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Financial IssueFinancial IssueFinancial IssueFinancial Issuefor the Operation and management of MICEfor the Operation and management of MICEfor the Operation and management of MICEfor the Operation and management of MICE

Chapter 10Chapter 10Chapter 10Chapter 10

อาจารยปวิธอาจารยปวิธอาจารยปวิธอาจารยปวิธ ตนัสกลุตนัสกลุตนัสกลุตนัสกลุสํานกัวชิาการจดัการสํานกัวชิาการจดัการสํานกัวชิาการจดัการสํานกัวชิาการจดัการ มหาวทิยาลัยวลยัลกัษณมหาวทิยาลัยวลยัลกัษณมหาวทิยาลัยวลยัลกัษณมหาวทิยาลัยวลยัลกัษณEEEE----mail: mail: mail: mail: tpavit@hotmail.comtpavit@hotmail.comtpavit@hotmail.comtpavit@hotmail.comโทรโทรโทรโทร.... 081081081081----082082082082----7273727372737273

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ObjectivesObjectivesObjectivesObjectives1. outline the overall financial implications of conventions and

meetings to the MICE industry2. design, produce, monitor and control a financial budget for a

convention or meeting covering both expenses and potential income

3. outline the concept of yield management and explore its application to convention and meetings

4. identify some of the legal liabilities associated with organising conventions and meetings

5. establish a system of risk management and explore its application to conventions and meetings

6. recognise the importance of ethical behaviour within the convention and meeting industry

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IntroductionsIntroductionsIntroductionsIntroductions• This chapter covers a range of critical elements in convention

management. • The topics introduce students to the nature of budgets and their

importance to the well being of a convention and meeting organisation, whether a venue, a conference organiser or a firm of PCOs.

• However, we have also included some vital factors that impact onthe operational and managerial aspects of conventions. These include the issue of ethical business practices, certainly a topical theme in today's cut-throat economic and commercial environment.

• The other major factor is that of risk management and its potential consequences to convention organisers.

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OutlinesOutlinesOutlinesOutlines1.1.1.1. FinancialFinancialFinancialFinancial PhilosophyPhilosophyPhilosophyPhilosophy andandandand ObjectivesObjectivesObjectivesObjectives2.2.2.2. MICE MICE MICE MICE BudgetBudgetBudgetBudget3.3.3.3. TheTheTheThe NegotiationNegotiationNegotiationNegotiation ProcessProcessProcessProcess4.4.4.4. TheTheTheThe BillingBillingBillingBilling ProcessProcessProcessProcess

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Financial Philosophy Financial Philosophy Financial Philosophy Financial Philosophy and Objectivesand Objectivesand Objectivesand Objectives

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CorporateCorporateCorporateCorporate OrganizationsOrganizationsOrganizationsOrganizations• Generally, Mice Events have been seen as a cost to the business

• The main philosophy of MICE events is focusing on planning,

marketing, sales or production

• The purpose of the event will also determine howhowhowhow thethethethe budgetbudgetbudgetbudget isisisis totototo

bebebebe spentspentspentspent, and which outcomes would be its consequences

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AssociationsAssociationsAssociationsAssociations• Expenses incurred in the provision of convention or meeting do not

exceed the income received.

• Purposes of meeting is for the purpose of continuing education and

networking opportunities for its members.

• Generate sufficient income from the event to support other member

activities throughout the year.

• To maximize, stimulate and increase membership growth, and the

financial goal in this instance might simply be to break even or

even to allow a small deficit.

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MICE BudgetMICE BudgetMICE BudgetMICE Budget

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MICEMICEMICEMICE BBBBudgetudgetudgetudget• This budgeting process involves discussion between the conference

organizer or PCO and the client firm or organization to decide onthe overall budget figure and to identify and establish potentialareas of ““““incomeincomeincomeincome”””” and ““““expenditureexpenditureexpenditureexpenditure””””

• There is also a need to establish an efficient and effective monitoring system to ensure that event revenue is maximized and expenditure is minimized.

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MICEMICEMICEMICE BBBBudgetudgetudgetudget• The The The The taskstaskstaskstasks inininin thisthisthisthis processprocessprocessprocess wouldwouldwouldwould clearlyclearlyclearlyclearly involveinvolveinvolveinvolve::::

1. Identifying sources of income

2. Identifying areas of expenditures

3. Other issues concerning the budget process

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Identifying sources of income Identifying sources of income Identifying sources of income Identifying sources of income and expenditureand expenditureand expenditureand expenditure

Income or revenue for MICE EventsIncome or revenue for MICE EventsIncome or revenue for MICE EventsIncome or revenue for MICE Events1. delegate registration fees2. exhibition fees3. sponsorship4. grants5. merchandising6. advertising

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Identifying sources of income Identifying sources of income Identifying sources of income Identifying sources of income and expenditureand expenditureand expenditureand expenditure

AreasAreasAreasAreas ofofofof expendituresexpendituresexpendituresexpenditures forforforfor MICE MICE MICE MICE EventsEventsEventsEvents• VVVVenueenueenueenue

– Room hire– Exhibition area hire– Dinner venue hire– Additional meeting rooms

• SSSSpeakerpeakerpeakerpeaker//// EnEnEnEntertainmenttertainmenttertainmenttertainment– Speaker fees– Performer fees– Travel costs

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Identifying sources of income Identifying sources of income Identifying sources of income Identifying sources of income and expenditureand expenditureand expenditureand expenditure

AreasAreasAreasAreas ofofofof expendituresexpendituresexpendituresexpenditures forforforfor MICE MICE MICE MICE EventsEventsEventsEvents

• PPPPrintedrintedrintedrinted materialsmaterialsmaterialsmaterials– Stationary – Promotional material– Media releases– Registration forms/brochures– Invitations/ tickets– Programs– Name tags/ badges– Conference proceedings

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Identifying sources of income Identifying sources of income Identifying sources of income Identifying sources of income and expenditureand expenditureand expenditureand expenditure

AreasAreasAreasAreas ofofofof expendituresexpendituresexpendituresexpenditures forforforfor MICE MICE MICE MICE EventsEventsEventsEvents

• FFFFoodoodoodood andandandand beveragebeveragebeveragebeverage– Opening function– Gala dinner– Lunches– Morning / afternoon– Themes events

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Identifying sources of income Identifying sources of income Identifying sources of income Identifying sources of income and expenditureand expenditureand expenditureand expenditure

AreasAreasAreasAreas ofofofof expendituresexpendituresexpendituresexpenditures forforforfor MICE MICE MICE MICE EventsEventsEventsEvents

• SSSStagingtagingtagingtaging costscostscostscosts– Audiovisual equipment– PA system– Lighting– Operator/technical fees– Signage

– Plants/ decorations

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Identifying sources of income Identifying sources of income Identifying sources of income Identifying sources of income and expenditureand expenditureand expenditureand expenditure

AreasAreasAreasAreas ofofofof expendituresexpendituresexpendituresexpenditures forforforfor MICE MICE MICE MICE EventsEventsEventsEvents

• AAAAdministrationdministrationdministrationdministration costscostscostscosts– Registration staff– Office staff– Photocopying– Postage– Fax/ telephone– General stationary– Transport

– Insurance

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MICEMICEMICEMICE BBBBudgetudgetudgetudgetOtherOtherOtherOther issuesissuesissuesissues concerningconcerningconcerningconcerning MICE MICE MICE MICE BudgetBudgetBudgetBudget

1. Especially for those international events, exchange ratesand currency fluctuations need to be taken intoconsideration

2. Delegate registration fees for events held within thehost country should be paid in local currency

3. See more details on attached page about the outlines ofa section of pro-forma budget for a particular event

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A section of a pro-forma budget planner for a convention or meeting

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A section of a pro-forma budget planner for a convention or meeting

20202020

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Monitoring the BudgetMonitoring the BudgetMonitoring the BudgetMonitoring the Budget• The conference organizer is responsible

for ensuring the viability of the budget

and financial plan for a convention or

meeting. In order to make sure that the

final outcome is satisfactory.

• The simplest way of monitoring financial

transaction is to use income and

expenditure statements and cash flow

forecasts.

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Monitoring the BudgetMonitoring the BudgetMonitoring the BudgetMonitoring the BudgetAreas for cost containmentAreas for cost containmentAreas for cost containmentAreas for cost containment• Providing speakers in writing as to what audiovisual equipment able

for presentations• Reviewing the event’s master account produced by the venue,

including a daily check of items charged to the master account and an agreement as to the final delegate numbers for each F&B occasion

• Checking the number of delegates attending the event and, in particular, the numbers of delegates who actually plan to attendparticular activities

• Providing guidelines on the reimbursement of travel expenses

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Negotiation ProcessNegotiation ProcessNegotiation ProcessNegotiation Process

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The Conference OrganizerThe Conference OrganizerThe Conference OrganizerThe Conference Organizer• The successful of a conference organizer’s negotiations

with a venue depends on a number of factors, including the size of the group and the potential revenue that event will generate for the venue.

1. Room rate charges for the meeting rooms2. Exhibition areas3. Parking4. Deposits5. Storage areas

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The VenueThe VenueThe VenueThe Venue1. The purpose of the convention2. Dates3. Capacity of the facilities4. Budget available5. Past problems

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Area for NegotiationArea for NegotiationArea for NegotiationArea for Negotiation1. Room rates and the number and types of

rooms required2. Complimentary and reduced rates for

rooms 3. Meeting space and public space4. Exhibition space5. Food and beverage requirements6. Audiovisual equipment7. Delegate arrival and departure patterns8. The availability of complimentary

transport to and from the airport9. The method of payment

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Calculating Calculating Calculating Calculating BreakBreakBreakBreak----even Pointeven Pointeven Pointeven Point

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Calculating BreakCalculating BreakCalculating BreakCalculating Break----even Pointeven Pointeven Pointeven Point

• Break-even analysis is a tool that assists in the setting of price

• The basic concept is that at some level of sale (revenue) there will be sufficient income to cover the expenses of the convention or meeting.

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Calculating BreakCalculating BreakCalculating BreakCalculating Break----even Pointeven Pointeven Pointeven Point

0000 50505050 100100100100 150150150150 200200200200

Number of DelegatesNumber of DelegatesNumber of DelegatesNumber of Delegates

20000200002000020000

40000400004000040000

60000600006000060000

80000800008000080000

100000100000100000100000

120000120000120000120000

Cost ($)Cost ($)Cost ($)Cost ($)

Number of DelegatesNumber of DelegatesNumber of DelegatesNumber of Delegates

Fixed CostsFixed CostsFixed CostsFixed Costs

Income

Income

Income

Income

Variable costs

Variable costs

Variable costs

Variable costs

BreakBreakBreakBreak----even pointeven pointeven pointeven point

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The Billing ProcessThe Billing ProcessThe Billing ProcessThe Billing Process

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Billing Process1. The setting up of the master account for the event and

how it is to be itemized

2. Charges for the various types of rooms (accommodation,meeting, etc.)

3. Food and Beverage

4. The handling of delegate personal charges

5. The charges for special events e.g. tours, transport, etc.

6. AV and other electrical arrangements

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Billing Process7. Security, housekeeping and other labour provided by

the venue8. Deposit policy9. Guest credit facilities, e.g. clarification of the accepted

credit cards, personal cheques, etc.10. The numbers of staff from the event organizer or PCO

who are authorized to sign accounts prior to andduring the event

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How to handle with the paymentsHow to handle with the paymentsHow to handle with the paymentsHow to handle with the payments• Clearly identify areas of

master account would coverand personal expenditures ofdelegates

• Setting up the paymentrequirements; e.g. deposits,schedule of payment, etc.

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Question and AnswerQuestion and AnswerQuestion and AnswerQuestion and Answer