Some pharmaceutical companies have cut back on secondary expenses for events in the face of higher hotel and air costs. Audiovisual, food and beverage services and attendee gifts all have been targeted for cuts to offset travel expenses, buyers said.
As hotel and air costs continue to rise, Eugene Emond, event management executive for Princeton, N.J.-based drug research and development firm Covance Clinical and Periapproval Services, said that his meetings have become less elaborate. Although the firm has not changed properties, it has made drastic cuts in such areas as attendee gifts and catering.
"We're still looking at high-end hotels, but the gifts now are down to $25 or there are no gifts at all," Emond said. In previous years, attendee gifts were valued at $150 or more. "They're also doing very simple dinners offsite or just keeping it in-house. No big theme dinners anymore."
Meetings also have been shortened to adjust for higher costs, Emond said. Some overnight events have become day meetings. As hotels adjust their revenue mix away from groups, availability has tightened, he said.
"It's getting harder and harder to find space on peak days. Even with programs with more than a month's notice, which I don't usually get, it's becoming more of a problem to get into a good hotel," he said.
Pharmaceutical meeting attendees are accustomed to luxury and lavish events, Emond said, so meeting sponsors will cut out all they can to be able to hold events at high-end hotels. "We had Cadillacs before and now we have a Hyundai," he said.
Higher airfares have made an even bigger impact than have higher hotel rates on meetings scheduled for this year, Emond said.
"When I do our proposals, I add $100 or $150 more on to airline costs than what we normally propose. There goes your expensive gifts, your extra meals and your entertainment," he said.
Other cuts targeted by Emond's internal meeting clients include the cost of audiovisual services.
"Two of the most expensive things on anybody's proposal are airfare and hotel; audiovisual comes third. I had a couple of programs that instead of bringing their own audiovisual companies they just used the hotel's company. Some of the hotel audiovisual companies are OK, but some of them failed on the job miserably. It becomes a little scary," he said.
Although AstraZeneca Pharmaceuticals has not made any cuts in its use of meeting services, Eileen Zampini, Wilmington, Del.-based manager of purchasing meeting services for the company, said the company keeps a close eye on costs.
AstraZeneca negotiates with meeting vendors in the same way it negotiates with airlines and hotel chains: through consolidation of spending and leveraging its volume with preferred vendors, Zam pini said.
"We don't make cuts in areas. We look at all the different core businesses and consolidate and get the best deals we can with those suppliers. Our network consists of core suppliers," she said.
Costs are consistently reviewed and adjustments are made as needed, Zampini said.
"AstraZeneca is looking across all spend through category management. This is our second year of this so it will continue as we go forward. We'll look at areas in which we've been overspending and to consolidate where we can and where it makes sense," she said.
Michael Lyons, president and CEO of the Global Events Partners affiliate in Philadelphia, said he has seen greater price sensitivity among pharmaceutical clients looking for destination management company services.
"In the past 15 months, there is a greater price sensitivity, whether it is the pharmaceutical meeting planners themselves or a third-party meeting planning firm," Lyons said.
Pharmaceutical clients are trimming services where they can and seeking alternative activities that may achieve the company's meeting objectives at a cheaper price.
"When planners want to do a meeting in a city like New York, where the hotel rates are so high even after they've negotiated them, it does affect the other components of their budget," he said.
Hotel group rates may rise an average of 5 percent to 7 percent in 2006, with key markets such as New York seeing jumps of 10 percent to 15 percent in peak meeting periods, said Bjorn Hanson, head of the hospitality and leisure practice at PricewaterhouseCoopers
(Meetings Today, Oct. 17, 2005). In addition, meeting buyers can expect higher food and beverage charges, meeting room charges and fees, he said.
Costs such as dining and entertainment are more adjustable than hotel and air costs, Lyons said, and trimming $20 per attendee off a meal can make a big difference to the bottom line.
"That's one of the reasons why they're robbing Peter to pay Paul, so to speak, in terms of some of these services. We get leaned on as a destination management company to tighten it as much as we can, and obviously we're trying to work with our clients to provide good value for them," according to Lyons, "but you can only cut so much without influencing the integrity of the product of the service."