Meeting Buyers See Budget Cutbacks Ease

Most planners expect meetings expenditures to increase or remain flat in the next six months compared with the last six months, as only 19 percent of 220 respondents to a survey conducted by BTN sister publication MeetingNews expect further declines to meetings spending in the first half of 2010.

The findings represent the first time in more than a year that the majority of group budgets are growing or holding steady, and support a growing sense that things are improving in the meetings business shared by hoteliers, industry associations, corporate travel buyers and meetings planners. Despite that optimism, it remains to be seen whether a rekindling of meetings spending would fuel a full-on recovery.

"We're not out of the woods yet," said Maritz Travel Co. president and CEO Christine Duffy. "I think people are still being pretty cautious and are really taking it quarter by quarter based on earnings and budgets being approved, which has not happened in one fell swoop."

A survey of corporate travel buyers gave a very similar outlook on meetings expenditures for 2010, as 35 percent of the 26 buyers surveyed for the Masters Program in Washington, D.C., this week said their companies’ meetings spending would be higher than 2009 levels, while 50 percent said such spending would remain flat. Both surveys show a positive direction for meetings spending, but some attendees said improvement does not mean recovery, considering the deep decline of meetings activity and spending in 2009.

ExxonMobil global travel manager Vivian Wu attributed some of those increases in the industry to "pent-up demand," claiming, "If you're down 20 or 30 or 40 percent in meetings, then guess what: You've only got up to go."

Maria Chevalier, manager of travel services for Johnson & Johnson, said her company like many others slashed and burned meetings expenditures in 2009, but customer-facing travel is going back up this year. "Last year, we did a mandate of a reduction of 30 percent of meetings, but this year we're flat," Chevalier said. "A lot of it is you can only go so long without some of these meetings. It's short-term. We're not going to go back to normal levels, to where we were the year before, because it will be flat this year, but what we're seeing is where we cut back on the internal meetings, we're going back up on the external meetings."

Despite the downturn, some organizations have been raising their investment in meetings all along, including 17 percent of the respondents claiming growth in meetings spend in the past six months. "Our meetings are going up," said Trish Rothman, travel manager at William Blair & Co. LLC. "We haven't stayed flat for quite a few years because it's important for our clients and our business."

Despite those increases, 51 percent expect meetings spending to remain flat in the next six months. Lora Di Padova-Tannehill, director of scientific meetings at the American Society of Neuroradiology, falls into that category. "Our budget cycle is July 1 through June 30, so we kind of went through the budget cycle for our meetings last year. We definitely went in with fewer expenses in our 2009-2010 budget. We were counting on less sponsorship, exhibitors and attendees."

Still, Di Padova-Tannehill said she was optimistic about some indicators for the association's big meeting in May, but still was not expecting a full bounce-back this year, particularly for medical meetings, which carry their own set of challenges and regulations.

"We're still looking for strong attendance. I think the concern is the sponsorship and the exhibitor participation. Even those that are participating, they're sending fewer representatives. That affects the bottom line."

The trend line in the MeetingNews survey shows unquestionable motion toward more meetings spending. While 40 percent of respondents decreased meetings spending in the past six months, only 19 percent plan to do so in the next six.

"We have heard that things are looking up for 2010 and planners are optimistic," said Convention Industry Council COO Karen Kotowski. "I haven't heard it expressed in expenditures so much as expectations for attendance, and those seem to be on the upswing."

Starwood Hotels & Resorts Worldwide Inc. said group business gathered steam toward the end of 2009, compared with the steep declines witnessed in the fourth quarter of 2008. "Last year at this time, our group business was heading downhill fast, but now we are seeing a few positive trends," said CFO Vasant Prabhu during the hotel company's earnings call in February. Among those, Prabhu said cancellations in the fourth quarter were down 50 percent, while "bookings into 2010 were up over 50 percent and bookings in the first half of 2010 were up over 100 percent," he said. "In addition, businesses have started to confirm meetings that had been put on hold. Corporate rate negotiations are ending better than we might have expected a few months ago. We're hearing from our corporate customers that cuts in travel are behind them. Companies want to get their people back on the road drumming up business and motivating their teams."

Prabhu warned, however, that "group business always lags" other segments in recovery. Though he expected an improving year for groups, he said he was hardly expecting a "robust" year.

Marriott detailed similar trends as it reported its fourth quarter and full-year results in February. "While relative corporate demand is picking up, cancellations are running again at normal levels, and our 2010 group bookings continue to build," said president Arne Sorenson. "In December, new group bookings for any time in the future were both higher than the prior year and ahead of our expectations."

CFO Carl Berquist noted that group business continues to lag behind where it typically would be, which at full service Marriotts is around 40 percent of overall room nights. "Right now, it's running probably around 37 percent," Berquist said.