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The news this week that PCMA was acquiring Corporate Event Marketing Association (CEMA) might be the first of many similar merger and acquisition announcements that will be made in the coming months and year according to industry watchers.

PCMA’s official statement about the purpose and timing of the merger pointed to the COVID slowdown. “The pandemic has impacted the events industry at all levels and has been challenging in many ways. During challenging times, you are often forced to think differently, think about new opportunities, and a new path forward.” The same logic could be true for many other associations, DMCs and hotel properties.

Read more about state of the hotel and events industry.

Ripe for Buyouts

Smart Meetings asked for context from Chris Meyer, who retired from his job as vice president of global sales for Las Vegas Convention and Visitors Authority in October after 20 years there to start his own global merger and acquisition consulting company ChrisMeyerGlobal. “The devastating impact of the pandemic makes the industry ripe for buyouts after a frothy 2019,” he said.

Chris Meyer
Chris Meyer

First, he put the market for buying and selling in perspective. A year ago, companies were selling at nine and 11 times earnings before interest, taxes, depreciation and amortization (EBIDA), sometimes higher. “Unless there is an outstanding growth opportunity or some other factor at play, that is a lot to pay, so few deals were getting done,” he explained.

Fast forward to today and the selling price is down about 300 percent with price tags about three or four times earnings. “That is when you know the market has reached the bottom and is a reflection of the reality that a lot of associations, hotels and event companies are really hurting right now,” he said.

Associations

For many associations, events generate 50-90 percent of their annual revenue. Add to that harsh reality the fact that IRS guidance encourages nonprofits to not keep more than two years of operating expenses on the books, and most only have enough in reserves to survive 16-18 months without new revenue. Virtual events are not filling the sales funnel and the community is not getting the value they expect and/or they can’t afford dues because their industry has been impacted and they lost their job. Pile on the possibility that major sponsors may no longer able to support them and you have a precarious situation. “It is not their fault. No one saw COVID coming and it would have been tough to plan for this scenario. But they are desperate,” he concluded.

Read more about PCMA President and CEO Sherrif Karamat. 

In a world where an estimated 27,000 associations currently serve up education, networking and professional development, Meyers predicts there will be a lot of consolidation in the first quarter of 2021 as many start running out of cash and larger competitors absorb niche groups.

He also suggested that some private equity companies and event production companies could buy the event arms of associations that have powerful brands to give the group cash for a product that could show returns in future years. The good news is that if it is a partner with deep pockets, that could breathe new life into the event.

“Some groups will be looking for a lifeline. Some will just go out of business,” he said.

CVBs

Also at risk are convention and visitors bureaus, many of which laid off as much as 70 percent of their staff at one point. “DMCs were hit big time,” Meyers said. Their revenue streams dried up as transient occupancy taxes dwindled, hospitality members and city budgets struggled. “Their role may be changing as the business model shifts to advocate for the local community and overall business development,” he surmised.

One big ugly secret is that airlines have reduced the number of planes flying. Six months from now, when a vaccine is widespread, they won’t be able to just snap their fingers and put planes back in the air. “Smart DMCs are advocating now for lift to their cities. Travel will come back, but it will look different,” he said.

Hotels

Meyers warned of massive carnage to come for hospitality properties. A lot of hotels simply won’t open again or won’t open under their existing flag. Some new, highly leveraged properties might not open for five years. Many will be purchased at those new, lower prices, by investment banks and even SPACs (special purpose acquisition companies also known as blank check shell corporations).

new survey of 1,200 members by American Hotel & Lodging Association (ALHA) found that seven out of ten (71 percent) will not be in business in six months without further federal assistance.

“Now it is a waiting game and an opportunity for folks picking up assets,” Meyers concluded.

The post A Year of Hospitality Consolidation on Horizon appeared first on Smart Meetings.