Six reasons outside supplier fees are a bad idea

Six reasons outside supplier fees are a bad ideaMeeting planners have the complex task of managing conference budgets and the wide array of suppliers that come with it. We do our due diligence to ensure everyone gets their fair share while maintaining a positive bottom line. Unfortunately, some suppliers that are an essential service to hosting a conference, like conference facilities, are taking advantage of their position. One of the ways is through outside supplier fees in the area of audio visual services.

Most conference facilities have an official audio visual supplier who pays a commission to them on the services it provides in-house. This official status rarely provides exclusivity thus outside vendors have access to service their clients. The outside supplier fee comes into play when the facility charges the conference a fee for utilizing their supplier of choice.

These outside supplier fees are differentiated from reasonable fees the facility may charge to recover costs for the use of electrical service, rigging points, in-room sound systems and security or supervision.

What is the problem with these fees? Let’s look at six reasons why they are a bad idea.

  • Reduced transparency – Excessive fees and service charges make it difficult for facility sales teams to secure contracts, especially when their competitors don’t charge the same fees. Hence they may avoid disclosing and being up front on what fees may apply. This leads to a decrease in transparency, with the knowledge that once a contract is signed the planner’s ability to control outside supplier fees is inhibited.
  • Unexpected costs – When facilities are not transparent regarding outside supplier fees, planners may be faced with unexpected costs that have not been budgeted for. This increases the risk of cost overruns and can easily place the conference in a deficit position.
  • Compromised quality – Imposing outside supplier fees can actually compromise the quality of the conference. Planners must be able to choose their supplier based on what is best for them. The preferred in-house supplier is not always the best solution for the conference. They may know the hotel the best, but they most likely do not know the planner’s conference the best.
  • Monopolization of the industry – Imposing outside supplier fees discourages the development of local and regional AV businesses. This leads to a monopolization of the industry by a few large international firms. A competitive market is maintained when we find a balance between local and international interests.
  • Potential legal issues – The facility may be interfering with an established and independent contractual relationship between the planner and their preferred supplier. This can force the planner to make a choice between paying unreasonable outside supplier fees and breaking a pre-existing contract with their supplier of choice leading to potential legal issues.
  • Tarnished reputations – Unreasonable fees and service charges are commonly perceived as not having been earned. This can tarnish a facility’s reputation and can result in the planner taking future business to other facilities.

The Exhibition Services & Contractor’s Association published a position paper in 2008 addressing freedom of choice and restrictive outside supplier fees. The ESCA Position Paper on Freedom of Choice is worth reading to gain a better understanding of this emerging trend. It also includes sample language for inclusion in RFP’s to safeguard against these fees.

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