Why meetings and conventions drive revenue at hotels
 
Why meetings and conventions drive revenue at hotels
22 AUGUST 2017 7:25 AM

Conventions, meetings, industry events and group travel have a significant economic impact on tourism.

Most residents of today’s convention and meeting destinations are unaware of the transient occupancy tax (TOT) or its significance on their lives because it is paid for by visitors who book hotels, meetings and business in their markets. In San Diego, we just finished up hosting Comic-Con and its 130,000 visitors. Virtually every hotel room and short-term rental was booked.

According to the Convention Industry Council, the U.S. has 1,870,000 conventions per year, generating $280 billion in direct spending in 2016. I’d like to shed some light on the importance of this industry and what it has gone through recently.

It was a tough period in the meetings business from 2009 to 2015 with the finally fading “AIG effect” that placed a stigma on luxury meetings, the continued reluctance of many corporations to spend money on business travel and the continued emergence of technologies that promise low-cost substitutes for face-to-face events. A turnaround finally began to occur by 2014, but the meetings landscape has been permanently transformed by all of the above. According to PwC, 85% of meetings take place in hotels and the understanding of the value of face-to-face meetings has returned.

A central reason to the transformation of meetings is that the attendees are getting younger, and more importantly, have much different workplace habits. Today’s attendees want information now—on demand. But age is only a small part of it. We have to group customers in different ways. You used to know how baby boomers acted, but now it’s not about age. There is a growing demand for non-traditional meeting spaces like lobby/communal areas where people can meet, gather, check email and more. It allows for interesting flex space.

To provide some perspective on a meeting’s impact on a city, a significant portion of the TOT is used to supplement a city's general fund and underwrite basic municipal services, such as road repair and park maintenance. These revenues also help fund cultural events, arts organizations and community-based programs throughout the city. In addition, the TOT provides funding to hire police officers for our neighborhoods, train firefighters and promote economic development.

The TOT also helps to maintain many of the amenities that are enjoyed not only by tourists, but also by local residents. The TOT is the source of funding for the expansion of many successful convention centers. While there are cities that are not competitive in the meetings market, we operate in several cities where major transformations have taken place.

Perhaps most importantly, jobs created by the meetings industry cover a broad array of skilled labor, unskilled labor and management—most of which include significant benefits.

Meetings create the strongest spending in the local markets as attendees spend more dollars on hotels, restaurants, shopping and transportation than other visitors. Additionally, amenity packages in many markets could not be supported without the tax revenue created by meetings. These amenities include, but are not limited to, the arts, museums, restaurants and attractions.

Tourism helps shift the tax burden to nonresidents, and as mentioned earlier, meeting attendees spend more per traveler than any other sector of the tourism economy, except perhaps certain international travelers.

Spending from out-of-county visitors results in an expansion of the local economic base. This spending would not occur if these visitors had not come. These sales to visitors are like exports that are purchased with non-local dollars and are a net addition to the local economic base. Meeting attendees spend about 3.5 times as much as leisure visitors who stay in hotels do.

There are markets where meeting planners do not have any interest. These might be markets where tourism attractions are limited, city centers are not exciting, weather is problematic or flights are limited. However, there are markets where meetings demand is outstanding and securing the meetings business is highly competitive. These include Phoenix/Scottsdale, Las Vegas, Los Angeles, San Diego, San Francisco and Orlando, Florida.

How do today’s planners get attendees to be excited about meeting in their city? One thing we have noticed is that virtual reality is hitting the market. Look for VR to land as a mainstream entity in the meetings industry. The meetings industry currently includes convention centers, fairgrounds, arenas, hotels, cruise ships and many more. Today, the real question is whether or not the meetings industry will continue to grow at the same levels as other hospitality sectors—I believe the industry is once again healthy!

Robert Rauch is an internationally-recognized hotelier, CEO, and founder of RAR Hospitality, a leading hotel management and consulting firm based in San Diego, California. RAR Hospitality’s hotel collection includes independent, boutique and branded properties throughout North America.

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