Speaker 1: Then there are a few things we want you to think about as you're getting into site selection, getting into choosing your venue.

Speaker 2: Yeah, and the first thing that I think is important to think about when it comes to choosing the venue is understanding how the venues operate, regardless of whether or not it's a smaller venue or a larger venue that has a little bit more full service like the one that we're at this week. They all tend to make money primarily in three different ways. One is what the hotel industry calls heads and beds, which is those are your room nights.

Speaker 1: Let's just say in the events industry, you often hear butts in seats, like how many people in every seat. The equivalent of that in the hotel industry is heads in beds. How many heads in every bed? They don't make money unless they're selling rooms, of course, but more importantly, every head in every bed spends money in the hotel. They spend it at the spa, at the restaurant, in the bar, so it's all that ancillary income as well. The other revenue doesn't really happen without the heads in beds, so it's a big piece for the hotel and the thing that they're most often looking at.

Speaker 2: The second way when it comes to meetings and conferences that hotels tend to make money, at least in a big way, is food and beverage. Whether you're feeding your attendees through a VIP program that we talked about earlier this week or you're feeding your staff.

Speaker 1: So many ways to spend food and beverage.

Speaker 2: That's another way that hotels make money, and then the third primary way that hotels tend to make money when it comes to live events and conferences is through room rental. If you were going to host a half-day conference or a one-day conference where you don't have any room nights associated with your live event, you're probably going to pay a room rental fee and then you're going to have some food and beverage that you have to spend.

Speaker 1: So, yeah, they absolutely do. The reality is if you're looking ... We were talking on last night's episode about how there are certain metrics you can count on in this industry. One of the metrics that you can count on, at least of the moment, it has been this way for as long as I've been doing it, is in rooms, hotels make 75 to 80% profit margin. Those numbers vary slightly depending on whether it's limited service or like a high-end Ritz-Carlton, but it's a pretty safe benchmark. So if you think about it, if you're a hotel and you can make 75 to 80% profit margin on rooms or 35 to 40% profit margin on food and beverage, which is about the metric that hotels use on average ... Again, higher-end hotels may tell you as much as 50, I don't always believe that, but I think it's basically 35 to 40% profit margin on food and beverage. And then rental is kind of like 100% profit, so you would think that would be the one they really want. But the thing with rental is that you're spending the money, you're kind of paying it into a dark hole, and for the hotel, they don't really get anything from that other than just profit. So if you think about food and beverage, they want to keep their people working, and if you're not serving any food, they don't need the servers to be in that day, and they still have to employ them. So they really love food and beverage because it keeps the team working. And then on rooms, they really love rooms because not only are they making that profit margin, it's all those ancillaries, what we call incidentals, that they're going to spend in the hotel.

Speaker 2: So you might be wondering why we're telling you all of this, because all you really want to do is figure out where you're going to host your live event. But I think it's important to understand how the hotels operate so that you can better negotiate and find the right venue for you. The reason that it's important to know this is because of those three ways that hotels make money, they really want to make money at least two of those different ways. And if you can cover two of the three ways that they are going to be generating revenue or they want to generate revenue inside of their hotel, you're going to be an attractive piece of business to them because it relates to rates, it relates to food and beverage, and room rental, and how you use your leverage as a live event host and your attendees to make your investment in the hotel as little as possible.