Budgeting
 for UncertaintyDecember 13, 2019

Experts Predict a Possible Downturn
 in the Second Half of 2020 By
December 13, 2019

Budgeting
 for Uncertainty

Experts Predict a Possible Downturn
 in the Second Half of 2020

2019-DEC-IFMM-Col3-Jordan,Kyle-110x140Kyle Jordan, Ed.M., MS, CAE, CMM, CMP is a meetings architect and association strategist, currently serving as the Director of Conferences and Meetings for the Financial Planning Association (FPA) headquartered in Denver, Colorado. Jordan is a Certified Association Executive (CAE), a Certified Meeting Professional (CMP), and recently completed his Certificate in Meeting Management (CMM). He is also a member of the FICP Education Committee. This article originally appeared on ficpnet.com. Visit ficpnet.com/blog.

Every year, whether we want to or not, there comes a time when we must start working on our budgets. Budgeting allows us to create a spending plan to help us best achieve our financial goals for the upcoming fiscal cycle. However, what happens when you’re trying to create a budget in a year of potential economic uncertainty?

If you’ve been following some of the press, both industry-wide and otherwise, there have been gentle whisperings about the potential of an economic slow down and maybe even a little ‘r’ recession in 2020. Now, I’m not a fortune teller, but I’m concerned about budgeting for the 2020 economy, and it’s my responsibility to understand how economic fluctuations can impact our budgets and our budget forecasting.

Why are we talking about a 
slowdown, or little ‘r’ recession?

While there are lots of potential causes for a possible slow down — trade wars, the impact of Brexit, possible instability of the oil supply and our own upcoming election cycle, to name a few — there are data points and trends to which we as meetings professionals need to pay attention.

Recently, news reports gave us our first real inside the industry insight of a possible slow down with the article, “Corporate Group Bookings Decline for 2020: Cvent Data.” The article, which focuses on the data from Cvent’s Group Business Outlook report, indicated that group bookings will continue to increase during Q1 and Q2 of 2020 before taking a negative turn in Q3 and remaining negative through the first half of 2021. Outside of our industry, the RV Industry Association reported in July that “the total number of RV shipments dropped by 23.2 percent in July compared to the previous year. The drop was the 12th-straight month of year-over-year declines, and 2018 was the first annual decline in RV shipments since 2009.”

So, what does this mean exactly, and why do we care if people are buying fewer RVs?
Industry leaders like Michael Dominguez, president and CEO of Associated Luxury Hotels International (ALHI), have long been highlighting the record occupancy and demand, not only from the group business, but from the leisure and transient sectors, thus driving up rates. However, 2019 is the second year in a row where shipments of recreational vehicles to dealers have fallen, behavior which preceded the last three recessions. And we’re starting to see growth and demand slowing in the hotel market. So what does this mean exactly? With luxury purchases like RVs slowing down and booking patterns reducing comparatively to the growth of inventory, we’re likely to see some stabilization and rate corrections in the markets (courtesy GBTA).

Budgeting Hacks in 
Preparation for the Slowdown

Every meetings professional has their own approach to budgeting, but here are some steps I’m taking to help lessen any significant hits on my expense line items in my 2020 budget.

  • Short-term meetings (2020 meetings not yet booked). Play the waiting game: I’m holding off on booking meetings in Q3 and Q4 in 2020. What are the current conditions and trends in the market where you’ll be taking your 2020 meetings, especially in Q3 and Q4 of 2020? With the current projections, I’m willing to take a chance that rates may improve as we get closer to those dates and that the opportunity to fill gaps for a better deal may exist.
  • Add some clauses. If you have a strong pick-up history, see if you can get your supplier partner to agree to a no attrition or significantly lowered attrition clause.
  • Consider virtual. Not all meetings have to happen in person. One of the easiest ways to control some of your variable costs is to consider making your event virtual.
  • Long-term meetings (already booked/contracted meetings). Use your history: Review your post-2009 recession data and numbers. Over the last few weeks, I’ve dusted off some of my predecessors’ spreadsheets, including budgets and expenses, to see what kind of hit we took in the most recent big ‘R’ recession. I can tell you, the numbers weren’t pretty, but those numbers have given me some insight into the behaviors of my conference participants.
  • Review those contracts. Do you have any clauses in your contract that will allow you to proactively reduce your block or food and beverage commitment by an amount or percentage? If so, pay close attention to those dates and consider executing those reductions.
  • Hope for the best and budget for the worst. Do you have an attrition or contingency line item in your budget? If not, consider adding one for 2020. We all hate the idea of paying attrition. However, in a down economy, everyone must make ends meet, including our supplier partners. And they may hold you to that attrition clause. Use your occupancy history to determine what amount of attrition you could be liable for and budget accordingly.

While we won’t know specifically how and when an economic slowdown or recession will actualize, you can take steps now to make sure you’re protecting your budget and your organization from any negative impacts that the economy may throw at you. I&FMM

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