^{September 2001}

The seller’s market for hotels has turned at last, but that may not mean show managers can call the shots when scheduling their events.


By Michael J. Flynn & Linda Kephart Flynn

 

Almost as many exhibitions take place in hotels as are held in exhibition/convention centers, according to the Center for Exhibition Industry Research’s first Exhibition Industry Census. Of the 13,185 exhibitions held in the United States and Canada in 2000, 37 percent took place in hotels, compared with 38 percent in exhibition/convention centers, 8 percent in conference or seminar facilities and 17 percent in “other” venues.

And hotels know expositions are a hot market. “We’re very focused on the meetings and convention business,” says Fred Shea, Senior Vice President of Sales Operations for Hyatt Hotels & Resorts. “When you see the CEIR figures that show all the trade shows happening in hotels, we want to serve that market.”

These days, many shows that might seem more suited to a convention center are choosing hotels as a venue. Tim Brunswick, Minor League Baseball’s Director of Baseball Operations, prefers to hold the annual winter meeting and accompanying Baseball Trade Show in a hotel. And at 125,000 square feet, the show is large enough to attract the attention of convention centers. “There are some cities with nice convention centers and nearby hotels,” he admits. “But it’s almost a no-brainer for us to choose one hotel for the whole thing instead.”

Hotels have long made sense for show organizers who’re looking for one-stop supervision, spaces that can be matched to the show and a way to build round-the-clock synergy among exhibitors and attendees. “Hotels are what our membership is used to and what they like,” says Brunswick, whose show has used facilities ranging from the Anaheim Convention Center to Opryland Hotel Nashville. “It makes our job easier when we don’t have to deal with multiple suppliers, and we always have a better event when it’s all at one site.”

Several recent industry trends bolster Brunswick’s choice of a hotel as his preferred venue. What factors are affecting hotels and shows?



Current economy

“Soft” is one of the most-repeated words in hotel management these days. “For meetings, cancellations are happening at a higher rate than last year,” says Steven Armitage, Senior Vice President of Sales for Hilton Hotels Corp. “The majority of cancellations so far have been corporate meetings. With major expositions, which are booked farther out, there’s been a slowdown in attendees and a shortening in the length of stay. I’d say there’s been a 15-percent reduction in guest rooms required.”

Cities that once hosted technology-related gatherings, especially, have felt the impact of the slower economy. Others see less of a drop off. “Nashville actually picks up business when the rest of the country is down,” claims Tod Roadarmel, Senior Vice President of Sales at Opryland Hotel Nashville. “I call it a ‘pocket of prosperity.’ While big resorts may be getting less business, the perception is that meetings held in Nashville really must be business meetings.”

In the short term, say industry experts, show managers could benefit by snagging desired dates, flexible pricing and other negotiables. The key, though, is being able to act quickly during the business lull. “Over the past six months, it’s been a buyer’s market due to cancellations and slower bookings,” says Jeff Higley, Editor-in-Chief of Hotel & Motel Management, a newsmagazine that tracks the hospitality industry. “Hotels are working very hard to make sure their customers are happy. Some groups that have been able to fill space quickly have done so to their advantage.”



Occupancy, rates and profits

Last year, large convention-oriented hotels saw occupancy increase 2.2 percent over 1999 to 72.6 percent and enjoyed a 5.8 percent increase in their average daily room rates — the greatest growth among all hotel types — to $163.30, according to PKF Consulting’s Hospitality Research Group (HRG). This year paints a dramatically different picture. “So far, it’s more like the complete opposite of 2000,” says Robert Mandelbaum, HRG’s Director of Research Information Services. “The large convention hotels have suffered the most.”

After years of strong growth in occupancy, average room rates and profitability, large, full-service, upscale hotels in major cities have suffered the greatest performance declines this year. According to HRG, convention hotels’ occupancy fell 7.4 percent between January and May 2001, compared with a 1.5 percent increase last year.

One thing that has helped many hotels during these tough times, HRG notes, is enforcing strict cancellation and attrition clauses included in convention contracts in the 1990s. Benefiting from those now, hotel sales staffs will be unlikely to soften such clauses for show managers in the future.

Supply also has helped hotels that host shows. “There weren’t a lot of big hotels built in the past few years, like we saw in the industry’s limited-service segment,” says Mandelbaum. “There were tons of Hampton Inns built compared with, say, Hyatts with 100,000 square feet of exhibit space. That’s picked up a bit in 2000-2001, so we’ll see some change, but it won’t be dramatic.”



Upgrades and new construction

Only three years ago, an eye-popping 1,520 new hotels — boasting 149,597 rooms — were in the works, according to new-development tracking firm Lodging Econometrics. PricewaterhouseCoopers’ U.S. Lodging Industry Forecast predicts that the supply rate overall will increase only 3.2 percent this year.

Still, convention hotels and other lodgings with considerable exhibition space have come on line, expanded their offerings or plan to open soon. And many existing properties have worked to accommodate the need for more space from association and show management clients. Hyatt, for example, expanded its Hyatt Regency Dallas at Reunion, adding 44,000 square feet of exhibit space to its 72,000 square feet of meeting area. The group also recently announced similar improvements in San Diego and broke ground for an Orlando hotel that will contain 1,500 guest rooms and 50,000 square feet of exhibit space.

Hyatt has plenty of competition, much of it from hoteliers thinking in very large terms. Megahotels and resorts with multiple properties needing a steady stream of guests are looking to shows to drive the business. “I’m surprised that other hotels don’t have more of this kind of space for shows,” says Roadarmel at Opryland Hotel Nashville. “We have almost 300,000 square feet of dedicated exhibit space, and it’s working splendidly for us.”

So splendidly that parent company Gaylord Entertainment plans to open the 1,400-room Opryland Hotel Florida, with 170,000-plus square feet of exhibit space, in Kissimmee next year and the similarly sized Opryland Hotel Texas in Grapevine in 2003. In Las Vegas, Mandalay Bay Resort & Casino is developing an on-site convention center. Mandalay’s 1.8 million-square-foot facility, projected to open mid-2002, will serve the Mandalay Bay, Luxor and Excalibur properties’ 12,000 combined rooms.



Cost considerations

Cost is an important point when it comes to choosing a venue for a show. Unfortunately, the answer to the question about rates nearly always starts with, “It depends....”

Hotel exhibit hall pricing, for example, will always be tied to the number of “heads in beds,” food and beverage needs and other revenue from the group. And that’s just for starters. “Our rack rate, if you’re not using all the available rooms and as a base from which to start, is $1.25 per net square foot,” says Nan Stone, Director of Sales and Marketing at the Hyatt Regency Dallas at Reunion. “But if you have major food and beverage needs and use lots of rooms, that rate becomes very negotiable.”

Hotel owners and management companies increasingly need to produce a return on their investment in dedicated meeting and exhibit facilities. “Exhibit space costs, like everything else over time, have gone up,” says Hyatt’s Shea. “It’s no longer a matter of converting unused parking into meeting rooms as an afterthought. Hotels have to get a return on that dedicated space, since it’s unavailable for other uses.”

Many show managers recall the days when hotels gave away or at least deeply discounted space. Today, however, increasingly savvy private owners and publicly traded lodging companies that must answer to their investors demand more from their operations and the bottom line. Even so, most show producers continue to see great value in hotel-based events, particularly when viewing the total price tag for exhibitors and attendees.

“The cost for us is at least 50 percent to 60 percent less for our trade show alone,” says Minor League Baseball’s Brunswick. “Even our show and meetings together cost about 25 percent less in a hotel. We get breaks at convention centers, too, but they don’t compare with what a hotel will do for us.”



Technology

Whether their exhibit spaces are measured in millions or thousands of square feet, hotels continue to add technology to serve their increasingly sophisticated customers. “We’re seeing a lot more in the way of catwalks and tunneling built into spaces so they can be easily adapted to the latest technology,” says Rob Canton, Director of Sports, Convention and Leisure Services for PricewaterhouseCoopers.

In fact, nearly 80 percent of hotels now do or soon will offer Internet capabilities, compared with fewer than 5 percent just five years ago, according to Stephen Moran, Senior Vice President of Sales & Marketing for Dulles, VA-based Core Communications Corp., which provides data communication services to lodgings with anywhere from 10,000 to 700,000 square feet of meeting and convention space.

In the hotel business alone, research firm Cahner’s In-State Group predicts the market for broadband hardware and services will grow from last year’s $59 million to $679 million by 2005. “In the past year or two, hotel demand has increased dramatically because customer demand is so great,” says Moran. “T1 lines are the minimum standard now for everything we do.”

Hyatt hotels has already committed to wiring all its meeting facilities for high-speed Internet access by the end of this year. Likewise, Omni Hotels is adding the technology to many of its U.S. and international hotels, and Marriott plans to wire 500 properties by year’s end.

Wireless access may be another goal, but technical challenges have slowed that development. “You have to ask whether enough of the market really needs that now,” says Shea at Hyatt. “We’ll watch it and do what it takes to keep our meeting and convention customers happy.”

That’s the name of the game, according to Minor League Baseball’s Brunswick. “I can’t think of a better way to serve our membership than to locate everything under one roof,” he says. “Hotels really are the way to go.”

Michael and Linda Kephart Flynn cover the hospitality industry for EXPO, other trade publications and consumer travel magazines throughout the country.

• How easily can exhibitors and attendees access the location?
• What’s your group’s size, what percentage will use guest rooms 
  and for how many nights?
• What size exhibit, meeting and function spaces will you need?
• How do rates for show spaces and guest rooms match exhibitors 
  and attendees’ budgets?
• How much latitude do you have in choosing show dates?
• What kind of flexibility is built into the meeting and exhibition space?
• How well does the hotel meet your on-site technology needs, and 
  what reliable-vendor arrangements are in place to fulfill them?
• How flexible are exhibitors’ space needs with regard to ceiling 
  heights, column-free spaces and lighting?
• If exhibitors need unusually large areas, say for automobiles or 
  heavy equipment, how much of the property is available for pavilions or 
  other tented space?
• What are exhibitors’ drayage requirements?
• What’s your show’s history with the hotel?
• How well is your event’s history documented for use in 
  negotiating with the hotel?
• Who do you know on the hotel sales staff, and how 
  well-established is that relationship?
• Do you need an on-site convention services manager? 
• How much experience does that person have?
• What are your attendees’ needs apart from show space and 
  guest rooms?
• What recreational amenities does the hotel offer?
• What’s the availability of non-function restaurants and bars throughout 
  the property?
• What’s the room-night tax in the areas you’re considering?
• How much interaction do you expect between exhibitors and attendees 
  during the event, and how well does the hotel’s layout accommodate after-hours networking?
• What sort of ambiance or buzz are you seeking to create with your event?