26 Nov, 2003

WTM 2003 Dispatch 6: MICE Events – A Twist In The Trends

Imtiaz Muqbil

While the impact of economic and technological issues on the meetings, incentives, conferences and exhibitions (MICE) industry has been well-documented, new research is examining the cultural and social impact of changing consumer lifestyles.

Sixth in a series of dispatches taking an in-depth look at the issues, policies, strategies and trends that emerged at one of the world’s largest travel trade shows.

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1. M.I.C.E. EVENTS — A TWIST IN THE TRENDS

Rob Davidson, Senior Lecturer in Business Travel and Tourism at the University of Westminster, has been appointed by Reed Travel Exhibitions to research the MICE industry for RTE’s sister event, the EIBTM. In the first of a series of reports, Mr. Davidson discussed at length some of the prevailing trends and market share analysis. One relatively new field of coverage is the impact of changing demographics and consumer lifestyles. This dispatch of Travel Impact Newswire reproduces that specific section. The full report, which discusses economic and technological issues as well individual market trends, can be downloaded free from http://www.eibtm.ch/ (click on the e-forum button).

In a Preface to the report, Mr. Ian Dockrill, RTE’s Director, Global Industry Relations & Strategic Development, Meeting & Incentive Events, says: “Since the last EIBTM in May 2002, the market environment in which we buy and sell has been characterised by falling stock markets, U.S. corporate scandals, plummeting levels of consumer and business confidence, growing unemployment, the airlines in crisis, changing business travel policies, falling budgets, and, of course the long, agonising run-up to conflict in the Gulf. All of these factors have combined to create the most uncertain short-term future for our industry most of us have ever known.”

He says that as the industry strives to return to ‘business as usual’, its past investment in “continuing, life-long education and constant skills updating” will play an important role. “It has never been more important to fully understand the trends and forces currently shaping the business events industry, in order to preserve and enhance our ability to provide the best possible service to the ultimate consumers of meetings and incentives – those who participate in them.”

Mr. Davidson’s report brings together data on trends in the MICE industry, in terms of changing purchasing patterns, emerging markets and the new types of product appearing in the meetings and incentive sectors. Its emphasis is on European countries both as suppliers of services and as markets, but still provides buyers and suppliers a highly worthwhile review of how the MICE industry is changing, both in terms of quality and quantity.

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SOCIAL TRENDS AND THEIR IMPACT ON THE MEETINGS AND INCENTIVE INDUSTRY

Our ultimate clients — those who participate in the business events we buy and sell — are getting older. More of them are women. And they are all keener on being close to their families.

Demographic forecasts indicate a marked increase in the number of delegates aged over 50 and a decrease of those under 30. And, as industry commentator Tony Carey has pointed out, since the over-60s are being encouraged to remain in employment longer, they will increasingly expect to continue attending conferences related to their professions. There are implications for many aspects of meetings planning, from the type of food provided to the ambient music and frequency of comfort breaks.

More women than ever are travelling on business. A 2002 survey for the U.K. Civil Aviation Authority shows that women business travellers accounted for about 22% of passengers using Heathrow airport last year. Women already constitute 65% of the market for meetings in the U.K. — more in the U.S. — and their proportion of the total is fully expected to grow as western economies move even further towards being service-based. But, maintains Tony Carey, too many conferences are still being planned around the needs of male delegates, whose tastes are reflected in many aspects of the event, from the choice of food on the gala dinner menu to the type of entertainment provided.

A fast-growing number of delegates are single — and increasing numbers of those are bringing up children alone. A recent survey indicates that in 2005, there will be a million more single people in Europe than in 2000. More and more, planners will need to take into account school holidays and the need for childcare facilities at the venue.

The family market for business travel and business events is expected to continue to grow significantly, as executives working longer hours look for ways to balance work and family. A recent report from the Travel Industry Association of America indicates that the number of those bringing children along on business trips jumped by 55% in six years, during the 1990s.

Mary Power, Executive Director of the Convention Industry Council stated recently that (in the U.S.), travel to business events accompanied by one or more family members has increased by 13% since 9/11, and continues to increase. ‘Now, family time is more often an add-on to a business trip rather than a full week or so away from the office. The make up of family travel has changed as well. Family programmes need to be revised to include grandparents and children’.

International Trade Forum magazine also reported recently that a growing number of business travelers were bringing their families on business trips. The article notes that this creates an opportunity for hotels and conference centres to develop new offerings for children and spouses during business meetings. Niche companies focussing on children are appearing, as a result, as suppliers seek to provide a safe and child-friendly package for business executives travelling with children. In London, for example, a five-star hotel offers a ‘Mary Poppins’ package that includes a trained nanny who will take children on sightseeing trips while the parents are working. One New Orleans organisation is ubcontracted to a destination management company to provide programmes for children during conferences.

MEETINGS & CONFERENCES — SHORTER AND SMALLER MEETINGS, BUT MORE FREQUENT ?

An ongoing trend is the move towards meetings becoming shorter and with fewer delegates. Clearly, the need to keep control of corporate spending on meetings is one of the reasons behind both of these trends, as companies strive to cut costs by avoiding overnights whenever possible, and keep the number of attendees to the bare minimum. The soft economy in general has led many companies to slash meetings budgets, in many cases booking meetings only when quarterly finances allow.

Time, as well as money, is generally in short supply in a severely downsized corporate world, and several commentators have noted that, increasingly, time-impoverished delegates are only attending the parts of meetings they really require, instead of staying for the duration. But it is not only to be able to spend more time at work that attendees are tending to prefer to condense time-consuming 3 or 4-day events into more intensive one-and-half-day meetings. More and more employees are requesting shorter meetings in order to be able to spend more quality time with their families.

From the supplier’s point of view, the trend towards smaller meetings and niche conferences presents growing opportunities for hotels and unusual venues, which typically excel at providing facilities for small and medium-sized meetings.

On a more positive note, there are growing indications from planners in Europe and the US that while meetings are becoming shorter and smaller, in general, they are also being held more frequently. In the association sector, where the revenue from conventions, meetings and exhibitions accounts for more than one-third of association income, declines in attendance and exhibit sales have become a drain on many association budgets over the past year. But on the plus side, since the education and skills updating of their members is central to the mission of most associations, many are seeing the need to plan more meetings more frequently, to keep up with the fast-moving changes in their field or profession.

In the corporate sector, too, companies are coming to understand that they must communicate more frequently with their staff and other stakeholders. The one big annual ‘hit’, in the form of the yearly sales conference/incentive is considered, by a growing number of CEOs, to be no longer enough to meet their corporate objectives.

But if meetings are being held more often, in some sectors, there is, nevertheless, a continuing trend towards meetings demonstrating more work-focused style and much less ostentation in the way they are staged. Emphasising this characteristic, North American Trends Analyst, Warren Evans, said at the first ITMA Forum, in October 2002, that ‘the days of the Stephen Spielberg-style productions are over. The business message is more important than the anecdotes of sports stars’. Confirming this impression, several commentators have noted recent moves towards choosing speakers with a relevant business background, rather than newsreaders and sports personalities with funny anecdotes.

SHORTER LEAD TIMES

Another continuing trend is the move towards short lead times for meeting events. The uncertain status of the global economy means that many organisations are shortening their planning cycles, with buyers postponing committing their budgets, until the last minute, because of the volatility of the markets. In many regions, they have been assisted in their ability to book at the last minute by a persistently weak hotel market, which has led to widespread availability, leaving buyers with little fear of not being able to find venues and accommodation for their events. Indeed, there is substantial anecdotal evidence that many venues’ rates become more favourable to the buyer as the date of the event approaches.

While most buyers expect the trend towards shorter lead times to continue, there was at least one dissenting opinion voiced in the past year. According to a Meetings Today survey of corporate meetings buyers conducted in the summer of 2002, there is a certain conviction among buyers that that trend has peaked. 69% of respondents said that lead time would remain about the same, while 16% said that lead times would be longer or much longer in the future. The rest believed that short lead times would become even more prevalent. However, against this, Mary Power, Executive Director of the US-based Convention Industry Council has stated that shorter lead times represents a long-term trend that is certain to last long beyond 2004. The Council’s figures show that, for smaller meetings, US planners are booking 15-60 days in advance rather than the customary 90-160 days. The lead-time for large meetings has shrunk from 3-6 years to 1-3 years.

Clearly, this adds even greater pressure in the booking process because there is less time available to assess needs and go back and forth, negotiating the details of the contract. For suppliers, this means that information must be much more thorough and complete before the booking process begins, and response time is critical. Chris Davis of Business Travel News, has stated that in the US, many companies have looked to suppliers for help in better managing short lead times, with some developing some type of standard contractual addenda to attach to proposed contracts. These addenda limit the amount of time-consuming negotiations necessary to finalise a deal.

But, despite the prevalence of last-minute booking, most buyers are, nevertheless, looking for venues and suppliers with imagination and creativity, who can overcome the constraints imposed by the short lead times.

As a response to this trend, many suppliers have proposed a solution to planners’ reluctance to plan far ahead. A growing number of hotels and conference centres are waiving cancellation fees and attrition fees for the meetings they host. For example, Thistle Hotels have suspended all cancellation charges for international inbound groups. Shangri La Hotels and Resorts is offering customers a full refund or the option to postpone bookings.

BETTER RETURN ON INVESTMENT

As cost-conscious organisations continue to insist that planners squeeze every last penny out of reduced meeting budgets and secure the best bargains available, a major challenge for buyers and suppliers will be to demonstrate the strategic value of the events they organise or host, and show a tangible ROI for them.

Benchmark Hospitality has identified as one of the top current trends the fact that more meetings have a serious training component, as training is increasingly seen as a key way to maximise overall ROI for meeting events. Team building is another popular meeting focus, with companies increasingly ready to invest in creative team-building programmes for their events.

DESTINATIONS

One of the consequences of the intense political turbulence of the past year has been the restructuring of attendees’ travel habits, which has generally favoured destinations closer to home, more familiar, more easily accessible and perceived to be low-risk. Recent surveys of US business travellers, for example, have indicated that they are not afraid of air travel as such, but desire to be closer to home so that they could return there quickly and easily in the event of conflict or terrorist attack.

Nevertheless, a growing number of planners have chosen to use means of transportation that are perceived to be safer, in some cases preferring to locate their meeting events in destinations which are accessible by train or car. At the extreme level, there has been a trend towards some corporate business travellers using individual, rather than mass transport. Despite concerns about the economic situation, there has been significant growth in the use of private aviation for business travel in markets across Europe, through full ownership, charter or fractional ownership of private jet aircraft. While fractional ownership has established itself in North America, it is only beginning to make inroads in Europe. It is being marketed, by companies such as NetJets, as a cost-effective, accessible business solution, rather than as an extravagant symbol of corporate excess.

But for the majority of international meeting events, mass air transport will continue to be the mode used to reach the destination. In general, it can be stated that we are currently seeing a trend towards less international business, but an increase in regional and national demand.

Supporting this, a relevant prediction made by the MPI/American Express 2003 FutureWatch report was that more meeting business opportunities would materialise for suppliers in emerging, non-traditional meeting markets. As budgets remain tight, some meeting planners will continue to look for less expensive, regional alternatives to higher-priced, higher-profile destinations.

MORE SECURITY, AND RISK MANAGEMENT

Given the instability of the international situation and the continuing threat of terrorist attacks, security is now – of paramount — and growing – concern when planning and running events. New security measures have been introduced, world-wide, in our airports and transport termini, such as the ‘registered traveler program’ in the US, which provides a means of reducing the waiting time for business travellers passing through airports, with no compromise in security. From the point of view of planners, they have to ensure that delegates are fully briefed on these measures, in order that they experience minimum inconvenience and delay en route to their destinations.

Hotels and conference centres have also been active in providing added protection for guests and meetings delegates. They have had to steer a balanced course between implementing practical measures to promote vigilance (investment in security awareness training, security hardware – CCTV) on the one hand, and on the other, acting with sufficient discretion so as to avoid compromising their guests’ enjoyment and freedom of movement.

INCENTIVE TRAVEL

Many of the trends identified above for meetings and conferences are echoed in the incentives sector. However, this is a sector, which is also currently facing up to many of its own challenges and opportunities.

SHRINKING BUDGETS AND SAFETY CONCERNS

Few incentive programmes were left untouched by the events of 2001/3. Particularly in the U.S., the world’s largest market for incentive travel, tighter budgets and safety concerns have prompted many companies to choose domestic venues. Hit hard by cancellation and attrition fees, U.S. companies in particular had generally less funds for incentive programmes. Many responded by splitting international groups into separate trips — for example, a European destination for the company’s European sales force and a North American destination for the U.S. team. As well as being a cost-cutting measure, this arrangement also has the advantage of keeping participants nearer to home.

Another widely-reported cost-cutting measure is the move towards groups with fewer participants, on average, as companies trim back on the number of qualifiers for the trip — often by setting higher stakes, which make it difficult for the participants to qualify.

Naturally, planners need, more than ever, to be convinced that a destination is safe before they will even begin to consider it. Destinations such as Malta have managed to capitalise on the current situation by emphasising how secure and peaceful the country is. All European capitals continue to enjoy the status of desirable destinations for incentive programmes — although one national market, at least, has indicated that they are avoiding London, for reasons linked to security.

In response to the threat of terrorist attacks on airlines, a growing number of firms used charter planes for their groups. For example, Lisa Grimaldi of Meetings & Conventions magazine reports that the agency FlightTime.com saw a dramatic increase in business, particularly from pharmaceutical and investment companies who cited security and convenience as the reasons for using private planes.

WIDENING THE FIELD OF PARTICIPANTS

A problem increasingly evident for incentive travel as a reward is that as it is often the top 5% of sales people who routinely qualify, the question arises over whether incentive programmes can be truly said to be motivational. More companies are asking whether the practice of sending basically the same people to exotic destinations year after year actually increase sales. Louise Thame of Thomas Hannah Associates, a full-service incentive travel agency, has stated that companies are increasingly coming to the conclusion that they need to extend the incentives to reach a bigger part of their audience, because they need to influence more people in order to meet their business objectives. One solution being tried by companies in all markets is to offer motivational programmes for all staff, not only the top few high-flyers, the objective being to improve the performance of the bulk of the workforce, rather than the top achievers only.

An example of this trend was given at the ITMA Forum in October 2002, when Simon Elliott of DaimlerChrysler UK said that instead of running the usual yearly incentive for 100 dealers, he was considering running more motivational programmes addressing all dealership staff, and also customer loyalty schemes.

In general, more firms offering incentive programmes to support staff, in addition to those out selling ‘in the field’, has continued to widen the range of those participating in incentive trips.

MORE CHALLENGES FROM OTHER MOTIVATIONAL TOOLS

Despite the proven advantages of incentive travel for employees’ performance levels, in the past year a number of companies have made changes in the way performance is rewarded. With travel being regarded by some — particularly in the U.S. — as a negative incentive, there has been much more competition from non-travel rewards, such as cash or merchandise, which, as well as avoiding anxiety over travelling in tense times, also offer the advantage — to companies and to employees — of not taking up time spent away from work/family.

With people enjoying increasingly more sophisticated lifestyles, many now believe that travel has less of a ‘dream’ connotation than it had 20 years ago, and some planners even complain that ‘aspirational’ destinations are getting much harder to find.

The CEO of Maritz Travel recently said that 20 of their US clients had switched from travel to merchandise after 9/11, but he added that he did not believe the switches as permanent, but that in the future, companies will offer participants a selection of awards that include both travel and merchandise.

RETURN ON INVESTMENT

Given the challenge to incentive travel from other motivational tools, more and more emphasis is being placed on the need to demonstrate the effective return on investment (ROI) offered by travel programmes. Since most incentive programmes are intended to boost a company’s bottom line by improving productivity, increasing sales or promoting employee retention, clients are increasingly articulating the need for cost-effective business solutions that achieve these objectives.

Clearly, the focus needs to be on demonstrating how incentives can improve business performance. But, as Anne Turnbull of Maritz Canada Incentive, has stated, unless a planner can clearly show the benefits of incentive programmes, budgets or even the programmes themselves can be jeopardised in times of economic turmoil. Turnbull has led the way in developing effective ROI measurement tools for incentive travel, and increasingly they are being used to demonstrate the effectiveness of such programmes.

But too often, corporates do not publish accurate figures of performance increases due to incentive travel, claiming that the information is market-sensitive. Many in the industry believe that what is needed are some positive case histories from both incentive travel planners and their clients, demonstrating real business improvements as a result of motivating employees through travel experiences.

One way of squeezing more value out of incentive trips has been the technique of doubling up. Companies are reported to be increasingly combining the budget for incentives with the resources of another department such as training, to hold a joint event such as a combination sales meeting/incentive programme. So-called ‘concentives’ may develop faster in the years ahead, particularly as a growing number of tax authorities show an interest in incentive programmes as a potential source of revenue.

MORE INDIVIDUAL/FAMILY PROGRAMMES

Finally, many commentators have noted that individual travel rewards, as opposed to group programmes, are gaining popularity, because they allow recipients to travel when and where they want. Duane Penner of travel planners RoadTrips points out that, increasingly, ‘Award recipients want flexibility’.

Another planner, Bill Ryan of incentive agency Travel Round, has recently said that he believes that more firms will move towards individual travel awards. He also points out that in addition to giving winners power of choice, such awards also offer a major advantage to the company, since they are spared the necessity of having to make the type of hefty deposits required for large group programmes.