What great rates are really costing you Attrition issues complicate as visitors book more rooms outside the block
By Dawn J. Grubb
Recently, an exhibitor at a major healthcare show received a letter from the show’s housing provider stating that, if the company didn’t book hotel rooms within the block, they wouldn’t receive their freight at the show. That’s a pretty strong ultimatum, but it may be necessary to keep attrition rates low.
Room pickup is a problem for all shows. In 2003, the International Consumer Electronics Show (CES) reports a pick-up rate of less than 10 percent, with only 10,000 of the 116,000 attendees booking within the block. That’s why they’re re-evaluating their third-party housing relationship and considering direct partnerships with the hotels, says Laurie Lutz, Director of Operations. “The issue for us comes down to maintaining rate integrity in Las Vegas and providing a good method for attendees and exhibitors to book rooms,” she says.
On its post-show survey, International CES asked why. Attendees who didn’t go through the third-party housing provider said they got better rates directly from the hotels or through travel Web sites, Lutz says. These online booking options have become a serious issue for both hotels and show managers, perhaps moving attrition issues to the back seat.
International CES isn’t alone in its struggles to maintain rate integrity. Occupancy rates are only expected to reach 61.4 percent in 2004 compared with 63.6 percent in 2000, and room rates should be $86.11 compared with $85.54 in 2000, according to PricewaterhouseCoopers’ lodging industry forecast. That means hotels are trying harder for last-minute bookings.
Richard Green, Vice President of Industry Relations and Association Sales for Marriott, blames the prolonged recovery on corporate travel decline, which began in spring 2000. “Companies just aren’t spending. Everyone thought we’d see positive numbers in late 2003, but now it looks like it will be 2004 or 2005,” he says. “This is just a cycle. It may feel like we’re in a crisis now, but it’s signaling an end.”
And he’s right, the PricewaterhouseCoopers report shows numbers starting to inch up. Some affecting factors to note:
Demand — Occupancy is expected to hit 60 percent this year, up only 1.1 percent from 2002. And the average daily rate should creep up to $83.92 — a 0.9 percent increase from 2002. Bjorn Hanson, Global Leader for PricewaterhouseCoopers’ Hospitality and Leisure Practice, predicts that discounting and price competition will continue, which is good news for show managers.
Availability — Supply grew less than 1.8 percent, falling below the long-term trend of 2.1 percent. Hanson says slowing demand growth is slowing the construction of full-service hotels, which could bring it back to a seller’s market if demand turns around like it did in the ’80s and early ’90s.
Contract negotiations — Green says the contracts being written today still contain attrition and cancellation clauses to protect both the show manager and hotel against risk. However, the clauses themselves are being scrutinized more closely, as are the pick-up percentages hotels require.
Downsizing — About 40 percent of hotels reduced their sales and marketing budgets, so hotels will be working harder to get your business, which may mean more contract concessions.
Online outlets — More hotels are willing to slash rates and promote rooms online during weak periods. Thus, travelers are finding better rates through these strictly voluntary outlets. With the continued weakness in the industry, this trend is likely to continue for the next couple of years.
What’s ahead?
Green advises show managers to take heed of these factors that will shape the future: Marketing — Look for more show managers and hotels to be working together to boost demand. “Attendee marketing will become a joint effort among the show manager, venue and hotel to communicate the value of face-to-face meetings,” he says.
Brand loyalty — Show managers need to better meet attendees’ needs, warns Green. For example, say you only offer rooms at the Hilton. What about Marriott travelers who want to earn their points? “Brand loyalty is very important to some people,” he notes. Segmentation is also important. Once upon a time, Marriott was the only segmented market, offering consumers cheaper options at a Fairfield Inn. “Segmentation is now becoming more common, giving consumers more price options within a brand family,” Green says.
While the next few years will continue to be a buyer’s market for show managers, it comes at a price. With more attendees booking outside the block, show managers have a whole new issue to confront.
Dawn J. Grubb is owner and president of 24/7 Communications in Overland Park, KS.
Sidebar: How the industry is responding
Here are some of today’s issues that will affect the future:
• Dealing with online vendors. Besides offering easy-to-find, lower rates, many of these companies have contacted exhibitors and attendees directly. To react, consider offering exhibitors and attendees perks for booking within the block. Some show managers have even approached hotels about matching the rates these discounters offer.
• Crafting a solution. To address hot issues, the Convention Industry Council has established the APEX (Accepted Practices Exchange) initiative, with a housing and registration panel looking into room block management. In addition, CIC is developing the Project Attrition Task Force to find techniques for dealing with Internet housing issues. For more, visit www.conventionindustry.org.
• Working with CVBs. As we reported in EXPO last month, the San Diego CVB has created a formula to more accurately measure peak room nights, rather than relying on pick-up reports (see “CVBs Under Scrutiny,” February 2003). In addition, the San Antonio CVB is considering offering hotel audits, based on requests from show managers.
Stay informed with Expo's weekly e-newsletter: Get daily industry news via RSS What is RSS?
