It always strikes me as bizarre that so many people treat the cycle of change throughout boom and bust as something new or as somewhat of a shock. Like the streamlining processes, the discounts, the expansion, diversification and ultimate return to normality hasn’t played out time and time again?
IMEX America in Las Vegas, describes itself as THE pulse of the meetings industry. It’s hard not to agree with so many prominent industry figures speaking, networking and sharing the pains and gains, highs and lows of a very dynamic, maturing sector. A better place than many to take the pulse of the industry than it would seem! The buzz around the convention halls of Las Vegas was constant. “We’re just about keeping up with demand!” and even “Something’s gotta give soon!”.
While attending the Maritz Summit earlier this year, I had the good fortune to listen to Michael Dominguez, Senior Vice-President of Global Hotel Sales for MGM Resorts, deliver a speech. As International, co-chair of the U.S. Travel Association’s Meetings Mean Business Coalition and MPI’s Immediate-Past Chairman of the International Board of Directors, you know that every insight he provided was backed by experience, understanding and a solid bird’s eye view of the industry as a whole. He reminded me of an issue that has been in the back of my mind for a while when he discussed how it was no longer feasible for venues to keep providing the kind of discounted packages and low rates that have been available throughout the recession.
This point is valid, fair and an indication of things to come as the time honoured recession cycle continues. When venues can no longer supply bargain basement rates to agencies, these savings can no longer be passed on to clients. Obviously in practice this can be a painful process as clients continue to demand more bang for the buck and agencies and suppliers in the middle feel the squeeze.
I’ve experienced three periods of recession and it’s eye-opening to watch history repeating. It plays out like this:
- Recession hits! Demand drops, budgets tighten or disappear and unfortunately, some companies go bust.
- The sector streamlines itself to cope with reduced demand and lower prices
- Cautiously things begin to recover. Demand increases but prices remain low as the recession mentality prevails. Those companies left begin to expand and diversify as they recognise the opportunity to grab more market share. They either gain new clients or buy out smaller companies to consolidate their cautious growth.
- Little by little, demand begins to outstrip supply. Customers are still stuck in the low price, budget conscious mentality but are demanding more from their supply chain. Suppliers can’t sustain this and slowly but surely, prices must rise.
- The market will soon become buoyant, customers will understand that prices are rising and the cost of business is increasing. This creates opportunity for new suppliers to pick up the demand over-spill meaning new agencies and suppliers are born and supported by the growing market
- Supply and demand are now equal and we’re into the good years!
- More and more suppliers appear, fight for market share becomes more apparent, suppliers and agencies break rank and begin to offer deals and discounts to claw back market share.
- Supply grows faster than demand, prices bottom out and, you guessed it, we’re back in recession.
- Let’s start all over again!
Anybody with their ear to the ground in the events industry can tell you that this is happening. Some younger professionals will be experiencing their first boom and bust cycle and probably believe they are creatively battling on the front line of recession, innovating their way out of a tricky situation and delivering value across the board. Truthfully, it’s nothing new. If we are at point four in my cycle summary, what’s the tipping point that pushes us over the edge into point five? I think we’re on the brink and agencies are about to embark on a period of pain, educating clients that the market is changing and prices will rise.
That leaves the question – can we break this cycle? Instead of focusing on this somewhat foolhardy endeavour, we should focus on remaining agile and ready to respond to the pressures of an ever-changing society. Working with clients to ensure they understand costs across the supply chain whilst maintaining an active focus on ROI both in and out of recession could be the difference between sink or swim.
Maybe my view of the situation as cyclical, repetitive and unavoidable may seem pessimistic but I don’t see it that way at all. The market we operate in and the nature of capitalism means we all know that history will repeat. It’s how you set yourself up for both the boom times and bust.
Originally published in Stand Out Magazine – December 2015