It should have been an ordinary annual summit: 30 bankers for three nights at the Ritz-Carlton, Bachelor Gulch in Avon, CO. It was a high-end event. Rack rates start at $750, and bankers can drink and eat plenty of gourmet meals in three days, but Countrywide Financial Corp. has held such an event at least once a year since the late 1990s without a problem. This year, though, in the months prior to the meeting, the company has laid off thousands of workers, racked up huge losses, all while the credit crisis of growing loan defaults is threatening to pull the entire national economy into a recession. Facing a barrage of criticism and a call from New York Democratic Senator Charles E. Schumer to cancel the meeting, Countrywide did just thatand financial meeting planners around the nation winced.
Countrywide said it would also cancel similar meetings for the remainder of 2008 in light of the troubled economic times, but declined to elaborate on the specifics of the canceled ski event. And there are fears that the cancellation of the company's high-end meetings is not an isolated case. As signs of economic troubles continue to pile upthe government bailout of Bear Stearns, the Fed's slashing of interest rates, tumbling home sales, and stagnant job growthwhat other corporations may decide to cancel events and pay enormous cancellation fees rather than face negative public scrutiny?
Nickels & Dimes
"There's definitely a change. I think all of us are realigning our businesses with a look toward a smarter way of doing things. As a result, we're all more cautious about how we're spending money," says Barbara Blumhof, manager of trade shows and events at Citi Commercial Business Group, a division of Citigroup that provides leasing, banking, and real estate products. Blumhof says she has noticed the increased attention on spending for at least the past nine months.
"We're judging the value of what we're doing," she says. "It's looking at the return, the reason of why we're there, and what value we got out of it."
However, cancellations similar to Countrywide's are unlikely to happen across the board, she indicated. Even in an economic downturn, financial executives need to meet face-to-face and marketing executives need to reach their customers. There may be even a greater need to connect during a financial crisis.
"Events are still necessary; meetings and trade shows are still necessary," Blumhof says, "but it really all comes down to evaluating their worth and our exposure. I'm well aware of the Countrywide fiasco. It's just unfortunate. Perhaps if they had just downsized or down-budgeted a little, it would have been easier to swallow. I don't know. There are still programs in place at Citi to recognize valued employees. It's still important to recognize employees that bring greater value to the business."
Now, Blumhof says she consults with meeting clients to suggest ways to contain unnecessary costs. Instead of sending five company representatives to a trade show, it may be better to send three, for example. Each case is considered individually, with an eye on greater fiscal responsibility.
"Clearly, there is an effect, and people are taking a hard look at their dollars when it comes to meetings, events, and incentives," says Steve O'Malley, vice president of strategy and industry relations for St. Louis-based Maritz Travel. "But what we're seeing with our clientsand financial services represents the largest swath of customers that we have for the travel businesseverybody is sticking to what they have."
Countrywide was a company in extreme financial distress, on the verge of bankruptcy, O'Malley says. So they aren't necessarily a reflection of what most financial services companies are doing in regard to their meetings expenditures. Holding a luxury ski event after months of economic troubles "was itching for bad headlines," he added.
"We tend to advise our clients on what is the right level of activity and spend for the types of outcomes that they're trying to achieve with these programs. At the end of the day, in discussions with our clients, it comes down to effectiveness," he says.
Slim Pickins
While no Maritz client has canceled planned events due to the downturn, some clients have slimmed down their overall expenditures on events to weather the crisis. The volume of meetings and events is holding steady through the rest of 2008 and into 2009, he says, but some companies are reducing attendance or making other changes to control costs.
The strong focus Maritz has put on building metrics to show return on investment is also helping clients avoid any perceptions of excessive spend.
"We've gone up to the C-level in these companies, showing them that by choosing the right types of programs and the right types of destinations, they're getting the biggest bang for their buck. It's tying it back to their objectives," O'Malley says. "We've inoculated against many of the questions and issues that are coming up for other companies in this space."
While financial companies are spending more time in the planning process to ensure events are held within budget and that their meetings are absolutely necessary, lead times have yet to show any sign of becoming longer, says Jeff Salmon, new president of Campos Creative Works (CCW). Salmon took the reins of the Santa Monica, CA-based high-touch event production company in early March. Prior to joining CCW, he was executive vice president of production at TBA Global Events.
CCW focuses on experiential marketing events, often glamorous, unique meetings such as sending attendees on off-road adventures for Land Rover and creating photo shoots at Macy's department stores for Toyota, intended to launch a viral marketing campaign. However, in light of the economic downturn, clients are now asking for events that are just "good enough," Salmon says.
"Extravagance is a word you don't want to use anymore," he says. "It can't look too expensive. If you do the financial and analyst meetings, you don't want all the bells and whistles. It's not the time for that."
Many companies, not just financial services companies, are tightening their meeting budgets, but Salmon says it doesn't come as a surprise.
"Budgets have been tightened for years now, and the days of the big extravaganzas are sort of gone," he says. "We have to be sensitive to those things."
Belt Tightening
Rather than cancel, CCW clients are continuing to hold marketing and brand events, Salmon says. Companies still need to communicate to customers and their own internal teams, and new business needs to be developed. To cope, CCW planners are coming up with more creative solutions to achieve content objectives and brand messaging without the high price tag, and are stressing the importance of preplanning with corporations to ensure logistics are handled efficiently and in a cost-effective way. Any mistakes or changes in the planning process can mean additional costs.
"You have to know your audience, know what their expectations are, and make sure you are always delivering on message with a level of creativity and strategy that fits for that particular company," Salmon says. "The execution of these events is one thing that we do, but the process to get there and the pre-planning is probably the most critical of all."
One thing that hasn't changed in this economic climate is the focus on value, he adds. "You have to be in sync with your client so that they see the valuenot too far to the left or the right," he says. "It puts parameters on things. And while some people see that as a negativesmaller budgets, less time frameto me it almost simplifies things. You're not necessarily going to deliver a better product with an unlimited budget and an unlimited time to do it. In all honesty, you could almost lose focus with that."
O'Malley says there are actually opportunities for money-saving deals in the downturn, as some companies that have overextended themselves in meeting budgets cancel events and last-minute space at properties opens up at a discount.
"We're getting canceled space notifications from hoteliers regularly now," O'Malley says. "We look forward to taking those opportunities to our clients who continue to look for space."
As demand softens, the rate increases at hotels will moderate, and meetings and events will once again be "the belle of the ball" as transient revenues fall.
"As much of a threat there is, there is also an opportunity," he says.
Originally published May 01, 2008
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