Labour shortages and rocketing prices were the two issues that dominated discussion at last month’s Business Travel Show Europe in London. Meetings and events are no exception to this travel sector-wide trend.
“An event that cost $3,000 in 2019 is probably going to cost $6,000 today and you’re probably not going to get as great service,” says Bizly chief customer officer Kevin Iwamoto, a travel and meetings veteran who adds he has never previously encountered such personnel shortages or price inflation.
The crisis is raging on both sides of the Atlantic, experts told BTN Europe. In the USA, 97 per cent of American Hotel and Lodging Association hotel members report being short-staffed, with 130,000 open vacancies across the sector.
Nor, as Iwamoto alludes to, is it only the quantity of staff that has diminished. So too has quality. “A lot of the people let go because of Covid have declined to come back, so it’s not just a jobs shortage but a skills and experience shortage,” says Iwamoto.
“Hotels and venues are having to train people from a novice level. That means it takes that much longer for these people to gain competence and experience and for the venues and properties to benefit from their labour contribution.”
Other meetings industry stakeholders are also struggling to recruit. Larissa Steinbäcker, co-CEO of meetings agency Proske, sees the same challenge at restaurants, ground transfer companies and within meetings agencies, including her own.
Steinbäcker believes the problem pre-dates Covid. “For many years junior staff especially were not properly compensated and we know the industry often comes with long hours plus weekend work and evenings,” she says. “The youth of today are very eager to have a good work/life balance, so what was super-interesting beforehand, having a job that involves travelling the world no matter what the hours, isn’t appealing any more, and that’s accelerated because of Covid.”
Bobbi Djordjevic, global category manager for Dentsply Sirona and chair of the Swedish Business Travel Association, says older staff let go during Covid have opted to retire early, while younger ones have retrained and shifted to other sectors. The timing could not be worse for Djordjevic because her company is desperate to start running events again.
“Our directors want to put on the schedule those events which have been on hold for such a long time,” she says. “They want to hold quite large events one year from now, but there is no one to take care of these requests because there are shortages of staff at convention bureaux, venues and agencies.
“Some vendors would rather shut off part of their capacity and not even open some of their rooms so that less skilled staff can cope with a reduced volume of business. As a result, simply finding availability is a problem, even for next year. A lot of properties are sending optional responses [a commitment to provide some but not all rooms requested] because they don’t know how many staff they will have. It’s like walking on a rope bridge.”
In spite of these problems, many corporate customers continue to attempt to organise events at very short notice – sometimes as little as one month ahead, according to Steinbäcker and Iwamoto. They may end up being disappointed. “For this summer we are extremely well booked – so much so that we are having to turn clients away, which is something I really don’t like doing,” says Steinbäcker. “All over the industry, people are experiencing the same.”
In addition, warns Iwamoto, “if you’re planning to do something within 30 days you’re going to pay through the nose.” Rates are also shooting up because suppliers and service providers are facing higher costs, not least because of the talent drain. Ninety per cent of AHLA member hotels have increased their wages. Proske has increased salaries twice over the past year to retain talent, as well as introducing more flexible conditions, including the option of working part-time.
There are other inflationary pressures. According to Iwamoto, building material costs for hotels have risen 116 per cent since Covid started, triggered in large part by supply shortages. Those shortages are also inflating meetings rates indirectly because they delay new properties opening and old ones refurbishing, thus constricting room supply even further.
Faced with this perfect storm, it is impossible for meetings buyers to magic away resulting price hikes and availability challenges. Therefore, says Djordjevic, the first task is to manage expectations internally. Djordjevic is educating her colleagues, for example, that for the largest events trying to book even 12 months ahead is problematic.
Yet, given an increasingly uncertain world, who has the confidence to book events now for 2024? “It still feels a better choice to book two years ahead because there is a better chance that more venues will be operating, and we would still have a year of free cancellation,” says Djordjevic. “If we book now for next year, cancellation fees would kick in pretty soon.”
Meanwhile, warns Iwamoto, “you have to communicate to senior level executives the need to recalibrate budgets and expectations. Costs are going to be higher and supply is going to be more limited, so you really need to come up with alternatives to meet the demand. You have to keep the hybrid component of meetings. You can’t have too many people travelling because there may not be enough rooms for them and it may be too expensive.”
In addition, says Iwamoto, “you have to do a much more comprehensive destination analysis, factoring in air fares and other costs. You might have to widen the net in terms of locations.”
This is also the time, if ever there was one, to be fully disciplined about applying rigorous procurement practices, including scrutinising contracts. Djordjevic has seen hotels try to introduce more onerous cancellation terms while also smuggling in liability clauses to exempt themselves in the event of failing to meet their own commitments.
“We need to be very careful not to just sign those as they are but to add our own clauses: force majeure for example and trying to postpone those cancellation fees further down the road,” Djordjevic says. “That means it takes more time to complete the whole process, which makes the marketing and sales people impatient. But we have to be very detailed. To make the steps easier, I have asked our regional procurement resources to work with the legal department to create a template so they don’t have to create it from scratch every time.”
Steinbäcker, meanwhile, advises clear specification of expected service levels to safeguard against reduced quality at venues which have lost experienced staff. “It also means project management is even more important today to make sure all your suppliers know what they are supposed to do,” she says.