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Grass Roots Meetings Industry Report 2013 2012 Market Analysis & 2013 Forecast
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
Grass Roots Meetings Industry Report 2013 2012 Market Analysis & 2013 Forecast
3 | P a g e Source: Grass Roots January 2013. Rates are quoted exclusive of VAT
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).
Grass Roots Meetings Industry Report 2013 2012 Market Analysis & 2013 Forecast
4 | P a g e Source: Grass Roots January 2013. Rates are quoted exclusive of VAT
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.
Grass Roots Meetings Industry Report 2013 2012 Market Analysis & 2013 Forecast
5 | P a g e Source: Grass Roots January 2013. Rates are quoted exclusive of VAT
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.
Grass Roots Meetings Industry Report 2013 2012 Market Analysis & 2013 Forecast
6 | P a g e Source: Grass Roots January 2013. Rates are quoted exclusive of VAT
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).
Grass Roots Meetings Industry Report 2013 2012 Market Analysis & 2013 Forecast
7 | P a g e Source: Grass Roots January 2013. Rates are quoted exclusive of VAT
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.
Grass Roots Meetings Industry Report 2013 2012 Market Analysis & 2013 Forecast
8 | P a g e Source: Grass Roots January 2013. Rates are quoted exclusive of VAT
Asia Rates 2012
Grass Roots Meetings Industry Report 2013 2012 Market Analysis & 2013 Forecast
9 | P a g e Source: Grass Roots January 2013. Rates are quoted exclusive of VAT
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.
Grass Roots Meetings Industry Report 2013 2012 Market Analysis & 2013 Forecast
10 | P a g e Source: Grass Roots January 2013. Rates are quoted exclusive of VAT
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
Grass Roots Meetings Industry Report 2013 2012 Market Analysis & 2013 Forecast
11 | P a g e Source: Grass Roots January 2013. Rates are quoted exclusive of VAT
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.
Grass Roots Meetings Industry Report 2013 2012 Market Analysis & 2013 Forecast
12 | P a g e Source: Grass Roots January 2013. Rates are quoted exclusive of VAT
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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