The image of corporate entertainment has been damaged in the last couple of years. Reports of Government subsidised banks having expensive events entertaining clients, sticks in the throat for many people who have lost their jobs, or who are struggling to pay their mortgage. Hospitality tents at Wimbledon; half empty, but paid for in full, also annoy many people.
Yet in all cases, the banks booked and paid for the events before the financial crisis AND corporate entertainment is part of the process of developing relationships in business. Many businesses: particularly City companies are concerned about visibly entertaining clients given the current economic situation. They cannot be seen to be having ‘jollies’ even if they are entertaining existing and prospective clients. Of course, this has had an impact on the Events, Conference, Hospitality and Entertainment sector.
Simon Speller from Hillier Hopkins LLP Accountants said that the Event sector is a very good indicator of economic stability. Clients of his in this sector began to be hit at the beginning of 2008: before other sectors were affected, but, he optimistically said that his clients are now seeing increased activity in the latest quarter: suggesting that there is economic growth – or optimism.
Before the Credit Crunch, large or even limitless budgets were available for corporate entertainment, and lavish affairs were organised with no expense spared. Prices were high, and it was not unheard of for Event Companies to have huge mark ups on their suppliers prices, which they passed on to their clients. Now, however, the trend is for limited budgets and for fees to be negotiated and some entertaining to be cut.
One of our clients mentioned that they were no longer organising their regular hospitality events for all of their clients; instead of taking 100 clients for a corporate day at Twickenham, including watching an International; they were now taking 10 high earning clients to see the match and a curry: cutting the cost from £700 per person to £70. They were also going through their database; inviting people to fewer events and saving the best invitations to their highest earners only.
Another client, who works for a major supermarket that made record profits last year, said that all of the Christmas Office parties were cancelled last year as a cost cutting exercise. Normally her department of 20 would have had a budget of £40,000, yet the company were reluctant to even organise an in house drinks party. Of course cancelling office parties impacts on staff morale and is not always the most effective cost saving measure!
So why do organisations entertain? Is it for fun, or to make them look good? Is it to show off or to reward their staff? There is a little of all these factors when organisations entertain, but it is generally for business purposes. Providing employees with a fantastic away day experience or Office Party is a good reward for loyalty and hard work – hence the demoralisation when these are cancelled. However, first and foremost it is to establish and maintain relationships with clients.
If you arrange to meet a high earning client in McDonalds for a coffee, it says little about how you value the client and their business to you, but if you take care with the venue you choose to meet for coffee: that it is private and quiet to have the opportunity to discuss business in a professional way – it says so much about how you value the business relationship. Likewise, a restaurant where the service and ambience is not good (even if it is expensive) will do little for the business relationship that a lovely family owned restaurant where the chef and front of house really care about their customers.