How to Manage Outsize Hospitality Budget Inflation

Inflation chart

If it feels like everything is more expensive now, you are right. A team of event experts from Leo Events—Principal Kent Underwood, Principal Kevin Brewer and Senior Vice President Amy Manzanares (a Smart Women in Meetings winner)—led a lively discussion at Smart Meetings 3-Day Experience in Nashville about the ups and downs of prices of everything from cooking oil to copper. Although inflation has taken a toll on event budgets, some precautionary moves can help side-step the worst impacts by being prepared. The biggest takeaway: act quickly because the tight turnarounds for RFPs are not doing anyone any favors.

Inflationary Realities

Underwood shared that, overall, hotel rates are up 38% since before the pandemic and properties are less likely to negotiate day rates or minimums than pre-Covid as they are under pressure from increased labor and operating costs.

A 46% increase in construction materials is hitting booth, AV and stage set-up costs hard. Steak and chicken prices are up more than 50% and scallops are up 119%. A lot of properties are simply taking some high-priced items off the menu to avoid pushback. On the positive side, wine and liquor prices have not increased above normal unless imported, so ask if a property is adding a surcharge.

How an app could help manage rising transportation costs. 

“We are finally seeing some right-sizing in supply and demand, but prices won’t all come back down when the pressure is off,” he predicted.

Scarcity Eats Cost for Breakfast

Brewer pointed to several factors in the lack of service at hotels, including a visa backlog that is creating a bottleneck for foreign workers who usually staff resort areas, mass retirements and competing industries. “I worry about the loss of mid-level employees and their institutional knowledge,” he said. “Who will teach what service means?” he asked.

The tight event production market is manifesting in last-minute no-shows for work and impacting load-in and out. “If we want 75 people to work, we are calling 100-150 people because we are seeing a 40% drop off,” he said. In union venues, he is negotiating contract clauses that say if the venue can’t get enough people when they are needed, Leo can bring in their own.

“Fast, cheap, and good is gone. You have to pick two.”

The other way a tight labor market impacts meetings is in transportation. The lack of everything from airline pilots to Uber and coach drivers are challenging last-mile logistics. A lot of bus and limo drivers moved to more lucrative trucking jobs over the last two years. Taxis are few and far between because the emergence of ride-share sent them to other lines of work. And when you can find a car, it may not be the clean, service-oriented ride you remember from 2019.

Transportation is a big problem. Uber availability and quality alone are depressed. Taxi availability is already depressed which affects arrivals and departures. Private transportation companies lost many employees who went to more lucrative trucking and aren’t coming back to motor coaches. “Scarcity is a greater threat to success than cost,” Brewer said. “Fast, cheap, and good is gone. You have to pick two.” The sooner you can make decisions, the more likely it is that you will get what you need.

“We have to be willing to say the quiet part out loud because indecision has consequences.”

Lean on Your Network

Manzanares agreed that now is the time to have hard conversations about budgets and deadlines. Vaccine requirements are easing all over the country and that is leading to higher attendance and higher costs. However, contagion is still happening, so meeting professionals must have backup plans.

“We have to be willing to say the quiet part out loud because indecision has consequences.”

“Put in contingencies to account for uncertain travel and costs,” she advised. That includes accounting for or negotiating additional administrative fees of 30% or more showing up at many properties.

Tips for post-pandemic contract clauses. 

This is the time to be an authority, rather than an order-taker, Manzanares said. “We have to be willing to say the quiet part out loud because indecision has consequences.”

 

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