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Is carbon a black mark on business events?

Published: 12-Jun-2014 MCI’s managing director Ray Shaw believes the Federal Government’s new carbon tax will increase the cost of holding business events in Australia.

Ray is seeking feedback for his comments which can be made via email – ray@im.com.au.

Alternatively, why not read what he has to say by making a comment of your own in the micespace forum section of our website. 

“I am going to start with the conclusion and hopefully start you thinking. This is one of the first articles specifically relating to business events and I hope it creates debate and comment… email me ray@im.com.au.
 
The carbon tax will, from July 2012, increase the cost of holding business events in Australia – be they conferences, incentives, special events, training, awards, whatever.
 
Why? Almost all business events inputs will increase in cost due to flow on effects of the tax and there will be no compensation package to offset them.
 
The only relevant questions are by how much and what it will mean to the industry?
 
So what about the carbon tax and business events (part of the tourism industry)?
 
Bond University Adjunct Professor Damien Lockie said the tourism sector was “the industry set to pay the highest price for the new tax”.


The Tourism and Transport Forum states that taxes and charges on tourism is the 4th largest impediment to business events growth (behind exchange rates, weather/disasters and rooms/infrastructure).

80% of tourism executives interviewed believe a carbon tax will negatively impact on business, business events and in particular our international competitiveness.


Fact:  Australia is already one of the highest cost business event destinations in the world. It will soon have even higher costs perhaps leading to more people flying off shore (international airfares are exempt carbon tax – domestic are not) or worse still less people coming here for international meetings. At a recent Business Events Australia Industry Advisory Panel the remark was made that “Only Australians can afford to meet in Australia any more”.
Business events are recovering from the GFC but indications are they are teetering on the edge of a slippery slope – again! Our strong Aussie dollar has made it less attractive for international delegates (great export earners) to come. Where once they would put up with the long haul they are beginning to opt for destinations closer to home - usually the very much cheaper booming Asian MICE destinations where you can run a business event for perhaps up to 66% less cost than Australia (make that 66% plus X% after the carbon tax).

We have a two speed economy – the resources side is booming (although that may slow and/or die if resource exporters become uncompetitive with other countries sans the carbon tax). The remainder of the economy (retail, tourism, housing, food/beverage, transport) appears to be either in stasis or in need of a damned good defibrillator.
Tourism is on its knees driven down by natural disaster, reduced consumer spending and better value off shore.
Business events are being impacted by the constant blows to business confidence and viability. Yes they are traditionally more resilient than tourism so lets not panic yet.
 
Let’s analyse some of the business events inputs (figures reasonably sourced from the internet so I won’t take responsibility for their accuracy).
 
Domestic airfares
will rise allegedly by $3.50 per sector – that’s say $14 for a return Brisbane/Melbourne ticket.
International airfares won’t increase so we are offering more incentive to take that business event off shore.

Accommodation: Damien Lockie said “major players… would have to hike up room rates…” Err – hike does not sound good and rumours are that it will also be the catalyst for catch up to recover forgone increases and to recover flow on effects on wages, rates, taxes, rubbish and more.

Taxis: Petrol is exempt for private users and “tradies” – otherwise it is predicted that it will increase by about 6 cents a litre (4-5%).

Transport: We will see increases in cost of train and coach tickets. Heavy transport will be impacted - Australia Post courier/freight prices went up on 11 July by up to 10%.

Convention venues: A mid sized venue operator said it was a catalyst for “catch up” increases they have had to absorb since the GFC so expect “well above CPI”. A dedicated centre operator felt the increases would be in the order of 1-2% above CPI.
Australian made Food and Beverage will increase due to higher grower costs, processing, transport, distribution, refrigeration, fertilizer, machinery and wages costs. The Food and Grocery Council predicted a worst case scenario of 3-5% increase in Australian produced food costs and a Sydney restaurateur stated that this and other carbon tax related costs would force plate prices up by around 10%. Ironically imports won’t be as affected (if the dollar remains high).

Rubbish removal: These are big polluters so expect to see significant increases for conferences and exhibitions which can be large producers of same.

Printing and promotional items: The industry supplies brochures, handbooks and promotional items. It is a heavy user of power and the tax will mean much higher manufacturing costs via rising energy costs, raw material costs (paper is a major carbon producer), freight, wages and transport. Modelling released by AAP shows that the price of books, newspapers and magazines will rise by 0.3%. It may drive printing and promotional materials to Asia and impact Australian printing business that have done it tough for a while.
Internet costs: Several information and telecommunications companies are heavy polluters. The carbon tax will increase the cost of running data centres. It may force Australian data centres off shore where cloud storage will be much cheaper.

Entertainment/AV/Staging: Equipment, especially lighting uses lots of electricity and entertainers use transport for equipment. Costs up.

Rates/Services: Many local governments are predicting a 2% increase in rates and services over CPI which will push venue costs up.

Energy costs: Energy costs will be the main driver for price increases that affect us all.  “Koshie” predicts small business will pay up to 10% more for electricity and that the average household will see approximately a $10 per week increase due to the tax (and some will be compensated) so where does that leave major infrastructure like hotels, convention centres, tourist attractions and sporting venues which won’t be compensated?

Business confidence, share market and money prices. Australian business confidence is low. We need to factor in that it is harder to get sponsors and exhibitors, it is harder to convince corporates to spend on events, it is likely that delegate numbers will drop due to funding issues in academia, medicine (hospitals) and science. In all it is about confidence and restoring that the heady days pre GFC. We also need to factor in the current decimation of the local share market wiping billions of dollars off our companies. We need to factor in the increased costs and the inflationary impact if our dollar goes south and much more.
 
Conclusion:

There will be a raft of small increases on almost all business events inputs. Each of these impacts will add up here and there. What will the cumulative impact be and can it be passed on to business event consumers?  The tax starts in July 2012 and I suspect it will be a year or two before we see the real impact. As a guestimate (and I am happy to be corrected) it seems that typical conference budget will see combined business input rises of around 3% or $30 per person (based on a typical $1,000 registration fee) on top of any CPI increases in that period. This is on top of whatever personal cost increases that a delegate/guest experiences.
 
It does not sound much but if the worst case scenario occurs – that it acts as a catalyst to catch up for all the other rises the industry has absorbed as a result of the GFC then we could easily see that figure double or treble that. And yes it will need to be passed on to the client who won’t be compensated in any way.”
 
Ray Shaw

Copied from the Mice net e news of 15 July 2011.

Thank you Ray.

Thank you Micenet.

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