Corporate entertaining has come roaring back

New York
CNN Business
 — 

Samuel Roe, regional sales manager for Terlato Wines, had business associates visiting a few weeks ago and called a friend at one of the most expensive rooftop eateries in New York to ask if his group could get a table.

He got a reservation, he said, but also a request: “Make sure to spend money.”

Executives with corporate expense accounts who used to order $200 bottles of wine are “showing off” and ordering $1,000 ones these days, Roe explained. His friend didn’t want to get in trouble for bringing in a less-profitable party. The restaurant’s private room goes for $12,000 a night. Lately, it is always booked.

Boosted by a Covid-era tax break-window that closes at the end of the year — and under pressure to cement ties and reassure clients — companies are now spending big on wining and dining current and potential customers.

“The last two to three years have been incredibly difficult,” said Thomas Donohue, chief marketing officer for Culinary Solutions, a Sterling, Virginia food company whose partners and clients include Starbucks

(SBUX), Hilton

(HLT) and American Airlines

(AAL).

“We wanted to reconnect with these people, we needed splash, engagement,” he saId. The company, which has operations globally, needed something that would make clients “want to get on a plane from Singapore, from Japan” to attend.

On Jan. 26 Culinary Solutions is hosting elaborate events with celebrity chefs in Washington, DC, Reims, France and Bangkok to celebrate “sous vide” day, the French cooking technique the company specializes in.

Donohoe declined to disclose costs but noted that in France, “there may be a castle and Champagne caves.”

The wining and dining surge 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 eatery Le Bernardin, a three-star Michelin restaurant that is one of the city’s most expensive.

“It’s just like when kids go back to school and 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 “are realizing the recovery is another year or so away,” said New York event planner Lawrence Scott. “They figure the only way they are going to stay in the biz is entertaining.”

Events are smaller, say 60 guests instead of 200. “They’re inviting the [clients] who will keep their boats afloat.”

Le Bernardin’s private rooms have been largely booked for the holidays since late September, Ripert said. And in the restaurant, guests typically opt for the $298 chef’s tasting menu — $468 with wine pairings. Business has specifically been boosted, Ripert’s managers tell him, by the soon-to-expire tax break.

Dubbed the enhanced deduction, “for 2021 and 2022 only, businesses can generally deduct the full cost of business-related food and beverages purchased from a restaurant. Otherwise, the limit is usually 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 are doing when they’re paying for meals themselves: cutting back sharply. Inflation and gas costs are historically high and recession worries are mounting.

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

But companies feel they have to spend to compete and to keep their relationships upbeat, especially after years of lockdowns and Zoom meetings.

“Everything changed after Covid,” said R. Couri Hay, publicist in New York. “People don’t want to go out anymore, they got lazy. They started to edit events – and when they do go out, they say ‘Wonderful you’re still here, you’re still alive!’ ”

In particular, companies are scrambling to attract younger guests and the next generation of businesses, Hay said. “They think: You’ve got to do an extravaganza.”

During the pandemic, group dinners or parties were rare. At first charity events started returning, then weddings. After that, according to restaurateurs and event planners across the country, came bar and bat mitzvahs.

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

Bill Laurie, an auto-technology supplier, has begun taking current and prospective clients out to dinner again at top Detroit and Dearborn, Michigan restaurants at costs of 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 attended to,” Laurie said. And the hospitality goes beyond spending money on them to asking them what they think of the market, or about their family, he said.

Certainly, there may be some businesses taking a generous view of the IRS rules. The deduction, which was meant to help support restaurants during the pandemic, only applies to restaurant meals, and only if a member of the client company is present. And businesses can’t deduct expenses for meals that are “lavish or extravagant.”

But, according to the IRS, “an expense isn’t considered lavish or extravagant if it is reasonable based on the facts and circumstances.”

That definition leaves a lot of wiggle room.

“Meal expenses won’t be disallowed merely because they are more than a fixed dollar amount,” according to the IRS, “or because the meals take place at deluxe restaurants, hotels, or resorts.”

But even in this more accommodating environment, client expectations have to be managed, Laurie said. Because of inflation, he can no longer say, “order anything on the menu.”

Now he says, “even if caviar is on the menu, caviar is not on the menu.”