Risk and Recovery Concerns of Event Organizers and Suppliers

Author: Dave Lutz, CMP       

risks

Planners and suppliers will continue taking risks in 2021. (Sammie Chaffin at Unsplash)

Over the past 12 months, we’ve consulted with dozens of associations on their go/no-go event strategies. One of our early — and still applicable — recommendations was for conference organizers to communicate and publish the date when they expect to make the decision for their in-person conference. Over the summer and the fall of 2020, most organizations were able to make decisions six months out without incurring liability. That window has tightened to 90 days. By May or June, facilities are less likely to allow force majeure cancellations more than 30 days out.

At some point, hotels and convention centers will need to draw a line in the sand — they expect organizers to make their best effort to live up to their side of the deal. It remains to be seen if hotels will adjust pricing to market conditions and be more flexible with partial performance and resulting liabilities. What hotels and event suppliers need to remember is that until the time when conference organizers are able to recover, the entire supply chain will be affected. It’s not going to happen overnight.

Revenue Recognition

The two major variables that impacted 2020 revenue were the dates of your event and whether you have an expo with a conference or a conference with an expo.

Expo with a conference: For events scheduled for Q1 through Q3 of 2020, a lot of exhibitor and sponsor fees were prepaid. Because the expense was budgeted and paid, exhibitors were mostly amenable to applying those funds to a future in-person or virtual event. There is much greater urgency for the expo with a conference model to get back to face-to-face. Revenue for anchor exhibitors cannot be recognized until that happens.

Conference with an expo: These events generally have a lower gross margin than their counterparts. In 2020, most associations provided options for registrants — full refund, apply to the virtual, or donate to the foundation. Many conferences that moved to virtual in the first few months were free. In the second half of the year, conference fees were about 35 percent of the in-person rates, according to our pricing research.

When creating expense budgets for the future, most recent spend is a significant input into the process. For expo deposits paid in 2019 for 2020 events, it remains to be seen if those funds will return to budgets for 2021. Marketing or professional development spend that has been redirected or cut during the pandemic is at risk for both event types. For events that go all virtual for 2021, organizers are going to have a tougher time securing renewal for both exhibitor and attendee participation. Patience will be required. Decision timeframes will be cut in half.

Dave Lutz, CMP, is managing director of Velvet Chainsaw Consulting.

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