While expectations for 2013 are rosier than last year’s, MICE players in the region agree that the race for survival is still on and there is no time for a breather

Meetings and incentives: Busier days ahead

Asia’s healthy economy brings hope of better business and looser purse strings. By Karen Yue with inputs from Xinyi Liang-Pholsena, Shekhar Niyogi and Mimi Hudoyo

A spot of hand-wringing among meeting and incentive planners in Asia at the start of last year has given way to greater optimism today.

While trade players readied their hearts for a difficult 2012, the year panned out better than expected for most, with some reporting a double-digit increase in business last year. As such, many are confident of better prospects this year.

Jere Tala, director consulting APAC, Advito, said most companies in Asia-Pacific had maintained their spend on meetings and incentives last year because “this region is still seeing business growth”.

Kritidech Srabua, founder and CEO of Oriental Events in Thailand, reported a pick up in regional traffic and a 25 per cent year-on-year growth in business.

He said: “Indications so far are good and we are cautiously optimistic about 2013.”

Daniel Chua, managing director at Singapore-based Aonia, who expects a good year ahead, said: “Last year was unpredictable. We panicked and worked especially hard to make sure we had enough forward bookings to tide us through. As a result, we secured several events that will take place this year and through 2014. For this reason, we expect 2013 to fare much better than last year.”

Indonesia’s Pacto Convex and Melali MICE Bali also painted a pretty picture for 2013, encouraged by the country’s hosting of the Asia-Pacific Economic Cooperation (APEC) Summit and related meetings throughout the year.

Pacto Convex president director, Susilowani Daud, whose company handled 71 conferences in 2012 – 90 per cent of which were international government and association events – expects the APEC Summit and related meetings to generate even more business from government events.

However, Pacific World country manager – Indonesia, Ida Bagus Lolec, warned that quality hotels in Bali might be booked out this year, especially during the prominent APEC CEO Summit from October 5-7.

Besides spillover business from the summit, Melali MICE Bali’s managing director, Ketut Jaman, noted that Indonesia’s economic growth would give birth to a rise in meetings and incentives this year.

A welcome turnaround in business

There are, however, a number of meeting and incentive specialists who did not escape unscathed from the uncertainties last year.

MCI Group CEO – Institutional Division, Robin Lokerman, described 2012 as a “very challenging year, with margins lower than originally budgeted”.

“Clients were restless, budgets were cut and projects were postponed. The political uncertainty due to elections in the US and several European countries, and the leadership change in China, created an erratic business environment. MCI made 55 per cent of its profit target and revenues were down 10 per cent from our budget. However, our business did grow eight per cent, mainly outside of Europe,” recalled Lokerman. Today he expects increased spending in 2H2013, “as there are a lot of pinned up funds in major corporations”.

He said: “Asia and South America will be key drivers of growth and the US will start to come back. Other mature markets like Australia and Europe will need another year before we can see increased business and client spending.”

Lokerman believes a significant growth in incentives is on the horizon in Asia, as building staff and customer loyalty are crucial to companies in this region.

“Chinese incentives have the largest budgets. We see a growth of pre-paid credit cards in the incentive world, but creating new and unique experiences to reward high performers will continue to be important in the MICE industry,” he said.

Things are looking up too for Sushil Wadhwa, chairman of Platinum World India, who anticipates an “exponential growth” in business events this year, a welcome change from the “bad” year the company had in 2012.

“The cutback on spending from prime source markets in the US and Europe had a telling effect. Business was down 30 per cent year-on-year,” he lamented. “We expect a 30 per cent growth in meetings business in 2013. Currently we have events until July, and they will be held in luxury hotels. For incentives, we expect an 800 per cent growth. (As of early-January) we have a high-yield booking for (an event at) Camp Nou in Spain for 80 top insurance executives, and a 200-pax incentive to Miami in 1Q2013.”

Budgets up, but air of caution remains

The general consensus is that 2013 will see slight upward shifts in client budgets, particularly for incentives.

Lokerman expects bigger client budgets in 2013, but noted that clients are still very cautious and focused on ROI.

Tala is optimistic too, saying: “Most companies (in Asia) are still registering business growth, and that growth is outpacing the rising cost of travel. Therefore, to some Asian companies, there is no need to slash travel spend.”

He predicts a controlled growth of no more than five per cent in budgets.

E T Quah, owner of Feature Tour Malaysia, said: “Companies will still be thrifty with their meetings spend, but there will be an upward shift in budgets for gala dinners and meals during incentive trips as clients have to differentiate such programmes from normal tours.”

On the other hand, according to Chua, some clients are raising the bar on qualification criteria for incentives in 2014 in order to reduce participant headcount and overall spend. Although cost per pax will be higher, Chua expects overall budgets to dip as much as 50 per cent.

Blessings of good exchange rates

With the euro still weak against Asian currencies, more clients are casting their eyes on destinations in Europe.

Wadhwa noted that incentive clients with large budgets and an appetite for luxury are keen on destinations such as Spain, Croatia and Hungary.

Chua said: “Europe isn’t much of a MICE source market now. But whenever a source of demand shrinks, I see a new source of supply. In the case of Europe, I now view the region as a destination to market to my Asian clients because it is more affordable.”

Goswami agrees with the price advantage, saying: “Prices in Europe are lower now and destinations there offer great quality, which allows us to create high-quality programmes at a lower cost.”

However, Asian meeting and incentive buyers have not forsaken their own backyard. Tala believes that Asia will continue to be “self-sufficient, feeding itself with intra-region traffic”.

Tala said: “The euro may be weaker, but Europe is still an expensive destination. Here in Asia, countries are booming. Asia is hot as a destination for fun incentives, as tourism development is taking place in so many cities. It is also hot as a destination for business, as here is where many opportunities lie.”

Indonesian events specialists singled out cities such as Jogjakarta, Medan and Surabaya as destinations to watch for in 2013.

Quah said: “China and ASEAN cities are evergreen destinations for Malaysian corporates, while South Korea and Japan are top picks now. Asia is popular because the value of the incentive tour suits the current sales targets set for average qualifiers. For European destinations, a longer qualifying period is needed. However, we are now encouraging clients to pick Europe for incentives because of the weak euro, which has resulted in lower land cost and greater value for shopping.”

Bumps in the road

Event planners point out the obstacles in business this year

“Labour will continue to be a key challenge. The cost of hiring a graduate in Singapore is (very high). It is also difficult to find staff who are not afraid to get their hands dirty, while being able to visualise the nitty-gritty of planning and executing a business event. Labour challenges make it hard for companies like mine to grow (in terms of manpower). And while I want to increase my fees to better cope with the rising cost of operations, I cannot do so when competitors are absorbing the increment to win business.”

Daniel Chua, managing director, Aonia Singapore

“Pricing is still a sensitive (decision-making) element and the greatest challenge in this business. Sometimes, with some extraordinary ideas, we can encourage the client to spend a little more. We will have to keep a look out for new, unique activities and attractions, and entice clients to choose destinations where these draws are. It will be an advantage for us to have first-hand information, so access to destination information is even more crucial.”

E T Quah, owner, Feature Tour Malaysia

“We are facing tougher competition as there are many new PCOs and event organisers. Consequently, professional manpower, especially those experienced in MICE, are harder to find. Also, increasing costs mean greater efficiency measures must be taken.”

Ketut Jaman, managing director, Melali MICE Bali

“Competition has become so intense. We need good sales (figures) while maintaining a healthy profit margin to overcome high costs. We have to develop new and creative products, and present competitive proposals to negotiate successfully with suppliers.”

Ida Bagus Lolec, country manager Indonesia, Pacific World

“India’s current tax regime is oppressive. When we invoice a client, a 12.4 per cent service tax is applied irrespective of where the event is held – overseas or in India. Many clients resent this burden. We lost some business when clients chose to (engage) DMCs in Singapore for their events in Asia-Pacific.”

Sushil Wadhwa, chairman, Platinum World India

“Like the rest of the world we are following the roller-coaster ride of the eurozone and the politics that surround it. We are aware of the possible ‘knock-on’ effects of the fiscal uncertainty, so we plan for the worst and hope for the best!”

Kritidech Srabua, founder and CEO, Oriental Events Thailand

“Airfares will continue to be an issue. We have encountered business class fares from India to Las Vegas that varied by more than 200 per cent. Moreover, in the high season, airlines are averse to negotiating group rates for MICE.”

Koushik Goswami, general manager-outbound, Travelcorp India

The year forward for the meetings industry

ICCA CEO, Martin Sirk, puts his finger on the pulse of the international meetings segment and identifies four key issues that will impact the industry in 2013

Issue 1 Changing perceptions about the importance of international meetings

We believe that in 2013 there will be wider understanding at a national political level of how international meetings contribute towards national economic development strategies. Asia is already ahead of most other regions with regard to this issue, and intra-regional competition will encourage greater awareness and strategic thinking.

Once China fully understands this link between winning more international meetings and policy advancement in areas such as trade development, inward investment, high-tech knowledge transfer, healthcare programmes and commercial opportunities for local businesses, this will accelerate the trend throughout the region. Beijing recently launched its first Congress Ambassador programme for academics and healthcare leaders, specifically
because of this change in perception about our industry. And where Beijing and Shanghai (which launched the first such programme a few years ago) lead, other Chinese cities will quickly follow.

Issue 2 Competition on the basis of intellectual factors

Singapore and various cities in Australia are leading the way by highlighting their Nobel Prize winners and leading research institutes rather than their tourist and cultural appeal, but other destinations in Asia are rushing to catch up. Brainpower is trumping tourist appeal in the congress decision-making process. Expect more of the same in 2013.

Issue 3 More marketing platforms to invest in, along with greater pressures to reduce spend

It’s tough out there! We’re hearing from numerous ICCA members all over the world about the pressures they are under to cut back on their marketing spend – especially from convention bureaus, as they rely on member contributions to fund this activity. At the same time, there are more media choices – both print and online, more trade shows, more decisions to make regarding  levels of expenditure on social media, gamification ideas (the use of game mechanics to engage users and improve ROI) and website improvements, as well as more association memberships to evaluate.

This is going to be a year when any organisation looking for a share of the marketing spend is going to have to work incredibly hard to prove the effectiveness of their channels and activities. Asia’s meetings market is doing better than the global average, to be sure, but competitive pressures are just as tough, so there are sure to be winners and losers among both meetings suppliers and the companies fighting to attract their marketing dollars.

Issue 4 Another year of scientific, healthcare, and technological breakthroughs

ICCA will be celebrating its 50th anniversary this year (visit http://50years.iccaworld.com for more details), and throughout this half-century we have seen a non-stop increase in the importance of international association meetings. Meetings activity has indeed  accelerated over the past decade. This change is being primarily fuelled by advances in science, medical research and technological breakthroughs.

We are still in the early stages of the Information Revolution, and as researchers improve our understanding of genetics, as new materials are invented, and as computer power continues to obey the accelerating growth of Moore’s Law, these are going to drive increasing association meetings activity, sustain existing events and create new ones for the fastest growing specialisations. For this reason, even though 2013 is almost certain to have some unpleasant economic surprises in store for the world, ICCA is very optimistic over continued growth in the international association congress sector.

Conventions and exhibitions:  Asia-Pacific rising

Asia-Pacific’s exhibitions sector is brewing with opportunities, and several trends are gaining momentum now. UFI’s Mark Cochrane shares his outlook for 2013 with Karen Yue

How did Asia-Pacific’s exhibitions industry do in 2012 as a destination?

It takes several months for us to complete the update of our database of more than 2,000 Asian B2B exhibitions. So while I do not have a definitive answer regarding growth in 2012, my sense is that it was another solid year for exhibitions in this region. (See chart on Asian exhibition space sold below.)

I expect South-east Asia will continue to perform well as international organisers are very interested in launches and acquisitions in this region.

China – despite concerns that the economy has slowed – is still expected to record GDP growth of 7.5 per cent in 2012. That should provide plenty of support for the growth of B2B exhibitions in China.

However, it is worth noting that the growth in China’s exhibitions industry is by no means evenly spread. The category-leading exhibitions and events organised by international organisers will generally outperform the weaker tier-two and tier-three events in most categories.

Which destinations fared best in 2012 according to UFI’s research?

Again, we do not have definitive 2012 figures yet, but I would expect that the South-east Asian trend, which began in 2011, will continue throughout 2012 and 2013. The fastest-growing markets, measured by space sold in 2011, included Singapore, Malaysia, the Philippines, Thailand and Indonesia. I would expect that 2012 would result in a similar configuration of these markets at the top of the growth chart.

Large markets such as China, India and South Korea will also likely post modest, but reasonable exhibition growth.

And unfortunately, once again, Japan can be expected to be one of the poorest performers in 2012, given the strength of the yen and the weakness in Japan’s underlying economic fundamentals. Of course, Japan’s ongoing political dispute with China over the Diaoyu/Senkaku islands will hit trade between the two countries and that will inevitably negatively impact B2B exhibitions in Japan.

How did Asia-Pacific’s exhibitions industry do in 2012 as a source market?

Trends in the exhibitions industry generally take several years to play out, so we are seeing quite a few interesting trends gaining momentum. There are three most interesting trends.

First, organisers are showing interest in exploring visitor services such as match-making, video conferencing for VIP visitors who can cannot attend the exhibition in person and “guided tours” of the floor of large exhibitions. These are just some of the innovative visitor services currently being evaluated by exhibition organisers.

Second, paid conferences are getting increased attention from exhibition organisers as a means to generate both incremental revenues and unique content that can be re-used on an online platform.

Third, mergers and acquisition activity is increasing, as exhibition organisers with international reach are looking at Asia as a growth opportunity – especially when compared with their home markets in the US and Europe where finding growth is much more challenging. There are plenty of such examples throughout 2012. For instance, Tarsus took a 50 per cent stake in the China International Automotive Aftermarket Industry and Tuning (Guangzhou) Trade Fair, and Global Sources acquired an 80 per cent stake in China (Shenzhen) International Brand Clothing & Accessories Fair.

This trend will drive growth within these individual shows as the international organiser will help the local (partner) to bring in a greater variety of visitors and exhibitors from overseas. It will also give the international organiser and the local partner a chance to work together to launch other new exhibitions in that particular market. Both sides of the deal will benefit with increased opportunities and incremental growth.

Which industries generated the highest frequency/scale of exhibitions in this region in 2012?

Actually, B2B exhibitions in Asia are very well diversified in terms of industry categories. We segment the Asian exhibitions market into 27 different industry categories. In 2011, no category held more than 10 per cent (in shares). The three largest categories, Furniture & Interior Design, Electronics & Components, and Engineering & Industrial Machinery, each held a 10 per cent share of the total Asian market.

All other categories accounted for six per cent or less of total space sold. In any given year, some categories may have an increased number of launches – energy, construction and automotive come to mind – but in terms of regional space sold, the industry will remain very well diversified.

Q:  What sort of growth opportunities will Asia-Pacific see in 2013? Which destinations in this region will stand out?

A:  China dominates the exhibitions industry in Asia, accounting for more than 55 per cent of all space sold in the region in 2011. So as long as the Chinese economy remains vibrant, one can expect the exhibitions industry in Asia to post a reasonably strong year.

I think that will be the case in 2013. China’s overall economic growth may modulate and the exhibitions industry in mainland China may begin to mature and consolidate, but I think you will see quite strong growth for the larger, higher-quality events across the industry in China.

As I had said earlier, all indications are that the growth recorded in South-east Asia in 2011 will continue in 2012 and 2013. There is a lot of excitement about the exhibition opportunities in markets such as Indonesia, Malaysia and even Myanmar.

This is one of the many reasons that the annual UFI Open Seminar in Asia will be held in Jakarta in February this year. Markets in South-east Asia – in particular Indonesia – are finally and deservedly gaining attention.

For example, Indonesia is one of the most under-served exhibitions markets in Asia with a population of 240 million and a GDP of US$845 billion. The economy there continues to grow and Jakarta is adding two new exhibition venues in the coming few years. Yet, measured by net square metres sold, Indonesia ranks 11th in Asia, behind Singapore.

The growth opportunity there and across South-east Asia is significant and should not be underestimated.

A now international Pacific World aims to triple its size and revenue by 2017. Its global managing director, Hervé Joseph-Antoine, spills the gameplan to Raini Hamdi

It’s a sign of the times that TUI has rebranded all its DMCs in Europe – Ultramar Event Management Spain, Travel ScotWorld Scotland, TUI Hellas Corporate Services Greece and Miltours MICE Division Portugal – as Pacific World and this global organisation is now based in Singapore under you.

Yes, 60 per cent of the business is already in Asia and with the continued growth of this market, it makes sense that our headquarters is here. Usually, you (cover the region) with an affiliate in China, Singapore, etc. For us, it’s the other way round. We look at the world from where the main business is.

TUI also separated the MICE business from Hotelbeds, whereas both used to come under the Accommodation & Destination platform. Why?

The business model is changing fast. Hotelbeds is growing rapidly. The FIT/individual business is now online, less tied to the local industry and more transactional. Your portfolio is in one place, contracting in another, the product is sold elsewhere and all this is connected, so the nature of the business has changed.

MICE remains tied to the local industry and is also changing fast. TUI acknowledges that the business model is in flux and allows the companies to follow what’s right for them. That’s why the separation.

What difference does it make being on your own?

We are the MICE platform within the group. So we have the strengths of group functions like legal or HR but are recognised as a very specialised business within the group. Our people, like Jeff Amato (regional director, Thailand and Indochina) and Cindy Zhang (regional director Greater China), have worked in the MICE business all their lives.

Who do you report to?

The TUI board, every quarter.

What is the advantage of being a global organisation?

Your perspective is richer, because you have people of different cultures working with you. Your clients today are also more global and have people of different cultures working for them too. You can’t have one culture or country dominating the decision-making anymore. We don’t have a Europe or US mindset. We have a global mindset.

As the MICE platform of TUI, has your parent set you higher targets?

The mandate is growth, to multiply our size and revenue threefold by 2017. We’re going to grow all segments of our business, which is 65 per cent DMC and the rest split equally between corporate/association and PCO.

What’s your revenue now?

I won’t say (laughs). Size-wise, we have a staff count of more than 200.

What will you do to triple your size?

Open new destinations and source markets while growing existing ones.

Pacific World fully owns all its 12 offices in five geographical areas – Europe, Greater China, Singapore/Malaysia, Thailand/Indochina and Indonesia. Will you be opening, acquiring or partnering up to set up new offices? And where?

Our presence is very balanced worldwide but there are still places in Europe and Asia (we have yet to reach). In Asia, this is namely Japan and South Korea.

We’re signing papers for legal entities – I can’t say where yet – and if we find partners with the right level of operational excellence, offering top service, creativity and places which others have not opened – all this is our DNA – we will team up. If we can’t find the right partners, we can open our own offices, acquire or postpone.

There are also some MICE businesses within the TUI group, which is a large organisation, that can be integrated into Pacific World if they are at the right level of maturity.

Going forward, do you foresee most of the growth coming from Asia?

Yes, if you look at the additional MICE market growth between 2012 and 2017, 80 per cent comes from Asia as a destination or as a source, because of the region’s economic growth. So if you are a global MNC headquartered in the US or Europe, you’re going to be doing more conferences and business meetings in Asia.

There is a correlation between MICE and the economy. If GDP grows two per cent, the multiplier effect on MICE is three times, thus you can expect six per cent growth. If GDP is down, the multiplier effect is about 10 times. So if GDP is minus two per cent, your business collapses 20-25 per cent. It’s true, I’ve seen this myself.

In a recession, the first thing that gets cut is the marketing budget. If a company (usually) holds two big conferences, it will do one or none. That’s why US incentives disappeared in 2010/2011, though they are now coming back, as are incentives from Brazil and South Africa, but not so much for Europe.

As you know, the MICE industry has seen many fluctuations since 2006 – up in 2008, down in 2009, that sort of pattern. MICE is vulnerable to economic changes and is not as resilient as the luxury travel business. It’s also very fragmented because when you have a crisis, a lot of companies disappear.

Ninety per cent of the business in Europe, the US and Asia are small companies with five to 10 pax that can lose 20-30 per cent of business in a crisis. That creates a change in the marketplace – the small companies are becoming more fragile while the big, international players who have a certain stability because of their shareholders or size, are growing bigger.

As a company owned by TUI, you benefit.

We need to see how the market evolves in Europe as the economic crisis in 2009 and the (debt-crisis) now add another layer of impact: What’s going to happen to the boutique agencies and DMCs in Europe?

The market, from the corporate and association point of view, is looking for stability and reliability. You don’t want to give your big conference to a company that will disappear in six months. You look for people who have good insurance cover. MNCs also have a strict compliance policy as they want to safeguard themselves against legal or credit risks.

There is also the impact of new laws, such as anti-bribery laws. An agency with a local owner and five to ten people may do things to facilitate immigration or entrance to venues that the client does not want it to. Although that may have been alright two to three years ago, such arrangements are high-risk now.

Major companies want to make sure we have controls in place. So relationships are still important, yes, but the traditional relationship model as we know it has changed.

What’s the biggest challenge in multiplying your size by three?

I don’t know yet, but I think it is related to generational change. The interaction with clients or hotels is different because project managers belong to Gen Y, so your communication with them has to change. They do video conferencing, look at what we do on Facebook, look at pricing differently, i.e., quicker and more of a procurement type discussion. We are preparing ourselves for this.

How?

More empowerment. I’m not the ‘father’ of the Pacific World organisation, with the team under me. The team is empowered to make decisions. Cindy (Zhang), for example, is in charge of global marketing and empowered to come up with our strategy for tradeshows, budgets, marketing approach, etc. It’s a big change but one we must make.

Who do you view as your strongest competitor?

The business is so fragmented. If you look at the biggest players at the country level, each has a seven or eight per cent share. It’s not like some industries where it is clear-cut, with the number one player holding a 20 per cent share, number two 15 per cent and so on. We are all very small in a big market.

You handled MICE at Carlson Wagonlit Travel (CWT) before joining Pacific World. What best practices would you take from CWT in your new role?

The region is different, the market dynamics are different. I can’t think of a good example – probably its diversity. CWT is an MNC present everywhere. It’s not a monoculture and it’s good to bring that experience to Pacific World. We want to take that diversity further.

Why did you join Pacific World?

It’s the future.