Today’s meeting planners often find themselves confronted with more challenges than just the successful delivery of their event. Following are five of the hottest issues around.
1. PCO commissions v fee for service
The business event sector appears divided on this subject which doesn’t make life easy for those who are looking at hiring a PCO to run an event for them.
Roslyn McLeod of Arinex has been a strong advocate for a combination of PCOs being paid commissions and a fee for service, but is strongly for transparency in all transactions.
“We take commissions from hotels to manage the marketing, inventory and customer relations on behalf of hotels for our conference clients,” Ms McLeod says.
“It is rare for Arinex to take other commissions even though we are a licensed travel agent and entitled to do so.
“We hope this article will allay the fears that seem to have festered in the marketplace about the commission issue. Arinex declares our position in contract, however, it is very offensive that some clients sometimes still seek to find out how much commission we make? Where does this notion come from? As a long-standing company under one owner who has consistently reinvested in the business to build it and make it of world standard we simply have depth and breadth of good management and staff, work on consistent improvement of processes and systems, and have built a constantly evolving infrastructure to deliver delight to our clients. We are successful and share our success with our clients without commission revenue streams.
“Commissions are one of the revenue models adopted by some PCOs. It is not illegal if declared both by the company paying the commission and the one receiving it. Some clients are happy to have their PCO make up their revenue through commission as it is considered by some clients to be a normal way of business and an advantage to their expenditure levels if the PCO revenue is supplemented by the suppliers as it is perceived that it keeps down the overall expenditure by the client.
“I foresee commissions but probably in the future becoming an integral way of doing business for many operators if the pressure on transparency does not ease up. There has been a preoccupation with stripping PCOs and suppliers of their revenue to build, maintain and sustain their businesses and in so doing clients are driving a shift in the market place. The worry is that it may force suppliers to offer covert financial exchange to enable businesses to survive and thereby push power to those suppliers who take this avenue of action.”
Another long-time industry member, Peter Sugg of AST Management, says if a PCO is receiving commissions from a client’s suppliers then it must be declared in their agreement/contract with the client.
Mr Sugg says this assumes the PCO is the agent of the client and is working under their instruction.
“If the PCO is the principal, is providing all goods and services, and is responsible for the payment of all accounts to venues and suppliers, then they can have commercial arrangements in place with those suppliers. The client should always approve the initial event budget which would clearly show the proposed cost of all services/products,” he said.
“The obvious exception in both cases is the commission paid on room sales. If the PCO manages the room block they will be entitled to payment from the venue(s). The PCO should not/do not charge the client for managing the room block.
“I don’t think there are any PCOs who are surviving on a `commission only’ model. A 300 to 400 person conference with four streams, call for abstracts, website requirements, social media and marketing management, sponsorship acquisition and management, delegate registration and accounting and banking services will take from 600 to 1200 hours to organise, depending on the complexity and needs of the client. At the end of the day the PCO needs to be paid for the hours they allocate to the project.
“There is a new model that is starting to gain popularity with some association and `not-for-profit’ clients. This is where the PCO takes all the risk for the outcome. In this case fees and charges will be higher and suppliers may pay commissions. This is a matter solely for the PCO as they are, in effect, financing the event.”
2. Hotel contracts
If you’re new to the business event sector and have been charged with negotiating a contract with a hotel or venue then best of luck. Hotel groups offer different contracts and simply signing the contract without really understanding what it all means can be fraught with danger.
To assist PCOs with contract negotiations, a standard venue contract was developed by the PCO Association in 2009 which can be found on its website – www.pco.asn.au.
AST Management’s Peter Sugg says there have been many changes in the terms of venue contracts since 2009.
He suggest that PCOs and anybody signing venue contracts should read them carefully and if they have any doubts get legal advice before signing them.
“Most venues are very good to work with, however, there is anecdotal evidence that some are trying to enforce `small print’ clauses that were not understood at the time of signing. It may come as no surprise that big corporate clients do not bother with venue contracts, the venues sign theirs. PCOs should have some standard clauses they get the hotel to agree to before they confirm the business. A typical one would relate to the venue not advertising cheaper rooms than the contracted block, over the same dates, without extending the lower rate to the block.
“PCOs want the same outcome as the host venue, that is, to have as many delegates as possible stay there. The two parties need to work as a team to make this happen.”
ICMS Australasia GM, Emma Bowyer, says the challenges for association clients and hotel contracts often relates to conference lead times which are generally lengthy to assist with marketing of the event and rotation planning and the provision of flexible deposit payment schedules.
“This is a constant challenge with hotels who are more focused on the next quarter sales results rather than annual results,” Ms Bowyer said.
“The minimum number confirmation is another challenge. The client is often unaware of the financial pressures it places on itself by confirming the number of final attendees as at the last event rather than building in contingencies. It’s in the client’s interest to add numbers to final event orders than pay deposit schedules based on highest numbers to the event.
“For those new to the industry, build relationships with key hotel sales staff that you can leverage on behalf of your clients. Even with the high turnover of staff, they often move to competing properties and this relationship can be carried.”
Ros McLeod says a step-by-step strategy should be undertaken to manage accommodation contracts. These include:
- Thoroughly read and understand the terms to ensure you know your exact financial and room night commitments to the hotel/venue. Work out your minimum room nights based on the allowable release (attrition percentage).
- Be sensible with your expected numbers as over-inflation of numbers is not helpful to anyone! Make sure you don’t underestimate either as you could get stuck with trying to source additional spaces elsewhere.
- Room rate protection/parity is included to ensure you have competitive room rates.
- Be very clear on financial liabilities with hotels for rooms and have this written into the contract especially if your delegates are paying their own account.
- Adhere to the timelines in the contract for release dates and final numbers (and set your conference due dates for registrations and bookings accordingly).
- Most importantly communicate with the venues/hotels regularly, provide updates and never hesitate to pick up the phone to have a chat!
As tertiary institutions continue to spit out new event managers who have big dreams of starting their own businesses, and as clients show little loyalty with companies and people they have used for running events in the past, it appears as if there will continue to be a scramble for new business. A consequence of this is that some companies will reduce their fees to get the business, with the hope that any additional business that comes their way will reduce any losses from the first gig.
Funktionality’s Tracy Wood says the undercutting of event services has definitely been a challenge her company has experienced first-hand.
“Being part of a booming industry, it was always inevitable to see new players pop up wanting their share of the lucrative market – and yet, having been in the industry for over 25 years, and with
Funktionality recently celebrating its 15 year milestone, I have seen my fair share of event companies come and go. In the early days your options were few and far between when it came to decent furniture and high-end décor for events – the marquee companies that did exist only had very limited stock – hence why I created Funktionality! Now, the abundance of event companies is mind-blowing, many of which are a husband and wife team working from their home or storage unit, and who can do it all for a lot less labour.
“Compounding the problem is the rise of globalisation – in such a consumer-driven world, everything is becoming so much more accessible, and purchasing stock cheaply from overseas can be done with the click of a button! For many, the lure of this can be all too enticing, and for new start-ups so too is the idea of discounting to secure a client’s initial business.
“However, this alone won’t guarantee return business and can ultimately lead to the demise of the start-up itself. In my experience, clients will grow to expect reduced rates moving forward, especially if this was how you secured their business in the first place. And when you can’t deliver, they will look elsewhere.”
Ms Wood said she expects undercutting to be a continuing trend, much to the detriment of the events industry.
Verve Creative’s Rob Frank believes the business events industry has changed forever.
“An event manager needs to be far more than a good organiser with a little black book full of contacts. In fact, I believe the title ‘event manager’ is no longer an adequate description of what we do. Sure, we may have to book venues, negotiate on behalf of our clients, know about the latest entertainment options and prepare a comprehensive run schedule. But that’s a ‘ticket to entry’ to the business. And, increasingly, clients are taking these functions in-house.
“So where does that leave us? How do we use our skills and expertise to help our clients’ businesses grow in the face of this changing market?
“Our job is to work with our clients to create event campaign strategies. After all, as part of a business strategy, the most important aspect of an event is the outcome: how has the audience changed as a result of their experience? What will they do differently when they get back to the office? And, importantly, how will they feel about the business? In order to deliver outcomes from events, we need understand the answer to this fundamental question: ‘What do you want the audience to know, feel and do in the days, weeks and months after the event?’
“That process starts way before the event and is certainly not over once the audience/delegates/guests have left the venue – in fact, in many respects, that’s only the beginning.
“As event campaign strategists, we offer our clients the benefits of our skills as communicators at both an emotional and an intellectual level. We have the potential to have a huge impact on our clients’ businesses.
“Those in our industry who recognise events are more than logistics and entertainment and have the skills to work with clients at this strategic level, are in a unique position to rise above the downward spiral of cost cutting and the question of fee cutting becomes almost irrelevant.”
Hosting a meeting or event has to be relevant and effective or else a company may decide that it will simply do away with the annual program altogether and do something else entirely.
To do that the outcomes of the program at the very minimum have to be met, and hopefully exceeded.
Rob Frank says there is a lot of talk out there about disruptive technologies replacing events or at least making events less necessary.
“Technology cannot be a substitute for putting a group of people in a room and facilitating meaningful interaction at both an intellectual and an emotional level.
“To quote Christopher Graves from Ogilvy Public Relations: `We are not thinking machines that feel. We are feeling machines that think’.
“While technology has the ability to enhance the process of emotional connection between humans, it will never replace it. And events are the perfect place to create that. Events are all about stimulating the intellect and the emotions.”
He does, however, say that there is one significant way technology has changed the way we should think about events.
“The entire universe of human knowledge is literally in our pockets. Your smart phone can lead you to absolutely any piece of information you could possibly want – and lots that you probably don’t want!
“So events should not so much be about delivering information – but more about motivating and leading people to discover the information for themselves – together. That is a far more effective way of engaging an audience than good old ‘death by PowerPoint’.
“Given this shift in thinking, it opens up the potential for events to increasingly be extremely powerful tools for business growth. The key is audience engagement at a deeply human level. And that requires a fairly radical re-think about how the traditional conference/meeting is structured. It requires creativity and open-mindedness in the way we design events and it means throwing out some of the old rules and replacing them with some of the even older rules!
“Technology can be a valuable tool in this process, but never let shiny new things replace the fundamentals of human interaction. That’s what events are all about!”
5. lead times
Short lead times is an ongoing challenge for meeting and event planners. Many companies are not getting approvals internally for running events until sometimes weeks out. Then, when they do, it’s a mad scramble to find venues and suppliers to make it all happen.
The Mantra Group’s Paul Wilson says for hoteliers short lead times is an ongoing challenge, believing that in 2015 there is no longer a “normal” lead process.
“It directly affects budgeting and forecasting, especially for regional properties as there is only two real markets (leisure & MICE),” he explains.
“If the MICE business isn’t there it’s impossible to meet budgets as you only pick up limited leisure business.
“It also directly affects marketing efforts. Traditionally you’d be working three to six months out.
“Thankfully the larger groups still trend booking six to 10 months out. At least if you secure these it gives you base to yield from. If you don’t have base business you’re then scrambling trying to secure the last minute (generally smaller) bookings, hence you become reliant on short lead (often erratic) business.
“The short lead bookings stretch onsite resources because the last minute co-ordinating puts uncomfortable pressure on the conference and operations team, which includes rostering and ordering, etc.
“The client is under tight deadlines to turn it around in a matter of days. We have had a number of events confirm a week or two out; we do all the documentation (wheels are in motion), and then the client will cancel or postpone due to logistics (flights, transfers, availability of the stakeholders/delegates). You have no recourse as you’re waiting on deposits and signed contracts.”
Verve Creative’s Rob Frank says short lead times are nothing new, however suggests the ever- quickening pace of the business world, partly driven by technology, has meant that there is a greater expectation that projects can be delivered in ever-decreasing time frames.
“Short lead times are both a blessing and a curse,” he says.
“By definition, our profession is all about finding effective solutions to our clients’ requirements. Fast turnaround and flexibility should be one of the hallmarks of an effective event agency. That doesn’t mean that when the urgent project lands on our desks that they aren’t a significant challenge. From a practical perspective, finding suitable venues and available suppliers to deliver to the high standards we all expect can be difficult. Budgets are also much harder to contain when there is a short lead time. There is often less room to negotiate, when the person you are dealing with knows you are ‘between a rock and a hard place’.
“There is an old saying in business: Good. Cheap. Quick. You can only pick two. Apply that principle to short lead times and you have an effective answer to budget issues.
“In the frenzy of the short lead project, it’s often easy to lose sight of the most important aspect of an event – what is the desired outcome: what does the client want the audience to know, feel and do in the days, weeks and months after the event?
“In putting together a fast and furious event, the client’s objective needs to be firmly at the top of mind in all decision making. This takes discipline and focus and often having robust discussions to avoid taking the easiest path under pressure.
“The path of least resistance is often not the path to an effective event outcome! Naturally, the more time we have to develop an event campaign strategy, the better. But sometimes that’s just not how it works. Our job is to take the burden away from our clients, allowing them to focus on their roles and applying our creativity and communication skills to deliver business-changing results.
And sometimes, this needs to be done under tight time frames. That’s what makes us professionals.”