Buyers Try To Ease '08 Rate Hikes

Meeting buyers will be facing increased prices across the board in 2008, according to forecasts recently released by third-party travel management companies.

Hotels will increase group rates and fees, including charges for meeting space, but buyers are trying to mitigate costs by expanding site searches, negotiating value-adds and even holding certain meetings virtually or onsite.

BCD Travel in September released its 2008 industry forecast that predicted average group hotel room rates in major markets will increase between 8 percent and 10 percent. American Express in its forecast released last month also predicted a 10 percent increase in guest room rate.

"The high cost of guest rooms will directly impact corporate meeting and event planners," said Chris Wilkes, American Express practice leader of advisory services for meetings management. "Hotel rooms are now representing nearly half of all meetings spending, exclusive of air."

The increase in pricing already is being felt by meeting buyers.

"We've definitely seen the costs going up. Hotels are still negotiating, but not like they were in the past," said Cheryl Hoffard, manager of meetings and events for Schwan Food Co.

"Room rates overall are just getting higher. You see the creep going up when you look at different cities, and whether we have at a larger city or a smaller city, the creep is still there," said Debbie Douglas, meeting planner for aviation and travel services for door and window manufacturer Jeld-Wen.

Site-selection firm HelmsBriscoe also predicts an average U.S. guest room rate increase of 5 percent, said COO Greg Malark.

Amex reported a 34 percent increase in average client per-meeting spending when comparing the first half of 2007 to full-year 2006. BCD also expects meeting costs per attendee to rise in 2008, due to increases in food and beverage costs and increased room rates. HelmsBriscoe's Malark and corporate meeting buyers also see hotels charging for meeting space.

"We used to be able to negotiate meeting space, with the number of people we had and meals we were providing. We're seeing now that there's not a lot of room for negotiation on some of that," Jeld-Wen's Douglas said.

Flexibility, including looking at different locations or times to hold a meeting, will help mitigate some cost increases.

"People are starting to look at shoulder seasons and low seasons and take into account the best time to have a meeting from a cost perspective. The negotiating strength really relies on the marketplace," said George Odom, senior director of business development for BCD Travel's consulting subsidiary Advito.

The increase in supply also will help buyers get into a shop-around mindset, said HelmsBriscoe's Malark.

"Rates are increasing, but at the same time supply is increasing, so it behooves customers to shop multiple hotels and multiple time periods, if possible, in the same market. We expect to see a lot of shopping going on in '08," he said.

Douglas has been negotiating add-ins like Internet access and parking—"whatever we can negotiate in to offset that rate."

Some buyers are taking a further step by bringing back cost estimates to the meeting requestors. Schwan's Hoffard has begun showing estimates to internal customers and letting them decide whether they want to hold the meeting onsite, a decision that is becoming more popular, she said.

Jeld-Wen's Douglas has followed a similar pattern. "We have become more cost-conscious, and that has led to some people looking at the costs of meetings and saying, No, we're not going to have a meeting. We'll figure something else out, like teleconferencing, or another time to do it," Douglas said.

Other departments and senior executives also are looking closer at spending.

"Accounting people are starting to take a long look at some of the costs and ask if this is really necessary," said Douglas.

Hoffard said that for the first time, "we've had to have approvals from our senior-level management for all of our meetings."

"Within corporations, there is much more scrutiny on what is the return on that dollar that is spent for the meetings. Meetings, we're finding, is getting more and more visibility and scrutiny," Advito's Odom said.

Meeting buyers will see additional increases in group air travel. BCD Travel anticipates increases of 2 percent to 4 percent in 2008, due in part to fuel prices.

"The price of jet fuel going up affects meetings as well," Odom said, adding that some companies are now looking to combine its group and transient air business to keep costs down.