Is There Still Room for Corporate Hospitality?

Is There Still Room for Corporate Hospitality?

by | Marketing

sponsored by Tamar Telecoms

With its recent growth and strengthened position in the marketing mix, might corporate hospitality be more resilient to the downturn this time than on previous occasions?

Many companies have moved away from treating corporate hospitality as just ‘doing what the CEO likes doing’, and pay more attention to measuring return on investment (ROI). Will this new, more accountable view of entertaining mean that the sector can achieve further growth?

To answer these questions, a study was carried out based on 36 telephone interviews with sector stakeholders. Three stakeholder types were represented: event agencies and intermediaries; caterers and activity providers. This last group refers to businesses that provide activities for client or staff entertainment, such as cooking classes, wine tasting courses, outdoor activities, corporate drumming or murder mystery plays, to name but a few. They were asked how they felt the economic downturn affected their business, and how they saw the future of the industry.

Business performance

When asked about how they felt their business performed since the start of the downturn, clear differences between the different respondent groups became clear. The event agencies and the activity providers were cautiously positive: most reported the downturn had not affected business so far, or said they had only experienced a slight dip.

Many raised concerns though, and highlighted that the downturn might become more severe in the coming months and affect the level of demand. Many also referred to competitors that they perceive as struggling, and to previous downturns.

One agency testifies: ‘Across the board there is not yet a decline. Still, corporate hospitality is now further down the food chain in corporate business – this was definitely the case in the last recession. Corporate hospitality was the first thing that went, it was seen as a luxury.’ A murder mystery activity supplier added: ‘In terms of the number of events, it has slightly dipped. The main thing I have noticed is that the number of enquiries has dropped’. One interviewee, representing a big band, commented they had seen a large decline in demand for live music performances.

The group most affected by the downturn seems to be the caterers, the majority of whom say business has been slower. A bar services provider said: ‘We are finding it very tough to compete due to lots of companies that offer similar services at unrealistic prices.’ A bar services provider added to this that there has been a general decline in the overall volume of work since the beginning of the year and around a third less than for the same period in 2007.

Except for a bar service provider, none of the respondents had experienced cancellations, but many told about competitors who had: ‘I’ll give you an example: at Christmas time, (company) usually holds about 10 different Christmas parties. They will spend thousands of Pounds on Christmas entertainment, and all of the events were cancelled, with something like 3 weeks’ notice. So I pity the poor event management companies that had that gig and then lost it.’

Two agencies also noted that although there had been a decline in the domestic market, the interest of Mainland European buyers had increased, due to the strong position the Euro. One also mentioned new markets that are emerging: ‘There is a downturn in the domestic market and the American market. There is a certain excitement about other markets, mainly China and Russia, Eastern Europe up to a certain extent’.

Product choice

In all categories, respondents highlighted that cost had become a dominant factor in product choice, and the majority reported that cheaper options are chosen. Companies were reported not to stop providing corporate hospitality, but value for money is more important and prices per head are going down.

More expensive tickets, activities (such as trips abroad) and venues are becoming less popular. Many activity providers also commented that expenses now need to be justified a lot more. ‘Corporations are much more careful about the money they spend. They used to ask for prices and say it was OK, but now they really want to pin down every expense, they want the cost broken down for them and analyse it a bit more.’ For activity providers who work with the public sector, this often resulted in an increased need for tendering.

Lead times were reported to become ever shorter: ‘People used to book these things months in advance. Now we are getting calls about entertaining clients next week. Sometimes we get as little as two days notice’.

Change has also been necessary for the caterers, seeing that the price for foodstuffs has gone up sharply in 2008 due to the higher oil prices and transport costs. Because clients are more budget-conscious, the caterers are forced to change menu’s to include cheaper ingredients: ‘We used to sell fillet of beef in our menu. Most clients now go for a rack of lamb, or they take a sirloin instead of the fillet. They are not looking for certain products any more, they look at the price’.

Bar service companies see a higher demand for basic services, without cocktails. The sales of expensive wines have also gone down: many caterers commented that clients now prefer to buy the wines themselves in shops or supermarkets. To compete, one caterer had started to sell exclusive French wines, from small vineyards, that are not available in the shop but also inexpensive Sales of cakes and desserts are also down.

One caterer bucked the trend by starting a delivery services for small business events, whereby the clients can do the serving themselves. The trend seems to be that events are becoming smaller, reducing the need for chefs and waiters on-site.

Outlook for the future

When asked how they thought the economic downturn would affect the industry, the majority of respondents pointed to the benefits of corporate hospitality for client retention and sales as saving features. Still, a large minority of the respondents was more pessimistic. A few agencies commented that small businesses might go under. Activity providers were generally most optimistic, whereas catering companies were most pessimistic.

Several respondents commented though that the industry in recent years had become a ‘free for all’, because the barriers to entry in it are low. 1 agency and 3 caterers commented that not all of these businesses are run professionally or offer a quality products, and think the economic downturn will mean a ‘clean up’ of the industry. One caterers comments that: ‘Caterers in London sometimes charge silly money, £200 per head, and it will be hard for them to compete in the current climate. I notice I get more corporate clients because my prices are better. They used to be snobs, and think that only expensive food can be good.’

Is there still room for corporate hospitality?

The findings of this study have shown that the industry is still dependent on the wider economic situation, and not resistant to it. Although the companies who participated in the research were generally withstanding the downturn, many are only cautiously optimistic or rather pessimistic about the future. Caterers are feeling the downturn most acutely. On the positive side though, many respondents highlighted that they felt the professional businesses, offering quality products, would survive the downturn; and that the economic climate would force the industry to free itself from its negative and whimsical image. With higher demands on smaller budgets and ever shortening lead times, the sector is facing a challenging time, but also one where it can show its rigour and professionalism.

(Reproduced with kind permission from Planet Planit)

sponsored by Tamar Telecoms

Featured Listings

Pin It on Pinterest

Share This

Join Our Mailing List

Join our mailing list for Everything Good inPlymouth

Success! Next keep checking your email and click the confirmation link to complete your sign-up