The much talked of recession may not have kicked in yet, but talk of it is enough to make people scour their budget allocations just in case.
It is no secret that, in lean times, corporate hospitality is one of the first marketing suspects to be lined up and blown away. For all that, the providers – and those who spend money on it – assert how effective and worthwhile it is, the value of corporate hospitality seems quickly forgotten when money needs to be saved.
Managing director of corporate events consultancy Motivforce Randle Stonier waxes lyrical about how much more focused and effective corporate hospitality is becoming, but then admits: “When times are hard, the corporate hospitality budget will always be attacked. It will be pruned back.
“If I had a business and was forced to choose between spending 50,000 on new people and skills or corporate hospitality, I would drop the hospitality. But, if I’ve got a long-term relationship with someone, I hope that wouldn’t go out of the window because I didn’t take them to Ascot one year.”
The reality is that no matter how much corporate hospitality is supported emotionally and financially in good times, in bad times, those marketing goals suddenly seem less important.
Late last year, Gardner Merchant, the food and management supplier, conducted a study on the market. It asked buyers what their perceptions and requirements of corporate hospitality were.
The headline results found that 60 per cent of all respondents would not cut corporate hospitality in the event of a recession and 60 per cent anticipated their budgets would remain the same in real terms over the next few years, while 30 per cent felt it would increase.
Read this way the figures may seem impressive, but the fact is that 40 per cent have said that budgets will be cut. If this were predicted for most other marketing disciplines, there would be uproar.
Another finding states that 60 per cent of respondents feel the results achieved through their corporate hospitality spend could not be attained through any other method. Again, this means that 40 per cent believed their hospitality marketing goals could be achieved through another discipline. Why does the industry think this is such good news?
Managing director of Elegant Days Eddie Hoare says he has lived through the past three recessions and believes there is a difference this time round.
“The big difference is that people are being a lot more cautious – but they still have the money to spend. Whereas in previous recessions people didn’t spend on corporate hospitality because the cupboard was bare, now the cupboard is quite well-stocked, but they are being cautious as to how they use it,” he says.
There are some sectors of cor-porate hospitality that seem gloriously unaffected. Patrick Deuchar, chief executive of Rugby Hospitality 1999, the organisers of the Rugby World Cup hospitality, is predicting that all the hospitality packages will be sold.
“Since packages became available three months ago, the Grand Final at the Millennium Stadium in Cardiff on November 6 has been almost sold out, while the quarter-finals and semi-finals are selling extremely well.
“At 850 per person for a hospitality seat at the Final, and eligibility for the package strictly on the basis of buying a similar package to previous rounds, the recession looks a distant concern,” says Deuchar.
“When fears of a recession loom,” he adds, “it seems marketers look even more closely at where they spend their promotional budgets. They see corporate hospitality not as a luxury, but as a viable cost-effective opportunity to build close relationships with important clients, a serious investment rather than a jolly.”
But getting an accurate gauge on the health of the corporate hospitality sector based on sales of events like the Rugby World Cup and the FA Cup is hardly possible. These events will be sold out however dire the economy may be looking. It is the one invitation that is bound to lock in a supplier through sheer gratitude rather than any professional considerations.
One company whose business is growing is management and sales skills consultancy Huthwaite International. It has launched a new training programme called Influencing in a Social Context (InSoCon), that is aimed at organisations which regularly use corporate hospitality and want to be more strategic in their approach.
Huthwaite developed InSoCon after an accountancy firm asked the company to instruct its staff at being more skilful at social events.
“A lot of money is still being spent in this sector, but everyone we speak to is questioning more closely the value of this spend. Senior management is beginning to question their organisers about the kinds of return they are getting on their investment,” says training consultant Peter Belsey.
Other factors are also causing this scrutiny, according to Belsey. He says invitation acceptance rates are dropping as guests find it increasingly difficult to justify attending events. “Also, more people are wanting to be invited with their partners. If they are giving up spare time to attend an event, there is more pressure on getting partners invited as well. It is not always a given that partners will be invited,” he says.
This last point is supported by the Gardner Merchant report where 47 per cent of respondents said inviting partners tended to make an event more successful.
Belsey says he is also getting enquiries from corporate sponsors which are questioning their spend – citing one that spends well over 1m a year on corporate sponsorship.
“Many companies end up sponsoring particular events, and then send out the invitations. This way, the event is running the whole thing and the success of the event is based on the ‘smiles test’.
“Most skilful people start at the other end. They ask who they want to do business with and who they should be influencing and once they have this intelligence, they decide on the event. The most successful people are ruthless with the numbers they try to influence in a social context,” says Belsey.
But there can be no talk about corporate hospitality during the next two years without linking the inevitable impact that the millennium will have on this sector. Indeed, some feel that any economic contractions will be averted only by the celebratory nature of the millennium.
Says Hoare: “Any recessionary pressure is being balanced by millennium business. From where I’m sitting, bookings are in a stronger position than they have been in the past two years – quite significantly so. I think the reason for this is the millennium. We are marketing the Millennium Experience as a two-year experience and we are finding that most growth is coming from new people or people who have not spent for a while.”
This, however, was not borne out by the Gardner Merchant research. Only one in ten respondents thought their companies would be hosting millennium-related events and the majority who will host such activities say this will be in addition to their events calendar, rather than a substitution for other events.
Stonier at Motivforce is claiming the company’s corporate event business “will increase by 100 per cent this year” – and he doesn’t believe that’s due to the millennium.
“The millennium is prompting people to be more creative rather than getting them to spend for the first time,” he says.
Stonier also believes corporate hospitality is more recession-proof because it is being seen as an extension of relationship marketing.
“Relationship marketing is effectively a one-on-one relationship. Activities and hospitality which are specifically targeted and focused and where you know the interests and aspirations of the target market will reap much more benefit,” he says.
The last word has to go to chief executive of Gardner Merchant David Ford who says the research was conducted late last year as talk of the recession was gathering momentum.
“Generally speaking, corporate hospitality has been a good barometer of the state of the nation. But the reality is that it shows a longer view.
“When recession looms, people tend to spend more on corporate hospitality in the short term – they want to portray a positive image in hard times. You need to look out for what happens in the longer term.”
He adds: “I don’t believe people use corporate hospitality to win business.
“I’m sceptical about using hospitality as a come-on because it means you can lose business if your competitors start providing better corporate hospitality than you do.”
CHA Annual Awards
There were 32 entries in this year’s Corporate Hospitality & Event Association Annual awards – up from 28 last year. Now in their ninth year, the awards are judged by an independent panel of judges, made up of buyers and a representative from Marketing Week – which sponsors the awards.
Winner: Jarvis Woodhouse
Event/Client: London & Manchester Financial Services; and GE Capital GCF.
Category: Activity Operator
Winner: Catalyst Event Management
Event/Client: Beat Works
Category: Event Management
Winner: Cavendish Hospitality
Event/Client: London to Brighton Veteran Car Rally
Winner: Crown Society Special Event Caterers
Event/Client: Farnborough Air Show
Category: Event Services
Winner: Owen Brown
Event/Client: Presentation of Colours to the Parachute Regiment
Winner: The Gibson Hall
Category: Small Business (under ten employees)
Winner: A Day in the Country