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Conference Centers Staying Power
in a Challenging Environment
by David Arnold and Dana Ramus, November 2003

PKF Consulting, in conjunction with the International Association of Conference Centers (IACC), has recently completed the 2003 edition of Trends in the Conference Center Industry – North America. This 78-page report presents a wide variety of operating and financial statistics, as well as commentary on current critical issues. 

The conference center industry is holding up rather well, despite the on-going problems with recession, air travel and lingering "war effect." The best conference center performers for 2002 were those properties that benefited from the insulating effect of demand from a small number of large users. These include most university centers, corporate centers, and those open market centers with one or more contracted corporate customers. Although certain industry segments, like technology, are generating much lower volumes than in the recent past, other segments, like pharmaceuticals, are still healthy. 

Compared to their hotel counterparts, this specialized sub-segment of the lodging industry has generated higher revenues and operating income on both a per available and per occupied room basis. In this era of specialization, purpose-designed-and-operated conference centers appear to have an established clientele.

Revenue

Various types of conference centers are more adept at generating higher total revenues per occupied room. As expected, resort conference centers generate the most revenue per occupied room, primarily attributed to their recreational amenities and higher percentage of double occupancy (33.7%),as many conference attendees bring their spouses to resort environments and because resort conference centers accommodate a greater percentage of leisure travelers. Corporate owned conference centers generate the lowest revenue per occupied room, as their primary function tends to be the support of corporate training and conference needs. However, many corporate conference centers do actively solicit external business to defray operating costs when not used by their corporate owner.
 

Source: PKF Consulting

Executive conference centers were able to maintain, and even slightly increase, their per occupied room revenues, while their full service hotel counterparts experienced a decrease of 4.4 percent. Resort conference centers followed the resort hotel trend of revenue declines.

Unlike hotels, where occupancy and average rate are the primary performance measurements, conference centers are more aptly evaluated on the basis of their total revenue stream. Average room rates are an internal function of an allocation of the Complete Meeting Package (CMP) Rate, with many conference centers also attracting a number of day meeting attendees. Whereas conference center occupancy rates are typically lower than those for hotels, the revenue generated per guest tends to be higher and operating profits are more efficient. This is due to conference center operators working in a more closed system than their hotel counterparts, which allows conference center operators to more effectively anticipate their staffing and food purchases. The following charts illustrate how executive and resort conference centers fared in both 2001 and 2002, compared to full-service and resort hotels.
 
Changes in Total Revenue Generated Per Available Room
Source: PKF Consulting

Executive conference centers, which generate 51 percent more revenue per available room than hotels, essentially maintained their 2001 revenues in 2002. In contrast, full-service hotel revenues declined 5.3 percent. Resort conference centers revenue for 2002 declined 7.4 percent, significantly more than the resort hotel’s 5.6 percent decline, but still managed to achieve 31 percent more revenue per available room than did hotels.

Operating Profits

In terms of operating profits per available room, resort conference centers are the most profitable, primarily due to their revenues from recreational amenities and associated events. Executive conference centers are the next most profitable, followed by corporate and college/university centers, respectively. All conference centers suffered a decline in operating profits in 2002 compared to 2001, with the exception of corporately owned centers, which actually experienced profit growth. The decline in profits can be attributed primarily to increased fixed expenditures such as insurance rates, which have increased significantly.
 

Source: PKF Consulting

 
Change in Operating Profits Conference Centers and Hotels
Source: PKF Consulting

In terms of operating margins on a percentage basis, conference centers lag behind hotels. Thankfully, however, owners do not bank percentages, and its dollars that count. 

In summary, given all the economic woes, travel decreases, and rising expenses, conference centers have outperformed the other hotel types in general. Meetings and conferences continue to be held, despite technological advances and travel concerns. The conference centers’ formula for success is the ability of this segment to provide a distraction-free business environment conducive to the serious business need of Corporate America. 

To purchase a copy of the 2003 edition of Trends in the Conference Center Industry – North America, please visit the PKF Consulting website at www.pkfonline.com or call (215) 563-5300.

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Dave Arnold is an Executive Vice President of PKF Consulting and is located in the firm’s Philadelphia office. He also serves as Financial Consultant to the IACC Board Of Directors. Dana Ramus is a Vice President in the PKF Consulting Philadelphia office and has conducted numerous operational and financial studies on individual conference centers.

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Contact:

Mark Woodworth
Executive Managing Director
The Hospitality Research Group
3340 Peachtree Road Suite 580
Atlanta, GA  30326
(404) 842-1150, ext 222

Robert Mandelbaum 
Director of Research Information Services 
The Hospitality Research Group 
3340 Peachtree Road
Suite 580 Atlanta, GA  30326
(404) 842-1150, ext 223

Also See: Conference Centers Hotels Outperforming Rest of Hotel Industry / PKF Consulting Study / Aug 2003
Conference Centers Adapt to Changing Environment / David Arnold / PKF / Sept 2001
Operating Profits for the Average U.S. Hotel Dropped 9.6% in 2002, This After a 19.4% Decline In 2001 / PKF Consulting - HRG Annual Hotel Trends Report / April 2003
Hotel Benchmarking Revisited; Bottom-Line Comparisons Among Similar Properties Are the 'Bottom Line' / May 2003


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