Budgeting For Today’s MarketNovember 9, 2018

What Planners Need to Know to Calculate Strategically By
November 9, 2018

Budgeting For Today’s Market

What Planners Need to Know to Calculate Strategically

Business Team Concept: BUDGETThe 2019 Global Meetings and Events Forecast, released by American Express Global Business Travel Meetings & Events in October, gives planners and stakeholders in the meetings industry reason for optimism.

Issa Jouaneh, senior vice president and general manager, American Express Meetings & Events, a division of American Express Global Business Travel, provides some insight into the new report.

“The meetings industry has bounced back after its dramatic slowdown 10 years ago to settle into a new normal of steady and stable growth,” he says. “After four consecutive years of growth in both spend and number of attendees, meetings are thriving, and incentives have not just come back, but continue to grow.”

Yet even in positive economic times, changes related to client demands,
attendee needs and the evolution of tools and the way in which meetings are constructed put pressures on planners and, ultimately, budgets.

Trends & Changes

One continuing disrupter impacting all facets of meetings is technology.

“The evolution of technology is having a substantial impact on meeting budgets,” Jouaneh says, “particularly regarding the end-to-end management of delivery and the attendee experience. Emerging technologies such as virtual reality, artificial intelligence and facial recognition, and the ongoing development of mobile-app and hybrid-meeting solutions, are creating innovation and value-add opportunities for both meeting owners and attendees.”

Consolidation and growth, Jouaneh continues, are also changing things up. “Consolidation across the industry and the rise of new players creates an environment where meeting planners have an eclectic range of choice and capabilities but are under significant pressure to meet growing demands. Meetings activity is expected to grow across all meeting types and regions in 2019. Meetings will be both larger and longer, with
attendees increasing as much as 2.4 percent and meeting length growing up to 1.9 percent in some regions.”

“The No. 1 challenge that can throw off a budget is other people, specifically, those in a decision-making position.” — Alison Milgram, CMP, DES

While economic and geopolitical influences continue to spark uncertainty and affect budgets, Jouaneh says, “The meetings industry remains resilient and focused on creating successful experiences. The localization of meetings programs is a growing trend as planners across the globe look to add flexibility and nuance to offerings that address specific market needs and drive program adoption.”

The 2019 Forecast also shows that attention is shifting to the attendee experience. “Planners indicate that if they were to receive [a bigger] budget for a meeting, they would put it first toward content and other ways to enhance the attendee experience. Planners seem to be increasing focus beyond the logistics to ensuring the meeting achieves its stated purpose,” Jouaneh says.

And then there’s the increasing gap between meeting budgets and spend, which is anticipated to continue in 2019. “Meetings activity and expenses across all regions, including hotel rates and airfare, are expected to rise faster than the associated increases to budget,” Jouaneh says. “For example, the Asia-Pacific region is anticipating a 1.1 percent rise in group hotel rates alongside only a 0.86 percent rise in spend. This dynamic creates a continued need for meeting owners to clearly articulate their desired outcomes for meetings, so budget can be allocated to items that directly support meeting goals — particularly when tough choices need to be made during the planning process.”

Despite tightening budgets and an underlying shift in funding, Jouaneh says, “Planners are managing competing demands for strong meetings activity and optimal attendee experiences to establish a healthy and optimistic outlook for the meetings and events industry on both a global and regional level.”

The nitty-gritty details often have just as much of an impact as larger global concerns. Alison Milgram, CMP, DES, director of events with PCMA, points to evolving technology, as well, but says that for the newest group of meeting-goers, face-to-face time is also important — and that, too, impacts budgets.

“In just the last few years, Generation Z has begun to enter the workforce, and therefore, has become an attendee for our events. Millennials, we know, are all about the tech; however, Z has come in, and while they’re incredibly savvy when it comes to tech, they are also craving the F2F experience,” she says. “As planners putting together a budget, we need to shift our focus and ensure that both tech and F2F have the financial support to be outstanding, and that can be costly.”

Additionally, Milgram says, “I’ve seen a significant increase in event cancellation insurance costs. With everything going on in the world, it’s not just earthquakes and hurricanes we have to worry about. It used to be a quick calculation of a dollar amount times anticipated attendance. Not so simple anymore, and while this expense is maybe 3 to 4 percent of an overall expense budget, cutting back on the coverage because it wasn’t properly budgeted will cost far more in the end.”

Emily Thibodeau, CMP, CITP, senior director operations, event management with Maritz Travel Company, says she’s seeing increasing client demand for more personalized experiences, as well as high expectations around technology, and both add to the budget.

“[Clients] request events that allow guests to experience things that they couldn’t do on their own,” she says. “I see that even in meetings. In addition to extra budget for personal experiences, we see increased budgets for technology items such as onsite implementation of RFID, interest in facial recognition check-in or mobile apps, which are now almost standard.”

But, she continues, “The most revolutionary thing I’ve been reading lately is that corporations are a bit more cash rich today. Fortune 500 companies have more in the bank than they’ve ever had in history, allowing them to continue to support the budget for meetings and incentives. While there’s still pressure to get more done for less, companies are investing in experiences, rewards and recognition for their teams, perhaps more than in the past.”

For Amy Maxey, manager, global conferences and events at Hyland Software, two trends are impacting budget. “Costs and competition are on the rise,” she says. “Compression in the marketplace has definitely impacted budget planning. Hotels and meeting venues are being less aggressive with incentives as the demand for meeting space increases.”

In terms of competition, she says, “We have a lot of folks tell us that due to budget limitations, they can only attend one conference every year or every other year. Many times, organizations have to alternate employees, as well. We offer alumni and group discounts to help encourage group and multi-year attendance. We also offer added incentives, such as discounts on future training, to help justify the expense.”

Competition is coming not just from other meetings but from leisure travelers, too, notes Thibodeau. “Hotels continue to see revenue generation through more transient travel, which makes booking group travel more competitive. I see our budgets affected by this such that clients are feeling they don’t have as much room for negotiation as they previously had or where decisions are having to be made earlier than they normally would be.”

Challenges Big & Small

Regardless of the economic situation or time period, planners will face challenges and have to find ways to mitigate them.

“Our 2019 Global Meetings and Events Forecast predicts 2019 will be a busy year for the industry,” says Jouaneh. But, he notes, with global expenses increasing at a faster rate than meetings budgets, planners are being challenged to master this increased volume and maintain an effective ROI despite limited funds. More than half of planners surveyed, including 68 percent of North American planners, say they are working with smaller commission pools from which to fund their meetings.

“Mitigating this problem requires a commitment to creating strategic meetings that prioritize the attendee experience and embrace technology to meet an explicitly defined goal,” Jouaneh says. “This trend is growing across all regions, with 52 percent of planners in Europe implementing an explicitly defined meeting policy, and 42 percent in both North America and Central/South America following suit. The Asia-Pacific region has been slower to adopt this change, with only 27 percent claiming to have dedicated meeting plans. Even as funding for meetings undergoes a significant shift, planners and hoteliers are adjusting appropriately to establish a bright future for the industry.”

For Milgram, short-term bookings and meetings are present major challenges. “If you don’t know where the event will be, it’s hard to budget properly,” she says. “An East Coast meeting is more than likely going to be more expensive than a Midwest one, although that’s not always the case, either. Chicago in the fall, for example, can be expensive.”

Maxey points to big-ticket items coming up late in the game, including increased attendance. “When you’re paying $60 for a meal and $200 for an evening event ticket, 100 additional attendees can be a huge impact on a non-revenue-generating event,” she says. “For larger budget items, I suggest signing multi-year agreements, as long as you build in service clauses.

“Working with Experient, we’ve found that signing multi-year contracts gives the venue more flexibility to offer higher incentives since the revenue impact on a multi-year deal is so much more lucrative to them.”

Her company went through a comprehensive RFP process this year for some of its biggest line items, such as AV, hardware rental and exhibitor services. “That helped to contain costs,” Maxey notes. “We were able to successfully negotiate five-year deals with each of those vendors and saved more than $1 million over a five-year period. Not only did we see more negotiating power due to multiple years and competing vendors but locking in rates now gives us peace of mind and allows us to better plan long term. It was a lot of work, but it’s nice to know that we’re locked and loaded for the next five years, and we don’t have to go back to the drawing board each year to renegotiate these agreements.”

Thibodeau emphasizes that even if companies have more cash on hand, planners are still expected to get more for less. “I think the biggest challenge our event managers face today with regard to budget is that even though the perception may be that companies are in a healthy place financially, there’s still that pressure to get more for less — to do it ‘better than last year’ for the same or less budget,” she says. “In order to mitigate potential problems, it’s important to understand the client’s priorities and the desired business results. By doing so, we can help allocate funds appropriately from the beginning.”

Budget-Busters

What’s most likely to throw a budget off? The most prevalent answer is the unforeseen and unexpected.

“Whether it’s something coming up during a site inspection that someone wasn’t aware of, a technology issue or even surprises on a program operation, it seems that unexpected costs that pop up are what most affect a budget,” Thibodeau says. “I think as these things happen it’s important to understand the why and be able to come to the table with solutions for resolution. In order to do this, we have to be communicative and transparent with clients and partners and work to negotiate a fair balance. Doing so enables us to re-allocate funds in the appropriate manner.”

For Milgram, “The No. 1 challenge that can throw off a budget is other people, specifically, those in a decision-making position. They get to a destination and just start ordering — equipment, food, additional signage, etc. — and because of their place in an organization, the venue and/or supplier may not come back and ask the planner before they go ahead and order. This can be a tough challenge to manage; however, making it clear with suppliers/vendors/venues that all requests must go through you first will at least help you track any onsite or additional expenses or perhaps find a better, more cost-efficient solution.”

Maxey points to last-minute items added by venues. “Sometimes you have to stand your ground, and you always have to reference what’s in the contract. We negotiated a flat rate for our Internet needs with one of our venues. While they were honoring the agreement, I noticed they tried to tack on a $10,000 facility fee last minute. Since it was not outlined in the contract, we fought the charge and won. Meeting planners have to be vigilant and look for all of the hidden fees. Doing a proforma invoice before you get onsite is a great way to tell if you and the venue are matching up on estimated charges and how they calculate costs.”

But the devil isn’t just in the details. Sometimes it’s in the big picture, too. “What’s most likely to throw off a budget isn’t a line item,” Jouaneh says, “but rather a lack of agreement among meeting owners and stakeholders about what is the desired outcome of the event.”

Drilling Down on Increases

Calculating the greatest increases impacting budgets today is no simple matter according to Jouaneh, who says increases vary depending on such things as meeting priorities and location.

“The 2019 Forecast discovered that budget line items prioritized by planners varies greatly by location,” he says. “For example, North American and European planners value ‘Property Type’ and ‘Air Lift & Access’ the most. Meanwhile, Asia-Pacific and Central/South America meetings and events industries both place a larger emphasis on ‘Economic/Political’ stability.”

Milgram has been watching room rates rise over time. “Then, one day, you’re reviewing a proposal in a second-tier city and realize it’s costing more than the first-tier city you used a year ago,” she says.

That rise in cost may be worth it if a hotel has had a substantial renovation, she notes. “But that’s something a planner should investigate before committing.”

Echoing the 2019 Global Meetings and Events Forecast, Thibodeau sees overall costs outpacing inflation in all general program areas. “The most noticeable two increases I’ve seen in recent years, however, are related to hotels and airlines. Hotel prices, be it room rates, meeting space rentals or rising food and beverage minimums, have contributed to increased spend. But I’ve also consistently seen that clients are now willing to budget more for ancillary airline charges, such as seat assignments and baggage fees,” she says.

F&B is often a cost culprit. “Food and beverage seems to keep going up and up,” says Maxey. “I’ve been in this business for over 15 years, and it still crushes my soul to spend $7 or more on a can of Coke or bottled water or over $130 for a gallon of coffee. Attendees don’t see this side of things and would never expect these items to cost so much, so they can’t understand why we’re unable to offer free-flowing drinks and snacks throughout the day. Balancing attendee expectations with rising costs is not easy.”

Best Practices for Planners

So how do planners create accurate budgets in the face of changes and increases?

“Before creating a budget, “ Jouaneh says, “planners must first identify their ultimate goal. Strategic meetings built around explicitly defined results will help better prioritize budgets to satisfy the continued need for improved attendee experiences and integration of innovative technology. This commitment indicates meetings and events are being purposefully designed and executed — cementing their place as drivers of business outcomes.”

Thibodeau agrees. “My best advice is from the beginning to understand your client’s business objectives and what impressions attendees should walk away with. By defining expected outcomes first, it’s easier to take a consultative approach to designing a program. Understanding what kind of experiences you want to create to achieve those outcomes allows you to identify priorities and begin to budget an event.”

And for those unexpected challenges, take a proactive approach.

“Always have money set aside for additions or unforeseen circumstances,” says Maxey. “I budget for nonessential items separately and try to hold off contracting those items as long as I can. If costs for necessities are more than anticipated, I can escalate to management to see if the nonessential items can be cut or scaled back or if the company wants to increase the budget to offset the higher costs.”

Milgram advises taking detailed notes on what you were thinking or projecting when you put a budget into place. “Don’t just say the staff travel budget is ‘for 10 people.’ Who are those people? What’s the assumption for airfare? Taxis? Checked luggage? Of course, staff changes as do airline fees, but a baseline of what went into that figure to begin with will help down the line. If your budget system doesn’t allow for notes, make an Excel spreadsheet. If your budget is an Excel spreadsheet, be sure to add a note column and don’t be afraid to wrap that text a few times if necessary! You’ll be glad you did.” C&IT

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