Analysis: Future focus

MPI UK members met to discuss the impact of procurement and how it is shaping the future of the industry. It may have been a cold Monday night in October - when most people prefer to be tucked up at home - but the opportunity to debate the thorny issue of procurement enticed almost 70 people from the meetings industry to attend an MPI UK event in London - a record number for the organisation.

This is clear evidence that, although the 'p' word can no longer be considered new to the meetings vocabulary, it is still a word that causes many affected to come out in a hot sweat.

The reason for the rise in temperature according to the MPI event panel is a lack of understanding of each party's role. "Procurement departments are there to challenge event organisers, not run the event," says PricewaterhouseCoopers head of business services Mark Avery. "We're not here to dictate."

At the same time, "What do corporate event organisers know about procurement?" asks Norwich Union head of events Andrew Latta. "I'm not a negotiator of bed rates, I organise events."

The solution: education and cooperation. Whether we like it or not, procurement is now a critical element of the event organising process and the over-riding message is that all parties need to work together.

"We've got to put an end to the Us and Them mentality," says AstraZeneca associate Jayne Stephens. "It should be more about partnering and getting best value for all concerned and this means challenging our behaviour."

No one questions the need for all companies to cut costs but the involvement of the procurement departments in the meetings process is changing the way all parties involved do business. The future of the event-organising industry is under greater scrutiny than ever before. Best practices are being revised and change is well underway. Looking to the future, the panel members made their predictions for change:

The end of commissions

"As corporates become more savvy, they will look at axing agency commission altogether," says Avery. "Despite the fact that a corporate may have already negotiated a deal with a certain hotel group, a few agencies insist on the hotel paying them a higher commission yet they don't declare it to the corporate. This means we don't actually know what we're paying for."

The erosion of commission is increasingly happening in the leisure travel sector where travel agents are having to make up the shortfall by charging clients a management fee. "Corporates are seeing this as a profit centre," says RAND chairman Peter Rand. "Commission is exactly what procurement departments want to get their hands on.

Agencies are starting to give the commission they make on venues back to the corporate and charging management fees, so it doesn't necessarily mean the overall cost will be ten per cent cheaper just because the commission has been scraped. In fact, agencies should only get commission if they introduced the business to the venue in the first place."

More consolidation

With a typical firm organising a variety of meeting types - from customer conferences, incentives and product launches to training sessions and sales reviews - numerous departments tend to take on the role of event organiser, with each one employing a different logistical procedure and making ad hoc purchasing decisions. This could be a thing of the past, as meetings switch from falling into the 'ad hoc' spend category and into the 'managed' cost category.

This means tighter agreements and closer working relationships with agreed suppliers and the implementation of centralised cost controls.

And, as the industry places increased emphasis on measuring the ROI of meetings and events, rationalisation is an inevitable consequence. "Often the same delegate will attend two functions hosted by one company with both events conveying exactly the same message, even having the same speakers. A lot of meetings are held when they needn't be," says Rand.

At Norwich Union, Latta is working to influence the organisation as to the best way to use meetings. "We look at the objective of the meeting first before we even think about the itinerary," he says. "We bill ourselves on the effectiveness on the individual delegate, especially for internal meetings," says Latta.

Greater use of technology

Technology will play a greater part in the meetings industry over the coming years. This is one area that attained the panel's unanimous agreement.

"Most big corporations have spend management systems that nail down to the last dollar what is being spent in each department - except when it comes to meetings," says Travent managing director Ray Thackeray. "This means there is no way of measuring how much a company is collectively spending on meetings. Meetings is one of the last great areas of unmanaged spend because it is so fragmented."

Through companies investing in specialised technology, data can be collected to "de-mystify" meetings spend, says Thackeray.

Recognising this, Amex is one of the few financial card providers that is focusing on the meetings sector. "With the current card system it's hard to track where the costs are coming from," says American Express director business strategic initiatives, innovation and development Clarke Simpson. "Advances in technology will allow event organisers to attain more detailed information using an Amex 'meetings card'."

Clarke predicts a move towards 'folio data' whereby all the costs of a hotel meeting - from the audiovisual to the food and beverage - will be itemised on one invoice from Amex. "Rather than getting 30 invoices, they'll get one electronic invoice," he says.

Thackeray praises this move: "Five per cent of meeting spend can instantly be cut by ridding the system of paper," he says.

A further move to cut down on paperwork will come in the form of on-line delegate registration, predicts Clarke. "In the future more hotels will offer on-line allocations," he says. "Delegates will be given an allocation code allowing them to log on to the hotel's website and register for an event, book their room, inform the hotel of their arrival time, any dietary requirements and so on."

End of annual rate negotiations

If Avery's wish comes true, we'll see "an end to the annual farce of rate negotiations".

"Each September hotels employ an army of labour to renegotiate their clients' room rates for the next 12 months," says Avery.

"It takes a huge amount of time and money and should be stopped, especially when there is a mature relationship between the hotel and the client.

"There should be a formal matrix that is index linked and allows for economic factors and market competitiveness. It would make so much more sense."

BOX: VENUE VIEWPOINT

While the battle between the agency and procurement department is well documented, the impact on venues has tended to be overlooked. "There's so much emphasis on us as the end supplier to cut cost, whether that be via audiovisual support, registration or catering," says Thistle Hotels meetings and events account manager Robert Eveleigh. "It's getting to the stage where it can become unprofitable and we're having to turn away business."

In response, Choice Travel commercial director Nigel Glover says: "the focus always will be on hotels first and foremost, because they are the most expensive part of the whole process."

So, it would seem that of all the parties involved in the meetings business, it's the venue that has the least power when it comes to negotiating.

BOX: PANEL VIEWS

"Agencies are increasingly having to consider which events they pitch for. Companies are demanding more indepth proposals and we are having to think more effectively about the bigger accounts."

CHOICE COMMERCIAL DIRECTOR, NIGEL GLOVER

"Meeting planners think they know how to negotiate, but if they don't know what the overall company spend is on meetings how can they negotiate."

TRAVENT MANAGING DIRECTOR, RAY THACKERAY

"In most businesses the procurement officer and the marketing manager are millions of miles apart in the same business. ROI is the glue that brings them together."

RAND CHAIRMAN, PETER RAND

"Hotels have traditionally lagged behind when it comes to technology, but we're moving more into an electronic age and in the future all hotels will have to have fully integrated systems to manage meetings."

AMEX DIRECTOR BUSINESS STRATEGIC INITIATIVES INNOVATION & DEVELOPMENT, CLARKE SIMPSON

"A lot of organisations are way behind in their thinking about meetings - they run events simply because it is what the director wants and don't think what is right for the company."

NORWICH UNION HEAD OF EVENT MANAGEMENT ANDREW LATTA

"The approach in this industry needs to be standardised, at the moment all companies organise events and meetings differently. We're in the business of people meeting people and it needs to be a single market for cross selling."

PRICEWATERHOUSECOOPERS HEAD OF BUSINESS SERVICES MARK AVERY

"Lot of people have gone on record saying they don't want to work with procurement departments. However, procurement is here to stay and only the ones that recognise this will survive. Procurement professionals are new customers for all agencies whether we like it or not."

TFI GROUP MANAGING DIRECTOR MARTIN LINES.

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