It's easy to underestimate costs associated with offshore meetings--there are, for one thing, more expenses involved. Here is some help for managing the bottom line.
- Some veteran planners estimate that an offshore program will cost $1,000 to $1,500 more than a domestic one, and some advise doubling the operating budget. Others say that with very careful planning, an offshore program does not have to cost much more than one held in the U.S.
- One thing everyone agrees on: Build in a generous slush fund — as much as 25 percent greater than your domestic meeting's contingency fund.
- Put together a detailed budget worksheet that covers every imaginable expense, including air, hotel, meeting rooms, AV, food and beverage, shipping, speaker support, translation, spouse programs, staff costs, printing and copying, local transportation, and telephone and fax costs.
- Don't expect deeply discounted hotel room rates or free meeting room space. Meeting space is at a premium in many foreign countries.
- Hotels in general are smaller, so if you need more than 50 rooms, you may have to use more than one property. That can drive up your shuttle costs.
- Dealing strictly in U.S. dollars is the simplest currency strategy. It will work to your advantage if the American dollar falls in value against a given currency. However, expect to pay premium exchange rates, and in some cases, service fees. If you go this route, it is best to use a corporate credit card for your financial transactions.
- Monitoring currency fluctuations with the goal of locking in a favorable exchange rate can reap fiscal rewards. But making an educated guess as to how foreign currency will move vis-à-vis the American dollar requires regular monitoring such areas as interest rate trends, inflation, trade surpluses and deficits, and local political conditions in the chosen destination. The best approach is to develop a target number when currency exchange rates will enable you to meet your budget, and then lock in the rates at that time.
- Opening a local bank account will yield good exchange rates and allow quick payment to suppliers. However, it also requires a lot of management and may not be worth the effort for organizations that do not have branch offices or sister associations in the chosen destination. (Each country has different banking rules, and there are IRS regulations as well.)
- The forward is an agreement to purchase a set amount of a foreign currency at some future date for an agreed upon number of American dollars. The exchange rate is locked in, and guaranteed never to change. The forward contract can be handled by the foreign exchange department of a commercial bank, but you will get the best deal from a currency management company. These firms operate just like a bank, with some added services and savings.
- Forward are usually purchased about a year before the program date, but can be purchased up to a month before the meeting. A $10,000 minimum is standard, as is a good-faith deposit (around 15 percent). You can arrange to pay the remaining 85 percent of the money in staggered amounts that coincide with suppliers' payment schedules.
- What happens if you purchase a forward contract for more money than you need? Part or all of the contract can be sold at any time. The selling price is based on current market rates.
- Options contracts also lock in exchange rates, with the advantage of a built-in escape clause: You can reserve the right to do nothing. But the clause carries a hefty fee.
- Perhaps the most vexing area of currency management for European, Canadian, and a few Pacific Rim programs is a hefty indirect tax collected on most good and services. These taxes are called the value-added tax (VAT) in Europe and the goods and services tax (GST) in Canada. They could easily represent a 15 to 25 percent of a total meeting budget, and should be included as line items on the budget work sheet.
- Most of the countries in the European Union have adopted VAT refund procedures that allow U.S. companies to reclaim the taxes charged on many of their overseas meeting expenses. The bad news is that the procedures governing VAT reclaim are complex and vary from country to country. Each country has its own application form that must be completed in the country's official language — and that's just the first of many steps that end, when successful, in a refund in local currency as much as six months later.
- Few planners tackle the process of reclaiming the value-added tax on their own. Currency management and VAT reclaim companies can help out. (See Resource Guide on page 60). For more information on VAT, see page 43.)
Printing and copying charges can be very high in some offshore destinations. If your program requires printed materials, either bring adequate supplies with you, ship early, or strike a deal with a local printer.