Meeting and convention venues are holding their own despite an economic downturn as advance bookings keep hotels and larger complexes busy.
But things could change in a few years as smaller meetings are shrinking or disappearing altogether and big shows are worried about how higher air travel costs will affect attendance.
The number of 2008 groups booked in Anaheim at 699 is slightly higher than 2007’s total of 650, as of the end of July.
Brad Logsdon, director of sales and marketing at the Hilton Anaheim, said the hotel has had few cancellations and that it is 30% ahead of its projected booking pace for 2009 when compared to a year earlier.
Those numbers are buoyed by some of the area’s largest conventions, which have been ramping up attendance in the past few years.
The NAMM Show,the International Music Products Association gathering that’s the largest annual convention in Orange County,posted a 4% attendance growth to more than 88,000 in January.
The recently concluded International Association of Assembly Managers,drawing people from across the country who run places such as Honda Center and Angel Stadium of Anaheim,filled about 85% of the rooms it had reserved, Logsdon said.
Sandy Webb, director of meetings and events, said the convention drew a record number of members and was the highest grossing trade show for the group on record.
Large conventions tend to be less affected by the economy because they book years ahead and rarely cancel, said Jim Kissinger, vice president of convention sales for the Anaheim/Orange County Visitor & Convention Bureau.
In addition, the bulk of OC’s convention business comes from associations rather than corporate groups that are quicker to pull the trigger on budget cutbacks.
Groups are attracted to the county because of its central location in Southern California, said Charles Ahlers, president of the convention bureau.
The things that are keeping booking rates up for now could create a false sense of security for local convention planners.
A group that books five years in advance may find the economic landscape drastically changed by the time the convention rolls around.
Sliding Business
Despite a strong start to 2008 and a healthy calendar for 2009, attendance has softened for some recent groups and the overall yearly attendance in Anaheim may slip slightly below that of 2007 by the time 2008 is over. Current projections put this year’s total at 1.16 million, compared to 1.2 million last year.
“Some groups have been down in attendance by about 10%,” Ahlers said.
While association business is holding its own, corporate business is iffy. Hoteliers contacted for this story repeatedly said the corporate market is booking with shorter lead time for fall and into next year. Unconfirmed meetings reservations also are higher than usual.
“We sometimes get very short-term bookings just two or three days in advance,” said Fernando Carranza, director of national sales for Radisson Hotels, including Newport Beach.
“Financial market (business) is way down, so we’re looking for makeup business,” he said.
To do that, the Radisson is offering all-inclusive pricing similar to that found at conference centers, he said.
“We’re trying to make it attractive to clients,” he said.
That may be a wise move for the future.
Trade show industry leaders expect to see attendance decline later this year if economic conditions surrounding fuel costs, airlines and the financial markets don’t improve.
The conflicting signals from strong association business and weaker corporate business is sending convention and visitor bureaus and hoteliers into overdrive to help clients plan for future events.
Some hotels increasingly are working with clients who fear that changed economic conditions might affect their contracted room guarantees, so hotels are giving them the option to revise their estimates without penalty or to use some rooms at future dates.
Rhanda Richardson, director of sales for the Anaheim Marriott, said the Marriott sensed a slowdown late last year and started working with booked groups to make sure the hotel retains existing business.
“We’re not aggressive with deals, but we changed our sales strategy last year,” she said.
The good news for OC is that the manufacturing, medical and business services industries are among the strongest in the current climate.
But trying to predict what 2009 will bring has never been more difficult, an analyst said.
Airline cutbacks could impact convention attendance. Ontario International Airport al-ready has lost about one-third of its flights. More airline cuts are expected this fall.
A study by PKF Hospitality Research, part of PKF Consulting Corp. in Atlanta, said that a 1% decline in the number of airline seats in the U.S. would result in a corresponding decline in hotel demand of 0.4%. That translates to about a 4% drop in hotel demand if airlines,as expected,reduce their capacity by 10%.
By comparison, hotel demand dropped 3.3% after the terrorist attacks in 2001.
“Future year bookings may be impacted (by) air and other costs,” Richardson of Anaheim Marriott said.
Groups booking events for years beyond 2010 already have expressed concerns, she said.
So far, John Wayne Airport has seen only minimal cuts in service, but it took a hit on passenger counts when Aloha Airlines filed for bankruptcy and stopped flying earlier this year. It was the only airline that offered nonstop flights to Hawaii from OC.
The expansion at John Wayne Airport is proceeding on schedule with no budget cuts, in part because passenger facility charges collected last year exceeded expectations.
John Wayne Airport also benefits by not having one airline dominate its service, according to spokeswoman Jenny Wedge.
The airport may get its first international service in the near future.
Air Canada is making another run at gaining approval to operate in OC and passed its noise test in July. Customs issues that scuttled flights a few years ago have not yet been sorted out.
But even without the improvements at John Wayne, the county’s meeting and convention business is somewhat insulated from airline cutbacks because there are four airports within an hour of Anaheim.
Leg Up on Competition
Whether shows such as The NAMM Show, Medical Design & Manufacturing, which is held in February, and Natural Products Expo West, which is held in early March, maintain their 2008 growth this upcoming winter may foretell the fate of other conventions.
OC still has a leg up on regional competitors on many fronts.
The Anaheim Convention Center is the largest on the West Coast and has roughly 8,000 hotel rooms at various price points within a mile of it. It also has the Anaheim Resort Transit: a system of environmentally friendly trolleys that transport people around the visitor districts of Anaheim and Orange.
The area also is cost effective on several fronts.
The county’s hotel rates are less expensive than its major competitors’. According to PKF Consulting in Los Angeles, OC’s overall average daily hotel rate was $156.67 as of May, compared to $162.19 in Los Angeles and $172.72 in San Diego.
OC ranks No. 37 among the top 50 U.S. destinations for its overall hotel tax rate of 15.6%, according to a survey by the National Business Travel Association. San Diego ranks No. 48 with a 17.5% hotel tax and Los Angeles ranks No. 49 with a 19% hotel tax.
Other recent developments have added to Anaheim’s appeal.
The newly completed Anaheim GardenWalk, an outdoor retail, entertainment and dining complex near the convention center, added half a dozen dining options, along with a 14-screen movie theater, nightclub and upscale bowling alley within walking distance of the center and many hotels.
Another hotel,the 285-room Sheraton Garden Grove-Anaheim South,opened in July, adding 9,000 square feet of meeting space within a mile of the Convention Center.
The Resort at Pelican Hill, set to debut by year’s end, is likely to attract executives for small meetings or retreats. It will focus new attention on OC’s coast as a destination of its own for group business.
But that’s not the only thing bringing attention to the county.
OC was an early adopter of what’s now called the greening of the meetings industry, adapting environmentally friendly procedures. That’s turning out to be a plus in selling the destination.
According to the Meeting News March survey, 34% of corporate and 43% of association planners make choices about meetings based on environmental efforts.
“The No. 1 question from planners is (about) green efforts,” said Ahlers of the convention bureau.
Having national organizations from the travel and convention industries come to town is always a plus in keeping a destination on the radar screen. This year has been a boon for the region in that regard, Ahlers said.
The National Business Travel Association met in Los Angeles in July while the International Association of Assembly Managers met in Anaheim. This week, The American Society of Association Executives is meeting in San Diego.
Challenges
But there could be some challenges ahead.
A weakened economy makes it harder to compete with other cities like Las Vegas, Ahlers said.
Sixty-three percent of meeting planners say they get higher attendance if their meetings are in Las Vegas, according to the Las Vegas Convention & Visitors Authority. And Las Vegas has the lowest hotel taxes of any major city at 9%.
Los Angeles and San Diego also compete with Anaheim for convention business. Both have new convention hotels in the works,one at L.A. Live and one adjacent to the San Diego Convention Center.
High-growth conventions at the Anaheim Convention Center also present a challenge for the future. While they generate significant economic impact,NAMM alone accounted for roughly $80 million,continued growth means they need more space and that’s increasingly hard to find.
“Saying there’s tremendous need for this expansion is an understatement,” said Greg Smith, executive director of the convention, sports and entertainment department for the city of Anaheim.
Various plans to expand the Convention Center have been kicked around for the past couple of years. The current plan would add space financed by hotel development on a “shared use basis” with the Convention Center, according to city documents. The convention space must connect to the existing center and would sit on four acres now occupied by Car Park 1 facing Katella Avenue in front of the Hilton Anaheim. Parking for up to 1,500 cars must be part of the plan.
Three proposals were under consideration by the city: one each from Dallas-based Garfield Traub Development, Sacramento-based Regent Asset Management Group LLC and Los Angeles-based Sonnenblick-Del Rio Develop-ment Inc. Anaheim City Council met in closed session to review the proposals and chose Sonnenblick-Del Rio’s plan, according to a spokesperson for the convention center.
Garfield Traub has completed other projects financed by public-private partnerships, including the Oregon Convention Center in Portland, the Sheraton Overland Park Hotel in Overland Park, Kansas, that connects to a convention center, and the Puerto Rico Convention Center complex of hotels.
Sonnenblick-Del Rio has also completed numerous projects for Starwood Hotels & Resorts Worldwide Inc.
The Anaheim expansion would likely not debut before 2012.
According to a PricewaterhouseCoopers LLP analysis of the convention industry, from the middle of 2006 through the middle of 2007, there was a 5% increase in convention center demand and just a 1% increase in supply.
“It’s a good time to (expand),” Ahlers said.
Hilton’s Logsdon said they’d welcome the competition.
“It would make the destination more appealing,” he said.
