Many destinations reported 2006 was an excellent year for group business. What do they anticipate for 2007? What are their challenges/opportunities for attracting meetings? j "Based on data from DMAI's [Destination Marketing Association International] Meeting Information Network (MINT), which houses extensive meetings information going back more than 20 years, we've seen a steady and constant increase in the number of group meetings and meeting attendance since 2003. It is anticipated that in 2006, group meetings will exceed the previous record numbers of 2000, and 2007 will continue following this trend as well.

"In a strengthening economy such as we're currently experiencing, there is a moderate new supply of hotel rooms and at the same time a strong consumer demand, especially in corporate transient business. For DMOs [Destination Marketing Organizations] searching for group business, the climate is still very competitive, as we've seen an increase in new private convention facilities and expansion of existing facilities. Overall, for DMOs, it is important to strike the proper balance between attracting group and corporate business for their destinations. DMOs should also maximize their relationships with their hotel brands - repeated partnerships often benefit both parties involved.

"For meeting professionals, in an atmosphere in which demand is up, it is important to adopt longer booking cycles than they have in the past, in order to obtain their preferred meeting dates, hotel rates and convention facilities. Based on our MINT data, they should also expect to see a moderate increase in meeting attendance. Overall, 2007 looks to be a very positive and encouraging year for the industry." Michael Gehrisch,
President & CEO
Destination Marketing Association International (DMAI)

What are the meetings industry's biggest challenges in today's economy?
"As an industry we are doing well and business is strong. Average hotel rates are up an average of 9.7 percent and occupancy levels are hovering nationwide at 72 percent.
"The challenge for both planner and supplier is how to maximize revenue and minimize costs. Lead time for booking has not increased. For many it has continued to shrink along with the staffs that are responsible for the meeting planning and execution. More players are involved now in the form of revenue managers on the property side and procurement officers on the planner side. This forces the planner to know the economic value of their meetings now more than ever. ROO and ROI are increasingly even more part of the equation.

"Planners need to know the internal strategic value of their meeting as well as its value to the supplier they are dealing with. They need to know what type of packaging of meetings can be accomplished. Can a multi-year contract be developed for a single hotel or conference center? Can committee meeting or leadership meeting be combined in order to enhance the overall buy? What additional revenue can you provide to the facility to make your meeting even more attractive and aid in your negotiating? What options are you willing to consider?

"Second- and third-tier cites are becoming very attractive meeting destinations with enhanced facilities. Lower- cost options for planners in first-tier cities are a much stronger option today. There has been tremendous growth in the limited service hotel sector. Many of these once 'bare bone' facilities are now offering complimentary breakfast, workout facilities, and considerable technology options in the guest room. Savvy developers are moving their limited service products from the highway to the center of town near convention centers and meeting venues with great success. More and more multi-hotel packages are including some type of this limited service market for at least one segment of their attendees. This causes a balancing act for the planner at the headquarters hotel in order to ensure the main block is protected and their meeting space is maintained.

"The increasing fuel costs and other labor cost are forcing associations and corporations alike to look for synergies and maximize revenues. Within the Convention Industry Council, we are seeing this for all aspects of our members' operations. Our board has asked that we prepare a quarterly update from our 32 member associations on proposed foundation projects and those projects under way. Resources and research that are required will be listed so that two or more organizations can pool research efforts and dollars to make the best use of their development funds. For those foundations, it offers a much better idea of what is in the pipeline and hopefully, it will eliminate costly duplication of effort.

"As an industry, we will continue to race to keep up with technology and use it more effectively for each new generation that becomes our marketplace. Our audiences have the microwave mentality when it comes to speed of service. The need is always immediate. Delivery of services now runs the gamut from those that want the personal touch of a phone call to those that need only a text message or a podcast. Our biggest challenge lies in tailoring the right message to the right group quickly and efficiently."
Mary Power,
CAE President & CEO
Convention Industry Council (CIC)

"The biggest competitor for associations is time. Time is today's hottest commodity and for that reason, association annual meetings have to provide more than ever. They are constantly scrutinized by each and every potential attendee. With travel not being as fun as it once was, associations must be providing uncompromising value for attending their meetings, and since association meetings are all optional, the time is now for some reinvention. We are well into the 'experience economy,' and if an attendee doesn't have a positive and moving experience, the risk is that they will choose to stay at home, and read the conference proceedings online. We need to all work together as an industry to provide the experience for which members will be willing to endure travel and pay more for."
Richard Green
Vice President of Association Sales and Industry Relations,
Marriott International

What is the No. 1 legal or contractual issue/challenge or opportunity for meeting sponsors in the near future? How would they best handle this issue?

"Negotiating performance clauses in hotel contracts continues to be the No. 1 legal challenge for meeting planners. Specifically, how to word the 'attrition' and 'cancellation' clauses in order to provide a formula or process for calculating contract damages for under-performance (attrition) or total cancellation must be dealt with early in every negotiation. Once the process or formula has been determined, calculating and enforcing the clauses should be a lot easier.

"There are two primary methods in use for stating guest room performance levels in hotel contracts: a minimum room revenue guarantee or a minimum room night guarantee. The minimum room revenue guarantee method requires the meeting sponsor to generate a minimum level of revenue from guest rooms picked up by attendees based on the group rate, number of room nights held, and percentage of allowable attrition before performance damages are applicable. The minimum room night guarantee method is based only on the room nights blocked and the percentage of allowable attrition.

"Hotels prefer the minimum room revenue guarantee method because it shifts 100 percent of the risk to meeting sponsors if one or more attendees get a rate lower than the negotiated group rate when they make a reservation. This method makes the meeting sponsor a guarantor, and the hotel's insurance policy, to make up the difference. This is an unfair shifting of risk to meeting sponsors when a savvy attendee gets a lesser rate from an Internet site or from the hotel's own Web site because hotels control what rate an attendee is quoted and not the meeting sponsors. For this reason, planners should reject the minimum room revenue guarantee method and insist on calculating performance guarantees based on the minimum room night guarantee method.

"The minimum room night guarantee method is fair and reasonable to both parties. It is also a 'cleaner' way of calculating performance damages based on unused guest rooms by the group and resold guest rooms with the net result multiplied by the group's average rate. The resulting dollar amount should then be multiplied by a percent to represent the hotel's estimated lost profit. The industry average for profit in guest rooms is between 70 percent and 80 percent. The specific percentage amount should be agreed upon in advance and stated in the contract. [Note: In breach of contract or underperformance situations, the injured party is entitled to its lost profit on the deal, not 100 percent of the lost revenue.] The parties should also decide and state in the contract what revenue items the lost profit will be based on. The choices include guest rooms, catering, and sometimes ancillary revenue items such as room service, gift shop, restaurant purchases, etc. [The industry average profit for catering food and beverage is 20 percent to 40 percent, which should be stated in the contract.] Making meeting sponsors responsible for unrealized ancillary revenue items at the hotel is controversial in the industry and should be negotiated out of the formula by planners, if possible."
John Foster, Esq., CHME
Attorney and Counselor at Law
Foster, Jensen & Gulley LLC

An Additional Influence
The economic health of an association can be determined by its success in attracting and retaining sponsors. Here are the five biggest challenges associations face, according to an authority on sponsorships.

1. Internal Buy-In - For any association to become more strategic and grow revenue from sponsorship, the support has to begin at the top of the organization. If sponsorship is not considered a strategic priority and as important as any other area of business, it will not succeed. That message also needs to be communicated, from the top, throughout the association.

2. Staffing - Associations typically lack enough dedicated resources to maximize their sponsorship potential. Revenue growth cannot be achieved when sponsorship is the part-time responsibility of one or several positions. It takes 100 percent dedicated resources with the correct skill set to achieve sponsorship revenue growth.

3. Asset Maximization - In most associations, sponsorship means selling off bits and pieces of the organization a la carte. Until the collective assets of any association are packaged strategically, and pitched to corporations en mass, money will be left on the table.

4. Commercialization - Many associations struggle with membership concerns surrounding sponsorship and its perceived commercialization. Associations need to take time to properly educate their members on the true value and nature of every sponsorship. Without this education, membership concerns will only grow.

5. UBIT - Unrelated Business Income Tax, is a growing concern for many associations. As with most tax issues, there is a large gray area. Association marketing professionals tend to read the law differently than in-house council. The bottom line: Every association has plenty of room to grow sponsorship revenue within the UBIT tax guidelines.
Dan Kowitz
Vice President
IEG Advisory Services
www.sponsorship.com