While Convention Attendance Struggles, Group Hotel Demand Improves
Convention centers and other big box meeting venues are purpose-built facilities designed to attract high-impact events to a market, such as conventions and trade shows—coveted by hotels for group room night production.
While overall meetings activity in the U.S. has continued to recover from the effects of the economic downturn and resultant scrutiny around lavish spending—particularly in the corporate and government sectors—convention and trade show event occupancy at convention centers in North America remained down nearly 8 percent through the end of last year compared to 2007, prior to the onset of the economic downturn, according to the most recent PwC Convention Center Report. Yet group lodging demand, while still below pre-recession levels through August 2014, has exhibited stronger recovery toward peak levels, suggesting a disconnect, at least at the national level, between lagging convention center occupancy and current group room night production for hotels.
Increased competition among meeting venues for these big events is a key factor driving this current disconnect, as post-recession growth in convention and trade show event activity has been spread over a larger supply of high-quality function space—more than a 7-percent increase between 2007 and 2013—and alternate meeting venues, resulting in suppressed industry-wide convention center occupancy.
In response, convention centers have reduced rental rates since 2009 and backfilled the loss of “high-impact” conventions and trade shows with “other” non-meeting related events, such as seminars, banquets, holiday functions, social events, concerts, festivals, graduations and other such events, which generate far fewer room nights for the host lodging market than conventions and trade shows. Between 2009 and 2013, convention center occupancy for “other” events increased approximately 61 percent, while convention and trade show occupancy decreased 8 percent (Figure 1). “Other” events are expected to continue to represent a higher percentage of convention center occupancy through 2014 as competitive pressures continue due to supply growth outpacing any increases in convention/trade show demand.
Hoteliers continue to feel the impact of these trends at the local market level, particularly those properties which depend on city-wide convention business for their group room night production. These hotels are enduring sustained lower volume, greater year-to-year variability as rotating events incorporate more destinations into their future schedule and/or calls for additional community investment for the market to increase or sustain its share of high-impact events.
Further competitive pressure has shortened the booking window for advanced room night commitments generated by convention center events. Previously, room night blocks associated with convention and trade show events were typically committed more than 18 months in advance, while room nights associated with “other” events were booked in a shorter time period. The number of convention center generated future room nights on the books in 2013 for events more than 12 months out was the lowest in five years—a trend likely to continue through 2014 (Figure 2).
Looking forward, a fairly mature calendar of convention and trade show events, coupled with further realization of additional convention center capacity, is expected to continue to suppress local market share and convention center occupancies. However, industry initiatives, such as Meetings Mean Business and Brand USA, should help preserve the overall levels of meetings activity and attendance, positive indicators for group lodging room night production.