Ethics
Trends in the meeting/convention industry
There are a number of trends in the meeting/convention industry. The industry struggled with respect to demand during the recession from 2008 onwards. While there are some signs of recovery, the growth in the industry remains sluggish (Chen, 2012). This slow recovery is a problem, given that in 2008 at the beginning of the recession, there was a high likelihood that the industry was already suffering from overcapacity (Detlefsen & Vetter, 2008).
The rapid growth in the number of convention centers in the United States in particular has resulted in overcapacity, and this has increased the intensity of competition in the business (Davidson, 2008). The competition is necessary, because convention capacity is a perishable good -- a day of sitting empty is revenue that is lost forever, and fixed costs are still being incurred. This drives a high level of price competition in particular, since other attributes of the convention center are essentially locked in once the facility has been built. The price competition may come from direct pricing, but also from the inclusion of different perks for free that might have been charged for previously.
While there is considerable price competition in the market, and undoubtedly some convention centers being effectively shut down as the result of slumping demand, meeting planners are also feeling the budget crunch as clients cut their budgets for both the meetings and for the planning as well. In the U.S., meetings planners are expected to achieve more with the same budget (Davidson, 2008) so there is pressure from planners on convention centers, something that will only fuel the intensity of competition among convention centers.
Where the industry is struggling with overcapacity and there is considerable competition for convention revenue, governments have at times become involved in the convention center business (Davidson, 2008). They are sometimes willing...
There is considerably competition between governments to attract convention business, and that leads to government intervention, which distorts the economics of the business and therefore has contributed to some of the overcapacity in the industry. The end result is a feedback loop where more governments are forced to intervene, which only distorts the economics of the industry further.
Braley (2008) notes that even where demand has increased, corporations in particular are stingier. They are becoming willing to use high-end properties again -- sparking the luxury market -- but they have also remained tight-fisted with their money. The result of this is that even at the luxury level of conventions and meetings, there is a need to be cost-competitive, and that revenues per event are not as high as maybe they once were.
Another trend that is concerning for people within the industry is the higher price for fuel, which drives up the cost of meetings and can also drive down attendance. There is significant concern that rising fuel costs will constrict growth in the industry even when the overall U.S. economy begins to improve. There is little indication, especially in the U.S., that conditions for internal travel are going to improve, given the various security issues at airports, lack of viable discount airlines and general horridness of domestic air travel.
Implications
For hospitality managers, there are implications to these trends. The first implication is that when all the trends are put together, there is still significant overcapacity in the industry and intense competition. Firms want to get back into the market with new demand, but are having a hard time committing top dollar. Thus, for those in the industry, the…
