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The NEW NORMAL

Author: Sandi Cain
November 2009

Features

No-Nonsense Meetings—Here or Headed Your Way
Although the furor over meetings has subsided, the future remains cloudy. Meeting budgets have been slashed, corporate travel restrictions continue to impact event attendance and companies that proceed try to stay under the radar of media attention. But the show must go on, and companies and associations appear ready to move ahead in 2010.

In the months since meetings took a media beating, cancellations have slowed and organizers are tiptoeing back into the lukewarm market. In a spring survey by White Plains, N.Y.-based StarCite, a leader in meeting management, meetings procurement and online event registration, 75% of respondents said they’d spend the same or more on meetings in the second half of 2009 as they did in the first half. But 70% are meeting closer to home, and 43% said backlash against corporate meetings had made them a bit skittish. “Things won’t bounce back, but they will bounce forward,” said Terry O’Brien from Chicago-based Hospitality Performance Network.

Planners know next year won’t be like the good ol’ days—those days may be gone for good. But they also know that meetings have to happen for business to get done; they’ll just look a little different. Call it the “new normal.”

In the new normal environment, meetings are dressed in a no-nonsense, austere fashion. They are sensible, practical and responsible, and emphasize value, convenience and service. They are smaller, closer to home or in second-tier cities (see our small meetings story on page 44). They may include a virtual component for presenters to save on travel costs. They are likely to face far more scrutiny—at least in the corporate sector—before proceeding. They may even include the word “resort” if that means one like Disneyland, where complete meetings packages offer leadership training, in-park receptions, airport transportation and hotel accommodations. And they’ll be booked with less lead time and smaller budgets.

“The biggest change is budget cuts that are almost in half,” says Cindy Y. Lo, president and owner of Red Velvet Events Inc. in Austin, Texas. According to a survey by the National Business Travel Association, 36% of business travelers say they’re under company mandates for cheaper air travel and cheaper hotels. Eighty-five percent of corporate travel manager respondents said their companies had reduced travel spending since last year.

For many, meetings at high-end resorts are no longer an option, although nonbranded and local properties may be considered. According to the International Association of Professional Congress Organizers, the healthcare industry has been told that they shouldn’t even consider using resorts or Five-Star properties or bringing spouses along to pharmaceutical meetings. Instead, practical is the new luxury. In a 2008 study of the luxury hotel market by W Market Metrix and The Leading Hotels of the World, Sofitel was named the most practical luxury hotel brand; Kimpton Hotels received that honor for the upper upscale hotel sector; and Staybridge Suites got the nod for the upscale category.

Phrases like “TARP regulations” are part of the new normal vernacular. In a survey conducted by MPI with the U.S. Travel Association, 91% of meetings organizers said they’d made cutbacks simply due to the possibility of government guidelines, even if their companies weren’t TARP recipients. Brian Hollien, vice president and general manager of Morris Meetings in Salt Lake City, says clients who work with any government program—including the SBA—have been concerned about the appearance of holding meetings. One client cancelled a program simply because they didn’t want to hold a meeting at a resort when their own clients were struggling, Hollien says.
Yet the new normal doesn't look the same for every market.


Corporate Caution

Corporate groups are doing their best to be cautious with their funds. In lieu of a hosted cocktail reception, attendees may find a wine bar; dinner may now feature food stations instead of sit-down service. Big-ticket entertainment by and large has gone the way of the dinosaur. Instead, some planners are turning their attendees into the entertainment through things like karaoke contests or American Idol-style programs featuring attendees (but minus Simon).

Private companies aren’t subject to as much public scrutiny, but they’re still careful. “They’re cautious, not flamboyant,” says Kathryn Jurgensen, president of Premier Meetings in Irvine, Calif., whose client base is primarily from the private sector. She’s substituted convenience for amenities that are no longer free, making the arrangements for airport transportation or spa appointments even if attendees have to pay out of their own pockets. “They don’t care if they have to pay as long as someone else is setting it up,” she says. Her clients also are publicly stating the reasons for having any meeting to avoid misunderstandings.

Different details are the focus at the Fullerton, Calif. facility of ThalesRaytheonSystems, a U.S. and French maker of air defense systems. “We use local MPI suppliers to get the best rates for hotels, transportation and other vendors...bring our own A/V equipment and IT staff, and use our own drivers whenever possible,” says Ree Taylor, manager of customer relations.

Association Attrition

Associations face a different challenge. Most are required to hold an annual member meeting, and most are heavily reliant on member dues for revenue. According to a winter survey of 8,500 members by the American Society of Association Executives, 57% of those whose association dues are paid by employers said they’d drop the membership if the employer stops paying. Another ASAE study showed that associations expected a 13.4% drop in member revenue this year.

“Associations are scaling back dramatically, cancelling or going to less expensive destinations,” says Hollien of Morris Meetings. Two clients opted for Las Vegas instead of Hawaii or Florida; another moved a program from the South Pacific to a U.S. destination.


Invisible Incentives

Incentive meetings—the scourge of the public eye in the post-AIG era—aren’t off the table, but often have more strings attached for potential attendees. Maritz Travel says its incentive business is off by 25% from last year, even though the cost is typically lower than cash compensation for top performers, the company said.

There are exceptions. One of Cindy Yo’s clients announced an incentive trip in the midst of the outcry over the AIG event. The Mexico incentive trip—part of the compensation package for the client’s sales staff—was held last June. Yo says there were some subtle differences from past events: the sales staff had to qualify for the incentive for the first time, and the CFO signed off on every expense. In addition, each attendee was given a stipend amount to spend. “Any excess was out of pocket,” Yo says. The trip was well received, however, in part because it showed the company kept its word about staging such trips as part of employee compensation. “We were fiscally responsible even though we spent money,” she says.

That kind of story may encourage other incentive groups to move forward. Jurgensen, of Premier Meetings, says the industry shouldn’t hide from incentives or resort meetings that work in terms of motivating employees. “If someone is going to increase sales by $1 million because they went to a spa during an incentive, I want (that person) on the massage table,” she says.

Storm Clouds Still on Hotel Horizon

In the new normal environment, planners and hotels are finally working as partners to retain business while adjusting to the recession reality. Rate cuts, attrition adjustments, rebooking options and other creative planning tools have helped both hotels and groups stay out of the red. That’s the good news.

The bad news is that hotels are continuing to face their own financial challenges. After several years of rising values, rising rates and rising profits, some hotel owners are as upside down in the real estate market as homeowners who suddenly owe more than their homes are worth. “Any hotel property refinanced between 2006 and 2008 that has the usual levels of debt is possibly a candidate for bankruptcy,” says Don Wise, managing partner of Johnson Capital in Napa, Calif. He says hotels aren’t expected to fully recover to 2007 levels of profitability until 2013. That might be a challenge for planners who want to lock in future space.

HPN’s O’Brien already had to rebook one group’s 2010 conference—twice. The first hotel went into bankruptcy before it was complete, and the client lost their deposit with the bankruptcy. (Until then, O’Brien’s company was getting regular completion updates, and the company had done as much due diligence as it could, she says.) The second hotel also ran into financial difficulties.

Going forward, Wise says, planners may have to rely on booking into branded properties for the time being, because those hotels have a higher probability of retaining the brand no matter what happens. O’Brien says the biggest question mark for 2010 is that no one really knows what to expect at their events. “It’s not just one group not picking up its room block, it’s everyone,” she says. Her clients are waiting to see how their events do in the third quarter this year before they decide on plans for 2010. That could be an iffy proposition.
“2010 doesn’t look to be a comeback year, but 2011 is already looking promising,” Hollien says.

A Fickle Future?

There are some indications that next year may still bring uncertainty, but that also provides planners an opportunity to shine. An increase in regional meetings may mean more business for planners, although the events will be smaller. And smaller budgets give planners a chance to show their ability to save money and still stage a quality event that meets attendees’ and management’s expectations.

“It’s a new business landscape, and if you can’t shift perspective and have a new attitude, you’ll be out of the loop,” Jurgensen says.

Also, says Geoff Freeman, senior vice president at the U.S. Travel Association, all members of the meetings industry need to actively hammer home the business value of meetings. “The moment our industry takes its foot off the pedal, the car will again veer off the road,” he says.


Tech Talk

Virtual Meetings
Budget cutbacks and public scrutiny of meeting expenses have led to a new look at virtual meetings options. According to a May 2009 survey by White Plains, N.Y.-based Worktopia, 79% of businesses said holding a meeting with both in-person and virtual components is important to them for next year. Already, 50% of business travelers use conference calls to complement face-to-face meetings, while 41% of the respondents complement in-person meeting with videoconferencing, according to the National Business Travel Association.

Telepresence
New technology like telepresence is gaining ground. Starwood and Marriott are among the hoteliers adding telepresence rooms in key cities around the world. They’re hoping that this advanced meetings technology will bring in some of those groups that want to save money on presentations while still having a face-to-face meeting. The technology does have its limitations and may not be for everyone:  After all, you can’t shake hands with a hologram. Nor can you share a meal, a drink or a quiet conversation on a patio.
   
Video Rooms
Another virtual option is to rent a video room, like those provided by Affinity VideoNet of Denver, which has rooms in 60 countries and stages about 30,000 such meetings annually. Affinity VideoNet’s vice president of marketing Emily Vagrish calls it “Skype on steroids,” and says it is widely used for sales and training meetings or to replace the one-day-turnaround business meeting. “Companies aren’t allowing travel, so it’s an alternative,” she says.
Some companies, however, simply don’t want the inconvenience—or expense—of travel. One Affinity VideoNet client had a daunting 54-city event that would have required four people to travel to all the cities to make presentations. Now they do the presentations on video, saving money and time.

While Vagrish admits video can’t replace all meetings, she says there is great potential for short turnaround, training, board meetings and sales. “It’s a meeting tool we hope planners will embrace,” she says.

Better Meetings and Event Management
Another place where technology might make an immediate difference is behind the scenes of meetings and trade show management. “Visibility, control and cost-savings are driving the corporate market to (better) manage the meetings,” says John Arenas, CEO of Worktopia. The company’s Universal Meeting Solution Corporate Edition is one example of automated meetings contracts—with a twist. The system can be programmed to include company-specific information, such as preferred hotel providers, cancellation policies or approval compliance while still allowing planners to quickly compare bids from various hotels across all brands. It can track payments and cancellation credits and ensure that company policy is followed in the planning process.

“Contracts can be complex and risk-laden,” Arenas says—and 80% of the meetings for fewer than 100 people are arranged by people without a CMP. He believes such automated systems will enable planners to move into the more complex side of meetings management. “Small meetings take a lot of work to source and arrange, and true planners should be freed up to handle the more difficult aspects of the meeting instead,” he says. On the trade-show side, a new management system from St. Louis-based Busy Event aims to provide actual measurement of ROI by identifying which contacts made at a show are the most likely to be converted to serious leads. The hand-held, remote control-style device also provides audience response and social networking by connecting event participants with each other. “It answers the question of how to run an event for 30% to 40% less money,” says CEO David Schenberg.



Meetings Mean Business—and Dollars!

Last March we reported on the turmoil in the meetings industry and the U.S. Travel Association’s Meetings Mean Business outreach campaign. While the campaign has succeeded in many respects, many policymakers, media and other opinion leaders continue to believe that meetings are frivolous or unnecessary. According to Geoff Freeman, senior vice president of USTA in Washington, D.C., we must reinforce the message and “speak to the revenue that meetings and events create for companies, how they help to retain the best employees and how they make businesses stronger.”   

Here are some facts provided by USTA, as a reminder:
  • Each meeting and event traveler in the U.S. spends an average of $1,000 per trip.
  • 87% of Americans who have attended an out-of-town meeting or convention for work say meetings are important to running a strong business.
  • Meetings, events and performance incentive travel in the U.S. account for roughly 15% of all domestic travel, generating 1 million jobs and $27 billion in wages.
  • Meetings provide $16 billion in tax revenue at federal, state and local levels.
  • Without jobs related to meetings, conventions and incentives, the average American household would be on the hook for roughly $136 in extra annual taxes.
  • The FAA projects U.S. airlines will have 7.8% fewer passengers in 2009 than in 2008.
  • Five of the top 15 states in meetings and events travel spending (for 2007) are in the West, per the American Traveler Study by TNS Global. They are: No. 1, California ($16 million); No. 2, Texas ($9.3 million); No. 3, Nevada ($8.9 million); No. 10, Arizona ($2.2 million); and No. 15, Colorado ($1.8 million).
  • According to a Fortune magazine survey of 1,000 chief marketing officers, meetings and events provide the highest return on investment of any marketing channel.
  • According to a TSEA Exhibit Management Survey Analysis, corporate private events budgets are expected to have dropped 30% to an average of $145,500 this year.
  • According to a Smart Meetings poll, 53% of respondents said the public backlash to meetings influenced company decisions on whether to hold events this year.


Sandi Cain, a regular contributor to Smart Meetings, is a freelance journalist who has covered the meetings, hospitality and tourism industries for more than a decade.