his company's brands saw record-high occupancies last year, which "will give us more ability to drive rate."
It's important to note, Bates says, that the one potential variable that could affect this outlook is the situation in Crimea. After all, Russia's takeover of the peninsula could result in trade embargoes that would lead to slower economic growth and more expensive business travel, since Russian oil embargoes could raise the cost of jet fuel. However, it seems that the crisis thus far has had little to no impact on the U.S. business travel market, according to the latest GBTA report.
In fact, going forward, many cities in Russia likely will be popular meetings destinations, as will other lesser-known cities across Europe, says Cynthia Cortis, director of event services for SmithBucklin. "I think you have to be prepared to look at cities that you haven't before," she says. 
That's because with rising demand, the booking window for international events is getting wider and wider. "We're not getting into London and Dublin and Paris -- some of the cities that we automatically would turn to. They're getting booked up much further in advance," she says. "One of my clients is looking at Sofia. When Russia lifts the visa restrictions, St. Petersburg is going to be the city everyone wants to go to." Kiev was also on a "hot list" of international meetings destinations prior to the political unrest in the area, Cortis says, and the city may return to that shortlist once the region is more stable.
This is not to say planners shouldn't consider top-tier cities in Europe: In fact, these cities have more draw than ever, with the U.K., France, and Germany attracting significant numbers of events last year, according to the IBTM Global Meetings Industry Research for the Americas. It's simply that planners should prepare to sign contracts much further out. This may mean two years in advance, says Herve Joseph Antoine, global managing director of destination management company Pacific World. As a result, "planners should bear in mind the constant fluctuation of the euro to the dollar," he says. 
But there is one advantage to a larger booking window: more new and luxurious options from which to choose. Peninsula Hotels will open its first European property, the 200-room Peninsula Hotel Paris, near the Arc de'Triomphe this August; Vienna, Austria, will see the opening of the 143-room Park Hyatt Vienna in June; and London will get a new Beaumont property, the 73-room Beaumont London, in the city's exclusive Mayfair district. And that's just a handful of the options coming online in the next few years.
However, if planners do end up turning to properties in some of the more emerging areas, they should bear in mind that they may play a larger role in the booking process, Cortis says. "Venues in London or Munich or Frankfurt or Amsterdam -- they know the Western market. When you go into some of these cities that are more up and coming, they don't," she says. "When you go into Bucharest, you're basically building the wheel for them. They're learning right along with you."
That may change in the near future, however, with the increased interest in these regions. Within the next year and a half, Starwood is opening St. Regis hotels in Istanbul and Cairo; a Four Points by Sheraton in Slovenia; and Sheratons in Rostov-on-don, Russia, and Ismayilli, Azerbaijan. The company also plans to open Aloft and Luxury Collection hotels in Ukraine. Marriott's cadre of recently opened properties includes the Courtyard by Marriott Budapest and JW Marriott Hotel Ankara (Turkey). 
"Looking ahead, we are excited to introduce our luxury brands into gateway cities," Ahmed says.
Also, because the cultures and traditions of these countries may be less well known, planners should also educate themselves on the high and low seasons, as well as the holidays, of their destination of choice, Antoine says. This can help avoid peak times as well as aid in the negotiation process.
Bates concludes: "There's quite a number of bright spots. It's been a tough road ever since the global financial crisis hit back in 2009. [But] for the first year in many years, we're going to see positive business travel growth in all five major markets in Europe. That's clearly a watershed moment." 
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