The Future of Incentives
According to Northstar Meetings Group’s latest Incentive PULSE Survey
, incentive travel programs are being sourced, researched and booked at much the same pace they were in May. Nearly 80 percent of the 122 incentive planners polled will hold their next incentive trip in 2022, but only one in three expect their travel programs to return to prepandemic norms by 2025.
A year has passed since the meetings industry’s first pandemic-era forecast season, and prognosticators are now even more cautious in their predictions for events.
The factors driving the uncertainty are familiar and well-documented: Covid variants, vaccination rates, meeting protocols, comfort with gathering, technology, the environmental impact of travel and the need to trim expenses all will play a role in how we gather in 2022. Over the past year, we’ve experienced just how influential these factors can be — and how quickly market conditions can change.
Still, we have seen recovery take root, and a few trends could be grounds for optimism — including the tremendous surge in leisure domestic travel, which the U.S. Travel Association and Tourism Economics project will surpass its prepandemic spend volume in 2022. Here’s how experts predict group travel and meetings recovery will unfold in the coming year and beyond.
Corporate Meetings Are Happening
Group travel is showing signs of life — in some ways more than expected. “We came out of 2020 saying, ‘The recovery is obvious: leisure travel first, corporate transient second, group and meetings last,’” says Jan Freitag, senior vice president of lodging insights for STR and national director of hospitality analytics for CoStar Group, which owns STR. “I think we have to change that narrative a little bit now. Leisure did come first, no doubt about it — in full force and with almost no price sensitivity, it seems. But then smaller corporate events started happening, and that will continue.”
However, for hoteliers to reap the benefits, adds Freitag, citywide association meetings need to return. “We can’t just say ‘group’ anymore; we have to look at small corporate group vs. large association group and acknowledge that the former has begun.”
Small corporate meetings business started to gain traction in July and strengthened in September and October, notes Kristi White, chief product officer of Knowland, which reports and forecasts hotel meetings volume. Before that, most hoteliers were attributing events activity to SMERF (social, military, educational, religious and fraternal) groups and sports.
Everyone seems to think that we need these big, massive events to come back. But in the U.S., only 3.2 percent of events have more than 1,000 people.
Kristi White, chief product officer of Knowland
“Earlier in the year, corporate meetings made up about 59 percent of group business,” explains White. “This has now bumped up to 69.6 percent — so we’ve seen a nice little shift.”
In terms of meeting size, the shift hasn’t been little: The average number of attendees shot up to an impressive 112 for the month of September and 110 for October — well above the 80-person average seen in October 2019. Knowland doesn't have the data to forecast attendee numbers, but White doesn’t think the trend will continue at that pace. "My guess — and it's just that — is that we'll see the numbers come in line with 2019 averages soon," she says.
Most importantly, even at the 75- to 80-attendee average typical of prepandemic corporate meetings, the small gatherings are crucial to the recovery of group business. “Everyone seems to think that we need these big, massive events like the Salesforce conference or World of Concrete to come back,” White says. “But in the United States, events with more than 1,000 people only make up 3.2 percent of the events that occur.”
Before the pandemic, about 62 percent of events had 100 or fewer attendees, she adds. “Those are the meetings we actually need to come back. September and October numbers are showing that we’re getting there, and people are comfortable meeting in those numbers.”
Volume Is Slowly Recovering
As of early October, total meetings volume was about 40 percent of what it was in the same month of 2019 — and the climb back up will take time, White projects. According to Knowland's new U.S. Meetings Recovery Forecast, which will be updated quarterly, the industry will have recovered 58.3 percent of meetings volume by the end of 2022. By August 2023, individual months will recover to 2019 levels; for the year, the industry will be 86.9 percent recovered by the end of 2023.
Meetings volume is projected to exceed 2019 levels in 2024, and by the end of that year the industry will be at 109.8 percent of prepandemic volume.
But that natural recovery model is just one potential scenario, White notes, and it doesn’t consider the possibility of another Covid variant stalling business once again. That model also assumes the meetings industry will get back to 2019 levels — something we shouldn’t take for granted, agree several sources.
Knowland created an adjusted forecast model as well, which not only accounts for hiccups along the way but assumes a recovery target of meetings volume that’s 15 percent less than 2019 levels. That scenario addresses the real possibility that a portion of our previous meetings simply might never return.
Hotels Need Group Travel
The pickup in small corporate meetings is a positive sign for hoteliers, but it isn’t enough to speed up the long-range group and business-transient outlook for the U.S. hotel industry. Rather, lodging analysts tempered expectations a bit when the latest wave of Covid cases deflated the optimism for a busier fall season.
“The Delta variant and the increasing number of Covid infections led to delays in return-to-office plans at many firms and coincided with the start of the 2022 travel-budgeting season,” points out Rachael Rothman, head of hotel research and data analytics for CBRE, a global real estate company that provides hospitality research. “For business-centric hotels,” she says, “the rebound in business travel expected in September of 2021 is delayed and will likely have a ripple effect into 2022’s corporate travel budgets.”
According to their latest update, issued in October, CBRE expects an annual hotel occupancy of 54 percent in 2021, an average daily rate of $112.85 and revenue per available room at $60.91. That’s decidedly less optimistic than the projection from fellow hospitality research firms STR and Tourism Economics, updated Nov. 8, whose joint report calls for 57.1 percent occupancy with an ADR of $123 and RevPAR of $70.
STR’s 2022 forecast predicts a much bigger leap in occupancy, with an 11 percent year-over-year gain, and a strong RevPAR increase of 17.1 percent.
But those gains are coming off the catastrophic drop of 2020, and will likely continue to be driven by leisure demand. “The pace of recovery for business and group demand is top of mind for most hoteliers,” acknowledges senior hotel economist Bram Gallagher from CBRE Hotels Research. “Group-oriented hotels, northern markets, and global gateway cities reliant on inbound international travel are projected to lag in performance.”
Weekends can’t drive the events recovery. Convention hotels need the midweek corporate and association group business.
Jan Freitag, senior vice president of lodging insights for STR and national director of hospitality analytics for CoStar Group
STR’s Jan Freitag points to a 40 million shortfall in group room nights when comparing January through August 2021 with the same eight months in 2019. “That is obviously not going to snap back immediately,” he says. “Transient demand recovery is moving at a much quicker trajectory.”
This year’s average group room rate of $173 is also significantly behind the transient rate for January through August 2021 ($231). Also notable, the transient rate is actually $3 higher than it was for the same period in 2019. The average group rate, on the other hand, is $31 lower than it was in 2019.
“Both the demand impact and the room-rate impact will be with the industry for a while,” Freitag says. He adds that convention hotels in particular — the large, upper-upscale properties in the 25 largest cities — will continue suffering midweek lulls. Weekends are less of a worry, thanks to strong demand from social gatherings. “But that can’t drive the recovery,” Freitag adds. “They need to have the midweek corporate and association group business.”
That said, leisure transient rates have risen far more rapidly than STR projected earlier this year. With their latest update, STR and Tourism Economics have accelerated their expected recovery timeline by about a year — on the strength of leisure ADR. Their forecast now calls for overall U.S. hotel demand and ADR to nearly recover to 2019 levels in 2022 and for RevPAR to exceed the 2019 average in 2023. CBRE's September projection, also driven more by rate, called for ADR to reach prior peak levels by Q2 2023.
In terms of occupancy, CBRE projects the industry will hit the long-run average of 62 percent in 2023 — but will remain below the record-setting pre-Covid occupancy levels for the foreseeable future, with hoteliers prioritizing rate gains over full hotels.
Exhibitors Are Enthusiastic
At a time when many are wondering whether the trade show industry can recover, the latest report from UFI – the Global Association of the Exhibition Industry and its research partner, Explori, offers some reassurance. “Global Recovery Insights 2021,” based on a recurring quantitative survey of thousands of exhibitors in 30 countries, found that intent to participate in future trade shows is back to prepandemic levels. In fact, 62 percent will attend such events with the same or increased frequency in the future, and another 10 percent will do so “much more frequently.”
“Organizers may see some absence of budget for the first shows they run again, but this seems unlikely to extend to their next cycle.”
Sophie Holt, managing director of Explori
Crucially, exhibitor budget cuts for trade show participation are gradually decreasing. As of the second quarter in 2021, the average expected cut was 41 percent, an improvement over the 50 percent average reduction reported in Q2 2020. Exhibitor spend on virtual events is essentially flat, and is up only slightly in other marketing channels.
What’s more, 45 percent of exhibitors expect budgets to return to prepandemic levels within a year. That bodes well for future events, says Explori managing director Sophie Holt, one of the report’s authors: “Organizers may see some absence of budget for the first shows they run again, but this seems unlikely to extend to their next cycle.”
Strategy Is Critical
One recurring theme across industries and sector forecasts is the need to take a more strategic approach to meetings and meeting formats.
“I’ve found myself saying this so many times over the past year,” notes Kari Wendel, vice president of global SMM strategy and solutions for CWT Meetings & Events. “What a great time to reengineer your processes and your systems when there’s almost no volume going through the machine.”
Wendel stresses the importance of purposefully planning the right meetings in the right way, whether in-person, virtual or hybrid. “With a crisis of this proportion,” she says, “the need for a centralized strategy has never been more evident.”