With energy prices rising the UK Government has stepped in to place price caps on electricity and gas, but how effective are the caps? Cameron Roberts finds out.
Rising energy prices are a key concern for the entire events supply chain, with events often taking place using the finest of margins and typically using large amounts of energy – rising costs could spell doom for many a conference.
The UK Government has stepped in to introduce a price cap under the Energy Bill Relief Scheme, which gives businesses a discount based on a government supported price of 21.1p per kilowatt hour (KWh) for electricity and 7.5p per KWh for gas.
But does this cap go far enough to ensure businesses can still operate at a profit? I spoke to Duncan Reid, CEO and co-founder, Reset Connect and Charles Sargeant, managing director, Whittlebury Park about how the caps work in practice and where cost increases will crop up for organisers.
Legislation in action
On the face of it, capping the price of energy is no bad thing, but the industry is still only in the early stages of how it works in practice. Venues are taking the brunt of the cost increase as it currently stands, so just how high are the price increases expected to be?
Charles Sargeant, managing director, Whittlebury Park, said: “We would be seeing an increase in our electricity bill of 560%, which is enormous. To put that into monetary terms, our annual electricity bill for the park is normally about half a million pounds a year. It’s estimated to go up to about £3.3m without the energy price cap.” The price cap introduced by the government has reduced this to a 50% increase in the price of wholesale energy prices according to Sargeant. Which, he remarks, is obviously preferable to a 560% increase.
“Of course, it’s not that simple,” continued Sargeant, “the business energy cap is different to the consumer energy cap, because the energy cap is on the wholesale price that we pay for electricity. So, when a business gets its energy bill, the wholesale price of the energy is only 29% of your electricity bill. In our case, we’ll probably end up paying a new rate of around 46p per KWh, which is still a 230% increase on what we’re currently paying.”
While the cap is obviously helping on the price front, it’s an inescapable fact that, at least in the foreseeable future, events are going to become more expensive to operate due to increasing costs.
The cost of costs
With costs rising for suppliers, this increase in price is likely to result in a change in pricing, whether suppliers absorb the increase or pass it on to clients en masse remains to be seen.
Duncan Reid, CEO and co-founder, Reset Connect, said: “I think cost increases are definitely going to be passed on to organisers, but it’s not just an energy price problem. It actually has a knock-on effect into everything. Which means organisers are having to choose between cost and quality, which often leads to them having to make decisions based on what they can or can’t afford anymore.”
Should organisers be passed on these costs then, many delegates and organisers will have to curb their expectations when it comes to what amenities can be provided on-site, Reid used the example of refreshment quality as something that is likely to be on the chopping block, due to inflationary costs and energy usage.
He did, however, say events would still take place as we enter Q4, Reid said: “Because the energy prices haven’t gone up that much that actually makes the event unaffordable. It just means that some of the good bits that delegates are used to and look forward to at the event, have got to be cut.”
The solution
I asked the pair if there was a solution, or at least positive steps, that the industry could take to blunt the impact of rising costs on the sector.
Sargeant spoke about how all suppliers are facing the same challenge and that, therefore, organisers would need to be realistic about what could be provided at an event with new cost constraints. He said: “Because of my link with the Meetings Industry Association, I have spoken to other operators and realised that I’m not the only person in this position and that all operators are going to be facing these challenges. “When you look at the market impact, I am concerned about the industry, we’re facing huge inflationary costs and there is price sensitivity in the market, both for leisure and business customers. Therefore, we’ve got to be sensible about what the year and year increases look like.”
Reid, on the other hand, called for dramatic changes in pricing models to make organisers more conscious of what they consume and how much they are paying for it. He spoke against the day delegate rate model, saying it did not encourage organisers to monitor their specific usage, across energy, food waste and other factors. Reid instead advocated for the conference industry to look to exhibitions and expos for pricing models, he said: “If you look at the expo market, when you’re organising an event, you buy the venue, then you buy the electricity separately, then you buy the food separately and so on. Which means you’re conscious of exactly how much electricity or food or any of those additional services that you use.”
Whilst the situation may be bleak, it’s clear that there are steps we as an industry can take to be more aware of what we use, as well as be more transparent in our challenges to allow for more productive working relationships.
