Bringing business travel to regions

Sergey Vladimirov, 22.11.2013 13:32
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According to the WTTC estimate, Russian business travel market is bound to grow from $6.5bn to $18.4bn by 2020, with the year-over-year growth of 6%. Global market is to spike from $820bn in 2010 to $1600bn in 2020 with the growth rate of 4.3% a year. However, on an ICCA (International Congress and Convention Association) Central European chapter meeting that took place in St. Petersburg experts deemed many Russian cities to have large potential in the MICE sector. Yet due to a number of reasons this large potential is largely wasted, and TRN magazine is here to discover why…

A notable example would be the city of St. Petersburg, which went up 19 positions in the global rating of international convention-hosts for 2012, but is still only the 60th worldwide. Last year the city hosted as few as 38 conventions recognizable by the international statistics, while cities like Vienna or Paris host up to 200 a year.
 
According to experts, one of the main factors hampering business travel development in the country is the lack of convention bureaus (CBs), of which in Russia there is hardly a dozen. And the problem that, in its turn, hinders CBs from being established is the lack of firm support from tourist destinations, for the very sake of which CBs are created in the first place.
 
Role models
 
So what is a convention bureau? As a rule, it is a marketing agency tasked with promoting a destination (a city, a region or a country): its existence is conditioned by the presence of a proper business and tourism infrastructure and the desire to use it to a full extent. It is virtually an instrument that aids a destination in fostering business travel.
 
The first CB was created in Detroit as far back as 1895, and it promptly turned the city into a major business center. A modern example would be the Stockholm convention bureau, which in a few years after its inception increased the number of international conventions held in Sweden and compliant with ICCA criteria by 30%. 20% of net tourism income in Stockholm is made up of profits drawn from organizing conventions, since delegates spend, on average, $346 a day (as opposed to a leisure tourist, who spends $100-200).
 
The need for CBs is not dictated by the economy alone. Large conventions held by international organizations are the most profitable, and the hosting place is chosen through tenders.
 
However, participation is restricted to the CBs of the cities or regions that prepare exhaustive tender documentation: the order is passed to a professional convention organizer only after the location was decided upon. It comes as no surprise then that in Europe CBs are common not only for capitals, but for relatively small towns as well. Case in point – the budget of Vienna’s municipal CB is €16m, while the CB of a small Czech town Olomouc has €170k at its disposal. 
 
European CBs are normally organized in the form of nonprofit partnerships aided and supervised by the municipal authorities. They usually comprise from 20 to 100 members. The main financial backer is either the city or the region – their contributions account for 50-80% of a CB’s budget. The rest is comprised by the yearly CB member donations that can be proportional to business operations or to the participants’ field of work. 

Off the well-trodden path
 
In Russia these institutions take on various forms, but the results of their work are more or less the same.
 
The first Russian CB was created in Sochi back in 2002, and a similar project has been functioning in Yekaterinburg since 2007, initiated and supervised by the External Relations Committee of the city administration. At the moment Yekaterinburg’s CB, operating as a nonprofit partnership, includes 21 companies, ranging from event organizers (PCO, DMC) to venues and travel companies. In St. Petersburg a CB was set up in 2008 as part of the city’s tourist information bureau and has been functioning ever since as a public budget institution. Yaroslavl convention bureau and Sochi convention visitors bureau (CVB), as well as the Ural one, are nonprofit partnerships that incorporate a few dozen entities interested in developing MICE tourism.
 
A convention & exhibition bureau (CEB) in Moscow was established by the local government in the form of an autonomous nonprofit organization as recently as August, 2013.
 
At the same time, the higher collegiate management body of the bureau, the Supervisory Board, comprises the officials from the government body that had established the organization,” Moscow convention & exhibition bureau CEO Ksenia Boikova told TRN. “And as for the Board of Trustees, it is comprised of experts in the convention & exhibition field.”
 
The roots of the problem
 
"The existing Russian legislation prohibits the city government from establishing a CB if its legal form is a nonprofit partnership. As for the business community, more often than not they will not fund this kind of organizations given the lack of state guarantees,” says Olga Zaikova, the CEO of the tourism and convention department of the International assembly of capitals and cities (IAC).
 
As a result, many Russian cities are unsuccessfully striving to find a form of organization that would suit both cities and businesses. For instance, ‘Development strategy for exhibition, fair and convention organization in Moscow for 2013-2015’ reads: “establishing a convention bureau as an executive body is prohibited inasmuch as legislation does not cover state control or management over entrepreneurs in this economic field; at the same time, a state institution cannot efficiently manage the activity of all the organizations”.
 
“The best scenario is to have a regional government partner up with a CB and sponsor it,” asserts Natalia Frolova, the CEO of the Yaroslavl CB. “Judging by the experience of our foreign colleagues, the ratio can be 80 to 20% or 70 to 30% (the former being the government and the latter – the business). Thus a convention bureau gets a lot more leeway to realize its objectives and goals". 
 
Olga Zaikova agrees: “The most efficient CBs are those that are established by the city government in the form of a public-private partnership with the aid of the Chamber of Commerce and Industry and the business community,” she says. “The convention bureaus of Vienna, Paris or Barcelona are all good examples of that, while other forms of organization are less efficient".
 
However, due to legislative hurdles three out of five active CBs in the country are nonprofit partnerships, with a public convention department fulfilling CB’s “duties” in St. Petersburg and an autonomous nonprofit organization – in Moscow.
 
As for new attempts at developing business travel and starting CBs, it is tourist information bureau that usually ends up fulfilling a portion of the CB’s functions. Such was the situation with a recently-established visitors-center “Smolensky terem”.  Low financing ensues: St. Petersburg provides only government money, and otherwise CBs exist off the funds of the founders and nonprofit partnership member donations. As a result, even given the government’s support Russian CBs are very poorly financed, especially when set against their foreign counterparts. For example, London’s CB receives a yearly government grant of £1m, which is beyond Russian CBs’ wildest dreams.       
 
But there is another point of view. The manager of Sochi convention visitors bureau, Sergei Shuklin, considers it possible for a tourist committee, or administrative board, or for any similar institution, like a large travel agency, to take up the functions of CBs.
 
“What is important is that this institution should cater to the interests of all parties,” he says. “Currently the rules of the game are unclear, and that is where the problem lies. Often someone’s private interests ‘surface’ from under the guise of attractive brands and mergers, and this is not a place for bias or lobbying.”
 
His opinion echoes that of Svetlana Garipova, the chairwoman of the Convention Bureau Council in Yekaterinburg. “The concept of a convention bureau is relatively new for the Russian business community, which is why it will take significant organizational efforts to familiarize our people with it,” she believes. “It is no secret that any association attempting to incorporate market players is going to face the conflict of interest.”
 
This view is shared in Yaroslavl. “Some CB partners who are in the same business-niche (say, hotels of the same class) see potential competitors in each other, which is why they are reluctant to partner up,” says Natalia Frolova. “As for those who are already a part of a CB, they are often not pleased with potential newcomers.”
 
Finally, Olga Zaikova complements her colleagues’ statements, saying that “one of the hurdles in creating CBs in Russia is the lack of experience and clear understanding of the proper way to promote convention and tourism resources of a city.”
 
Incidentally, when the Yaroslavl CB was being registered in the Ministry of Justice, it turned out that the very concept of ‘business travel’ was missing from the dedicated Russian law… 
 
Everybody wins
 
But does Russia even need these bureaus? What is to be gained by clients?
 
“The customer is better off working with a CB: what we are is ‘one window’, where all the objective information on a city’s capabilities can be obtained,” explains Natalia Frolova. “Potential clients like big corporations and associations prefer to consult partnerships which are supported by their experience and by the government.”
 
The same can be heard in Moscow. “Our immediate task is to create a ‘single window’ for event organizers, through which potential clients will be able to get all the relevant information on Moscow’s convention and exhibition capabilities and, as a result, hire only the most qualified contractors and organize an interesting entertainment program,” says Ksenia Boikova, the CEO of the Moscow CVB.
 
All the while a CVB acts as an impartial and objective consultant that does not depend on the commercial interest of any kind and provides services to event organizers free of charge, since the main goal of a CVB is promoting the capital in its capacity of a MICE destination and attracting large international events.
 
Sergei Shuklin is sure: “If we are talking about international MICE market, CBs are simply indispensable.”
 
“A good CB marketing policy bolstered by the legal, informational, organizational and financial partner support enables cities to take the leading positions in the field of the MICE industry,” adds Olga Zaikova. “In the long run it is going to create new job opportunities, end social woes and benefit overall city social and economic development by increasing income. What is needed for current and future Russian CBs to become successful is a concerted effort on the part of the government and businesses, as well as good understanding of goals and objectives of developing the tourism industry and promoting your destination,” asserts Svetlana Garipova.    
 
At the same time experts emphasize the need for a well-thought-out strategy and for demonstrating the extent to which CBs will benefit both the city (region) and the business community.
 
According to an International Congress and Convention Association (ICCA) statistic for 2012, Vienna is in the lead as regards the number of conventions hosted (195), Paris is second (181), then comes Berlin (172), Madrid is fourth (164) and Barcelona is fifth (154 conventions).
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