Have you ever wondered why the bids for in-house AV seem so high? There are many possible reasons for this, but today, we will focus on one of the more likely ones: in-house AV Commissions. Did you know venues can get paid a kickback for referring an in-house vendor to them? Doesn’t it make sense? From a business partner’s perspective, it makes sense. However, those kickbacks could lead to increased AV costs that hurt your budget. These commissions can be as high as 60%-70%. The money must come from somewhere, and it’s you! Will Curran explains how in-house commissions for AV work work and how this could affect your budget.
Video transcription: How do in-house AV commissions work
How are you Endless fans doing? Will Curran is back with another Whiteboard on Tuesday. We’re going to talk about the in-house AV Commissions today. Brent Kreuger, others, and I were running a session for Connect called our AV Smackdown. In this session, we pitted third-party AV against the in-house AV company. Brandt moderates the discussion. You can learn a great deal about the business models in those conversations. We talk a lot about the in-house commissions for AV. Most people do not understand how they work. Many people are unaware that these commissions exist. I wanted to explain how that works and why people think in-house AV is a bit more expensive.
Let’s quickly talk about it. If you don’t understand, often, hotels contract the in-house audiovisual company in an arrangement that allows them to work together. The majority of people are aware of this. Most people do not understand the little commission system. I’ll explain the process. The first step is for a hotel to say that they want to have an AV company in-house for their client’s convenience so they always have someone available. We want to make sure there are no last-minute changes or requirements that the hotel will be able to handle.
Bidding For In-House AV
In this case, the process is done by a bidding process. They will look at vendors in the same way you would. We will send out bids for in-house AV to those who are interested. In most cases, the relationship is structured so that the in-house company has some equipment, staff, and an office on site. They will work closely with the client. The hotel shares with their client in return. As soon as you sign your hotel contract, they will say, “Hey, I’m going to introduce you to John from the AV Company, an in-house company.” Most people do not realize that this is usually done with a commission.
This works as follows: When the hotel shares business with an AV firm, that company usually gets a 100% commission, though this depends on the property. Usually, however, the AV agency will get a kickback in the form of a rebate. This incentivizes hotels to do business with them, and they can then get money back. You may have wondered why hotels are so motivated to use their in-house audiovisual company. Now you know why. It’s because of these kickbacks. You may be thinking, okay, cool. That makes sense. Are they sharing business? Why would they not share revenue?
In-House Audio Visual Company Offers Venue Kickbacks
Well, these commission structures are sometimes very different. These commission rates can be as low as 5%. However, when we spoke to planners and in-house AV firms, the numbers could reach as high as 60%. Even once, I heard 70%. This is a very high percentage. That means that 70% of the revenue generated by the hotel’s in-house AV firm is returned to the hotel. The hotel gets an extra source of income. However, the AV company loses money. They have to raise their prices.
You can see that this commission is affecting the price. It’s a symbiotic arrangement whereby the hotel passes business to the in-house audiovisual company, which then shares money with them. The hotel also provides them with an office, contacts, and other things. In return, they have intimate knowledge of the property. This is how it works. The kickbacks are a big part of pricing. When you get to these 60, 70 percent, it’s not a bad thing. But when you reach a projector that costs $1,000, the company only makes $300. To make the money they need to maintain that projector, they may have to charge up to three times as much. Remember that when it comes to these symbiotic partnerships with these kickbacks.
Before signing any contracts, negotiate with the other party.
You might think to yourself: I don’t want to be involved in this. It’s no wonder that they charge so much. As we discussed in our How to Remove In-House Restrictions guide, which you can find below, and in previous videos, where we debated negotiations with wifi, etc., this all needs to be done before signing the contract. You need to negotiate this before signing the contract if you decide that you want to be able to bring in an outside AV company. If you don’t, then we call anything, including negotiating after a contract has been signed, “begging.” Negotiate this before you sign the contract.
We also talked to some in-house AV companies. They say that sometimes, if you speak to the hotel and AV company, kickbacks can adjusted event by event. Again, this depends on the property. Will they work with you or not? Will they work with you? This can sometimes be changed if necessary. All of this has to be done before you sign the venue contract. All of this must be done before signing your contract for in-house audiovisual.
This is a short one. Just wanted to make sure that you all understood how the kickbacks and the commission structures for hotel-sharing work with the in-house audiovisual companies. It’s something to consider when you are looking to hire your next AV firm for your event.