Jennifer Borth, CCTE, director of travel services at Knoxville, TN-based educational enterprise Edison Learning, is guardedly optimistic about the 2014 meetings industry outlook. “I feel like the demand for meetings is increasing, and the industry is getting back to normal,” says Borth, who plans about 60 U.S. meetings each year.

However, planners in some segments of the industry are slightly more concerned about next year.

Christine Gorham, CMP, senior associate at Booz Allen Hamilton, a management consulting firm in Herndon, VA, leads an 18-person team that is involved in 100–150 meetings and events a year, both for corporate and government entities.

“Because of ongoing economic and political concerns in our market, what I’m seeing is people holding tight and adopting a wait-and-see attitude in terms of what they’re doing,” Gorham says. “On the other hand, our clients understand that meetings are important, so we are continuing to plan future meetings. However, with prices increasing for next year, as a planner we have to either reduce budgets or reduce the size of or cancel some meetings.”

As a result, Gorham says, she is seeing trends toward shorter meetings or a reduced number of attendees. “For example, what used to be a two-day meeting is being reduced to a one-day meeting,” she says. “And some organizations are keeping their meetings more local as a way of reducing costs and travel time.” And in some cases, she notes, those one-day meetings no longer include overnight hotel accommodations.

Budgets

Despite a general sense of optimism for 2014, one thing planners agree on almost unanimously is that budgets remain flat.

Like a majority of her peers, Borth is facing flat budgets. “There’s always an interest in trying to save money,” she says. “And now that relates to things like saving money on food or bringing in our own audio-visual equipment and people.”

Quigley’s budgets at Microsoft also are flat. However, she says, flat is better than reduced, given that there is now so much additional scrutiny on meeting expenditures and budgets in the age of strategic meetings management.

Jody Brandes, CMP, senior meeting partner at South San Francisco-based Genentech, a medical company in the genetics field, also is facing flat budgets. The overarching issue the industry faces is reducing costs, she says, even for the kinds of high-end meetings traditionally hosted for doctors and other medical professionals.

And as a result of tight budgets and rising costs, she is now looking at second-tier destinations for 2014. “When we noticed the lack of availability and higher costs in some of the destinations we had traditionally used, we started looking at our calendar and saying, ‘OK, what do we know we are going to have to do in 2014 and let’s start planning those meetings now,’ ” Brandes says.

“And then we started looking at alternative destinations for some of our meetings as a way of reducing costs.”

Hotel Costs and Issues

One key factor that will have a major impact on the meeting industry for 2014 is that the proverbial pendulum has swung back to a strong seller’s market. Not only are room rates and F&B costs rising sharply, but in many cases major meeting hotels in A-list destinations are once again being booked years in advance, meaning that availability also is limited.

In its 2014 Global Meetings and Events Forecast, American Express Meetings and Events predicts a relatively modest 3–5 percent increase in hotel costs in all areas of the world, except Europe, which will remain largely unchanged. But with planners almost universally facing flat budgets, even that will be a challenge, planners agree.

And by definition, the seller’s market also means a tougher negotiating climate.

“I’m seeing less flexibility from some hotels,” Borth says. “And that includes less willingness to negotiate. There’s more dotting of every ‘i’ and crossing of every ‘t’ when it comes to contracts now.”

The only bright spot Borth currently sees on the hotel horizon is that hotels are still willing to cut deals on short-term bookings when they have a hole on their calendar. “And so because we book a lot of meetings in a short-term window, we’re usually able to get something from the hotel in return for our business,” Borth says. “And that helps us tremendously.”

On the other side of the equation, however, are rising occupancy taxes and assorted resort fees that drive up the total cost of hotel rooms.

“It seems those taxes have gone up across the board around the country,” Staley says. “Now that the seller’s market is pushing hotel rates up, it is much more challenging to find the overall “good deal” we had grown accustomed to in years past. By the time you add in the higher taxes and other fees, including higher F&B fees, your total meeting expense has risen significantly.

At the same time, Staley says, finding available hotels that have the right amount of meeting space remains a challenge for companies that host breakout-intensive meetings, such as pharmaceutical companies like Smith & Nephew.

“We need a lot of meeting space,” Staley says. “And those hotels are typically booked years in advance when the market is healthy. So it’s harder and harder for me to find that perfect hotel that meets my exact requirements.” That challenge, she says, is now being exacerbated by a return to a long booking window, with major flag hotels booked several years in advance. That often means that even if a suitable property can be found, it is no longer available for the dates she needs.

Quigley agrees that the availability of meeting space is a key challenge for the future. “That’s something we have been fighting for some time, especially because we tend to book a lot of meetings short-term,” she says. “And it can be really hard to find the space you need.”

Borth is facing the same challenge. “Many times now,” she says, “I’ll find a hotel that is flexible in its negotiations, and the room rates are good. But the breakout rooms are on the second level or we’re going to be divided up into three different areas so we can’t have all of our sessions and people together in one place.”

As a result of the frustration she sometimes faces, Staley has started to look at destinations once considered second tier. For her 2014 National Sales Meeting for 500 attendees, she booked Nashville and the Gaylord Opryland Resort and Convention Center in Nashville. “We had never even thought about Nashville before,” Staley says. “But as we have grown so quickly, it made sense, based on the amount of meeting space, weather conditions and room rate we needed.”

Food and Beverage

When it comes to hotels, many planners are more concerned about rising F&B costs than they are hotel rates.

“That can be a real problem,” Quigley says, “because F&B is such a huge part of your budget.”

As a result of steadily rising F&B costs, Quigley now looks at budget-conscious practical alternatives, such as more flexible “grab-and-go” lunches rather than a traditional sit down buffet.

Borth now works more closely with chefs to optimize what can realistically be delivered based on her budget. She also is concerned about sharply rising F&B service fees, which are now as high as 22 or 23 percent in some destinations. “And that is a huge markup on your food budget,” Borth says. “And haven’t seen much willingness on the part of hotels to negotiate down the higher service fees. So that means I have to depend even more on the creativity of the chef to make our budgets work.”

Quigley agrees that rising F&B service fees are a significant concern. “And it’s hard to negotiate those down when you’re in a seller’s market,” she says.

Gorham tries to negotiate the fees down, but finds that it’s usually difficult if not impossible. “So where we try to negotiate is on the F&B minimums and how we can get those down,” she says.

And like Quigley and other planners, Gorham is always looking for ways to reduce F&B costs, such as replacing a lunch buffet with box lunches or leaving some nights open for attendees with no formal dinners. “We are doing all of those things,” Gorham says, “because today you have to keep your costs down.”

Because Staley typically books major convention hotels, she has been able so far to negotiate higher room rates back down, using the leverage of her total F&B spend. “But I do have to budget for higher F&B costs,” she says. “That is just a reality now.”

Airfares and Airlift

For 2014, airfares — in general — will only increase on average by about 1.6 percent, with a 1.1 percent increased predicted for 2015, according to American Express’ 2014 Global Meetings and Events Forecast. However, planners who host meetings in some major U.S. destinations are already reporting increases significantly larger than that. And an even bigger concern for some planners is the availability of airlift to and from particular destinations.

As a result, a comprehensive analysis of the availability and cost of flights before a destination is officially approved is now an additional step in the process for many planners.

“Many times in recent years we’ve ruled out a city because the availability of flights is limited and the cost is high,” Borth says. “And instead, we’ll look for a destination like Atlanta or Chicago, where there are lots of flights and the fares are generally good. But even with that, we now try to get our folks to book farther in advance to get better fares. But we also look more now at the convenience for our attendees and how easy it is to get to the destination.”

Staley is now more concerned about a lack of flights in some instances than she is about increasing airline costs. “And even if flights are available, it just seems harder and harder for more of our sales reps to get back home on a Friday night without having to either spend the night or get home at midnight,” she says. “And that’s because there are fewer flight options.”

She expects the situation will get even worse in the future, as airlines continue to consolidate and reduce capacity. As a result, Staley also now routinely runs a comprehensive flight analysis with her travel department before signing off on a destination. “And if I’m looking at several different destinations at the same time, I’ll use the flight comparison to make my decision based on the routes that are best for my attendees,” she says.

Quigley also is more attentive to the availability of flights and routing for her attendees.

“More and more, the places we go to for meetings is based on airlift,” she says. “And that is especially true for our international meetings. If there is a city that you have to make a couple of connections just to get to, people are just not going to come. For most attendees now, it’s not about the registration fee to come to the meeting. It’s about the travel. So you have to make sure your destination selection offers convenience, and also hotels at a range of prices.”

Technology

Although planner concerns about hotel costs or the availability of convenient flights for attendees tend to come up in almost any given year, one legitimately new concern for 2014 is the capability of hotels and other meeting venues to meet the demand for bandwidth, as attendees carry more and more devices as mobile technologies transform the way meetings are conducted.

Somewhat surprisingly, planners agree by broad consensus that even many major flag hotels in A-list destinations fall short of being able to meet the demand for or performance of bandwidth and other technology-related meetings infrastructure.

“And even with all the right people involved,” Borth says, “it’s still very common to find in working through the details that our people and the hotel people are not talking the same language. In turn that means that it’s sometimes hard for us to be sure that our needs are going to be met. And part of that, I find, is in hotel people not anticipating and then not delivering what we are going to need.”

Given the speed with which technology has transformed the meeting industry, Borth says, that surprises her. “Not only is it surprising to me that the technology isn’t always there, but it is more surprising to me that sometimes that can be real problem for you as a planner,” she says. “For example, at one of our recent meetings, one of our general sessions was a failure because the bandwidth we needed just wasn’t there.”

And that was made even more surprising by the fact the meeting was held in a major flag hotel in a well-known, top -tier meeting destination.

“That kind of problem is especially surprising when you think you’ve looked at every detail and carefully considered everything you think you’re going to need,” Borth says.

How is it possible that hotels could fail to meet such a basic need as technology?

“I think a lot of it has to do with the big investments that are necessary to really keep up with the bandwidth that we need as meeting planners,” Borth says, adding that the situation was made worse by the deep, enduring recession and unprecedented slowdown in the meeting industry from 2008 to 2010.

Quigley agrees that one current industry surprise is the lack of sufficient bandwidth in too many hotels and meeting venues. “As a company, we now have a tremendous ability to stream information out to our attendees,” she says. “But in many cases, the physical infrastructure of the facility has not kept pace. And for hotels to update their capabilities is very expensive. So there have actually been a couple of recent instances where we went to destinations and provided advice on how to upgrade their technology.”

Gorham shares the concern about technology, but also broadens the context. “I think the hardest part of that issue is that it’s very difficult for a lot of planners to say I am going to have X number of attendees and as a result, I am going to need this much bandwidth because each of my attendees will have three devices,” Gorham says. “And in that scenario, it’s too easy for the hotel to come back and say, ‘We have that much bandwidth.’ But what you have no way of knowing is how many other meetings are going to be in-house and how their use of some of the available bandwidth is going to impact your meeting. And there’s really no way to analyze or test that. So you have to rely on the hotel.”

And even if a particular hotel has upgraded its capabilities to resolve the issue, that automatically brings up the issue for planners of increased costs. Given the expense of installing and maintaining increased bandwidth and performance, Gorham says, it is inevitable that technology costs will rise, putting more pressure on flat budgets.

That is just one issue, among many, that will make 2014 a challenging year for planners, Gorham says. “But sometimes challenges are good, because they bring out new and thoughtful ideas and good things can come from that. And as meeting planners, I think the important thing is that rather than being reactive in dealing with the issues the meeting industry is facing, we have to be proactive. And part of that is constantly reinforcing the importance of face-to-face meetings.” C&IT