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 and marketing for 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 about corporate meetings has 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 contracts. 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 speaker 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.”