Grass Roots Meetings Industry Report 2013 · Grass Roots Meetings Industry Report 2013 2012 Market Analysis & 2013 Forecast. Grass Roots Meetings Industry Report 2013 2012 Market

1 | P a g e

Grass Roots Meetings Industry Report 2013 2012 Market Analysis & 2013 Forecast


2 | P a g e Source: Grass Roots January 2013. Rates are quoted exclusive of VAT

Outlook for 2013

The US fiscal cliff and European financial crisis continue to create uncertainty in the global

markets. While the debt crisis remains unresolved and traditional economies predict

negligible growth, we shouldn’t expect any major business growth within the meetings and

event sectors. The leisure market will continue to remain critical to high end hotels and

London should once again benefit against the weakening of the pound.

Elsewhere, emerging economies such as Asia are experiencing rising borrowing costs and

high import prices, leading to regional slow-down; but growth in 2013 is still expected to

outstrip the developed world. Hotels which saw their profits crash in the early years of the

recession have benefited against the year on year rate increases since 2010. This has to be

balanced against the need to repay or refinance loans, and the rise in the cost of

commodities, which have eaten away at profit.

In 2013 this will inevitably translate to single figure rate increases. Overall though, our

clients in the UK, USA and Asia are all showing a modest increase in meeting activity and

have slightly higher budgets than a year ago. The mood is quietly positive, and we would

expect to see most hotel groups have a satisfactory - if not spectacular - trading year.

Our mood is quietly positive



UK & Europe

The UK was buoyed by the Olympics and there was a genuine ‘feel good’ factor during the

summer; but was it enough to kick-start economic growth as politicians had banked on? The

average rates for 2012 suggest a real divide between North and South, with falling rates

across most of the North of England, Scotland and Wales; while the South had more mixed

results. Despite the Olympics, the larger global economic problems and European debt crisis

appear to have wielded a greater effect upon provincial UK rates, even if London and the

South East have largely felt the benefit. Ironically, it was the 5-star operators who benefited

the most as those who can afford luxury continued to increase activity.

The 3-star and 4-star markets will no doubt be hoping for a trickledown effect in 2013. As

Figure 1 illustrates, Scotland felt its sharpest and highest rate reductions in the 3-star

meetings market, where DDR plummeted by almost 35% on the previous year. Wales was

similarly affected, with the 3-star market also the worst hit, with a 27.5% decrease in annual

rates. The North East and North West of England suffered 13% and 12% DDR reductions

respectively (as an average across all hotel categories), with the North East worst hit in the

4-star market (24.5% DDR decreases) and the North West in the 5-star market (24% DDR

reductions).



Figure 2 illustrates the largely positive story across the Midlands and South of England. The

Midlands benefited from gains across all areas except the 3-star market, where the DDR slid

by almost 17% on 2011, whereas the 5-star Midlands market posted a healthy growth of

14% on DDR. The South West suffered rate reductions across all areas, with the exception of

5-star 24-hour rates, where rates increased by 44% due to strong residential business with

luxury high end operators. In London and the South East, the luxury high end market

continued to see growth. Residential business was not as strong in the London 4-star

market, where 24-hour rates contracted by 10% on the previous year. The 3-star London

market struggled to keep pace with the popularity of high end operators, witnessing a 15%

reduction on annual DDR. Europe has been characterised by some stark differences in

performance, with in-vogue destinations reaping the benefits and demonstrating substantial

rate growth.

Figure 3 indicates where some of the larger destination rate gains and losses have occurred.

Demand for Barcelona, Brussels, Istanbul and Paris has been strong and is thus reflected in

rate growth, with Barcelona’s 4-star market posting 29.8% growth versus the next best,

Paris, whose 4-star rates grew by 28.3% in 2012. Athens was, rather expectedly, the largest

faller in 2012, with 4-star rates falling 38% and 5-star dropping by 26.9% on 2011.



Popularity in demand for well-connected hub destinations had led to slower demand for

destinations, such as Budapest, where rates have fallen by 17.4% (4-star) and 12.9% (5-star)

during 2012.



European Rates 2012

USA

Despite uncertainty created due to the elections and the fiscal cliff, the North America

market has shown a typical air of optimism in the last twelve months. Meeting rates are up

an average of 16.7% (Day Meeting Packages – DMP) between 2011 and 2012, with healthy

average rates indicated by Figure 4.The meeting market growth compares to a smaller

growth in lodging, with a 4.2% increase in rooms revenue whilst demand increased by 3%

during 2012, according to recent figures released by Smith Travel Research. Increased

demand and optimism following President Obama’s re-election and a temporary fiscal cliff

solution will inevitably continue to drive the rate up, particularly as there is limited new

supply in the market (only up 0.4% per annum according to the same Smith Travel Research

figures).



USA Rates 2012

T

Asia

The Asian market slowed in 2012 although growth remained consistent across key markets.

The pace of demand has slowed a little as new hotel stock continues to increase, which has

affected rate growth amongst long established properties. As Figure 5 demonstrates,

Mumbai’s 5-star meetings market was the clear winner in 2012, posting double digit growth

of 18%. However, the overall health of the Asia market remained positive with major cities

all posting key growth in the 5-star meetings market, albeit at a slower rate. Bangkok was

the only one of the cities surveyed whose rates remained static during 2012.



Asia Rates 2012



Market Trends

The uncertainty in the market has led to a number of trends, as we see a move from it being

buyer-led to supplier-led. The shift in the balance of power is likely to continue through

2013 and 2014, and has led to some of the current trends highlighted below.

A number of interesting patterns have started to develop across the North American

market, some of which are consistent with global trends. Others are more specific to the

region; and one or two may be considered more alarming if they are not managed

professionally. The trends signify a hardening market that is moving towards being supplier-

led:

Regardless of size, hotels are not committing to catering-only events without

accommodation until 30 days prior.

The change in tax laws means corporate organisations are not committing to long

term budgeting, resulting in increased short lead business.

The contracting of meetings is taking longer – a result perhaps of hotels waiting to

see if they receive a more profitable enquiry. Meeting space being held by

companies is increasingly being “bumped” for more lucrative enquiries.

Travel bans for employees are affecting face-to-face meetings.

Property owner involvement in managed hotels around business decisions leading at

times to confusion.

The trends signify a hardening market

that is moving towards being supplier led.



Shorter hotel Option periods

As the recovery continues, the most popular venues are unable to provide clients with

lengthy option periods. Corporate planners need to be prepared to come to market with

more certainty regarding whether their events will go ahead and ready – if need be – to

contract sooner to secure their most desired options

Short Lead Times

Short lead times for the organisation of meetings and events has been a staple feature of

the market since the financial crisis, with many regional meetings consistently averaging a

lead time of less than 3 weeks over the last 24 months. Figure 6 demonstrates 92% of all

2012 contracted bookings were received with a lead time of less than 6 weeks compared

with 93% in 2011.

Smaller Budgets & Fewer delegates

An analysis of our clients’ top 10 destination countries provides some interesting reading

when comparing 2012 trends with 2011. Figure 6 indicates that overall average spend has

declined by 16% from 2011 to 2012 due to an on-going squeeze on budgets and fewer

delegates attending events. However, there are some trend breakers with event spend into

the US and France posting a 29% and 83% year-on-year increase, whilst the Netherlands “Go

Dutch” and almost split the difference with a 3% rise. The larger event spend for both the

US and France may well be underpinned by buoyant rates in their respective key markets

rather than higher corporate event budgets. But one thing that is certain, the higher rates

have not put corporate organisations off holding events at key destinations



Increase in meetings & Events Activity

The trend of declining meetings and events budgets and delegate numbers seen in recent

years is now reversing. Figure 8 provides an analysis of the top 10 client destinations and a

comparison of meetings and event activity between 2011 and 2012. Our number of

meetings booked increased by 5% overall in 2012, with very healthy growth shown in our 10

most booked countries. The UK and the US demonstrated moderate growth in activity,

whilst the Netherlands (up 146%), Singapore (up 200%), Italy (up 130%), and Hong Kong (up

129%) were stand-out performers. The growth in both Singapore and Hong Kong can be

partly attributed to Grass Roots HBI growth in the region. France, rather surprisingly showed

a 28% drop in overall activity compared with a year earlier, which may be a result of budget

busting rate increases typified by Paris, as indicated in Figure 3.



Supply Chain Upheaval in 2013

A number of hotel groups are now effectively owned by the banks. Lloyds has become one

of the biggest hoteliers since the credit crisis, refinancing The Rocco Forte Collection,

Macdonald Hotels, The Alternative Hotel Group, Principal Hayley and Menzies Hotels

amongst others. As the economy shows signs of improvement, the banks will be looking to

recoup at least some of their investment. With organic growth proving to be slow,

businesses now see this as a good time to invest. The cost of capital is relatively low, so well

thought-out investment projects are likely to give healthy returns in the long-term.

This review forms part of the Grass Roots Meetings Industry Report.

For more information visit www.grassroots-hbi.com

Grass Roots HBI is part of Grass Roots Group, a global performance

improvement company with offices in 15 countries around the world.

For more information visit www.grg.com

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Grass Roots Meetings Industry Report 2013 · Grass Roots Meetings Industry Report 2013 2012 Market Analysis & 2013 Forecast. Grass Roots Meetings Industry Report 2013 2012 Market