Higher air and hotel costs in the past six months have not deterred corporations from holding more events with greater numbers of attendees, according to a survey of corporate meeting buyers.
Buyers said they have begun to feel the effects of a growing seller's market on their budgets, but that their companies' meetings volume has helped to keep costs steady with key suppliers. However, midmarket companies may be affected sooner and more deeply than larger corporations.
According to a recent Meetings Monitor survey of 186 corporate meeting buyers, 44 percent said expenditures have increased in the past six months and 16 percent of total respondents said spending has increased more than 10 percent. In April, 34 percent of Monitor respondents reported that meetings expenditures were rising, and 8 percent of total respondents said spending was up more than 10 percent.
Despite the rising air and hotel costs reported by 63 percent of respondents, more meetings also have contributed to the rise in spending. According to the survey, 67 percent of buyers said their companies are holding more meetings and 38 percent of respondents said meetings included more attendees. Among buyers who said meeting expenditures have decreased at their companies, 80 percent said they were holding fewer meetings. Only 12 percent of respondents who said that their companies were spending less on meetings were able to save through lower air and hotel costs.
Such midmarket companies as Redwood City, Calif.-based Openwave Systems Inc. may be more vulnerable to the shifting market than large corporations. Maralynn Adams, meetings manager for the communications service and software provider, said she has begun to leverage its spend with preferred hotel chains in the past year, but that negotiations are becoming more difficult. Adams said some vendors recently have begun to charge higher room rates for meeting attendees than for reservations booked outside of a negotiated room block.
"I've had a couple of hotels come back with a higher rate," Adams said. "They said if I want a group room block then I'm going to have to take the higher rate."
If the group is small, Adams said she sometimes books individual reservations through a global distribution system.
"I take the rooms out of the contract, but then, of course, I have to deal with meeting room rental charges because I don't have any sleeping rooms on the contract," she said. "It's a little more of a struggle now and I haven't had to deal with that in quite a while."
Adams said she tries to steer business to chain hotels to leverage national volume. Openwave has not cut back on meetings and has begun to increase budgets to reflect rising costs, Adams said.
"The company seems to be opening up, spending a little more this past year," she said. "I would expect us to keep moving in that direction."
Expectations earlier this year that meeting expenditures would level off after fulfilling pent-up demand for training and conferences have yet not proved true
(Meetings Today, April 18). Past survey results have attributed rising expenditures directly to higher air and hotel rates, but the new survey shows "more meetings" has become the most common reason for a higher spend.
Linda Gray, travel and meetings manager of pharmaceutical and biotechnical company Chiron Corp., said higher air and hotel costs have not yet impacted the company's meeting expenditures but that she expects rates to continue to increase.
"We're not seeing a change in our meetings spend at this particular stage, but we do see in certain geographical locations in the United States that availability is extremely difficult to find and it's getting very expensive," Gray said. The Emeryville, Calif.-based company has not yet moved events to secondary markets, she added, but Gray cautioned that as the market continues to shift in hotels' favor, costs would continue to rise.
"Rising costs are becoming a little more real to everybody. It might be a more long-term effect than what we had hoped," she said. "A lot will have to do with the price of oil."
As costs rise, the company has some room to adjust by cutting out unnecessary expenditures, she said.
"At Chiron, we probably have not cut out everything we could, but we haven't been asked to," she said. "We try to get the best deal for our customers in respect to meetings, but we haven't trimmed our travel and meetings to the bare bones like some other companies have."
Larger corporations that have been able to leverage significant discounts, long-term contracts and preferred agreements with suppliers may be more protected than others from rising hotel rates and airfares.
Donna Healy, vice president and deputy head of corporate events for the Americas for New York-based financial services firm Credit Suisse First Boston, said her company has insulated itself from hotel rate fluctuations through a policy mandating use of internal space, when available
(Meetings Today, March 29, 2004)."We're moving ahead with everything we have," Healy said. "We have a very full calendar for the next six months."
Healy said over the past year she has noticed a swing to a seller's market for hotels, but that CSFB meeting volume and spend has not been greatly affected.