Prices, New Meetings Push Expenses Skyward

Corporate meeting budgets have risen in the past six months, spurred by hotel rate hikes, an increased number of meetings and more attendees, according to nearly half of the respondents to a new Meetings Today survey.

According to an exclusive Meetings Monitor survey of 176 corporate meeting buyers, 43 percent said their expenditures had increased in the past six months. Of those, 34 percent said it has increased more 10 percent and 76 percent said costs had risen by more than 5 percent.

"Costs go up and of course prices are higher," according to Michele Snock, global manager of meetings solutions for Cisco Systems. "We're trying to reduce it, but it is very hard because prices keep going up. Even if you do less meetings, you might have the same amount of spend because now it's more expensive. We try to save money by reducing the number of meetings we have and traveling less. That makes us break even year to year," she said.

Higher air and hotel costs were cited as the source of cost increases by 61 percent of the survey respondents. Fifty-three percent said that additional meetings increased their expenditures and 38 percent said that more meeting attendees contributed to costs. Only 5.3 percent said that longer meetings increased their company's expenditures.

Hotel prices have "skyrocketed," especially in top-tier cities, said Lisa Palmeri, vice president of strategic initiatives and planning for meeting planning company Meetings & Incentives, and high prices have even trickled down to second-tier cities and beyond. "It's a supply and demand economy, and right now the demand is up, so they can command more," Palmeri said.

"Hotel costs have generally gone up and availability is tougher than ever," according to Paul Salvatore, president of meeting and events management at travel management company HRG North America.

"Try and get a room in New York City any time of year, much less planning for a group," he said. "Transient traffic alone has driven occupancy levels up, and now on a meetings basis we have to compete for those rooms as well. When you need a block of rooms, you're fighting a good, healthy economy."

"People are buying, they're meeting and generally speaking costs are going up with regard to that," said Salvatore. "No one wants to increase their budget; they're forced to do so. With the cost of room rates, food and beverage, audiovisual and entertainment rising, you need more in your budget."

Meetings & Incentives' Palmeri attributed the current mergers and acquisitions cycle in the industry to "a combination of more meetings and more people attending those meetings." The new sales staff must be trained or existing staff retrained to new company regulations, according to Palmeri.

Also contributing to the rise in meeting costs is the price of fuel, which has been passed on to the customer by airlines and ground transportation companies, according to Salvatore.

"Look at the cost of gasoline. When we use a destination management company to transport our people to and from an airport, those costs have increased. If you take into consideration a transport company, those charges have obviously gone up because of the cost of fuel," he said.

Consulting firm McKinsey & Co. has implemented new training programs for new and established employees, which has required them to increase the number of the training meetings they hold.

"We've been in an expanding mode in terms the number of learning opportunities that we've put out for our consultants," said Tony Pastor, manager of conference services for McKinsey. "We are committed to having the best possible people, which means hiring the best and having the best learning programs at all stages of our organization."

The company also is offering courses for their established employees, which has added to the expense. "That's probably where one of the largest areas of expanse has been, developing courses for people that we really didn't pay a whole lot of attention to before. We are really putting more and more course material out for them," McKinsey's Pastor said.

He noted that the increase in the number of distance learning courses has contributed to higher costs due to the need for curriculum development, faculty and technology to support it.

Pastor said that while the new initiatives have caused expenditures to increase, the costs will level off once employees have completed the programs.

"I would say once we get out of the expansion and into a maintenance mode, then it will be a matter of trying to lean things out, seeing what works and what doesn't work and maybe there will be a slight contraction," he said.

Even with prices and number of meetings increasing, HRG's Salvatore said "companies are looking to get their arms around the meeting spend."

Despite technological offerings such as remote conferencing, Salvatore sees a continuing demand for in-person meetings and conferences.

"We were all told 10 years ago that meetings on a face-to-face basis would go away but they certainly have not. They have increased," according to Salvatore. "It can be replaced in certain contexts by WebEx and videoconferencing, but there's still a desire for people to meet on a face-to-face basis."