Losing Proposition

Losing Proposition
  • A hot button issue right now within the live event industry is the current state of in-house hotel audiovisual services. Twenty-plus years ago, audiovisual departments within hotels offered reasonable commissions to the venue, which allowed them to provide a quality service to the customer at a reasonable price, and were able to make a profit. It was synergistic relationship between the provider and hotel, and it presented value to the customer. Today, the majority of in-house hotel audiovisual companies operate on a model with highly inflated commissions going to the venue, resulting in prices that have skyrocketed to rates well beyond market pricing. The value in this proposition for the customer is virtually nonexistent.

Les Goldberg
The in-house hotel audiovisual companies that have created this environment, where hotels have become accustomed to these overblown commission structures, should be ashamed of themselves. It’s a losing proposition for both the in-house provider and the customer. If the in-house audiovisual company is giving approximately half of the revenue from a transaction as a commission to the venue, it becomes a challenge to provide a high quality product. As a result, in-house providers are forced to charge escalated prices and service fees to the client just to make a slight profit. The economics of the situation make it nearly impossible to provide value for services rendered. It’s simply not fair to pay what they are asking for these services.

Then, there is another variable of the hotel’s exclusive services, such as power, rigging, and internet. These exclusives have become tools of trickery in making it seem as if customers are receiving some type of a deal should they agree to use the hotel’s in-house audiovisual services. Hotels offer these exclusives for free or highly discounted if planners use the in-house audiovisual provider, and on the surface appears as if the planner is saving a lot of money. The reality is that pricing for these exclusives has been hiked up to outrageous rates in most venues, and just in the last few years. For example, power has become so expensive in some hotels that it can be cheaper to rent a generator for your event! Meeting planners really need to educate themselves on the real cost of these services, and negotiate these items with the hotel up front while booking space, before paying on the back end. In the world of in-house audiovisual and exclusives, the only one currently gaining from this scenario is the hotel, through a rich revenue stream.

In addition, this commission-centric model puts the in-house audiovisual company at a competitive disadvantage against outside providers. If an in-house audiovisual provider is paying around 40 or 50 cents for every dollar to the hotel, they are not able to charge competitive prices in line with the outside market rates, and are put at a disadvantage in capturing the business. Outside providers, not bound by these commission structures, can offer clients the full value of each dollar, at market pricing, and in most cases, even offer a discount. In-house providers in turn struggle to capture business in their own venue when competing to win events for clients that appreciate a high level of quality and technical sophistication.

In some cases, although less common these days, hotels have implemented a model with the in-house audiovisual company that can offer value for the client. First, let me be clear, not every hotel operates with inflated commission structures, which I would define as anything over 30%. In some cases, reasonable commission structures still exist in the market that allow an in-house company to provide a quality product and value to support events operating within the venue. Also, in rarer cases and more common outside the United States, hotels work with the in-house providers to add permanent or semi-permanent audiovisual infrastructure to meeting rooms. This model requires less labor for set-up and strikes, and allows the audiovisual provider to charge reasonable rates for the use of these rooms, and capitalize on that investment over the long term. Unfortunately for the live event industry, these approaches are much less popular, and the shift to excessive commission structures and egregious pricing models continues to grow within the hotel market.

In the current hotel audiovisual paradigm, what can a meeting planner do to ensure they receive value? On a positive note, planners can typically negotiate with hotels before signing any contract for space. But, it’s extremely important to go into that discussion well prepared and educated on the current market conditions. Be diligent with researching competing hotels and pricing on exclusive services. The planner is in a great position before booking space to negotiate fair pricing for these exclusive services, and it’s critical to know these costs and market rates, especially if electing to use an outside audiovisual provider. Understand that you are not bound to use the in-house hotel provider, and research outside providers and pricing to find the best value and service. The hotel’s main priority is booking rooms and space, and an educated planner that brings a large event with hundreds or thousands of attendees to a city holds the biggest bargaining chip in this process.

As it stands right now, the state of in-house hotel audiovisual services is severely flawed. It’s an untenable structure. Outside of the hotel, everyone loses with this proposition– the in-house provider, the client, and ultimately, the show. Meeting planners and event producers need to draw a line in the sand and demand to receive true value for every dollar spent in the hotel for these services. The live events industry cannot thrive in an environment based on greed. Value cannot be achieved from a commission-centric approach to events. Great shows are the result of quality people, service, and innovation, and planners should expect nothing less. Caveat emptor. Buyer beware.