It is possibly no surprise to hear that cost-cutting remains a major theme in the corporate sector and subsequently, the MICE industry. Liesl Venter takes a look at how hotels are responding in this tough economic climate.
Speak to hoteliers and they will tell you, the MICE market is an important segment, even more so in these difficult times.
With South Africa officially in a technical recession following the publication of gross domestic product figures in June, markets remain uncertain and budgets are still tight. While cost-cutting has undoubtedly had an impact on conferencing and events - more particularly the kind and size rather than not hosting them at all, is has not been all gloom and doom.
“While 2016 was a somewhat slower year because of economic pressures, we are seeing slightly stronger economic activity this year,” says Danny Bryer, director of sales, marketing and revenue management at Protea Hotels by Marriott. “We have seen growth in the corporate travel market during 2017,” he says.
Where companies do feel the need to save on travel costs, it is not about cutting out travel and conferencing altogether, but rather about savings, such as on the cost of airline tickets, and perhaps downgrading a category of hotel accommodation (e.g. from 5-star to 4-star) or reducing the number of days spent in another place, Bryer says.
There is an ongoing trend of increasing global business coming to South Africa, Bryer adds, but he has not seen any major cost-saving initiatives from this market.
Stacey Hopkins, director of sales – East and Southern Africa at The Westin in Cape Town, says while their corporate segment continues to do well, it is becoming increasingly more difficult to comment on the transient corporate traveller in the current economic environment.
“One corporate is cutting costs while the other is increasing business travel,” she says, indicating it is not all cut and dried out there.
That the market, however, is tough cannot be denied. “Rate is incredibly important and while we might not be seeing the major cost-cutting in terms of fewer conferences and events, corporates are not budging on rate and it continues to be a critical element in the decision making process,” Hopkins adds.
According to Hopkins, many of the smaller corporates are increasingly using either in-house conferencing and event facilities or some of the upcoming innovative spaces that are being incorporated in new office projects.
“A venue like ours is not going to be able to compete and offer a cheaper option than an in-house boardroom,” she says, regardless of what value-add is offered.
But there is still a large enough market segment looking for space and who require an out-of-office experience, Hopkins says.
Bryer adds: “Conferencing is a wide term that encompasses a number of different elements: conferences are held for strategic marketing planning meetings, for product launches, for training and development initiatives to name a few. Many of these are not viable for being done in in-house venues.”
Less spending, more value
Whilst most hotels maintain there has been no real change in the number of events being held at their establishments, the spending on the events has been reduced.
Especially from the government departments, says Trish Lawrence, sales director at BON Hotels.
“This doesn’t mean that the conferences and legotlas are not taking place, but we definitely note that this market is looking at the mid-market hotels, rather than the higher star properties they have previously supported. There is huge competition within the mid-market, which is good for the end-user, but can be dangerous for the hotel market.”
Bryer says reducing rates and value-adds are not the biggest benefits. “The real benefit is when we build a conference that truly meets the requirements of the company, so ensuring that they have achieved what they set out to accomplish, followed by thorough evaluation after the event,” he says.
“When we deal with a company that we have previously provided a conference facility for, we look back at what was delivered then, so that we can make the new experience an even better one,” Bryer says.
For Lawrence, it is more about delivering a good rate than a low rate. “Venues are going to be forced to follow the global trend of authentic experiences,” she says, adding that, because of budget cutbacks, hoteliers are going to be challenged to find alternative market segments or niches with the market-to-market to encourage conference business.
“Clients will be swayed by price and vote with their feet, which can often lead to a dangerous price-cutting downward spiral. Short-term price cuts can also be seen as a negative approach in some cases, as one tends to gain loyalty from a corporate client, which are price sensitive and might have the risk of losing their business when price increases arise,” Lawrence adds.
According to Hopkins, value-add has become a relative term to some extent. “What was once considered value-add, like parking, audiovisual equipment and Wi-Fi for instance, are now non-negotiables and not even a question of not being included in the package.”
She says while hotels remain under pressure to deliver good rates, they are also having to think outside of the box and meet the individual needs of each company.
“The value that you offer now comes in giving that bespoke experience and that is different to each and every corporate client,” says Hopkins. “You cannot copy and paste and the days of the standard buffet lunch followed by scones and jam at tea time is not enough.”
More creativity and more individual experiences are sought and hotels have to be continuously working on ways of delivering these expectations.
“For us at the Westin, it means employing experts in every single field. There is a specialist designing the menu, a specialist in technology working with you on your equipment requirements – we tick all those boxes and make sure that the organiser, and ultimately the conference delegate, has an experience from the moment they step into our premises.”