LUXURY VENUES: Selective spending

Concerns over profligacy are causing a shift in the C&I industry. Catherine Chetwynd reports.

If the second International Luxury Travel Market (ILTM) held in Cannes in December last year is any barometer, luxury is still in, despite lack of confidence in the economy and associated restrictions - budgetary or otherwise. The show was sold out by October, with stands going to 600 companies, 94 per cent of which were repeat business.

Luxury, it seems, runs the gamut of conference and incentive requirement: destinations, trains, yachts, cruise lines, jet charter companies, hotels and hotel groups.

Says ILTM CEO Serge Dive: "There is serious competition at the top end of the C&I industry and organisers cannot continue to send groups to the same destination and hotel. Innovative programmes in new destinations and at new properties are an essential part of an incentive for the highest performing groups, and travel is still the most effective motivator.

"Unlike money, an unusual experience creates loyalty and leaves good memories," says Dive. "That is why C&I organisers come to ILTM - to find new products and places."

According to MPI figures, corporate meetings and conventions account for some $102bn (£55.5bn) in annual spending worldwide. This suggests the problem for companies wanting to create motivational events is not always budget, it is often perception: they do not want to be seen splashing out on luxurious trips and accommodation when times are hard.

The trend has led to changes in the sector. Executive vice-president of BI worldwide David Hackett explains: "The industry is polarising and there are fewer pure incentive programmes. Where traditionally they wanted a luxury statement, many companies are concerned not to look profligate, so trips are now more about destination than hotel." This has worked against places like Monte Carlo, which are seen as a rich man's playground and expected to be expensive on-site for delegates.

Value destinations are winning through. "Six hotels in Mauritius featured in the last Conde Nast Traveller Top 20 hotels, but they give luxury at a price that is affordable for the corporate budget and for participants," says Hackett. He also highlights the Far East, including Thailand; Dubai, where the dirham is pegged to the dollar; North America and the Caribbean.

Account director at Travel Impact Caroline Staveley also finds clients want to be seen to be frugal: "Our clients are still looking at luxury venues, although groups can be smaller for budgetary reasons. Often, the venue may be in the UK rather than overseas because the UK is perceived to be cheaper." For that reason, last year Staveley took a group of top dealers to Ackergill Tower in Scotland. "Expectations were exceeded and the right message was definitely received," she says.

Luxury also seems to operate on the small is beautiful principle. "There were many more smaller hotels at ILTM, particularly from France and Italy," says Staveley. "They have undertaken renovations and are marketing themselves to the C&I industry. Some offer exclusive use, which is particularly appealing."

However, there has been a shortage of large venues in the UK, especially England, and the arrival of The Grove has proven to be a boon, if an expensive one. "We have some clients who are loath to use venues like The Grove and Pennyhill Park, because although meeting space is good, they are expensive," claims IBR director of sales Josephine Rudkin-Binks. However, this does not seem to deter customers: these venues are always well booked.

Rudkin-Binks also points out that top locations continue to attract business because companies do not want to be seen by competitors to be trading down. This particularly applies during trade shows and industry events, when all participants are vying for the same audience, so their functions have to be well chosen locations to get the guests they want.

After an initial slump in 2000, The Dorchester found impressing clients and sustaining a high profile won through, although its experience suggests businesses are holding fewer, smaller events, with just one or two high-budget functions a year. While the hotel industry is often criticised for being inflexible over rates, hiking them in good times and being reluctant to negotiate in bad, The Dorchester has not increased rates for some years and adds value through complimentary or discounted stays for organisers, and menu upgrades. "This has retained customer loyalty," says spokeswoman Claire Bernard.

But expensive surroundings do not alone create luxury. For guests to feel truly spoiled, there must be attentive service to match.

"An event is greater than the sum of its parts," notes Harrods banqueting and events sales executive Emeline Bernard.

Luxury venues will continue to hold their appeal both because competition creates the need for companies to stand out and because the venues themselves ensure they remain good value, while maintaining standards. Luxury incentives are not dead. They are just retaining their position as the prerogative of the elite, but with an eye to commercial reality, which is where they ought to be.

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