Business Meals and Entertainment Expenses Surpass Pre-Pandemic Levels

The past few years saw a change in business spending, as expense reports that once centered around business travel and related expenses shifted to “Office” or “Other” expense categories for remote work equipment.  

With the first half of 2023 behind us, we’re once again seeing a shift that we expect to continue—at least through the end of the year. In 2022, 192M expense reports flowed through Concur Expense. And based on the data from January through June 2023, spending on entertainment and meals surpassed pre-pandemic levels.  

Small Businesses Splurge on Entertainment  

Work hard, play hard? 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.  

What exactly does entertainment entail? The Internal Revenue Service (IRS) defines entertainment expenses as, “entertainment, amusement, or recreation, such as entertaining at night clubs, cocktail lounges, theaters, country clubs, golf and athletic clubs, sporting events, and on hunting, fishing, vacation, and similar trips, including such activity relating solely to the taxpayer or the taxpayer’s family." 

The greatest contributors were small and mid-sized businesses (SMBs), which saw the largest increase in entertainment at 32%. That’s compared to a four percent increase at large businesses.  

It’s possible that workers are simply entertaining clients or partaking in group outings more, or it’s the uptick in cost from inflation. The average entertainment expense increased 23% from 2019 to 2023, from $123 to $151. Although, that’s down from a high of $155 in 2022. 

Vikki Rondeau, staff accountant at Motley Rice LLC confirmed, “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.” 

Inflation Hikes the Average Cost of Meals  

Whether it’s a quick lunch with a client or a to-go meal on a business trip, spending on meals in the first half of 2023 increased nearly 10% (9.1%) compared to the first half of 2019. 

What does the average meal expense look like? It’s probably less than a three-course meal and more than a coffee and baguette. The average meal expense costs $55, but like entertainment expenses, that’s up 23% from $43 in 2019.  

The increase in meal and entertainment spending has been partially driven by the return to office (RTO). Many companies have been using things like team happy hours and office lunches to attract employees back to the office. More than one out for four (28%) workplace leaders used onsite meals as RTO incentive and 11% used social events, according to workplace platform Envoy. 

Indeed, 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 said, “we provided a subsidy to a meal delivery service when we initially returned to the office.” 

At Burlington Coat Factory Warehouse Corporation, Senior Credit Card Specialist Christine Makai said, “while overall meal cost has increased as a part of travel, our company has also had ‘on-campus’ events with food as well as more breakfast and lunch gatherings as an incentive to be ‘in office.’” 

Looking a bit closer, SMBs seem to spend more on meals with a $64 per expense report average. On the flip side, large businesses are a bit lower at $53. The difference in average meal expense likely stems from expense policies and the guardrails around what may and may not be expensed.  

How to Prepare for the Busiest Expense Season 

One of the busiest times of year for entertainment and meal expenses is the final quarter of the year, with end-of-year holiday parties, and the final push to reach year-end goals. Indeed, data in Concur Expense reveals that entertainment and meal spending peaks in Q4 each year with October being the busiest month for meal and entertainment expenses. 

As the busy season approaches, here are a few words of advice to prepare – especially since meals and entertainment are two categories that have a lot of grey area in expense policies.  

• Clearly communicate expense policies. Remind employees of what is and isn’t covered in meal and entertainment expenses. Past SAP Concur research found that nearly all finance managers saw an increase in non-compliant expenses after the pandemic.   
• Be strategic in planning RTO tactics. Keep in mind that while entertainment expenses are not deductible in year-end taxes, meals are. As part of the Consolidated Appropriations Act, food and beverages will be 100% deductible if purchased from a restaurant—and that applies to 2023 taxes. As such, it may make more financial sense to encourage year-end meals instead of entertainment outings. 
• Use technology to audit expense reports. November and December make for a busy spend management season as procurement departments work to collect final payments and issue invoices, employees submit expense reports before the end of the fiscal, and finance departments process and influx of reports and requests. Finance managers should use advanced expense management solutions to automatically check reports for errors. VMware saved an estimated 8,000 FTE hours by using Concur Audit to automate its manual internal audit process. Concur Verify is another solution that uses AI and ML to automatically check 100% of expense reports for errors.  

At SAP Concur, we believe that nothing can replace the value of in-person interactions. Business travelers feel similarly. Our SAP Concur Global Business Travel Survey found that 92% of global business travelers say the future of their career is dependent on successful business travel in the next year because it’s important for maintaining client relationships (42%) and starting new ones (41%). 

At The Mosaic Company, Continuous Improvement Manager Brad Barton noted, “we had suspended international travel and a lot of sales trips, but now we have opened everything up again.” 

We’re thrilled to see signs of lunches with colleagues, sporting events with clients, work events at restaurants, and morning coffees at airports return to pre-pandemic levels. The return has us looking ahead to what’s next for business and travel.  

_{Methodology: SAP Concur analyzed expense reports filed by SAP Concur customers in Concur Expense between January 1, 2023, through June 30, 2023, and equivalent time periods from 2019 and 2022. Expenses for this analysis were tagged as “meal” or “entertainment.”}