Bottom Line BluesJuly 6, 2023

How Inflation Is Affecting Association Planners By
July 6, 2023

Bottom Line Blues

How Inflation Is Affecting Association Planners
One of the largest chunks of the budget for association meetings is its food and beverage costs, which are still elevated.

One of the largest chunks of the budget for association meetings is its food and beverage costs, which are still elevated.

While data shows the inflation rate in the U.S. eased recently – the rate in May was its lowest annual rate in more than two years — high prices for food, flights and hotels among other goods and services still pose a challenge to association meeting planners.

According to NerdWallet’s Travel Price Index, the overall cost of travel in May 2023 was up 16% compared with May 2019 though down 2% versus the same month in 2022. NerdWallet’s Travel Price Index combines data from individual travel categories tracked by the Bureau of Labor Statistics’ Consumer Price Index data, such as airfares, lodging, meals and rental cars.

With the higher costs affecting everything from venue rentals to catering, there has been more pressure on association budgets, leading to higher costs for organizing meetings and events.

“We’re not any different than any other industry, and when a price goes up on one aspect, then you just have to take stock and maybe minimize something on another side of your equation,” says Becky Hopkins, director of meetings & education for the Distribution Contractors Association (DCA). DCA engages in a broad spectrum of meetings, including an annual convention for about 500 to 600 attendees. In the first quarter of the year, DCA also hosts a summer meeting that often draws families with attendance about 250. In addition, Hopkins helps organize DCA’s board meetings and other industry events.

“We do have to think about costs, and then it rolls to our members,” Hopkins says. There is a limit to how much the association can charge for registration fees, according to Hopkins. “It’s not as elastic as some things; we know what our parameters are on what the customer base is looking to pay for registration. If segments such as food and beverage bite into the program budget, then I have to figure out other ways to make that up or increase registration, but there’s sensitivity to that.” She adds that their numbers are getting back to where they were in February 2020. “We’re getting close. Yes, we’re seeing that our registrations are coming back. But, every company is taking a hard look at registration fees and at flights.”

Mary Cason, director of special events, Iowa Automobile Dealers Association, is also adjusting to the higher costs of hosting meetings. “It’s not a planners’ market so much because people are meeting now. The need to book earlier is more apparent because I think people are anxious to get things finalized and contracted, but short notice is a little bit more difficult now and hotels are not as lenient as during Covid,” Cason says. “I think the hotels were great to work with and they had so many cancellation clauses to help alleviate everyone’s reluctancy to meet. Well, now I think that the hotels are trying to recoup some of their losses and people are wanting to meet, so those costs have shot up as well.”

One strategy Cason’s association has taken is to reduce the number of meetings they are having. Where they used to meet in about a dozen cities around the state, this year that number has dropped to five. “We’re forcing our members to travel a little bit more, but it just doesn’t make sense for us with those increased costs on hotel fees to meet in those other seven cities.”

F&B Costs

One of the largest chunks of the budget for association meetings is its food and beverage costs, which are still elevated. Food prices rose 6.7% between May 2022 and May 2023, according to the most recent consumer price index (CPI) report from the Bureau of Labor Statistics. By comparison, at the same time, in 2022, prices rose 10.1% over a one-year period. Attendees are still paying more (8.3%) for food when dining at restaurants than they did a year ago.

“There are a lot of things other than the cost of the steak dinner that affects a meeting planner’s food and beverage budget,” Hopkins says. “There are many other charges that are not talked about. At the end of the day, after the contract is signed, there are a lot of things that are affecting the overall food and beverage costs.”

Hopkins notes specifically an acceleration in service charges. “That disturbs me a lot because that percentage is tacked onto an already increased cost of a steak dinner,” she says. “And the service charges, which, not too many years ago, were hovering somewhere around 22% to 24%, are now hovering at 25% to 26%. I saw 28% recently, and the hotel is keeping a portion of that money to cover their costs. Some portion of it is then going to the to the server, which is appropriate, but the server gets an increase every time the steak dinner goes up. I see a double whammy there. And I’ve had conversations about that with hotels – okay, I see the steak dinner going up, but I also see your service charges going up and we may need to talk about that.”

One of the largest chunks of the budget for association meetings is its food and beverage costs, which are still elevated.

One of the largest chunks of the budget for association meetings is its food and beverage costs, which are still elevated.

Another aspect of contracts that has changed dramatically over the last couple of years is the guarantee process, according to Hopkins. “I understand the guarantee process. You don’t want kitchens preparing more food than is needed or vice versa,” Hopkins says, adding that the guarantee percentage at one time was 10%, and now more often 5%.  “I got a contract the other day and it was 2%. Planners who are dealing with 1,500 people, hitting the 2% mark is pretty tricky. I think the meeting planner needs to take a close look at and have an open conversation during the contracting portion and not be blindsided.”

One strategy for saving is limiting specialty drinks. “The special drinks are what will break your budget every moment because they start out at $21-plus, so I do try to shy away from those the best I can, but hard liquor drinks have come back in fashion,” Hopkins says. “The differential between one glass of wine and pouring one bourbon and coke isn’t that great anymore, but I do stay away from top shelf.”

Room Rates

Hotel room rates in the U.S. in May averaged $157.45 a night, up 17% from 2019. Though in the case of DCA, the association is not responsible for the room night expense, Hopkins says they do their best to get a reasonable negotiated room rate for their attendees. Higher hotel rates can affect attendance, so even if the cost doesn’t affect the planner’s budget it can have an influence on the overall association meeting.

Cason notes that finding a lower cost booking window is more challenging with the higher demand for hotel rooms. “I don’t know if shoulder season exists anymore. We used to have our winter meeting in Arizona, and we would always go the week before Thanksgiving because that was considered shoulder season at that time. I don’t know if that shoulder season exists anymore.”

Another cost that often is passed onto attendees is the hotel’s resort fees, though Hopkins says hotels are generally more open to negotiating the resort fees. “The first price they may put on paper is $40 a night, but we do pretty well at negotiating that one down. As far as a negotiating lever, they’ll pull that one first. The fees are just all over the place, meaning there are just so many things now that a hotel can and do charge for that have percolated up over the last seven or eight years.”

Auxiliary expenses at the hotels also have an impact. Hopkins recalled a recent stay where the cost for getting a coke or a sandwich by the pool was extremely high, which she says planners have no negotiating power over. “Our members are finally saying, ‘Look, I’ve got the plane, check. I’ve got the registration, check. I’ve got the hotel accommodations that you booked, check. But not the auxiliary expenses at a four-star property in the Sunbelt.’”

To compensate for the high auxiliary costs, planners need to get creative. One area is the production and entertainment, according to Hopkins. “Maybe instead of an eight-piece orchestra band, I might have a five piece. Instead of some of the audiovisual, maybe I’ll cut back on that because audiovisual charges have just exploded. A speaker will say, I need a conference phone and a projector and screen, or a computer and screens. Before I bat an eye, we’re up to $6,000.”

She notes there are just a couple of major audiovisual players left in the industry. “It’s either one or it’s the other and they’re in all the hotels across the country. There’s a lack of competition, which I’ve pointed out in a few industry meetings that I’ve attended. The in-house company will charge a 25% or 26% surcharge and I’m thinking, ‘I’m paying you for the labor. I’m paying you for the equipment. I’m not paying you a 26% surcharge. Why?’ If it was an outside company coming in, they’re not charging me a surcharge. Well, there’s a lot of song and dance that goes on around that conversation, but 26% on say, $100,000 is a lot of expense.”

Location, Location

Some of the increased costs are dependent on the destination chosen for the meeting, and association planners often choose locations based on their budgets. “We look more closely now, and I start asking about a city’s tax rates in the beginning conversations,” Hopkins says. “‘What is your tax on food and beverage? What is your service charge?’ I think it was New York property that had a 10% tax on food and banquet. I hadn’t seen that digit before. I’ve seen 7.7%, but it was just a bold faced 10%. There are sometimes room taxes, what they call an occupancy tax. As we start a negotiation, I do say to them, please you need to provide me with all costs involved, not only the hotel room, but all the costs surrounding food and beverage. Some cities just don’t work.” Hopkins adds that DCA looks at four- and five-star properties, which means it may take more to afford that particular property, but some locations, such as California, are difficult because of the tax structure.

Cason also considers the location when planning her meetings, though some locations will stay on the roster no matter the cost because of the popularity with its members. Las Vegas is one where her members want to meet, so she looks at ways to help reduce costs by planning ahead. She does have some wiggle room, though. “Our budget for Las Vegas is more than if we go to Dallas or another city,” Cason says. “We try to find ways to reduce costs, but we realize that costs are increasing.”

Though Hopkins predicts that attendance at her association events will recover within the next 18 months, that recovery is dependent on the economy and whether other roadblocks pop up in the future. Continued high costs and inflation could be one of those. She is hopeful rates for airfare and hotels stabilize. “Otherwise, it will hurt the industry,” she says. “The hotels need us to come back, and we want the hotels to come back. Maybe both sides need to be a little bit more patient on how fast we can accelerate. Your hotels cannot make up the millions and possibly billions that were lost by sitting out for a year, two years or or in some cases closer to three. I understand that and I’m sympathetic towards that, but you can’t throw that avalanche at the meeting planner all in one go. We’re all going to have to work our way back.” | AC&F |

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