As published on Consortiuminfo.org, March 18, 2020
By Joanna Lee
As the world goes into social lock-down to prevent further spread of the COVID-19 virus, many conferences, face-to-face meetings, and other in-person gatherings are being cancelled or postponed. While the mass cancellations are disappointing and disruptive for everyone involved, they are potentially devastating for non-profit associations—such as open source foundations and standard setting organizations—that rely on in-person events to sustain themselves financially and facilitate collaboration and community. If you participate in the leadership of a collaborative association that hosts conferences or other large events, read on for tips on how to navigate likely challenges in the upcoming months.
To Cancel or Not
Since many governmental bodies are imposing bans on large public gatherings, you might be forced to cancel or postpone your event. Even without such a ban, you might decide to cancel or postpone anyway due to health risk, low attendance, cancellation by event sponsors or speakers, or for other reasons.
Hotel and Vendor Contracts You Have Already Signed
If your event cannot proceed as planned, you will want to terminate your contracts with the hotel, convention center, or other hosting venue, and any other vendors supporting the event. If there is a government-issued ban on large public gathering that prevents your event from proceeding, the ban might allow you to terminate without penalty if your contract contains a “force majeure” clause—i.e., a contract provision that excuses performance prevented by extraordinary events beyond a party’s control. The wording of such provisions varies, however, so the exact language found in your contract will be important.
For example, although some contracts specifically define epidemics/pandemics as force majeure events excusing performance, many do not. If the reasons for cancelling the event do not clearly constitute grounds for termination under the contract’s express language, you may end up in a disagreement with the vendor over how to interpret the contract, opening the door to loss of deposits, significant cancellation fees, and even potential litigation.
Under some jurisdictions’ laws, your contract might still be terminable even without such a clause if the ban makes it impossible to perform and frustrates the purpose of the contract. In contrast, if your event can still legally proceed but you want to cancel for other reasons such as low attendance or health risk, whether you can terminate will again depend on the specific language of the contract.
If you are willing to reschedule the event and commit to hosting it at a later date at the same venue, or if you commit to hosting another future event at the same venue (for example, next year’s recurrence of the same conference), the venue is more likely to be flexible and accommodating with respect to termination of the current contract, because this will preserve the longer-term relationship as well as secure future business. However, your leverage in negotiating a potential postponement will also depend on the underlying contract terms. If you are seeking to cancel without providing any assurances of future business, the venue may dig their heels in and stubbornly insist that the contract is not terminable, in which case your only recourse might be to resolve the disagreement through arbitration or litigation.
Entering into New Contracts with Vendors
If you are planning a conference for the second half of 2020 and have not already booked the venue, you are likely currently in negotiations with potential vendors. There is a risk that the pandemic will continue into the third or fourth quarters of the year, in which case you might need to cancel later. You could wait and see how the pandemic unfolds and book the venue later, but then you might pass up a good deal, lose the space to another renter, or otherwise compromise your ability to plan or market the event effectively. For these reasons, you might want to book a venue now, but you’ll want to negotiate the termination provisions very carefully to plan for the risk of event cancellation.
Be aware that if you enter into a new contract now or in the future, even a broad force majeure clause that expressly mentions epidemics or pandemics is not guaranteed to allow you to terminate later due to COVID-19 concerns. This is because the vendor could potentially argue that force majeure does not apply because, by entering into the contract at a time when you already have full knowledge of the pandemic, (a) you are implicitly acknowledging and agreeing that performance is possible notwithstanding the pandemic, and/or (b) you are knowingly assuming the risks associated with the pandemic. Thus, when entering into new contracts, rather than relying solely on the force majeure clause, it is best for the contract to explicitly address the circumstances under which you may terminate, including those related to the COVID-19 pandemic. For example, you might negotiate the right to terminate the contract if more than a certain percentage of your registered attendees cancel due to the pandemic, or if related travel bans are in effect to or from relevant countries.
If you negotiate a contract with a hotel that is providing accommodations to your event attendees, consider negotiating a requirement that, if, due to pandemic or related concerns, the event is cancelled, or individual attendees cancel even if the event continues, that they can do so without penalty and receive a refund of any amounts they prepaid. And you would also ask for these same terms to apply to any room block guarantee you would otherwise be bound by under your contract with the hotel.
Keep in mind that the hospitality and event industry is hurting badly due to the pandemic. Thus, when it comes to new contracts, vendors are eager to compete for your business, and as the customer, you’re in a strong negotiating position (in stark contrast to your less than ideal negotiating position when trying to get out of an existing contract). Thus, don’t be afraid to ask for favorable contract terms and accommodations (pun intended) that vendors might not ordinarily agree to.
Cancellation Policy for Event Sponsors and Attendees
Shifting focus to your role as an event provider, for the foreseeable future, your potential sponsors and attendees will be paying close attention to your own cancellation and refund policies. Obviously, if you cancel an event, sponsors and attendees will expect refunds, or credits toward future events, depending on your policies and contract language. However, if you decide to continue an event but sponsors or registered attendees choose not to participate due to health concerns or company policies restricting non-essential travel, will you allow them to terminate and receive a full or partial refund or credit? The advantages of doing so are preserving trust and encouraging sponsorships and advance registrations. If sponsorship or registration fees are non-refundable, potential sponsors and attendees will be more hesitant to sign up, especially far in advance of the event.
Event Cancellation Insurance
It may be worth obtaining event cancellation insurance for future events, particularly if event cancellation would be financially devastating to the organization due to non-refundable costs and expenses incurred in preparation for the event. If you do consider acquiring insurance, pay close attention the details of coverage and exclusions to ensure that the insurance product will meet your needs. In light of the current corona virus outbreak, many insurers are refusing new coverage with respect to this disease, at least for now. Retaining a skilled insurance broker with broad expertise in the risk markets can be very valuable in times like these.
Retooling to Go Virtual or Diversify
Consider whether there are ways to achieve some of the goals ordinarily served by in-person events with remote interaction or other solutions. For example, some associations that previously offered in-person professional training courses are now launching online live or on-demand versions of those same courses. Finally, if a significant portion of your revenue comes from in-person events, to ensure the organization’s long-term viability in case the pandemic and its broad-reaching economic impact aren’t resolved quickly, your organization’s leadership team might want to do some creative and strategic thinking about ways to diversify its sources of revenue and funding, or retooling its approach and IT tools to support more virtual programming.