Business News

Rising Production Costs and Labor Shortages Are Holding Back Live Events Recovery

Skift Take

In-person events are making a comeback, but happy days are not quite here again. Labor shortages and rising costs are straining event planning budgets and putting a damper on the resurgence. 

In-person events are on the road to recovery, but it’s one laden with potholes and detours. Rising costs on everything from venue rentals to french fries, along with widespread labor and staffing shortages, are challenges facing planners in the current landscape.


F&B Staffing Shortages Raise Rates While Straining Service Standards

Just how staffing problems are affecting services and amenities was apparent to MaryAnne Bobrow of Bobrow Associates Inc. when attending a meetings industry convention at a major Las Vegas resort in mid-June. She was stunned to find that a very high-end restaurant and a food court were the only dining options at the hotel, which had offered a huge variety of them prior to the pandemic.

“Planners need to educate their stakeholders as to the current market with staffing issues,” she said. “I understand in some locations that busboys and dishwashers are being called to step up to work as chefs. Many of our supplier hospitality folks who are the most experienced have been gone for a very long time and will not return. Event facilities are still understaffed as many of their former employees have gone in other directions as well.”

In some cases, these staff shortages are directly impacting event budgets, according to Renee Radabaugh, president and CEO of Paragon Events.

“We have had conversations with venues about hosting an event and needing staffing surcharges to ensure the appropriate number of staff,” she said, adding that the problem is compounded by the fact that culinary teams are having to add labor for staffing buffets as self-serve is no longer acceptable in the Covid era.

Managing expectations among attendees who think they will find pre-pandemic service levels at hotels and other venues is another current pitfall, according to Joan Eisenstodt of Eisenstodt Associates.

“Demands on existing or newly hired staff are heavy,” she said, referring to reports from a colleague of poor banquet service at a recent large event. “I asked if the staff were new and was told that some were but many were ‘just out of practice.’”


Staffing Shortages in All Sectors Are Pushing Budgets

Jennifer Brisman, founder and CEO of VOW, is also finding that staffing shortages are being felt throughout the event industry, with both sales and production teams. “Everybody is challenged in getting the quality and quantity they need in terms of experienced staff,” she said.

Brisman also noted that the problem is exacerbated by the number of companies vital to event planning that went out of business after the pandemic hit. “Where once you would send out RFPs to dozens of caterers and production companies, you now find that 50 percent of those resources are no longer there,” she said.

However, Brisman believes that staffing shortages will ease as event business rebounds. “People are not going to bring on and train new talent without guaranteed business — they will staff up when the business is there,” she said.

Jeff Goldstein, CEO of production company Legend Productions, similarly anticipates a return to relative normalcy. He doesn’t perceive the rising costs as necessarily inflated, suggesting instead that they are now rising to “pre-pandemic levels” after having been depressed through simple supply and demand shifts during the pandemic — though adding that in certain cases, “the labor market is even tighter than pre-pandemic levels, which may force staffing costs to go up, even if temporarily.”

Brisman, whose company recently launched VOW Digital Health, an app that enables users to upload Covid test results or proof of vaccination, said Covid vaccination compliance and protocols are the key to getting the event industry, including staffing, back to a healthy state.

“Clients are asking us if the whole event staff is vaccinated, so as the event industry becomes more vaccinated, it will be easier to satiate customers who request this,” she said. “It’s an ecosystem in which one affects the other.”

Solving the event industry labor shortage may also require reforms in remuneration and working conditions, according to Eisenstodt.

”People in service jobs have left the industry, realizing there are other jobs that take place on weekdays, pay more per hour and bring respect,” she said. “For all the kvetching by planners about unions, it appears that union labor, which is experienced in what they do and often more loyal because they have representation, is more likely to return.”

Rising food costs are another current challenge. While labor shortages are partially to blame, Eisenstodt noted that the unprecedented drought conditions over much of the Western U.S. is another factor impacting food supply. So are rising transportation costs.

Another factor straining event budgets are increased shipping costs, particularly for overseas products, according to Brisman. She also said the increased demand for hybrid events involving both digital and live components is also bringing greater expense.

Goldstein confirms that while many planners may already be familiar with the AV and production requirements of broadcasting content, those embarking on hybrid events for the first time will have considerable additions to their budget associated with things like camera kits and switching equipment, camera and engineering crew to operate, high speed dedicated internet and backup 5G, staffing to organize inbound traffic, tech checks, streaming tests, etc.

However, planners who have engaged these services before may have a low tolerance for any sort of unjustifiable AV surplus charges. These planners are empowered both by their familiarity with event AV and by the expectation that venues and production companies be accommodating as they bring event business back with limited budgets and maximum wariness.

“My client’s budget is very sensitive to AV charges,” said Magdalena Bonnelly, founder and CEO of Event Strategies, “so any kind of fee associated with bringing your own AV vendor is a no-go from the get go.” Her clients “will not go anywhere with an excessive surcharge for an AV contractor unless it’s rigging or power,” but said that this level of vetting at the sourcing stage has not significantly limited her options.


Hotel Rates and Fees Are Following Suit

While it may be possible to vet specific types of fees, hotel stays and venue rental costs are also on the rise. “The overall increase in room booking costs has been significant,” said Bonnelly, noting that a hotel she is considering for a large national sales meeting quoted room rates at $179 compared to $139 at the same hotel and time of year in 2019 — a 28 percent increase.

This is hardly surprising given the setbacks suffered during the pandemic.

“Hotels and venues who have been dormant for 12-18 months now are coming back on line and have pressure to perform and get back their budget numbers,” Radabaugh said. “They’re also seeing demand as the public gets more comfortable and excited about live events.”

Along with higher rates, she said many hotels and venues are tacking on fees to cover the cost of Covid precautions. “Hotels and venues are charging for the extra cleaning, hand sanitizers and costs associated with staffing,” Radabaugh said. “It can be as much as 3 to 5 percent of a bill.”

Notably, this Covid effect is not limited to first-tier cities. Client sensitivity to the risk of cancellation in cities like New York have pushed Bonnelly to consider second-tier cities that would normally be cheaper, but comparing New York and Baltimore for a corporate client recently, she was shocked to receive quotes that were more or less the same.

“Normally the savings second-tier cities confer by way of lower room rates and F&B minimums give you a more flexible budget for other things, but the room rates were essentially the same. There are also new surcharges for complying with different Covid measures, like per-person fees for setting up outdoor spaces in addition to the per-person F&B fee.”

This parity pricing could be because of disproportionately rising prices in alternative cities, but Bonnelly speculated that hotels in large metropolitan hubs like New York may be somewhat less inclined to try on inflated rates or foist additional fees on planners due, ironically, to the higher perception of risk associated with them.


Dealing with the Rising Cost of Onsite Events

What can event planners do in the face of rising expenses? One answer is to drive down overhead and operating costs and develop new efficiencies, Brisman said.

“We need to look at how we communicate with vendor teams and customers,” she said. “At how we manage our jobs and how we can streamline and automate repetitive functions. We need to learn to take time back, so we can assure that time is optimized for the talent we do have.”

Another strategy is to engage in long-term planning whenever possible, Brisman added.

“This is a good time to be planning events that are several years out — the sooner you can lock in long-term dates, the better,” she said. “If you can book, say, three years out, you can get competitive pricing at some extraordinary spots.”

A little grit can also go a long way. Bonnelly notes that she has had to be creative in balancing her clients’ interests with her other venue and supplier partners.

“My corporate clients are very attentive to anything that might exacerbate a cancellation fee,” said Bonnelly, who has had to challenge cancellation fees and arbitrary fees that might drive them up at the sourcing stage. “If you want to get this business,” she tells her partners, “you have to start the cancellation fees at 15 percent, not 50 percent.”

While she hasn’t received much pushback from hotel partners yet, demand is steadily rising and an obligation to make a firm commitment with a higher cancellation fee is likely to follow.

If clients balk at rising event costs, Radabaugh said it’s important to make them understand the bigger picture.

“Help them see that it’s similar to what’s happening in their personal lives, whether it’s higher prices at the grocery store or shortened hours at their favorite restaurant. It’s not the event planner adding to their personal budget.”