Competing for business: the state of the hospitality industry today.

Hotels, airlines, and convention centers are working harder to attract your business.

Competition is the motor that's driving the hospitality industry these days. The 1980s saw a surge in construction for hotels and convention centers, which now find themselves in an overbuilt market. Airlines, too, are caught in a costs crunch and must compete for travelers, since, according to the National Business Travel Association, Inc., Alexandria, Virginia, corporate downsizing has reduced the number of potential travelers by nearly 4 million since 1982. Association executives with sharp negotiating skills and good knowledge of contracts can benefit from this buyer's market. "There are great opportunities for association meeting planners because of the overbuilt |hotel~ situation," says Howard Feiertag, a professional meeting planner and instructor at the hospitality school of the Virginia Tech Continuing Education Center, Blacksburg, Virginia. At the same time, properties will be more cautious, he says: "You're going to see tougher contracts, they'll be tougher on deposits, tougher on pickup, and tougher on quick payment."

The hotels' hard-line approach comes at a hard time for meeting planners, who are edgy about registration numbers because of the economy and legislative action. As of January 1, a new tax law reduces the deductibility of business meals and entertainment expenses from 80 percent to 50 percent and virtually eliminates the deduction for spousal travel. The effects of this change are uncertain, but hospitality industry spokespeople all predict the restrictions will have an adverse effect, either by limiting meals or causing meeting attendees to shorten their stays.

Hotels and lodgings

"The demand curve is catching up with the supply curve, and they're beginning to look like a sensible match," says Kenneth Hine, president and chief executive officer of the American Hotel & Motel Association, Washington, D.C. The national average hotel occupancy rate is up, to 65.3 percent as of August 1993, but room rates have remained flat.

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However, rates will probably go up soon, says Feiertag. "I predict in 1994 you'll see an increase of about 5 percent. You'll see 10-15 percent in food and bar service." Costs, such as employee benefits, taxes, utilities, and paper goods, are going up. At the moment, association executives have plenty of negotiating room--but they will probably find more flexibility in areas other than room rates. Hotels, looking to fill empty beds, are inclined to be cooperative about service and extras. "I've encouraged people in our industry to think of themselves as resources for the meeting planner, rather than a supplier of space and services," Hine says.

Trends:

* Long-term residence properties converting to short-stay, all-suite hotels

* More nonsmoking rooms

* Room rates rising slower than inflation

* Few newly built hotels

* Stricter agreements and harsher cancellation clauses in meeting contracts

* Use of negotiators instead of lawsuits to resolve contract disputes

* Properties changing their brand names as they look for a chain affiliation that provides better reservation and marketing assistance--which means less continuity for planners

* Fewer hotels actually owned by their chain affiliates

Convention centers

"The competition is growing dramatically among convention centers," says John S. Swinburn, CAE, executive director of the International Association of Auditorium Managers, Irving, Texas. As happened with the hotel industry, convention centers were overbuilt during the 1980s, in some cases without adequate study: "Some feasibility studies have a tendency to be overly optimistic," Swinburn says. In addition, tightened municipal budgets mean that centers, which are for the most part heavily subsidized, will be under pressure to pay more of their own way. That means association meeting planners will have to pay for space, one way or another. As Swinburn says, "Convention centers, generally speaking, do expect to receive a fair level of payment for the services and the space they provide." Centers also are booking more consumer shows and local events in addition to conventions, because such shows tend to pay a higher square-foot rate than association meetings. To maximize income from services, they have also been exerting tighter control over which catering, decorator, and other services meeting planners may use. As a result of these trends, executives planning association meetings are likely to find narrower choices in dates and service providers.

Trends:

At the International Convention Centers Conference, October 28-31, 1993, in San Antonio, Texas, convention center managers discussed the trends they see affecting convention centers and their relationship with meeting planners:

* Aggressive and tightly focused marketing by centers

* Rebates for space rental fees, paid to centers from revenue raised by bed taxes

* Listing several "preferred vendors" rather than one "exclusive contractor"

* Greater environmental awareness: energy conservation, etc.

* More flexible booking policies, in terms of type and spacing of events

* More alternative uses for centers, including more consumer and specialty shows between conventions

* Shifting of insurance coverage and Americans with Disabilities Act compliance to the meeting organizers rather than the facility management

* Bringing services, such as trash hauling, in-house

* More "no smoking" meetings and convention centers

Restaurants and food service

"The food service industry continues to grow," says Bill Fisher, executive vice president of the National Restaurant Association, Washington, D.C. At present, approximately 80 million people--30 percent of the population--eat out every day. New restaurants and convenience-food outlets are springing up to meet that demand.

The reduced deduction for business meals and entertainment expenses will most affect the more upscale table-service restaurants, motivating them "to be more creative and innovative in order to keep their customers coming," Fisher says. "People's behavior does change when there's a change in the tax law," and travelers will eye their budgets more carefully.

Competition at all levels has restaurants vying for diners. Special promotions and features like the "frequent diner card" are designed to maintain customer loyalty, Fisher adds. This means more negotiating room for meeting planners looking for coupon deals and restaurant packages.

Costs are going up, however, and meeting and convention caterers will be paying more for labor, materials, and employee benefits. They will be forced to pass some of these costs along to associations that want to have catered meals with their meetings.

Trends:

* Slower turnover of restaurants as more franchises enter the market

* Continued emphasis on healthful foods, particularly vegetarian dishes and combination dishes

* More spicy and ethnic foods coming into the mainstream--meeting planners may find the opportunity to be more adventurous in menu planning

* Restaurant kitchens automating some services

* More coupons and promotional meals as competition heats up

* Lower consumption of alcohol, particularly hard liquor 

* In spite of the trend toward healthful eating, "Desserts are still in," says Fisher.

Air travel

"The biggest issue by far is finding a path back to profitability," says Tim Neale, director of the office of public relations for the Air Transport Association, Washington, D.C. The airline industry as a whole lost $10 billion in the past three years and is still in financial deep water. Southwest, which is the most profitable airline, succeeds because it flies only one type of aircraft, offers only short-haul trips, does not serve food, does not TABULAR DATA OMITTED provide interline services, does not fly overseas, and does not maintain a hub.

Just as association travelers have become very price-sensitive, airlines are focusing on cutting costs rather than raising revenue to boost the bottom line. "Airlines have come back to meeting fares," says Feiertag. "They're not as easy to get, and they're not as lucrative as they used to be." Although the Internal Revenue Service has threatened to tax frequent flier miles, the threat remains unrealized. In the meantime, airlines are using mileage plans competitively to attract and keep customers.

Trends:

* New user fees at airports as municipalities tax travelers

* Fares remain relatively low unless oil prices rise sharply

* Competitive special fares to destinations served by multiple carriers

* More labor disputes as airlines try to trim costs

* More "bare bones" flights

* Interactive video in airplanes, possibly including gambling games

Taxis and trains

Traveling by taxi. "Almost nationwide the taxi industry is going in for fare increases right now," says Alfred B. LaGasse, executive vice president of the International Taxicab and Livery Association, Kensington, Maryland.

The higher fares are powered by fuel tax increases and insurance cost hikes, LaGasse says.

Faced with competing service by van services and airport shuttles, some taxi companies are branching out into other areas, such as executive limousine services, he adds.

Meeting planners may find they can take advantage of these new developments when arranging transportation for events and attendees.

Trends:

* Computerized dispatch systems that speed phone taxi service

* More handicapped-accessible vehicles available

* Better security and shields to protect taxi drivers

Traveling by train. "We have slowly worked our way back up to near-record ridership this year," says Patricia Kelly, public affairs officer for Amtrak, Washington, D.C.

Amtrack ridership dipped during the recession, and is in any case highly localized according to Kelly. "Nearly half of our daily ridership occurs in the Northeast corridor between Washington, D.C., and Boston," she says.

Amtrak is sprucing up cars and adding new services, including discounted meeting and convention fares similar to those offered by airlines.

Trends:

* Table-service restaurants on long-distance trains, with linens, china, and menus prepared by trained chefs

* New snacks on short-haul trains, including fruit and salads

* Meeting and convention fare discounts

* New equipment, including double-decker sleepers

* Enhanced on-board service

The road ahead

For the foreseeable future, association meeting planners will be affected by their own tight budgets on the one hand and increased competition among suppliers on the other. All components of the hospitality industry are struggling to increase their profits and cut costs, while vying with other businesses for a share of a static or slowly growing market. Association meeting planners are likely to find the most negotiating room in "extras"--services a hotel or convention center, for example, can provide at minimal additional cost--rather than in the base price, although upscale chains may not reduce amenities that helped build their reputations. Service providers, watching their bottom line, will be unlikely to negotiate on anything that might interfere with their cash flow.

In addition, hotels and convention centers will want more assurance that room blocks and exhibitor space will sell at the promised rates. In this environment, the savvy association meeting planner will be able to negotiate a good deal--but will probably have to sign a tightly drawn contract to get it. How Much Are Conventions Worth?

Here's how cities profit from association meetings, conventions, and expositions:

* The average delegate stays 4.1 days and spends $818.82.

* The average exhibitor stays 3.38 days and spends $3,664.07.

* The average association stays 5.66 days and spends $121,305.62

* The average meeting, convention, or exposition draws 1,300 in attendance.

* Between 1985 and 1993, attendee spending rose 52 percent while the Consumer Price Index rose 34 percent.

Source: 1993 Convention income Survey, conducted by Deloitte & Touche for the International Association of Convention and Visitor Bureaus, Champaign, Illinois.

What Hotels Offer

No-smoking rooms: 86 percent

Handicapped access: 84 percent

Health clubs: 40 percent

Multilingual staff: 53 percent

Teleconferencing capabilities: 33 percent

Sources: American Hotel & Motel Association, Washington, D.C., and Smith Travel Research, Gallatin, Tennessee 

Stephanie Faul is a senior editor of ASSOCIATION MANAGEMENT.