Is it a buyer’s market yet? How are airline cuts affecting
meetings? We asked key players from CVBs around the country to tell us what’s going in their cities—and do a little
crystal-ball gazing to predict what the near future holds.
Is it a buyer's market yet? How are airline cuts affecting meetings? What are the trends in themarket? This fall, we asked key players from CVBs around the country to tell us what's going in their cities — and to do a little crystal-ball gazing to predict what the near future holds. We've got some good news, and we've got some bad news.…
David Peckinpaugh, president & CEO
Peckinpaugh: We're seeing consistent pickup on the meetings side, although we are seeing softening on the leisure end. As a top-five market, we're still in high demand and are seeing few cancellations to date — a handful here and there, but nothing like what we've seen during other significant economic downturns.
We're definitely seeing more of a buyer's market, including more aggressive pricing from the hotels, although there has been little impact on. In some instances, groups are trading down in terms of what hotels they're using, and we're also seeing some hotels go for group business that they wouldn't ordinarily look at in a stronger market.
One of the other things that affects our market is that we have a lot of new inventory coming online in an 18-month period, including the new 1,200-room Hilton San Diego Bayfront, opening in December.
We see this as a time to be more aggressive and focused on the meetings market: We're ramping up our meetingsefforts and are expanding our sales team by eight people.
Peckinpaugh: Like most markets, we have definitely been affected. We expect an 8 percent decrease in airlift this fall, compared to about 11 percent in the industry overall. Our nonstop direct service is expected to be reduced from 54 flights to 41 (mostly due to Express Jet closure), which is significant.
One result of these changes that we expect — not just here but nationwide — is an increase in regional meetings. We are also seeing a nice increase in international visitation due to the value of the dollar.
Peckinpaugh: About 70 percent of our meetings here are association meetings. We very rarely have cancellations in the association meetings market and we expect that to remain the same. So far, we're also still seeing attendance hold pretty true at association meetings. We do expect to seecreep back up as attendees go around the block and use the Internet to find availability so that could be more of a problem moving forward.
Gary Sain, president & CEO
Sain: We're holding our own, but we're facing the same challenges that many destinations are facing — especially in certain segments of the corporate market, such as financial, where we're seeing some last-minute cancellations at hotels.
Occupancy will be slightly down for the year at the convention center and the hotels right now. We've provided additional incentives in the meetings market for November and December, as well as during select time frames in 2009.
The buyer's market can be enhanced based on flexibility — if a planner can be flexible, it can be a great time to buy. Professional, seasoned meeting planners are asking for more value, and they're getting more built into the rate.
Sain: This fall, we have about 12 percent less seating capacity, primarily from the Delta Connection (regional jets), so that will affect tertiary markets that no longer offer direct service. However, travelers from those markets can still connect through other hubs to get to Orlando. We'll still continue to serve every major destination in the United States, and in the international arena, we're doing very well with air service.
Last summer, we formed Air-team Orlando, a CVB-sponsored task force, in conjunction with the major attractions, convention center, airport, economic development council, and others, to sit down and communicate with the airlines directly about our needs. Since then, we have met with several airlines and have increased our co-op marketing with some to drive additional demand.
Sain: We're seeing renewed interest on the part of associations to be more flexible with their dates in order to get better deals. There's a sense that we can't all continue to do business the same way we always have. The other side of that is that there seems to be a renewed interest and focus on the meetings customer from the supplier side. As in previous downturns, the customer will come out of this as a more equal partner.
[Forwe host], we're seeing more scrutiny as to the purpose of the meeting, the , questions about what they want to get out of a meeting, and so on. It's up to both the planner and the destination to help sell the story of why it's important to have this meeting and what we can do to make it more successful.
Maura Gast, executive director
Gast: It's chaos right now. Every day is a new adventure. There's nothing in the handbook about weathering an economic downturn — in an election year — with a war on. It's just a very different time.
We're used to economic cycles. Every seven to nine years we go through a dip, and we roll through it. But we've all got to be more conservative, more cautious. We need to be doing things more efficiently. So that means that critical business meetings will continue but will take place over two days instead of three. Companies aren't spending $100,000 on a keynote. They're foregoing the “nice-tos” and going to the “need-tos.”
Companies still have to roll out products, issue new releases, test the market. But they have to approach their meetings and travel differently, and they are being more resourceful.
We've always been a very short-term meetings market, and that is definitely not changing. We've started to see a little bit of “give” on hotel rates, but it is cautious and the hotels remain more willing to sacrifice on occupancy. It has been very positive to see that hoteliers have been more cautious in their selling strategies this time and have not immediately embraced deep discounting as the only solution to stimulate sales. Hoteliers who experienced the very long recovery period from dramatic rate discounts in 2001 are aware of the impact that sort of reaction has on their business.
Gast: The airline industry is directly connected to the success of short-term meetings business. If secondary markets can no longer depend on air service, they have to work differently. We're a primary air market, not a primary destination, but it remains a key advantage to have really good air access. Dallas/Fort Worth remains a major hub, and we benefit from people being able to fly in and out in a half-day's time.
Chris Meyer, CMP, CEM, vice president, convention sales
Meyer: The biggest impact we're seeing is in the number of days that groups are staying here, which is down. But the volume of activity is still very strong — in fact, in July we were up 1.2 percent in convention attendance over the previous year. We also track leads, and my lead volume is actually up, which is an indicator of future business.
We have about $30 billion worth of development going on here, with 32,000 guest rooms under construction and slated to open over the next four years — obviously hotel developers are still very bullish on Las Vegas. But we have seen it turn into a buyer's market.
We have seen some impact on room rates — there's a lot of value out there these days. We believe this will be the death of the hotel revenue manager position at hotels, and there's a loud cheer from planners about that.
Meyer: We have a diversified mix of carriers: Even if one cuts service significantly, it won't hurt us as much as the gateway destinations that have only one or two carriers that are their bread and butter.
We've created five different task force committees, including one focused on business travel, to talk directly with the airline industry. We are losing some flights, but those aren't being filled now anyway. We will still be serviced from about 130 domestic markets, and international is growing for us. We are even seeing new service from some airlines: Virgin America started service in September from New York to Las Vegas to tie into their international arrivals at JFK, and we're seeing new routes from Allegiant in the U.S. and West Jet in Canada.
Meyer: The association market is vitally important to us here in Las Vegas, especially in economic times like this because we're seeing that market as very stable. They will have their meetings in good times and bad. What we are seeing is a lot more short-term inquiries from groups that used to book 10 or 15 years in advance; now we're getting action from them two or three years in advance.
Pat Moscaritolo, president & CEO
Moscaritolo: I was actually trained as an economist, but I've given up on trying to forecast what's going on. There's been a lot of talk and speculation, but we have not seen it turn into a buyer's market here yet. Consumer confidence is low, the stock market is volatile, gas is high — these are all factors that should say that it would be difficult for the lodging industry to survive without fire sales, but it's not happening here.
We're well insulated here for a couple of reasons: We're very well diversified and attract financial, medical, educational, biotech/life sciences, international, and other groups. We're also continuing to grow our international marketing as it relates to those markets. The data shows that international meetings are a growth opportunity for us.
Moscaritolo: It's a similar situation with the air carriers: No carrier here controls more than 22 percent of the total seats, which helps from a competitive point of view. Still, we lost some flights this fall and I expect that there will be a further retrenchment of the airlines — and when that happens, it could change my answer. Boston is also an easy gateway for international service and we've seen added nonstops from Milan, Italy; Frankfurt and Munich, Germany; and Stockholm, Sweden, along with an increase in flights from London. We're also well served by Amtrak, especially with New York, Washington, Portland and other parts of Maine, and even Canada. There's been a dramatic market shift for Amtrak, and the New York-to-Boston run is the fastest-growing route right now.
Moscaritolo: Some of ourgroups are seeing a little decline in numbers, which makes sense since in those markets, people have to pay to attend out of their own pockets. We've also seeing some shorter booking times — many are down to five years now — but that's been going on for a while.
Within the meetings themselves, we're seeing more structured networking events as they try to create an environment where people can experience cross-fertilization of ideas and meet people. To gain that time, we've seen a slight decrease in the time for opening receptions, say from three hours to two hours for example. We're also seeing more receptions taking place in the exhibit hall itself instead of moving to another room.
Kevin Kamenzind, CMP, senior vice president, sales & marketing
Kamenzind: We're starting to see changes in the single-property meetings market. Occupancies are trending lower and rates are remaining flat. We're also seeing the booking window shortening. This, combined with some properties experiencing short-term cancellations, is making it difficult to accurately forecast production. The convention center meetings market, however, is holding pretty strong. We're not seeing a total shift to a buyer's market, but we are seeing more value-add being negotiated.
With our convention center expansion scheduled to open in January and our new headquarters hotel, the 1,000-room Sheraton Downtown, now open, we feel we are in a much better position than some of our competition to weather this economic storm.
Kamenzind: There's no way to predict what will happen. We've heard that US Airways might cut 6 percent to 8 percent here, and we might lose as much as 10 percent capacity altogether. However, as a hub for two low-cost carriers, US Airways and Southwest, we feel that we have an advantage over some of our less fortunate competitors.
Kamenzind: As a brand-new destination with the opening of the convention center expansion, we don't really have much to compare it to. We will be able to host much larger groups than in the past and get onto rotations that we couldn't accommodate before. The SMERF market is also going to be very important to us, especially during the summer months, when we can offer a value package for groups that couldn't consider a resort destination in the high season.
We haven't seen this yet, but I suspect that we might find attendees cutting back on traveling with their families or deciding not to spend extra days after a convention on vacation.