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Strong decade for meetings sector
Monday, February 23, 2009 By Catherine Chetwynd Industry Review – 1999 to 2009 The past 10 years have been good for the meetings industry. The economy has been strong, ensuring consistent and heavy demand for venues, and rates that have risen way above the level of inflation. According to Grass Roots HBI research, rates increased by 5% globally in 2003, with another 5-10% leap every year from 2004 to 2007 inclusive. To balance this, a healthy stream of new facilities has come on line and although this has not put serious pressure on tariffs, it has certainly kept operators on their toes, resulting in better levels of service and a more creative approach. For those who got it right, the rewards have been high. However, prices are subject to more than supply and demand. The rising cost of food in 2008 made yield management a nightmare. “We have had to reintroduce supplements on particular dishes,” says director of One Great George Street Gary Payne. “I took them off when I arrived here 3½ years ago but beef and some fish are expensive now.” Conversely, fluctuations in exchange rates have had a positive effect. “Since the beginning of the year, both sterling and the euro have fallen against the dollar, with sterling’s drop more dramatic,” says sales director for SECC Ben Goedegebuure. “Accumulatively, this has made us 43% cheaper than we were two years ago. It presents an outstanding opportunity to seize and grow market share in the North American market and allows us to challenge perception issues the US market has had with UK venues and suppliers.” Procurement The decade has seen the increasing involvement of procurement in the purchasing of meetings space, bringing a more hard-nosed element to negotiations. At first, this was a double-edged sword. It may have put meetings budgets under the microscope and created savings for companies with a high meeting spend but it also drove a coach and horses through relationships. However, once the industry realised that procurement was here to stay, leaders in the sector took a more strategic approach, resulting in a better mutual understanding and more productive relationships. Negotiations used to be conducted more on a wing and prayer basis than incisive strategy. “But as corporates have become more aware of their spending, proposals have had to be squeaky clean, with no surprises in the bill,” says director of event sales for Royal Lancaster hotel Medina Peters. Lack of policy in meeting buying exacerbated the problem. “A travel or event manager was responsible for running a large department and individuals either went direct or chose an agent on personal relationships, how good they thought the company was. It was quite subjective,” says Grass Roots HBI’s managing director Des Mclaughlin. “The meetings market was the last area for procurement to go into and it became a force some three years ago,” he says. “Procurement people buy in a different way. They are more interested in what a company can deliver to them – what services are included, management information, cost models, putting in booking processes throughout the company. They want to understand how you will reduce cancellation fees and associated costs and how that can be linked up globally throughout the company.” This brings an advantage for venues. “Instead of quoting for one specific event, we are now quoting for four or five events per year,” says Medina Peters, which has led to better diary and yield management. “We offer a better rate for less popular times of the year. Ten years ago, the summer was quiet and we needed a minimum number of staff but now, there is no real peak and trough,” she says. But the picture is still not perfect. “Clients want to negotiate terms & conditions and rates but are not willing to commit to any levels of business,” says MICE sales director of Accor Hospitality Dana Lewis. “For transient business, they can say they have 1,000 rooms going into Paris but on the meeting side, it is difficult to identify where business is going and this makes it hard for a hotel to guarantee space when there is no pattern.” Senior purchasing manager, Europe, for E&J Gallow Winery Hannah Bodilly is starting to collate meeting information. “I am using a meeting card to see what bookers are doing. To date it has been undisclosed because it is part of T&E,” she says. But she is still in the minority. “The last bastion is to put accommodation and meeting spend together to negotiate better rates,” says Des Mclaughlin. “We are still a long way from understanding the total cost of a meeting and most companies are trying to get UK spend under control or to adopt European policies.” A tidy package Procurement’s desire for transparency has led to all-in pricing, a far cry from the days when a meeting manager bought space and then paid extra for just about everything else. “We went to the market on the basis of wanting a package,” says head of business services for PwC Mark Avery. “Around 90% of what we buy is the same, and we wanted free tea and coffee, lunch, flip charts and projectors. Now that is the norm.” The way bookings are taken has also changed. “We are working more as a brand on the sales side,” says general manager of Marriott Grosvenor Square Kevin Kelly. “Customers call one number in a corporate sales office and we can cross-sell within the brand, so if there is no availability in your requested Marriott, we can sell another venue.” That central system also has advantages for the customer. “There is now a standard package across groups, by brand or by group, and we set out to deal with space on at least a brand basis, if not group wide,” says Mark Avery. “We have a single point of contact and we leverage spend, including transient accommodation, and get well defined contracts, so we don’t have to negotiate every time with preferred venues.” Terms & conditions T&C has long been the thorn in the side of many meeting planners. Until recently, they were drawn up by lawyers to protect venues from every conceivable eventuality and were then imposed on buyers. And when an event was cancelled months in advance, venues often made more money on the cancellation than they would have on the event because they charged for food and extra staff they had yet not paid for. However, these days, many venues charge for loss of profit rather than loss of revenue. And although they write cancellation charges into contracts, many state that if they are able to re-let the space, they will not charge. Industry bodies are playing a positive part in all this. HBAA has a code of conduct to cover contractual relationships between agent, client and venue, plus a hotel and venue charter; and Meetings Industry Association (MIA) provides guidelines and standards for members. “Booking terms and conditions must be simple, clear and publicly available,” says MIA’s chief executive Jane Evans. The association launched an accreditation scheme for member venues in March 2007. “It is compulsory and is designed to give buyers confidence,” she says. Location, location, location Until the pound sterling tanked against the euro, meetings and conferences in Continental Europe were the norm. “In 2000, there were very competitive rates even in some 5-star deluxe properties such as the Hotel Arts Barcelona and Four Seasons the Ritz Lisbon, where we secured room rates of €142 and €148 respectively,” says Grass Roots HBI’s international conference director for Robert Bottomley. In the same year, new Central and Eastern European destinations such as Prague and Budapest became of interest; and the Grimaldi Forum opened in Monaco. Business cities such as Geneva, Paris and Frankfurt tended to be used for training, with company away days heading for southern Europe and the sun. Grass Roots HBI’s figures show an increased interest in Athens in 2001, possibly due to the 2004 Olympics, but long-haul travel did not feature large due to 9/11. The end of 2002 shows a turnaround, as corporate confidence starts to return. “Long-haul locations such as Singapore and Hong Kong were back on the radar,” says Bottomley. New York followed suit in 2003 and 2004. “Clients wanted to support the city,” he says. “By 2006, Dubai had become a daily requested destination, especially for our investment banking clients and it was a record year for international business with more than £12 million venue revenue confirmed,” he says. “And UAE gained recognition as a major emerging market – many corporates opened offices there.” A decade ago, most meetings were held in hotels or conference centres and the very idea of using a museum, a train or a boat, let alone a Ferris wheel, was laughable, not to say impractical. Now, the popularity of the Natural History Museum, Bateaux London and the London Eye says it all. Figures from Unique Venues of London, which embraces 69 locations, including the Natural History Museum, suggest this is true, with turnovers that have increased from £31 million in 2005 to £48m in 2007, representing a 54.8% increase and backed by a 6.8% growth in venue membership. Portfolio director of Confex Group Duncan Reid praises Excel. “It changed the events industry when it opened in 2001,” he says. “Earls Court, Olympia, NEC were all running in-house food concessions, the food was shocking. Excel had branded outlets such as Costa Coffee and that forced other venues to go to high street brands.” In addition, venues up and down the UK have regenerated industrial towns and cities. “ACC Liverpool suddenly made Liverpool a conference or meeting city. It has had phenomenal events, from the MTV music awards to a fire fighting show,” says Reid, who highlights venues in Manchester, Yorkshire and Wales as having a similar effect. And sporting venues are also tossing their hat into the ring. Twickenham, The Brit Oval, Lord’s Cheltenham and Doncaster racecourses and Silverstone have announced plans to develop or are already buildings hotels and state of the art business and conference facilities, according to PwC Hospitality Directions Europe September 2007. Sweetmeets The format of meetings has also changed beyond recognition. The CEO no longer waffles on for an hour and a half at the annual conference and instead, interactive formats rule the day. Audience involvement through keypads, panel discussions with Q&A and Wiki workshops that allow delegates to form a community on line before the event are just some of the options. This puts additional pressure on venues to move with the times and in response to that, Novotel London West has opened Eureka, a creative room, halfway between lounge and meeting room with relaxed seating that can be raised to table height for more formal gatherings. CSR The cynical have suggested that with the pressures of the current economic climate, CSR will sink on the priority list but it is now an inherent part of most companies’ thinking. “I don’t think it will play as big a part as in the past two years because everyone is doing it,” says Duncan Reid. “CSR underpins the credentials of an event.” Ten years ago no one would have worried about whether the tablecloths were woven by slave-driven six year olds in Asia. Now a venue could lose business over it. Similarly, “We have received some RFPs that state unless you have a front entrance with disabled access, don’t bother to send the form back,” says Gary Payne. The future Forecasts for 2009 vary. David Clarke, chief executive of Best Western believes people will still need to communicate. “They will meet to develop companies and aspirations,” he says. However, frugality will rule, with a move away from experiential events towards a minimalist approach. “Meetings will go back to their original functionality,” he says. “And they will be predominantly in hotels because companies will get meeting facilities, bedrooms and food under one roof and within budget.” And as is traditional in an economic downturn, lead times are getting shorter. “We can now get a conference for 400 people that confirms one week in advance,” says UK head of MICE, Starwood Hotels & Resorts Stephen Walker. Grass Roots HBI’s experience at the end of 2008 suggests a tighter 2009. “Rates were held at the beginning of 2008 but there were reductions of up to 20% in Q3 and Q4,” says Robert Bottomley. “And from October onwards, there were some last-minute cancellations in 2008 and numerous cancellations for 2009.” “It will be a buyer’s market with as much as 30% reductions against rack – and offered year-round,” he says. “And we are noticing a trend in clients’ returning to the UK due to the euro exchange rate and perception in the marketplace.” Catherine Chetwynd worked for Executive Travel magazine for 12 years before going freelance and now specializes in business travel, conference, incentive and exhibition writing. She also writes for The Times and the Financial Times.
For copies of the Grass Roots HBI Meetings Industry Report 2009 please call Lisa Maddix on 020 7924 3663 or go to www.grassrootshbi.uk.com/meetingsreport.html Copies cost £95 + VAT. Corporate travel buyers can apply for free copies.
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