Leading Meeting Professionals

Professional Convention Management Association

December 18 2012

12th Annual Meetings Market Survey

By Michelle Russell, Editor in Chief

On our radar for 2012

Travel

On the Horizon: ‘A Sea Change’

“I don’t think people realize what’s coming,” Michael Boyd, president of the airline forecaster Boyd Group International, told New York Times On the Road columnist Joe Sharkey earlier this year. (Read the full column at convn.org/nyt-airlines. “Airlines are going to do okay, but doing okay means they’re going to be dropping a lot of places they now fly. Air travel is going to get accessed by fewer and fewer people,” as airlines continue to reduce service to many markets to cut costs. “This is a mixed metaphor,” Boyd said, “but it’s going to be a sea change in air-travel patterns.”

As Sharkey went on to explain in his column, for more than a year, “most airlines have been reducing capacity in the domestic air travel system while concentrating on the major routes that provide the most revenue and feed their international routes.” Sharkey cited industry trade group Airlines for America stats: Domestic airlines earned $390 million last year, and $2.7 billion in 2010, after a decade in which they collectively lost $53 billion.

The trade group, Sharkey wrote, “has been calling on the federal government for help to reduce aviation taxes and regulations, assist the industry in facing more aggressive global competition, curb fuel prices and volatility, and spend more money on improving the national air traffic control system. ... And argued that without help, ‘domestic service levels will suffer,’ especially at smaller cities and rural communities.”

Global Travel Prices for 2013

Findings from Carlson Wagonlit Travel (CWT) 2013 Travel Price Forecast report include:

  • Prices in most areas of travel spend are expected to grow modestly around the globe next year, with the most significant inflation expected throughout the Asia Pacific and Latin America regions. “Price increases in 2013,” said Senior Vice President of Global Product Marketing and CWT Solutions Group Nick Vournakis, “will begin to level off in most regions throughout the world compared to what travel buyers experienced in 2012, as booming economies like Asia Pacific’s begin to normalize, and as uncertainty remains in Europe. While slightly higher prices will be the reality again next year as demand for travel outpaces supply in most places, our forecast demonstrates there is still plenty travel buyers can do to watch costs and take care of travelers through other measures, including reexamining how they influence traveler behavior.”
  • Airfares will likely climb 2.5 percent during 2013, as carriers have been diligent in implementing tight capacity controls that continue to yield high load factors despite economic concerns.
  • High-speed rail rates will likely increase 4.3 percent during 2013 as this mode of transportation continues to offer a competitive alternative to air travel in key markets. Notably, increases of up to 9 percent are expected in premium-class cabins, where corporate travelers typically ride to access free wireless Internet and other amenities.
  • The Asia Pacific region has experienced strong economic growth over the past several years, which quickly drove prices upward. Growth in 2013 is expected to stabilize, which likely will lead to modest price increases, although specific results vary widely by country.
  • The Latin America region continues to experience overall economic growth, though significant disparities continue to exist that will create varied travel pricing by country next year. The newly formed LATAM Airlines, which is now the world’s second-largest airline by market value, will embark on its first full year of operation in 2013, which may result in improved routes and frequencies to, from, and within the region.
  • While the economies of the United States and Canada are experiencing slow and steady improvement, there is no major growth expected for the foreseeable future, which will help contain travel price increases in 2013 for most categories of spend.
SOURCE: Carlson Wagonlit Travel, carlsonwagonlit.com

Global Travel Prices to Rise in 2013
Airfares: 25%
High-speed rail rates: 43%
Premium Class: 9%

Airline Performance


  • On-time arrivals - From 2007 to the first half of 2012, the on-time arrivals rate improved by 14 percent, from 73.4 to 83.7 percent of domestic flights within 15 seconds of scheduled arrival time.
  • Mishandled bags - The incidence of mishandled bags has dropped by 58 percent, from seven to three instances per 1,000 domestic passengers.
  • Flight cancellations - The number of flight cancellations has decreased by 50 percent, from 2 percent to 1 percent of scheduled domestic departures.
  • Revenues - Per enplaned passenger, 2011 revenues exceeded costs by just 77 cents. Excluding $8.06 in ancillary fees, revenues would have lagged costs by $7.29.
  • Air-service cuts - Due to rising costs and constraints on revenue production, domestically, the United States has a smaller industry than five years ago. Scheduled domestic U.S. air service in the fourth quarter of 2012 vs. the fourth quarter of 2007: 15.6 percent fewer flights, 12.4 percent fewer seats. 
SOURCE: Airlines for America, airlines.org

Airline Performance

On-Time Arrivals: +14% Improvement
On-time arrival rate: 83.7% 
Mishandled Bags: 58% Drop
Flight Cancellations: 50% Drop
Air-Service Cuts: -15.6% Flights; -12.4% Seats

More Resources
For an online graphic chart comparing 12 major domestic airlines’ baggage fees, go to convn. org/bag-fees. An interactive graphic illustrating the future of baggage handling from Condé Nast Traveler can be found at convn.org/bag-carousel.

Travel: Ancillary Fees

According to a study released this summer by airline consultant IdeaWorks and sponsored by travel technology company Amadeus:

  • United Airlines made nearly $5.2 billion from ancillary fees last year, topping the study’s global list. United’s ancillary fees - which cover penalties for items such as baggage, food, and boarding times - brought in more than double the $2.5 billion that Delta, next on the list, collected.
  • In total, $22.6 billion was collected by the 50 airlines analyzed in the study - an increase of more than $1 billion from 2010 and a 66-percent jump in two years.
Fees

50 airlines analyzed

$22.6 billion collected in 2011

+66% jump in two years

SOURCE: IdeaWorks, ideaworkscompany.com

Travel as Economic Driver

1 in 7

The ratio of projected growth of travel jobs (3.3 million) to total U.S. job growth by 2020 is 1 in 7.

7.5 million

Travelers supported 7.5 million American jobs - 7 percent of the country’s total private-sector employment (in transportation, hotels, restaurants, retail, entertainment, and many other sectors).

$813 billion

Direct traveler spending in the U.S. in 2011.

#6 Travel ranks sixth in total U.S. employment; only five of the 20 major industries employ more people than travel.

SOURCE: U.S. Travel Association, poweroftravel.org

Up Next

  • Runway status lights The FAA is testing a new, automatic runway lighting system at Los Angeles International Airport and a handful of other airports, designed to help reduce and prevent runway incursions and accidents. According to a New York Times article, since 2008, there have been about three incidents a day in which a plane or vehicle gets on an active runway by mistake - an average of 1,000 a year. convn.org/runway-status(LIN)
  • Continued scrutiny Two U.S. passenger advocacy groups - the Business Travel Coalition (BTC) and the Consumer Travel Alliance (CTA) - continue to push for the DOT’s (Department of Transportation) vigilance regarding potentially deceptive online pricing. BTC Chairman Kevin Mitchell said: “… there must be a system that empowers consumers to compare and purchase all airfare offerings and ancillary fees across multiple airlines. We must guard against unfair policies and practices that short-circuit the free market and deceive both business and leisure travelers by showing the traveler only those offerings an airline wants the passenger to see.” convn.org/BTC-pricing(LIN)
  • Airports as public event spaces? A terminal at Dusseldorf airport turns into a public event space one day each month as part of an “Airxperience Sunday” series, free for passengers and visitors. Last month’s fashion focus included fashion shows, makeover desks, and presentations and consultations by major fashion labels across the check-in areas. fly2dus.com(LIN)
LODGING

North America: Rate Increases

Remainder of 2012

+5.4% Committed occupancy

+5% ADR

Upcoming three quarters


+3.9% Committed occupancy

+4.3% ADR

Demand and Average Daily Rate Increases

  • Committed occupancy for the remainder of 2012 is up 5.4 percent, and average daily rate (ADR) is up 5 percent. Growth is driven by individual business and leisure travelers, with an occupancy increase of 5.6 percent and an ADR increase of 5.5 percent in comparison to the same time last year.
  • For the upcoming three quarters (to July 2013), committed occupancy is up 3.9 percent and ADR is up 4.3 percent, based on reservations on the books in comparison to the previous year. Occupancy growth is driven by the group segment with an increase of 4.6 percent, while the transient segment shows an increase of 3 percent. However, the transient segment leads the increase in ADR - up 5.3 percent compared to 2 percent for the group segment.
SOURCE: August 2012 TravelClick North American Hospitality Review, travelclick.com

U.S. Hotel Fees and Surcharges

  • U.S. hotels will collect an estimated $1.95 billion in revenue this year from fees and surcharges, compared to $1.85 billion last year.
  • Common charges include resort or amenity fees, early departure fees, early reservation-cancellation fees, Internet fees, phone-call surcharges, business-center fees (charges for receiving faxes and sending/receiving overnight packages), room-service delivery surcharges, minibar-restocking fees, charges for in-room safes, and automatic gratuities and surcharges.
SOURCE: Bjorn Hanson, divisional dean at the Preston Robert Tisch Center for Hospitality, Tourism and Sports Management at New York University, convn.org/hanson-surcharges

Capital Expenditures on the Upswing

The U.S. forecast for 2013 is for capital expenditures of approximately $5 billion, a 33-percent increase over 2011’s $3.75 billion - but still 10 percent below the $5.5 billion in capital expenditures for U.S. hotels in 2008. The forecast reflects several factors, including that occupancy will recover to its highest level since 2007, and that average daily rate will increase the most since 2007. Capital expenditures do not include spending for hotel expansions or major changes, but include improved guest amenities and services, such as:

  • in-room iPads
  • guest-room design, including workspaces, radio-alarm clocks, and sound systems (many are MP3 compatible), seating, bathrooms, and lighting
  • beds and bedding
  • high-speed Internet access
  • flat-screen TVs
  • in-room amenities including irons/ ironing boards, and coffee makers
  • guest services and conveniences, including enhanced complimentary breakfasts, check-in/check-out kiosks, and expanded business centers
  • redesigned lobbies
  • reconceptualized restaurants, to appeal to Gen-Xers and Millennials
  • added or enhanced fitness facilities
  • added or enhanced technology for meeting rooms and ballrooms.
SOURCE: scps.nyu.edu

Guest Satisfaction

Guests have grown less satisfied with their hotel stays, according to J.D. Power and Associates 2012 North America Hotel Guest Satisfaction Index Study. Among the results:

  • Guest satisfaction declined to 757 on a 1,000-point scale, down 7 index points from 2011.
  • Relatively high levels of satisfaction with cost and fees mask declines in other areas of the guest experience: Satisfaction with check-in/check-out; F&B; hotel services; and hotel facilities are at new lows since the 2006 study, and satisfaction with the guest room has declined within one point of its lowest level in the past seven years.
  • Overall, 56 percent of hotel guests have a high opinion of staff;(B) 34 percent have an average opinion; and 10 percent have a low opinion.
  • Fifty-five percent of guests use the Internet during their stay; 87 percent of those use Wi-Fi to connect. Among those who use the Internet, 11 percent were charged an additional fee to connect. Those that were charged a fee have an average costs and fees satisfaction of 76 index points lower than those guests not charged a fee.
  • Guests who book through an online travel agency tend to be more price sensitive, have lower levels of satisfaction with their stay, are less loyal to hotel brands, and tend to report more problems, compared with guests who book through the hotel website or call the hotel or hotel brand directly.

SOURCE: convn.org/jdpowers-satisfaction

On the Horizon: ‘Unlocking Creativity in Order to Unleash Productivity’

“There’s a real focus on collaboration and collaborative environments, not just within, but outside of traditional meeting space. It really speaks to the reality that meetings are now going well outside of the traditional meeting room and meeting space - and in many ways, kind of permeating the entire hotel, not just prefunction and the spaces off of the traditional ballroom space, but public spaces, lobbies, great rooms, and even what I call connective areas within the hotel - elevator lobbies and corridors.

“There’s a whole recognition of the value of these more informal kind of spontaneous connections between meeting participants who are trying to solve complex challenges. In terms of a philosophy, this notion of collaboration and bringing people together by cultivating connections is really something that is gaining traction with innovators within the meeting segment. From a facilities perspective, we are certainly recognizing that and building in a foundation and stage to allow those sort of informal collaborations within new builds as well as upcoming renovations - and we are seeing that among our competitors as well.

“There is an increasing focus on the approach to conducting meetings in terms of looking at how you can drive creativity, drive or improve innovation, and how you actually design your meetings to allow for a greater exchange of information, and to better leverage tools around collaboration that unlock creativity. I think that is key: Unlocking creativity in order to unleash productivity.”

Matthew Von Ertfelda
, Vice President of Insight, Strategy + Innovation, Marriott International

Coming Up: New Distribution Channels for Booking Hotels

  • With Google Hotel Finder, Google is entering the distribution landscape.
  • Apple has a patent for its yet-to-be- launched iHotel app.
  • YouTube is considering adding travel to its “Merch” site.
  • Facebook is still trying to enter the hotel distribution marketplace, despite early negative returns on its booking widget.
SOURCE: HotelNewsNow.com, convn.org/booking-online

2011 Total Revenues

  • Eighty-one percent of hotels experienced an increase in total revenue.
  • Nearly 13 percent experienced an increase in net operating income.
  • The cost to operate a hotel rose 4.3 percent - slightly above the 3.2 percent rate of inflation.
  • A strong growth in profits is projected for 2013.
SOURCE: PKF Hospitality Research, pkfc.com

EXHIBITIONS

International Meetings Facts and Figures

  • Average registration fee per delegate per meeting in 2011: $561 (down from $584 in 2010).
  • Most popular subject for international meetings: medical science, followed by technology.
  • North America has been the region with the largest average numbers of participants per meeting over the last decade, with an average 732 participants per meeting in 2011, followed by Latin America.
  • The average number of participants per meeting reached its lowest point of the past decade in 2011, with 535 participants per international meeting, a drop of 36 participants per meeting compared to 2010.
  • Estimated total number of participants of all 2011 meetings: 5.5 million-plus (compared to 5.4 million in 2010).
  • Most popular month for association meetings: September, followed by June, October, and May.
  • The smallest meeting size has become the biggest category since 2009: 30 percent of all the identified meetings that were organized in 2011 attracted between 50 and 149 participants - a growth of 11 percent over the past decade.
  • The U.S. saw the biggest jump in the number of events held in 2011 over 2010, up by 136 meetings to a new record of 759.
SOURCE: International Congress and Convention Association (ICCA) Statistics Report 2002-2011, International Meetings Market, iccaworld.com

Top 10 U.S. Cities for Meetings and Events

  • Orlando
  • Washington, D.C.
  • Las Vegas
  • Miami
  • Chicago
  • San Diego
  • Phoenix
  • Atlanta Dallas
  • New Orleans
SOURCE: Cvent Supplier Network (booking activity) cvent.com
More Resources

For the 2012 STR Global Chain Scales list (classifications from luxury to economy brands, based on previous year’s average daily rate), go to str.com/documents/STRGlobal_Chain_ Scales.pdf.

PKF Hospitality Research Director of Research Information Services Robert Mandelbaum offers highlights of the PFK Hospitality Research’s 2012 Trends in the Hotel Industry survey in this four-minute video:pkfc.com/en/videos/trends/2012trends.aspx.

To obtain the 2013 per-diem rates (maximum allowances that federal employees are reimbursed for expenses incurred while on official travel) on a city-by-city basis, go togsa.gov/portal/category/100120.

For GBTA’s list of travel taxes (hotel, car rental, and meal taxes) in the top 50 U.S. destinations, go to convn.org/GBTA-taxes.

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