How they're changing their business models to survive
Scary. That's never been a word you'd expect to hear describing the state of our industry.
And yet that's exactly how Hannah Greenberg, CMP, describes business at Meeting Mavericks, a meeting planning company in Cherry Hill, N.J. “I've had two cancellations in the last four weeks,” she reports. “Before this, I had two in the past five or six years. It's definitely scary.”
In St. Louis, Julie Greenspoon-Kelly is feeling it, too. “We have two large groups who book in January every year,” says Greenspoon-Kelly, president of Destination St. Louis. “They both canceled.” She has also seen some large St. Louis-based corporations pull out of annual events. Anheuser-Busch, Enterprise Rent-a-Car, and MasterCard all canceled their 2008 holiday parties, she says, and while her company was not involved in planning those events, the cancellations hit many local suppliers hard. “These are the kinds of things that make you sick to your stomach.”
It's made virtually all suppliers in the meetings industry — from destination and meeting management companies to incentive houses and speaker bureaus — take stock and rethink their business strategies, says Chris White, chairman and CEO of Global Events Partners, a worldwide partnership of DMCs based in Washington, D.C. At a recent meeting in Nashville, Tenn., White brought together all the company's domestic DMCs. “Each owner stood up and told us what is going on in their region, and nearly everyone said 2009 business was going to be down. They were forecasting anywhere from 10 to 40 percent less business this year.”
As Bill Boyd, CMP, CMM, CITE, president and CEO of Sunbelt Motivation, Dallas, and a well-known industry leader, puts it: “I haven't seen business this bad in the 28 years we've been in operation.”
Who's Hurting Most?
“Event professionals who serve the corporate market exclusively are bearing the brunt of the downturn,” says Lisa Hurley, editor-in-chief of Special Events (a sister publication of Corporate Meetings & Incentives). “While social business is certainly feeling the pinch, the corporate event business is facing a sharper falloff.” It's not surprising, she says. “People still want to celebrate a wedding or other milestone event, but corporations are not only reining in spending, they also fear looking extravagant in these tough times, so they are canceling events that might appear frivolous.”
Debbie Meyers, CSEP, head of Dallas-based entertainment company Bravo! Entertainment, expects a 20 percent to 30 percent drop in the budgets slated for her events this year. While some of the cuts are due to lower projected attendance at conferences, she agrees that the negative press that companies like AIG have received over sending people on incentive trips has caused others to rethink what they are doing. “We've seen cancellations even when canceled services have to be paid for anyway,” she says.
Malcolm Greenwood, owner of Big Events, Franklin, Tenn., has seen more cuts than cancellations — things such as dine-arounds and catered events. “Clients are watching the menu more closely and choosing more economic entrées.” They are also scaling back on décor. Audiovisual, however, is one area where clients are not as willing to make cuts, he says.
For DMCs, the situation depends on the destinations they serve: Exotic locales such as Hawaii are getting hit harder by the economy than second-tier cities like St. Louis, says Greenspoon-Kelly. “We're fortunate in that we're not an incentive destination,” We have never seen the super-highs, and now we are not seeing the super-lows like [DMCs] in cities such as San Diego or Miami. St. Louis is also still easy to get to. We're down from last year, but it is nothing compared to my colleagues at DMCs in Boston, Atlanta, Miami, and Nashville.”
Times are definitely tough in Nashville, reports Rhonda Marko, CMP, CMM, DMCP, president and CEO of Destination Nashville, who has had to lay off three people at her company. As president of the Association of Destination Management Executives, she has seen “more DMCs laying off staff than I can count on both hands. I have never experienced that before in all my years in the business.”
Then there are the small- and medium-sized incentive firms, which sometimes rely on just a few key clients. Following the late cancellation of a large travel reward program for a West Coast automotive client, Excellence in Motivation laid off 34 employees in November. These were the first layoffs for EIM since the Dayton, Ohio-based company has been in business, says Bob Miller, president and CEO.
Speakers and entertainers are also feeling the pinch. “A few of our clients have canceled outside speakers and are holding reduced-length meetings,” reports Andrea Gold, president, Gold Stars Speakers Bureau, Tucson, Ariz. She is also seeing “a radical change” in the way some groups are budgeting for speakers. “In one case, a [client] that normally books a pricey keynote speaker is now spending one-third that amount for the same keynote speaker, and a few groups have cut out speakers altogether. ”
How Does This Recession Compare?
While many of these suppliers have weathered recessions in the past, the consensus is that this downturn is worse than the others, including the period following 9/11.
“In my opinion, 9/11 had a very different feeling,” says Valerie Hershiser, CMP, DMCP, president and owner, The Key Event Group, Nashville. “That was an attack on our country, and people were adamant about not letting it affect them.” Destination Nashville's Marko agrees, adding that financial uncertainty is at the heart of the current crisis, unlike in the period following 9/11.
Another big difference: The current recession is global. “Most of the recessions we have faced in the past have been U.S.-based,” says Julio Campos, founder and executive creative director of Santa Monica, Calif.-based production company Campos Creative Works. “In those downturns, global companies could sustain their business even though domestically they were suffering. The problem now is that everyone is affected — both nationally and internationally — and the first thing to go is the marketing dollars.”
In the current climate, diversification is the key to survival, says CCW's Campos. “We are strengthening other departments in the company and diversifying our client base. Rather than fight for the same number of clients in the industries we have always worked in, we are building different segments in our business to explore what else is out there.” For example, his company has always focused heavily on the automotive and high-tech industries, but he is now looking to expand into the pharma and financial sectors. He is also delving into experiential marketing events for consumers in addition to corporate events. “Consumers will still be going out and spending money,” says Campos.
Excellence in Motivation is also expanding its reach in an effort to remain successful in 2009. Despite layoffs in its travel management division, Miller says the company is seeing growth in its marketing and technology services divisions and is hiring in these areas.
And when it comes to layoffs, one person's loss may be another's gain. “Some corporations have had to lay off their in-house planners,” says Destination St. Louis' Greenspoon-Kelly. “We are getting calls from those companies that wouldn't have come to us otherwise but who now need a.”
David Richardson, president and CEO of Memorable Meetings, Charleston, S.C., says his company has primarily focused on the national market, but due to the financial squeeze, he is putting greater emphasis on developing clients regionally. “It doesn't cost us as much to do regional business in Georgia, North Carolina, and South Carolina,” he says. “A client is more likely to pull back on a meeting booked in the Bahamas than one that is booked locally.”
Other companies are making operational changes to cut budgets and keep their employees. At Atlanta-based A Legendary Event, Creative Director Steve Welsh reports that managers were recently asked how, if they owned the company, they would cut costs without shortchanging quality. “Some suggested that we can reduce our courier bills by hand-delivering proposals or bills to clients or by offering them the opportunity to stop by for a tasting of some of the chef's recent recipes — both of which give us valuable face-time with the customer,” he says. “Our executive chef was able to cut his overall food budget by 20 percent simply by calling his vendors and negotiating a better deal. By issuing paychecks every two weeks, we are saving over 50 percent of the cost of weekly checks! Many were so thankful to be included that they vowed to find ways to cut budgets in every department and to do whatever it takes to get through this.”
And for those who are willing to look for them, the opportunities are still there, says Global Events Partners' White. “In our New York office, we have a woman who just turned 70 who is known for being the best in New York at what she does,” he says. “She just lost several accounts, and now she is making cold calls to people and having lunches four or five days a week with potential new clients. At 70, she is going back to doing what she did 25 years ago.”
Forecast for '09: Uncertainty
Another result of the down economy: shorter booking cycles, making forecasting for 2009 virtually impossible. For example, White recently had a client in Nashville call in on a Tuesday for an event that was coming into town the next day. “And this was a major piece of business with off-site events and dine-arounds.”
While the unexpected business is a plus, the inability to forecast through 2009 may translate to some suppliers going belly up. “I think some of the smaller DMC operations are not going to make it,” he predicts. “These are the ones that generally don't plan ahead very well and live on the edge with very close margins. I think we are going to see some of these three- or four-person operations fold this year.”
The Key Event Group's Hershiser says her company has gone from forecasting every six months to assessing the business on a quarterly basis. “Our customers are buying short-term, and we don't have a solid idea of how 2009 is going to shape up the way we did last year at this time.”
Some of her 2009 proposals have been out to customers for the past three to six months with no sign of action. “They're afraid to commit. They say they are doing the program but [it doesn't mean much] unless ais signed. We have a lot of leads. It's more a matter of what is going forward and what is not.”
On the supplier side, everyone agrees that 2009 is going to be a survival year. Says Campos: “Like us, most production companies are just trying to protect what [they] have. It's going to take a huge effort to keep what you have booked. We'll likely be in survival mode until possibly 2010 — and I'm really an optimistic person.”
Sidebar: Hotels Lighten Up
With so many hotels hit hard with cancellations, many independents are finding them more flexible about. When Hannah Greenberg, CMP, director of conference services at Meeting Mavericks, a meeting planning company in Cherry Hill, N.J., saw attendance at an event in the Bahamas drop from 100 attendees to 22, the hotel was willing to waive all attrition penalties once she agreed to hold the event there again for the next two years.
It wasn't an easy sell, she says, but because she brings a lot of business to the property throughout the year, the hotel was willing to negotiate. “I really had to work hard to prove my case and go up the chain [of command] to the executive office.”
It was a good business decision by the hotel, says David Richardson, president and CEO of Memorable Meetings, an event planning company in Charleston, S.C. “The ones that are really willing to partner together to do business are going to survive this [recession].”
Richardson is going back to properties to renegotiatefor his clients for meetings that are already on the books. “As a third party, I have clients who do not want to cancel, but it is not economically feasible for them to have the meeting. It's a question of asking a property what can be done to keep the meeting from canceling, whether that be postponing cancellation fees, reducing room rates, or renegotiating attrition clauses. He also often enlists the hotel's general manager in these sit-downs to discuss how they can offset certain costs in order to keep the business.
It's never too early, he says, to “use the relationships you have with national chains and proactively go to them to ask for help.”
Sidebar: Positive Imagery
With all the doom and gloom out there, David Richardson, president and CEO of Memorable Meetings, Charleston, S.C., wants to make sure his employees start their days off feeling positive. As part of aactivity, employees are wallpapering the entire reception area with a collage of positive expressions, happy photos, and fun words and thoughts.
“It's a silly thing we are all doing together as a ‘psychological shift,’” says Richardson. “There is so much negative thinking in the world right now, we decided we wanted to paste something on the walls that is uplifting and fun.” Richardson says the collage, which employees began creating around the holiday season and will continue to evolve throughout the year, is meant to bring employees together.
“The more you think positively, the more you will be able to see happiness and joy in all things.”
Sidebar: Mind Shift
Tips for Suppliers on Rethinking the Recession from James Feldman of Shift Happens!
Stop pointing fingers. It's not the airlines' fault. It's not hotel's fault. We're all in this together and everyone is in the same boat. There is enough negativity out there already. Why add to it?
Elevate your attitude. Sure, it's easier said than done, but going around with a “woe is me” outlook guarantees you are not going to be in the right frame of mind to come up with effective solutions. “This is the biggest piece of advice I would give anyone,” says Feldman. “You have to make sure you have a clear mind-set so you can help your customers find confidence.”
Accurately identify the problem. What are your customers' real pain points? Is it that they can't hold any incentives at all in 2009? Is it that room rates at the hotel are too high? Or are they just looking to hold a meeting on a severely reduced budget? “I think if you go back to the customer and ask, ‘What would it take?’ you will get some very informative answers.”
Partner, partner, partner. Do you need to offer customers a cheaper transportation alternative? Maybe a partnership with a cab company could help.
Tune in, not out. Blogs, e-newsletters, social networking sites, and the like should not take a back seat when business is down. Use these forums to make introductions to new partners and customers, and have those in your network refer you to colleagues in their own circles.
James Feldman, CITE, CPIM, CPT, MIP, is a meeting industry consultant and speaker. www.shifthappens.com