All segments of the lodging industry struggled in 2009. Surprisingly, the combined impact of the economic recession and the demonizing of corporate meetings resulted in an even more dramatic fall-off in performance for North American conference centers. However, this downturn may present an opportunity for value-conscious travel sellers.

According to the recently released Trends in the Conference Center Industry report prepared by Colliers PKF Consulting USA, the average center in the survey sample reported a decline in net operating income of 43.5% in 2009. This compares to an average hotel income decline of 35.4% for the nation as a whole.

“It’s surprising and counterintuitive,” said industry consultant Joan Eisenstodt of Eisenstodt Associates, LLC. “Conference centers are a serious solution, one that those worrying about the AIG Effect would naturally gravitate towards. They are also the best value for so many meetings; I think that many planners and organizations are simply not familiar with them.” Eisenstodt pointed to two Web sites: www.iacconline.org and www.uniquevenues.com as sites where travel sellers can learn more about conference centers.

Dave Arnold

"During economic recessions it is not uncommon to see associations and corporations cut their meetings budget," said Dave Arnold, CEO East, Colliers PKF Consulting USA. "However, never before have we seen the stigma attached to organizations that attempted to hold valuable training and planning conferences. With the average conference center occupancy level falling below 50% , the negative impact is obvious."

Since the majority of conference center guests stay as part of a package plan, total conference center revenue is typically measured on a dollar-per-occupied-room basis (POR). In 2009, the centers in the Trends survey sample reported a 9.2% decline in total revenue POR. Executive and resort conference centers, the two property types most dependent on business organizations as the source for their meetings, suffered the greatest declines in total revenue POR. On the other hand, total revenue POR at College/University centers declined just 2.4% . This shows the relative stability of educational institutions during the economic recession.

Drop in Demand

"In 2008, conference demand accounted for 72.2% of the rooms occupied at the centers in our survey. In 2009, this ratio dropped to 63.9% , meaning that conference centers relied on transient business to fill over one-third of its rooms last year," Arnold observed.

To combat the deterioration in conference demand, centers turned to local organizations for business. Local based conference attendees increased 2.4% in 2009. Conversely, guests attending conferences of a national scope declined 1.9%. The greater dependence on locally based business contributed to the decline in rooms occupied.

“As the meeting market fluctuates, that will greatly impact the conference centers revenue opportunities,” explained Tom Cappucci, the president of the International Association of Conference Center (IACC)-Americas.  “Although the main focus is and always will be meetings, during difficult economic times, residential conference centers will seek to fill low demand times and increase revenue opportunities with transient/individual guest business.  The transient room nights help with occupancy and room revenue however the conference center then loses out on the incremental revenues from the conference services and food and beverage departments.  So even though people will be moved through the facility to help cover basic costs for owners, overall revenues are decreased,” he said.

Despite management's best efforts to control costs, the average center in the Trends survey reported a 43.5% decline in the bottom-line in 2009. Resort centers suffered the most (-55.1%), while corporate centers' profits fell less precipitously (-33.5%).

Buyer’s Market

Consistent with historical recovery patterns, conference center managers expect occupancy levels to rise, but room and package rates to lag. On average, the managers in the survey budgeted for a 4.8% increase in occupancy in 2010. On the other hand, their expectations for CMP rate movement are a minimal increase of just 0.5%. "It is still a buyer’s market in the short term. This is good news for meeting planners, but still presents challenges for property owners and operators," Arnold concluded.

Cappucci is optimistic. “As the meeting market comes back with the economy, net income will increase. The questions no one has an answer to at this time is exactly when and will it come back to the levels of the past. Companies need to meet. A president of a company recently brought together his team for the first time in six years.  When I asked him why he was having the meeting, he explained that the company culture was declining due to not having face-to-face meetings. Some business was getting done but without looking someone in the eye and having in depth conversations with his team, his company was suffering. Meetings may be shorter in length and the content may be more compact but companies will realize that meetings do matter to the individuals and the organization as a whole.”

The downturn in conference center occupancy translates to opportunities for meeting planners, said Cappucci. “Bargains can still be had at conference centers.”

Easy Planning

Another advantage, noted Cappucci: “With the meeting package conference centers offer, most of the planning details are taken care of and the planner can spend their time on the actual content of the meeting – not the peripheral items. So meetings can be booked faster and easier. In addition, most conference centers will customize the meeting package to meet the needs of the meeting. Because the focus is on the meeting and not just filling guest rooms, the conference center wants to be sure you have what you need to ensure an exceptional return on the meeting experience,” he said.

Cappucci said smart planners will know where to negotiate on price. “Meeting do matter and thus the content and the main items that go into the meeting are areas a meeting planner should ensure are taken care of first and foremost. The areas that surround the meeting content – evening events, parking, off-site activities – are all areas that although fun and helpful, do not impact the return on the meeting experience as much as if you cut back on your technology or speakers.”

He also said he expected that the 2010 Trends in the Conference Center Industry report will actually help build occupancy. “I think the study brings the idea of using conference centers to people’s minds that might not have used them in the past due to misconception of what type of product and service is provided. Many conference center users are repeat customers. Once they have discovered the ease of booking the meeting and the success of the experience, they realize a regular hotel cannot provide the same experience.”

Copies of the 2010 Trends in the Conference Center Industry report are available for purchase and immediate download at www.pkfc.com/store.