Beyond Reproach

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.

Study SOX
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.”

Heed procurement
Indeed, the Sarbanes-Oxley era has brought corporate procurement and purchasing departments into the traditional realm of meeting planners, precisely to eyeball the kind of exorbitant spending that dominated national headlines and to police luxury. “We’ve seen a seismic shift in the last two years. We now see a mix of planners and procurement evaluating our services,” says Bruce Morgan. “It used to be just the planners, but procurement wants to be sure the company is maximizing its spend.”
Procurement departments can help planners formulate policies for spending procedures that will make the line between excessive and acceptable levels of luxury quite clear or at least make sure all such spending is well documented.
    “Sarbanes-Oxley has involved our purchasing department in everything,” says Stuart Gold. “Before, it was just planners asking procurement, ‘Can we have the money?’ Now, procurement goes through terms and conditions, and I don’t sign contracts alone anymore. Now, we need signatures from procurement and myself.”
    “This is an ongoing process with procurement,” says Abbot’s Lilian Brozek. “They’re not service purchasers, they’re widget buyers. They don’t get that there’s a big difference between four- and five-star properties. So we have to spend a lot of time in dialogue explaining why we’re going to this property, this location. We’re not quite there yet. My wish is to have an implant in procurement, a specialist in service purchasing.”
    While some planners bridle under overly controlling procurement departments, others have ironed out differences with their purchasing specialists, and even find their involvement helpful in establishing policies and procedures for buying top-notch service.

Detail all billing
For their part, luxury chains are eager to accommodate the new corporate emphasis on transparency in billing and increasingly strive to provide meeting and event planners with invoices that are clear, comprehensive and even customized to a company’s accounting and legal policies.
    “Billing has changed,” says Michelle Caporicci, senior corporate director of catering and conference services with Ritz-Carlton, based in Chevy Chase, Md. “Our computer system allows  us to break down a bill any way a planner wants to see it. We can itemize per guest or by all banquets or all guest rooms. We ask planners at the beginning of the process: ‘How does your department like to see that?’”
    Other luxury chains are following suit, striving to give planners similar control over how their spending is presented. “Sarbanes-Oxley is going to make sure corporations document everything, so in case they’re audited, they can show everything was aboveboard,” says Fairmont’s John Meissner. “On our agenda is by the end of the year to transform our property management systems in order to simplify billing. Planners will have the chance to look a lot more deeply at master accounts, individual room charges and F&B. We can break it down any way they want in an Excel spread sheet.”

Explain the value
The planner’s records should reflect the fact that luxury properties provide value, sometimes in ways that aren’t obvious. For instance, some amenities that could sap the event’s budget at a lower-tier property come gratis at a luxury hotel.
    “Typically at a mid-tier hotel you would have to purchase things that at a Ritz-Carlton are included,” notes Caporicci. For example, “buffet decor would be enhanced by flowers or props, plus fresh fruits and vegetables. It would never be just chaffing dishes on a table. At a mid-tier, you’d have to order flowers for the buffet and pay for any garnishing.”
    Another advantage might be better attendance at an upscale property in an exciting destination. “People are tying their meetings into vacation and personal time,” says Caporicci. At an enticing location, “people will say ‘Hey, I want to attend this meeting and bring my family.’ So, absolutely, it’s a draw for customers looking to boost attendance numbers.”
    Caporicci also notes planners can save money by cutting back on on-site staff when holding an event at a luxury property. “An event concierge or a banquet captain is there to take charge, and a convention services manager is right there at all times,” she notes.
    WTMI’s Bruce Morgan agrees that top-notch service has an inherent value. “Good planners understand that they might need a hotel partner that brings more to the table than a standard package,” he says. “At a luxury property, you can get anything fixed though a CSM or concierge. They’ll do anything they can to make that happen. But for a fundamental meeting,” Morgan notes, “you might not need that level of service. Make sure you align the level of need with what you’ll get from the property you choose.”

Ask for discounts
The old adage that applies to deluxe purchases “If you have to ask how much it costs, you can’t afford it” does not apply to room rates, amenities or even high-end gifts.
    “Just because it’s a high-end property doesn’t mean you shouldn’t ask the price of everything,” says Brozek of Abbot Laboratories. “You’re going to get somewhere. With our clients, we say, ‘We want this at the HoJo’s rate.’ And they come back with a better price. Some people make the mistake that you can’t go to the Ritz and ask for a discount, yet you can.”
    According to Susan Roth of Trims Unlimited, planners increasingly are leveraging their events to get luxury item manufacturers to make customized gifts within the necessary price point. Manufacturers often oblige in order to make VIPs, executives and other attendees at upscale meetings familiar with their brand or products.
    “Yesterday, we met with the licensee for all Swiss Army products,” says Roth. “He wants to partner with one of our clients to supply conference bags and speaker gifts, so the Swiss Army brand gets connected with our client. They want to create special products in the factories that meet the price points our client needs to fit into his budget.”
    Similarly, says Roth, “Tumi once made a bag that cost $50 for a client’s event. They don’t make anything that even wholesales for that. But because we ordered 2,500, they altered one of their products to meet the price.”