Saturday, May 29, 2010

“All-Inclusive” Packaged Meetings & Events — The Upside and the Downside

I recently read an article published by MeetingsNet entitled “Why Choose an All-Inclusive for Your Meeting?”  Jean LaCorte, the author, raised some interesting points in favor of purchasing events this way.

For clarity, an all-inclusive plan is one employed by a venue (usually a hotel), in which customers pay room, tax, gratuities, and food and beverage included in one package price, on a per person basis.  There are variations to this methodology, at some facilities, and other services and products, such as audio visual, in-room amenities or recreation,  may be bundled into the package.  Most commonly Conference Centers utilize this business model.

The premise of the aforementioned article is “Variety and cost-effectiveness are the two main reasons” for opting to use this type of plan.  While I agree that an all-inclusive package typically offers budgeting convenience, and variety with food and beverage selections, I don’t necessarily agree that it is cost-effective.  Here’s why…

The Challenge

In the realm of hotel food and beverage, the profit margin is usually very narrow, usually somewhere in the neighborhood of 20-25%.  Hotelier friends, am I on track with that statistic?

To offer food variety, means the facility has to purchase, hold in inventory, and potentially prepare a broader selection of items, resulting in higher food and beverage costs.  Secondly, with buffets, there is less portion control, so more food must be prepared and put out to maintain the integrity of the customer experience.  So, as with any good business, the pricing for delivering these goods and services must be developed in consideration of these factors, in order to meet profitability goals.

The Upside and the Downside

From my perspective here’s a quick look at the basic upside and downside of “all-inclusive” style packaging:

Value Factor Upside Downside
Bundled Price
  • No budget surprises, it is easy to forecast expenses
  • Good solution for organizations with limited event staff.
  • No f&b guarantees to manage or inventories to audit/verify.
  • Wasteful, cost is based on #ppl registered not on #ppl actually consuming food, or other services bundled in pkg.
  • Surcharges may apply for private catered events.
Greater Food Variety
  • Typically many food options offer great customer experience and “bang for buck” factor.
  • More expensive for facility to deliver on this type of foodservice.
  • Cost will be passed on to customer ultimately. (via pkg. price)

In my experience, as an event professional, all-inclusive pricing is  only an economical option if all attendees use all or a majority of the services bundled into the package.  With many events, it does not play out that way, particularly with food and beverage.

My comments in this article are absolutely not intended to alienate, or diminish the value of “all-inclusive” packaged facilities.  In fact some of the finest meeting and conference venues operate successfully, using this business model.  I believe what is most important is to match up an event to a facility that meets its historical needs and personality.

If quality is your event’s primary objective, and you have limited event management staff, and ample financial resources, then all-inclusive priced facilities may be the best solution for your situation.  If your meeting has a history of low attendance at meals, and your organization is operating on a tight budget, then it may be wise to consider alternatives.  Make sense?

Question:  How do you perceive your event fits into this scenario?  What factors do you consider?  Have I missed something in this article?  Please add your thoughts!

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{ 11 comments… read them below or add one }

Dave Lutz May 30, 2010 at 9:43 am

Mike, nice analysis! Here’s a couple more thoughts to add to the pros and cons:

– Breakage – For all-inclusives, the facility (not the group) benefits from the no-shows. If someone decides to skip breakfast, go off property or catch a flight before lunch, the facility keeps the revenue without delivering the goods and services.

– Satisfaction – Attendees love the continuous coffee breaks and special treats! Often times though, this is substantially more than the group would do on their own when purchasing ala carte. Non-perishables can also be recycled for the next day.

– Back office accounting – lots of corporations like the fact that they can have the attendees put the charges on their corporate card and in-turn alocate to the right department.

– Increased liability – Most facilities offering this model have increased liability for performance. i.e. higher attrition fees based on the full package

Reply

Michael M McCurry CMP June 1, 2010 at 7:56 am

Hi Dave,

Some great additional points to consider, thanks for providing them.

It really is a very narrow niche of meetings that will benefit financially from an all-inclusive plan, as you know. If cost savings are the objective, this is most likely not the way to go, in most cases.

If quality of the experience is top priority, along with convenience, for orgs with limited staff, then it very well could be the best way to go.

Thanks for contributing to the discussion.

Mike

Reply

Faith Adams May 31, 2010 at 6:05 pm

Thank you for this post!

Don’t hotels use hotel room bookings to offset some of their costs – offering discounts on venue rental, rooms or both? This is certainly an advantage for events with lots of out of town guests. However, I disagree that there are a wider variety of menu options available at a hotel. Hotel menus are generally limited to an Americanized cuisine with limited dish items. A professional caterer may be trained in a wide variety of cuisine styles and can tailor their menu to the needs of the client — and if not, the client can choose a caterer specializing in the desired culinary tradition. Billing is certainly easier with all-inclusive packages, but you may be charged for services you aren’t using. Final thought – all inclusive packages generally provide cookie-cutter approach to events, leaving little room for customization. Every event is unique.

Reply

Michael M McCurry CMP June 1, 2010 at 8:38 am

Hi Faith,

All perspectives are welcome here, and thanks for providing yours. You raise some really good questions and make some really valid points.

First, to clarify something, “All-inclusive” style pricing is not necessarily isolated to just a hotel, as there are many facilities, that offer meeting space only, that use this pricing method. One example of such a facility is the Summit Executive Center in Chicago.

In the vast majority of traditional hotels, the number one profit center is sleeping room revenue. For each dollar spent 70-80% of it is profit. In contrast f&b revenue hovers around the 30-40% mark.

Venue rental is a third component in the pricing mix which is utilized by hotel managers to bridge the gap between the profit goals of the hotel and the perceived value of the event. So, if the hotel believes the sleeping room revenue and f&b contribution are unbalanced, they may quote meeting room rental as a method of regaining revenue balance.

With regard to food & beverage variety, in all-inclusive style facilities, meeting attendees often eat their meals in a general dining room (which may be shared with other groups), not in a private catered scenario, although it is possible to do that as well, for a surcharge. Since the meals are typically in a dining room, setup like a restaurant, greater food variety can be offered. If the organization decides it wants private catered events, then, as you pointed out, the menus are more limited, and as already stated, there is a surcharge.

There are many other scenarios that apply to all-inclusive style facilities, too many to list here. Suffice it to say, that these type of facilities do not profess to be the “least expensive” facility on the block. Their focus is to provide quality, not necessarily cost savings.

Faith, thanks for contributing to the discussion. It is much appreciated!

Mike

Reply

Anne Thornley-Brown, President, Executive Oasis International June 1, 2010 at 11:49 am

There are many advantages to the All Inclusive scenario. The main downside comes if a group wants to do a number of off-site outings and excursions. Typically you can’t mix a BP and an all inclusive plan for the same group (i.e. BP some days, all inclusive plan other days). One way to get around this is to have the group check out of the All inclusive after a few days, do all of their off-site excursions on one day and then check into a nother hotel that offers a BP. I wish that hotels offered a BP bundled with the activities that are included in the all-inclusive option. Even a MAP plan that includes breakfast, dinner and also all inclusive activities would give some flexibility.

I had written something related about the downside when hotels get into the team building business. I hope your readers find it to be of value and that you will add your comments Mike:

When hotels get into the “team building” business, is there cause for concern?
http://corporateteambuilding.wordpress.com/2010/05/22/team-building-do-you-see-the-difference

Anne @executiveoasis

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Miguel Castillo July 20, 2010 at 10:20 am

I just returned from cabo san lucas and stayed at an all inclusive resort. It was great ! to say the least.
my question is. how does a resort make a profit?
24 hour service
the quality of food was great.
liquor was top shelf
and you did not have to leave a tip to employee’s who work hard (we left tips)
please help me understand.
i will not stay at all inclusive hotels from now on.
thank you

Reply

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