Economy Tempts Boards To Ease Restrained Mtg. Spend

As the stock market rises and some indicators point to a growing economy, the meetings industry is paying close attention to corporate executive and board meeting buyers to see if they will continue the philosophy of austerity that has guided site selection for more than two years. Though calling any move to more opulent executive and board meetings a trend would be an overstatement, there are those who feel executives will be unable to resist opening their corporate wallets for their future events.

However, most buyers still are hesitant to jump on better economic news as an excuse to cloak their executive meetings in luxury. Many executives believe it still is imperative that they honor the cost-cutting corporate philosophies they heavily promoted since 2001. Yet, few believe executive board meetings will avoid resorts and luxury hotels forever, and some believe that avoidance already is ending.

"We're finally seeing some light where companies are making and spending a little bit of money," said Brian Stevens, president and CEO of Los Angeles-based meetings management firm ConferenceDirect. "After Sept. 11, they all made examples out of visible reductions. Instead of the Ritz, they went to the Marriott or teleconferenced. Now, what we're seeing is that corporate executives haven't held a resort meeting since Sept. 11, so now they're going to try one out."

It's not a widespread trend, Stevens said, but those companies that have seen higher stock prices of late have begun to become less resistant to executive meeting spending. "Here's one example: We have a corporate account that just held a meeting, where the average room rate was $900, as a reward for not having done much the past two years," he said. "Another account last year took their board meeting to an airport hotel. This year, they're going to the Greenbrier."

Despite all the cost-cutting initiatives during the past two years, Stevens said, there are companies that feel returning to normal business patterns inherently entails a level of luxury for their executive and board meetings.

"A lot of leadership groups are saying that since they sucked it in last year and didn't hold these meetings last year, they'll get back to some degree of normalcy," Stevens said. "They've turned the corner. People felt they have held their breath too long."

Still, Stevens said, that trend varies not only by particular industries—the pharmaceutical industry is the most likely to hold lavish board meetings, he said—but by company. "If there still are layoffs, chances are that executives will take some heat if they start knocking around in Hawaii," he said.

Other buyers, though, feel that philosophy is still dominant.

"For the past two years, CEOs have been under the magnifying glass," said Bill Boyd, president of Dallas-based Sunbelt Motivation & Travel. "It's too early to start spending lavishly on meetings for themselves. They're still keeping too close to the vest, in domestic locales, with no fancy stuff."

Even as the economy shows signs of improvement and many companies have seen healthy increases in their stock prices during the past few months, Boyd argued that executive and board meetings will remain meticulously budgeted for at least another year or two. "They have to wait for a few years of positive earnings before they have nice meetings," he said. "The market is up this year, but it's still down from two years ago. It's not the worst of times for shareholders, but it's not the best of times either. They want to get to where they were before the downturn started. It's far from a slam-dunk recovery."

Boyd said his firm has not seen any decrease in the number of executive and board meetings during the past few years, but the revenues from those meetings have slipped as corporations avoid high-cost properties. "We have the same number of customers, if not more, but less revenue," he said. "They're not going to the Four Seasons in Puerto Vallarta, they're going to the DFW Airport Hyatt instead. Because of that, the high-end hotel market is not rebounding as quickly as it is in secondary and tertiary markets."

Because meeting site downgrades primarily are driven by perception issues, Boyd said, any attempt by luxury hotels to compete with less-extravagant properties, be it on price or otherwise, has little chance of success. "They deal in more than just room nights, they deal in the experience," he said of luxury properties. "That's what they market, and they do a good job. Yet, the board meeting segment is all about perception now, and companies have to be very careful."

Those executive board meeting property downgrades have created business for some hotels and chains that offer high levels of service without a name or reputation that screams extravagance.

"In some cases, as a reflection of the economic state or for perception reasons, some companies have been more thoughtful in how they spend," said George Aguel, senior vice president and general manager of resort and park sales and services for Lake Buena Vista, Fla.-based Walt Disney Co. "Boards are thinking about scrutiny and visibility and transparency. They may not run off to a Four Seasons in Maui or terribly exotic locations, maybe instead going to a Florida resort. We've benefited from that."

Aguel acknowledged that an improving economy, however, could persuade some executives and board members to do the opposite and choose an international, luxury destination as a meeting site. He added, though, that changes in corporate executive and board meeting spending patterns enacted in the past few years will not reverse themselves simply because the economy may.

"We're aware of that opportunity," Aguel said, "but there are shifts that have permanently occurred. A lot of the new philosophies regarding business and meeting travel are now institutionalized. We'll have a creeping return over a period of time. Overall, they probably mirror the broader market, but where companies have made other meetings smaller or more regional, executive meetings always went on. Board meetings are not as short term since, for governance reasons, they are more planned and less reactive."

"That business has been pretty much the same of late, because those meetings have to be held," said Tom Chevins, senior vice president of sales and marketing for Omni Hotels. "If anything, we may be seeing a little bit more because of the nature of our brand. There are many companies that are looking for a lower-profile meeting site without evading the luxury component. Because of where we are in the food chain, we likely see more."

Drawing a contrast to the corporate meetings market as a whole, Omni Hotels' Chevins said that lead times continue to shrink in segments other than executive board meetings.

"It's incredible, we're getting inquiries about holding multimillion-dollar meetings eight weeks out," Chevins said, "but executive and board meetings are longer term, because corporations know in advance when they're happening."