Venue & Catering Costs.....Why is it so Complicated!

The competition between wedding venues is intense and as more venues open, this will only increase. When looking for venues, couples will of course be looking at costs and for venues that fall within their budget. Venue hire fees and catering costs can make up 50% of couples wedding costs. That's a huge sum of money and chunk of the overall budget. Most couples will spend upwards of £10,000 on their venue and food alone depending on guest numbers.

Yet when couples start looking for a venue, most of which will come with catering in house, and start comparing costs between venues, they often find it the most confusing and complicated task of wedding planning.

Wedding venues all charge for use of their premises in a different way. You could have any combination of the following:

• Venue Hire Only - with external caterers

• Venue hire and catering costs

• Catering costs only

Very often these various options will be offered as part of a package.

Then there's the seasonal variations and price fluctuations for days of the week, Some venues have a whole chart of different costs for different months and days. It's no wonder today's modern couple find the whole process incredibly confusing and difficult to manage.

So why do the majority of venues have such a complicated charging strategy? Whatever, the day or the season your costs will be exactly the same, so why have so many variations. Mostly this comes down to supply and demand.

Naturally, the most demand is on a Saturday so venues will charge higher for a Saturday rather than a Tuesday. But what about Friday & Sunday? This is also the weekend and growing in popularity for weddings, as is the number of mid-week weddings mainly due to the discounts offered Monday to Thursday which can be substantial. The same theory can be applied to wedding seasons, which tend to run from May to September with the peak being July and August. Though April and October are increasing in popularity, as is the time around Christmas and Valentines Day. So a wedding on a Saturday in July can be almost as 5 times as much as a wedding on a Tuesday in November. This doesn't seem right or fair.

So how can we simplify the pricing strategy for couples? The key is treating your venue hire and catering separately when working out costs and the amount you are going to charge couples.

Discounted Packages

These are often advertised as for example, "Mid-Week Package", "Weekend Package", "Winter Package" or various packages named Bronze, Silver, Gold or Gold, Diamond, Platinum, each name suggesting a level of service. These basic packages though often come with various stipulations, such as minimum numbers e.g. 50,60,70,80 or its essential to take the accommodation which is not included in the costs. Most likely there'll also be a lot of upgrades or extras available. For instance, a wedding package for 50 guest will charge upwards of £95pp for any guests over the 50. So quite quickly that enticing package becomes quite expensive.

But if your customer is only buying from you because you've offered a discount, then you are selling the discount or package and not the product, your venue itself. Magnolia and Me's advice is don't do it.

Venue Hire

Before you set your venue hire fee you'll need to work out your breakeven point; take your fixed overhead costs relating to the venue and divide by the minimum number of weddings you aim to hold each year; then add any variable costs to this figure such as extra staff, rubbish collections etc. This is then the minimum charge you can apply to breakeven.

E.g. Number of weddings a year 48, overheads per year £100,000, gives you a total cost per wedding of £4,166 plus say another £900 variable costs per wedding, this gives you a base cost of approximately, £5,000 whatever you add to this will be your profit margin so say 40% would give you a minimum hire fee of £7,000. You may then wish to inflate this margin for peak season by 50% which will make the venue hire in July £10,500.

You may wish to offer a discount for mid-week Monday to Thursday weddings of 2/3rds making your venue hire £7,000.

Magnolia and Me recommend you keep things simple and stick with the same hire fees for the whole year, with an adjustment as above for mid-week weddings. You can then offer incentives for those dates that are hard to fill rather than compromising on your venue hire. Add value to the fee rather than discounting.

Accommodation

Often venues stipulate that either a certain amount of rooms or all the accommodation needs to be taken on the night of the wedding. If that's the case then it should be included in the venue hire fee, then it becomes an added value rather than an added cost. Obviously, if its optional then keep it separate.

Minimum Numbers

Minimum numbers are often set as venues wish to gain on bar sales from a certain number of guests. However, this is no guarantee that the guests will spend and you'll receive that extra income. If you've calculated your minimum venue hire fee and applied a margin percentage then the number of guests shouldn't matter.

The costs of any additional kitchen, waitressing staff, crockery, tablecloths should be included in your margin calculations for food costs, usually around 70%, whilst the same applies to bar costs.

Keep all your cost calculations and revenue stream separate, this will make your charging to potential couples much simpler to follow and also allow you to understand your revenue streams better.

Hidden Extras

Very often there will be a list of extras available to couples, these extras can often be essential items that should be included in the venue hire fee as an added value, e.g. use of PA systems, chairs, tables, table cloths and napkins. Other items which are optional such a decorative items or candy carts can be left as extras available but clearly advertised as optional extras.

Most wedding couples will will choose the venue that offers them the experience and wedding they dream of; the venue that has the essentials to make their day perfect.

Your pricing should be based on value and while you need to know your costs, it's also essential to charge for the outcome and experience of what you're going to deliver. Don't be afraid to charge what you are worth, not what you think a couple will pay. Don't be afraid to charge more than your nearest competitor, if you're worth more, charge more. Just make sure your marketing strategy backs you up.

So when setting up your pricing strategy, remember these 5 simple rules:

• Know your costs

• Know your breakeven point

• Be Brave, Charge what your worth

• Add value, don't discount

• Keep it Simple

Magnolia and Me provide business consultancy to wedding venues and suppliers. Take a look at our options on www,magnoliaandmeconsultancy.co.uk for an informal discussion on how we can help your business obtain it's full potential drop us an email on hello@magnoliaandmeconsultancy.co.uk