Austerity chic

By Mario de Marco, Parliamentary Secretary for Tourism, the Environment and Culture

Last year was a very difficult one for the tourism industry with the conference and incentive segment feeling the crunch more than other sectors because of the international economic and financial difficulties. As is to be expected this segment suffered in a higher-than-average manner during last year’s financial crisis as cash-strapped companies affected drastic cuts in staff overseas travel. It also suffered due to a perception factor, given that most companies felt that continuing to attend overseas conferences whilst affecting staff cuts was tantamount to negative public relations.

According to the latest UNWTO barometer report “demand for segments like meetings and incentives plummeted in some countries, in part because companies were reluctant to be seen spending on such items in a recession and at a time when so many people were losing their job. ‘Austerity chic’ has become the new buzzword”.

Information available in the latest EIBTM 2009 Industry Trends and Market Share Report notes that an analysis of the impacts of the prevailing economic conditions on our industry presents a picture as varied as the diverse states of national economies throughout the world. There is, however considerable consensus that corporate profits have fallen in most countries over the past year, companies have reacted with an array of cost-cutting measures related to their employees’ business travel and their participation in meetings and business events.

We have seen:

• Ever shorter lead times, as clients show increasing reluctance to commit themselves to signing contracts with suppliers significantly in advance of their meeting or event.

• Clients shopping around more and comparing prices for facilities and services.

• Greater use of one-day events to reduce the number of overnight stays, and

• A reduction in the number of suppliers they use, to increase the potential for economies of scale.’

The conference and incentive travel (CIT) segment is a growth segment that contributes substantially to our tourism industry. It fits within one of the government’s strategic objectives that of an increase in tourists especially in the high yield sector. Government is supporting financially a subsidy scheme for the public and parastatal sector through which a number of conferences are being organised in Malta. So far through this scheme 26 conferences were attracted to Malta, 10 conferences were attracted last year, 13 conferences are being organised this year, whilst there are a further two more conferences booked for 2011 and one for 2012, Between them, these account for 10,300 delegates or about 31,000 nights.

Meetings, incentives, conferences and events (MICE) is a very important segment of the Maltese tourist industry because it attracts substantial quantities of high-value, off-peak business tourists to complement the leisure tourism flows which are attracted during the year to our country.

The MICE market uses upscale accommodation during the shoulder months of the spring and autumn. Last year the most popular months were April, May and October. In spite of shorter than average length of stay, it generates expenditure that is estimated at three times higher than that for leisure tourism.

Besides its contribution to the accommodation sector, MICE also creates business for destination management companies, conference venues, caterers, audiovisual service providers and other ancillary businesses such as companies specialising in incentives. Another important characteristic of this segment is that it tends to attract travellers who may not have a strong awareness of Malta, but who end up returning as bona fide tourists with their relatives following their initial business trip to the country.

The provisional figures for 2009 indicate that conference and incentive together with business travel brought over 107,685 travellers to Malta, or 13.3 per cent of all tourists visiting Malta. The share was 0.8 per cent less than that of the previous year.

On average the budget per delegate for 2009 was €729.3 or €40 more compared with 2008. The largest share of the budget is spent on accommodation, followed by organised entertainment and activities and meals. The CIT sector in 2009 generated around €21.76 million.

Eight out of every 10 MICE delegates stay in five star accommodation, 17 per cent of the delegates use four star hotels and two per cent use three star hotels. On average conference and incentive delegates stay in Malta for an average of three nights.

The upturn in the economic and financial international situation the prospects for this year are positive. The large majority of DMCs forecast growth in MICE business for this year. The MICE segment’s performance during the second part of this year is expected to be very positive as evidenced by the number of events, some of them huge – as the Oriflame Golden Conference – which have been committed so far. The international forecast is that companies will bounce back strongly and also react to the pent-up demand that has been lying dormant for the past 12 to 18 months.

The more destinations promote themselves as excellent value, with no compromise in quality, the more likely they are to emerge stronger than before. The decision of Oriflame Cosmetics to organise their conference in Malta, in face of a number of bidding countries, is proof that we have the necessary infrastructure to support such conferences.

Excerpts of a speech delivered by Dr Mario de Marco - Parliamentary Secretary for Tourism, the Environment and Culture - at a press conference about the Oriflame Golden Conference on 13 April 2010