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MP74008

MAPS CORPORATE HOSPITALITY JULY 1998

Overview

Table of Contents

Executive Summary

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EXECUTIVE SUMMARY

Corporate hospitality originated in the UK in its current form in the 1970s. Only recently has it begun to be taken seriously as a marketing tool. It is a means of developing business relationships by improving customer loyalty, increasing direct sales, and raising staff morale. Britain has a very sophisticated corporate hospitality market largely due to the traditional summer social season which revolves around sporting and cultural events such as the Henley Royal Regatta and the Chelsea Flower Show.

The image of corporate hospitality has changed since the boom of the mid-eighties when ostentatious gestures were commonplace. In the 1990s, particularly since the recession, more consideration is given to creating the right image. Companies still spend large amounts on the best corporate hospitality packages, but do not like to be seen to be spending money, and therefore take a more subtle approach.

The benefits of corporate hospitality are that it is precise, involves no wastage, provides an ideal selling atmosphere, and is a memorable way of developing relationships with customers, employees, and their families. It can also be used as a means of communicating important information to customers and employees.

Corporate hospitality is often regarded as more effective than many other forms of marketing. This is particularly true in business to business markets, but less so in selling fast moving consumer goods (fmcg). It is considered to be more effective than exhibitions in targeting particular customers and more efficient than direct mail and advertising in the mass media.

The corporate hospitality market is becoming increasingly sophisticated: bespoke activities are in demand as a result of a need for originality. Companies wish to distinguish themselves by creating unique events. In addition, companies are demanding these events in a shorter space of time from event organisers and corporate hospitality agents, putting increasing pressure on these companies to perform. Moreover, many event organisers and corporate hospitality agents are organising events all over the world, as links with travel companies develop and major sporting events are given worldwide media coverage.

There is a danger that corporate hospitality can be misconstrued as bribery or corruption, particularly if public figures are involved. The laws concerning bribery are at best ambiguous, and it is easy to see why companies sometimes unwittingly overstep the mark.

Corporate hospitality is often closely linked with sponsorship, as one of the main reasons for sponsorship is to facilitate corporate entertaining. However, sponsorship is moving away from this purpose and sponsors concentrate more on generating goodwill to a wide or community audience. Corporate hospitality opportunities arise from sponsorships and vice versa: a company considering corporate hospitality may decide to become a sponsor to add value to an event. Corporate hospitality can be used by sports and arts organisations as an alternative source of revenue, giving such organisations greater freedom in their business practice than they would have under the influence of a sponsor.

The corporate hospitality market is currently worth an estimated £600m in the UK. This is divided into three main sectors: sports hospitality events, accounting for 25 percent of the market; arts hospitality events, accounting for 5 percent of the market; and participant hospitality activities accounting for the remaining 70 percent of the market.

The most popular corporate hospitality events amongst consumers are rugby union, football, golf, arts and horseracing. Cricket, tennis, rowing, sailing and rugby league are also popular. Research has shown that the top five venues are Twickenham, Wimbledon, Ascot, St. Andrew’s, and Lord’s. Their popularity is largely governed by major events in the sporting calendar such as the Wimbledon Lawn Tennis Championships.

One of the issues for corporate hosts is the seeming lack of research which is carried out into the impact of events on the guests. Research has shown that two-thirds of host companies do not carry out research to measure effectiveness. However, it is easy to measure effectiveness in terms of increased sales to customers who have attended corporate hospitality events.

The popularity of certain sporting events has led to the sale of unofficial black market tickets. In response to this, event organisers often appoint official corporate hospitality providers. Corporate hosts can find themselves with inadequate packages if they buy from unofficial providers.

Arts hospitality is estimated to be worth £30m in 1998, 5 percent of the total corporate hospitality market. Major events in the arts and cultural calendar are the Henley Festival of Music and the Arts, the Chelsea Flower Show, various jazz festivals and classical music concerts, and trips to the theatre in the West End of London.

Sports hospitality is estimated to be worth £150m in 1998, 25 percent of the total corporate hospitality market. Sports hospitality centres around the summer sports season with events such as tennis at Wimbledon and the Henley Royal Regatta. However, other traditionally British sports such as football, rugby, horseracing, and cricket all cater for corporate hospitality. Clubs and venues have realised the monetary value of corporate hospitality and have developed extensive corporate hospitality facilities.

The participant hospitality activities sector is estimated to be worth £420m in 1998, 70 percent of the total corporate hospitality market. The main issue in this market is the transient nature of consumer tastes and fashions. Very few events retain their popularity for a long period of time as corporate hosts are constantly seeking new and original ideas to encourage their guests to attend. Currently popular activities include driving days where guest have the opportunity to drive all manner of vehicles; multi-activity family days; and challenging team building activities which usually require a combination of physical and mental ability.

There are a number of suppliers to the corporate hospitality industry including activity and event organisers, corporate hospitality agents and brokers, caterers, equipment hire firms, and venues. Some companies have dedicated in-house corporate hospitality departments, although these departments may still have to use the services of corporate hospitality agents who are appointed as official providers of corporate hospitality for major sporting events. Some corporate hospitality agents are also tour operators which allows them to organise overseas packages including flights and hotels. Corporate hospitality venues can be anything from hotels or historic buildings to major sporting venues. Many of these sporting venues are developing corporate meeting and conference facilities in order to generate revenue outside the sporting season. In addition, large stadia are being used to programme corporate hospitality activities.

The UK corporate hospitality industry is forecast to rise by 66 percent to reach £998m by the year 2003. One of the major influences on the industry will be the millennium, in which the corporate hospitality industry, like many other industries, is likely to experience a boom year. In addition, the increasing globalisation of sporting events will further trends in corporate hospitality for international travel, and spending will increase in line with sponsorship at such events. Predicted economic downturn poses a threat to corporate hospitality as the industry is sensitive to fluctuations in the economy.

Text © 1997 MAPS

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