On
the QT...ROI requests on Meeting RFP's make me LOL
Overdoing
ROI in the Meeting Industry
By
Jeffrey Hansler, CSP
I’ve
used the phrase… .On the QT a fair amount and never
really thought about what it might mean other than to not
talk about something. In fact, the first record of it’s
use was in 1870 and it became popularized in 1891 with
it’s inclusion in a minstrel show number called
‘Ta-ra-ra-boom-de-ay’ and it does mean to be quiet
(shorthand made of the first and last letters of the word).
A
lot of us use words or phrases that we’re not sure of the
exact meaning, although we have a vague idea of what it
might mean. ROI (Return-on-Investment) has become such a
word in the meeting and travel world. Lots of people are
asking for ROI to be calculated as part of proposal
responses and the decision-making process.
Its
proliferation is being supported by purchasing agents and
CFO’s that are becoming increasingly involved in meeting
and travel related decisions and by the completely
uniformed.
ROI
is something purchasing agents and CFO’s understand –
it’s a quantitative measurement used to help reduce risk
in business decision-making. It has no place in evaluating
qualitative issues associated with meetings and travel. So
my only thought is that it is being used in these situations
by people who understand it as a club to wield on the
uniformed. After all, finance and financial terms can
terrify the non-financial. Unfortunately, the term is now
being applied to decision-making situations by many
uniformed as a mask to appear informed.
Here’s
the problem with ROI. Return on investment is a
quantitative measurement and it is being applied as a
measure in qualitative situations. ROI can be calculated
quantitatively in several forms:
ROI
= NPV of Savings/ Initial Investment x 100 or
ROI
(%) = Income/Expense x 100 or
ROI
(%) = Net Program Benefits / Net Program Costs x 100
or
Simple
ROI = (Gains - Investment Costs) / Investment Costs
There
are several problems in applying these quantitative
measurements to meetings.
In
the mid 90’s, hotels began to downsize the number of B.T.
(Business Travel or volume accounts) rooms per night because
hotels were increasing the group ceilings. In some cases,
hotels even eliminated the B.T. Sales Managers. The
justification for this decision was ROI. Hotels had
determined through quantitative measures that Groups were a
better return. Hotels are now reversing this trend and going
back to soliciting B.T. business and lowering the Group room
ceilings. Again, the justification is ROI.
The
problem is ROI is and internal focused measure at best. What
the accountants didn’t include in their calculations was
the insurgence of extended stay hotels and all-suite
properties to address this trend. Nor did it include changes
in travel and overnight spending trends due to technology,
security, and business pace changes. There are as many
qualitative (and trend statistical) arguments for keeping
Group ceilings high right now as there are for shifting the
focus to B.T.
The
pendulum has swung so far to an immediate ROI focus there
have been occasions where hotels have walked a block of
group rooms to free up space for higher rated B.T. In the
long run, the cost to achieve an immediate higher ROI may
prove to be very costly by any measure.
The
biggest problems with ROI include determining the gains and
expenses that are to be measured?
If
Groups suddenly determined that ROI was going to be the
deciding factor on holding or not holding a meeting and held
the meeting manager responsible for that ROI, the hotel and
travel industry would be in for a very bad year. A meeting
does not generate gains in terms of income for the company
directly. It does generate an immediate expense. Secondly,
even if there were immediate gains that could be attributed
to a meeting, the meeting department has no authority for
those gains. It is bad business to apply responsibility for
a consequence without providing the authority over that
consequence. I would hope the meeting manager is not
responsible for generating the revenue for a company.
As
for evaluating a decision based on the investment cost in
calculating Return on Investment (ROI) for a meeting, the
best ROI for a meeting would be achieved when no meeting is
held!
The
ridiculousness of this last concept is apparent. Meetings
are not about costs: They’re about people and despite the
proliferation of virtual meetings, real-life meetings and
events are important to the productivity of people in
accomplishing their objectives.
A
better measure of decision making in business regarding a
meeting and the associated costs would be Resources +
Activity = Results.
Applying
this type of equation to decision making allows for
qualitative elements to be considered like a camaraderie,
recharging batteries, receiving education, and sharing ideas
with others. The question becomes ‘What is the environment
that will facilitate the results that we want for those
attending? Will it be Five Star or No Star or something in
between?’ Impact is a qualitative element, not
quantitative.
Sure,
evaluating a decision qualitatively openly acknowledges that
there is no formula for success, but that is the truth about
business. ROI is about risk reduction and business growth
and innovation is about risk taking.
ROI
has a place in business decision-making, just not when
applied to the Meeting department or any other individual
department.
When
asked what the ROI is, a reply might be, "I thought
that the idea was to increase the ROI across the company,
not for every function or department or activity. I
believe this will contribute to overall ROI!"
BTW (By the Way) LOL means Laughing Out Loud
and my 17 year old son tells me that QT is outdated and now
they use DL for Down-Low. SWAK
© 2005 Jeffrey Hansler All rights
reserved
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Jeffrey
Hansler is a professional speaker, author, and consultant.
He is a frequent speaker at association events, creating change with communication
and is the
author of Sell Little Red Hen! Sell! He can be reached at jhansler@oxfordco.com.
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