Healthy Lodging Industry Poses Challenges to Meeting Planners

With increased occupancy and rising rates at hotels, meeting planners are increasingly challenged to keep their meetings and conventions within budget.

That is one of the conclusions from a recent survey of 131 meeting planners conducted by PKF Hospitality Research and Convention South magazine.

According to the survey, nearly 65 percent of meeting planners expect that the number of meetings they will organize in 2007 will be comparable to the 2006 level, while an even greater number, just over 86 percent, believe the number of exhibitions year-over-year will remain the same.

But 63.4 percent of the planners did say they were under some degree of pressure to control their events budgets. Among these cost-cutters the areas targeted for reduction costs broke down as follows: 36.6 percent planned to reduce off-site events, 32.1 percent planned to have less food and beverage and 24.4 percent planned a cut back on audio-visual efforts. But conceding that hotels now have pricing power in their corner, only 21.4 said they planned to reduce guestroom rates, while 17.6 said they planned to reduce the cost of meeting room rentals.

"So if you own a charter boat that hosts parties, this is probably bad news," said Robert Mandelbaum, director of research information services for PKF Hospitality Research,

Hotel owners in secondary markets may benefit from the cost crunch. The survey found that, because of cost considerations, second or third-tier cities are becoming more attractive to meeting planners.

"If you own a hotel in Raleigh or Memphis, this is a positive," he said. But he said that business in major convention and meetings destinations, such as Las Vegas and Orlando, is so strong, that hotel owners in these cities are unlikely to feel any pain.

As hotel owners have increased their leverage, meeting planners are increasingly struggling with tough attrition clauses, or clauses that guarantee a certain percentage of booked hotel rooms will be filled, or the planner must pay a penalty. Just over 57 percent of planners surveyed stated that the severity of hotel attrition clauses have affected their site selection process.

Planners rated on-site restaurants and lounges as the most important hotel amenities, followed by access to a business center, and availability of guest room and meeting room technology, such as high-speed Internet access. Also, the planners said having swimming pools and fitness centers in hotels was important.

"We've seen many large downtown hotels adding spas recently, and that is why," Mandelbaum said.

While meeting planners and hotel owners sit on opposite sides of the negotiating table, they may find one area of common ground. While meeting and convention planners must frequently reserve large blocks of rooms years in advance, that long-term planning may be thwarted, as attendees may book a room through a third-party Internet site at a lower rate than the convention room block in that hotel.

"This is something that hotels and meeting planners can join together and work on, "Mandelbaum said.—Eugene Gilligan