China’s crackdown takes bite out of meetings

By Korea Herald

Policies to curb lavish spending continue to dent profits of high-end restaurants, hotels

  • Published : Feb 11, 2014 - 19:21
  • Updated : Feb 11, 2014 - 19:21

Linda Liu was surprised to find that booking a banqueting room for a company meeting was an unusually easy task during the Christmas season. Finding large suites at hotels in Beijing’s central business district is usually impossible in December, but during last year’s Christmas season, Liu, a marketing director for a beverage manufacturer, was offered promotional packages with plenty of available dates.

The meeting and conference industry nationwide has been experiencing a hard time since the government introduced policies to crack down on lavish spending of public funds almost a year ago. According to Xinhua News Agency, spending on conferences by the Ministry of Public Security has fallen 80.9 percent compared with a year ago.

“We urgently need to cut the number of government and institutional conferences,” said Wu Shaoyuan, deputy director of the Alliance of China Conference Hotels. The number of conferences paid for with public funds has been declining since 2011, according to the 2013 China Conference Blue Book released by the China Tourist Hotel Association.

A local resident peeks into a high-end restaurant in Beihai Park in Beijing. The restaurant closed amid a government crackdown on lavish spending. (Kuang Linhua/China Daily)

Enterprises, institutions, local governments and organizations are still the four main movers in China’s meetings, incentives, conferencing and exhibitions market, but the percentage spent by institutions and governments continues to fall in line with central government regulations, said the report.

Meanwhile, the number of MICE organized by enterprises increased from 49.9 percent of the total in 2010 to 59.7 percent in 2012.

Government conferences accounted for just 5.2 percent of the United Kingdom’s MICE market in 2012, while business conferences accounted for 81 per cent, according to Wu.

Conference sizes have also been reduced year by year, in line with central government directives on thrift; conferences with 1,000 and more attendees declined by 75 percent from 2010 to 2012, according to the tourist association.

“The numbers prove that huge government conferences can be slimmed down,” said Wu.

To solve the problem of overcapacity, the National Tourism Administration canceled 21 festivals and 84 conferences this year, he added.

On a positive note, though, a greater number of professional agencies, such as travel agencies and conference service companies, are involved, which could save more money than events organized by the sponsors themselves.

The percentage of MICE events held by professional agencies increased from 9.1 in 2010 to 12.3 in 2012 and the MICE market also has seasonal and regional differences.

For example, a large number of conferences were held in January, March, April, July and December, while the slack seasons were February and October, according to the blue book.

Wu said the government’s austerity campaign has seen a change in customers in the conference and meetings market, from government-dominated to enterprise-dominated.

For example, January used to be the peak season for government-related annual conferences and meetings. But the implementation of the new policy has greatly lowered revenues at conference hotels, said Wu.

Beijing, Shanghai and Hangzhou in Zhejiang province hosted the highest number of international conferences in 2012, the blue book said.

“These cities have good facilities, rich tourism resources and convenient transport, but industrial bases, plus the technological, cultural and educational resources are the most important factors,” said Wu.

Beijing, Shanghai and Hangzhou in Zhejiang province, hosted the highest number of international conferences in 2012, the blue book said.

“These cities have good facilities, rich tourism resources and convenient transport, but industrial bases, plus the technological, cultural and educational resources are the most important factors,” said Wu.

Zhong Bing, an industry insider who publishes Mice China magazine, said that for many hotels and service providers, revenue from government meetings, conferences and related businesses has fallen by nearly 70 percent. Conference centers and hotels that mainly target government meetings and banquets have been the most-severely affected, with a 90 percent decline in revenue compared with 2012.

Foreign-invested hotels and conference venues have also hosted fewer events. The reduction in spending on meetings and banquets from government departments and organizations and related enterprises is more visible in smaller cities because of stricter implementation of the policies, said Zhong.

“No official wants to risk their career for a lavish meal,” he said. “In the era of Weibo (micro-blogging services) and WeChat (instant messaging services), any wrongdoings can be publicly exposed much more easily.”

Zhang Yuan, a banquet sales manager at a five-star hotel in Beijing under a leading global hospitality chain, said that in addition to the declining number of meetings and conferences since the beginning of last year, the average spending has halved to about 100 yuan to 200 yuan per ($16 to $33) person, per meal.

Government procurement, which does not include foreign-invested hotel brands, has sometimes considered their services, but since the implementation of the policy spending has plummetted, resulting in a loss in business revenue of nearly 20 percent, said Zhang.

Any government-related meetings and conferences have been conducted according to the principle of austerity, she said. “No flowers, no liquor, and fewer dishes. Meetings moved back to offices, and trips were scrapped.”

To deal with the sudden drop in demand, Zhang’s hotel has offered a reduction in banqueting rates to lure more customers. Even consumption at wedding banquets has been affected by the austerity campaign. “The first season of the year has seen almost no wedding bookings,” she said. “Although we don’t know how closely related that is to government policy, it’s clear that an increasing number of people want a lower-profile event, rather than being the target of public blame.”

The government initiated an anti-corruption campaign aimed at the medical industry in July, after conducting an investigation into the British pharmaceutical giant GlaxoSmithKline.

According to the public security authorities, since 2007 the company had used travel agencies to funnel at least 3 billion yuan in bribes.

But for many travel-service providers, crises such as these could help to consolidate the industry and phase out those who engage in illegal practices.

“The GSK incident and the government’s austerity policies will help the MICE industry get back to normal,” said Ma Xiaoqiu, deputy general manager of Grand China Mice, a services company launched two years ago, under the HNA Group.

The company’s annual revenue was unchanged year-on-year and annual growth in 2012 was 20 percent. However, Ma is confident of higher growth next year, given the existing demand from enterprises.

“Meetings and conferences as a major channel for marketing and sales will remain unchanged,” she said. “Companies will not cut spending. But they will hold events in a more transparent way.”

This year, Ma has noticed that some clients have requested four-star venues instead of five-star, but often the conference halls in the smaller hotels are too small for the large number of attendees.

Ma also said that as foreign companies have moved their operations to second- and third-tier cites, from the eastern regions to western and central China, demand for venues in those areas is higher than ever before.

By Wang Zhuoqiong and Wang Wen

(China Daily)