Brandt Krueger

TECHNICAL PRODUCER, EDUCATOR, SPEAKER, AND CONSULTANT FOR THE MEETING AND EVENTS INDUSTRY. GEEK DAD, HUSBAND

Consultant, Meeting and Event Technology
Owner, Event Technology Consulting
Instructor, Event Leadership Institute
Cohost, #EventIcons - Where the icons of the event industry meet

Filtering by Tag: Hotels

Audiovisual Megamergers: Expansion of Services or Potential Budget Buster?

(A heavily edited version of this article was published in MeetingMentor Magazine in Summer 2019. This is the original text of the article, and does not reflect the opinions of MeetingMentor Magazine or ConferenceDirect.)

It wasn’t a national emergency, or some other sad and tragic news event, but it’ll still be one of those moments I’ll always remember where I was when it happened: the moment PSAV announced their intention to purchase Encore Event Technologies. I was on the headset, calling the cues for a meeting in Nashville when the news broke. First I got a text from a technical director friend of mine, and before I could hit Reply, it came over the headset as the news spread backstage like wildfire. There were an awful lot of [expletive deleted]s on the headset for the next few minutes, I can tell you.

Within days, it hit the industry magazines and websites. The headlines were all fairly reserved, including “PSAV Acquires Encore Event Technologies: What It Could Mean for Event and Meeting Planners” and “Freeman to Sell Encore Event Technologies to PSAV”, but the articles themselves raised a significant number of questions and thinly-veiled versions of those same [expletive deleted] concerns.

So now it’s a few months later, and the dust has started to settle. While it’s too early to know how the merger is going to affect things like commission structure or audiovisual equipment prices, we can look to the past to see our possible futures.

BrandtKrueger@gmail.com

In-House vs 3rd party: an old debate

So let’s get one thing out of the way, and fast. This is not a hit piece on the in-house model of audiovisual providers. I’m not one of those, “All in-house providers suck and are overpriced” guys. Anyone that knows me knows that I’m a big proponent of using the provider that makes the most sense for your event. Some times that’s the in-house, sometimes it’s a third party AV company. Sure the in-house is often more (and sometimes quite a bit more) expensive, but you’re paying for convenience. You don’t have to buy the $8.00 tin of gummy bears in the minibar, but they’re right there and y’know, it’s been a long day and gosh darn it, I deserve those smiling little guys... but I digress.

Bigger, Better, MOre

Let’s face it: this isn’t PSAV’s first rodeo. Ever since they were acquired by Goldman Sachs, and then later by Blackstone, they’ve been buying up audiovisual and production companies at an accelerating rate. The press releases are basically boilerplate at this point, expressing how “excited” and “proud” they are to have acquired Company X, how doing so will be “expanding the breadth of its capabilities”, and what it will mean to PSAV “ and more importantly, our customers.” Swank, American AV, Hawthorn, Hargrove, Concise AV, FMAV, and now Encore - each one extending the scope and reach of the company into new markets.

What market dominance brings

BrandtKrueger@gmail.com

The advantages to PSAV are obvious. The newly-combined companies span markets across a wide geographic area, including most of North America and, thanks to Encore, Asia Pacific. If you have a national/international sales contact, they can help you work with your local offices, smoothing the often, um… inconsistent... pricing that can occur from property to property, and ensuring quality standards from location to location.

With each acquisition, PSAV’s local inventory grows by leaps and bounds, meaning less rental equipment and/or shipping of equipment over long distances. If a certain piece of gear is needed for a show, PSAV is more likely to have it close by, and easily move it from warehouse to warehouse, keeping it where it’s needed most. Any existing R&D experiments into things like projection mapping, closed “silent disco” audio systems, and advanced lighting techniques are automatically absorbed, potentially leapfrogging competition into the future of AV.

The upsides to the customers have not been so obvious, especially for smaller meetings and events. While the increase in R&D can translate into loosely defined concepts such as “innovation” and “experience”, I’ve yet to hear of any decreases in the costs to the consumer due to reduced shipping or equipment rentals. While having a national contact can help smooth price fluctuations from property to property, they can only go so far, and if your group isn’t particularly large, I’ve heard plenty of planners who have difficulty getting responses from their national sales contacts. Put simply, with a company this big, you better be a big fish if you want attention.

a shift in hotel priorities

Hotel representatives haven’t been shy over the last few years about where their priorities lie. I’ve heard well-respected senior management publicly declare, to a room full of planners, that they are no longer the top priority for venues. It’s the transient business (I hate that term, it sounds like they’re chasing after 1930’s hobos) that hotels are prioritizing these days. When a room block fills up, good luck getting more rooms. They’d rather sell them to last-minute business travelers.

Since hotels are perfectly happy not having your meeting and event business, thank you very much, there’s less incentive for them to bargain with you for that business. As a result, more and more planners are running into the phrase, “non-negotiable”, or worse, “Sorry, there’s nothing I can do about that. That’s just our policy.”

Nonetheless, having an in-house AV option is an important part of being a modern, meeting-and-event-oriented hotel. It’s kind of a given: if you’re going to have meeting space, you need to offer some kind of AV services.

our possible futures

So what happens when you combine market dominance of an in-house AV provider with hotels that aren’t inclined to negotiate? I’m not going to lie… there’s a lot of potential for budget-busting possibilities.

BrandtKrueger@gmail.com

The optimistic outcome is that as PSAV expands, customers reap all the benefits that go along with that expansion. Prices come down as the company is able to move assets easily from warehouse to warehouse, reducing costs and improving efficiency. The only problem is that, so far, those cost savings haven’t been passed on to the event organizers, and have only been realized in the form of profits.

The much-more-realistic outcome is that the trends of the last few years will continue. As hotels no longer feel the need to negotiate contracts, they’re much more likely to enforce “exclusivity” clauses with in-house AV. Basically, “If you come to our space, you’re using our crew.” And why not? In-house AV contracts include commissions returned back to the hotel, so it’s in the hotel’s interest to enforce these clauses. In the past, these could easily be negotiated away by experienced planners, but as we’ve already said, more and more often the answer is, “Sorry, nope.”

And so comes the worst case scenario: you have a hotel industry that doesn’t feel the need to negotiate, combined with an in-house AV provider that increasingly is the only option in most markets. Put simply there’s no incentive to negotiate. If you’re the required provider, and hotels don’t care to negotiate, why not raise your prices? And then raise them again? And again?

I’m not going to lie- I’m already starting to see some suspiciously large opening bids from “required” providers. Right now, they’re still willing to negotiate and come down on those prices, but for how long?

so what’s next?

Planners need to stand strong. If more and more hotels are requiring you to use the in-house provider, you need to be willing to walk away and find one that doesn’t. You should always have the option of bringing in your own AV company. If I want a snack, I shouldn’t be forced to grab those gummy bears from the minibar. If I want to take the time to leave the hotel, walk down the block to the local gas station and buy them there for a fraction of the cost, I should be allowed to. I would never stay at a hotel that refused me the ability to bring in any personal snacks or beverages, and planners shouldn’t put up with these “requirements” either.

There’s an old saying: Before the contract is signed, it’s called “negotiation.” Afterward, it’s “begging.” With the consolidation of in-house AV providers, and the prioritization of hotels of transient business, the contract negotiation process when it comes to AV is becoming a massively important part of budgets. I’ve always said that planners have more power than they realize. Now’s the time to make sure you use it!