meeting_venues

CONGRESS PRICE BAROMETER 2023

Kongres Magazine conducted an analysis dubbed the Congress Price Barometer 2023 in light of the tremendous interest shown by readers. We invited 24 larger conference centres to cooperate and received 13 replies, representing a statistically credible sample.

Our research has shown that a justifiable rise in venue prices depends on the average level of inflation or the Consumer Price Index (CPI Index). In the European Union, both indicators showed inflation ranging from 10 to 15%. Event organisers accept such a rise with understanding. However, any price above this rise is a speculative venture. A part of the study aimed to calculate the average price of a venue per square metre. The result showed that one square metre costs 10.42 EUR. Event organisers can use this valuable information when negotiating prices with venue providers.

A justifiable rise in prices can occur only when the CPI Index (Consumer Price Index) rises.

2022 will be remembered for the highest price increase in the past three decades. European studies in macroeconomics foresee slightly more tolerable inflation in 2023, still due to the rise in energy prices and materials. The current market situation is incredibly uncertain. Not a day goes by without our readers asking us questions regarding pricing policies, guarantees or cancellation policies. Given the immense interest, we have prepared a Price Barometer for 2023 and analysed information provided by 13 conference centres across Europe. Our statistical sample is large and credible enough to draw logical conclusions. We hope our analysis will assist international event organisers in overcoming this tumultuous period, which started during the pandemic.

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Photo Credit: IAKW-AG/Ludwig Schedl

Index of consumer prices comparable across Europe

To realistically compare the prices of congress services, we must start by dissecting the Harmonised Index of Consumer Prices (HICP), prepared by the European Central Bank. The HICP is considered the golden standard in the world of finance. In November 2022, the average rate of inflation in the EU was 10,1%. The lowest inflation was recorded in Spain (6,7%), whilst the highest inflation struck in Latvia (21,7%) and Hungary (22,5%).

Most Central European countries experienced inflation rates between 10 and 15%. This median should be considered when drafting a pricing policy. At the same time, the Consumer Price Index must be applied in individual countries. Our research has shown that this index is crucial when overviewing the pricing policies of meeting venues. In renowned and developed meeting destinations, such as Vienna, London, Prague or Krakow, the price for hall rental only increased accordingly to the CPI Index. Several of the most distinguished European conference centres emphasised that they follow the CPI Index when creating their pricing policy. Such a transparent policy must become the standard, and other conference centres should follow suit.

Fragile normality

Our study led us to believe that the pricing world we knew before is considerably more fragile, vulnerable, susceptible to change and, above all, filled with uncertainty. Everything can change overnight. Large congress events and other meetings planned up to four years in advance must consider facing significant financial risks. Our industry has become a complex and intricate machine that we must understand thoroughly and constantly evolve.

To illustrate and compare, we calculated the price of renting one square metre in a hall. As part of the research, our default hall, measuring 600 square metres, could capacitate 500 attendees. The price of renting it did not include multimedia equipment or other services. By comparing the prices of an average hall, we could realistically collate the pricing policies of venue providers that are diverse and often hard to understand. When comparing prices, it is imperative to distinguish between conference centres that generate their income from renting space and conference centres within hotels that generate their income from overnight stays. There is also a third category – conference centres that craft pricing policies in light of market prices. They are exceptions, nonetheless. Our study has shown the following prices of meeting venues (all prices include VAT):

The average price in conference centres:12.22 EUR per square metre (from 9.17 to 14.33 EUR)
The average price in meeting hotels:7.65 EUR per square metre (from 5.50 to 9.80 EUR)
The average price in other venues:3.82 EUR per square metre (from 2.00 to 7.26 EUR)

 

Should we eliminate the extremely high and low prices according to the method of standard deviation, the average price of renting one square metre of a meeting hall amounts to 10.42 EUR. The information serves as an excellent basis for negotiating prices with venue providers.

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Photo Credit: Marko Delbello Ocepek

By the time this article is published, my shock when stopping at a petrol station yesterday will have passed. The price of petrol had decreased so much that a full tank cost me only 60 EUR, even though I was subconsciously preparing to pay 90 EUR. Upon the joyful discovery, I pondered where the rise of prices is leading us. We are witnessing a typical anchoring effect, a well-known concept in marketing. For petrol stations, it is optimal when high prices get anchored in the subconsciousness of consumers. Therefore, regulating prices in the oil market is still somewhat better than enabling the invisible hand of the free market to govern. Once high prices get imprinted in our minds, there is no turning back.

Referring to a 500% growth in energy prices

Our research aimed to discern whether another myth was true. Our industry is not short on myths – many of them based on a priori assumptions rather than empirical and scientific grounds. One such myth claims that energy prices have increased by 500% or more. That sounds catastrophic, and we may feel sympathy for our devastated partners. Considering Eurostat’s statistics, though, that is far-fetched. In countries that the research included, energy prices (by autumn 2022) on average increased by 88,15% compared to 2019. Although, there are extremes too: the greatest increase was recorded in Greece (365,3%), Turkey (215,0%) and Bulgaria (170,5%). Poland, on the other hand, recorded the lowest rise in energy prices (24,2%).

In short, before you foolishly purchase data regarding an unprecedented rise in energy prices, see what official statistical information shows. Most often, the numbers do not lie. It is precisely the energy crisis that venues exploit to raise the price of hall rentals beyond all reason.

Every event organiser deserves to know why prices have soared by more than 10% or why there has been an increase exceeding the CPI Index.

Common sense still prevails

Our research pointed to another finding – most venue providers still use common sense. That is true for the most developed regional markets, where venues strictly adhere to standards, certificates and the instructions of their governments and macroeconomists. We must praise Austria in this context, where there is a clear consensus that prices can only increase by the CPI Index. Austrian venues were adamant in their decision and did not increase prices by more than 10%. It is also intriguing that some venue providers did not wish to answer our questions (6). When collating market prices, we unravelled that those who did not participate in our research had increased their prices the most. Most surprisingly, our study showed the outline of an emerging cartel arrangement. That is incredibly controversial when conference centres owned by the government or city are involved. Ultimately, we believe that every event organiser deserves to know why prices have soared by more than 10% or why there has been an increase exceeding the CPI Index. We deem the transparency of venue prices imperative.

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Photo Credit: Vienna Convention Bureau

What actually works on the market?

Conference centres can draft their pricing policies in various ways. Among a slew of models, the following three are the most popular:

1. Cost-based pricing strategy: A pricing policy based on an analysis of costs and markup
2. Market-based pricing strategy: A pricing policy based on the prices of the competition
3. Value-based pricing strategy: A pricing policy created by understanding the sensitivity of clients to prices

Positioning prices is often a combination of all three models.

All three models are closely associated with contradictory methods that include ignorance towards clients and competition or the unadaptability of prices. We did not delve into this or the policy of discounts deeper. Such approaches do represent an integral part of several pricing policies, however. We concluded that ill-advised cartel pricing policies could result in unrealistic prices. Such approaches can be devastating for individual meeting destinations. Event organisers are, in essence, shy animals who hold their events where prices are comparable with the competition. In the long run, destinations that provide flexible terms for reservation in combination with lower prices in the off-season and price guarantees will come out on top.

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Photo Credit: Conventa Crossover

Practical solutions regarding pricing policies

Let’s see what respondents said about their pricing policies in 2023. We have segmented their answers to see what direction they will choose:

Payment terms and cancellation fees
The majority of respondents strive to be flexible and adapt to their clients. A large part of them do so by imposing payment terms that depend on employee benefits. Several respondents demand a 100% payment in advance for events that take place in sought-after terms. We will further research this segment in the future.

Guarantees and insurances
Virtually no venue in our research offers any particular guarantee unless they host annual events. Guarantee schemes initiated during COVID-19 have also expired. This segment poses a timely opportunity for venues striving to create a winning marketing campaign in uncertain times.

Price optimisation
Respondents frequently mentioned price optimisation regarding technological equipment. That is unsurprising, considering they are wasteful with energy. Answers concerning the optimisation of space were also intriguing – respondents highlighted that attendees should be offered more energy-efficient halls.

Investing in green energy
Several respondents noted that their venues had already invested in improving energy efficiency. Two examples include fitting solar panels on the premises. By providing self-sufficient energy, they will compensate for the skyrocketing energy prices.

Long-term power purchase
Some respondents mentioned purchasing energy for longer periods, i.e. signing a Power Purchase Agreement (PPA).

New pricing models
The answers included the introduction of new pricing models that will comprise a guaranteed/fixed price of a hall. Such models will comprise additional payments for energy costs (considering the time of year) and environmental tax that may vary. Venues will thus precisely define new prices for every segment of the pricing mosaic. Hence, event organisers should keep a close eye on future pricing models.

Undoubtedly, respectful and tolerant dialogue among destinations, venues and event organisers is imperative. The only way to see a return of positive trends for in-person events is to establish a dialogue with mutual tolerance.


Disclaimer: According to prior arrangements with venues that responded to our questions, we will not disclose their names. The participating venues that took part in our research were sent the entire analytical part of the study, which they can use for their internal purposes. Our research aimed to outline the market situation and draw the attention of event organisers to positive and negative practices whilst helping venues create transparent pricing policies.