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What Are We Measuring Anyhow?

Professor Leo JagoDeHaan Institute

AIPC 2010Liverpool 6 July

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FACT• Business events make key broad-based contributions to economies

BUT• Most of our efforts focus on the tourism contribution of business events

CONSEQUENCE• Business events don’t get the appropriate recognition or support

SOLUTION• Effort needed to assess the ‘beyond tourism’ value of business events

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Presentation Outline

• Traditional Approaches to Valuing Business Events

• Problems with these Approaches

• Change Prompted by the Global Financial Crisis (GFC)

• Business Events Council of Australia Study (BECA)

• Business Events’ Contribution to Innovation

• Melbourne Convention & Visitor Bureau Study

• Next Steps

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Traditional Measures for Estimating the Value of Business Events

• Delegate Numbers

• Total Delegate Spend

• Economic Impact of Delegate Spend

• The sector has been “sucked into” narrow measures

We are focusing on the wrong thing and often not measuring it well anyway

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Economic Impacts

• Input-Output approach• Overly optimistic as no supply side constraints• Lower credibility with government in many regions

• Computable General Equilibrium Modelling• More accurate estimate of true economic impacts• Requires a model of the destination & suitable expertise

• Cost-Benefit Analysis• Starting to be employed in major events• Not seen in business events• Enables net benefit to community to be estimated

• Not just impact

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Difficulties with Economic Impacts

• Substantial variability in assessment techniques that are employed• Leads to credibility problems with government

• Evaluations tend to be macro in focus• State, Province, or Country impact rather than city specific• Numbers often seen to be very large and meaningless

• Generally ignore the inputs required to generate the impacts (except for CBA)• Must be considered in order to estimate true benefits

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Example

• Australia’s National Business Event Study (2005)• Business Events generate $17.3 billion

spending per year• Contribution to total employment of

213K• Contribution to Gross Value Added of

$11.4 billion

• Obtained substantial ‘traction’ with government

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More Fundamental Problem

• These measures focus exclusively on the tourism impacts of business events

• Many see the impact to only benefit hotels, convention centres and restaurants

• Tourism benefits are seen to be more frivolous and have lower credibility than benefits from other sectors

• Until recently, not even those in business events often promoted the additional benefits of the sector

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AIPC’s Guide to Calculating EconomicImpact Figures

Whilst this Guide focuses on the tourism impact, it does identify the need to consider other dimensions:

• “Don’t forget the other business benefits that result from congress centre activities.

These can include such things as trade and investment impacts, new business opportunities and creating a showcase for local product and services, and may be of more direct importance to parts of the business community than spending data.

• Along with business benefits, your congress centre also generates broader community benefits such as educational opportunities, technology development, professional and cultural development and enhanced tourism. In a time of heightened global tensions, the kinds of activities and events

• Conferences and congresses promote international cooperation and create forums that help improve international relations, global communications and professional networking.”

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Key Messages for the Meetings Industry(Joint Meetings Industry Council)

• Meetings and conventions generate uniquely high-yield economic benefits and attract influential visitors;

• Meetings generate a wide variety of other economic and community benefits;

• Meetings and conventions generate incremental tourism;• Meetings and conventions promote the profile of a city or region and its

role in national and international affairs;• Meetings are directly connected to the key issues of the day;• Meetings play an important role in building better understanding

amongst different groups and countries throughout the world.

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Consequences

• Grossly understates the value of business events to the region• Understates the range of dimensions / variables / benefits• Understates the range of beneficiaries• Understates the total value

• Connection with government tends to be through Tourism Minister (usually lower status in government)

• Rarely do ‘Industry Ministers’ let alone the ‘Prime Minister / President’ see tourism / business events as key high profile drivers of economic development

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External Shock Prompts Change

• Global Financial Crisis prompted government and companies to cut expenditure• Business travel, especially business events seen as a soft target• Leisure tourism could offset facilities losing business travel• Advances in technology seen to compensate• Attending business events seen by many as a ‘jolly’

• Forced the business events sector to reflect on its true value• A range of studies were commissioned to assist

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The Return on Investment of U.S. Business Travel

(Oxford Economics)• For every dollar invested in business travel, companies realise

$12.50 in incremental revenue

• The average business in the U.S. would forfeit 17% of its profits in the first year of eliminating business travel

• 28% of current business would be lost without in-person meetings

• Business travellers stated that 5-20% of their company’s new customers were the result of trade show participation

• In order to achieve the same effect of incentive travel, an employee’s total base compensation would need to be increased by 8.5%

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Oxford Economics Study(Cont)

Trip Type Return on $1 of Investment

Customer Meetings $15 - $19.99

Conferences $4 - $5.99

Trade Shows $4 - $5.99

Incentives $4 +

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Managing Across Distance in Today’s Economic Climate:

The Value of Face-to-Face Communications

(Harvard Business Review)

• A global survey of 2300 HBR subscribers

• 79% said that in-person meetings are the most effective way to meet new clients to sell business

• 89 agreed that face-to-face meetings are essential for “sealing the deal”

• 95% said that face-to-face meetings are a key factor in successfully building and maintaining long-term relationships

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Why Face-to-Face Business Meetings Matter(Richard Arvey)

• Historically, face-to-face meetings have played an important role in the social, and especially the political life, of Western and non-Western societies” (Schwartzman, 1989)

• Meetings:• Facilitate verbal and non-verbal communication• Provide human contact• Underpin strong social and exchange relationships• Facilitate transparency and trust• Allow sideline conversations (important for other business)

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Why the Need to Demonstrate Size and/or Value?

• To be taken seriously, an industry must produce credible figures to show its contribution to the economy

• Tourism Satellite Accounts (TSAs) were the ‘coming of age’ for tourism• Underpinned investment in infrastructure• Government support for promotion

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Why the Need to Demonstrate Size and/or Value?

(Cont)

• Business events adopted this logic but it clearly undervalues the contribution• Even the UNWTO project to estimate value looked only at the

tourism value

• It also overlooks opportunities to leverage the value of business events

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Business Events Council of Australia Study

• Examine business events’ connection with tourism

• Explore the “beyond tourism” broader-based value of business events

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Four Dimensions that Underpin Value

• Value to attendees

• Value to employer organisations

• Tourism value• Largely under control although standardisation needed

• Comprehensive value to the economy

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Value for Attendees & Employer Organisations

• Business events too often portrayed as ‘paid holidays in exotic locations’

• Many in the community have been to events like this which underpins their scepticism regarding the value of business events

• Many events are held and/or attended through habit

• Often there is no clear purpose or ‘take-away’ from the event• How can one determine whether it is worthwhile?

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Return on Investment (ROI)

• Substantial effort has been made to adapt ROI technique to business events

• An excellent technique for assessing and enhancing the value of business events to attendees and employers

• Essential that all business events have a clear purpose with strong ‘take-aways’ for attendees that are communicated throughout the event and reinforced afterwards.

• ROIs need to be undertaken on a regular basis

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ROI(Continued)

• Although it requires some effort to calculate the ROI, it has been shown to enhance performance and output

• The combined value of ROI across attendees and employer organisations is generally substantial and a useful inclusion in the total value of the business event

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Why the Link with Tourism?

• Dates back to at least the nineteenth century where business events were seen as a way to promote destinations and fill hotel rooms

• The attraction of delegate visitors and their spending pushed business events into Tourism Departments

• Tourism Departments measure value through visitor numbers and spend, hence the flow on to business events

• This impact is fairly easy to measure and short term so can be estimated soon after the event

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Beyond Tourism

• The fact that the funding for business events has often come from Tourism Departments has meant it has been difficult to extend outside tourism

• There is now a push for this to happen but it tends to be ‘rear guard action’

• “The meetings and events industry should rightly be thought of as a key component of the global knowledge economy, rather than as a branch of tourism” (Leigh Harry, 2009)

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Beyond Tourism(Continued)

• Tourism is a key beneficiary of business events, not a driver

• Business events are staged for specific reasons that have nothing to do with filling hotel rooms – this is purely a spinoff benefit

• They are key knowledge creation tools

• If business events are to realise their potential, there must be a mind shift on the part of government, destination and event managers about their real purpose and outcomes

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‘human interaction, especially face-to-face interaction, drives innovation and

inspiration. Accidental connections between leading

thinkers studying different topics can unlock seemingly intractable challenges

and insoluble puzzles’ (Harry 2009)

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The Role of Business Events in Enhancing Innovation

• Maskell et al’s (2006) research argues that:• Meetings and conferences are temporary clusters for knowledge building

Core Motives or Needs

Develop and share ideasEducate/informPromoteNetwork / socialiseChange attitudes / behaviourSales and performance

Core Motives or Needs

Develop and share ideasEducate/informPromoteNetwork / socialiseChange attitudes / behaviourSales and performance

Business

EventBusiness

Event

Key Outcomes

InnovationImproved organisation performancePersonal developmentIncreased productivityIncreased salesNew skills and knowledgeAwareness

Key Outcomes

InnovationImproved organisation performancePersonal developmentIncreased productivityIncreased salesNew skills and knowledgeAwareness

Tourism Impacts

•Direct spend

Job creationInfrastructure investment

Tourism Impacts

•Direct spend

Job creationInfrastructure investment

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The Role of Business Events in Enhancing Innovation

(Continued)

• Enhance science and technology:• which helps generate new forms of technology itself• improves understanding and access to it • helps improve local knowledge and skills by bringing outside

information and technology into the host community • providing a vehicle for local businesses and professionals to access

the latest developments in their respective fields.

• Promote cultural exchange by providing forums and new opportunities to expose local culture to national and international audiences.

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Industry–science relationships and Face-to-Face Networking

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Fostering InnovationInternational Comparisons with Australia:•China’s R&D spending has grown by 22 per cent a year since 1996, compared to 8 per cent a year in Australia. Australia spends 2 per cent of GDP on research and development.

• Austria, Denmark, Germany, Iceland, Switzerland, Taiwan, and the United States spend more than 2.5 per cent;

• Finland, Japan, South Korea, and Sweden spend more than 3 per cent; Israel spends more than 4 per cent

Firms with New-to-Market Innovations by Size, 2002-2004

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Fostering Innovation(Continued)

Firms Collaborating in Innovation Activities, by Size, 2002-2004 (as a percentage of all firms)

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Fostering Innovation(Continued)

University-industry interactions contributing to innovation (% firms)

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Priority Description1 Public research funding supports high-quality research that

addresses national challenges and opens up new opportunities.

2 Australia has a strong base of skilled researchers to support the national research effort in both the public and private sectors.

3 The innovation system fosters industries of the future, securing value from the commercialisation of Australian research and development.

4 More effective dissemination of new technologies, processes, and ideas increases innovation across the economy, with a particular focus on small and medium-sized enterprises.

5 The innovation system encourages a culture of collaboration within the research sector and between researchers and industry.

6 Australian researchers and businesses are involved in more international collaborations on research and development.

7 The public and community sectors work with others in the innovation system to improve policy development and service delivery

Australia’s National Priorities in InnovationBusiness Events Essential Ingredients for Priorities 2-7

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A Framework for Enhancing Innovation through Face-To- Face Business events

ASSOCIATION CONFERENCESASSOCIATION

CONFERENCES

CORPORATE MEETINGS & INCENTIVESCORPORATE MEETINGS

& INCENTIVES

EXHIBITIONSEXHIBITIONS GOVERNMENT MEETINGSGOVERNMENT

MEETINGS

Income generator for non-profit organisationsDevelopment of industry positions and policyMedia profile of key community-related issuesKnowledge dissemination within sectorsRelease of new researchCollaboration between colleaguesCommunity outreach programsNew members

OUTPUTS: INNOVATION, TRADE, EDUCATION, PROFILE, PRODUCTIVITY, ORGANISATION CHANGE

Performance reward

Collaboration on new products/servicesProblem-solvingCorporate plansInformationProduct promotionMotivationTeam buildingWork skills trainingImproved organisational performanceImproved individual performance

Business investment

Identification of product gaps in marketNew contacts and collaborationsExport marketsFuture business leadsSalesNew products and services to market

Encouragement of investment and business migration

Collaboration on common interestsInformation exchangeTrade negotiationsInfluencing national & international policyAustralia’s international diplomacy and profile

Participants

AcademicsProfessionalsNon-profit organisation hostsSponsorsGovernment representativesUniversitiesMedia

AcademicsProfessionalsNon-profit organisation hostsSponsorsGovernment representativesUniversitiesMedia

Categories

Outcomes

EmployersEmployeesDistributors/franchiseesCorporate guestsSponsorsMedia

EmployersEmployeesDistributors/franchiseesCorporate guestsSponsorsMedia

Exhibition ownersVisitorsExhibitorsSponsorsTrade delegationsMedia

Exhibition ownersVisitorsExhibitorsSponsorsTrade delegationsMedia

Government hostMinistersParliamentariansBureaucratsVisiting heads of state & delegationsDiplomatsMedia

Government hostMinistersParliamentariansBureaucratsVisiting heads of state & delegationsDiplomatsMedia

Destination / tourism outputs

eg:

Hotel bedsAirline seatsVenue spaceF&B servicesShoppingEvent managers & suppliersGround transportPre and post touring Repeat visitationAccompanying persons activities

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Relationships and Innovation from Business Events

Clusters InnovationClusters

InnovationIncreased Membership; Increased Income

Facilitates and underwrites meetings

Contribution to Science and Technology in Destination and Broader Community Legacies

Business Events (BE)

DelegatesDelegates

EmployersEmployers Host DestinationHost Destination

Host Organisation

Host Organisation Post Event

CollaborationPost Event

Collaboration

Further spin-off BEs to:•disseminate new information• launch new products to market.

Further spin-off BEs to:•disseminate new information• launch new products to market.

Attendance

Speaking

KnowledgeContacts

Employment Opportunities

Professional Development

Business Development for Destination

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Melbourne Convention and Visitors Bureau’s ‘Holistic Value’ of Business

Events Study

• Two year study tracking 4 business events held in Melbourne

• Full economic evaluation at the end of each event

• Follow up with key stakeholders for each event at 6 monthly intervals

• Document the flow-on benefits

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Where to from here?

•Promote the tourism value of business events as the ‘tip of the iceberg’

•Actively promote the ‘beyond tourism’ benefits of business events

•‘Innovation’ resonates with government

•Seek ways to document the broader value of business events