by Cheryl-Anne Sturken | May 01, 2008

Rising room rates aren’t the only plague meeting planners have been battling in the current seller’s market. The mandatory hotel service charge on group food and beverage events has been inching steadily upward, frustrating and angering many planners, particularly those who have had to work within the constraints of stagnant year-over-year budgets.

“Back in the 1990s, I paid anywhere from 11 to 18 percent, now I’m routinely seeing 23 to 25 percent,” says Jennie Campbell, CMP, CMM, chief executive officer and president of Metairie, La.-based Meet Your Market, a meeting planning firm. “Not only are hotels bumping up their F&B prices, they are going up on their service charge percentage. You don’t put your price and your percentage up -- that’s double-dipping, pure and simple.”

How high the F&B service charge will go is anyone’s guess. According to recent M&C research (see “How Much?” at right), 51 percent of 164 planners surveyed said 16 to 20 percent was the norm, while 44 percent cited charges in the 21 to 25 percent range.

chartAt first glance, it might seem that a seller’s market breeds greed, and the ever-increasing service charge percentage simply mirrors the hotel industry’s ability to command such figures. That is how Jonathan Feinberg, director of events for New York City-based American Institute of Graphic Arts, sees it. “I have always felt that service charges are a revenue stream for hotels,” he says. “While I know they cover gratuities for banquet service staff, I have never received a complete answer as to where the rest goes. The blanket term ‘administrative costs’ seems inaccurate to me.”

Even more frustrating: The charge does not always cover gratuities. Jennifer Brown, CMP, a partner of Irvine, Calif.-based Meeting Sites Resource, a full-service meeting planning firm, says she has seen several contracts that call for an 18 percent administrative fee, plus a 22 percent mandatory gratuity. She and others want to know: What precisely does the service charge cover?