Sorry, but it looks like your holiday party is probably going to happen at the office this year

The Covid-19 omicron variant put a damper on last year's holiday season, but improving case numbers, strong corporate profits and major return-to-office campaigns made it look like 2022 would mark the corporate holiday party's comeback.

After all, bosses have spent a lot of time and money all year trying to get workers back to the office. They've thrown welcome-back parties and lured people back with free food. Having fun with your coworkers in the office became a business priority.

That priority took a turn in recent months as warnings of a recession echoed through boardrooms and some high-profile layoffs hogged the headlines. Some executives, like Google CEO Sundar Pichai, urged workers to return to offices in order to be productive despite booming profits during the work-from-home era, and that workers accustomed to travel and plush perks should no longer "equate fun with money."

So, as we barrel toward end-of-year celebrations, where does that leave the good old fashioned corporate holiday party?

Last-minute party plans

If you asked Tommy Halvorson just a few weeks ago, the outlook wasn't so good.

Halvorson is the founder and CEO of Foxtail Catering & Events in the Bay Area. Pre-Covid, his company would have its holiday bookings pretty much lined up by the February prior. This year, even by the summer, he only had one or two December bookings locked in.

"This year, it's economic uncertainty and business performance that's driving what people want to spend," Halvorson says.

More bookings rolled in through the fall, but then came two massive cancellations in the hundreds of thousands of dollars, with clients citing economic uncertainty despite being "companies with 9-figure war chests," Halvorson says.

As of mid-November, though, Halvorson said his company was fully booked through the end of the year. Bosses are still making last-minute decisions, he adds: The week of Thanksgiving, he fielded a request to organize a 900-person holiday party with three week's notice.

The back and forth, failures to commit and last-minute requests are "really striking," Halvorson says. "People are waiting to see what their budgets are. They're going from, 'We don't know if we're going to have the money for it,' to 'We do and we have to try and jump on it last-minute.'"

Some companies may be waiting for the new year to plan a holiday-related event with refreshed budgets, which would be welcome news for Halvorson — his company usually drums up a fair amount of work in January, but he worries recent layoff news could get worse.

"I've been terrified about Q1 for the last six months," he says. He'd normally have a good idea about January bookings by the October prior. They finally started rolling in by November.

"Seeing events come in allows me to sleep better," he says.

The office becomes party central

Massive party cancellations are proving to be the exception rather than the rule.

"No one has canceled," says Maggie Kennedy Braff, founder and CEO of Kennedy Events, which operates in the Bay Area. However, "there is the optics of, somebody down the street just laid off half their workforce. Is it appropriate for us to have any kind of big bash?"

Halvorson has seen this, as well. One of his events went from being black-tie formal to a more casual affair. "The budget stayed the same, but the presentation changed pretty dramatically," he says.

One way companies are keeping holiday parties from appearing too lavish is to host it at the office — which bosses hope will feel like a novelty in the remote-work era.

Before Covid, Kennedy Braff says, "going to the office sounded like a terrible idea because you just spent all week there. Now, it's a way to reengage people to come back to the office and to see it in a new light. It feels familiar, but there's a bit of excitement because maybe not everybody's there on the same day."

But just because parties are staying in the office doesn't mean companies are just throwing some cookies on someone's desk. Without the expense of renting out a venue, Kennedy Braff and her team can focus on refreshing the workspace to make it a party. "I don't want to go as far as saying that the office can have sex appeal," says Paige Buck, partner and chief strategy officer at Kennedy Events. "But you're really creating and reinventing the concept of what it means to come in and be together."

One client will use their multi-level office to have different experiences to move through: A virtual party to interact with remote colleagues on one floor, an interactive light display and arcade games on another, one level dedicated to community service stations (like assembling toiletry kits and writing holiday cards), then a final floor with food and drinks.

While all of their events this year will include a virtual component, executives are adamant about putting their corporate real estate to good use. Buck remembers doing a building walkthrough with one client and asking whether they wanted to come up with a virtual plan B if Covid cases got bad. "And they were like, heck no. We're having this party. We're determined to be together in-person in one form or another."

Inflation hits the holiday party circuit

Events are scaling back on ostentatious food options, too. "Last year, for example, one of our clients had potatoes and caviar bites, and that is not an optic or an expense that they want to have. That's been cut," says Kennedy Braff.

Halvorson agrees: "Companies aren't looking for steak and lobster or caviar," but instead are opting more for street food-style options like tacos and sliders.

Even if companies have the budget, their event-planning dollars aren't going as far as before. Skyrocketing food prices are taking a bite out of event budgets: Halvorson's menu prices are up 10% to 15% to offset inflation of food costs.

Then, there's the staffing shortage. There are 1 million fewer hospitality workers today compared with pre-Covid, according to Labor Department data. Halvorson says he's paying staff 30% to 40% more in order to hire competitively among a smaller pool of workers. And because companies are approving holiday party budgets so late in the game, that makes it all the harder to find available workers to staff them.

In the next few weeks, Halvorson and his company will support holiday parties as big as 4,000 people and as intimate as 100 guests. It's going to be a challenging stretch, he says: "It feels like we're all holding our breath and crossing our fingers more than we used to."

2022 is ending in a 'dark cloud,' but bosses need to motivate workers more than ever

Whatever form they take, bosses know how important it is to celebrate their employees in some way before the end of the year, says Ben Erwin, CEO of Encore, a global events planning firm.

At the very least, he sees more holiday parties being an extension of a year-end business update, connecting the company's plans to the current economic climate, followed by a social activity. Despite some gloomy economic forecasts, workplace experts say hiring will remain difficult in the new year, and that bosses have to do everything they can to bolster engagement and avoid turnover.

"When it comes to celebration, 2022 may be ending with a dark cloud. But with what we've experienced the rest of the year, there's still a ton to celebrate," Erwin says. Plus, "events are tentpole moments where you can get stakeholders back together and create energy, excitement and attachment" to the company.

For what it's worth, Erwin says Encore's event planning volume is 10% higher today than pre-pandemic, and "business is running full-speed ahead."

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