Hotel’s in-house AV: What you should know before signing.

A hotel’s in-house AV provider is like a Starbucks coffee stand inside a Safeway grocery store. When you buy your grocery, you don’t necessarily need to or must purchase a Starbucks coffee.

One of the first steps in planning an event is securing a venue, and along with it comes one of the most common mistakes I see event organizers make, which is using the hotel’s in-house AV contractor without understanding the potential challenges it may cause. They make this decision either because they want to avoid hotel penalties from using an outside vendor or they prefer the “convenience and security” that an in-house AV contractor can seemingly provide.

Before I continue, I should clarify that this article is not about assessing the service quality one might receive from a hotel’s in-house AV provider. All reputable AV companies generally operate in making sure that your event is executed well, and a hotel’s in-house AV contractor is no exemption. Rather, my goal here is to share with you the reasons why agreeing to an exclusivity clause when signing a hotel agreement can have planning and budgetary consequences that you may not have realized. As an event production planner for over 10 years, I see this costly mistake happen often and my goal is that by sharing my knowledge in this article, you will be equipped to recognize and make an informed decision when you plan your next event.

Why hotels insist on you choosing their in-house Audio-Visual Contractor?

Financial incentives and maximizing revenue. Rightly so since hotels and convention centres are in the business of making a profit. I think it is important to know that it is almost always for certain that a hotel’s in-house AV provider is not part of and is a separate business from the hotel. They are business partners. Their relationship can be likened to a Starbucks coffee stall inside a Safeway grocery store; when you buy your grocery, you don’t necessarily need to or must purchase a Starbucks coffee.

Hotels and their in-house AV company are in partnership agreement that allows them to receive financial incentives from your business. Typically, a hotel’s audio-visual contractor will pay roughly 50% of all their gross budgets to the hotel, and maybe an additional signing bonus to get the sole access of the venue. This is the reason why the audio-visual rental and service price you receive from a hotel’s in-house AV provider is much higher than an outside vendor.

Despite of the fees that an in-house AV provider pay the hotel, one can argue that the cost outweighs the benefits that they receive in return. By becoming the sole contractor for anyone using the venue, the hotel’s in-house audio-visual contractor:

  • effectively eliminates their competition for your business;
  • avoids transport costs that they would otherwise incur each time they bring equipment onsite; and
  • receives an automatic flow of customers whenever an event is booked at the hotel.

From the perspective of the in-house AV company, these all sound convenient, doesn’t it? But what does this mean for your event? By conceding to use the hotel’s in-house AV, you are conceding your leverage to receive an equitable pricing and quality of service for your event. More on this below.

Why using the hotel’s in-house AV provider is optional, not a requirement in your hotel agreement.

In my opinion this is the number one misconception that many clients have when negotiating a hotel agreement. A hotel, unless in the case of a union contract (more on this later), cannot legally prohibit you as a client from choosing who you want to work with for your event. Doing so would be in direct violation of the Competition Act. It is only when you sign the hotel agreement containing an exclusivity clause that you become tied to work with their in-house AV contractor. This may sound obvious but unfortunately, many people still think they don’t have a choice but to work with the in-house AV if they want to host their event at the hotel. But why is this so?

Most would attribute it towards the confusing language used in the agreement coupled with the heavy-handed tied selling tactics involving additional fees and penalties during the negotiation process. This maybe true but in my experience, this is only addressing a surface level issue. I believe a deeper reason why most clients feel they have no choice but to work with the hotel’s in-house AV is because they are not empowered with the correct information that would allow them to make confident decision in tipping the negotiation scale more in their favor.

For example, most clients enter the negotiation process without a clear breakdown of their event budget. As human beings, we are generally risk averse, we prefer a for sure outcome over a gamble with a higher or equal expected value. For majority of clients, hiring an outside audio-visual vendor feels like a gamble because of the additional hotel fees and penalties they might incur. This perception of risk often comes from lack of information or sometimes misinformation. Without seeing a breakdown of projected cost, hiring an outside AV provider will always feel like a risky gamble.

Having a clear breakdown of your event budget means really working out the numbers. It involves asking the hotel to fully disclose all cost for your event in the agreement from the start, including additional fees and penalties for bringing in an outside vendor. It involves collecting a price quotation from several audio-visual contractors and comparing them with the hotel’s in-house AV contractor. Having a clear understanding of your event costs should empower you as a client to gain confidence in deciding whether hiring an in-house or outside AV provider makes the most sense from a financial and service value perspective.

Another example is some clients may not know (or forget) which service components hotels make the most revenue from, so they enter the negotiation process thinking they have no leverage to offer. Hotels will make most of their revenue from the total guestroom bookings and banquet orders (i.e., meeting room rentals and food and beverage orders) of your event, and not from an in-house AV commission. If your event is blocking overnight stays and utilizing catering services, the hotel will be more willing to negotiate on the removal of the exclusivity clause.

And third example is that most clients don’t sit on the negotiation table believing that the hotel ultimately wants their business. Hotels are not in the business of selling audio-visual service and if your event is in a major city where many venues are lined up along a single street, hotels know they can lose your business to a competitor who wont lock you into using an in-house AV contractor. Imagine being required to buy coffee from the Starbucks stall every time you buy groceries at Safeway, you’d probably start looking at buying your groceries somewhere else.

The bottom line is this: knowing your rights and understanding your budget will grant you a better positioning in the negotiation process with the hotel. Having the right information will enable you to clearly gauge whether its worth incurring hotel penalties if you bring in an outside AV vendor of your choice. What I find often is that despite of the additional hotel fees, client’s not only save money but also receive better service from hiring an independent AV vendor. I’ll explain this further below.

Negotiation tactics: reasons you might hear why the hotel’s in-house AV is better.

Hotels will of course never disclose the reason why they want you to choose their in-house AV contractor is financially motivated. Instead, you might hear the following reasons below and I want to clarify why these are not necessarily true.

“Our in-house audio-visual contractor knows our venue best.”

This is not a real advantage. Any reputable and experienced audio-visual contractor can easily acclimate to any venue and room setup.

“Our in-house audio-visual contractor has all the equipment you need ready onsite.”

This is not always true. Their equipment is often shared across the different hotels that they have exclusive contract with. So, they may not always have the equipment readily available onsite. Any reputable outside AV vendor will have just as much equipment as the in-house AV contractor.

“Our in-house AV contractor will provide the least risks of damaging our meeting space.”

Or you will hear similar concerns surrounding security and insurance requirements but again, any reputable and well experienced audio-visual contractor understands the proper handling, transport, installation, and breakdown of equipment for any type of venue, large or small. And they will have an insurance as well, so this isn’t a real advantage either.

“Our in-house audio-visual contractor serves all types of events on a weekly basis; we have seen it all.”

True. In fact, it’s likely that their in-house audio-visual contractor will also be serving other events at the same time as they are servicing yours. Not having a dedicated team can be a huge risk specially when organizing a multiday event. Having the same onsite team involved from start to finish is crucial in running a smooth production.

“We are unionized company and must use our in-house audio-visual contractor.”

True, but even a unionized venue can still bring in a third-party AV contractor. They may require shadow labor, resulting in additional fees, however, there are ways to negotiate around this too.

As I mentioned earlier, the hotel cannot legally prohibit you from bringing in an outside audio-visual and support team so long as they (your chosen vendor) adhere to the safety standard laws and are not modifying the venue’s meeting facilities. The venue will certainly try to discourage you from bringing in an outside audio-visual provider because they have an agreement with their in-house AV contractor, an agreement that you have no obligations to fulfil unless your sign the contract and agree to their exclusivity clause. Everything can and should be negotiated. Ask to have any clause removed that restricts you from bringing in your own vendor of choice.

What are the main event planning challenges resulting from a hotel’s in-house AV exclusivity clause?

There are three critical event planning challenges that every client should keep in mind before agreeing to an in-house AV exclusivity clause with the venue. They are critical because I think these challenges are often overlooked and hard to discern without having a clear breakdown of costs, including hidden fees. What’s more is that these challenges almost certainly lead to a negative event experience overall for both the client and their audience.

Unplanned expenditure that adds no value to your event.

The first challenge is spending an out-of-scope cost that adds no value whatsoever to the event. As I mentioned earlier, a hotel’s audio-visual contractor will pay roughly 50% of all their gross budgets to the hotel, and maybe an additional signing bonus to get the sole access of the venue. Unfortunately to maintain their profit margin, the in-house AV contractor would have to build these internal fees in their service pricing for your event.

On average, an in-house AV contractor will bill customers between 120-200% of the prices charged by an independent AV vendor for the same type of event. This means that you as a customer would need to, on average, double your original AV budget to cover for the internal fees that an in-house AV contractor is liable to pay the hotel. This cost adds no value to enhance your event and, what’s more, it can cripple your event budget from potentially investing in components that would otherwise provide a positive return – components such using an event platform and App, boosting your event marketing tactics, or creating new opportunities for audience engagement.

Decline in service value relative to price.

The second challenge is receiving a service value that does not justify what you pay for. Consider this, if vendor A and vendor B are given equal AV budget of, say $15,000 to service your event, but Vendor A would have to pay half of that budget to the venue, then Vendor A would only have $7,500 to make a profit and still somehow effectively service your event. Vendor B on the other hand will be able to maximize 100% of your AV budget in creating the best possible experience for your event. Because of the hotel commission, vendor A has no choice but to either raise their service price or utilize older AV equipment and less experienced AV technicians to cut cost – regardless, either scenario does not benefit your event.

Let’s see how this plays out in a more realistic scenario that I guarantee you may have already experienced. In your next AV quote, I encourage you to examine how much you are being charge for an AV technician operating onsite. Based on current industry data, an AV technician earns around $60K per year, which comes up to roughly $30 per hour. But if you look at your AV quote, you will probably see a charge anywhere between $100 to $150 hourly rate for an AV tech onsite. At $150 an hour, you should expect an expert and highly experienced senior technician managing your event. However, this is not often the case, and the breakdown of the numbers below should demonstrate why.

Fee breakdownBreakdown description
$75.0050% of $150 paid out to hotel by the in-house AV as commission
$30.0020% profit margin on average for the in-house AV company
$30.00AV technician’s hourly rate with an average annual income of $58-60K
$15.00Variable costs, cover’s incidentals etc.
$150.00Total charge

As the table shows, roughly 20% ($30 per hour) of the $150 hourly rate is spent on an AV technician for your event while half ($75 per hour) is spent towards the hotel commission, which again adds no experiential value for your event. Although the table above only shows a breakdown of cost for an in-house AV tech, it should nonetheless help explain why the AV rental and service price you receive from a hotel’s in-house AV provider is much higher than an independent vendor.

Side note: I should also mention here that an independent vendor will not always provide you with an expert audio-visual engineer for your event. Some do and some don’t. The best way to tell is to gauge the price they are charging you for their service personnel. If the hourly rate works out to be between $60 to $80 or more, don’t hesitate to ask and make sure they are not providing you with an entry level AV technician to manage your event. In some cases, independent AV vendors will enlist specialty labours which could be a reason to drive up their cost.

Hampers creativity in putting on a really great event.

Innovation in event technology and design has exploded in the last 10 years, and the rapid changes in the events industry following the pandemic called for changes in structure, technology, and professional skills. If you are planning events, you should feel every excited and inspired by the possibilities of incorporating new ways of connecting, engaging, and sharing ideas for your event. But this creativity is harder to explore when you do not invest your event budget to components that generate the best possible return. The 50% of your AV budget should be spent on finding creative ways to elevate your event, not as a hotel commission.

Conclusion

At the end of the day, it’s more comforting to make informed decisions when you have the right information in front of you. You as a customer have the right to choose which provider you want to be working with at your event. Do not be afraid to ask questions and explore all your options. Really work out your numbers in your event budget. Be as detailed as possible and gather quotes from other providers to receive the most equitable pricing for the same type of service. Having all the necessary information before you sit on the negotiating table with the hotel (or any service provider for that matter) is a must have, not a nice to have. The person who can communicate his or her needs first in the negotiation table always gains the upper hand because what they put forward sets the tone for the discussions moving forward.

In a follow-up article, I will be sharing a step-by-step guide that you must have in place before you book a venue. Signup to our monthly newsletter to be notified for when we have it available . And if you have an event and would like our help, book a free consult with us via our contact page.

17 Comments

  1. I work for a large in house provider that services multiple venues. This is a really great and honest article. However, not all Starbucks are the same. Using the in house provider may not always be the best option based on the scale of the event. Regardless, It really comes down to the experience of the staff and relationship with the client and venue that determines value.

    • Craig, you are quite right sir, It really comes down to the experience of the staff and relationship with the client and venue that determines value.

    • More importantly, while that Starbucks can do all the basics, they do not have ALL the drinks on the menu and likely don’t even know how to make them as their bread and butter is coffee’s and Latte’s. that fancy stuff… they rarely do that.

  2. Very well said, and yes I personally have been on both sides of this fence and it hits the nail on the head. More emphasis should have been made about the in house having to service multiple events during your event. I have personally seen an in-house A/V tech having to leave a meeting in progress with a panel discussion to deliver a stupid flipchart… (more than once) And to fess-up, I was forced to do it when I worked for the “in-house” SMH…
    ****But what REALLY should have also been mentioned is that the A/V services are ALSO subject to the hotel’s “Service Charges” like they already add to coffee breaks/meals/banquets, and this is on top of the higher pricing. It’s no joke when you add 22.5% – 28.5% in “Service Charges”, and to add insult to injury, in California even the “Service Charges” are taxable… So, assuming you are “Quoted” a $10,000 in-house budget, but get billed $13,000 – $15,000 with the “Service Charges” & taxes added…

    • Hi Bill, nice comment!
      Thank-you very much for raising an important issue.
      Maybe that topic in itself should be a separate topic on its own.

  3. Great article, I have made These same observations for years, hotels will never give you an exact budget showing all their fees or explain their relationship with their in-house vendors. It is straight collusion. There is no added value using the in-house A/V companies except paying double the price for half the value.

    • Hi Peter, thanks for your comment. You are correct it has been going on for a while, the key value an in house team can bring to the table is the knowledge they should posses of the facility and its little idiosyncrasies.

  4. I”m in Canada and we have run into this issue more than once. One thing to be aware of is how the AV company works as a team. We did an event where we were contracted by a long term client but they went to a hotel and were “forced” to use to the in-house provider. fortunately, our client was able to bring me on-board as an iterface between them and the in-house AV supplier. Simply asking their “audio guy” to adjust a light or move a piece of drape was like pulling teeth and he took it as in insult. In this case he was definitely not a team player.

    • Thanks for your comment Michael, it was very smart of your client to bring you in as an interface, they obviously saw your value and respected your work/experience.
      You were unlucky the person onsite was not a team player, which is quite unfortunate to same the least. I think it is very important to note that there are many absolutely fantastic inhouse teams who are great to work alongside. Our rule of thumb when dealing with in any inhouse av provider is to treat them with respect they deserve, and ask how we can best access their skill sets, to create a melding as such of two organizations. At the end of the day our only job is to work with everyone to make our client look as good as possible.

  5. Excellent read, indeed — been preaching so much of this for years. Clients need to be educated about their leverage pre-signing vs. post-signing.

    In recent history, I have found PSAV/Encore to use Internet charges as a financial bludgeon for using their services — use PSAV/Encore, they’ll give the internet for free…….use an outside AV provider, they’ll financially punish you by charging exorbitant $$$ for a shitty little 25M service.

    The main way to get out of this vise is for the client to pre-negotiate internet access before signing. Free internet is one of the easiest ask of a hotel……it literally costs them $0 to give it away, whereas other client concessions will have real costs to the hotel. JUST ASK, they’ll give it away in the bat-of-an-eye

    • Thanks for the response to the piece Ben, education is always key as you stated.
      It truly never hurts to ask and have open discussions and pre-negotiate with venues prior to signing.

  6. Good article but I don’t know where you come up with $30 per hour for a tech. I work many jobs non-union and a 10 hour day runs between 550-700 per day for quality tech. You can get away with a less hourly for carpenters and load-in crews.

    It is very hard to negotiate anything with the hotel once the contract is signed. Planners need to really look at the discounts from in-house and the Service Fees that are nothing to the client but expense. It’s the payback to the hotel for having their company in-house. AND don’t forget to negotiate items like power and rigging if at all possible.

    Negotiating contract has much to do about the size of group and the amount of business bringing to hotel with rooms, F&B. Time to get the hotel sales department in to help with the negotiating.

  7. It is about time someone (Thanks Les) put all this information on the table, for better or worse!! Almost every production contractor that does this level of work has been put in this position of having to work with a client to see if it makes sense to “fight city hall”, or, just let the client run with the hotel or venues in house provider. To be clear, many in house providers provide great personnel and great service, and at least for the higher price, the deliverable is met with flying colors. At least for the “ouch”, the client walks away satisfied. This said, that is not always the case and and that is where the rubber really hits the road.

    There are other points to consider looking at. For example, what happens when there is a technical issue that, like it or not, 99% of the time falls on the contractor? Someone has to get tossed under the bus! Rare as these scenarios may be, it happens. We have all been there, we have all taken the hits, and we have all smiled when wanting to strangle someone. With an outside A/V contractor with a direct client relationship, it is 99.9% of the time worked out easily and immediately for better or worse for the contractor. There is a summary resolution with whatever recourse nets out. The A/V contractor wants to keep working with the client generally at all costs. Cutting a slice off a bill or adding “gimmes” for a client of yours for 10 years is priceless, as are the next X years of ongoing business. On the flip side, the client may never be in this particular hotel again and the staff there knows it. The technicians a the hotel, generally speaking, move around (as does equipment at times) to other properties. The primary staff techs, supervisors, and management are valuable to the provider as F/T personnel. If they completely drop the ball or have a less than pleasant interaction with the client, there isn’t necessarily any recourse for the client nor much with the employee unless a total disaster and a real battle ensues.

    With a private contractor, complaints are taken very seriously as even the slightest issue can cause a client to change providers. The contractor is either servicing a long term client they value or, a new client they want to service 1000% and hopefully develop a relationship with. The hotel provider has a contract and is not going anywhere for X years. It is unlikely someone is getting fired over one issue that is valuable to keep at the property.
    Also on this subject, it is not unheard of for hotels to throw their own contractors under the bus so to speak; “because of X, and we will give you 25% off of the A/V” or “we know the XYZ problem is real and we can’t do anything with F&B, but we will discount the A/V. Why? Because generally they can, and they pound the hotel contractor who takes it on the chin. I have even seen this as part of hotel negotiations. They want to keep the occupancy rate up which is very visible. If the A/V revenue goes up or down, that is not quite as noticeable or measurable to the head office.

    Another issue is simply the lack of any negotiating ability with the hotel or hotel provider once the die is cast and that is whom the provider will be. A private contractor with a client relationship will bend over backwards (within reason) to support the client. The goal is to keep the client for as long as possible. The hotel staff generally is always professional qne has a skilled leader, yet ultimately, they know that while they are in the hotel, the business keeps on coming. There is no marketing to be done, no chasing clients, it is the proverbial “shooting fish in a barrel” scenario. The moment the signature is on the page, the client loses very significant leverage. Overtime is a frequent client complaint. Lack of personnel oversight is another. Lack of ability to service last minute “OH SHITS” can be a problem as only so much equipment can be kept on the property. Excessive charges to bring in equipment is as well. Outside contractors pack like they are going to war; plenty of spares, plenty of backup, little things that at the 11th hour can be accessed in minutes or seconds and not have to come from off site. On the flip side, in house contractors are often pummeled by NOT being able to charge for shortages or crazy costs to cover a last minute request.

    Then there is the shadowing…….. I will leave that for someone else to comment on. I don’t think anyone will disagree that a facility rep should be on site to look out for what goes on in the space for many reasons. Curious to see if someone can opine on this. Someone else can talk about what happens when an outside contractor has equipment sitting in several locations in the facility for days and the next morning………. WTF? This was here last night! Then there are power charges, electrician charges (even when connecting cam loks and flipping on the disconnect), the rigging requirements, etc. that at times make sense and at times do not. The elevator operator that somehow is not there when needed, the blocked dock, etc. Some of this occurs naturally, some might not…… Oh, lest I forget the Wifi if anyone would care to comment on that.

    Overall, both sides of these scenarios are profit motivations. At the end of the day, profit notwithstanding, it should be all about satisfied clients no matter what and dealing with them fairly. None of the above comments are intended to stir the pot, they are merely to expand somewhat in a great article by Les who deserves a shout out for putting this in an open forum.

  8. It’s interesting. I’ve actually worked on all three sides of this paradox, contractor, in house (for a long time), and now venue (ish). I have formed the conclusion that those who are willing to do the most for the business and provide the most value for the customer deserve the business though. No one side is “entitled” to it. You have to constantly win business and develop direct customer.

    IMO whichever service provider is willing to provide the most value to the customer and the customer wants to use (despite consequences of that choice) they should freely use them. Very idealistic, but I’m at that point.

  9. A highly accurate and impartial assessment on a particularly specific and complex phenomenon in the business events industry. Bravo 👏

    Thankyou for the development of this article as it will benefit many to be so valuably informed.

  10. Good Read. Thanks for pointing out the pre-negotiating up front when signing your contract with a property. You can always choose the in-house company but if you don’t you won’t have extra fees with bringing in your own provider.

  11. For years I’ve been sending this “Buyers Rights” clause to my customers to add to their hotel contracts.

    Buyer’s rights regarding third-party suppliers:

    Buyer will not accept or agree to any proposal or contract containing conditions, terms, or clauses which unreasonably restrict our choice of third-party suppliers for our event(s) at any meeting facility, whether such conditions are expressly stated in the proposal or contract, or whether they are contained in the general operating policies of the facility, be they published or unpublished.

    Furthermore, Buyer will not accept or agree to any fees, surcharges, or penalties of any type charged by a meeting facility that are in any way based on or tied to our choice of third-party suppliers, whether such fees are expressly stated in the proposal or contract, or whether they are contained in the general operating policies of the facility, be they published or unpublished.

    This “Buyer’s rights regarding third party suppliers” clause shall be appended to all contracts that are executed by Buyer, and if it is determined that this clause is in conflict with any other clause, portion of any contract, or any general operating policy of the facility, then this “Buyer’s rights regarding third party suppliers” clause shall be deemed to take precedence over the other item(s) with which it is determined to be in conflict, unless specifically agreed otherwise.

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