Orange County event planners may not have a trio of witches around a bubbling cauldron to foretell how the recession will hit their business this year, but they do have a trio of shows they think will be an accurate oracle.
Three of the county’s largest conventions and trade shows are held in the first quarter: The NAMM Show, which ended Sunday; Medical Design & Manufacturing, an umbrella show that features seven different groups; and Natural Products Expo West, which has benefited in recent years from a renewed focus on environmental issues and natural foods.
Together, the three accounted for more than 170,000 of the 1.25 million people who visited OC conventions last year.
In all, first-quarter shows account for about a third of Anaheim’s annual convention business.
How they do this year may be a harbinger of things to come.
Convention planners and hotels are bracing for a pullback in company spending, but see certain groups,association, healthcare and religious groups,maintaining and even growing their meeting business this year.
The major local conventions come at a time when the economic downturn is widespread. Employment data released Jan. 9 by the Department of Labor counted 2.6 million jobs lost nationwide last year,the worst decline since 1945. The unemployment rate hit a 16-year high of 7.2% in December.
NAMM draws heavily from the regional market. Organizers expected attendance to be similar to last year, but final numbers were not available.
The Medical Design & Manufacturing group, staged by Los Angeles-based Canon Communications LLC, hopes to see a 3% increase in exhibitors. Attendee registration is “holding up compared to last year,” said Dan Cutrone, Canon’s director of marketing.
The show is weathering the downturn well because attendees view it as a necessity to keep up with changing technology, according to Cutrone.
The nationwide drop in meetings started last fall when companies began scaling back on their meetings and conferences.
San Jose-based Cisco Systems Inc. was one of the first, canceling its 2009 sales conference to hold a virtual meeting instead.
Fifty-eight percent of more than 600 meeting planners surveyed during a fall Webinar said they expected business to worsen this year.
The things that will hit conventions the hardest this year are likely to be corporate mergers and acquisitions, reduced marketing budgets, restrictions on travel expenses and fewer people working at exhibit booths, according to market watchers.
The hotel and convention industry survived a downturn after the terrorist attacks of 2001, but Charles Ahlers, President of the Anaheim/Orange County Visitor & Convention Bureau, said this downturn is different.
“It’s broader and longer-reaching than 2001,” he said. “And consumer confidence is destroyed.”
The December forecast for trade shows from Trade Show Executive’s Exposition Forecasting Board estimated the number of exhibiting companies will fall 8.5% this quarter and 10.6% for the year while attendance is likely to drop 14% this quarter and 12.5% this year nationwide.
Even Las Vegas,the largest convention market in the U.S.,saw its convention attendance fall by 4% through October. Visitor volume that month plummeted by 10.2%, the worst drop since 2001, according to Las Vegas Convention and Visitors Authority. And attendance is expected to continue dropping this year.
Some convention centers are offering discounted or free space and other perks to lure groups, while some expansions and new construction projects have been put on hold or pushed back.
Hotel Reaction
Some hotels also are offering perks such as free parking or Internet service at no extra cost at the request of conference organizers.
Hotels also are bracing for a downturn in convention business,Starwood Hotels & Resorts Worldwide Inc., Marriott International Inc. and Wyndham Worldwide Corp. all announced cost-cutting measures before year’s end,and have seen some, but not too many booking cancellations.
The Hilton Anaheim, OC’s largest hotel and a frequent convention headquarters, is ahead of the booking pace for the same period a year ago. Yet some groups have asked to reduce the number of rooms reserved.
“We’re trying to be as flexible as possible,” said Brad Logsdon, director of sales and marketing for the hotel.
It’s harder than ever to predict a group’s room usage, Logsdon said.
“Some look like they’ll be short of target and end up OK; others look to be OK and end up short,” he said.
Ahlers of the Anaheim/Orange County Visitor & Convention Bureau said he’s hopeful that the convention business will remain strong, if not stellar.
“We have more (large convention) business on the books than in a long time,” Ahlers said. “We’re framed up pretty well for a good year. But we can’t predict the number of leisure visitors, business travelers or the number of people who come to work at an exhibit booth.”
At a November hotel investment briefing in Long Beach, PKF Consulting Inc.’s Executive Vice President Bruce Baltin said there likely will be six more quarters of decline ahead before things turn around for hoteliers, putting recovery some time around mid-2010.
Reports indicate hotel tax revenue is down 3% so far for the 12 months through July, Ahlers said. The number of rooms used by conventioneers versus initial projections is off by 4%, he said.
That leaves visitor officials hopeful.
The OC sky may be cloudy, but it isn’t falling. Real estate and construction events are scarce, but those related to healthcare, energy and other industries targeted by the Obama administration are likely to fare well this year.
The local hero could be association business. This group is widely credited for saving the business in 2001 and may ride to the rescue again.
Associations typically are required to meet annually and professional associations are the backbone of many industries.
OC association manager Erin Bello said one financial industry group has seen more interest from prospective members at its local events in recent months as attendees look for networking and educational opportunities.
When association members travel to conventions, they typically pay their own way, so are less subject to corporate travel cutbacks.
It’s a sector where OC shines. There are roughly 40 association meetings already booked in the county for this year.
“Association meetings are picking up (rooms) at a healthy rate,” said Steve Pufpaf, director of sales and marketing at the Anaheim Marriott.
Aside from association business, OC attracts several large religious conferences. Some of them cite Anaheim’s affordability, family atmosphere and good safety record as attractive features.
There are other positives that may help OC through the downturn.
Groups often mention the area’s choice of airport options as a plus.
“(Anaheim) is very accessible with fairly good rates and good access from the East Coast,” said Joette Cross, director of meetings for the Denver-based Financial Planning Association, which is due to meet here in the fall.
The location also is well known internationally, which helps bolster global attendance, Cross said.
Disneyland is a big draw for the meetings market and has already ramped up its recession engine to drive more business to its hotels. Disney Meetings and Disney Institute programs provide opportunities for groups to tailor a program to their budgets.
“We’re leveraging Disney assets to the benefit of the meetings customer,” said Robert Donahue, director of groups and conventions for the Disneyland Resort.
There are a few things that could dampen enthusiasm.
Companies are pulling back on corporate retreats after a public flogging of American International Group Inc., which hosted an expensive retreat at the St. Regis Monarch Beach last fall shortly after receiving federal bailout money.
Partly as a result of that fallout, “resort” has become an unwelcome word in the corporate board room, planners said.
“Any place you go that deals with tourism, AIG comes up,” said Jack Kyser, founding economist for the Los Angeles County Economic Development Corp. “It probably will for a couple of years.”
Some resorts admit group business has been off slightly, but most are confident it will return.
“It’s a compelling destination for both leisure and corporate (business),” said James Bermingham, general manager of the Montage Resort & Spa in Laguna Beach. “It will stand the test of time.”
Airlines were a big concern last summer as Los Angeles, Las Vegas, Oakland, Phoenix, San Jose, San Diego, Portland and OC airports suffered big cutbacks in airline service. Planners worried that the cuts would result in higher fares.
“Members will stay home if fares are too high,” said one association planner on a meetings networking Web site.
Passenger traffic at John Wayne Airport was down 10% through November to 8.3 million passengers compared to 9.2 million for the same period in 2007.
Travel spending is expected to grow just 1.4% this year, compared to 6.3% in 2008, according to the U.S. Travel Association (formerly the Travel Industry Association) and the Department of Commerce. That might affect budgets for the next few years if the falloff results in lower hotel room taxes, which help fund the Anaheim/Orange County Visitor & Convention Bureau. This year, the bureau’s budget is $7.5 million.
The bottom line is that this recession makes forecasting a challenge.
Kyser said OC’s meetings and conventions industry is probably poised to come out of the recession relatively unscathed because of its package of hotels near the convention center and the lure of Disneyland.
Hilton’s Logsdon agrees.
“We’ll have to pull out all the stops (this year), but it’s not mission impossible,” he said.
