Signage for the Budget Minded

We all have clients who are very careful about how money is spent on their signage. We have done everything from large banners and foam core signs to an inexpensive slip-in sign holder. In many cases we have done a combinations of all these options for one client.

If you are looking for an inexpensive way to produce signs for your client try using slip-in sign holders. We use commercially produced sign holders from PC Nametag. These holders are 16X20 inches with a vinyl pocket that holds 8 ½ x 11 inch paper. In addition to having the signs in multiple colors, they also have one that is a large red arrow with the vinyl pocket. The signs are inexpensive and we used our first set almost 10 years. Although we have lost some to shipping, the wind, and even once to a lawn mower, these signs still fill many of our signage needs. We now have a large portfolio case that we use to ship the sign holders to our events and that has increased their survival rate.

The key to making these sign holders look like they belong to the event is the consistency of the message on the insert. The logo and name of the conference needs to be large enough to be recognizable from a distance. Once attendees key into the signs being a part of their event, they know to look for them and the information they convey, either in terms of what is happening in a meeting room, or directions to difficult to find rooms. The vinyl pocket allows room for multiple pieces of paper so, for each session, the old sign can come out and the next page is ready with the new information.

These portable sign holders can be used either landscape or portrait. Sometimes we have arrived on site with our signage produced portrait style to find that the only way an arrow will work is landscape. We have learned to bring some of each style and/or produce new ones on site. We always have the template for our signs with us in case we need to make changes to the information, such a new speaker or a cancellation.

Another cost savings tool we use focuses on the large foam core signs. We set them up to allow for the customization of information by having generic general signage with space to place a smaller sign, attached with Velcro, that makes the sign specific to an event. Our inserts are usually 2-3 inches in height and the width of the sign, though they can be done at any size you need for your functions. The same sign or series of signs can be used to welcome attendees, direct them to a reception or a luncheon, and they can often be moved to off-site events and customized accordingly. We even have had red arrows made for our signs to convert them to directional signs. For local events, the large signs can be reused each year, providing the basic information and design is generic enough.

We find that using these combinations of signs has represented a significant cost savings for our client. The slip-in signs and the inserts for the foam core signs are inexpensive, representing a significant cost savings over custom signs for our clients’ events.

~ Linda Begbie • Executive Director and Meeting Planner, RDL enterprises

Event Cost Savings: Signage

Creating signage for events is an easy task that every planner can do with ease. When planning an event, it is important to have the correct information available and an easy-to-read format for attendees. However, the display and choice of materials is widely varied. Often the client budget is a big factor in how elaborate signage is at any given event.

RDL takes pride in working with our clients in all facets of planning the logistics of their meetings, conferences, or events. Client budgets are always very important and looking for cost savings measures for our clients are options that we like to share. Signage can be a huge expense and the message is the same; directions & information for attendees. Signs can be as large as billboards, they can be multiple colors, illuminated, 3-dimensional, magnetic, and in every size and shape imaginable. Banners and large foam-core signs are beautiful and depending on the number of signs needed to assist attendees in getting from place to place and knowing what is happening in each venue can be huge.

Here’s some information for many different and unique options for event signage.

Signage can also be very moderated and still be quite effective, depending on the venue, the client and the number of attendees. RDL planners often reduce the cost of big expensive signs by using slip in sign holders.

The slip in sign holders have borders in many colors that can compliment our client’s theme or colors. These sign holders have a plastic center for a 8/5x11 pre-printed sign. This style sign is easy, efficient and inexpensive for our clients. These slip in signs also have large red arrows to assist attendees with directions to venue meeting rooms and other events. Signage provides directional assistance to elevators, up and down stairs, around corners, and down long hallways.

Just a little bit of information that I thought would be interesting to share. Great to know of something that other planners may not be aware of & to know that this form of signage is cost inexpensive and efficient.

~ Cyndy Hutchinson • Executive Director, RDL enterprises

Why is hotel food so expensive?

Lately, there has been a lot of chatter in the blogosphere about government excess and the $16 muffins and $8 cups of coffee that the Department of Justice had at a couple of their events (Here is the article that touched it off). Mind you, the article leaves out a lot of details behind the numbers and, instead, focuses on the particular items that are sure to fire people up. After all, they need an attention-grabbing piece to sell the news and including the details explaining how those figures came to be would have turned off most readers. The Meeting Professionals International (MPI) blog posted a response to it here, so I won’t go into that particular issue.

However, I have heard complaints for many years – from conference attendees and funders, mostly – about how expensive hotel food is. It certainly seems that way. $8/person for a coffee break, $22/person for a lunch, $34/person for dinner – you can certainly eat quite well as an individual at those prices, especially when you find out that these prices are “plus-plus”. Let’s examine each of these examples one by one. I’ll start with dinner, since that is the one most often referenced in conversations on this topic.

Dinner, at a hotel, typically includes a soup and/or salad, bread, the entrée (with sides), dessert, and coffee service. All of that is included in the $34/person. Now it isn’t fair to compare this to a fast food joint, like McDonald’s or Carl’s Jr. The two types of meal service aren’t even close. Meals served at conferences are more like eating at a restaurant – and a moderately nice one at that. If I were to get the same menu items at a middle-of-the-road restaurant in the same city as my conference, the prices (before tax and tip) might break down like this:

• Soup (or Salad): $5
• Bread: usually included for free
• Chicken Entrée: $16
• Dessert: $7
• Coffee or Tea: $3

Add that all up and you have…$31. Suddenly, the hotel’s pricing does not seem so out of line as it did before, does it? Yes, it is still a bit higher, but it is not shockingly so, which is what most people react to.

Lunch is very similar to dinner. For a restaurant lunch comparable to what a hotel might serve, you’re looking at prices something along these lines:

• Soup (or Salad): $4
• Bread: usually included for free
• Sandwich Entrée: $10
• Dessert: $5
• Coffee or Tea: $2

The total for a similar lunch at a restaurant is…$21? Yep, we’ve saved an entire dollar compared to the hotel’s pricing. Not much of a difference there…

Finally, let’s look at the $8 coffee. Yes, I know I said I wasn’t going to into it here but this is the one that seems to generate the most ire from certain folks and it is one area where your local coffee shop is way below the prices charged by hotels. Let’s look at in more detail…at $8/person for coffee service, what do you get? You get coffee service for a fixed amount of time (usually 1/2 hour), during which your attendees can pretty much drink as much coffee or tea as they want. How many of them do you think have just one cup?

When I order “in bulk” for coffee (to save money), I know that one gallon will give me 16-20 cups, depending on the size of the cups used by the hotel (see this post for more details). Will I order one gallon, then, for a group of 20 people? Probably not. I will want to have some extra available in case they drink more than I anticipated, even if this results in leftover coffee that no one drinks.

When ordering a break package, such as coffee service billed “per person” instead of by the gallon, the same principle is at work. The hotel does not want to run out of coffee (it makes them look bad), so they need to prepare more than they think people will drink. Plus, coffee service includes tea and decaf. The hotel needs to make sure that there is enough for people with those preferences as well. Your corner coffee shop (even Starbucks) can make coffee one gallon at a time and still promptly serve their customers. A hotel, trying to serve coffee to several hundred people all at the same time, must make much larger batches.

The upshot of all of this is that there is the potential for considerable leftovers (aka “waste”) with coffee service. Since the hotel must, at least, cover costs for providing it, they must take that into account – which results in higher prices. Even your corner coffee shop does this; their level of “lost product” is simply much smaller. In fact, every business that serves food must take wastage into account with their pricing or they will quickly be out of business. That’s basic economics.

So, does this mean that hotel food in not expensive? No, it’s still pricy – and I still think it’s expensive when I compare it to preparing a meal at home. However, when I compare it to eating out, I find that the prices are not too far off from what I would pay in a restaurant. Restaurants and hotel both need to cover not just the cost of the food, but also the costs of rent, equipment, staff wages, maintenance, and a myriad of other expenses that go into providing a service to the public – which means that it will always be more expensive than what it costs me to make the same dishes at home (assuming I even know how to make and have the time to make said dishes…).

So, the next time you hear a complaint about how expensive hotel food is, look at similar options before joining the chorus. You might find that the claims are right on track – or a bit overblown…

~ Karl Baur, CMP • Project Director, RDL enterprises

How much would a Meeting Planner charge to produce my event?

That’s a tricky one to answer and there is no way I could give a realistic estimate without knowing details. So – let’s look at how the Meeting Planner would come up with an answer for you. It mostly comes down to two main factors…

To begin with, it depends on how the planer expects to get paid. Do they work on commission or do they use a “fee for service” structure? If they are “fee for service”, do they charge by the hour or by the job? Or, do they mix the difference fee options? [For more on how meeting planners get paid, check out this post.] Each approach yields different answers in terms of how much you would need to pay the planner, though the amount earned by the planner often ends up being roughly the same.

The second piece of this puzzle is the event itself and what you items you want the planner to handle. This is, in many ways, the greater of the two factors as well as being the more complex of the two. A couple of things you may recall from earlier posts: event RFPs outline the basic structure of the event and staffing (who staffs the event and how many people you will need) helps determine the planner’s physical presence at your event. But these areas only scratch the surface of what a planner will want (need!) to know about your event before they can give you an accurate estimate of cost… What more will they want to know? Well, once you get past the basic information about when, where, and how many people, a meeting planner will want details about each task that you want them to do. Each task requires a different amount of work and that amount is potentially different for each event – even for the same task.

For example, if you want the planer to handle registration, then information about how many people you expect to attend, what fees they will pay (if any) and who collects those fees, who produces name badges, etc. will all be useful for the planner to know in building a quote for you. Similarly, asking the meeting planner to handle all of your food arrangements will involve needing to know how many food functions you will have, how many people you anticipate attending each one, and meal restrictions or guidelines. And, an event for twenty people will require different things than an event for several thousand (though there are many similarities). Basically, the more information you can provide for each task you wish the meeting planner to do for you, the more accurate a quote they can provide.

When RDL works on a response to an RFP, we examine each task area that the potential client is asking us to do, while looking at how that task fits into the “big picture” of the event. We then start building the estimated “fee for service”, using a grid that outlines each task area with the common jobs within each area (and, no, I can’t share the grid…sorry). The grid allows us to estimate the hours required for each job and for each level of staff expertise, then calculate a total for the event. One of the nice things about this approach is its ability to take in account overlapping task areas when pricing an event. For example, the budget management task area includes many jobs and responsibilities that also appear in areas like site selection, food ordering and management, attendee reimbursements, and audio-visual services, just to name a few. If we are handling multiple areas for a client, we can often reduce the charge for those services below what they would be if you simply ordered services off of a “menu”. The whole costs less than the sum of the parts…

If all of this seems a bit overwhelming, don’t worry about it too much. Remember, meeting planners – especially the independents – are used to doing this on a regular basis. They can get you a cost estimate fairly quickly. However, be ready to answer their questions in as much detail as you can so they can give you a more accurate response.

~ Karl Baur, CMP • Project Director, RDL enterprises

What are Base Prices and Inclusive Prices?

The simple answer (to me, anyway) is that Base Price and Inclusive Price are on opposite ends of the same equation – with tax and other charges in between. So how does that work if you are catering an event?

On a typical menu with catering pricing for a hotel, you will see a price listed next to each item or package. Often, that price is followed by a “++”. As discussed in my post on hidden charges, the “++” (or “plus-plus”) represents taxes and services charges that are added to the Base Price that is listed on the menu. If you cannot find the rates on the catering menus, ask your CSM for that information – you need to know it!

Now, let’s look at an example (warning – math ahead!)…

I’ve chosen to serve a dinner that is listed as $50 per person on the menu. Remember, that is the Base Price for my choice. For this example, taxes are 7.75% and the hotel will add a 20% service charge to the bill as well. That gives me an Inclusive Price of $64.65/person to serve that menu option. So how did I get to that number? Here’s the equation:

Inclusive Price = Base Price x (1 + Service Charge Rate) x (1 + Tax Rate)

Plugging numbers in yields…

Inclusive Price = $50 x 1.2 x 1.0775 = $64.65

So, if Base Price is the amount without tax and service charges figured in, then Inclusive Price is the amount with tax and service charge included.

Here is a simple price calculator that I’ve cooked up in Excel that you can download and play with. It will calculate either Inclusive Price from a known Base Price or Base Price from a target Inclusive Price. The only other information you’ll need to know is the tax rate and service charge amount and it will do the rest.

By the way, does the Inclusive Price appear excessive to you? If so you’re not alone. It seems that way to many people when they compare it to the cost of eating out. However, the same dynamic is at play there, too – people usually just aren’t consciously aware of it. The restaurant menu lists the Base Price for each item; you pay taxes on top of that, and tip on top of that. If you were to order a $50 meal, by the time you add tax and tip to the bill, your final tab will be similar to the amount calculated above (though, obviously, you can control how much to tip…).

~ Karl Baur, CMP • Project Director, RDL enterprises

How can I get free meeting space for my event?

I love this question! It is a very common one, especially from first-time clients that I’ve worked with. I think that is partially because it is an obvious cost that impacts an event’s bottom line and it is one that many properties are often willing to waive. However, since hotels (and other meeting venues) are in business to make money, the real question to my mind is – under what circumstances would they give me free meeting space? If I can answer that question, then I just might get free space for my client’s event…

To figure this out, I start with something called the Rooms-to-Space Ratio (sometimes called Space-to-Rooms Ratio). Simply put, this is a comparison of the percentage of guest rooms in the hotel that a group will use, compared to the percentage of meeting space that the group needs. For example, if you are using 50 rooms in a hotel that has 500 total guest rooms, then you are using 10% of the guest rooms. Similarly, if you are using a ballroom that is 5,000 square feet in size and the hotel has 20,000 square feet of meeting space, then you are using 25% of the available space.

A good rule of thumb is that if your guest room percentage is equal to or higher than your meeting space percentage, the hotel will be willing to give you the space for free (or sharply discounted). The greater the difference is in favor of guest rooms, the more willing the hotel will be to give you the space for free. Now, there are some key modifiers to the ratio (such as the contracted rate for the guest rooms, when you want to use the space, and which specific rooms you want to use) but examining the basic percentages is a good place to start.

What happens if the group has a poor Rooms-to-Space Ratio (lots of space and few guest rooms)? Now you have to pull out the big guns – and your group history. Show the hotel that the value of your business is high enough and they’ll negotiate with you on the space rental fees. Your group history can give you the documentation you need to make your argument stick. Remember what I said about them being in business to make money? I know of groups who use a lot of meeting space and fill relatively few guest rooms – but they get good discounts on room rental because their planner could show (from their group history) that attendees who did stay in the hotel would spend a lot of money in, for example, the bar and the restaurant. Hotels are willing to take a loss in one area (space rental) to gain a larger profit in another (outlets). Incidentally, this is also why many properties do not charge a room rental if you are doing a lunch or a dinner in the room. The money they make by catering the event more than offsets the money they “lose” by not charging a rental fee.

OK, so what if the group has a poor Rooms-to-Space Ratio and a small economic impact for the hotel (or no group history)? Here is where you might have to get creative – and flexible with your dates. Can you meet during slow periods at the hotel? This could be a certain day (or days) of the week or certain times of the year. When demand for space is low or nonexistent, a hotel is much more willing to let you have the space for free simply to get some business into the property, even if it is not as profitable as they might like. After all, if the hotel has no events, then those profit centers produce no income at all. Another option to consider is to look for gaps you can fill in the hotel’s schedule. Perhaps they have a group that is using a lot of guest rooms but little meeting space. If that is the case, your large meeting space needs and small guest room requirements might fit perfectly – and they’d be willing to comp the space as an incentive for you to book with them.

I have frequently heard in industry trainings that “everything is negotiable”. That is true – to a point. There are limits but you can always ask... However, if I know what the other side is able and likely to do, then that does give me a slight edge in negotiating. At the very least, it allows me to understand the constraints that my opposite numbers in sales have to work within, as well as allowing me to demonstrate knowledge that reveals me to be a good partner for them to work with (at least, I hope that’s how they see it). I have also found that knowing what is possible and being realistic about the things I ask for when negotiating with hotels has led to more successful contracts (i.e. getting more of what I want) than starting out asking for the sun and the moon.

~ Karl Baur, CMP • Project Director, RDL enterprises

Financial Goals and Funding Categories for Events

Generally speaking, there are three types of meetings when viewed from a fiscal standpoint: Revenue Generator, Break-Even, and Underwritten.

• A Revenue Generator is a meeting in which the primary goal is to make money and to have your income for the event exceed its expenses – the more you exceed expenses, the better. While other goals may also be pursued for the event, the main focus is on ending the event with significantly more money than it cost to put it on. 

• A Break-Even event is often confused with a Revenue Generator but they are not really the same thing; the main difference is in scale. Yes, income is still important for a Break-Even event but, once expenses are covered, more income is not necessarily desired or desirable. The basic goal here (and what sets it apart from a Revenue Generator) is to have income match expenses, with perhaps a little extra left over to use as seed money for the next event. The event should pay for itself.

• An Underwritten event is one in which there is no expectation of turning a profit. The agency or organization hosting the event is not concerned with showing a profit or even necessarily recouping costs. You simply have a budget for the event and, so long as you don’t exceed budget, you’re in good shape.

Funding for any of these types can come from one or more of three categories of sources: internal, external, and self-supporting.

• Internal funding is also known as organizational funding and is most common with Underwritten events such as trainings or business retreats.

• External funding is derived primarily from sponsorships. The group hosting the event looks outside their own organization for the money to put on the event.

• A Self-Supporting event is one in which the money to cover costs is raised from sales of registrations, exhibit space, etc.

While it is nice to be able to say a particular meeting is funded a certain way, most events use a combination of funding streams to reach their fiscal goals. And, as a planner, I find this to be both useful and interesting information to know about a client and their event: what are their financial goals for their event and where is the money coming from to pay for it? Each approach has its own strengths and weaknesses – knowing the group’s goals and funding allows me to better focus my efforts to effectively aid them in creating a successful conference.

~ Karl Baur, CMP • Project Director, RDL enterprises

Ed. Note: For more information about calculating break-even points, check out these posts: Calculating Break-Even and An Example of Break-Even Calculation

What is a Force Majeure Clause?

If you’ve done many contracts for meetings or conferences, you are probably familiar with the Force Majeure section (sometimes called “impossibility” or “acts of God” clauses) of hotel contracts. It's purpose is to protect the parties involved in case something catastrophic happens that makes it impossible for them to fulfill the terms of the contract and, if you are not familiar with it, you should be.

A basic clause may run something like this: “The performance of this agreement is subject to termination without liability upon the occurrence of any circumstance beyond the control of either party to the extent that such circumstance makes it illegal or impossible to provide or use the hotel facilities.”

The clause will usually go on to include examples of what qualifies for exercising the clause (disaster, war, civil disorder, government action, etc.) and what does not (such as strikes involving agents of the side seeking protection of the clause). An action date is typically included as well – the party seeking protection must notify the other party of their intent to use this clause within a certain time frame of the circumstance becoming known. The Force Majeure clause can be long and detailed or short and to the point. In either case, it should incorporate a few key elements.

First, the basic wording must be there, acknowledging that circumstances beyond the control of either the planner or the hotel may make it impossible for one or both parties to meet their contractual obligations. Immediately after 9/11, for example, many meetings were canceled due to the grounding of flights nationally for some time after the attacks – people simply could not get to meetings that required air travel. This was an event well beyond the control of the planners that made it impossible for them to meet their contractual obligations to hotels.

Second, including examples is a good idea. That helps make clear when the clause can be used and when it cannot. If there is a specific circumstance that concerns you, be sure to include it if the hotel does not have it in their existing language. For example, if you are concerned about hurricanes, include that in the list of examples. If you work with government groups, failure of the legislature to pass a budget may mean that the group will need to cancel – government action (or, in this case, inaction) could make it impossible for the group to meet its obligations.

Third, do include a “window of action” to make a decision. Once notified that a particular circumstance exists that could be a problem, immediate action should be taken – too long of a delay in activating the Force Majeure clause effectively means that you agree to continue with the contract as written.

Finally, and this one is the most important in my mind, the clause must be reciprocal. This means that it imparts the same protection to both parties. At one time, I saw many contracts with Force Majeure clauses written so as to provide protection for the hotel but none for the group contracting with them. So, a hotel could say that the recent earthquake made it impossible or unsafe for them to meet their obligations to the group but the group had no such option available to them (contractually). Fortunately, this has changed considerably over the years and most hotel contracts now do have reciprocal language here. Double-check it, though. Occasionally, I will still see one that protects one side and not both. When that happens, I make sure to change the clause to protect both parties.

~ Karl Baur, CMP • Project Director, RDL enterprises

Is the Service Charge hotels charge the same as a Gratuity or Tip?

Many hotels and catering venues include a “service charge” on top of their base prices (which came up in this post last year). Typical service charge amounts range from 18% to 22% tacked on to the base price for food and beverage charges. I have even seen rates as high as 25%. It is easy to assume, since these percentages are similar to what you would pay as a gratuity if you were to eat out at a nice restaurant, that the service charge is the equivalent of a gratuity. This would be a mistake.

In spite of how it may appear, the Service Charge that hotels tack onto the bill is not a gratuity – not even close. In fact, a hotel's own documents often explicitly state the two are not that same (though usually in the fine print). Service charges exist to help cover the indirect costs of supporting your food and beverage functions, such as cleaning, last-minute staffing additions, and replacement for broken or otherwise non-reusable serving items (plates, glasses, etc.). And, while the percentages venues use are in line with what you would add your dinner bill in a restaurant as a tip, the money collected from service charges very rarely, if ever, goes directly to anyone who actually worked your event.

A true gratuity, on the other hand, would go directly to venue staff and you determine who receives how much. In a future post, we'll look at ways to do this after the event has concluded.

~ Karl Baur, CMP • Project Director, RDL enterprises

The Current Economy and Three Signs that the Hospitality Industry is on the Road to Recovery

Like many professions and industries, the hospitality industry has been hurting. We wonder when the economy will turn around, when business will pick up, and how to survive in the meantime. And, these questions represent common themes of discussions in the groups and associations to which I belong. Given my many years in the meeting planning industry, I am frequently asked for my opinion and perspective as a planner on the state of the economy as it relates to our industry. Now, I am no economist and have nothing but anecdotal evidence and my own experiences to support my views but, for what it’s worth, here is my two cents on the matter…

The current economic “downturn” is the third one I have been through in my sixteen years as a meeting planner and it is certainly the longest and most severe. The causes are many and often disputed. To make matters worse, most reports in the news suggest that we may not come out of this for quite some time as the complex interplay of economic forces adjust to the “new realities”. Does this mean that the meetings industry is doomed? Are we condemned to languish for years in economic doldrums? I think not.

Each time there has been a downturn in the meetings industry, it has been preceded by a drop in leisure travel. The typical pattern has been for transient business to drop and, six to eighteen months later, corporate business falls off, which is then followed by the association market. Government meetings have usually gone on more or less unimpeded. They may have slight drops but nothing on the same scale as the other markets. This time, government has also dropped significantly (about the same time as corporate and association). However, it is not all darkness on the horizon. I have noted three signs that indicate that recovery may be on its way for meetings and conferences.

1st sign: that drop in leisure/transient business that seems to appear each time before a downturn? Well, I’ve noticed that it also appeared to rebound ahead of each of the previous recoveries. In talking with the hoteliers I know, they have all seen recent (last six months to nine months) increases in the level of transient business at their properties. And, these increases have been significant both in terms of numbers and duration. Transient business, once it started to pick up again, has remained solid for many of the hotels that I have talked to. In my mind, this is the most important factor in gauging how the industry will fare in days to come.

2nd sign: Inquiries for our services are up. Like hotels and other service providers, we do not win every job we submit a bid for but an increase here is another good sign. I see this an indicator that groups are once more looking to host events. In some cases, it has taken them longer to secure funding for their events; in other cases, they had fired their planners (to cut costs) but now need assistance to produce those mandatory events that were once handled in-house. In either case, it means that the desire to hold an event is there and as the saying goes: where there’s a will, there’s a way.

3rd sign: Last minute hotel bookings are up. This also tells me that people still want to do meetings and events but perhaps they have been waiting to make sure their funding is secure or it is taking longer for meetings to get approved. A year ago at this time, there was nothing happening - many hotels were practically empty - so to see the increase in last minute bookings is encouraging. The uptick in the transient market, combined with high levels of last minute bookings for events has helped carry them through thus far.

As encouraging as the signs may be, though, we are not out of the woods yet. I do agree with the economists that the industry is still in for some rocky times but I also believe that our recovery is already beginning. Where everything last year was very gloomy and all signs were negative, I now have some positive signs to point to that reinforce my belief that things are improving.

~ Karl Baur, CMP • Project Director, RDL enterprises

How do I know if a budget expense is variable or fixed?

Here’s another question for you: why should you care? After all, many planners never have to worry about this at all. I’ll assume that, if you asked the question, you care about the answer. However, my take on it in general is: if you are going to work with event budgets, then it is your responsibility as a meeting planner to make those budgets as accurate as possible. Knowing whether an expense is a variable or fixed cost is crucial to that goal. It is also an absolute requirement if you are going to do projections and not simply post-event reports. And, one of the most important projections you can do is to calculate at what point your event “breaks-even” and starts making money. [For more info on calculating the break-even point, check out my previous post on that subject (Part 1/Part 2).]

In preparing or working with conference budgets, one area that many novice planners struggle with is knowing when a budget expense is fixed and when it is variable. Fortunately, there is a simple rule of thumb that will help you keep it straight: if the total cost for an expense goes up or down proportionally as you increase or decrease the number of participants, then it is a variable cost. If not, it is a fixed cost.

Some cases are easy – meals, for example. Food and beverage costs are nearly always considered Variable Costs when calculating event budgets. Why is that? Well, meals are prepared, served, and billed “per person”. If your 75 person meeting suddenly jumps to 125, then your total bill jumps proportionally; each person added to the count increases your costs by the same amount. Similarly, the total cost of your meal will drop if your numbers drop (providing you have not already guaranteed a minimum number of meals). Handouts for attendees and confirmation letters are two more examples of Variable Expenses.

Speaker fees are another simple example – this time of a fixed cost. If you are paying $1,000 to a speaker, that fee does not usually change if there is a change in the number of attendees for the meeting. Nor do the speaker’s travel costs change (if you are paying for those). It does not matter how many people actually attend your meeting, the airline will still charge the same for the speaker’s ticket. Other examples of Fixed Costs are meeting space rental, audio-visual charges, and marketing expenses, just to name a few.

So what about tax and service charges – the dreaded “plus-plus”? They count as Variable or Fixed, depending on what expense they are tied to. When calculating tax and service charge on meals, you should include them as a variable cost. If they are being tacked on to room rental, then they should be treated as fixed.

Though much of this may seem to be pretty obvious, it can get confusing. Where most people start making mistakes is when they see expenses that do change as attendance numbers change but are not directly tied to individuals. Audio-Visual charges, for example, can often trick novice planners – these fixed expenses are often misidentified as variable. What the planner says to me is something like: “but I would not have ordered that microphone if my numbers had not grown so it must be a variable expense.” While that statement may be true, adding or removing a microphone on your order is a result of a certain threshold being reached and not a function of each individual added to or subtracted from the audience – therefore it should be considered a fixed expense.

Though the examples provided here are but a few of the potential budget items that you might have to manage, the rule of thumb provided above should aid you in determining how each item in your budget should be handled. If there is an item you are not sure of, or have questions about specific budget items, please send me an email and I’ll be happy to respond to your questions.

~ Karl Baur, CMP • Project Director, RDL enterprises

How much dry snack mix do I need for my reception?

This question has come up for me a lot of late, both online and off, and is one of those areas where your budget can quickly get out of hand if you do not have at least a rough guideline for how much to serve. Dry snacks such as peanuts, pretzels, popcorn, or chips are a staple in bars, very common for house parties, and fairly common for receptions following meetings – especially those receptions with a bar. Why is that? For house parties, it is primarily because they are easy for the host to provide. There is little to no prep time and all you really need is a bowl (though that may be optional depending on the party). In bars, dry snacks are a good way to sell more alcohol. The salts in and on the dry snacks promote thirst, which in turn leads to more sales. Even if you serve “unsalted” dry snacks, people eating them tend to consume more beverages than they would with “wetter” foods.

So how much of the snack mix should you serve? A good rule of thumb is to have one pound of dry snacks for every fifteen people in attendance. You can adjust that figure up or down based on the specific preferences of your group and what you are trying to accomplish with your reception. If nothing else is being served to eat, then you will need more – I’ll usually go with an estimate of ten people per pound in such cases. If you are providing a lot of other food choices, you may be able to get away with twenty people or more per pound. Knowing your group’s preferences will help you gauge how much you need to adjust the figure, too.

For receptions following meetings, dry snack mixes are often chosen because they are usually cheaper than providing other fare. In fact, they can even be cheaper than basic cheese platters or plates of fruit or vegetables and dips – but be sure to double check the venue’s pricing. You may not save as much as you think. Another reason for providing dry snacks is the same as any bar – to drive up drink sales (of all beverages). This could help you meet a minimum sales requirement for a cash bar.

The main reason, though, that I have come across for serving dry snacks instead of other reception items is to discourage people from making the reception their dinner. I have talked before about how much food to serve at a reception and how many different items to provide. If you recall, one of the dangers with receptions is that attendees may try to make the reception their dinner. Many reception items can easily be made into a dinner for someone – not so with dry snacks. Yes, they can still make it dinner, but it is more of a stretch for them to do so. Serving dry snack mixes is a good way to encourage people to leave the reception to find dinner.

Regardless of your reasons for choosing dry snacks for your event, though, start with a ratio of one pound of snacks per 15 people and you should have a decent estimate of how many snacks you will need to provide.

~ Karl Baur, CMP • Project Director, RDL enterprises

Calculating an Event’s Break-Even Point [Part II]

Last week, we looked at the “Rate Per Person” equation for events and went over each variable. Here it is again:

Rate Per Person = [SM + FC + (X * VC) + IC + PM] / Y

If you need to review what all of the variables mean, click here for the previous post. This week, let’s take an example and see how it plays out. Ready? OK, here we go...

I want to do a small gathering of cross-stitch fans for a luncheon. Let’s say we expect to have a maximum of 30 people attending, including an invited speaker whom we will not charge for their participation. I am also attending and am included in the 30 count.

SM (Sunk Money): I am able to advertise this fairly cheaply. I spend $25 on flyers that I distribute at local fabric stores, who allow me to post on their message boards for free.

FC (Fixed Costs): The speaker has a Power Point presentation that they plan to do, using their own laptop. Let’s assume that an LCD package (projector, screen, power, and cords) will cost $400, including tax and service charges. The total number of guests is small enough that I should not need a microphone for the speaker. And, since I am providing lunch as part of the program, the hotel will not charge me a room rental fee. (Aren’t they nice?)

X (Number of participants): We expect 30 total participants.

VC (Variable Costs): The only cost we have in this category is the lunch itself. I was able to negotiate a rate of $20 inclusive for my lunch. Remember, this is a per person rate.

IC (Indirect Costs): I am donating my time, so there are no admin costs that I am trying to recoup, but I will not be paying to attend either. This figure will be $0.

PM (Profit Margin): If I make a profit, that would be great, but I do not have a specific profit goal – I just want the event to pay for itself – so this number will be $0.

Y (Number of Paying Guests): We have two people who will not pay to attend (comps), so that means we have 28 paying guests.

OK – putting it all together, the equation now looks like this:

Rate Per Person = [$25 + $400 + (30 * $20) + $0 + $0] / 28

When we do the math, the final figure comes out to $1,025/28, which works out to $36.61 per person. Many novice planners’ initial reaction is to charge that amount; maybe they’ll round up to $37. If 28 people pay $37 each to attend, we’ll make $1,036, which covers all of our expenses. We have broken even!

However, there is one drawback to this – we need to sell out in order to break even. So, how can we fix that? We adjust the number of attendees and paid attendees and recalculate. Let’s assume that only 20 people attend (including our two comps). Now the equation looks like this:

Rate Per Person = [$25 + $400 + (20 * $20) + $0 + $0] / 18

We will now have to charge $45.83 per person to break even. Of course, each paid attendee after the 18th one starts adding to our profit, but our break-even point is 18 people at $45.83 per person.

You can also work from a predetermined rate to figure out how many people would need to pay that amount in order to break even. If, say, we wanted to charge $40 per person, then we’d break even with the 24th paid attendee (the Rate per Person with 24 paid attendees and 2 comps is $39.38) and start making profit with each paid attendee after that.

While most of these two posts have been just about the math, the art of calculating a break-even point comes in figuring out realistic numbers for all of the variables – especially since you do not always know what those numbers will be when you first begin – and that is one of the places where a professional planner can be of assistance to anyone who has to manage their event budget. They can help identify expenses and help come up with realistic numbers for you, as well as using your event history to generate solid tracking of paid attendance.

- Karl Baur, CMP • Project Director, RDL enterprises

Calculating an Event’s Break-Even Point [Part I]

As we start off 2010 and the economy is slowly recovering, most of the planners I know are much more aware of the costs of their events and are under more pressure to ensure that they make a profit (or come in under budget). At the very least, they need to break even (or not exceed their allocated budget). These folks deal with this issue regularly, however, and have all the tools they need to track income and expenses to be able to project how they’ll do financially. And, if they are working with a fixed budget, it is relatively easy to simply tally up all of the projected expenses and compare the two numbers. You break even when your income matches or exceeds your expenses.

But what if you are planning your own event and you do not have a specific funding amount or if the event has to fund itself? How do you know when you will hit the “break-even point” and start making a profit? Well…there is an art and a science to this.

Let’s look at a key formula first (science) and then we’ll discuss how to use it (art and science). [Warning! This will involve some math but don’t panic; we’ll go through each piece of it.]

Rate Per Person = [SM + FC + (X * VC) + IC + PM] / Y

That’s a lot of variables. What do they mean?

SM = “Sunk” Money: This represents money that you spend to put on an event that you must spend whether or not the event happens. For instance, money spent promoting the event and non-refundable deposits are both considered “sunk” money. Sunk money can often be “buried” within other costs but it is something that is quite important to know, especially if cancellation of your event becomes necessary.

FC = Fixed Costs: These are expenses that usually do not change based on the actual attendance at the event. A good example here is a speaker’s fees. Typically, a speaker will charge you a set fee to present at your event, which will not change if your numbers go from 100 people up to 125 people or down to 93 people. Other examples of fixed costs include audio-visual equipment, guest rooms for speakers or other VIPs (if covered by the event), awards, etc.

X = This variable represents the number of people who will attend your event. It is not necessarily the same number as the number of people who will pay to attend your event!

VC = Variable Costs. Variable costs are those expenses that depend on the actual number of people that you plan to provide for. In other words, the total amount you will pay is affected by changes in your attendance. The classic example of a variable cost is a meal. You pay on a per person basis for meals and they are even presented that way in hotel menus.

IC = Indirect Costs: Also known as personnel or administrative costs. This represents staff salaries, office overhead, and other related expenses that may not be directly tied to the event but must be somehow “recouped” by the event.

PM = Profit Margin. Quite simply, this represents how much profit the event must make once all expenses are paid. This is particularly useful to include in cases where an event is being used as a fundraiser for other activities your group is doing.

Y = Number of participants who will pay to attend

Note: all of these variables, except for number of people (X and Y), are expressed in dollars (or whatever currency you’re using). I tend to round to the nearest whole dollar to make calculations a bit easier but it is not necessary, especially if you use a spreadsheet to do the calculations for you. It can also be tricky sometimes to know if an expense is a fixed cost (FC) or a variable cost (VC). Just remember that a variable cost is one that is based on the number of people attending, even though you may order more or less of something based on other information. For instance, if I need poster boards for a scientific presentation session, the number of boards required will vary based on size of posters, number of presenters, and the layout I want to use. However, rental of the boards is still considered a fixed cost (FC) because it does not matter if I have 100 people attending the event or 75 or 140 – attendance does not affect the cost for renting the boards.

Fill in the blanks and do the math – and you have your break-even point based on your projected attendance. Essentially what we’ve done with this equation is add up all of the event’s expenses and then divide by the number of people paying to attend the event to get a rate per attendee. This amount is the basis for coming up with a registration fee for the event and, ultimately, determining a realistic break-even point.

Next week – an example using the equation…

- Karl Baur, CMP • Project Director, RDL enterprises

How do I make sure that people who come late to my reception still get something to eat?

This can certainly be a problem with some groups. I used to work with one group (no names!) where, if all of their food was put out at the beginning of a two-hour reception, it would all be gone in the first 15 minutes. When you do not have the budget to simply add more food, this can be a serious problem. Here are a couple of ideas for dealing with that…

My favorite tactic is to distribute the food service throughout the evening. Instead of having the hotel put all of my reception items out at the start of the reception, I will have them put out one half or even one third of the total out at the beginning. Then, at previously determined intervals, the banquet staff brings out more food. This gives the illusion that you have added more food and forces people to slow down a bit in their consumption, allowing the latecomers to have a chance to try all of the wonderful items the hotel has prepared. You, as the meeting planner, do have to monitor this process closely as you may need to adjust the timing and/or amounts of food that are brought out each time.

Another solution is to have servers circulate through the room with your hors d’oeuvres on platters. This approach also has its advantages over the “put everything out at once” method. You can control how often the servers make their rounds of the room and you can have them make sure that they get to everyone. Another benefit is that people tend to take less from a server’s tray than when they can simply walk up to a table and load up a plate. This is partially due to the fact that there is an “observer”, which makes people more conscious of how much they take, but is mostly due to the fact that the attendee typically does not have a plate, so they are forced to eat items as they pick them up. By the time they have eaten the items they have selected, the server has moved on to other guests. As an added bonus, your guests have the treat of having someone serve them, which always makes a good impression for your event.

Notice that, in both cases, we did not order more food. We can ensure that more people get to sample the food provided…without spending more money on the reception. And our clients’ guests still experience an enjoyable reception. However, these tactics do not work 100% of the time. There are times when we are still stuck with either purchasing more food for the reception or telling people there is no more food to be had. In spite of this, we have used both approaches successfully on many occasions and they remain strong tools in our toolbox. Do not leave them out of yours!

- Karl Baur, CMP • Project Director

Should I order a break package or should I order items "a la carte" for my Break?

The answer, as with so many things in this industry, is “it depends”. Both methods of ordering F&B (Food & Beverage) service for your event have their advantages and drawbacks. Which one you choose depends on your specific circumstances and needs.

A service package from the hotel gives you a set menu for a set amount of time for a set price (typically per person). For example, a hotel might offer a “Chocolate Lover’s Break”. For the price listed, you would get chocolate chip cookies, brownies, chocolate bars, coffee, tea, decaf, and sodas for, say, half an hour. They pretty much guarantee that there will be enough food for everyone. They will maintain enough food and drinks (within reason) for everyone to partake the duration of your break. When the time is up, everything is removed. Using packages can be a huge time-saver for the meeting planner. The hotel does all of the calculations for how much to serve and the planner knows that there will be enough food for everyone. This approach also works well in situations where you do not know the eating habits of the group or there are enough people eating so as to even out the variations of individual preferences. Please note, though, that ordering a package does not allow you to get more than you pay for. If you guarantee for 75 and 100 people show up, the hotel will only put out what they calculate to be enough for 75 – unless you increase your order to 100.

If you were to order the same break a la carte (or “in bulk”), you would specify to the hotel exactly how many cookies you wanted to have served, how many brownies, how much coffee, and so forth. The hotel would not set out any more than what you ordered (though you could always order more). This approach works well if you do not want all of the items in a set package or if the hotel does not have a package that has the items you need. It does require a little more work from the planner as well. You need to figure out exactly how much of each item your group will consume and order accordingly. The plus side to this is that you can tailor your break (in this case) to be more in tune with what your group actually wants. If my group doesn’t eat brownies but loves cookies, then I can order just cookies – instead of having a lot of brownies left over after the break is done (which then might just get thrown away). You can also have your food and/or drinks out for longer than you might get with a package.

When deciding which approach to use for my groups, I look at several factors: how well do I know the food preferences of the group, how large is the group, and (most importantly for groups on a tight budget) which is the better price value. If I know the group well, then I lean towards a la carte ordering. If it is a large group with diverse preferences, I look to packages to provide what I need. Ultimately, though, I sit down and do the math. I will calculate the total cost of the break both with the package and with the a la carte items I would provide if I were to order in bulk. This takes a bit of time to work out but allows me to know if the package is cheaper, more expensive, or the same cost as my expected bulk order.

Ultimately, though, my final decision is based on the needs of the group and which approach is the best way to fulfill those needs. But, by spending the time to compare approaches, I am better able to determine whether I should order a package or a la carte for my client’s food functions. I am also better able to work with the caterer/hotel to ensure that my group gets the best food options possible at the best price I can arrange.

- Karl Baur, CMP • Project Director

Ordering Items "On Consumption"

In previous posts, I’ve mentioned a few ways to gain a measure of control over your F&B budget at your meetings, conferences, and events. Ordering some of your items “on consumption” is another easy way to manage your costs.

“On consumption” is a term that essentially means that you only pay for what your attendees actually take or consume, instead of paying for everything that the hotel puts out for them to choose from. When you order sodas “on consumption” for your group of 40 people, for example, the hotel might put out 40 cans but, if only 15 sodas are taken by your participants, then you only pay the hotel for those 15 instead of the 40 they put out on the table. When you scale this up to a large event, the potential savings can be huge. But, before you get too excited about the possibilities, please bear in mind that there are a few limits as to what this can be applied to.

This approach really only works with pre-packaged items that do not spoil or otherwise become unsafe to serve again at a later date. For example: bottles or cans of soda, water, or other beverages; candy or snack bars; ice cream bars; or bags of chips or nuts – these are all good candidates for being ordered “on consumption”. The hotel can take any "left over" items and sell them to another group. Whole fruit is also often a viable possibility as well (they come pre-packaged by nature) as there are many uses for fruit that the hotel can take advantage of before they spoil.

It cannot be done with items such as pastries, breads, carving stations, coffee or tea, fresh-baked cookies, etc. These items, once made for you, are yours. The hotel cannot repackage them to sell (or give!) to another group – in fact, in many cases, they legally are forbidden from doing so.

So what about the other end of the spectrum? What if the group decides to take a lot more that what we can pay for? Let’s use our group of 40 people as the example again. To prevent our example group from taking way more than what we are prepared (or able) to pay for, we set an upper limit with the hotel. By instructing them to put out no more than 45 sodas, we have effectively capped the total amount that we would have to pay for these drinks – which means we can know with certainty how much of our budget is committed to this item.

As a meeting planner, wise use of “on consumption” can really help you to manage your F&B budget – but you have to ask for it. Few catering departments will offer it to you. As always, though, the hotel is your partner in this. Work with them to determine which of their F&B items are best suited to order “on consumption” and which items are best suited for your group and their needs.

- Karl Baur, CMP, Project Director

A Quick Tip...

for reducing your meeting’s food and beverage bill.

Serve dessert at your afternoon break.

It is such a simple concept, yet it is one that is often overlooked by novice planners. Indeed, most planners I work with when they are new to the field tend to treat each meal function as a separate event, unconnected to any other on the schedule. Although this is true to some extent, when it comes to breaks, you have a golden opportunity to save some money while providing timely snacks to your group.

I have often seen draft agendas that have lunch from 12:30 – 1:30, with a break (including more food!) set to occur at 2 or 2:30. Now, I love to eat, especially when someone else is paying for it, but this is a lot of food in a very short time. Your attendees will have just had lunch, including dessert, and you are now offering them more food – which is likely to be just as sugary as dessert…

Some planners believe that, in a situation like this, people will self-regulate and eat less at the break than they would if the break were served later. From my observations, though, that does not seem to generally be the case. People still pile up their plates with cookies (or whatever else is served). They then snack on the pile for a while and end up leaving most of the plate sitting on a table somewhere – uneaten! Not only have we failed to have people take less food but we have also generated a lot of wasted food – and spent a fair amount of money to do so.

The two primary solutions I offer to clients are (1) to change the time of the afternoon break and/or (2) to serve the dessert from lunch at the afternoon break. If they also need to rein in their budget, then I really will push for option #2. In fact, I will often recommend option #2 even if the break is or can be scheduled at a later time.

Serving dessert at the break instead of immediately after lunch helps spread out the meal a bit. People eat a bit less (or there is less wasted food) at lunch and their stomachs will not be as full – they will be ready for dessert when you serve it later. And, since dessert is typically included in the price of the lunch you provided, you are not spending more to have it brought out at the break. [So long as this option is arranged ahead of time, most hotels are quite willing to work with you on it and do not charge extra for serving dessert separately.] So… not only have we saved some money by not serving a whole new set of snacks but we will also, hopefully, find ourselves with less food left over both after lunch and after the break.

While this solution does not work for all groups in all situations, it is one more option to be aware of that you can use to trim your food costs while still providing your event’s participants with an enjoyable conference food experience.

- Karl Baur, CMP, Project Director

Budget Busters 101: Open Bars

Those are two words that can make your meeting planner cringe – especially if you have a limited budget for your event. Legal issues aside, having an open bar means that you have relinquished control of your budget and placed it the hands of your guests. They will decide how much money you are going to spend, not you, and they (typically) care the least about the final bill.

But, you say, my folks won’t order many drinks, so I can easily cover them. Perhaps, but many people will get more of something when it is free (to them) than if they have to pay for it. I have seen a lot of people who would normally buy just one drink have four or five drinks when someone else is picking up the tab. Get a large enough group of those people together and say good-bye to your budget…

The easiest way to control this is to simply have a “no-host” or “cash” bar instead of an open bar. With this method, your attendees pay for their own drinks. At most, you may have to pay a bartender fee (if your group orders very few drinks). And, if they do drink more than you expect, that may even result in the bartender fee being waived.

Now, I know what some of you are going to say, that you want to make your reception guests feel particularly welcome and that you do not want them to have to pay for their drinks. There is a way to accomplish this, too, without giving up control of the purse strings: tickets. This is a hybrid approach in some respects. What you do is give each attendee one or two tickets. They then use those tickets to “purchase” drinks at your event. Sometimes, the price of a soda or bottled water is one ticket, while alcoholic drinks are two tickets. Other times, one ticket buys you any drink of your choice. If an attendee wants to have more drinks, they can either purchase them from the bar or go to a ticket station to purchase more tickets. Exactly how this is set this up is not the key – that you set it up is the key.

We typically recommend to clients who want to have alcohol at a reception that they go with a cash bar as this has the least financial impact on their budget. But when we have clients who do want to have an open bar, we encourage them to use tickets instead. It allows them to still be a “good host”, providing a drink or two to each of their guests, while still keeping the event budget under control. They go into their event knowing the maximum number of drinks they will be paying for and, since we negotiate for it ahead of time, how much each drink will cost them.

- Karl Baur, CMP, Project Director

Budget Busters 101: Look out for hidden charges!

The specific charges I want to discuss in this week’s post are the infamous “plus-plus” charges. Now, I know these are not really “hidden” in the sense of planners not knowing about them but, if you forget about them as you are planning your event’s food budget, they can quickly break the budget.

So what does “plus-plus” mean? Plus-plus refers to service charges and taxes. These fees are added on top of the base price for, say, the per person cost of that banquet you are planning to serve to your top sales people. Menus for catering typically list the base price with the plus-plus added on. It usually looks like this: $35++. When my wife and I were looking at catering for our wedding, she was amazed at how deceptive that little “++” could be. It seems so easy to just plug that $35/person into your budget and know how much your banquet would cost – but you would end up with the wrong number. This is one place where novice planners and those who do not usually handle catering often get into trouble.

Service charges vary by specific property, though the different hotels within a city or geographical area typically have similar rates. (20% is a common rate in larger cities such as San Francisco.) Remember, too, that service charges are taxable. Taxes are set by cities and states and are one of the few items that hotels really cannot negotiate away – after all, they still have to pay those taxes to the city or state whether they collect them from you or not (unless you are lucky enough to be tax exempt). There are many others areas they would prefer to negotiate on instead. And, if you cannot find the specific numbers, ask. You need to know them.

So, let’s look at our example banquet at $35 per person (base price) again. If you are feeding 100 people and have a budget of $4,000, it looks like you are OK. However, remember that the rate is actually $35++, so you have to take service charges and tax into account to know if you are really under budget. If we assume a 20% service charge and 10% in state and local taxes, then the total for your dinner is not $3,500 but would be, instead, $4,620 – a difference of over $1,000! That represents a huge amount to a group on a tight budget and even large events with much larger food budgets can get into trouble if the planner forgets to include tax and service charges in their budgeting.

Keeping an eye on your food budget can be tricky with any group but, if you remember to budget for the plus-plus, then at least you won’t find yourself tripped up by these “hidden charges”.

- Karl Baur, CMP, Project Director