editorial
Photo Credit: Canva/Pixabay

Fast profits are not the solution

The meetings industry was first affected by the stark consequences of the pandemic and later hindered by the repercussions of Russia’s invasion of Ukraine. The prices of meeting venues thus went through the roof because of two external shocks. Consequently, event organisers became burdened by soaring prices. Luckily, they have various options, perfected during the corona crisis, at their disposal. If an event cannot be held in person, it may be wiser to host it in a hybrid or digital form. Meeting planners may even decide to host it in the Metaverse. Numerous large European convention centres have evidently overlooked this aspect. Many venues have passed on the increasing costs to event organisers, who must now shoulder the burden alone. According to a study conducted by CWT Global Business Travel Forecast, the expenses of organising events have increased by 25% in 2022 compared to 2019. In the upcoming year, the costs may rise by a further 7% (https://www.mycwt.com/global-business-travel-forecast/).

Europe is short on helicopter money that is supposed to compensate for the rising costs. Moreover, subsidies are a disguise for companies who refuse to make a green transformation or digitise their services. To regulate the increasing costs of renting venues in the long run, making a swift green and digital transformation is imperative. In other words, if conference centres wish to remain competitive, they must keep in step with technological advancements. Above all, to commence their green transformation, they must improve their venue’s energy efficiency or renovate their buildings entirely. The overwhelming majority of buildings are obsolete and inadequate simply because energy efficiency was not on the agenda at the time of their construction.

barbican_centre
Photo Credit: Barbican Centre, Max Colson
It is crucial to shine a light on the pressing challenge with respect to the general public. Most conference centres across Europe are owned or financed by governments, cities or governmental funds. Such conference centres and venues operate in the interest of the general public with the ultimate goal of creating multiplicative and regenerative effects for the destinations. Throughout European states, governments are well-aware of their importance and, unsurprisingly, offered them comprehensive help during the corona crisis. It seems they will receive similar aid for the current energy crisis. Paradoxically, event organisers must compensate for the constantly rising costs of renting venues. As the prices skyrocket, event organisers will have to pay higher taxes and indirectly finance new government subsidies for public infrastructure. Consequently, infrastructure companies will see record profits, whereas the creative sector that propels the economy will barely keep its head above the water. We must preserve a fragile equilibrium; otherwise, the meetings industry will face a similar fate as the oil industry, which is recording ridiculous profits amid an unprecedented energy crisis.

The whole situation is best illustrated by an overview of the structure of the rising costs when organising an event. An analysis of the budget of events with up to 500 attendees has shown the following pattern:

Budget segmentRise of costs
Costs of renting a venue and technical equipmentfrom 20 to 35%
Catering service costsfrom 20 to 30%
Programme costsfrom 15 to 25%
Marketing and communication costsfrom 15 to 20%
Staff costsfrom 10 to 15%
Organisational costsfrom 10 to 15%
Registration costsfrom 5 to 10%
Unforeseen costsfrom 5 to 10%

 

The analysis above is a rough estimate based on classic business events and conferences that include an expert programme, networking and lunch and coffee breaks. The structure depends on the complexity of event production.

Pivotal for every event organiser is the management of fixed costs, predominantly the costs of renting a venue, the staff costs and the costs pertaining to the programme. Variable costs, in particular, catering service, registration and organisational costs, largely depend on the success of marketing or the number of attendees.

The balance between fixed and variable costs is fundamental. Ideally, the balance should be 60:40 in favour of fixed costs.

convention_centre_hamburg
Photo Credit: Hamburg Messe und Congress, Jürgen Nerger

Establishing tolerance in dialogue

However, achieving the ideal balance is impossible if we add the current 10% rise in fixed costs (due to inflation) to the equation. Thus, event organisers must start saving funds by reducing the costs of catering services and the programme or diminishing the attendee experience. A new trend is becoming increasingly noticeable: venues have started to raise the prices of renting halls by 25% or more. In practice, event organisers will thus only have 25% of their entire budget for creating unforgettable experiences for the participants.

Any of us who provide full-service production will never agree to this because participants attend events for their unparalleled content and experiences. Venues seldom play any noticeable role in this part. As event organisers, we cannot raise the attendee fees significantly, either. Participants only accept a slight rise due to inflation.

How should we regulate the soaring prices of meeting venues, then?

It seems we only have a handful of options. The most drastic among them is to cancel an event and wait for better days, as many did during the corona crisis. Alternatively, we can transfer the events into digital and metaverse worlds or organise them in a studio. All developers of hybrid platforms will be tremendously grateful.

Still, there is a better option; establishing respect and tolerance in dialogue among destinations, venues and event organisers. We must create dialogues with tolerant reciprocity. That is perhaps the only option for the return of positive trends regarding in-person events. If that happens, destinations that offer flexible terms for reservations, provide lower prices in the off-season and can ensure a price guarantee will undoubtedly prosper. Most importantly, every event organiser deserves a clear answer from venues as to why the prices have soared by more than ten per cent. I deem the transparency behind prices crucial.

In any case, make sure to demand that your provider guarantees the prices remain valid until a particular deadline. By doing so, you will avoid future headaches.

As the pandemic withered, it seemed the storm had passed. However, the inflation and drastic rise in expenses seem to be new impediments that prevent the meetings industry from restarting. Our editorial board has decided to analyse the rising costs and trends. In the upcoming weeks, we will prepare a comprehensive study to discern what is happening in this part of Europe.


Editorial by Gorazd Čad