Exorbitant venue service fees and hidden AV charges are a big problem for event planners and producers. However, planners and producers can address this problem if they understand its genesis and take proactive steps at the pre-contract stage. Here, I’ll examine what’s going on and describe what you can do to protect yourself.
The 2008 Economic Crisis Transformed the Way Hotels Do Business
Let’s start with a little history. The problem goes all the way back to the 2008 economic crisis, which transformed the way hotels and convention centers do business. During the downturn, organizations held fewer meetings and events, which had a dramatic impact on venue profits. Many large, luxury hotels with the capacity to host 6-8 groups at a time began hosting only 1-2 groups at a time. Food and beverage services dwindled, while huge blocks of rooms remained empty.
Because hotels took such a huge financial hit, they stopped staffing their AV departments, as the in-house model became unsustainable. To recoup their losses, hotels began to generate profits by hiring in-house AV departments run by third-party vendors, outside entities that set up shop in the venue and hold an exclusive service contract.
Hotels thus began eliminating in-house AV responsibilities and associated overhead and focused instead on taking a commission, or percentage of overall sales, from their AV vendor of choice.
In response, production companies, event planners, and end clients quickly learned they had to earmark an increasingly larger portion of their budget to account for basic infrastructure and technology needs provided by the venue, such as power service, truss, rigging, elevator and dock access, and more. (To add to the problem, some in-house AV teams have exclusives on breakouts; others even hold exclusives on ALL labor, requiring most positions to be staffed by their team.)
Hidden AV Charges
Fast forward to today, where many of these same pricing structures are in place. It’s not surprising that many event planners and producers don’t understand why they’re required to use in-house services like rigging and power. It’s also not surprising that many have trouble locking down total show costs before signing a contract.
Here’s why. Let’s say a show would normally run $50K, resulting in a 10-20% commission paid back to the hotel. This commission would often appear under the guise of a “Service Charge” on an AV contract. During the economic crisis, hotels began raising their service charges, some all the way up to 40-50%. This increase was an attempt to offset downturns in the travel and events industry. Events that in-house production could normally secure (within budget) began to exceed market value (when adding in the service fee).
Thus, in-house companies no longer secured as many shows and events. Finally, this increase prompted charges for ancillary items (on which the hotel has exclusive jurisdiction), making them the sole source of revenue on many events (and grossly overcharged sources of revenue at that).
Confusion about total show costs often stems from these hidden service charges. It’s common for experienced meeting planners or producers to ask strategic questions up front about the cost per rigging point and the cost of power services. Nonetheless, in many cases the in-house vendor doesn’t clarify details about the service charges incurred on top of the prices cited. Meeting planners know they need to be on the lookout for hidden AV charges when planning important events. Oftentimes, however, venues make budget management nearly impossible.
Work with an AV Production Provider That Has Your Back
The 2008 economic downturn altered the pricing structure of in-house AV, along with jurisdictions over what AV services are required to be provided in house. The meetings and events industry is still feeling the effects today. However, what meeting planners and producers often don’t know is that they have the power to negotiate terms:
- Read every detail in your venue contract, which outlines many areas that can impact your costs.
- Get clarification on all terms included in the contract – especially the fine print.
- Review the contract with your AV production partner, who can play a critical role in identifying hidden AV charges and help to manage costs on the front end.
The time to negotiate in-house AV costs is at the pre-contract stage. Once the contract is final, you’ll have little to no flexibility. In some cases, you’ll be able to make expansive changes that save thousands of dollars. Other times, the changes will be minimal. Every bit helps.
Remember – you don’t to figure everything out on your own. Rely on your AV partner to draw upon their industry expertise and knowledge about the venue to help you identify hidden AV charges and strengthen your negotiating position. With your partner’s help, you can achieve the best contract terms possible.
Why Total Show Technology?
TST is the total show production solution for anyone who hosts, plans, manages, or produces events, meetings, and trade shows. We own the Pacific Southwest market and travel with our clients all across the country. Our clients have relied on us to deliver audio, video, lighting, equipment rental, and show production for conventions, corporate meetings and events, and trade shows since 1996.
Whether you’re looking for audio visual support or advanced event technologies that enable you to deliver your message effectively, we help your shows go off without a hitch and always make you look good. In an industry where almost anything can go wrong, we make sure everything goes right.