Pick a statistic—any statistic. For suppliers to the meetings and incentives
industry, the forecast for 2009 is as grim as it gets. But look hard: Is that a ray of hope ahead in 2010?
At the Americas Lodging Investment Summit in January, Mark Lomanno, president of hospitality research firm Smith Travel Research, presented STR's projections for the hotel industry. It was a string of bad numbers. Hotel occupancy: down 4.2 percent in 2008 and expected to drop by 3.9 percent in 2009. Hotels' average daily rate: up 6 percent in 2007, up only 2.4 percent in 2008, and expected to drop by 2 percent in 2009.
STR's chart showing this year's projected supply (up 2.4 percent) vs. demand (down 1.6 percent) even offered this caption: “Whine through 2009. Better when? 2010!”
Speaking at the same ALIS session, Mark Woodworth, president of PKF Hospitality Research, said simply, “This year will be the year of stress for all industry participants.”
That Sick Feeling
With meetings on hold, postponed, and canceled — plus the outright disappearance of many incentive programs — meetings industry suppliers are feeling that stress.
“In Orlando, 2008 was a record year for group cancellations, and 2009 cancellations are on pace to exceed 2008 levels,” said Vince LaRuffa, vice president of resort sales andfor Universal Orlando Resort, during a session at the recent Meeting Professionals International MeetDifferent conference in Atlanta.
Says another hotelier, “Companies are paying enormous cancellation fees without blinking an eye. It's not an economic decision. It's a perception issue.”
Debbie Meyers, CSEP, head of Dallas-based entertainment company Bravo! Entertainment, expects a 20 percent to 30 percent drop in the budgets slated for her events this year. While some of the cuts are due to lower projected attendance at conferences, she agrees that negative press abouthas caused others to rethink what they are doing. “We've seen cancellations even when canceled services have to be paid for anyway,” she says.
Julie Greenspoon-Kelly, president of Destination St. Louis, tells her own dramatic story: “We have two large groups who book in January every year. They both canceled.” She also notes that some large St. Louis-based corporations, including Anheuser-Busch, Enterprise Rent-a-Car, and MasterCard, all canceled their 2008 holiday parties. While her company was not involved in planning those events, the cancellations hit many local suppliers hard. “These are the kinds of things that make you sick to your stomach,” she said.
Across the board, suppliers are rethinking their business strategies, says Chris White, chairman and CEO of Global Events Partners, a worldwide partnership of destination management companies based in Washington, D.C. At a recent meeting in Nashville, White brought together all the company's domestic DMCs. “Each owner stood up and told us what is going on in their own region, and nearly everyone said 2009 business was going to be down. They were forecasting anywhere from 10 percent to 40 percent less business this year.”
As Bill Boyd, CMP, CMM, CITE, president and CEO of Sunbelt Motivation, Dallas, and a well-known industry leader, puts it: “I haven't seen business this bad in the 28 years we've been in operation.”
Fear of Extravagance
“Event professionals who serve the corporate market exclusively are bearing the brunt of the downturn,” says Lisa Hurley, editor-in-chief of Special Events (a sister publication of FIM). “While social business is certainly feeling the pinch, the corporate event business is facing a sharper falloff. Corporations are not only reining in spending, they also fear looking extravagant in these tough times, so they are canceling events that might appear frivolous.”
The perception issue has hit the financial and insurance industries especially hard, as the companies singled out in recent news reports have been from that industry. “The media is supposedly for the working class,” says one hotel executive. But when the media fans the perception flames by erroneously labeling programs as junkets, “they're killing the working-class person — the servers, the valets, the manicurist in the spa, all of whom depend on tips, and now they can't pay their mortgages.”
Another hotelier acknowledges having lost meetings because of perception, but remains optimistic in the long term. “Everybody is laying low but I don't think the incentive conference will go away completely,” this executive says. “If we can't save 2009, let's save 2010.”
It's Different This Time
The current situation for DMCs depends on the destinations they serve: Exotic locales are being hit harder than second-tier cities like St. Louis, says Greenspoon-Kelly. “We're fortunate in that we're not an incentive destination,” she says. “We have never seen the super-highs and now we are not seeing the super-lows like [DMCs] in cities such as Miami.”
Times are tough in Nashville, reports Rhonda Marko, CMP, CMM, DMCP, president and CEO of Destination Nashville, who has had to lay off three people at her company. “I've seen more DMCs laying off staff than I can count on both hands,” says Marko, who is also president of the Association of Destination Management Executives. “I have never experienced that before in all my years in the business.”
Then there are the small- and medium-sized incentive firms, which sometimes rely on just a few key clients. Following the late cancellation of a large travel reward program for a West Coast automotive client, Excellence in Motivation laid off 34 employees in November. These were the first layoffs for EIM since the Dayton, Ohio-based company has been in business, says Bob Miller, president and CEO.
Speakers and entertainers are also feeling the pinch. “After 20-plus years in the industry, and having made it through multiple recessions in that time, I have never seen what we are seeing now in the insurance and financial sector,” says Ruth Levine of SpeakInc. Speakers Bureau in San Diego, Calif. “Speakers are being canceled as much for perception issues as for budgetary reasons. This is particularly challenging when I speak to meeting planners in the insurance and finance industry who are frustrated because their division is actually doing well, yet they are unable to reward their employees with a big marquis name like they did last year because doing so will be perceived poorly by customers and the media. The frustration level is the same for meeting planners who are forced to eliminate keynote speakers from their programs for top performers who accomplished the same level of production this year as they did last year.”
Diane Goodman, CMP, president, Goodman Speakers Bureau in Windsor, Conn., reports a mixture of reactions to the economic crisis among her clients. “Across the board, people are being very cautious. Some clients are canceling some meetings, some are postponing meetings that are already booked, and others are scaling back budgets.”
Still, in her experience, things have not come to a standstill. “We are seeing lots of activity, especially with our insurance and financial services experts,” she says. “However, at the same time, we are sensing that clients are being tentative about finalizing plans and signing. We believe this is a direct result of companies being unsure about the future. And, given all the scrutiny going on in this industry, our planners are being especially cognizant of the educational value of any they bring to a meeting. And there is more discussion than in the past about alternative means of presenting educational programs, such as teleconferencing, videoconferencing, or webcasting.”
This Time It's Global
While many of these suppliers have weathered recessions in the past, the consensus is that this downturn is worse than the others, including the period following 9/11.
“In my opinion, 9/11 had a very different feeling,” says Valerie Hershiser, CMP, DMCP, president and owner, The Key Event Group, Nashville, Tenn. “That was an attack on our country, and people were adamant about not letting it affect them.” Destination Nashville's Marko agrees, adding that financial uncertainty is at the heart of the current crisis, unlike in the period following 9/11.
Another big difference: The current recession is. “Most of the recessions we have faced in the past have been U.S.-based,” says Julio Campos, founder and executive creative director of Santa Monica, Calif.-based production company Campos Creative Works. “In those downturns, global companies could sustain their business even though domestically they were suffering. The problem now is that everyone is affected — both nationally and internationally — and the first things to go are the marketing dollars.”
But it's also not just about the economy — it's about the press. Says Levine of SpeakInc., “Given that recessions always end, no matter if this one will last a few more months or worse yet, a few years, the bigger question is whether this new mind-set regarding perception will forever change the use of speakers at insurance and financial meetings.”
Excellence in Motivation is expanding its reach in an effort to remain successful in 2009. Despite layoffs in its travel management division, Miller says the company is seeing growth in its marketing and technology services divisions and is currently hiring in these areas.
And when it comes to layoffs, one person's loss may be another's gain. “Some corporations have had to lay off their in-house planners,” says Greenspoon-Kelly at Destination St. Louis. “We are getting calls from those companies that wouldn't have come to us otherwise but who now need a.”
Richardson at Memorable Meetings says, due to the current financial squeeze, the company is putting greater emphasis on developing clients regionally. “It doesn't cost us as much to do regional business in Georgia, North Carolina, and South Carolina [where the company operates],” he says. “A client is more likely to pull back on a meeting booked in the Bahamas than one that is booked locally.”
Other companies are making operational changes to cut budgets and keep their employees. At Atlanta-based A Legendary Event, Creative Director Steve Welsh reports that managers were recently asked how, if they owned the company, they would cut costs without coming up short on quality. “Some suggested that we can reduce our courier bills by hand-delivering proposals or bills to our clients or by offering them the opportunity to stop by for a tasting of some of the chef's recent recipes — both of which give us some valuable face time with the customer,” he says. “Our executive chef was able to cut his overall food budget by 20 percent simply by calling his vendors and negotiating a better deal. By issuing paychecks every two weeks, we are saving over 50 percent of the cost of weekly checks! Many of our managers were so thankful to be included that they vowed to find ways to cut budgets in every department and to do whatever it takes to get through this.”
Another result of the downturn: shorter booking cycles, making forecasting for 2009 virtually impossible. For example, White at Global Events Partners recently had a client in Nashville call on a Tuesday for an event the next day. “And this was major piece of business with off-site events and dine-arounds.”
While the unexpected business is certainly a plus, the inability to forecast through 2009 may translate into some suppliers going belly up. “I think some of the smaller DMC operations are not going to make it,” he predicts. “These are the ones that generally live on the edge with very close margins. I think we will see some of these three- or four-person operations fold this year.”
The Key Event Group's Hershiser says her company has gone from forecasting every six months to assessing the business on a quarterly basis. Some of her 2009 proposals have been out to customers for the past three to six months with no sign of action. “They're afraid to commit. They say they are doing [the program] but [it doesn't mean much] unless ais signed. We have a lot of leads. It's just a matter of what is going to go forward and what is not.”
Says Campos of Campos Creative Works: “Like us, most production companies are just trying to protect what they have. It's going to be a huge effort to keep what you have booked. We'll likely be in survival mode until 2010 — and I'm really an optimistic person.”
Sidebar: Opportunity Knocks?
With so many hotels being hit hard with cancellations, many suppliers are finding them more flexible about. When Hannah Greenberg, CMP, director of conference services at Meeting Mavericks, a meeting planning company in Cherry Hill, N.J., saw attendance at an event in the Bahamas drop from 100 attendees to 22, the hotel was willing to waive all attrition penalties once she agreed to hold the event there again for the next two years.
“I really had to work hard to prove my case,” she says, but because she brings a lot of business to the property throughout the year, the hotel was willing to negotiate.
It was a good business decision by the hotel, says David Richardson, president and CEO of Memorable Meetings, an event-planning company in Charleston, S.C. “The ones that are really willing to partner together to do business are going to survive this.”
Richardson is going back to properties to renegotiate contracts for his clients for meetings that are already on the books. “I have clients who do not want to cancel but it is not economically feasible for them to have the meeting. It's a question of asking a property what can be done to keep the meeting from canceling, whether that be postponing cancellation fees, reducing room rates, or renegotiating attrition clauses.” He also often enlists the hotel's general manager in these sit-downs to discuss how they can offset certain costs in order to keep the business.
“Use the relationships you have with national chains,” Richardson advises, “and proactively go to them to ask for help.”
Says one hotelier: “Anything you have customarily paid for in the hotel environment is negotiable today: F&B pricing, Internet access, meeting room rental fees. You're going to find more flexibility on things like attrition terms and cancellation terms too.”