Outlook 2017December 1, 2016

From Travel Costs to the Trump Presidency, What Planners Are Predicting for Next Year By
December 1, 2016

Outlook 2017

From Travel Costs to the Trump Presidency, What Planners Are Predicting for Next Year


It remains to be seen whether the incoming Trump administration will succeed in creating significantly more jobs and keeping the U.S. economy on the upswing in the coming years. But for 2017, one vertical in that economy will likely stay quite healthy: the hotel industry. According to STR and Tourism Economics projections released in September, the U.S. hotel industry next year will experience a slight decrease in occupancy (-0.3 percent to 65.2 percent) but a 3.1 percent increase in ADR to $127.99 and a 2.8 percent increase in RevPAR to $83.51. Flat to increased RevPAR growth is expected in all of the Top 25 markets except Houston.

“We’re definitely seeing a more intense focus on strategies to mitigate the realities of a seller’s market, and interest in SMM from clients of every size.”
— Kari Wendel, SMMC

The continued strength of the hotel industry means that planners will have to contend with an ongoing seller’s market. “Even though hotels are experiencing similar occupancy percentages for 2017, I think the rates are still going to go up,” notes Jennifer C. Squeglia, CMP, owner of RLC Events Inc., based in Warwick, Rhode Island. “I think it will be a seller’s market for quite a while. It’ll swing back some time, just not terribly soon.”

Squeglia reports no decrease in budgets among her clients, and indeed there is evidence that many corporations are increasing their meeting budgets: MPI’s Fall 2016 Meetings Outlook shows 57 percent of respondents predicting “favorable budget/spend,” and 25 percent predicting budgets will remain flat. But the increased spend, at least in part, may well indicate a necessary allocation due to higher costs.

“Our meeting budgets have had to increase with the rising prices of F&B and sleeping rooms,” observes Maggie Johnston, CMP, vice president, meetings, with Assurex Global. “I attend numerous industry events, and I have been hearing from many other planners that investment in meetings is increasing in almost every company.” Johnston says she expects the seller’s market to continue past 2017. “I am now negotiating and signing contracts for 2018, and I have not seen any changes in the rising sleeping room rates or availability at the hotels. If anything, it has been more difficult to find available hotels in the price range that I need for my groups.”

The challenge is not automatically removed by selecting a second-tier city, as a strong seller’s market is in effect at some of those destinations as well, with Austin and Nashville being prime examples.

Contending With the Ongoing Seller’s Market

On the positive side, there are well-known strategies that give planners leverage, and which will continue to be critical next year. “The more flexibility with dates you can bring to your hotel partner, the better your chances of negotiating” a better deal, says Squeglia. “For example, if it’s a short-term window and you’re filling a hole (in the hotel’s schedule), I think the planner is in a very good position.” She also recommends negotiating other line items, such as discounted internet in the meeting space or suite upgrades. “That’s one thing the hotel can do without losing a ton of revenue. However, the 1-per-40 comp is becoming more like 1 per 45 or 1 per 50,” Squeglia adds.

Sharon L. Schenk, CMP, is the director of conventions and event management at CCA Global Partners Inc., the umbrella company for 13 different businesses, the largest being Carpet One Floor & Home. Schenk cites the approach of signing multiyear contracts with the same hotel company or property when possible to increase leverage. “That’s been our practice for years, and we’ve been in situations where because of that relationship, we’ve been able to lessen the pain of attrition issues.”

Increased room rates are not the only rising costs affecting meetings. “They’re increasing the F&B service charges; it used to be 14–18 percent, now they’re 22–26 percent for the same level of service,” Schenk notes. “Sales taxes are going up as well. It seems that whenever they build a new stadium, whether the citizens of that community want it or not, the taxes rise, and visitors and tourists bear the brunt. Depending on what city you’re in, you may have three or four different taxes: convention center tax, city tax, sales tax and occupancy tax. Those creep up 1 percent or a half percent a year, and it impacts our bottom line.” On the transportation side, airfares are increasing, but thankfully, ground transportation is expected to remain flat due to greatly diminished fuel prices over the past few years.

Investing in Security

Due diligence calls for planners to allot more budget to crisis preparedness, particularly in view of the persistent threat of terrorism. MPI’s Fall 2016 Meetings Outlook indicates that safety and security is the “top budget request for 2017,” with 15 percent of respondents saying they had increased threat awareness and response preparedness. That includes elements such as improving contingency plans and enhancing safety and security training for employees. Incentive travel also has been affected by the unstable climate that the threat of terrorism has created. According to the SITE Index 2017, the “tightening of border security and the threat of terror groups has had a significant increased negative impact on incentive travel decisions for both sellers and buyers since 2015.” Specifically, “almost 8 out of 10 buyers see a negative impact of terrorism on their ability to plan and implement incentive travel programs.”

Yet the “negative impact” has far from shut down the incentive travel industry. Kevin Hinton, CIS, chief excellence officer for the Society for Incentive Travel Excellence (SITE), says, “In spite of people’s concerns about potential risks related to safety and security, and the threat of terrorism being so top of mind, more companies are going to be doing incentive programs next year. Corporations around the world are both planning to increase budgets and increase their eligible participants. We had 60 percent of the buyers planning to increase the eligibility, and then 49 percent are trying to increase their incentive travel budgets for 2017.”

Thus, companies are pushing ahead with incentive travel programs that are coupled with an emphasis on risk and crisis management. “They’re shifting some of their destination selection and looking to their corporate safety and security teams to do more contingency planning,” he says. “It’s made (the planner’s) job more complex for sure, as the crisis management component of their job is taking more of their time.”

Managing travel and lodging costs also is a “primary area of concern for incentive travel buyers,” says Hinton. Fortunately, some international destinations are both more affordable and more intriguing to the well-traveled incentive qualifier. Hinton cites Panama, Costa Rica and Eastern European countries such as Croatia and Slovenia as up-and-coming destinations for incentive travel.

SMM More Valuable Than Ever

In a market with rising costs, strategic meetings management programs (SMMPs) are especially useful. They provide centralized control over a company’s meetings spend, informing decisions about where to cut costs as well as which suppliers to drive volume toward, thereby gaining leverage. “One of the obvious advantages of deploying SMM is the visibility of what you’re spending your travel and meetings dollars on,” says Kari Wendel, SMMC, senior director, global SMM strategy and solutions, Carlson Wagonlit Travel Meetings & Events. “We’re definitely seeing a more intense focus on strategies to mitigate the realities of a seller’s market, and interest in SMM from clients of every size.”

While it takes time and effort to bring an SMMP to full maturity, where all of a company’s offices and departments are on board with the program, benefits can certainly be derived with each step in implementation. “One of the most common starting points is venue sourcing and contracting, which drives 60+ percent of the savings opportunity and starts to get you some pretty meaningful data,” Wendel notes. Getting buy-in on these programs continues to be a challenge at some companies, she adds. “As a consultant I’ve come into companies where they’ve got that champion (of the SMMP) identified, but their ability to get the champion to action is still a challenge,” she says. “It’s about business case development and being able to speak the language of the C-suite.”

CSR on the Rise

When planners merge corporate social responsibility (CSR) activities with meetings, they’re speaking the language of millennials. Giving back to the community is especially important to this demographic, even in the context of an incentive program. “In our study, seven out of 10 incentive programs include some kind of a CSR activity,” says Hinton. The survey also revealed that CSR was an “essential element” of 15 percent of respondents’ programs.

DMCs will continue to be key resources in identifying the most meaningful CSR opportunities at a destination. “We don’t want to go in and paint the same school one more time, so it’s important to find those unique projects that can be at the crossroads between the company’s mission and culture, and something in that destination that’s particularly unique,” says Hinton. “And the DMC ought to be your best partner in finding that.”

Wellness as a Best Practice

Just as the well-being of the local community is important to meeting attendees, so is their own. Wellness will continue to be emphasized by the meetings industry in 2017 and beyond, both by hoteliers and planners. On the hotel side, standout examples include MGM Resorts International and Hyatt Hotels Corp. MGM’s Stay Well Meetings program includes healthy work environment features such as air purification, circadian lighting, ergonomic seating, aromatherapy and activity breaks that revitalize the body and mind. This summer, Hyatt partnered with Be Well by Dr. Frank Lipman to offer guests healthy refreshments at arrival, wellness-oriented guest room amenities, expanded healthy menu options and nutritious to-go meals.

“Attendees are so much more knowledgeable about food now with multiple TV channels dedicated to it,” Squeglia observes. “They are more interested in food that’s local, that hasn’t been frozen, cage-free eggs, etc. Tapping into (cuisine that’s) indicative of the destination is also important.” According to Johnston, “During our annual wellness meeting I work with the chef at the hotel to provide healthy meals such as a salad bar and fruit smoothies. We also offer an early morning yoga session.”

Squeglia adds, “Sometimes it’s not incorporating wellness specifically, but just giving people time to take a walk or get a workout in. I’m always including information about the fitness center and have actually not picked hotels because their fitness center was too small or inadequate.”

Engaging Millennials

While CSR and wellness activities are increasingly important complements to meetings, business sessions remain at the core of these events. And the quality of the presentations is what delivers ROI for the sessions. Presenters have come to understand that in order to really engage their audience, particularly the Gen Y set, they need to be as interactive as possible, and avoid “death by PowerPoint.”

“Presenters now know that they can’t sit up there an hour and a half with a bunch of slides; people aren’t engaged in that,” says Squeglia. “I’m also finding the presentations are shorter, sometimes as short as 10 minutes. TED Talks have had a huge influence on how people are programming their agendas now: briefer and more interactive presentations with lots of video.”

The interactivity is often facilitated by mobile apps. Just one example is Poll Everywhere, an app that allows audience members to reply to the presenter’s questions in real time using mobile phones, Twitter or web browsers. The results are then displayed in PowerPoint. “We have been using Poll Everywhere for the past two years,” says Johnston. “I have found it to enhance presentations and engage the audience.”

Raising the Planner’s Profile

Most of the trends cited above were not in place 10 years ago, and just as the meetings industry has evolved, so has meeting planning as a profession. Education has been one key to that progress. Schenk transitioned from an executive secretary position to meeting planner jobs, and earning her CMP in 2001 helped to distinguish her skillset. “The CMP kind of emphasizes the fact that just because you can plan your wedding or a family get-together doesn’t mean you can do conferences and conventions, negotiate contracts and understand what’s going on in a general session in terms of production and technology,” she explains. Her participation in MPI member events was another source of “great education” and helped her grow in the profession, she says.

“I think that MPI and Meetings Mean Business and many other industry organizations have shined a light on the profession. It’s a profession, not just a job, and more executives are coming to understand that as well,” Schenk says. “One of my best practices after every meeting has always been to provide my supervisor a list of the money that I saved. For 10 years I worked at a financial services company, and the money that I saved in negotiations effectively paid my salary.”

In contrast to the more general CMP and CMM, planner certification programs in recent times have been developed to target specific skillsets, such as MPI’s Healthcare Meeting Compliance Certificate (HMCC) and Sustainable Meeting Professional Certificate (SMPC). That trend will likely continue. In late 2017, SITE expects to roll out a certification program aimed at mid-level incentive travel professionals. “We completed the job analysis earlier this year, and it gave us a validation of the 14 competencies that incentive travel professionals need to be able to become experts at,” says Hinton. “As part of that we recognized there is a need for some kind of mid-level certification program, so we’re in the process of developing a program aimed at the manager or director level incentive professional.”

The Impact of the Trump Presidency

Corporate America has come to appreciate the professional meeting planner, but will the American economy and political climate continue to support a healthy investment in offsite meetings and group travel? While it is too early to predict with confidence the effect the new administration will have on the industry, planners can certainly express their hopes that the outcome will be positive. “What I would carefully say is that I am hopeful that Trump’s business acumen will shine through and come to fruition for the economy in general, which can only help the meetings industry,” says Wendel. And the fact that Trump’s business is largely the hotel business suggests that he understands the economic value of meetings and events. Says Hinton, “Trump has an international hotel brand, and they have plans to be a 30-hotel brand in a couple years. They certainly are targeting the meeting and incentive sector.”

Of course, perceiving meetings as a valuable source of clientele and seeing them as important to large-scale economies are separate things. But ideally, the first perspective will engender the second. “I would hope that as a hotelier, which he is, Trump would be sensitive to how important meetings and conventions are in domestic and international relations,” Schenk adds. “And that he would continue to support trade and international access and just making things as easy as possible for people to continue to meet face to face.” C&IT

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