Who takes the can when expected room occupancies don’t materialise - the PCO or the client association? How much should the hotel just grin and bear it as a fact of life? Does anyone really understand venue contracts and what is stopping these from being a standardised document across the industry - both in New Zealand and Australia? Is it fair practice that hotels offer cheaper rates (especially late in the piece) to individual delegates than they do to the PCO for the ‘official’ registration price?
These were just some of the topics debated when a panel of three hoteliers squared off with three professional conference organisers (in front of an audience heavily weighted to the PCO side) in The Great Debate in the Gold Coast recently. The debate was one of the highlights of the inaugural Professional Conference Organisers Association Conference at Holiday Inn Surfers Paradise in December - an event that attracted about 150 PCOs from all around New Zealand and Australia.
A common thread of the discussion was that hoteliers and and professional conference organisers in general need to communicate more and have a better understanding of each other’s issues - those PCOs that do ensure there is plenty of ongoing consultation tended to report less problems.
Materialisation
Anne Gill, director of national sales Australia, New Zealand, South Pacific with IHG, started the debate by raising room materialisation and ‘some of the other issues we all face when a PCO wants to take a large chunk of the room inventory.
‘We need to quote on forecast demand estimated from all markets, not just conferences. So when a PCO wants to book 300 rooms from a total 400 available at a hotel the expectation is that we will not take the request at face value unless the PCO can support it with historical information. Materialisation is the key.’
Responding on behalf of PCOs, Peter Sugg, managing director of AST Management Pty Ltd, said he agreed that materialisation was an issue. ‘However, it’s a three way process. Often the association makes the decision in discussion with the hotel before the PCO is contacted or involved. Hotels tend to take the association’s estimates at face value and when we get involved we have difficulties extricating the expectations. We tend to ask more questions of the association clients, so some of the allotment problems are more the fault of the hotel sales people.’
Clive Scott, general manager of Sofitel Melbourne responded agreeing that many times the over confident estimation of numbers does come from the association.
‘But the PCO just sits there and nods like it is going to happen. If I am asked to hold 500 rooms I don’t - I hold 300 and we watch and wash constantly.’
Rob Henshaw, managing director of Organisers Australia, said that associations sometimes make statements about intended room allotment in good faith but in ignorance.
‘At the end of the day they are often architects, doctors or whatever - they are not necessarily business people. They rely on the report from last year but the event statistics will be hard for them to fathom, so they can get themselves into trouble.’
Mike Prior, director of TVP Law, reminded the debaters and the audience that life is a compromise. ‘When I talk to hotels and PCOs the first position they tend to take is ‘this is what we want’, not ‘what’s good for everyone.’ The battle is to change the way things are done and to come up with ways to achieve the goals. It is a process of communication.’
He says there are two extremes. One is to overbook and then, when the numbers don’t stack up, engage in a fire sale at the end. ‘But people will get used to it and will be encouraged to wait until the last minute to book.
‘The other way is to under book, and then if the numbers exceed the room allotment the destination probably still wins. But delegates may not come if they can’t get a room in the conference hotel.
Prior says the current state of contracts between hotels and PCOs often doesn’t make it clear where the responsibility lies if anticipated numbers are not achieved.
‘I have looked at five contracts in the last week. One of them I did not understand at all. Two were ok and the other two I didn’t understand who the parties were and, if things went wrong, who would be responsible.’
(One of the key priorities for the PCO Association is, in consultation with hoteliers, to come up with a standard format for venue contracts with a section at the back for variations, as in a real estate type agreement. Prior is working with the parties to establish this.)
PCOs in the audience said that delegates waiting until the last minute to book made it very difficult to give hotels a firm indication of numbers 90 or even 60 days out. Robyn Johnson, managing director of conexion Event Management, pointed out that statistics show 22% of delegates book in the last two weeks and she feels the situation has probably worsened since those figures were released some years ago. A quick survey of the audience at the debate backed her up - although a couple of PCOs said they get 75% of registrations 90 days out, many more reported taking 60% of registrations in the last month.
It was suggested that PCOs should look at setting more persuasive earlybird specials with easier compliance, and perhaps come up with more imaginative incentives.
Rob Henshaw said hotel contracts were based around penalties and negatives, rather than incentives and rewards.
IHG’s Anne Gill responded: ‘that’s right, historically.’
Peter Gray, of Motivating People said it was important for event managers to have a good relationship with the (host) hotel and feed information through the whole time. ‘We are not doing our job for the client if we don’t do this. It is a relationship issue, not just a contract.’
Clive Scott felt the dialogue between the parties at the conference was one of the greatest opportunities the industry has had. ‘How can we talk more between us and not stand at either end of the room and say: ‘you’ve got to wash these rooms or you face a penalty.’ We need to offer incentives if you fill the rooms.’
Christchurch based Megan O’Brien, of Conference Innovators, said her company was talking to hotels about dynamic pricing for clients. ‘For example, can we offer a cheaper rate for early bookers and then move to a more flexible rate system and a more premium rate later on - like airlines do.’
Sofitel Melbourne’s Clive Scott said his hotel had experienced some conferences on dynamic rates. ‘The PCO has said ‘we don’t really know how many we will get so we will send them direct to the hotel.’ The (guests) quote themselves as conference delegates and they get the dynamic rate. Sometimes that works well, but at other times the delegates don’t trust it. ‘
Undercutting
The issue of hotels undercutting the block conference rate - especially just before the event - was also raised. PCOs asked how they can be expected to persuade delegates to book early and take the conference rate if there was an expectation they could just wait and get a cheaper price by going direct to the hotel or through a public booking engine such as Wotif.
Greg Magi, general manager of RACV Royal Pines said the question was a difficult one. ‘It goes back to the organiser to ensure guaranteed availability (of rooms), a full registration package, flexibility for check-in and check-out etc.’
Mike Prior said the issue was obviously something that needed to be discussed further and resolved. ‘If people have ideas and feedback about this we want to hear from them. Constructive ideas are welcome.’
Varan Freestone, director of Dharam Meetings & Events, said it was important PCOs and hoteliers moved forward as a team effort.
‘It is all about building a relationship with the hotel, discussing needs and following up on a weekly basis. There is a huge lack of commitment in this industry and it is a big issue. When we use a hotel we have a meeting with every single person (involved in the event). If I can’t meet with the general manager of a hotel, I won’t go there.’
On the hoteliers side of the Great Debate (from left) Clive Scott, Greg Magi, Anne Gill
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And for the PCOs (from left) Rob Henshaw, Robyn Johnson, Peter Sugg
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Business event managers have been warned not to discount their services and products in the face of the challenging economic times ahead.
Speaking to New Zealand and Australian delegates at the inaugural Professional Conference Organisers (PCO) Association Conference on the Gold Coast late last year, Dr Ian Brooks told organisers that if they engage in discounting, give-aways and other price cutting activity they not only run the risk of reducing or destroying their own profitability, but also that of the industry.
‘You start a price war and there is no bottom to it.’
Brooks says companies who discount are giving the message that they don’t really believe in their product and that they feel clients are only coming to them because they are cheap - thus destroying the brand and the client’s trust.
He adds that people who feel they have to cut prices to get through the tough economic climates should think again. ‘I say you can not afford to discount.’
Brooks refers to research that shows if a company is making a 30% profit margin and it discounts by 10% it has to sell 50% more to make the same amount of profit. Any company discounting by 20% has to sell 200% more of its products or services.
‘Going into 2009 what are your chances of doing that?’
He says event managers should realise that price is never really the main reason customers do business with them.
‘Price is only the main issue if you have not created any more value than can be provided by your competitors and then you have failed - because business is about the creation of value.’
He says an even more tragic scenario is when you create the value and do not sell it.
Brooks says event managers have to realise what customers actually want. ‘Your customers do not want your products and services. They want the value they can extract from having an event and all the benefits from that event.
‘You need to be asking your clients ‘why are you doing this, what are you trying achieve?’ That is what they will be focused on.
‘You also need to understand that value is subjective. It’s not what you think it is - only they (clients) can determine what is value to them.’
He gave the example of hotels which fold toilet paper into a neat triangle when the room is serviced daily.
‘I don’t know about you, but I don’t need such accuracy. When I wait to check out and I am in a long queue because there are not enough people on the other side of the desk, I wonder if they are all up in the rooms folding toilet paper.’
Brooks also talked about an airline which offered a ‘reserve a seat’ online service for $5. ‘I thought that was great, but when the airline started to charge me a $5 fee for a credit card transaction, when I had no choice to pay online any other way I got really angry. But I would have happily paid $10 for the seat selection - in fact I would have paid $12, so the airline would have been $2 better off and I would not have been angry.
‘Value is not what people want, or what they need, or desire - it is what they are prepared to pay for. Do you know what it is that people are prepared to pay for?’
Brooks says the challenge for PCOs is to discover what they need to do to get their clients to pay the price they want.
‘If you don’t know, just ask your customers - they will tell you everything you need to know to make you profitable. Just ask them and listen to them.’
He says companies need to create a situation where the client says ‘gosh, if I don’t deal with that event company, I am missing out.‘
New Zealand and Australian based conference and event organisers were presented with both harsh economic reality and the message to keep their chins up and not talk themselves into doom and gloom, during a conference late last year.
The inaugural Professional Conference Organisers (PCOs) Association Conference attracted about 150 delegates and 40 supplier representatives when it was held at Holiday Inn Surfers Paradise in December.
Martin Winter, the chief executive officer of Gold Coast Tourism Corporation gave the message that while domestic meetings business in Australia may hold up, international conference delegates were virtually certain to be impacted.
Even within Australia, there is a ‘disturbing escalation’ in negative sentiments among governments and officials.
‘The danger is that consumers will see a recession a fåit a complet and will stop spending, and that it will be a self fulfilling proposition. It is probably likely we (Australia) will slip into some sort of recession next year.’
He says this would probably happen despite the federal government’s cash injection late last year to stimulate the economy, the low interest rates and the drop in oil prices.
However Winter had positive messages too. Australia has a solid domestic association base which can bid for international events, he says, and the opportunities this provides need to be further exploited.
‘The private and public sectors must work together. This is imperative.
‘Although the conditions are challenging we should not be too despondent long term. The inherent strength of the Australian economy will carry the meetings industry through, even though a return to normality will take some time.
‘We will come out the other side ok - the question will be whether we are stronger or weaker for the experience.’
Sandra Chipchase, the chief executive officer of the Melbourne Convention Bureau, is feeling more bullish about the future and reminded the PCO conference audience that the industry had survived SARS, 9/11, the Australian airline pilots strike, the Asian financial crisis and a number of other challenges.
She says the Melbourne bureau had not seen one cancellation of a major conference (by early December last year).
‘The Asian corporate incentive business is holding. We are concerned about materialisation (in 2009), but we are putting effort into boosting delegate numbers. It is going to be tough but this is an industry that has been through tough times before - this is another one.’
She says Australia and New Zealand have the ‘most professional meeting managers on the planet.
‘We’ve got the infrastructure and the natural attractions. What is there not to love. The worst thing we could do is talk ourselves down - we have to talk ourselves up.’
That was a sentiment shared by Paul Donovan, the chief operating officer of Gold Coast Airport. He says that though the aviation business globally is ‘going through drama’, this happens on a seven year cycle anyway and will not actually affect conference delegates’ ability to access destinations.
‘There will still be airline services, albeit more low cost carriers servicing domestic and short haul international markets. The long haul legacy carriers will consolidate but they will still operate significant point to point services. Airline prices will be kept at a reasonable level.’
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Martin Winter
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Sandra Chipchase
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