Presented by David Waddell, President, CEO, and Chief Investment Strategist, Waddell & Associates during a recent CANVAS Conversations
Supplier budgets and meeting costs are proving to be much higher than expected in 2021.
Many corporate meeting planners are struggling to negotiate event budgets with their senior leadership. But prepare to celebrate, because the U.S. economy has not grown at this pace since the 1980s – time to cut loose!
David Waddell, President, CEO, and Chief Investment Strategist of Waddell & Associates shared his expert knowledge on economic inflation to help event professionals leverage key takeaways for budget negotiations.
- Don’t let inflation scare you. Let the math guide your actions.
In 2020, the economy fell 31.4% as a result of COVID-19. We experienced mandated shutdowns and a record recession, and the total U.S. economy lost about $2 trillion. In response to this loss of GDP, the government passed nearly $12.5 trillion in stimulus. This means that there is a record amount of cash in the pockets of Americans.In 2021, the government stimulus will prove to be successful, with an estimated economic growth of 7% – the fastest GDP growth since 1984. These numbers are far better than most people expect. In 2022, we can expect another 4% GDP growth. The year 2000 was the last time this level of growth took place.
- Get ahead of inflation and pass the cost forward by increasing your rates.The re-open demand for goods and services is resulting in a surge of economic activity, which will accompany an increase in general price levels. While this sounds scary, profit margins are at record highs. When prices go up, they get passed forward.Because spending is also very high, there is plenty of capacity within the economy to absorb price increases. This also means that we are now seeing a record-high household net worth. With the U.S. economy set to grow $2.5 trillion in the next two years, corporate earnings will grow 50%. Inflation is inevitable – just pass it on.
- Consider paying service employees a competitive wage to incentive them to return to the hospitality industry.We are also experiencing a labor shortage in terms of participation rates. 61% of working-age Americas are in the current labor force. Pre-COVID, this was 62%. The labor shortage directly impacts the meetings and service industries, and the solution is policy-driven.With ongoing stimulus and continued unemployment benefits, there is a small chance that laborers will come back to work for less than $15/hour. But it runs much deeper than fair wages. Other factors include the cost of childcare, accessibility, location, industry stability, and more. Be mindful of increasing wages, and consider paying competitive earnings to incentivize experienced and well-trained hospitality workers to return to the labor force.
CANVAS is a brand-to-brand membership organization and consortium of senior-level event and meeting planners powered by LEO Events and Memphis Tourism. Interested in joining CANVAS? Visit meetcanvas.com to learn more.
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