The US economy is moving into a period of higher inflation than we’ve seen in the past 20 years, with inflation jumping 3.4% in May of 2020 – the biggest increase since the early 1990s.
The price of goods will continue to rise sharply through the end of 2021, and economists do not expect supply chain pressures to ease significantly until 2022. U.S. Bureau of Labor Statistics has found that CPI (consumer price index) inflation is currently at 5.4%, meaning the cost of retail goods and services has increased sharply in the last year.
Planners are looking to not only meet the aspirations of their audiences, but also fit within the constraints of their procurement departments, and companies are needing to make crucial decisions to drive business forward.
The pent-up demand and lost revenue of 2020 are continually increasing the price of live events, and LEO Events is finding that, on average, the cost of live events has increased 30%-40% compared to pre-pandemic events, with 10%-15% of total production budgets allocated for health and safety measures. So, what does this mean for 2021 and 2022 live events?
It’s time for companies and brands to rearchitect their experiential strategies and budgets. “My advice is to plan early and plan on increasing your budget,” explains David Kenyon, Senior Vice President of Production at LEO Events. “Because of COVID, our industry shrunk – it’s simple supply and demand. There are fewer companies and less supplier availability to meet the budget expectations than we saw pre-COVID. Planners are no longer in the driver’s seat, so making decisions sooner rather than later is important.”
For ticketed public events and festivals, inflated production costs can be offset by increased ticket pricing and sponsorships (more on passing on higher costs here), but how can corporate event planners create and adjust budgets in a post-lockdown (and now Delta variant) landscape?
The answer lies in contingency planning, strategic estimations, and realistic budgeting – knowing that inflation is slated to ease by the end of 2022. When it comes to budgeting and financial planning, over-communicate key information with stakeholders and suppliers to provide everyone with the most current and important information. Work with your team on the what-ifs and the worst-case-scenarios, and strategically align your event objectives with cost estimations on must-have items that will help you meet those objectives.
It is also important to manage attendee expectations on travel accommodations, as many hotels and venues are working to rebuild their staff. “Many hotels are asking for higher, non-refundable deposits, but everything varies across different properties,” says Jeanette Foster, Meeting Planner at LEO Events. “Transportation is harder to obtain, and there is a shortage of drivers and flights. With so many industries seeing labor shortages, managing attendee expectations is the most important thing to having a live event in 2021.”
Budgets should be based on event goals and objectives, which help to determine where to allocate funds when vendors are able to charge a premium. Prepare to create a flexible budget with regular forecasting to allow for adjustments and optimizations.
With so many variables, dependability deserves a premium in light of shortages. Working with an agency partner ensures proactive communication, transparent details, and dutiful contingencies. At LEO, we understand that event budgets aren’t one-size-fits-all, and we’re ready to help rearchitect your recovery-era budget to meet your most important event objectives.
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