Financial Co. Budgets Remain Flat Despite Rate Hikes
Some financial services companies have yet to increase 2006 meetings budgets, even as hotel rates increase and availability tightens. Some events may have to be scaled back and cuts may be made in food and beverage services or in other flexible costs, buyers predicted.
Patricia Kerr, director of conference planning and recognition for Manulife Financial Co.'s Canadian division, based in Kitchener-Waterloo, Ontario, said her budget has remained flat for next year despite predictions of higher hotel rates and limited availability for corporate groups. As a chapter head of the Association of Insurance and Financial Services Conference Planners, Kerr said many of her peers at financial companies are in similar situations.
In 2006, financial services companies will have a "transition year," Kerr said, as buyers are not able to secure the same level of services for the same amount of money. Smaller companies in particular will be affected.
"On the insurance and financial side, there isn't any more money. That's the bottom line," Kerr said.
Even as availability tightens, Kerr said for the past four years, lead times at Manulife have been very short.
"For the larger meetings, we're seeing further out, but for the small meetings we're still seeing incredibly short turnaround times," she said. "A year ago, when somebody came with a 200-person meeting and said, 'I want to do it in two months,' we would be able to find the space. Now, in two months we're not able to."
Many financial services companies have yet to change their meetings management approaches in the face of tightened availability, Kerr said.
"As we move from a buyer's to a seller's market, that means the demands are higher, the supply is less, the price increases. However, budgets within financial services companies are not increasing," she said.
Kerr's department handles 120 to 140 events a year with an average size of 150 attendees.
"Will companies start to use more four-star, instead of five-star, programs? Will they start to decrease audiovisual and production?" Kerr said. "Bottom line: We know the room rate is not going to decrease. It's going to go up and we're not going to be able to negotiate it down. Other things within the program are going to have to get cut if we want to stay at the same level of properties." Kerr suggested food and beverage and transportation as other areas that could be targeted for cuts. Manulife has not moved events to second-tier cities, she said, and probably will not do so in the future.
Margaret Tangen, director of corporate travel for Seattle-based Washington Mutual, said availability is a challenge in negotiating with hotels for meetings. The bank has a standard contract template and request for proposals it sends to hotels, but properties are less likely to agree to the terms if availability is tight.
Washington Mutual in 2002 spent $50 million to $90 million on meetings and determined it could save 7 percent to 13 percent of that through a new meetings management policy, Tangen said.
The bank estimated it could generate the greatest savings—2 percent to 4 percent of meetings spend—through establishing explicit guidelines on when travel to meetings is allowed and what services could be used, she said. Tangen estimated the company in 2004 saved 10 percent on its meetings spend compared with 2002.
"When you look at industry benchmarks, you'll find that typically meetings spend is more than you think it is," Tangen said.
Washington Mutual also worked to reduce the total number and frequency of major meetings, she said, to generate an estimated savings of 1 percent to 2 percent. "One caveat I would put here that we learned is that this really needs to happen in the budgeting process," Tangen said.
Clear data and communication have helped Winnipeg, Manitoba-based Investors Group Financial Services Inc. increase meetings budgets for 2006, said Angie Pfeifer, director of travel and meeting management services. Corporate meetings volume also has increased at Investors Group, which has helped to show a need for bigger budgets, Pfeifer said.
Pfeifer said the budget for one event in particular increased by 25 percent compared with the previous event in 2004. Preferred relationships with vendors also have helped to keep hotel rates steady, she said.
"A lot of other companies are in the position of cutting back. We've been around for 75 years, we're financially strong and we've got a good balance sheet. Others are facing challenges as a result of financial changes, but we're not necessarily in that same position," she said.
Pfeifer said she provides detailed information to company executives to support her requests for budget increases. Pfeifer outlines the reasons for higher expenses, including market factors, higher attendance and larger events.
"I'm very confident in my numbers and I've built credibility with them," Pfeifer said. "You have to show you're fiscally responsible."