Travel management companies expect corporate meeting budgets in 2007 to rise at the same pace as hotel rates, with percentage increases generally in the single digits. Buyers across the board will continue to do more with less, and attendees can expect host companies to be less generous with gifts, entertainment, upgrades or other add-ons as higher hotel rates take up the majority of budget share.
Meetings consultants at American Express, BCD Meetings & Incentives, Carlson Marketing, and HRG Events & Meetings Management said that, overall, any meetings budget increases either will match higher hotel rates or fall slightly below that figure.
The financial services industry generally was seen as the segment with the highest budget increases for meetings, the consultants said. Budgets at pharmaceutical companies, traditionally high spenders in the industry, were less clear as companies wait for regulatory approval to launch new products or navigate the increasing restrictions on their marketing and educational events
(Meetings Today, Aug. 14).
"We are seeing an increase in average spend in some sectors, such as the financial and pharma sectors, year to date—although we're noticing a downturn in the pharma sector recently," according to Shimon Avish, director of advisory services for American Express Business Travel, adding that pharma companies may be holding fewer product launches as they wait for approval from the Food and Drug Administration. "In the technology and manufacturing sectors, we're actually seeing a decrease in spend. The number of attendees is going up but, on the other hand, we see average spend going down."
Next year, the spending patterns are expected to remain the same, he said. Volume may have risen by 15 percent overall, but a number of factors affect per-attendee expenditures, he said.
"Definitely, the market has come back to where it was pre-9/11, and there was a lot of pent-up demand for meetings. That's why we're seeing more attendees, but companies are really trying to hold the line in many ways on number of days and in some segments a reduction in spend as well," he said.
"We're seeing maybe a 2 percent to 3 percent increase in dollars spent," said Kurt Paben, Minneapolis-based Carlson Marketing's vice president of business development for meetings and events. As hotels begin to increase supply, rates may level off, he said.
"We're seeing a little nudge up, not a lot," Paben said. "We're either seeing clients remain flat for what they're spending, or a mild increase. We are seeing clients trying to get much more for that dollar."
"For the most part, budgets will hold steady," said Scott Morris, vice president of business development for Chicago-based BCD Meetings & Incentives. "If anything, there is going to be a continued emphasis on doing more with less."
BCD M&I has seen greater cuts to such ancillary costs as room gifts or activities.
"Instead of going golfing at a place that costs $150 per attendee, they are spending more like $125 or trying to find ways to manage back to that same bottom line," Morris said.
Paul Salvatore, president of events and meetings management and loyalty programs for HRG's North America operations, said 2007 meeting budgets likely would increase based on hotel rates alone, in addition to any other rising costs. HRG expects to see meetings volume in North America rise 15 percent this year over 2005. HRG expects the number of incentives it handled by year-end to rise 10 percent from 2005.
"With the increase in rates, budgets have to expand," he said. "They may cut the number of attendees and increase virtual conferencing."
Companies are likely to zero in on cuts to event support staff first, depending on the type of meeting, he said.
Amex's Avish said companies also are spending less on individual amenities. "Gifts, for example—we're seeing a cutback on that. We're also seeing some cuts on high-end entertainment," he said.
Carlson's Paben said he has not yet seen clients cut back on attendee spending, choosing instead to control costs through sourcing.
"Our role is to help them strategically think about when to do these events, where to do these events, how to structure them so they can maximize their spend," Paben said. "They can either do the same for less or more for less. That is a pretty consistent trend we see across all our clients, even the ones where there is a significant increase in the number of events they're doing. How can we bring the cost down but not decrease the impact?"
One trend Carlson has seen among its clients is an increased interest in regional events, Paben said. Instead of flying all attendees into one central city, companies might consider breaking the group into smaller regional meetings and cutting travel costs. The savings in airfare can help lower per-attendee spend, he said.
"Sometimes you can cut a hotel night out of the equation because if you're not traveling across the country, you can get in and out in less time. You can fly in the morning and start the meeting in the afternoon," he said.
The bulk of savings to be had in corporate meetings come from hotel and air sourcing, he said.
"It's taking a much closer look at the key decision points along the way that could impact costs but keeping the net result the same," he said.
Clients are making every effort to find savings through site selection, shoulder seasons or other sourcing changes to the event before cutting back on the attendee experience, he said.
"We're optimistic about 2007. We're pleased to see that the spending continues and that the desire for face-to-face meetings continues," he said.
BCD M&I's Morris said for the past two years the average size of events has steadily increased as the national economy recovers. Clients are holding more regional events, he said, especially in the automotive and manufacturing industries.
"It's more true with industries that have temporary issues in regard to their bottom lines," he said.
The financial services industry continues to lead the increase in meetings expenditures, Morris said, and pharma companies, depending on new product releases, clearly are willing to hold more events.
HRG's Salvatore said many clients might cut ancillary costs to adjust for higher hotel rates, especially in incentive trips. However, the incentive can often reflect the company's financial health.
"You're going to take the event over the gift. People are so concerned with perception. It's hard not to duplicate what you did the prior year, but your employee will sense that the company isn't doing good. A lot of buyers don't want to create a negative perception that the company is cutting back," he said.
Among pharmaceutical companies, HRG has seen clients more often start business meetings on the attendee arrival day and try to shorten the length of the event. Pharma companies also are looking at destinations closer to their headquarters, he said. Attendees likely will not have as much free time at 2007 corporate meetings.
Depending on the location and type of event, companies may find greater synergies in consolidating regional events, he said, especially if that large event is in a headquarters city.