Special Report: Conference Centers--Conf. Ctr. Industry Anticipating Biz Rebound In 2004

Still wounded by low corporate meeting budgets and under pressure from discount-wielding hoteliers that have continued to modify their complete meeting package style of pricing, conference centers nevertheless are optimistic about the corporate meeting business heading into 2004, counting on a rebound in corporate training.

These days are slightly brighter than last year or in the months before the war with Iraq, but conference center operators still are discounting for corporate meeting business, particularly short-term business. Though the CMP style of per-day, per-attendee pricing has won favor with some corporate meeting buyers, due to its ability to offer cost certainty, such chains will modify the services included in the packages upon request. Yet, conference center operators can see the day when that changes.

"Occupancy and rates are both depressed, but occupancy shows some sign of improvement," said Tom Bolman, executive vice president of the International Association of Conference Centers. "I thought the fall and winter of 2003 would be the bottom, but things look a little better." Bolman said occupancy would recover before prices do and predicted occupancy would recover to pre-Sept. 11, 2001, levels in early 2004, with rate following in late 2004.

"It's still a challenge, but the light at the end of the tunnel is not a train," said Jack Schmidt, vice president of sales and marketing for Benchmark Hospitality. "We're ahead of the same time last year. Not significantly ahead, but ahead. There are some pockets that are not coming around as quickly as others—for example, northern California—but the Midatlantic is strong. We're optimistic, but we need some help from the economy."

Others still are more optimistic. "We have seen a strong return in demand since the beginning of May," said Steve Giblin, president of the Americas for Dolce International. "There has been a flurry of inquiries that are starting to produce bookings. For instance, our Hamilton Park property just booked 2,700 CMP rooms in one week. That's rare for us, and it's the second-best week this year. Year-to-year through the end of April, the market is down on an overall basis, but, according to Smith Travel Research, our marketshare has increased by four percentage points. The crater was so deep that when you see the light of day, it feels like a recovery."

Altering the structure of the complete meeting package has been one recent and frequent request from corporate meeting buyers. CMPs typically include several amenities and technological offerings and three meals per attendee per day. The latter is a common target, as buyers successfully have negotiated dinner, for example, out of the CMP in lieu of an offsite event.

"In general, the rate is still being negotiated," said Rory Loberg, executive vice president of Aramark Harrison Lodging. "We have space in the short term, and there's greater flexibility on rate than there has been historically. We will negotiate on day-only meetings and protect our occupancy levels, but rate overall is not down."

Giblin said Dolce in April offered discounts and CMP modifications for summertime meeting business to its top corporate clients—given that the summer is traditionally a softer booking season for conference centers—targeting specific companies that in the past have staged meetings during June, July and August. "We targeted our pricing to their specific needs," Giblin said, "if they wanted not to have dinner included in the CMP because of offsite excursions, for example."

The discounts, however, aren't meant to extend past the summer. "Now that we're looking at the fall, we're looking at getting some pricing integrity," Giblin said. "The discounts stabilized an uncertain time. As a general statement, 95 percent of the meetings we've booked since the beginning of May have been pure CMP."

The distinction that conference center sales executives like to make is that while the details of the CMP are not necessarily sacrosanct in a buyer's market, the CMP itself is. None will acknowledge wholesale unbundling of services or ad-hoc pricing.

"There is no unbundling and no change in the fundamental delivery of our product to get business where we do not traditionally get business," Benchmark's Schmidt said. "We still have a solid product, and we have shown price flexibility where it makes sense: If I have a hole 30 days to 60 days out when short-term demand is not evident, there will be flexibility."

Given the depressed corporate transient market that has crippled hotel revenue, corporate meetings are a natural target for hoteliers, which has led to increased competition with conference centers. In some cases, that fight takes place on the conference centers' turf, as some hotels have introduced CMP pricing and some corporate buyers successfully have requested such pricing of hotels. Conference center executives acknowledged battling hotels for business but were nonplussed about the growth of the hotel CMP. "If hotels package, then buyers are aware of the benefits of the CMP," IACC's Bolman said.

"We compete with the Four Seasons, for example," Giblin said. "Customers ask us for our room rate outside the CMP, which we dislike to do but have done so, and they may find the Four Seasons has undercut it. But then they see the pricing for food and beverage and other services, and they see ours is much better when added up. It's more effective pricing."

"Properties that have typically been very reliant on meetings business have become much more aggressive than they were two to three years ago," Schmidt said. "You have to go back and talk to customers about the objective of the meeting. If it's to have the least expensive meeting possible, we may not always be able to help you reach that goal."

"The good news is that conference centers are still the preferred provider of service," Loberg said. "It looks better in a corporate budget to go to a conference center for training than a golf resort for a sales meeting. Yet, there has been huge discounting on the hotel side, as they have been hit harder than conference centers. They are more competitive on price for one-off meetings, and they do play in that arena, but most educated buyers head to conference centers for training."