What can go up and down at the same time? Air fares, of course. The problem for meeting planners these days is that U.S. airlines' fare structures are taking on such complexity and changing so often that convention planners are questioning the value of the traditional meeting discount programs. Compared to the volatility of individual fares, these programs seem to demonstrate very little movement or innovation.
"If you select one airline [as your official carrier], sometimes it works against you," says Jane Berzan, vice president, meetings and expositions, the National Association of Convenience Stores, Alexandria, Va. "When members try to use the preferred or designated carrier and then find they can get a cheaper rate elsewhere, they can get really angry with you," she explains. "You select one airline, but another could be having a special."
Joan Eisenstodt, an independent meeting planner based in Washington, D.C., says that her association clients report a growing percentage of members who insist on making their own air arrangements rather than working with the designated airline or booking through the group's preferred travel agency.
She cites one client's recent meeting at which fewer than 10 percent of the 16,000 delegates booked the official carrier. Eisenstodt concedes that in the current pricing environment, she can't blame meeting attendees for trying to find a better deal on their own rather than the airlines' standard five percent off restricted discount fares (the best of which almost always require a Saturday night stay) or 10 percent off unrestricted business fares.
"I love checking my own fares and doing my own ticketing," she reveals. "I don't like trusting anyone else with it." But if this trend continues, she admits, it could lead to problems if associations can no longer deliver the volume of business that the official carriers expect in exchange for their discounts.
Business Vs. Discount The value of the airlines' standard meeting discount of 10 percent off individual unrestricted business fares is certainly being eroded by unrelenting increases in individual business fares over the past few years. The average cost of unrestricted business airline tickets during the first nine months of 1997 showed an increase of 20 percent over the same period a year earlier, according to the fare trackers at American Express, who conduct monthly surveys of price levels. That jump follows a nine percent increase in business fares in 1996 over 1995. With demand growing at a faster rate than supply, American Express is forecasting an additional five to six percent rise in 1998.
Not surprisingly, an increasing number of corporations are tightening the screws on business travelers, requiring them to adhere to more restrictive travel policies. This means, for instance, that more business travelers are staying over a Saturday night at their destinations. Further, if the American Express statistic on business fares is accurate, the standard ten percent savings an airline offers delegates for midweek conferences was wiped out--and then some--by fare increases last year.
As a result, the vast majority of association planners are more dependent than ever on other forms of meetings discounts. The most favored strategy for planners continues to be the five-percent reduction on Saturday-stayover discount fares (United, for instance, estimates that more than 90 percent of its contractedbusiness travels on these fares).
On the plus side for planners, the value of the five-percent meetings reduction off th e lowest discount fares has remained relatively unscathed, according to American Express, because discount fares have not been rising at anything like the rate of unrestricted coach fares and other typical business fares.
In fact, American Express found that the lowest discount fares actually declined by 11 percent during the first nine months of 1997, at least in the 215 domestic city-pairs included in the study. But the company advised that this figure could be misleading, since its survey samples fares only one day a month and the lowest discount fares available tend to fluctuate rather wildly.
"If you smooth out the line [of monthly discount fare levels in the survey], dropping out any unusual sales that our methodology happened to have picked up, you come up with a trend line that shows for the last one and a half years the lowest discount fares stayed at about the same level, or came up maybe two or three percent," notes American Express spokeswoman Melissa Abernathy. "But business fares went up dramatically."
Airlines' load factors (percentage of seats occupied) are currently running at around 70 percent--the highest levels since the 1940s, and the industry has posted four straight years of very healthy profits. This is not a scenario that will create major flexibility on the part of the airlines when it comes to convention business. But there have been some new pricing strategies offered for convention groups.
Pricing Innovations The most recent broad change in the meetings pricing environment was the introduction of an extra five percent discount on top of the standard levels for persons who are booked and ticketed at least 60 days before departure. First introduced last August, it was quickly adopted by all major airlines.
"There seemed to be a general consensus among planners that the 5 percent and 10 percent just didn't cut it for a discount," says JoAnn Bedrosian-Ryan, United Airlines' national manager of association sales. "We weren't in a position to raise the discounts per se, so we were trying to be creative and think of a way we could do something with the discounts but also not hurt our inventory. So we came up with the extra five percent at 60 days out, because most people--at least for annual meetings--are booking that far out."
That depends on whom you ask. "I think it's fairly realistic," says Jane Berzan of the National Association of Convenience Stores. "Most of us publish our meeting dates way in advance, and most of our attendees are repeat attendees, so they know when they are going to come and go."
Patty Quinlin, director of meetings and conventions at the ProduceAssociation, Newark, Del., says the 60-day advance discount might work as an incentive for some, "but traditionally--especially for our exhibitors--companies don't know which personnel are going to attend until the last minute."
If levels of business are any indication, there is a greater acceptance among meeting planners of airlines' growing inventory of zone fares--a collection of flat fares into the meeting city that vary only by region of departure, and do not require a Saturday night stay.
Says Steve Martin, president of ITS, a travel and housing agency in Deerfield, Ill., that works with many associations, "When the zone fares started, they were really just for resort destinations. Now we are getting more cities that have zone fares. And we're selling a lot of them. They're usually better than the ten percent off that you get during the week." Airlines confirm that they have been growing their zone fares programs dramatically--and finding increasing acceptance of these fare deals from meetings groups.
"About a year ago, we modified our zone fare program and made those fares available to all of our North American destinations," says Earl McClendon, Delta's manager of meeting, incentive, and group sales. "Previously, they were available to about 35 or 40 cities. We've been seeing a rather large shift of our business now going with the zone fares."
United had tried to stay away from zone fares, but recently gave in to competitive pressures and added a zone-type fare product--called Area Fares--to its roster of meetings offerings, according to Bedrosian-Ryan. And American Airlines recently rolled out a new marketing initiative called AAssociation Fares, specifically for the association meetings market, which previously had not been differentiated from its overall meetings program.
"Our zone fareusage has surged since the introduction of AAssociation Fares," says Rick Weber, American's manager of groups, company meetings, and specialty fares. "We immediately saw associations using more of the zone fares for midweek meetings." More recently, American expanded the availability of its zone fares to the Caribbean and Europe. And Weber says American expects to roll out a " meeting product" sometime early in 1998.
But there's more to American's AAssociation Fares than just zone pricing. The package also includes the other discounts mentioned above, as well as name-change allowances, a larger "window" of permis-sible travel time under special fares (five days before or after the meeting dates), help in promoting the airline's services to association members, and cargo discounts.
"We ask for exclusivity as the official carrier in order for associations to obtain these benefits," Weber notes. "However, we realize there are some conference sizes and locations that make it impractical for an association to go with one carrier." So in those cases, American may allow a co-carrier designation.
The expansion of zone fares to many more cities is only part of the good news on that front; the other part is that those fares appear to be relatively stable, avoiding the price increases that have characterized individual business fares.
At Delta, for example, zone fares are showing "no big increases," according to Bob McNally, the airline's new system manager of meeting, incentive, and group sales.
"We are preparing to roll out our 'Year 2000' zone fares, and if there are any increases, they are only moderate, and only in certain markets," he states. "
American's zone fares "have stayed fairly constant through the end of 1998," says Weber. "Now we have [zone] fares available through the end of the year 2000, and on average the fares for 1999 and 2000 are about five to ten percent higher than the current levels."
Facing Deep Blue At the Produce Marketing Association, meetings chief Patty Quinlin says that the group's most recent convention attracted 14,000 delegates. Wouldn't that potential volume of traffic merit some special consideration from airlines that wanted to be the official carrier? "If it has, I haven't found it," says Quinlin, "and we've tried. Basically what we've been getting is the traditional five and ten percent off."
For the most part, airline officials insist that they are perfectly willing to negotiate specials with meeting organizers--but only on that airline's terms. American's Weber agrees that his airline is making its negotiations for meetings deals much more targeted than in the past. "We certainly do that when it comes to those groups that require blocked space. Our pricing there is flight-specific in order not only to provide more attractive pricing to our planners, but also to move the traffic to those flights where we are most interested in carrying groups in large numbers.
"The other thing we're currently developing is adding some seasonality factors into the zone fares, and really making it, even within the zone fare structure, more attractive to fly on certain days of the week and at certain times of the year."
Delta is following a similar pattern in its dealings with meetings groups. "We rely on our yield management folks to control the inventories," says McNally, "and the opportunities [for meetings deals] are still there on certain key flights. . . . We've seen recently that a lot of airlines are promoting certain city-pairs on a case-by-case basis, providing additional discounts. And these obviously depend on travel dates and number of passengers. It's really becoming like a chess game--watching who's making what moves, and deciding how to react to those moves."
The chess analogy is especially appropriate for United Airlines, where yield managers are now equipped with the best chess player yet, literally: The airline is phasing in a new generation of yield-management technology based on IBM's SP2 parallel-processing system best known as "Deep Blue," which defeated world chess champion Garry Kasparov last year in a series of demonstration matches.
United's Deep Blue parallel-processing system is aimed at developing a detailed forecast of how people "fly and buy," a United spokesman says, "and then making seats and fares available in the most efficient way to gain the maximum amount of revenue. It's the most sophisticated yield-management application in the entire airline industry and is expected to raise United's revenue by $50 to $100 million annually."
Planners who consider themselves masters of, take note: In the months ahead, you might find yourself facing your toughest opponent yet when you sit down at the bargaining table.
Several major airlines are turning to the World Wide Web to promote their meeting programs and products. Here's what some of the better sites offer:
* American Airlines' "First Call" group and meeting area includes a promotion of monthly group discounts, beyond its regular discounts, that are available in specific markets listed on the site. In December, for example, American listed specials in 30 markets in and out of Dallas/Fort Worth, 14 markets for Chicago, and lesser numbers for several other cities, with a booking deadline of December 31 and a travel deadline of March 31.
* Continental and Northwest both offer online meeting contract request forms that can be filled out on-screen and instantly e-mailed to each airline's group department. And both promise to turn the request around quickly, with a contract sent out within 24 hours of receipt.
* Southwest Airlines' site features a meeting program questionnaire designed to be printed out, filled in, and faxed back or mailed in.
Most airlines' online meeting sites provide instant e-mail areas; links to other parts of the carrier's Web pages like frequent-flyer or airport club sites; and basic terms and benefits of the airline's meetingand policies. When it comes to the marketing of meetings products via the World Wide Web, "I think there are lots of opportunities, and they'll be emerging over the next year or so," predicts American's Rick Weber. "I see an opportunity for a system of quoting zone fares directly within the Web site rather than delegates having to call our meeting service and ask for a particular zone fare. I think that will come quickly."
Here is where you can find the major airlines on the Web:
America West: www.americawest.com
Toll-Free Numbers for Meetings and Conventions American: (800) 221-2255
America West: (800) 548-7575
Continental: (800) 468-7022
Delta: (800) 241-6108
Northwest: (800) 328-2216
Southwest: (800) 433-5368
TWA: (800) 325-4933
United: (800) 521-4041
US Airways: (800) 334-8644