Breaking the BankNovember 7, 2022

Budgets Will Require Focusing on Meeting Cost Reduction By
November 7, 2022

Breaking the Bank

Budgets Will Require Focusing on Meeting Cost Reduction

This year has shown the steady return of in-person meetings and conferences as noted by both event organizers and destination marketing organizations (DMOs). Destinations across the country are seeing higher meetings and convention business numbers over last year, and even some nearing 2019 numbers.

Just ask Kavin Schieferdecker, chief sales officer for the San Diego Tourism Authority. He says, “From a meetings and convention perspective, we’re seeing higher registration and attendance numbers than we were expecting back in January. Our citywide conventions are averaging about 80%-90% of pre-pandemic levels, with a number of them meeting or exceeding those marks.”

Jeff Hewitt, CDME, executive vice president, sales & services for Visit Savannah, confirms his city’s own experience: “Overall, we’re seeing conference attendance improve beyond expectations.”

Promises and Pitfalls

Yet, for many association meeting planners and event organizers, devising a successful strategy for managing budgets after COVID-19 has felt a bit like throwing something against the wall to see what sticks. As the industry recovers with live and face-to-face events on the upswing, how best can organizers plan a realistic budget that still meets clients,’ attendees’ and host organizations’ expectations?

COVID has offered a cautionary tale for the meetings and events industry overall. Consequently, more decisions are being made higher up the C-suite chain. “We’ve seen a higher level of executive oversight on the decision-making process for clients,” Schieferdecker says. “Whether it be more legal oversight, risk management or marketing officials.”

Hewitt says he has seen planners take a more conservative posture as the industry has emerged from the pandemic environment. “That caution has its benefits and pitfalls, which has put everyone on a fine line between being too conservative and too aggressive in managing budgets. We have found many planners that have been understandably cautious in their room-block estimates, and then have to add inventory in the 11th hour.” He continues: “While this is a great problem to have, it can be difficult finding rooms at the desired price points or locations. There are also ripple effects on all the required services — food and beverage, housekeeping and transportation, for example. Staffing can be a challenge when the registration or attendance estimates are too conservative.”

What is one of the greatest challenges in managing budgets post-COVID? “The elephant in the room is inflation,” Hewitt says. “Everything costs significantly more. Fuel and transportation costs have gone up significantly; the cost of food is up; labor is up. So building a budget that reflects the current economic conditions is important.”

Laura Kesselman, CMM, president of Kesselman-Jones Inc., also cites the increased costs reflected in budget planning. “Basically, F&B has gone up, and depending on the venue, it can be very dramatic. And not only has the price of food gone up, but also the service charges. Everything has gone up; no less than 20% is what I’m seeing,” she says. “I’m mostly in New Mexico, and we are not as aggressive as are other parts of the country, so it could be going up more in other markets. [I say to the chefs], ‘Tell me what you can get for a reasonable price, and that’s what we’ll be eating.’ And there are still supply-chain issues, so you need to have honest conversations with your clients, because the more flexible they can be, the more we can control the budget.”

Schieferdecker says they have heard in San Diego from both clients and hotel partners that forecasting for F&B spend has been challenging due to the last-minute nature of so many meeting attendees. And when it comes to budgeting for safety protocols, Schieferdecker finds that spending on health and safety protocols is declining. “While everyone was focused on protocols during the days of high infection and low vaccination rates, we are observing a return to pre-pandemic measures for safety intensity,” he says.

Hewitt also says it appears that costs devoted to health and safety are declining. “I don’t think safety protocols are having an impact on the budget that they had over the last two years.”

However, Kesselman says not so fast. She has noted that, among her clients, “Safety is still very much top of mind, so I need to provide the support clients need. Don’t make the assumption that your venue will be covering the costs,” she says. “In one case, we asked the venue to please have the hand sanitizers out, but were told, ‘We don’t have the inserts anymore. We discontinued the inserts and never replaced them.’ So, you rent them, and renting is never cheap. Two years ago, it wasn’t a line item. Now, it’s a new line item that you need to include in your budget. It’s a variable line item based on your groups, and should be a line item like [making accommodations for complying with the Americans With Disabilities Act].”

Kavin Schieferdecker, Chief Sales Officer, San Diego Tourism Authority, says the city is seeing meetings numbers exceed projections set at the beginning of the year. Courtesy of Kavin Schieferdecker

Kavin Schieferdecker, Chief Sales Officer, San Diego Tourism Authority, says the city is seeing meetings numbers exceed projections set at the beginning of the year. Courtesy of Kavin Schieferdecker

Employee Issues

Regarding staffing, Schieferdecker says it’s mixed, adding that several clients are not back at full staff, and they’re facing challenges because they have to “do more with less,” adding, “On the hospitality side, San Diego performed incredibly well this year with one of the highest hotel occupancies, and as the pandemic subsided, our amazing weather, great outdoor activities and 70 miles of coastline attracted visitors. That allowed our hotel industry to increase its staffing in comparison to other markets.” Even so, Schieferdecker admits: “We are still not out of the woods, and there is more work to do and staff to bring on board.”

Both Kesselman and Hewitt note that hotels are having a hard time finding staff, and ground transportation is also an issue with vehicles and drivers in some destinations. “The best strategy then, is to have a Plan B,” Kesselman says. “In case you can’t find [drivers].”

In air travel, Hewitt says clients are also having a difficult time finding flights at affordable rates, which add to budgets. “Flights are full — people aren’t always able to find the flights they prefer at the price they’re used to paying.”

Kesselman echoes Hewitt’s sentiment, saying, in general, travel has gone up dramatically. “As a result, there needs to be a lot more contingency spaces in your budget. Also, the government rate for hotels has gone up quite a bit, and it goes up when it wants to. But we are absolutely seeing an increase in hotel rates, and not as much flexibility in space costs,” she says. “Planners have shared instances where hotels are even stringing people along, then giving the space to the highest bidder. So, the venue where you think you might host your event might not be what you get. Also, in venues, a lot more fees are being buried everywhere.”

Kesselman raises another point that might be overlooked when planning meeting and conference budgets. “When you are hosting a speaker and they get COVID, who pays for the extra hotel room nights? Or what about board members?” she asks. “These are discussions you need to have ahead of time, i.e. if someone comes down with COVID, who is liable for it?” Her recommendation? “Get the darn insurance. You must pay insurance for everyone. Pay the $100, because the extra $3,000 in hotel costs hurt.”

Are Virtual and Hybrid the Answer?

Schieferdecker suggests face-to-face meetings might fully replace hybrid and virtual events. “While much of the thought 18 to 24 months ago was that virtual events would overtake in-person meetings, that was quickly dispelled once everyone realized the importance of having people meet face-to-face,” he says. “Despite the fact that many successful organizations have found a way to enhance their events with virtual components, we are seeing a higher number of events in the back half of 2022 that are returning to in-person experiences due to the resources required for virtual meetings without a substantial return.”

Kesselman agrees, saying in general, technology costs have soared, and many planners initially thought virtual and hybrid events and conferences were a lot cheaper than they actually are. “We think anyone can do Zoom, but the platforms are expensive — Zoom is not free,” she says. “We pay thousands of dollars for Zoom and use a lot of technology. People may like more video production than we did before, but tech has gone up because you’re trying to do more with less. Hybrid programs take A/V, and those costs have gone through the roof.”

Another line item in the budget that might come as a surprise to planners is printing, Kesselman says. “I’m putting mailings back into my budgets because I’m not convinced my emails are getting to everyone. That’s a budget thing going backwards. We cut out the printing because we want to be green, but I’m putting it back in because I want to be seen.”

Many attendees and planners agree that air fares are increasing, and they are having a difficult time finding flights at affordable rates, which add costs to budgets.

Many attendees and planners agree that air fares are increasing, and they are having a difficult time finding flights at affordable rates, which add costs to budgets.

Look Back to Move Forward

Considering the higher associated costs of hosting meetings and conventions, Hewitt says, “I don’t have a crystal ball, but it’s not a stretch to think that associations, like everybody else, will have to raise registration fees or look for places to cut their costs significantly. Maybe the host organization will need to give attendees a free night, so they don’t have to cover the cost of that meal.”

What Hewitt does advise planners to do moving forward, is to look to 2019. “Make your future head-count projections based on your 2019 actuals, because 2020 was a bust, and 2021 was still a mixed bag. In 2022 we began to recover, but the degree of that recovery depended on where you live and where you were meeting. So, I think 2019 is in most cases the best benchmark for now.”

Kesselman also thinks looking backward may be the best way to move forward. “We all have to start with the last budget that was functional. So, start with 2019’s line items, however, not the overall budget. Also, do all your research and plan for things to go up, and plan for contingency issues. If you haven’t budgeted for contingencies in the past, you must do so now, because it’s so important.”

She adds: “I always have surprise line items, e.g. extra room fees. Start with really good numbers to begin with. The other hard part is, if it’s been a long time since you held a conference, you forget stuff. New essential budget items include: safety, bigger contingencies, revisiting printing, travel insurance — different kinds of insurance, because COVID is not covered under event insurance.”

Schieferdecker suggests event organizers be flexible in dates or desired locations and have — and share — the most relevant data on your event so DMOs and hotel partners can return a bid or contract as soon as possible. “And continue to educate your internal stakeholders.”

Hewitt agrees: “Remember the value of local knowledge. Your DMO is there and ready to help. From managing room blocks, venue selection, ground transportation and more, you have local partners that are vested in your success. Use them.” | AC&F |

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