Ready for some good news? It looks like 2004 could actually be a good year for the meetings business -- as long as SARS, terrorism, and Wall Street don't interfere. More economic activity, rising revenues, and new products are fueling the meetings and events industry. And many planners and suppliers, looking around and seeing positive signs, are hopeful for their chances next year.
The third quarter of 2003 saw the economy grow at 7.4 percent, the fastest rate since 1984, setting the stage for a strong start to 2004. Consumer spending is up and companies are increasing investments. Meanwhile, the National Business Travel Association forecasts a 6 percent increase in business travel spending for next year; likewise, the Travel Industry Association estimates growth of just over 4 percent in convention, seminar, and business trips. So next year could be a very good year, but it will still have its challenges.
The Case For Recovery
If there's a catch phrase that sums up the meetings industry's opinion on recovery in 2004, it's "cautious optimism." Planners are seeing signs of increasing demand for meetings, and increasing budgets to fund them. They're just hoping that nothing happens to derail this progress. Says Colin Rorrie, president and CEO of Meeting Professionals International in Dallas: "The year 2005 may see the return to real growth, but 2004 is a transition year, a transition in the right direction."
And the experiences of many workaday planners bolster Rorrie's big-picture proclamation. "We've been getting really busy now with a lot of requests for proposals, which means we're going to be busy next year," says Robert Tuchman, president of TSE Sports and Entertainment, an event management and marketing firm based in New York City. "The last couple of months there has been a lot on the table. Smaller events came back first, and now a lot of the bigger events are coming back to the market as well."
Indeed, planners of incentive, corporate, and association meetings all express at least some optimism for next year. It stands to reason that when the overall economy does well, some of that success will find its way into the meetings business. For instance, the incentive industry looks ready to improve in 2004 along with the business climate, says Bill Boyd, president of Sunbelt Motivation in Irving, TX. "We're seeing an increase in incentive travel programs planned for 2004 and 2005, from 2003 levels," he says. "For our company, 2004 levels should be about the same as 2001 levels."
In recent months, more workers qualified for incentive rewards, says Boyd, because more are meeting their sales quotas and business goals. It's a trend he expects to continue next year. But incentive programs still face budgetary pressure, and planners will continue to seek savings in domestic destinations and relatively inexpensive international sites such as Mexico, Canada, and the Caribbean.
On the corporate side, Bruce Harris, president of Twinsburg, OH-based third-party meetings management firm Conferon, is optimistic about the performance of that sector, where he oversees more than 850 meetings per year for over 500 clients. "The meetings segment lags behind improvements in business overall, but we're still getting a lift," he says. "Businesses are sending their people out and feeling more confident. Travel restrictions are not in the way, and the economic indicators are better."
Because 2004 budgets are relatively healthy, says Harris, many companies are planning to go ahead with meetings that they've postponed since 2003 or even 2002. "Meetings from this year have been rescheduled for January or February of next year -- on the front end of next year's budget," he explains. "We had some meetings that fell out at the end of this year, but companies aren't canceling the meetings. Instead, they're postponing them. There's actually some pent-up demand."
And association meetings, while still facing challenges in attendance, are likely to have a better year in 2004. "Even looking back as far as the 9/11 period, it's clear that associations have continued to meet," observes Jim Clarke, senior vice president for public policy at the American Society of Association Executives (ASAE) in Washington D.C. "We saw a drop-off in some meetings post-9/11, but many association meetings and events have been relatively steady."
ASAE's latest research on revenue generated by association events, conducted in 2002, showed that 42 percent of associations saw a decrease in meeting and convention revenues since 9/11; 22 percent reported an increase; and 36 percent reported no change.
People's ongoing desire for peer-to-peer networking could bolster association meetings next year, says Clark, and "growth in the economy would play a part in that, although that's still open to speculation. But projections speak to improvement, both in the travel industry and the overall economy."
Another encouraging sign is that planners are beginning to spend money on technology again. "Compared to last year at this time, we're seeing a huge increase in the number of RFPs," says Jason Mitchell, director of marketing at Linden, UT-based event management software maker Wingate Web. "They're coming from both smaller associations and the Fortune 500 companies."
Likewise, Wimberley, TX-based technology consultant Jeff Rasco says that more meeting professionals are looking into investing in new technology, particularly handheld computers, wireless networking tools, and LCD projectors. "It's small stuff, not million-dollar investments, but it will grow with time."
Disappearing Deals
Naturally, the nascent recovery of the meetings and travel industries means that the power in negotiations is slowly shifting from buyers to suppliers. "I can see the window of opportunity closing -- it's becoming more difficult to get concessions," says Conferon's Harris, who adds that he's seen this happen before in his three decades in the meetings industry. "It's trending to the position where the hotels have the power to set the rates."
In cities including New York and San Francisco, says Harris, hotels are already quoting higher prices. "You're far better off negotiating long-term meetings now, before the window closes. Otherwise you're just going to have to take what they offer," he advises. "This means that planners will have to work harder to find places that really need the business."
Nonetheless, hoteliers themselves admit that there are still deals to be had. "Right now we're negotiating with groups for 2004, and we'd love to push rates up a little, but it's still difficult," says Dave Scypinski, senior vice president of industry relations at Starwood Hotels and Resorts in Washington D.C. "But when we see transient business travel really come back, that's going to allow us to put some upward pressure on rates."
Still, many discounts are disappearing. "The deals are drying up. And if buyers don't realize this, they are going to be unpleasantly surprised when they come to the negotiating table," Scypinski warns. "There has been a fifteen to twenty percent increase in occupancy in certain markets." However, he says hoteliers are still experiencing softness in many major markets, including Chicago, Atlanta, Orlando, Southern California, New Orleans, Hawaii, and the Caribbean. "Those are the places you're really going to find the deals."
Uneven Fortunes
Some types of meetings have weathered the storm of the past two years better than others, and are ready for real recovery in 2004. Conversely, others remain mired in the doldrums, outmoded and out of favor, or unable to surmount persistent challenges facing the industries they serve.
Tamara Christian, president of Alexandria, VA-based National Trade Productions, is seeing those healthy meetings firsthand. She's seen revenues at her independent planning company grow by 275 percent over the last three years, despite the difficult climate. She attributes this growth to a simple strategy: retaining legacy clients and winning new ones. But despite her success, Christian sees more trouble ahead for trade shows in particular. "The trade show industry still hasn't recovered from 9/11 and the economic downturn," she explains. "We're still seeing a decline in visitors and exhibitors, especially from exhibitors who register and cancel because they decide they can't afford it."
For many trade shows, Christian says, attendance is down 15 to 20 percent from the heyday of the late '90s, and exhibit sales are down by 5 to 15 percent. "It depends on the industry and the show. In industries where there are a lot of shows competing for the same attendees, the weak shows are being weeded out," she explains. "Companies still choose to exhibit, but they're tightening their spending. They're focusing on return on investment, and sending fewer people to educational events and smaller buying teams to trade shows."
But while the meetings business is challenged in some sectors, several vertical markets are faring well. "We've done well with associations, and we're seeing strong movement in incentive, pharmaceutical, financial, bio-tech, and insurance meetings," says Starwood's Scypinski. "We're still seeing softness still in the automotive and manufacturing sectors."
Indeed, "some sectors have actually performed quite well for the past two years -- health care, building and construction, food and beverage -- so there is every reason to believe those industries are going to continue to do well," says Douglas L. Ducate, president and CEO of the Center for Exhibition Industry Research in Chicago. "The Pack Expo packaging show just happened in Vegas and set records; SEMA, the automotive after-market show, is up twenty percent, so certainly there are many positive signs for many industry shows."
Ducate says two industry sectors that are not doing as well are IT and telecommunications. "Exhibitions mirror the industries they serve. And in those two industries, there are a variety of reasons why it has been virtually impossible to produce a robust event for them." Regulation issues and a too-chaotic competitive landscape are some of these issues, he says.
Meanwhile, many planners report increases in new product launches and sales meetings for 2004 and 2005. "Companies are trying to bounce back, and they realize that without their sales teams being informed, they can't achieve their goals," says Debbie Rohlman, senior vice president of strategic planning at the Maritz Travel Company in Fenton, MO.
Consumer events are also relatively strong, because of their growing legitimacy as marketing tools; this is good news "because increasingly overbuilt convention centers want to focus on consumer events" to justify their existence, says Mike Westcott, vice president of marketing for the George P. Johnson Company, an event marketing firm in Cohasset, MA.
Conservatism Reigns
Despite signs of a thaw in the economy and the events industry, planners say they'll continue to be cautious in 2004. "Everyone is optimistic that we're going to see growth in meetings next year," says Christine Duffy, president of Philadelphia-based Maritz McGettigan. "But we had the same optimism in 2003, and the war, SARS, and the economy not coming back ruined our recovery."
So don't expect the big budgets to come back immediately. Next year, Duffy says "people will continue to be very conservative about when dollars will be released. They'll wait longer to pull the trigger and make commitments. We're working on a quarter-by-quarter basis, whereas before people would have their budgets for the year. I think that kind of thinking has fueled the trend of short-term bookings and shorter lead times, and it cuts across all the markets."
Instead of having one large training session, many regional meetings will be the rule, says Duffy. "The hard part for meeting professionals in 2004 is that instead of having one- or two-thousand-person meetings, they're having twenty regional meetings, each with one hundred attendees," she observes. "People prefer to be closer to home. It saves money and it's also a productivity issue: Managers don't want employees stuck at meetings, either."
Bill Connors, executive director of the Alexandria, VA-based National Business Travel Association, says cost management will continue to be the overriding concern when it comes to corporate travel budgets, even as those budgets increase. "The good news for 2004 is that there will be more money spent on meetings and corporate travel," he explains. "But, that being said, most corporate travel managers are still looking at all kinds of things that will save money. Seventy-eight percent of corporate travel buyers are using more mid-priced hotel brands. And it's pretty clear that they are using more low-cost air carriers and secondary airports as well."
Clearly, there's no return to the fancy bashes of the late '90s just yet. "Corporations are cutting back on anything that could be seen as extravagant," says Maritz's Rohlman. "They're holding simpler events with less food and beverage and entertainment."
And while increased spending on meetings has already created some new jobs, companies are still very cautious about hiring new full-time meeting planners, says Dawn Penfold, president of the Meeting Candidate Network in New York City. "I am seeing for the first time in two years, some permanent hiring taking place, but not a lot. Mostly, we're seeing some sparks of activity in the financial sector and the pharmaceutical sector," she says. "But I'm still seeing many more temporary jobs than permanent jobs." And planners' salaries are likely to increase just 2 to 4 percent in 2004. "People are still happy just to have jobs."