Wednesday, September 15, 2010

The Current Economy and Three Signs that the Hospitality Industry is on the Road to Recovery

Like many professions and industries, the hospitality industry has been hurting. We wonder when the economy will turn around, when business will pick up, and how to survive in the meantime. And, these questions represent common themes of discussions in the groups and associations to which I belong. Given my many years in the meeting planning industry, I am frequently asked for my opinion and perspective as a planner on the state of the economy as it relates to our industry. Now, I am no economist and have nothing but anecdotal evidence and my own experiences to support my views but, for what it’s worth, here is my two cents on the matter…

The current economic “downturn” is the third one I have been through in my sixteen years as a meeting planner and it is certainly the longest and most severe. The causes are many and often disputed. To make matters worse, most reports in the news suggest that we may not come out of this for quite some time as the complex interplay of economic forces adjust to the “new realities”. Does this mean that the meetings industry is doomed? Are we condemned to languish for years in economic doldrums? I think not.

Each time there has been a downturn in the meetings industry, it has been preceded by a drop in leisure travel. The typical pattern has been for transient business to drop and, six to eighteen months later, corporate business falls off, which is then followed by the association market. Government meetings have usually gone on more or less unimpeded. They may have slight drops but nothing on the same scale as the other markets. This time, government has also dropped significantly (about the same time as corporate and association). However, it is not all darkness on the horizon. I have noted three signs that indicate that recovery may be on its way for meetings and conferences.

1st sign: that drop in leisure/transient business that seems to appear each time before a downturn? Well, I’ve noticed that it also appeared to rebound ahead of each of the previous recoveries. In talking with the hoteliers I know, they have all seen recent (last six months to nine months) increases in the level of transient business at their properties. And, these increases have been significant both in terms of numbers and duration. Transient business, once it started to pick up again, has remained solid for many of the hotels that I have talked to. In my mind, this is the most important factor in gauging how the industry will fare in days to come.

2nd sign: Inquiries for our services are up. Like hotels and other service providers, we do not win every job we submit a bid for but an increase here is another good sign. I see this an indicator that groups are once more looking to host events. In some cases, it has taken them longer to secure funding for their events; in other cases, they had fired their planners (to cut costs) but now need assistance to produce those mandatory events that were once handled in-house. In either case, it means that the desire to hold an event is there and as the saying goes: where there’s a will, there’s a way.

3rd sign: Last minute hotel bookings are up. This also tells me that people still want to do meetings and events but perhaps they have been waiting to make sure their funding is secure or it is taking longer for meetings to get approved. A year ago at this time, there was nothing happening - many hotels were practically empty - so to see the increase in last minute bookings is encouraging. The uptick in the transient market, combined with high levels of last minute bookings for events has helped carry them through thus far.

As encouraging as the signs may be, though, we are not out of the woods yet. I do agree with the economists that the industry is still in for some rocky times but I also believe that our recovery is already beginning. Where everything last year was very gloomy and all signs were negative, I now have some positive signs to point to that reinforce my belief that things are improving.

~ Karl Baur, CMP • Project Director, RDL enterprises