May 28, 2024

Business entertainment expenses return to pre-Covid levels

Meal and entertainment business expenses have returned to pre-pandemic levels, according to figures released this week by SAP Concur.

Entertainment expenses suggest that in the first six months of this year, employees spent more on non-work events than in the past three years.

Even though entertainment expenses are no longer tax deductible, spending on entertainment increased more than 10% (11.86%) in the first half of 2023 compared to the first half of 2019.  

The greatest contributors were small and mid-sized enterprises (SMEs), which saw the largest increase in entertainment at 32%, compared to a 4% increase in large businesses.  

But SAP Concur noted it is not clear whether the increase is due to rising costs due to inflation or whether workers are entertaining clients or partaking in group outings more.

Vikki Rondeau, Staff Accountant at Motley Rice LLC, told SAP Concur it was a combination of the two.

“Spending did increase significantly, mostly due to inflation and travel, but we are hosting more events and working hard on business development and all these things are simply touched by the high cost of everything,” she said.

The average entertainment expense jumped 23% from 2019 to 2023, from $123 to $151. However, that was down from a high of $155 in 2022. 

Spending on meals in the first half of 2023 increased nearly 10% (9.1%) compared to the first half of 2019. 

The average meal expense costs $55, up 23% from $43 in 2019. 

SMEs seem to spend more on meals with a $64 per expense report average, compared to $53 for large businesses.

SAP Concur believes the lower average meal expense for larger businesses is likely due to expense policies and the guardrails around what may and may not be expensed. 

It believes meal and entertainment spending has been partially driven by the return to office, with many companies using things like team happy hours and office lunches to attract employees back to the office.

Lisa Simpson, Travel and Card Services Specialist at J.M. Huber Corporation, attributed the increase in meal and entertainment spending on an “increase in face-to-face meetings and in travel as well as ‘collaboration day’ events and meals”.

She added “We provided a subsidy to a meal delivery service when we initially returned to the office.”