Risk, Revenue Recognition and Recovery

by Dave Lutz

For well over a year, 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 such time conference organizers are able to recover, the entire supply chain will follow. It’s not going to happen overnight.

Are You an Expo with a Conference, or a Conference with an Expo?

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 extensive 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.

Revisit Your Cancellation PoliciesEvent organizers moving forward in 2021 should revisit their attendee and exhibitor cancellation policies. Take a page from airlines and cruises and allow risk-free booking. In addition to this being the right thing to do for your customers, it also demonstrates to hotels and your other suppliers that you’re doing everything possible to perform.

As in-person events resume, they come with a higher price tag. There are extra expenses the entire supply chain needs to shoulder to ensure attendee safety. For all parties, revenue will be negatively impacted in the first few show cycles. Event organizers will incur new expenses for capturing and streaming conference content. Facilities and event suppliers will need to adopt and implement new safety protocols and consult their customers on how to meet safely and will have to carry the burden for most of these expenses.

What is your timeline for go/no-go decisions for your quarter three and four events? What sort of cancellation policies are you putting in place for your members?

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