Long Live Live
Hell in a Bucket
When will large-scale events get back on track? Prognosticators who said that leisure would be the first segment to return have been proven correct. As of mid-July, online travel agent booking volume is only down 25% from last year and consistently rising each week.* Business travel initially showed signs of life but has flatlined since Memorial Day. This past performance data on corporate travel from Kalibri is consistent with a forward-looking MMGY survey that only 55%* of business travelers expect to travel for work in the next 6 months. Despite strong rhetoric about reigniting the economy, government travel has proven to be even more skittish staying down 70% from the 2019 volume throughout the summer.*
Group meetings and conventions, however, remain the biggest uncertainty and the hospitality industry cannot return until they do. Pennsylvania extended its ban on gatherings over 50 into 2021*. As of mid-July, hospitality volume remained down nearly 90%, essentially no improvement from the first lockdowns in the U.S. According to CBRE, group business drives 22–24% of overall U.S. hotel occupancy and 33% of profits at upper-upscale and luxury hotels — the pace setters for the industry.* This segment is particularly vulnerable to COVID-19 fears as the very nature is to gather, en masse, and often tightly. While other segments have seen improved interest since the peak of the pandemic (domestic leisure +8pts, domestic business +8pts), intent to attend a conference is only 1pt higher than it was in April. Consumer interest in taking a cruise (+4pts) has also improved, even with the Centers for Disease Control and Prevention (CDC) issuing a total ban on cruising.*
A survey by EventMB* shows that 75% of event planners expect to be back to business in or after Q4*. Reservation booking pace makes this look optimistic. In addition to every hotel and airline company, the CDC and World Health Organization (WHO) have developed official cleanliness standards to set travelers' minds at ease. The Global BioRisk Advisory Council (GBAC) launched GBAC STAR, an accreditation program that assesses cleaning and disinfection practices and infectious-disease prevention. American Hotel and Lodging Association’s (AHLA) “Safe Stay Guest Checklist” specifically requires face coverings in all indoor public spaces, contactless options where available (e.g., check-in, check-out, room service) and asks hotels to reconsider room cleaning during stays. While essential, these new standards have yet to reignite group meetings and conventions. Besides the panacea of vaccine, what must happen for events to resume?
A term that has fallen off since the early days of COVID-19 is “essential travel”. Rebecca Jeffries, Director of Travel and Event Services for Toyota shares her criteria for deeming travel “essential”:*
1. Ensures business continuity
2. Maintains/creates competitive advantage
3. If postponed, there would be significant negative financial or safety consequences and
4. Cannot be conducted by any alternative means.
Hotel sales teams can help nudge business forward by helping demonstrate these criteria. Still though, someone must approve the expense report. Presidents and CEO’s need a nudge.
Big Boss Man
Through July, group meeting cancellations continue to outpace new bookings for each remaining month in 2020. The question of when people will begin hosting and attending events again depends on four non-medical factors.
1. The first factor is simply regulatory. Federal and state guidelines either enable or prevent events from taking place. The guidance changes so frequently and with such little clarity that keeping track is its own obstacle. According to BCG, 31% of consumers want to increase travel but only 21% believe they will be able to do so*.
2. The second factor is CEO willingness. Decision-making on travel has moved up the chain of command with meeting planners saying that the CEO/President is now involved or is the final decision maker 45% of the time.* Bosses are actively weighing the non-financial risks of hosting events or sending employees out. Despite strong words about the need to reignite the economy, booking volumes show that few bosses are heeding their own advice to get their teams back to travel.
3. The third factor is the willingness of the traveler. As Maryland Governor Larry Hogan said, “The recovery will mostly depend on consumer confidence.”* As long as travel recommendations and safety regulations continue to evolve, travel industry employees will remain at home.
4. The fourth factor will be financial. Event producers will not host live events so long as they expect to lose money on them. Many venues, just like indoor restaurant spaces, simply cannot comply with CDC standards or social distancing norms without losing money. The financial factor is also limiting a quicker shift to virtual/hybrid events. Currently, only 2% of planners believe they can match the revenues previously achieved when pivoting to virtual.*
Let It Grow
The financial aspect is where hotels and event producers can positively advance the industry’s return. As CEO Mark Hoplamazian said on Hyatt’s recent earnings call, China is already proving the industry can return without a vaccine.* The overnight explosion of virtual interactions must be creatively leveraged to drive revenue. Those who wait to monetize virtual events risk suffocating slowly while hoping a vaccine will arrive before their business dies. Businesses that figure out how to monetize the hybrid environment of live and virtual will be first to return and gain a sustainable competitive advantage post-pandemic. Monetizing will require tech and event designs that benefit from the increased audience size virtual events enable.
Between December and April, Zoom grew from 10 million daily participants to 300 million.* Much of this volume; however, has replaced the normal daily activities that took place in offices and hallways, not major events or conferences. A June survey of 1,700 event professionals by EventMB shows that roughly 1/3 of events have pivoted to virtual while the other 2/3 have been canceled or postponed.* When it comes to big planned events, the big wave of virtual has yet to come.
As the May 8th travelINNsights article discussed “Cleanliness and Pandemic Ethics”, the Zoom-disruption will threaten types of meetings differently. Internal company meetings that previously required travel are most likely to be replaced with web-based apps, particularly small team gatherings where rapport already exists. In-person meetings that convert sales leads and demonstrate ROI will continue to get approved by the C-Suite. Large-scale conferences and trade shows are at the epicenter of uncertainty. Buyers and sellers must be able to develop relationships and perform product demos effectively at a larger scale through virtual interaction. *
A survey by Bizzabo shows that 87% of the largest event organizers will run virtual events in 2020.* Roughly 25% of spending on event production has gone to AV in the past. A conflict is brewing for event producers to deliver better experience through technology while budgets are tighter. Hotels and event venues may see former profit-generators (like catering) suffer as budgets shift to support the increased AV needs. 51% of meeting planners say they have been executing AV set-up and IT with internal company resources and 41% say they will be outsourcing more AV in the future to execute hybrid/virtual events.* Hotels may need to reverse the past decade’s trend of outsourcing AV to bring a rising profit generator back in-house.*
Hotels reasonably fear getting cut from the virtual delivery process and must position themselves as the primary hub within emerging meeting models. This means that in addition to the traditional offering of event space, catering and accommodations, hotels may need to think of hosting group meetings and conventions as broadcast service providers. Sales organizations must ease the contracting for hub and spoke-style meetings. AV and meeting technology can no longer be an outsourced afterthought. Board rooms and ballrooms must enable virtual product placement from sponsors so event planners can draw on new sources of revenue. Hotel loyalty programs that best enable this evolution will gain exposure to larger audiences than hotel capacities have ever allowed.
I Need a Miracle
Increasingly, consumer confidence is recognized as the key to economic recovery. As Kelton research illustrates, people need to feel ready to resume their lives but rely on the community around them to say it’s socially acceptable to do so.* A BCG study showed that 43% of Americans believe there will be another lockdown in the next 12 months compared to just 23% surveyed in China.* In the nearly opposite way of asking, 50% of Chinese participants agreed businesses should reopen as quickly as they can versus just 32% surveyed in the U.S. In taking to the skies, 68% of Americans versus just 45% of Chinese participants would be concerned about traveling internationally.* With the U.S. leading the world in COVID-19 cases, this is an odd reminder that consumer confidence is not always logical considering the virus is more likely to be contracted inside the U.S.
CES, the world’s largest trade show that annually welcomes over 175,000 global visitors to Las Vegas in January, is a bell-weather of the event world. CES recently determined that a fully virtual version will take place in 2021 without in-person participation. U.S. occupancy recorded just one week over 50% since March. While occupancy in the U.S. never reached the lows of China or Europe, the American industry has plateaued in the 40% range while China’s continues a steady rise reaching 67% and Europe’s trajectory about to pass that of the U.S.*
