Corporate entertainment is back with a roar

Executives with corporate expense accounts who used to order $200 bottles of wine are now “stepping up” and ordering $1,000 bottles, Terlato explained. His friend didn’t want to get in trouble for throwing a less profitable party. The restaurant’s private room costs $12,000 per night. It’s always booked.

Bolstered by the Covid era tax break window closing at the end of the year – and under pressure to strengthen relationships and appease customers – companies are now spending heavily to win and nurture current and potential customers.

“The last two or three years have been incredibly difficult,” said Thomas Donohue, chief marketing officer of Culinary Solutions, a Sterling, Va.-based food company whose partners and clients include starbucks, (SEX) Hilton (HLT) and American Airlines (AAL).

“We wanted to reconnect with these people, we needed excitement, engagement,” he said. The company, which operates globally, needed something that would make customers “want to get on a plane from Singapore, from Japan” to attend.

On January 26, Culinary Solutions is hosting elaborate events with celebrity chefs in Washington, DC, Reims, France and Bangkok to celebrate the day of sous vide, the French cooking technique in which the company specializes. Donohoe declined to disclose the cost, but noted that in France, “there could be a castle and Champagne caves.”

The increase in profits and meals began last summer and accelerated when many Wall Street workers were ordered back to the office in the fall, said chef Eric Ripert of New York seafood restaurant Le Bernardin, a a restaurant with three Michelin stars, which is one of the most expensive in the city.

“It’s just like when kids go back to school and they don’t want to, but then they get excited,” he said. “It’s just like that, but with adults. And tequila.”

Corporations, hedge funds and especially real estate companies “realize that the recovery is another year away,” said New York event organizer Lawrence Scott. “They think the only way they’re going to stay in business is to entertain.” Events are smaller, say 60 guests instead of 200. “They invite [clients] that will keep their boats afloat.”

Le Bernardin’s private rooms have been largely booked for the holidays since late September, Ripper said. And in the restaurant, guests typically choose a chef’s tasting menu priced from $298 – $468 with wine pairings. Ripert’s managers tell him that business has been boosted precisely by tax breaks that are about to expire.

Called the enhanced deduction, “for 2021 and 2022 only, businesses can generally deduct the full cost of business-related food and beverages purchased at a restaurant. Otherwise, the limit is generally 50% of the cost of the meal,” according to the IRS.

This kind of spending, of course, is in direct contrast to what most consumers do when they pay for food themselves: cutting back. Inflation and gas costs are at historic highs, and fears of a recession are mounting.

Meanwhile, the restaurant industry is still struggling with “staffing, food cost and supply issues,” said Food-TV celebrity chef Maniet Chauhan, who owns Indian, Chinese and American restaurants in the Nashville area.

But companies feel they have to spend to compete and survive Trelations with the heirs are upbeat, especially after years of blocking and meeting on Zoom.

“Everything has changed since Covid,” said R. Currie Hay, a publicist in New York. “People don’t want to go out anymore, they’ve become lazy. They started editing events – and when they come out, they say, ‘It’s great that you’re still here, you’re still alive!'”

In particular, companies are struggling to attract younger guests and the next generation of businesses, Hay said. “They think: You have to throw an extravaganza.”

During the pandemic, group dinners or parties were rare. First, charity events began to return, and then weddings. Then, according to restaurateurs and event planners across the country, came bar and bat mitzvah.

But now bankers, watchmakers, real estate investors and executives are launching new projects manufacturers, retailers and “tech bros” also throwing the more expensive dinners and lavish parties.

Bill Laurie, an automotive technology supplier, has resumed taking current and prospective customers to dinner at top restaurants in Detroit and Dearborn, Michigan, at prices up to several hundred dollars per person. “It’s not extravagant if you do it right,” he said.

In this post-Covid era, “people want to feel cared for,” Laurie said. And hospitality goes beyond spending money on them or asking them what they think of the market or their family, he said.

Of course, there may be some businesses that take a generous view of the IRS rules. The deduction, which was intended to help restaurants during the pandemic, only applies to restaurant meals and only if a member of the customer company is present. And businesses cannot deduct expenses for meals that are “lavish or extravagant.”

But according to the IRS, “an expense is not considered lavish or extravagant if it is reasonable under the facts and circumstances.”

This definition leaves a lot of wiggle room.

“Meal expenses will not be disallowed merely because they are more than a fixed dollar amount,” according to the IRS, “or because the meals are taken at upscale restaurants, hotels, or resorts.”

But even in this friendlier environment, customer expectations must be managed, Laurie said. Because of inflation, he can no longer say “order something off the menu”. Now he says “even if caviar is on the menu, caviar is not on the menu.”

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