By Cate Banfield, Director, Event Solution Design & Strategy, BCD Meetings & Events
Once upon a time a tier system was established to describe the types of markets in the meetings industry. Each was described based on its desirability as an event destination and not as a formal industry or ratings designation. It used to be that a Tier 1 market was considered a premier event location based on a set of general but measurable attributes. This included criteria like the largest convention cities, non-stop and international airlift, hotel inventory and public transportation.
As time passed, meeting planners added other, subjective criteria like the quality and services of the venue, discounts and perks and personal experiences. Tier 1 cities became easier to spot, extra desirable and more costly to use. Despite higher prices and restricted capacity, these markets held a certain cache and a three-tiered class system was born. From then on, Tier 2 and Tier 3 markets struggled to gain awareness, let alone notoriety, as meeting and event destinations.
Market dynamics and attendee engagement have changed the metrics used to define a successful meeting. Today, total value and curating the attendee experience are as paramount to planners as the cost, venue and event content. This shift in focus puts Tier 2 and Tier 3 markets back on the proverbial meetings map and, for many, positions them as the “go-to” destinations for meetings.
Here’s why Tier 2 and Tier 3 markets are worth a second look.
You need leverage
Hotels now use more sophisticated, airline-like revenue management tools to finalize contract terms. If preferred hotels have limited supply or refuse to negotiate LRA (last room availability) in top markets, Tier 2 and Tier 3 cities offer lodging and venue alternatives that very much want to be a part of your meetings program. Your influence extends further in these cities where there are new hotels, multiple carriers, over supply, a growing base of business-grade independents and you have the ability to combine meeting and transient volume for preferred pricing.
Hold down costs
Hotel rates are expected to increase between one and five percent for corporate travel in North America, Asia, Southwest Pacific and Latin America. Though the demand for meetings is up, planners remain cautious about spend. They have shortened travel times, moved meetings domestically and rolled multiple meetings into a single event to demonstrate they are buying responsibly. Tier 2 and Tier 3 cities offer alternative strategies to offset capacity shortages and hotels’ reluctance to negotiate discounts. Here, incentives are more plentiful, union workers are more affordable and properties are more willing to bundle ancillaries and wrap meeting elements into contracts for room night commitments.
Space is at a premium
Planners are failing to find space where and when they want. This is true in top cities in Asia where lead times are shortest, in Europe where there are few suitable venues for larger events and in the US where hotel openings are nearing saturation. Tier 2 and Tier 3 markets offer planners greater flexibility and a wider list of strong meeting destinations to support demand. This includes year-round meeting options, multi-year contracts, new convention centers, expanding airline destinations and transportation infrastructure.
Attendee experience matters
The lines are blurring between tiers as planners recognize how pivotal a unique and overall attendee experience are to the event’s success. Second and third tier cities – like Panama City, New Orleans and Budapest – offer the convenience of good airlift, locally-authentic experiences and food, clusters of like-businesses, repurposed (or upcycled) non-hotel buildings or opportunities to give back in a meaningful way that attendees now crave.
Diversify your portfolio
Planners want to hedge against rate fluctuations to stay in budget. This proves challenging when hotel rates are increasing, the worth of chain-wide discounts is depreciating and inventory at your discounted rate is declining. Planners are including Tier 2 and Tier 3 markets to mitigate exposed risk. It’s best to diversify your portfolio with a mix of negotiated rates in primary markets and fixed chain-wide discounts and dynamic pricing in secondary and tertiary markets to mitigate risks in a supplier’s market.
Meet where business is growing
Meetings are under the microscope to ensure events align with the firm’s industry, reflect its vision, are true to its brand and amortize spend to promote the business. This requires meeting planners to also consider any unique or growth factors in their destination decision. Tier 2 and Tier 3 cities often represent the areas of greatest investment, talent concentration, population growth, innovation and business opportunity. It is important to plan your meetings for the Tier 2 and Tier 3 markets where the next waves of growth will be in your industry. This could be Ahmedad in India for start-ups and angel investment, Phoenix, AZ for data centers, Pittsburgh, PA for sustainable businesses and Des Moines Iowa in the Silicon Prairie for technology.
The meetings market is becoming more challenging and increasingly complex. Planners are tasked with arranging more meetings with limited budgets and customizing meetings to deliver greater value for the company and curate a unique experience for attendees. For many, Tier 2 and Tier 3 markets are now the premier destinations in their meetings program. Aren’t these two tiers worth a second glance for your program?
 Advito’s 2017 Industry Forecast