Let’s face facts: Meetings and events that go overboard on luxurious frills and amenities can spell serious trouble for planners. Not only have the corporate scandals brought about governmental scrutiny in the form of Sarbanes-Oxley, there’s been a shift in corporate and cultural mores since 9/11 and the dotcom bust.
“We don’t go over the top anymore,” says Stuart Gold, vice president of global forums and sponsorships with BEA Systems Inc., a major software firm based in San Jose, Calif. “I don’t need to send champagne to your room. We’ve all felt we needed to one-up the competition with our customers when they go to a retreat. We had to have the nicest resort, the better golf course, the best bag. But now it’s inappropriate to give too much.”
Nevertheless, the luxury market is booming, and meeting planners are contributing to the trend, placing small-scale corporate meetings, retreats, executive seminars and incentive trips with high-end hotel brands such as Fairmont, Four Seasons and Ritz-Carlton, to name a few. These events are meant to wow and flatter attendees, as well as pamper them with unparalleled amenities and service.
“When you go upscale, you ensure quality that is way better than a two- or three-star hotel,” says John Meissner, executive director for corporate markets with Toronto-based Fairmont Hotels & Resorts. “F&B, amenities and meeting services are on a different level. And sometimes upscale properties are a better draw. A great hotel and a place you’ve never been before mean great attendance.”
Indeed, the luxury hotel market has been enjoying a rebound (see M&C,“Luxe Redux,” May 2005). For 2004, occupancy in that sector rose 7.2 percent, according to PricewaterhouseCoopers. Room rates are on the way up, too, and they should continue to climb over the next few years, says PwC.
But in a toned-down corporate landscape that has been rocked by scandals, how can planners give attendees luxury without incurring costs that raise red flags with auditors or even the press?
“A few years back, somebody would have bought Tumi luggage and not asked for any modifications,” says Susan Roth, president of Trims Unlimited, a Los Angeles-based vendor of high-end gifts and amenities for corporate events. “Now they want style and quality but feel it’s not appropriate to be spending corporate dollars on that kind of luxury product. They want something similar, but at a lower cost point.”
Is there a line drawn in the land of luxury that should not be crossed by planners, at the risk of embarrassment, job loss or even a criminal probe? Yes, say industry insiders, but the line can be blurry, even for veteran planners. When is an expense worth it, when is a perk unjustifiable, and when can costs be negotiated down? M&C asked planners how they keep high-end meetings even the most lavish ones beyond reproach.
A mandatory means for avoiding spending that might be considered overly lavish is the relatively new law that applies to publicly held companies: Sarbanes-Oxley, or SOX. The measure represents the U.S. government’s reaction to the corporate excesses and scandals of the first part of this decade.
Section 302 of SOX, titled “Corporate Responsibility for Financial Reports,” requires a company’s chief executive officer and chief financial officer to certify the honesty of financial reports, making CEOs and CFOs liable for prosecution for fraud if the numbers are cooked or misleading. With top executives now on the hook for what is on the books, the downward pressure on the corporate ladder for accounting transparency is growing. This is especially true of money spent at luxury properties.
“We tend to pick hotels of a higher caliber, especially outside the United States, because there’s a certain standard you have to maintain with physicians or high-level executives,” says Lilian E. Brozek, manager of event marketing with Abbot Laboratories, a pharmaceuticals company headquartered in Abbot Park, Ill. “We tend to go to a four-star, at least, where you get what you pay for when it comes to service. But in this climate, where there’s a lot of scrutiny on expenses, especially on soft-dollar spending like meetings, you have to demonstrate that you fairly awarded your business based on information from multiple suppliers.”
Keeping exhaustive records throughout the selection process can help show that the planner exercised due diligence when placing business in a high-end property and also can demonstrate how meeting costs are negotiated down. “It’s all about the audits,” says Brozek. “Keep detailed notes about doing one thing above another. And make sure all the meetings you are organizing are approved by procurement.”
Corporate meetings tend to face stricter SOX rules than incentive trips and customer events held at luxury properties. “Sometimes, there’s a crunch for internal management to be very cautious with those internal meetings,” says Bruce Morgan, vice president for marketing and business development with Chicago-based WorldTravel Meetings & Incentives. “For customer-channel events or incentives, you can justify the expense in terms of results delivered from the sales force or customer base. If the folks I’m entertaining drove X amount of dollars, my client’s ability to be compliant with SOX is enhanced to some degree by that.”