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November 3, 2009
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CHANGING MINDS:The fight to prove meetings’ worth




Despite recent research highlighting the importance of face-to-face meetings as a tool for driving business, the global meetings industry now faces yet another potential crisis as the EU looks to impose a mandatory 20% cut in business travel in order for it to meet its emissions targets. Having just about clawed its way back from the fall-out from the TARP debacle, what more does the meetings industry need to do to set out its credentials and underline its case as an integral part of developing business? Pete Roythorne investigates

The meetings industry has had a torrid year. Fall out from the Troubled Asset Relief Program (TARP) in the US, new scrutiny with the proposed introduction of CODEX again in the US and increased pressure from procurement, have all meant that the sector has been shoved into an uncomfortable spotlight.

There is an upside to being in the spotlight, and this is that you get forced to take a long hard look at yourself and justify your own existence. This is something that the industry is embracing and the focus over the past few months has been on demonstrating its worth to the global economy.

But just as it seemed that the world might be waking up to the power of meetings and events to both generate and consolidate business – even the G20 Summit seemed to play into its hands, demonstrating the power of face-to-face meetings in front of the world’s media – it looks like the industry could be about to be hit by another crisis.

 


The only way is up: US Travel Survey shows
the real economic impact of business travel

 

The European Union (EU), faced with having to drastically reduce carbon emissions by 2020, is reportedly considering the EU Telecom Package, one of the mainstays of which calls for a mandatory 20% cut in business travel, to be replaced with video conferences. While there is clearly a corporate social responsibility hook to hang this on – indeed we have been championing as much on this site over recent weeks – there is also more than a little self-interest.

Taking the soft option?
Christian Mutschlechner, director of Vienna Convention Bureau and a member of the United Nations World Tourism Organisation (UNWTO) steering committee examining the economic impact of the meetings industry, believes a move like this could be more damaging than productive. “Whatever the reasoning behind the EU’s decision to consider this proposal, we need to put things in context: only 2% of emissions are caused by air traffic. There are far more other issues to be dealt with beforehand.”

Mutschlechner also points out that stopping travelling means stopping intercultural exchange, people meeting people (not only in meetings), but understanding other civilisations. “If we proceed along the track the EU is proposing," he says, "this 20% reduction will create ‘closed shop’ countries where citizens are no longer moving around. I can’t imagine that anyone wants this. On top of this, it is contradictory to the global society we live in.”

Attacking business travel is also taking the path of least resistance, he continues. “Bigger issues are at stake, including idiotic economic activities such as transporting milk from Italy to Germany, producing cheese out of the milk and transporting the cheese back to Italy," he says. "But governments may feel they will have too much trouble convincing producers to change their ways, so airplanes are an easy target.”

Mutschlechner also believes that the economic impact of attacking business travel will have a wide-reaching and damaging effect on the global economy. A number of recent surveys back this up. A study by Harvard Business Review Analytic Services found that of over 2,300 readers polled, 95% said they believe that face-to-face meetings are key to success in building long-term relationships, and 89% agreed face-to-face meetings are essential for sealing the deal.

Another piece of research by the NBTA, found that 69% of travel managers surveyed expect business travel volume to grow in 2010, and 56% project their total travel spend to increase in 2010.

Business travel = increased profit

However, the killer stats come courtesy of the US Travel Association, which, in conjunction with Oxford Economics, has for the first time established a direct monetary link between business travel and profit.

The headline findings of this report should make interesting reading for the EU decisions makers:

• For every dollar invested in business travel, companies realise $12.50 in incremental revenue.
• Curbing business travel can reduce a company’s profits for years. The average business in the US would forfeit 17% of its profits in the first year of eliminating business travel. It would take more than three years for profits to recover.
• Both executives and business travelers estimate that 28% of current business would be lost without face-to-face meetings.
• Both executives and business travelers estimate that roughly 40% of their prospective customers are converted to new customers with an in-person meeting, compared with 16% without such a meeting.
• More than half of business travelers stated that 5-20% of their company’s new customers were the result of trade show participation.
• Executives stated that in order to achieve the same effect of incentive travel, an employee’s total base compensation would need to be increased by 8.5%.

The report goes on: more than 75% of customers either require or prefer in-person meetings, according to business travellers surveyed in April 2009. And an overwhelming majority of corporate executives (81%) believe a slow economy calls for more contact with clients, not less.

Clearly, cutting back on business travel poses significant business risks. Again the report hits where it hurts: according to business travellers across all industries, 25% of existing customers and 28% of revenue could be lost to competitors if customers were not met in-person.

So, unless any curbs on business travel were put into place on a global basis – which would be highly unlikely – the EU could be putting businesses within the region at a serious competitive disadvantage.

Healthy on the inside
And it’s not just external meetings and events that generate profits. From an internal perspective, cooperative relationships are integral to company performance. The survey shows that the majority of business travellers identified internal company travel as key to professional development (66%), job performance (58%), and morale (56%). And more than 40% of travelers perceive a strong relationship between travel and staff retention.

Furthermore, nearly 80% of executives indicate that incentive travel has a significant impact on employee morale and job satisfaction. More than 70% believe that incentive travel has a real impact on employee performance – and a happy workforce is a productive workforce.

“This has critical implications for business leaders facing decisions about their investment in business travel,” the reports concludes. “As with any cost, there are likely savings to be realised through more careful allocations of business travel. However, the evidence points to substantial risks associated with cutbacks in this particular area. And companies that continue to invest in travel, experience returns that more than warrant the investment.”

Paul Kennedy MBE, former Group Exhibitions Director of Reed Travel Exhibitions, and now a meetings consultant and chairman of MEETINGS:review, believes that the industry needs to invest in much more research like this if it is to ward off more ill-conceived threats.

Woeful misunderstanding

“The consideration by the EU of the telecom sector proposal to limit business travel, and thereby meetings, once again proves that the economic impact of meetings, events and business travel is woefully misunderstood and unrecognised by politicians and civil servants alike,” says Kennedy. “As an industry, it’s imperative that we come together and press for a full economic impact study to be carried out in our respective countries.”

To date, the only in depth regional economic study has been carried out, and that was in Canada. The Canadian Economic Impact Study proved, based on a robust methodology (World Tourism Organisation’s Tourism Satellite Accounting Meetings Extension), that the meetings and events industry is a significant contributor to the Canadian economy directly generating 32billion Canadian dollars annually, employing some 235,000 people and generating in excess of 4billion Canadian dollars in taxes.

Didier Scaillet, chief development officer for Meeting Professionals International (MPI), believes this underlines a clear need for more economic studies. “The lack of detailed research means there is no hard data to present to politicians and civil servants on the magnitude of our industry and the impact that a 20% reduction in corporate business travel would have on hundreds of thousands of jobs across the European Union," he says. "There is also no realisation of the efforts that our industry is already making to reduce its environmental footprint: from the British Standard BS8901 for sustainable events to participation in the Global Reporting Initiative from the United Nations; from green standards for venues to green practices in meeting planning. This has to be a call-to-action for the industry to undertake systematic economic and sustainability research on the value of our industry and its contribution to society.”

Kennedy believes the methodology already exists to do this across the globe and is directly linked to the system of national accounts. “I will be lobbying our industry in the UK and further afield to collaborate and help fund more studies like the one in Canada," he says. "We would then be able to prove the GDP impact as well as levels of employment, and even compute the related taxation. My concern is that the telecom sector is being self-serving here, and foolishly underestimating the importance of face-to-face meetings in the success of all organisations."

No one is doubting that video conferencing has an important part to play in the future of the meetings agenda, and to ignore the environmental impact of everything we do would be way beyond folly. However, any decisions that are made need to be tempered with a real understanding of their global economic impact, and not simply made on a political whim because the other issues are too difficult to deal with. Quick wins are rarely based on solid foundations.

The clarion call for more in-depth research into the impact the meetings industry has on the global economy has been sounded, and we cannot afford to turn a deaf ear.

 

Click here to take part in the latest MEETINGS:review survey

Download the Canadian Economic Impact Study

Download Business Travel: A sound investment (Oxford Economics/US Travel Association)

Read Why Meetings Matter (British Airways Business Life Magazine)

Download NBTA Business Travel Survey


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