Choosing the Right Model for Your Venue
By: Eric Bracht
Self-operated audiovisual (AV) department or outsourced AV provider? These are the two main choices that venue ownership and operators face today. Each business model has a distinct set of advantages and disadvantages and understanding how each of those applies to a particular venue is the best way to make sure you are maximizing revenue potential while providing value to customers. The right model for a given venue can depend on a variety of factors including property size, complexity of business, potential revenues and costs, staffing, availability of local resources, and market position.
Whichever model is pursued, there is a right and wrong way of doing them. Each business model must be optimized for the venue or the best choice, done incorrectly, can be worse than making the wrong choice.
Outsourcing audiovisual services to a third-party provider is the most common method of providing services in the hotel sector. Providers pay for the privilege of servicing venue customers while providing a commission on their revenues back to the host venue. Details of these contracts vary by service provider and location and must be reviewed in detail to determine which provider is truly offering the best combination of service and value.
The Top 5 Advantages of the Outsourcing model are:
Lower Operations and Labor Costs: Outsourcing services eliminates the need to purchase audiovisual equipment and the cost of technical staff.
AV Equipment is Up-to-Date and Readily Available: For many operators, outsourcing is the most efficient way to ensure their guests receive professional services, with up-to-date equipment.
Support Staff On-site: On-site provider staff is skilled in AV operations. They have the training and are familiar with a wide variety of equipment required by today’s meeting planners.
Specialized Technical Labor: Third-party providers maintain a network of specially trained AV production technicians that are available on an as-needed basis.
Accountability: Outsourcing AV services to a professional provider ensures that services are sold, planned and executed properly and that revenues are collected for the services provided.
These advantages to the Outsourced model have made it the go-to model in the hotel industry. However, once an agreement with a provider is signed, a carefully coordinated system must be put into place to monitor all categories of gross AV sales and forecast expected commissions. Without an organized process, reconciling the various commission percentages on different revenue categories can become time consuming and open to errors.
Providing self-operated AV services with venue staff is another means of providing AV services. While not as common in the hotel industry, this model is often found in the conference center industry, as well as private venues where there is little to no revenue stream to entice a third-party provider. Some venues hire technical staff while others may require non-technical staff to support these services.
The Top 5 Advantages of the Self-Operating model are:
Control Over the Guest Experience: Providing services with internal staff ensures that service levels are consistent with other departments and allows the venue to create a cohesive overall experience.
Higher Profit Margins: Rather than loosing significant top line revenue, self-operated venues can potentially offer value to meeting planners while still improving their bottom line.
Flexibility to meet Customer Needs: Self-op venues have complete control over pricing while still maintaining profitability as they do not have to share the revenue with an out-sourced provider.
Equipment is Reliable and Easy to Use: Where AV was once difficult to setup and operate, many of today’s AV systems are easy to use, intuitive, and very similar to what most people have in their own homes and offices.
Equipment quality is increasing while prices are falling: The speed in which current technologies (particularly display technologies) are evolving has plateaued in recent years, reducing concern about purchasing equipment that will become rapidly outdated.
Run properly, an internal AV service can produce a significant profit percentage to the venue while providing value to meeting planners. However, assuming that just having AV equipment for rental is sufficient for this model can create significant challenges. Staffing is also an important consideration. Many venues do not have a structure for operating AV services on a corporate level, and therefore have no Standard Operating Procedures, Job Profiles and other support and management systems as they do for their core businesses.
There is a third option which also may deserve consideration, and that is a hybrid approach. Depending on many of the same conditions discussed above relating to venue size, meeting space, market, business mix and local resources an internal department supported with a subscription-based AV program may be a viable option. Some venues have overcome the challenge of not having the support systems for running an AV business by subscribing to an above above-property program. As with the other options, this choice must be weighed against the benefits and consequences to the venue and ultimately their customers.
Identifying priorities between short- and long-term goals, service expectations and market positioning are important considerations in determining which model works best for a given venue. The bottom line to this question is the bottom line. No matter what model is used for AV Service it should be carefully examined to determine if it is the best model for the operator, the owner, and customers.