This Week's Herman Trend Alert

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  The Herman Trend Alert

February 11, 2009

Ripple Effects of Reducing Meetings

Though we expect scaled back meetings and reduced incentives during economic slowdowns, this crisis has resulted in "a wave of cancellations". According to MeetingsNet.com, 56 percent of corporate meeting planners and 65 percent of financial or insurance planners report canceling one or more meetings or incentives due to economic conditions.

Many planners expect to adjust their meetings, including shorter trips and smaller groups. Among corporate planners, 52 percent plan to shorten their meeting length, while 48 percent plan to reduce the number of attendees and 65 percent plan to choose more affordable destinations.

All of these cancellations and cutbacks have produced ripple effects. Organizations responsible for planning meetings have been so hard hit that some have laid off workers. According to Smith Travel Research, convention hotels, 12 percent of the United States room supply, have trended lower than other hotels in both average daily rate and revenue per available room. The opportunity here is for smaller-market convention hotels to provide less expensive alternatives for price-sensitive planners.

In fact, all segments of the meeting marketplace are attracted to destinations that offer enough direct flights at affordable prices, so that attendees donít have to spend an additional night due to schedules. Expect to see an acceleration of this trend in the next year. We are also seeing more planners switching to a combination of in-person and online meetings. Unfortunately, virtual meetings eliminate the networking opportunities which are one of the key reasons most attendees invest in meetings.

Some high profile cancellations are Wells Fargo's Las Vegas event, ING Life Distribution's 2009 incentive sale agent trips, General Motors' meetings at the National Association of Automobile Dealers Convention, and Cisco's annual sales meeting. These cancellations and others have resulted in reduced hours and reductions in staff for convention hotels.

According to PKF Hospitality Research, hotel occupancy rates in 2009 are forecasted to be down by 4.4 percent over 2008, to an average of just 58.3 percent. We expect to see hospitality and travel to take a major hit in the near-term future. Given that these reductions are greater than we experienced post 9-11, it will be years before we see previous travel and meeting levels.


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