Ultimate Conference Blog

In the last few years, food and beverage prices have been on the rise; unfortunately, it doesn’t look like this trend will be slowing anytime soon. The problem is based on a few factors—which we’ll discuss below—but you don’t need to let these issues negatively impact your upcoming event. There are creative things you can do to fight the rising costs without sacrificing quality. Knowing the reasons behind the increase in costs will enable you to seek out practical and creative ways to stretch your food and beverage budget.

In the last few years, food and beverage prices have been on the rise; unfortunately, it doesn’t look like this trend will be slowing anytime soon. The problem is based on a few factors—which we’ll discuss below—but you don’t need to let these issues negatively impact your upcoming event. There are creative things you can do to fight the rising costs without sacrificing quality.

Knowing the reasons behind the increase in costs will enable you to seek out practical and creative ways to stretch your food and beverage budget.

Let’s look at the reasons behind the rate hikes and the ways you can combat the costs.

1. California Faces Drought as Oil Prices Rise
The state of California produces roughly half of all the nation’s fruits, nuts, and vegetables. In fact, no other state comes close to matching the Golden State’s production rate; however, California has been experiencing severe drought since 2012. While conditions are on the upswing, 2017 looks to be on track for lower supply and higher costs for all of the products originating from California.

While decreases in the cost of oil of late have lowered transportation costs, offsetting higher food prices, it doesn’t look like this will be the case for much longer. It’s been forecasted that the average oil costs across the nation will be slightly higher in the coming year, meaning that transportation, and products that rely on it, will get more expensive in the months to come.

2. The Lingering Impact of the 2015 Bird Flu Outbreak
In 2015, 48 million chickens, turkeys, and other birds were killed so as not to pass on the H5N2 bird flu to humans. Subsequently, the price of eggs increased by nearly 80% for restaurants and other commercial ventures, who in turn raised their prices and, in some cases, shortened the hours in which they served breakfast in an effort to offset the significant cost.

There have been several minor US outbreaks of the bird flu in 2016, but overall the industry has stabilized, at least in the US. However, the overall economic losses faced by American businesses due to the 2015 outbreak reached $3.3 billion, and we can expect the associated price increases to stay around for a while.

3.The Increase in Minimum Wage
According to the Pew Research Center, the food service industry is the single largest employer of near-minimum wage workers. The industry requires many workers, and the jobs are often done by hourly, non-self-employed workers who are 18 and above. Of the 20.6 million Americans who hold jobs meeting this description, 3.75 million work in food service.

The proposed increases in minimum wage that have been put forward by federal, state, and local governments, especially those to target the hotel industry specifically are too high and too fast for the industry to absorb. What does that mean? Well, along with other negative consequences of raising the minimum wage, prices will have to increase to cushion the blow to the industry. Restaurants prices will start to go up, and hotels are also increasing their menu prices (not to mention their service charges) to help them cover their costs and maintain their profitability.

4. Attendees Expect Organic and Natural Food At Your Event
According to the Wall Street Journal, sales of organic and natural foods are significantly outpacing their non-organic alternatives. As consumers spend more to feed their families organic food at home, they will come to expect it at your conference as well.

While organic and natural food might be a healthier alternative, it is also an expensive alternative. As a matter of fact, organic products typically cost 20% to 100% more than their less glamorous counterparts, for reasons such as the greater cost for organic fertilizer and the fact that the demand for organic and natural food far eclipses its supply. Unfortunately, these expenses will be passed along to you. It’s going to cost you to feed your event’s attendees premium produce.

5. Hotel Bookings Are At a Record High
Leisure travelers are more likely to pay advertised room rates without a qualm, so, with bookings at an all-time high, discounted group room rates are far less compelling to hotels. Instead, they’re looking for alternative methods to gain profit from group business. With food and beverage as the next largest source of revenue, it just makes sense for the hotel to identify methods to increase their margins on catering to groups.

How to Relieve the Pain of Rising Food and Beverage Costs

So, how can you fight the escalating costs of food and beverages in a creative and engaging manner without sacrificing the quality of your event?

The best method for offsetting these exorbitant charges is to set your expectations early on in the planning process and budget accordingly. Share this list with your executive team; it will help them understand why you may need more money for your event in the context of the global marketplace. If they know that the costs are higher across the board, they’ll be more likely to increase your budget.

Work with your catering manager to source seasonal and local produce for your next event. This will please attendees who place importance on eating locally, and seasonal produce is less expensive than out-of-season fruits and veggies.

Find elements of your food and beverage budget that will have the least impact to your attendees if you change it. For example, if you substitute tap water for bottled water, or reduce the number of coffee breaks and snacks, you can save money without raising alarm among your guests.

Most importantly, know your audience and track attendance. This simple action will allow you to know what percentage of your attendees are not likely to attend your meal events and you can order less food.

The rise in food and beverage costs is a challenge that is not going away anytime soon.. Follow these creative tips, and you’re sure to have a successful event that won’t break your budget.

A special shout out to Michael Dominguez, Senior Vice-President and Chief Sales Officer for MGM Resorts International. Michael frequently shares his insights on the major economic and socio-political trends around the world and their impact on the hospitality industry. https://www.linkedin.com/in/michael-dominguez-66b9852