Fuel costs affect meetings
Unrest in the Middle East is sending oil prices to their highest levels in almost three years. While soaring fuel prices are discouraging to everyone, they’re especially troublesome for meeting and event planners.
The continual ascent in the price of oil affects many different aspects of meetings and events—most obviously, the cost of getting there and back. Whether by land or air, this cost is on the rise. For example, consider an association that rents five vans to bring 50 people to a conference 500 miles away. An increase in the cost of gas from $2.50 to $3.50 a gallon costs the association an extra $417 in gasoline (assuming the vans get 12 miles per gallon).
Airlines have already increased domestic ticket prices six times since the beginning of the year, notes Rick Seaney, CEO of farecompare.com. That’s bumped roundtrip prices on shorter routes by $48 and longer routes by $60. With fuel accounting for 35 percent of the cost of a ticket, analysts say prices will continue to rise as long as Middle East turmoil keeps pushing up oil prices. One analyst said that airlines would have to raise revenue nearly 10 percent just to break even with oil at $100 per barrel.
For now, airlines are focusing increases on higher-priced tickets purchased mostly by business travelers. However, even low-cost carriers are passing some of the pricing burden on to customers. Southwest Airlines has raised ticket prices four times this year, including a $10 roundtrip increase on Feb. 18.
“I can’t think of any way that higher airline ticket prices are not a net negative for the meeting and event industry,” says Seaney. “This is especially true given that business travel prices have gone up three times more than leisure prices since the beginning of the year.”
Robert Hard, publisher and editor of businesstraveldestinations.com, says current airfare increases are causing issues for organizations with strict and limited budgets. “Price increases beyond those that organizations projected for 2011 may result in a slowing of business travel, since organizations tend to project their travel and entertainment budgets for the year,” says Hard. “Even if their budgets aren’t decreased, they aren’t likely to be stretched enough to cover all planned activities, and attendance at meetings and events is likely to decline.”
Gasoline and airfares aren’t the only meeting and event costs impacted by rising oil prices. Trade show consultant Candy Adams, CTSM, trade show consulting expert, says the energy surcharge from her specialized exhibit transportation carrier has risen to 26 percent, which is on top of the 5 percent TSA security surcharge.
“Shipping trade show exhibits can get very expensive when there’s a nearly one-third surcharge on top of the base cost of transportation,” says Adams. “And it gets pricier every time the Department of Energy declares an increase.”
Once in the destination, land transportation is yet another aspect planners need to consider, says Jacquie Brave, a partner with Accenting Chicago Events and Tours. “Chicago taxis have added a $1 fuel surcharge, and chartered sedans and limos also add a fuel surcharge,” says Brave. “In addition, tour buses, motorcoaches and minicoaches, SUVs and vans in Chicago charge a minimum 3 percent fuel surcharge for time and travel. This cost has to be passed on to clients and has measurably added to the cost of a tour.”