According to the annual “Global Business Travel Forecast and Trends” report, released this fall by American Express Business Travel, the downwardly spiraling economy may actually cause a couple of results that could be positive for the meetings business: airfares likely will decrease and hotel rates will hold relatively steady.
According to the annual “Global Business Travel Forecast and Trends” report, released this fall by American Express Business Travel, the downwardly spiraling economy may actually cause a couple of results that could be positive for the meetings business: airfares likely will decrease and hotel rates will hold relatively steady. More good news, at least for planners on the corporate end, is that small meetings, direct-report staff meetings, smaller sales meetings, training meetings, and meetings that are essential for talent retention, which make up 70 percent to 80 percent of the total meetings spend, are not forecast to change in 2009.
However, said Hervé Sedky, vice president and general manager, Global Advisory Services, American Express Business Travel, “We're forecasting greater scrutiny on all expenses, and meetings are no exception.” While the AMEX report focused on, the assumption is that expenses related to will receive no less scrutiny.
“We're starting to see some indications of hotels being receptive to negotiations and concessions for meetings, particularly in cities where demand is lower than it has been in the past,” Sedky said in a teleconference this fall. Even first-tier cities will see slowdowns in rate increases to the single-digit levels, while second- and third-tier cities may become even better bargains as the economy slows and air capacity is cut. Some cities where hotel rates are dropping but air routes have not yet been cut, such as San Diego, may become more popular as meetings destinations, AMEX officials predicted. However, said Frank Schnur, vice president, Global Advisory Services, North America, “We expect gateway cities [such as New York, Boston, Philadelphia, San Francisco, Washington, and Chicago] will be able to hold their rates more than smaller cities.”
PKF Consulting also is predicting a tough year for hotels, including a 4.4 percent drop in occupancy rates in 2009 over 2008, to an average of just 58.3 percent of rooms being filled. Should this prediction bear out, it will be the lowest occupancy rate since 1988. The current low was hit in 2002, which sunk to a 59 percent occupancy rate. That was the year the SARS epidemic and the Iraq war further depressed a travel market already in severe doldrums after the 9/11 terrorist attacks. The Travel Industry Association is predicting a 4 percent downturn in business travel by the time 2008 rolls to a close, and another 3 percent drop in 2009, which is expected to add to hotels' occupancy woes. PKF also is predicting downturns inof 4.3 percent, and an almost 8 percent drop in profits.
In a press release, PKF Hospitality Research President Mark Woodworth said, “It's not the depth of the upcoming lodging industry recession that concerns us. It is how fast market conditions have weakened, and the rapidly changing outlook for the nation's economy. Uncertainty is the greatest bugaboo. One need look no further than the recent performance of the stock market to realize the level of uncertainty, and resulting volatility, that exists today.” However, with new projects now on hold due to financing issues, and projections that demand will rise again as the economy picks up in 2010, Woodworth does foresee an upward trend after 2009.
What About Airfares?
When it comes to airfares, the good news is that, overall, the AMEX study found airfares likely to decrease in 2009. The bad news, Sedky said, is that “this doesn't necessarily correlate to a decrease in prices paid, as airlines continue their pursuit of expanding the suite of fees charged for services such as in-flight meals and baggage.” He emphasized that corporate-meetings-spend scrutiny, and travel and entertainment spend management in general, will take into account not just the airfare, but all those ancillary air-related fees that can add up to 15 percent of the total air cost — not to mention parking, meals, and other expenses that can add up to $400 per trip on average and can double expenses for some trips, he said.
See page 24 for more on the current and future state of the airlines, and what it might mean for meetings.
Save the Date
The Religious Conference Management Association's 2009 World Conference and Exposition is coming to Grand Rapids, Mich., January 27-30, 2009.
Hotel Rates Rise for 2009
|Mid-range Properties||Upper-range Properties|
|New York||5% to 9%||4% to 9%|
|Boston||3% to 7%||2% to 6%|
|Philadelphia||2% to 6%||1% to 5%|
|San Francisco||2.5% to 7%||2% to 6.5%|
|Washington||5% to 9%||3% to 5%|
|Chicago||4% to 8%||3% to 7%|
Source: “Global Business Travel Forecast and Trends” report, American Express Business Travel, October 2008
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