Ethics Trends in the Meeting/Convention Industry There

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 to subsidize convention centers either in the building process, with tax breaks, or by providing a regular supply of conventions, because of the additional income that the local area receives as the result of the convention. 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 convention business is going to have to see its costs reduced. Indeed, this means for managers that they need to find a way to do more with less. Customers expect more, and managers in the business need to give them more, but they will also be competing on price. With margins squeezed, profitability is going to be dependent on strict cost controls.

Another implication is also related to pricing. It may come to pass that the convention itself must be a loss leader. For the hospitality manager, conventions have been a great source of profits because of the way that individual costs are lumped into aggregated pricing, reducing the ability of buyers to understand exactly what they are paying for. However, at this point, the hospitality manager may need to use the convention as a loss leader and hopefully earn back that money elsewhere, taking advantage of the captive audience and discretionary purchases.

There will also need to be more creative marketing in order to bring people in. Major convention clusters (Orlando, Las Vegas, etc.) have been able to succeed by being a destination foremost, and then having the individual convention centers sell themselves after that point. This approach can work wherever a cluster exists, but it requires a high level of cooperation. Local officials and competitors all need to work together. In addition, there needs to be airline support. Remember that one of the trends is a long-tern concern about higher fuel prices making flying to conventions less desirable. If there is some cooperation between destinations and airlines to help manage connections and costs, this could pay off in the long run.

Ethics

There are few ethical issues to consider with respect to these trends. This is business, so there is no worry about competing vigorously to attract business. If your convention center puts somebody else's out of business, that is just part of being in a competitive business, and such shakeout is expected eventually due to overcapacity in the industry. The issues identified simply do not have any ethical dilemmas.