The Fuel Factor

Pointing to high fuel costs, increasing demand, and decreasing airline capacity, forecasters project sizeable airfare increases. BCD/Advito is predicting worldwide corporate rates will increase 7 percent to 11 percent in 2007, while American Express projects a 3 percent to 5 percent increase in global domestic economy fares, and a 3 percent to 7 percent rise in global international business-class fares.

“With the hospitality side doing so well right now, and with prices going up so fast for group air, it's playing havoc with our budgets,” says Allstate's Mosley. “We may have to start looking at second-tier locations [as incentive destinations] in order to find cheaper places to fly to.”

There is a wild card out there that could reduce the pressure on planners' budgets: decreasing oil prices. Depending on whether they continue to fall or stabilize, this could have a positive effect on travel and other meeting-related costs.

Count Business Travel Coalition Chairman Kevin Mitchell among those who think fares will not increase as much as forecasters predict — and may, in fact, fall. “There are several factors that are coming together that will cause this,” he says, pointing out that lower oil prices may translate into as much as $6.5 billion in additional cash flow, money the major carriers might use to increase capacity in an attempt to fight off low-cost carriers that have increased capacity. Add the possibility of an economic slowdown, and airlines, he says, “will really have to discount” to fill seats and compete with low-cost carriers.

Avian Flu Threat Grows

A year ago, newspapers were filled with coverage of an impending avian flu pandemic. Those reports have disappeared from the headlines, but public health experts say the threat of a pandemic is still very real. And once it hits, companies with hundreds, or even thousands, of employees traveling on business could be vulnerable, particularly if those employees are attending meetings or incentives in pandemic hot spots.

According to Michael Osterholm, MD, director of the University of Minnesota Center for Infectious Disease Research and Policy, health experts have recorded twice as many avian flu cases and deaths as they did a year ago. And as we see more of the virus, says Osterholm, the greater the chance of a “genetic event” in which H5N1 — this particular strain of avian flu — mutates into a form that is transmitted from person to person.

So how well equipped are we to deal with a pandemic? “On a scale of 1 to 10, I would say 0.5,” says Osterholm. “We have a grossly inadequate supply of vaccine available right now. So will people be too frightened to go to work, to provide transportation services, electricity, communications, health care? The implications are daunting.”

“This is totally unlike any other challenge when it comes to issues of business continuity,” Osterholm adds. “If a hurricane severely damages a company resource in any given area, that company can usually provide relief from unaffected areas. With a pandemic, everyone is going to be affected, all at the same time.”

Corporations should be vigilant in tracking avian flu developments. “We're taking the widespread communicable disease threat quite seriously,” says Gary Niekerk, manager of global responsibility at Intel Corp., Santa Clara, Calif. “We continue to monitor global threats and preparedness, including advances in antiviral medications, detection, and treatment. We've conducted drills for every major site and business unit, and we're conducting follow-up exercises and continually assessing readiness, response, and recovery globally.”

The University of Minnesota's CIDRAP will be holding a second major conference on the issue in February. Last year more than 200 companies attended, including Boeing, Raytheon, and Exxon-Mobil. It's the type of planning, says Osterholm, that needs to be undertaken, whether or not this strain of avian flu becomes a full-blown pandemic.

Terrorism and Travel Hassles

The discovery of an alleged airline terrorist plot in the United Kingdom this past August had severe effects on travel to and from the U.K., while in this country, new carry-on restrictions added burdens to a security system that has become onerous, particularly for business travelers.

The good news is that implementation of a program such as Registered Traveler, along with increased use of air charters and even “air taxis,” could mean some relief for travelers in 2007.

While Registered Traveler has had trouble getting off the ground, it appears set for implementation in a number of airports around the United States in the next 12 to 18 months. As this issue went to press, the Transportation Security Administration had finalized standards for the program and was preparing to certify RT providers and participating airports.

Luke Thomas, vice president of Kirkland, Wash. — based Saflink Corp., a Registered Traveler provider, believes that his company, through its product FLO (Fast Lane Option), could have one or two programs operational by the end of this year. “If we get a couple of airports up and running,” says Thomas, “and they are providing a good level of service, then you'll get others jumping in.” (See page 11 for a list of airports seeking an RT programs.)

Once Americans get through security, there is an increased likelihood that they will need to have a passport with them. With the first phase of the Western Hemisphere Travel Initiative, Americans traveling to Canada, Mexico, and the Caribbean via air will need an up-to-date passport. (A paperwork technicality postponed the January 8, 2007, start date to late January or early February.) On June 1, 2008, the same requirements go into effect for travel by land and sea.

The difficulties involved in traveling by air have corporations seeking alternatives for business travel. The National Air Transportation Association estimates that the demand for air chartering has increased 20 percent annually since 2001. Charter companies such as Private Jet Services in Hampton, N.H., have started focusing heavily on the incentive market. Allstate's Mosley says his company will charter one commercial plane and two private aircraft for its 2007 incentive program in St. Thomas. Between the convenience of chartering, and the increasing costs associated with commercial flying, “charter is becoming a more equal player,” Mosley says.

A New World of Meetings

As regions outside the United States and Europe become targets of interest for Western business, and as these areas improve their hospitality infrastructures, new meeting destinations are rapidly popping up on planners' radar screens. That pace will only pick up in 2007.

“We're getting a lot more clients that provide services on a global basis,” says Kurt Paben, vice president of business development for meetings and events for Minneapolis-based Carlson Marketing Co. “So there's a lot more travel into newer markets.” He points to India as a destination that has become a meeting hot spot as American corporations become more heavily invested there.

Access Intelligence/Chemical Week is an example of a company that is looking for new destinations for its events. “Five or six years ago, it was China. Then it was India. Now we're looking at Vietnam and Thailand, where the chemical industry is emerging,” says Kerker. In 2008, his company will hold its first event in Vietnam.

For U.S. incentive groups, South America is getting hot, says Shaun Casey, director of the Europe, Middle East, and Africa division of Philadelphia-based StarCite. “Argentina and Chile have huge potential, not only for the quality of their infrastructure, but for the services that already exist,” he says. “They're just waiting to be discovered.”

In Europe, Casey says that Tallinn, the capital of Estonia, and Dubrovnik in southern Croatia already have reputations as, respectively, the “new” Prague and St. Tropez. And American companies willing to look at the Middle East will start considering Dubai because of its massive hotel room inventory. “It's exciting and it's safe,” he says. Once Dubai taps Europe, it will look for its next logical business target: the U.S. “I think Dubai will definitely take off,” Casey says. “Particularly as you get more airlift out of the U.S.”

6 Events That Marked the Industry in 2006

1. Changes at the top at MPI

   After a lengthy search, Meeting Professionals International in October named Tourism Toronto head Bruce MacMillan as its new president and CEO. MacMillan replaced Colin Rorrie Jr., who stepped down in March after he, along with the association's board of directors, determined, according to Rorrie, that someone with “a different set of business skills” was needed to lead the association in a new direction.

2. SITE Foundation Breaks from SITE

   The SITE Foundation broke away from the Society of Incentive and Travel Executives and relaunched itself as The Incentive Research Foundation. According to Ira Almeas, CITE, president of the SITE Foundation, the new foundation will broaden its focus, looking not only at incentive travel, but at merchandise and motivational events.

3. Starcite-Onvantage Merger

   Two of the most visible meeting technology companies in the industry, StarCite and OnVantage, announced in August that they were merging under the StarCite name. The merger, said StarCite President and CEO Michael Boult, positions the company to capture what it considers to be “a virtually untouched frontier of corporate spending.”

4. Hotels and Unions talk

   Faced with deadlines, hoteliers and Unite Here, the union representing hotel workers, began settling their differences. After a two-year stalemate, San Francisco hotel workers agreed on a five-year deal — retroactive to 2004 — with a group representing 13 hotels. An agreement was also reached in Chicago, where contracts with more than 20 major hotels had expired. Negotiations continue in cities including Toronto, Honolulu, Boston, and Los Angeles.

5. New Orleans Back in Business

   Just 10 months after being devastated by Hurricane Katrina, New Orleans began hosting citywide conventions again. In June, the American Library Association brought 17,000 delegates to the city. Despite some travel issues (the city's airport handles about two-thirds of the flights it did before Katrina), the city has since hosted dozens of large meetings.

6. Hotels go Smoke-free

   At more and more hotels, smoking is no longer an option. In September, all U.S. and Canadian Marriott International properties, including its Ritz-Carlton and Renaissance brands, became smoke-free. Earlier in the year, Westin Hotels & Resorts in the U.S., Canada, and the Caribbean banned smoking.

One Story We Didn't Write in 2006

HURRICANE SEASONS in 2004 and 2005 not only devastated several Gulf Coast cities, but they also put a dent in the meetings and incentive business. When forecasters at the National Oceanic and Atmospheric Administration predicted another active hurricane season in 2006 — up to 16 named storms with perhaps half reaching hurricane status — you could feel the shudders across the industry.

The final toll? Nine named storms, five of which were hurricanes. None reached U.S. shores. According to NOAA, the development of El Niño conditions in the tropical Pacific made this year's hurricane season less active than expected, and it could be good news for next year as well.

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